-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D2wOe2ApydqTbiyV5YNI/CgcPKsWucnTwewRK3422LRSOoAw8jDVoz/V+c4cbp5p cdbCUGnBKqDWWQc2/KAclQ== 0000950124-98-003654.txt : 19980630 0000950124-98-003654.hdr.sgml : 19980630 ACCESSION NUMBER: 0000950124-98-003654 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980629 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OXFORD AUTOMOTIVE INC CENTRAL INDEX KEY: 0001040475 STANDARD INDUSTRIAL CLASSIFICATION: METAL FORGING & STAMPINGS [3460] IRS NUMBER: 383262809 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 002-87041 FILM NUMBER: 98657105 BUSINESS ADDRESS: STREET 1: 1250 STEPHENSON HGWY CITY: TROY STATE: MI ZIP: 48083 BUSINESS PHONE: 2485771400 MAIL ADDRESS: STREET 1: 2000 N WOODWARD CITY: BLOOFIELD HILLS STATE: MI ZIP: 48304 10-K405 1 10-K405 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark one) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF ___ THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended March 31, 1998 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from ____________ to ____________ COMMISSION FILE NUMBER 333-32975 OXFORD AUTOMOTIVE, INC. (Exact name of Registrant as specified in its charter) MICHIGAN 38-3262809 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1250 STEPHENSON HIGHWAY, TROY MICHIGAN 48083 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (248) 577-1400 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all annual, quarterly and other reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant has been 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] The aggregate market value of the Registrant's voting stock held by non-affiliates of the Registrant, computed by reference to the book value of the Registrant's common stock as of March 31, 1998 (because there is no market for the Registrant's common stock) was $3,076,977. At June 1, 1998, there were outstanding 309,750 shares of the Registrant's common stock. 2 PART I ITEM 1. BUSINESS. GENERAL Oxford Automotive, Inc., a Michigan corporation ("Oxford Automotive" and together with its consolidated subsidiaries the "Company") is a leading Tier 1 or direct supplier of high-quality, engineered metal components, assemblies and modules used by original equipment automotive manufacturers ("OEMs"). The Company's core products are complex, high value-added products, primarily assemblies containing multiple stamped parts, forgings and various welded, hemmed or fastened components. These products which include large structural stampings and assemblies, including exposed ("Class A") surfaces, leaf springs and smaller complex welded assemblies, are used in manufacturing a variety of sport utility vehicles ("SUVs"), light and medium trucks, mini-vans, vans and passenger cars. The Company is the sole source supplier of these products to its customers. The Company had net sales of $410.3 million for the fiscal year ended March 31, 1998. Based on net sales, management believes the Company is one of the ten largest suppliers of stampings to the North American automotive market. The Company's five largest customers, General Motors Corporation ("GM"), Ford Motor Company ("Ford"), Chrysler Corporation ("Chrysler"), CAMI (a joint venture of GM and Suzuki Motor Corporation ("Suzuki")) and The Saturn Corporation ("Saturn"), accounted for approximately 54%, 31%, 9%, 2%, and 2%, respectively of the Company's net sales for the fiscal year ended March 31, 1998. The Company has been providing products directly to GM and Ford for more than 50 years and has earned outstanding commercial ratings for its high-quality standards, including GM's Supplier of the Year and Mark of Excellence Awards, Ford's Q1 Award and CAMI's President's Award. The Company also sells its products to other Tier 1 suppliers. For the fiscal year ended March 31, 1998, approximately 77% of the Company's net sales were derived from sales of its products manufactured for SUVs, mini-vans, vans and light trucks. In recent years, SUVs, mini-vans, vans and light trucks have experienced stronger growth in vehicle production as compared to the passenger car sector. This sector includes those platforms and models which have strong consumer demand, such as GM's popular C/K platform (full-size pickups and the Yukon/Tahoe/Suburban models), Ford's Ranger, Explorer and Windstar and Chrysler's Ram pickup and Mini-van. See Note 16 of Notes to Consolidated Financial Statements included in this Report for a description of the Company's domestic and export sales. Prior to August 1997, the Company conducted its business through two principal operations, BMG North America Limited ("BMG") and Lobdell Emery Corporation ("Lobdell"). The Company's recent acquisitions significantly strengthen the Company's position as a leading Tier 1 supplier of assemblies and modules to the OEMs. These strategic combinations provide the Company with the critical mass and capabilities in the areas of design and engineering, sales and marketing, and product expertise which provide the basis for the Company's strategy of becoming a fully-integrated, global systems supplier. The Company has already implemented a successful, focused sales and marketing initiative, which commenced concurrently with the operational improvements at BMG. As a result, the Company has been awarded the door assemblies and the side panel package for the new Saturn LS Program (the "LS Program"), the new vehicle which Saturn is launching in 1999 based upon the current Opel Vectra. Management believes these awards from Saturn will generate approximately $65.0 million of annual net sales beginning with the 1999 model year. In addition, the Company was recently awarded the door, hood, and underbody assemblies for the GMT 250 Program (Pontiac Recon, Buick Signia) (the "GMT 250 Program"). This program, a new GM platform, will be produced solely in Mexico and management believes will generate approximately $85.0 million of annual net sales beginning in 1999. 2 3 The Company currently operates 17 manufacturing facilities (including three facilities acquired in connection with the Suspension Division, described below), which offer the latest technologies in metal stamping, forging, welding and assembly production equipment, including fully-automated hydraulic and wide-bed press lines (up to 180 inches), robotic welding cells, robotic hemming, autophoretic corrosion resistant coating, and a patented eye forming process. The Company also has the world-wide exclusive rights (outside the CIS-formerly Soviet Union) to the "MAZ" tapering process for its suspension applications. Since 1992, the Company has invested in excess of $110 million in capital investments to support sales growth, expand production capabilities and improve efficiency and flexibility. The Company's diverse line of over 380 presses that range up to 2,600 tons and both include conventional and transfer technology and state-of-the-art robotic weld assembly and hemming equipment are capable of manufacturing a broad assortment of parts and assemblies ranging from simple stampings to full-size, Class A door and closure panels. The Company is one of a few independent suppliers that has the ability to produce large, complex stampings, as well as the technical expertise and automated assembly capabilities to provide high value-added modules such as door apertures and assemblies, A-pillars, Class A surface products, control arms, and multiple leaf and parabolic leaf springs. The Company is currently planning the addition of a new 300,000 sq. ft. facility in Ramos Arizpe, Mexico to support the GMT 250 Program and other opportunities in the Mexican market. BUSINESS STRATEGY The principal objective of the Company is to be a leading, full-service, global Tier 1 supplier of integrated systems based on metal forming and related manufacturing technologies. Management believes that the Company is well positioned to benefit from two significant trends in the stamping and metal forming segments of the automotive industry: outsourcing and consolidation. Outsourcing of metal stamping has increased in response to competitive pressures on OEMs to improve quality and reduce capital requirements, labor costs, overhead and inventory. Consolidation among automotive industry suppliers has occurred as OEMs have more frequently awarded long-term sole source contracts to the most capable global suppliers. In addition, OEMs are increasingly seeking systems suppliers who can provide a complete package of design, engineering, manufacturing and project management support for an integrated system (such as a front-end system). The Company intends to capitalize on these trends through internal development and strategic acquisitions. The key elements of the Company's strategy include the following: Provide Full-Service Program Capability. The Company is focused on developing full-service program capabilities. The Company works with OEMs throughout the product development process from concept and prototype development through the design and implementation of manufacturing processes. The Company believes that its ability to provide the package of design, engineering, prototyping, tooling, blanking, stamping, forging, assembly, and corrosion resistant coating to its customers creates a unique capability present in only a limited number of suppliers. The Company believes this capability will enable it to manage large programs, assist it in reducing customer program launch time, lower customer costs and increase its margins. Supply Complex, High Value-Added Systems. As a result of the Company's technical design and engineering capabilities and its reputation for highly-efficient manufacturing operations, the Company is able to secure supply relationships for complex, high value-added products, primarily assemblies and modules that contain multiple stamped parts and various welded, hemmed or fastened components. For example, the Company produces the rear door for GM's Yukon/Tahoe/Suburban vehicles, the lower control arm for GM's four wheel drive C/K vehicles, the control arm assemblies for Ford's F-Series pickups and Chrysler's T-300, the radiator support assembly for GM's W-car (Grand Prix, Century, Lumina, Monte Carlo and Intrigue), complex A-pillar assemblies for the Ford Mustang and the Ford Ranger pickup, and multiple leaf, parabolic (long taper) multiple leaf, and single leaf long taper suspension systems for products ranging from Ford's F-Series pickups to Chrysler's mini- vans. These complex products typically generate higher dollar content per vehicle as well as higher margins for the Company as compared to simple, individual stampings. The Company plans to capitalize on its ability to develop and provide integrated modules and assemblies to deliver to the OEMs an integrated product such as a complete 3 4 door or front-end system. In addition to doors, radiator supports and Class A surface components, the Company believes it has unique expertise with respect to control arms and leaf springs, which it will further develop as a fully integrated suspension system. Focus on High Growth Vehicle Categories. The Company's sales and marketing efforts have been, and will continue to be, directed toward sectors of the automotive market that have experienced strong consumer demand. For the fiscal year ended March 31, 1998, approximately 77% of the Company's net sales were derived from sales of products manufactured for SUVs, mini-vans, vans and light trucks. Similarly, the Company's sales to the passenger car market have been, and will continue to be, directed to the segments with stronger sales growth, including Saturn cars. Establish a Global Presence. The Company is actively pursuing strategic acquisitions and joint-venture opportunities in Europe and intends to pursue opportunities which will allow the Company to increase its presence in South America, and to establish a presence in Asia and other markets in order to serve its customers on a global basis. Several OEMs have announced certain models designed for the world automobile market ("World Car"). As a result, the OEMs have encouraged their existing suppliers to establish foreign production support for World Car programs. This globalization provides access to new customers and technology, as well as economic cycle diversification. The Company has established a presence in Mexico and Venezuela and currently provides components for OEMs doing business in Mexico and South America. Pursue Strategic Acquisitions. In response to the trend in the OEM market toward "systems suppliers," the Company is focused on making strategic acquisitions that will enhance the Company's ability to provide integrated systems (such as a door or front end systems) or otherwise leverage its existing business by providing additional product, manufacturing and service capabilities. The Company also intends to pursue acquisitions which will expand its customer base by providing an entree to new customers, including the North American operations of Asian and European based OEMs. The Company believes that the continuing supplier consolidation in the stamping and metal forming segments may also provide attractive opportunities to acquire high-quality companies at favorable prices, including businesses which can be improved financially through overhead elimination, organizational restructuring, plant reconfiguration, labor contract negotiations and management changes. The Company will also pursue acquisitions that enable it to achieve a global presence. RECENT DEVELOPMENTS On August 13, 1997, the Company acquired Howell Industries, Inc. ("Howell"). Howell is a Tier 1 manufacturer of high-quality welded subassemblies and detailed stampings used primarily in suspension system applications in the production of SUVs, light trucks, mini-vans, vans and passenger cars. Howell has developed a niche in designing, engineering and manufacturing suspension control arms in a variety of configurations and variations depending on drive-train and suspension application. Howell's expertise has complemented and enhanced the Company's ability to develop key suspension system components. Further, Howell's sales were principally in the high-growth vehicle categories of SUVs, light trucks, mini-vans and vans, the same market targeted by the Company. For its fiscal year ended July 31, 1997, Howell had net sales of $95.2 million. On November 25, 1997, the Company acquired all of the outstanding shares of common stock of RPI Holdings, Inc. ("RPIH"). RPIH, through its wholly owned subsidiary RPI, Inc., provides the Company 4 5 production of roll-formed pieces, metal stampings, service parts, and welded assemblies of functional and decorative trim for the OEM market. Net sales for the nine month period from July 1, 1996 to March 31, 1997 for RPIH were $8.8 million. On April 1, 1998, the Company acquired the suspension division (the "Suspension Division") of Eaton Corporation. The Suspension Division is a leading Tier 1 North American supplier of leaf spring suspension systems for automotive applications. Products of the Suspension Division include multiple leaf, parabolic (long taper) multiple leaf, and single leaf long taper suspension systems. The Suspension Division is a major supplier to the traditional North American light truck vehicle manufacturers, and also one Japanese automotive transplant, one Japanese heavy truck manufacturer, and one European vehicle program. The Suspension Division designs, manufactures and markets leaf springs for original equipment vehicle markets with product applications in light truck rear suspensions. The Suspension Division is focused on the light truck market, where full-size pick-ups and vans, mini pick-ups and vans, and sport utility vehicles are the major users of leaf springs, primarily for rear suspension applications. The Suspension Division includes a 49% interest in Metalurgica Carabobo, S.A. ("Metalcar"), a Venezuelan manufacturer of conventional leaf springs and coil springs for both light and heavy trucks. For its fiscal year ended December 31, 1997, the Suspension Division had net sales of $125.8 million. In January 1998, the Company announced the closure of its Winchester Indiana facility. The decision to close this facility was based on the Company's rationalization of its current capacity and will result in fixed cost reductions and improved productivity through reallocation of production to other facilities during fiscal 1999. The costs associated with the closure had been previously reserved for and will therefore have no adverse impact on the financial results of the Company. The Company is currently redeploying production assets to support recently awarded programs (e.g. GMT 250 Program). In addition, during the year the Company consolidated the financial and administrative operations of its acquisitions, thereby allowing for the closure of the Alma and Southfield administrative offices. On April 1, 1998, the Company issued $35.0 million aggregate principal amount of 10 1/8% Senior Subordinated Notes Due 2007, Series B (the "Series B Notes"). The Series B Notes are substantially identical to, and rank pari passu in right of payment with the $125.0 million aggregate principal amount of 10 1/8% Senior Subordinated Notes Due 2007 issued by the Company on June 24, 1997. The Series B Notes were issued at 105.84% of par, thereby generating a yield of approximately 9.0%, based on the earliest redemption date at par. INDUSTRY TRENDS The OEM market to which the Company sells its products consists of the design, engineering, development, production and sale of parts, components, assemblies and modules or systems (several components assembled together) for use in the manufacture of new motor vehicles. The Company's performance, growth and strategic plan are directly related to certain trends within the OEM market. Since the 1980s, Chrysler, Ford and GM have each been substantially reducing the number of suppliers that may bid for awards and outsourcing an increasing percentage of their production requirements. As a result of these trends, the OEMs are focusing on the development of long-term, sole source relationships with suppliers who can provide more complex parts, as well as complete subassemblies and modules on a just-in-time basis while at the same time meeting strict quality requirements. These requirements are accelerating the trend toward consolidation of the OEM's supplier base as those suppliers who lack the capital and production expertise to meet the OEM's needs, either cease to operate or are merged with larger suppliers. OEMs benefit from outsourcing because outside suppliers generally have significantly lower cost structures and, as described below, suppliers can assist in shortening development periods for new products. In addition to consolidation and outsourcing, suppliers are participating earlier in the design and engineering process, providing research, as well as product development, product testing/validation, prototyping 5 6 and tooling. OEMs generally expect Tier 1 suppliers to (i) participate in the design and engineering of complex assemblies, (ii) develop the required manufacturing process to deliver these assemblies on a just-in-time basis, and (iii) assume responsibility for quality control. This results in shorter development times for new products, as well as higher quality and lower parts costs. While the focus today by the OEMs is on quality, cost and service, the Company believes that the focus for the future will be on global capabilities, innovation and ability to provide value-added products and systems. The OEMs have been very successful in making high-quality and low cost a minimum requirement to remain in the industry, as opposed to a competitive advantage for certain suppliers. These evolving requirements can best be addressed by suppliers with sufficient resources to meet such demands. For full-service suppliers such as the Company, this environment provides an opportunity to grow by obtaining business previously provided by other suppliers who can no longer meet the current or future requirements and expectations of the OEMs and by acquisitions that further enhance product manufacturing and service capabilities. Although the requirements of the OEMs have already resulted in significant consolidation of component suppliers in many product segments, the Company believes that many opportunities exist for further consolidation within the Company's stamping and metal forming industry. PRODUCTS The Company generates the majority of its net sales from large, complex, high value-added products, primarily assemblies that generally consist of multiple parts, which the Company stamps and forges and combines with various welded or fastened components. The Company is the sole source supplier of these complex modules and assemblies. These products include unexposed components and assemblies that are intrinsic to the structural integrity of the vehicle such as A-pillars, radiator supports, floor pans, toe-to-dash panels, leaf springs, frame and suspension components and reinforcements. In addition to unexposed components and assemblies, the Company has the capability and expertise to produce Class A surfaces such as door assemblies, door apertures, rocker panels, fuel filler doors, and box side outers, which require virtually flawless finishes and more stringent customer requirements than unexposed assemblies. These products require superior engineering and automated manufacturing and assembly capabilities due to their complexity and high volume requirements. While the Company has the capability to produce small stampings, such as brackets and braces, it focuses on more complex and larger components and assemblies which typically generate higher dollar content per vehicle as well as higher margins for the Company. These assemblies, such as the A, B and C pillars, control arms, leaf springs, door assemblies, door apertures, deck lids and radiator supports require larger, high tonnage, wide-bed, fully-automated press capabilities, complex automated weld and hemming assembly, autophoretic corrosion resistant coating, machining, and automated assembly of purchased components. The chart below details by major customer the Company's major products, the type of vehicle and the model/platform for which they are produced: 6 7 (INCLUDES NEW BUSINESS AWARDS THRU 6/25/98)
CUSTOMER TYPE MODEL/PLATFORM COMPONENTS SUPPLIED - -------- ---- -------------- ------------------- General Motors Sport Utility Suburban/Tahoe/Yukon Door Assemblies, Door Apertures, Rocker Panels, Lower Control Arms, Wheel Moldings Sport Utility Blazer/Jimmy Leaf Springs, Seat Supports/Rails Sport Utility Pontiac Recon/Buick Signia (2000 Launch) Door Assemblies, Tailgate Assemblies, Hoods, Floor Assemblies, Rocker Panels, Rail Assemblies Light Truck S10/Sonoma Pickup Leaf Springs Light Truck C/K Crew Cab Pickup Door Apertures, Wheel Moldings Light Truck C/K Pick Up Lower Control Arms (4 Wheel Drive), Rocker Panels, Wheel Moldings Light Truck C/K Pick Up (Mexico) Class A Blanks Mini-Van Astro/Safari Struts, Lower Control Arms (All Wheel Drive), A Pillars, Leaf Springs Vans Savanna/Express Leaf Springs, Pillar Reinforcements, Latches, Supports Medium Duty Commercial Chassis Leaf Springs, Toe-to-Dash Panel Medium Duty Kodiak Floor Assembly, Fuel Tank Straps, Raised Roof Panel Passenger Car Saturn SC Deck Lid, Pillar Reinforcement, Inner Doors, Window Frame Reinforcement Passenger Car Saturn SC/SL/SW (1999 Launch) Underbody Rails Passenger Car Saturn LS (1999 Launch) Body Side Inners, Door Assemblies, Shelf Panel, Wheel House Inners, Radiator Support, Heat Shield, Gas Tank Shield Passenger Car Grand Prix, Regal, Intrigue, Monte Radiator Supports Carlo, Lumina Passenger Car Corvette Floor Panels Passenger Car EV1 Floor Panels, Wheel Houses Passenger Car Malibu, Cutlass Sun Roof Assembly Passenger Car Grand Am, Alero Door Beams Passenger Car Park Avenue, Riviera, Aurora, Seville, Rocker Panels Deville Passenger Car Joy, Swing, Monza (Mexico) Class A Blanks, Floor Pan Assemblies Passenger Car Cavalier/Sunfire (Mexico) Floor Pan Assemblies Ford Sport Utility Explorer, Mountaineer Rear Floor Reinforcement, Center Body Pillar, B-Pillar Assembly, Leaf Springs Sport Utility Expedition, Navigator Control Arms Light Truck F Series Pickup Control Arms, Load Floor, Leaf Springs Light Truck Ranger, Mazda Pickup A Pillar, Upper/Lower Back Panel, Roof Panel, Windshield Header, Box Side Outer, Leaf Springs Van Windstar Rear Floor Assembly, Dash Panel, Rear Crossmembers, Cowl Sides, Radiator Support Van Econoline Roof Rails, A-Pillar, Floor Pan, Shock Tower, Fuel Filler Doors, Leaf Springs, Brackets, Latches Passenger Car Contour/Mystique/Mondeo (Europe) Front & Rear Control Arms, Rear Suspension Bar Assembly, Brackets Passenger Car Cougar Front & Rear Control Arms, Rear Suspension Bar Assembly, Brackets Ford/Nissan Mini-Van Villager, Quest Leaf Springs Chrysler Sport Utility Cherokee Control Arms Light Truck Dakota Leaf Springs, Control Arms (1999 Launch) Sport Utility Durango Skid Plates, Brackets, Control Arms (1999 Launch) Light Truck Ram Pickup Control Arms Minivan Extended Voyager/Caravan, AWD Eurostar Leaf Springs (Europe) Isuzu Medium Duty NPR/W4 Truck Leaf Springs CAMI Sport Utility Tracker/Sidekick Rear Bumper, Side Frame Member, Door Inner Reinforcement, Floor Bar, Underbody Components Passenger Car Metro/Swift Rear Cross Members, Side Sill, Dash Panel
8 The Company has received purchase orders for production commencing after the current model year, which production typically continues through the product's life cycle and is subject to the volume requirements of customers, for the following major products: (i) the new Saturn LS Program, which management believes will generate approximately $65.0 million of annual net sales beginning with the 1999 model year, (ii) the 1999 Ford Windstar-radiator support, which management believes will generate approximately $7.2 million of annual net sales, (iii) the GMT 250 Program, which management believes will generate approximately $85.0 million of annual net sales beginning in 1999, (iv) the 2001 Chrysler Durango/Dakota control arms, which management belives will generate approximatley $8.5 million of annual sales beginning in 2000 and (v) the 1999 CAMI J2, which management believes will generate approximately $4.0 million of annual net sales beginning in 1998. DESIGN AND ADVANCED ENGINEERING The Company strives to maintain a technological advantage through investment in product development and advanced engineering capabilities that utilize structured program management techniques in an effort to exceed the customer's expectations for value and service. The Company's engineering staff encompasses such disciplines as program management, computer aided design ("CAD"), virtual prototyping, draw die and process simulation, advanced engineering, manufacturing feasibility, and tooling and process development. Responsibilities of the Company's engineers include (i) design, (ii) initial prototype development, (iii) design and implementation of manufacturing processes, (iv) production feasibility and improvement, and (v) data management. As the Company's customers continue to outsource larger assembled systems which must be designed at earlier stages of vehicle development rather than the smaller parts which are attached to them, the Company is increasingly required to utilize advanced engineering resources early in the planning process. Advanced engineering resources create improved engineering design, CAD feasibility studies, working prototypes and testing programs to meet customer specifications. Given this increased demand for early involvement in the design and engineering aspects of production development, the Company established a new technical center which houses its engineering and design group. The Company utilizes structured program management based on the Automotive Industry Action Group sanctioned Advanced Part Quality Planning principles to ensure part quality in all phases of design and manufacturing. The Company has established a data management and CAD department which is able to support all major customer systems. The Company provides "gray box" engineering capabilities in which the customer has 8 9 principal design responsibility while the Company's engineers work closely with the customer in designing the specifications of the product material, the part to be produced and the tooling required to produce the finished product. The Company is also on-line with all major customers which accelerates the process of design changes. The Company's design and advanced engineering expertise is an important differentiating factor in maintaining its relationships with and obtaining new business from Ford, GM, and Chrysler and, in management's judgment, was an essential factor in winning the LS Program business. CUSTOMERS AND MARKETING The Company supplies its products on a long-term preferred and sole source basis, primarily to GM (54%), Ford (31%), Chrysler (9%), CAMI (2%), and Saturn (2%) (percentages are approximates of net sales for the fiscal year ended as of March 31, 1998) with the remaining net sales comprised of sales primarily to other automotive suppliers. The Company has been providing products directly to GM and Ford for more than 50 years and directly to Chrysler for more than 20 years. The Company currently has locations in Mexico and Venezuela and provides components for OEMs doing business in Mexico and South America. The Company believes its presence in Mexico is strategically important and has led to several significant new opportunities (e.g. GMT 250 Program) with OEMs doing business in Mexico. The Company also believes the Venezuelan joint venture provides further entree into Latin and South American markets. Metalcar's production capabilities and strong management team will provide the Company the means to further penetrate these markets not only for springs, but also metal stamping and other Company products. The Company maintains very strong relationships with its customers and continually strives to exceed customer expectations and anticipate customer needs. This approach has enabled the Company to maintain its status as a long-term supplier with each of its major customers and as part of a limited group of preferred suppliers invited to bid for platform work. With the efforts by the OEMs to reduce the product development cycle time, top suppliers are increasingly included in the early design and development stages. For example, the Company obtains many of its new orders through a presourcing process by which the customer invites one or a few preferred suppliers to manufacture and design a component, assembly or module that meets certain price, timing and functional parameters. Upon selection at the development stage, the Company and the customer typically agree to cooperate in developing the product to meet the specified parameters. Upon completion of the development stage and the award of the manufacturing business, the Company receives a blanket purchase order for those components, assemblies or modules for the life of a vehicle model or platform, which typically range from five to seven years. Consequently, the key success factors for OEM suppliers now include total program management that encompasses state-of-the-art design, reduced launch cycle times, manufacture and delivery of high quality products at competitive prices. The Company believes that the advanced engineering and sales organization at the Company's technical center offers services few other suppliers have available for their customers. The group's primary activities are: (i) Quoting/Cost Estimating; (ii) Assembly/Automation; (iii) CAD Design and Data Control; (iv) Virtual prototyping; (v) Draw die simulation (vi) Tool Process/Design; and (vii) Program Management. The sales group is divided into customer oriented business units, each with a business unit manager responsible for all facets of customer needs, as well as strategies for growing their particular customer base. The entire group is dedicated to advanced technical development and servicing a multitude of customers' needs as one team. RAW MATERIALS The cost of raw materials represented approximately 54.7% of net sales of the Company for the fiscal year ended March 31, 1998 and steel represented approximately 69% of total raw materials purchases for the fiscal year ended March 31, 1998. The Company expects to purchase nearly 360,000 tons of steel in fiscal 1999 for use in its 9 10 production. The remaining 31% of raw materials purchases for fiscal 1998 represents various purchased parts such as forgings, bushings, ball joints, isolators, corrosion resistant coating, and various fasteners. The Company participates with respect to the majority of its platforms in steel purchase programs through Ford, GM and Chrysler wherein the steel is purchased by the OEM from the steel mill and sold to the Company at a negotiated price. These purchase programs effectively neutralize the exposure to steel price increases, as any price increases from the steel mills are either absorbed by the OEM prior to the Company's purchase of the steel or such increases are reflected in the Company's purchase of the steel and passed back to the OEM in the product pricing. COMPETITION The market for the Company's products is characterized by strong competition from both captive OEM suppliers and external, non-captive suppliers. The Company competes with a limited number of competitors that have the physical assets and technical resources to produce large bed stampings, complex parts and subassemblies of multiple parts. The Company's largest competitors include The Budd Company, a subsidiary of Thyssen AG; Magna International Inc.; Tower Automotive, Inc.; Aetna Industries, Inc.; Ogihara America Corp., a subsidiary of Marubeni Corp.; Midway Products Corporation; Active Tool & Manufacturing Co., Inc.; A.G. Simpson Automotive, Inc.; Mayflower Vehicle Systems Inc.; L&W Engineering; National Automotive Radiator Manufacturing Company; and divisions of OEMs with internal stamping and assembly operations. The Company competes for business at the beginning of the development for new model platforms, as well as the redesign of current models. This process can begin from two to five years prior to the introduction of the new model. After the customer awards a program, that supplier is generally designated as the sole source supplier for the life of that program, which typically lasts 4 to 5 years for passenger cars and up to 10 years for trucks (particularly for unexposed structural components and assemblies). EMPLOYEES At June 1, 1998, the Company employed approximately 3,800 persons in the United States, Canada and Mexico, approximately 700 of whom are employed on a salaried basis and the balance of whom are hourly employees. Substantially all of the Company's hourly employees are represented by various local unions through collective bargaining agreements. These individual agreements which are from three to five years in length expire over the period February 1999 through March 2003. In 1994, the Company, through the recently acquired Suspension Division, experienced a 2-week work stoppage at the Chatham, Ontario facility. Other than this, the Company has not experienced any organized work stoppages at any time during the past ten years. At the present time, the Company believes that its relations with its employees are good. REGULATORY MATTERS The Company's facilities and operations are subject to a wide variety of federal, state, local, and foreign environmental laws, regulations, and ordinances, including those related to air emissions, wastewater discharges, and chemical and hazardous waste management and disposal ("Environmental Laws"). The Company's operations also are governed by laws relating to workplace safety and worker health, primarily the Occupational Safety and 10 11 Health Act, and foreign counterparts to such laws. In many jurisdictions, these laws are complex and change frequently. The nature of the Company's operations exposes it to risks of liabilities or claims with respect to environmental and worker health and safety matters. At March 31, 1998, the Company has a liability of approximately $1.7 million recorded for estimated costs of known environmental matters. There can be no assurance that material costs will not be incurred in connection with such liabilities or claims. See Note 14 of Notes to Consolidated Financial Statements included in this Report. Based on the Company's experience to date, the Company believes that the future cost of compliance with existing Environmental Laws (or liability for known environmental claims) will not have a material adverse effect on the Company's business, financial condition or results of operations. However, future events, such as changes in existing Environmental Laws or their interpretation, may give rise to additional compliance costs or liabilities that could have a material adverse effect on the Company's business, financial condition or results of operations. Compliance with more stringent Environmental Laws, as well as more vigorous enforcement policies of regulatory agencies or stricter or different interpretations of existing Environmental Laws, may require additional expenditures by the Company that may be material. Certain Environmental Laws hold current owners or operators of land or businesses liable for their own and for previous owners' or operators' releases of hazardous or toxic substances, materials or wastes, pollutants or contaminants, including petroleum and petroleum products ("Hazardous Substances"). Certain laws, including but not limited to CERCLA, may impose joint and several liability on responsible parties. Because of the Company's operations, the long history of industrial uses at some of its facilities, the operations of predecessor owners or operators of certain of the businesses, and the use, production, and releases of Hazardous Substances at these sites, the Company is affected by such liability provisions of the Environmental Laws. Several of the Company's facilities have experienced some level of regulatory scrutiny in the past and are or may be subject to further regulatory inspections, future requests for investigation or liability for past disposal practices. The Company's Alma, Michigan plant is listed on the Michigan Department of Environmental Quality ("MDEQ") list of Michigan Sites of Environmental Contamination. Based on filings with the MDEQ by the current owner of the petroleum refinery which adjoins the Alma Plant property, the refinery has been determined by the MDEQ to be the source of certain contamination existing in the eastern area of the Alma plant property. While the Company is currently conducting certain remedial activity at its Alma plant in connection with this contamination, the Company may have claims against the refinery owner relating to this contamination. While the Company does not expect to incur significant future costs in connection with this matter, the Company cannot guarantee that such future costs will not be material. The Resource Conservation and Recovery Act and the regulations thereunder ("RCRA") regulates the generation, treatment and disposal of hazardous wastes. In the mid-1980s, the Company, through Lobdell, entered into a Consent Agreement and Final Order with the United States Environmental Protection Agency (the "EPA") relating to the final closure of a surface water impoundment area at the Alma plant under RCRA. The Company has remediated the impoundment soils and sediments and is now implementing a groundwater monitoring program with EPA approval under RCRA. In addition, the Company is conducting groundwater monitoring in a separate section of the Alma plant at which contaminants have been detected by the Company's consultants. Both of these programs may be affected by the suspected contamination from the petroleum refinery described above. While future groundwater remediation costs, if any, are not expected to be material, the Company cannot predict such costs with certainty and no guarantee can be made that these costs will not be material. 11 12 The Company has been named as a potentially responsible party, along with several other companies, in connection with a former disposal facility located in the St. Louis, Michigan area. The Company and certain other named parties, in cooperation with the State of Michigan, currently are undertaking a remedy for which they are sharing costs. Groundwater at the site is currently being monitored and while the costs of groundwater remediation, if any, are not expected to be material, the Company cannot accurately estimate such costs at this time. On April 1, 1998, the Company acquired the Suspension Division and is in the process of addressing certain environmental concerns. Eaton Corporation has agreed to retain and reimburse the Company for all known environmental liabilities for which claims are made prior to April 1, 2008 arising from the operation of the acquired facilities prior to the acquisition of the Suspension Division, including the present remediation efforts. Eaton Corporation has also agreed to retain and reimburse the Company for all unknown environmental liabilities arising from the operation of the acquired facilities prior to the acquisition of the Suspension Division, for which claims are made prior to April 1, 2000, up to a $1.5 million aggregate cap. While there can be no assurance that all costs associated with such matters will ultimately be reimbursed by Eaton Corporation, the Company does not currently believe that any liability associated with such matters will be material to the Company. FORWARD LOOKING STATEMENTS This report contains statements relating to such matters as anticipated financial performance, business prospects and other matters that may be construed as forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. In addition, the Company may from time to time publish or communicate other statements that could also be construed to be forward-looking statements. These statements are or will be based on the Company's estimates, assumptions and projections, and are subject to risks and uncertainties, including those specifically listed below, that could cause actual results to differ materially from those included in the forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of operations of the Company include the following: (1) the OEM supplier industry is highly cyclical and, in large part, impacted by the strength of the economy generally, by prevailing interest rates and by other factors which may have an effect on the level of sales of automotive vehicles; (2) future price reductions, increased quality standards or additional engineering capabilities may be required by the OEMs, which are able to exert considerable pressure on their suppliers; (3) the OEMs may decide to in-source some of the work currently performed by the Company; (4) work stoppages and slowdowns may be experienced by OEMs and their Tier 1 suppliers, as a result of labor disputes; (5) there may be a significant decrease in sales of vehicles using the Company's products or the loss by the Company of the right to supply any of such products to its major customers; (6)increased competition could arise in the OEM supplier industry; and (7) changing federal, state, local and foreign laws, regulations and ordinances relating to environmental matters could affect the Company's operations. ITEM 2. PROPERTIES. The Company's corporate headquarters, engineering, technical center and sales offices are currently located in Troy, a suburb of Detroit, Michigan, close to its core of automotive customers. The Company's manufacturing plants are strategically located near OEM manufacturing sites. The Company currently operates over 380 presses ranging from under 100 ton to 2,500 ton capabilities. The Company is capable of producing components and assemblies from the smallest brackets to full-size, Class 12 13 A door and closure panels with its unique wide-bed (180 inch), automated press lines. Production systems include oil feeders, welding robots, pick and place robots and other state-of-the-art automation, as well as autophoretic corrosion resistant coating systems. As OEMs have increased quality standards and implemented just-in-time and sequenced delivery/inventory management methods, the consistency of quality, as well as the timeliness and reliability of shipments by OEM suppliers, have become crucial in meeting logistical demands of the OEMs and reducing operating costs of the supplier. The Company has responded by developing and adopting manufacturing practices that seek to maximize quality and eliminate waste and inefficiency in its own operations and in those of its customers. The Company's manufacturing and engineering capabilities enable it to design and build high-quality, efficient manufacturing systems, processes and equipment. The Company has invested heavily in its commitment to quality through education of employees and implementation of cost management and control systems from the plant floor up. All suppliers are required to meet numerous quality standards in order to qualify as a preferred and long-term supplier to the OEMs. The QS-9000 standards were developed by international and domestic automobile and truck manufacturers to ensure that their suppliers meet consistent quality standards that can be independently audited. The QS-9000 standards provided for the standardization and documentation of a supplier's policies and procedures to improve suppliers' efficiencies. The Company is scheduled to meet the current qualification requirements of its customers. In addition to the QS-9000 standard, each OEM maintains its own certification or award system for preferred suppliers based on the supplier's demonstrated quality, delivery and certain commercial considerations. Ford requires that all suppliers receive its Q1 rating in order to quote for new production business. GM's Supplier of the Year Award provides certain competitive advantages to the recipients but is not a requirement for current GM suppliers to bid on new business. Chrysler allows suppliers who have received its Gold Pentastar Award to retain any current business when it is replaced by a new model without competitive bidding. Other OEMs maintain various award programs for their suppliers that recognize outstanding performance by the supplier. The Company has received Chrysler's Gold Pentastar Award for each of its facilities that have Chrysler as a customer. The Company has the Q1 rating from Ford at 9 of the 10 plants that are required to have the Q1 rating. The Company has initiated steps necessary to obtain the Q1 rating at this plant. The Company believes that this plant has met the minimum standards, is in the final phase for approval, and will be awarded the Q1 rating by September 1998. If this plant does not obtain the Q1 rating, it would be precluded from quoting on new Ford business and the Company would likely consolidate its Ford production in its other Q1 rated plants. A summary of the Company's major facilities, including the facilities of the Company's less than majority owned affiliates is set forth below:
SIZE FACILITY (SQ. FT.) -------- ------- Alma, Michigan 389,000 Argos, Indiana 386,000 Corydon, Indiana 200,000
13 14 Greencastle, 214,000 Indiana Cambridge, Ontario 290,000 Delhi, Ontario 115,000 Athens, Tennessee 100,000 Masury, Ohio 150,000 Lapeer, Michigan 85,000 Prudenville, 76,000 Michigan Oscoda, Michigan 57,000 Hamilton, Indiana 85,000 Chatham, Ontario 190,000 Wallaceburg, 240,000 Ontario Saltillo, 20,000 Mexico(1) Silao, Mexico(1) 42,000 Troy, Michigan(1) 34,000 Valencia, 122,000 Venezuela(2)
- ----------------- (1) All properties above are owned, with the exception of the Silao and Saltillo facilities and the Troy office. These properties are leased with lease expiration dates ranging from December 1999 to June 2005. (2) Owned by Metalurgica Carabobo, S.A., a Venezuelan joint venture of which the Company has a 49% interest. The Company is in the planning stage of a new facility in Ramos Arizpe, Mexico. The 300,000 sq.ft. facility will support the GMT 250 Program as well as other customer opportunities. ITEM 3. LEGAL PROCEEDINGS. The Company is subject to various claims, lawsuits and administrative proceedings related to matters arising in the normal course of business. In the opinion of management, after reviewing the information which is currently available with respect to such matters and consulting with legal counsel, any liability which may ultimately be incurred with respect to these matters will not materially affect the financial position of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of the Company's security holders during the fourth quarter ended March 31, 1998. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. There is no established trading market for any class of common equity of the Company. As of June 1, 1998, there were 21 shareholders of record of the Company's common stock. The Company has not paid cash dividends during the past two fiscal years and does not plan to pay cash dividends in the near term. The Company is restricted in its ability to pay dividends under the terms of the Indenture governing its 10-1/8% Senior Subordinated Notes due 2007 (the "Indenture") and the terms of its Credit Agreement (the "Senior Credit Facility") dated June 24, 1997, with NBD Bank, on behalf of itself and as agent for a syndicate of other lenders. 14 15 The Company did not sell any equity securities during the year ended March 31, 1998 that were not registered under the Securities Act of 1933, as amended. ITEM 6. SELECTED FINANCIAL DATA The following table sets forth (i) the selected consolidated historical financial data of BMG (the "Predecessor") for the years ended March 31, 1994 and 1995 which was derived from the audited consolidated financial statements of the Predecessor, (ii) selected consolidated historical financial data of the Predecessor for the period from April 1, 1995 through October 27, 1995, and (iii) selected consolidated historical financial data of the Company from October 28, 1995 through March 31, 1996 and the years ended March 31, 1997 and 1998. The selected consolidated historical financial data for the period April 1, 1995 through October 27, 1995; and the period October 28, 1995 through March 31, 1996 was derived from the audited consolidated financial statements of the Predecessor and the Company, which are included elsewhere in this Report, together with the report of Deloitte & Touche, independent accountants. The selected consolidated historical financial data for the years ended March 31, 1997 and 1998 was derived from the audited consolidated financial statements of the Company, which are included elsewhere in this Report, together with the report of Price Waterhouse LLP, independent accountants. The following table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the Consolidated Financial Statements of the Company and the related notes and other financial information presented elsewhere in this Report. 15 16
HISTORICAL ------------------------------------------------------------------------------ PREDECESSOR COMPANY ---------------------------------------- ------------------------------------------ APRIL 1, OCTOBER 28, 1995 - 1995 - MARCH 31, MARCH 31, OCTOBER 27, MARCH 31, MARCH 31, MARCH 31, 1994(a) 1995 1995 1996 1997 1998 ----------- ------------ ----------- ----------- ------------- ------------- (dollars in thousands) STATEMENT OF OPERATIONS DATA: Net sales . . . . . . . . . . . . $65,182 $75,097 $49,043 $35,572 $136,861 $410,321 Gross profit . . . . . . . . . . 5,955 4,206 2,148 3,948 11,773 41,901 Selling, general and administrative . . . . . . . . 2,164 4,554 3,922 2,235 7,685 21,839 Restructuring provision . . . . . -- -- -- -- -- 1,610 Gain on sale of equipment . . . . -- -- -- -- -- (1,602) Equipment impairment and non- recurring charges(b) . . . . . -- -- -- -- 287 -- ------- ------- ------- ------- -------- -------- Operating income (loss) . . . . . 3,791 (348) (1,774) 1,713 3,801 20,054 Interest expense . . . . . . . . 1,658 1,267 1,048 1,096 3,388 10,710 Other income (expense) . . . . . -- -- -- -- 2,201 321 Income (loss) before income taxes . . . . . . . . . . . . . 2,133 (1,615) (2,822) 617 2,614 9,665 Provision (benefit) for income taxes . . . . . . . . . . . . . 706 (349) (938) 202 1,065 4,074 ------- ------- ------- ------- -------- -------- Net income (loss) . . . . . . . . $ 1,427 $(1,266) $(1,884) $ 415 $ 1,549 $ 5,591 ======= ======= ======= ======= ======== ======== Net income (loss) per share . . . $ -- $ -- $ -- $ 9.10 $ 9.37 $ 13.74 BALANCE SHEET DATA (END OF PERIOD): Cash and cash equivalents . . . . $ 4,261 $ -- $ -- $ -- $ 9,671 $ 18,321 Accounts receivable . . . . . . . 7,936 9,835 13,312 8,338 47,626 65,273 Inventories . . . . . . . . . . . 3,542 4,170 4,429 3,719 13,411 21,305 Total assets . . . . . . . . . . 36,127 41,523 59,770 49,200 243,694 320,032 Total debt . . . . . . . . . . . 13,396 12,907 23,233 26,758 99,829 139,448 Redeemable preferred stock . . . -- -- -- -- 39,300 40,192 Total shareholders equity . . . . 12,406 10,833 9,329 935(c) 2,341 6,118 OTHER DATA: Depreciation and amortization . . $ 1,747 $ 1,413 $ 919 $ 687 $ 5,041 $ 20,279 Capital expenditures . . . . . . 920 4,384 5,111 3,466 3,326 16,723 EBITDA(d) . . . . . . . . . . . . $ 5,538 $ 1,065 $ (855) $ 2,400 $ 11,330 $ 40,654 Gross margin(e) . . . . . . . . . 9.14% 5.60% 4.38% 11.10% 8.60% 10.21%
See Notes to Selected Consolidated Historical Financial Data included with this Report. (a)Reflects the audited financial statements of the Predecessor prepared in accordance with Canadian generally accepted accounting principals, with Canadian dollars being converted to a U.S. dollar equivalent using an average Canadian to U.S. foreign currency exchange rate of 1.3810 for the period ended March 31, 1994. (b)This provision includes income before taxes for the discontinuance of Laserweld International, L.L.C. and Parallel Group International, Inc. Management does not anticipate that these costs will be a part of future operations. (c)The reduction in equity of $8.4 million from October 27, 1995 to March 31, 1996, is primarily a result of the elimination of the Predecessor's equity as a part of the purchase accounting adjustments made upon the acquisition of the Predecessor on October 27, 1995. 16 17 (d)EBITDA is defined as income (loss) before interest, income taxes, depreciation and amortization and equipment impairment and non-recurring charges. EBITDA should not be construed as a substitute for income from operations, net income or cash flow from operating activities for the purpose of analyzing the Company's operating performance, financial position and cash flows. (e)Gross margin is defined as gross profit as a percent of net sales for each of the applicable periods. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following management's discussion and analysis of financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements of the Company and notes thereto included elsewhere in this Report. The historical information for the fiscal year ended March 31, 1997 includes the Lobdell results of operations for the period subsequent to its acquisition. For comparative purposes, the financial information for the fiscal year ended March 31, 1996 represents the combination of the results of operations for the Predecessor for the period from April 1, 1995 to October 27, 1995 together with the results of operations of the Company from October 28, 1995 through March 31, 1996 (the period subsequent to the acquisition of the Predecessor by the Company). The financial statements of the Predecessor and the Company in the two combined periods are not comparable in certain respects due to differences between the cost basis of certain assets held by the Company versus that of the Predecessor, resulting in reduced depreciation and amortization charges subsequent to October 27, 1995, changes in accounting policies and the recording of certain liabilities at the date of acquisition in connection with the purchase of the Predecessor by the Company. Accordingly, the combination of these two periods does not purport to represent what the results of operations of the Company would have been on a pro forma basis had it acquired the Predecessor on April 1, 1995. Fiscal Year Ended March 31, 1998 Compared to Fiscal Year Ended March 31, 1997 Net Sales -- Net sales for the year ended March 31, 1998 were $410.3 million. This represents an increase of $273.4 million as compared to net sales for the fiscal year ended March 31, 1997 of $136.9 million. Net sales for the fiscal year ended March 31, 1997 included net sales of Lobdell only from the acquisition date of January 10, 1997 through March 31, 1997. The increase for the year was due principally from the Lobdell, Howell and RPIH acquisitions ($269.8 million). The balance of the increase related primarily to the strength of light truck and sport utility vehicle production partially offset by the discontinuance of certain customer platforms. On a pro forma basis, had the net sales from all acquisitions been included for the entire fiscal 1998, net sales would have been $453.7 million. Gross Profit -- Gross profit was $41.9 million or 10.2% of net sales for the year ended March 31, 1998 as compared to $11.8 million or 8.6% of net sales for the year ended March 31, 1997. This represents an increase of $30.1 million as compared to the prior year. The gross profit increase is related to the incremental sales resulting from the acquisitions, combined with operating improvements made throughout the year on existing as well as acquired sales. The increase in gross margin is a result of operating improvements through employment and cost reductions, productivity improvements, increased capacity utilization, quality improvements and production schedule attainment. The increased gross profit was partially offset by costs associated with the conversion of Canadian operations to transfer and robotic technology, startup of the Mexican operations and costs associated with the launch of future platforms (Saturn LS, Windstar and Ford Heavy duty pickup (PN 131)). Selling, General and Administrative Expenses ("SG&A") -- SG&A expenses were $21.8 million or 5.3% of net sales as compared to $7.7 million or $5.6% for the year ended March 31, 1997. The decrease as a percentage 17 18 \ of net sales was a result of the efficiencies derived through acquisition integration and cost reduction programs. The financial and administrative functions were consolidated into the Troy office, thereby allowing for the closure of the Alma and Southfield administrative offices. The increase in expenditures is primarily due to the overall growth of the organization during the year and the need to provide the necessary resources to support customer engineering support, global program management and the continued growth initiatives of the organization. Operating Income -- Income from operations was $20.1 million or 4.9% of net sales for the year ended March 31, 1998 as compared to $3.8 million or 2.8% of net sales for the year ended March 31, 1997. For fiscal 1998, operating income benefited from the growth in the light truck and SUV programs as well acquisitions during the year. The increase in operating margin reflects the continued improvement of operations, implementation of cost saving programs and the gain on the sale of equipment of the laser welding operations. Partially offsetting the increase was the recording of restructuring charges as a part of the Company's overall plant rationalization initiatives. Other Income - Other income for the year ended March 31, 1998 was $0.3 million or .07% of net sales as compared to $2.2 million or 1.6% of net sales for the year ended March 31, 1997. The decrease was due primarily to foreign currency exchange transactions gains recorded in Fiscal 1997 which were not present in fiscal 1998. Interest Expense - Interest expense for the year ended March 31, 1998 was $10.7 million or 2.6% of net sales as compared to $3.4 million or 2.5% of net sales for the year ended March 31, 1997. While interest as a percentage of net sales remained relatively flat, the overall increase in expense was due primarily to the issuance of $125.0 million of 10 1/8% Senior Subordinated Notes on June 24, 1997. The Notes represent both incremental borrowing as well as increased interest rate as compared to outstanding debt of the prior period. Proceeds of the Notes were used to payoff existing debt and support the acquisition activities of the Company. The increase in interest expense was partially offset by interest income derived over the year on unused bond proceeds available for short term investment. Income Tax -- Income tax expense was $4.1 million or 1.0% of net sales for the period ended March 31, 1998 as compared to $1.1 million or 0.8% of net sales for the year ended March 31, 1997. The increased income tax of $3.0 million is a result of the $7.1 million increase in income before taxes for the year ended March 31, 1998 as compared to the previous year and an increase in the overall effective tax rate of the Company. Net Income - Net income was $5.6 million or 1.4% of net sales for the year ended March 31, 1998 as compared to $1.5 million or 1.1% of net sales for the year ended March 31, 1997. The improvement of $4.1 million was a result of increased operating and other income of $14.4 million, offset by the increase in interest expense of $7.3 million and income taxes of $3.0 million, respectively. Fiscal Year Ended March 31, 1997 Compared to Fiscal Year Ended March 31, 1996 Net Sales -- Net sales for the year ended March 31, 1997 were $136.9 million, including the net sales of Lobdell from January 10, 1997 (the "Acquisition Date") through March 31, 1997. This was an increase of $52.2 million or 61.7% as compared to net sales for the fiscal year ended March 31, 1996 of $84.6 million. The increase was due principally to the acquisition of Lobdell and was partially offset by lower sales volume due to model changeovers. On a pro forma basis, if Lobdell net sales were included with that of the Company for the entire fiscal year ended March 31, 1997, net sales would have been $330.2 million, an increase of $245.6 million as compared to the prior year, and if Howell and RPIH net sales were also included for fiscal 1997, net sales would have been $433.4 million, an increase of $348.8 million as compared to the prior year. Gross Profit -- Gross profit was $11.8 million or 8.6% of net sales for the year ended March 31, 1997 as compared to $6.1 million or 7.2% of net sales for the year ended March 31, 1996. This represents an increase of 18 19 $5.7 million, or 93.4% as compared to the prior year. The increase was primarily a result of higher margins on Lobdell sales for the eighty day period from the Acquisition Date through March 31, 1997. Gross profit also increased due to (i) workforce reductions, (ii) improved materials cost management which resulted in lower raw material costs and (iii) strong sales in the light truck and SUV markets, the Company's largest sales segments and those which produce its highest margins. The increased gross profit was partially offset by costs associated with the production launch of the Saturn Coupe stampings. Selling, General and Administrative Expenses ("SG&A") -- SG&A expenses were $7.7 million or 5.6% of net sales for the year ended March 31, 1997 as compared to $6.2 million or 7.3% of net sales for the year ended March 31, 1996. The decrease as a percentage of net sales was a result of efficiencies and cost reduction programs undertaken by Company management. Specifically, the reduction in SG&A expenses as a percentage of net sales resulted from a restructuring of the sales and product engineering functions into customer focused business units. Operating Income -- Income from operations was $3.8 million or 2.8% of net sales for the year ended March 31, 1997 as compared to a deficit of $0.1 million for the year ended March 31, 1996. The improvement of $3.9 million was a result of improved gross profit of $5.7 million, partially offset by increased SG&A expenses of $1.5 million. Other Income -- Other income for the year ended March 31, 1997 was $2.2 million or 1.6% of net sales due primarily to foreign currency exchange transactions. No significant other income was earned for the year ended March 31, 1996. Interest Expense -- Interest expense for the year ended March 31, 1997 was $3.4 million or 2.5% of net sales, an increase of $1.3 million over the interest expense for the year ended March 31, 1996. While interest expense for both periods remained constant at 2.5% of net sales, the increase of $1.3 million was a result of variations in base lending rates and additional borrowings resulting from the acquisition of Lobdell. Income Tax -- Income tax expense was $1.1 million or 0.8% of net sales for the period ended March 31, 1997 as compared to a benefit of $0.7 million or 0.8% of net sales for the year ended March 31, 1996. The increased income tax expense of $1.8 million is a result of the $4.8 million increase in income before taxes for the year ended March 31, 1997 as compared to the previous year. Net Income -- Net income was $1.5 million or 1.1% of net sales for the year ended March 31, 1997 as compared to a loss of $1.5 million or 1.8% of net sales for the year ended March 31, 1996. The improvement of $3.0 million was a result of improved operating income of $3.9 million and increased other income of $2.2 million. The increase in net income was partially offset by increased interest expense and income taxes of $1.3 million and $1.8 million, respectively. 19 20 LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION Net income adjusted for non-cash charges generated approximately $24.2 million of cash for the year ended March 31, 1998. Cash also increased during the period based on overall increases in trade accounts payable of $11.4 million and refundable income taxes of $2.9 million. Offsetting the increase in cash for fiscal 1998 was a net increase in accounts receivable, customer tooling, and other working capital requirements of $13.0 million. The increase in customer tooling is primarily a result of progress payments made to tooling vendors to support scheduled program launches set for fiscal 1999 (Saturn LS, Ford Windstar and CAMI J2). During the year, the Company used approximately $43.2 million for investing activities, including the acquisitions of Howell and RPIH, as well as the purchase of an equity interest in a publicly traded automotive supplier. The overall cash requirements were funded by approximately $26.3 million of incremental borrowings. The Company has $ 98.7 million available under the Senior Credit Facility. At March 31, 1998, the Company had $1.8 million outstanding under the line of credit and $9.5 million in outstanding letters of credit to support certain Industrial Development Revenue Bonds and workers compensation commitments. During fiscal 1998, the Company received net proceeds of $37.6 million from its offering of $125.0 million of its 10 1/8% Senior Subordinated Notes due 2007 (the "Series A Notes"), after payment of approximately $83.1 million to refinance existing indebtedness and approximately $4.3 million in issuance costs. The Company used approximately $23.2 million and $2.5 million respectively toward the acquisitions of Howell and RPIH and related expenses. The remainder of the proceeds were used for general corporate purposes and in part to fund the acquisition of the Suspension Division. The balance of the Suspension Division acquisition was funded by the issuance of an additional $35.0 million of 10 1/8% Senior Subordinated Notes Due 2007, Series B ("Series B Notes"). The Series B Notes were issued April 1, 1998 and are substantially identical to, and rank pari passu in right of payment with the Series A Notes. The Company believes the proceeds of the Series A and Series B Notes have enhanced its ability to meet its growth and business objectives. However, interest payments on the Notes will represent a significant liquidity requirement for the Company. The Company will be required to make scheduled semi-annual interest payments on the Notes of approximately $8.1 million on June 15 and December 15 each year until their maturity on June 15, 2007 or until the Notes are redeemed. Cash outlays for capital expenditures were $16.7 million, or 4.1% of net sales for the year ending March 31, 1998 as compared to $3.3 million, or 2.4% of net sales for the year ended March 31, 1998. The increase of $13.4 million was due primarily to the inclusion of acquisitions, the start up of two Mexican operations ($3.7 million) and the development of a corporate Technical and Administrative center ($1.3 million). Other capital expenditures included investments to support new business (primarily the 1999 model year Saturn LS (previously designated Innovate), and Ford's Windstar and CAMI's J2, each due to launch during the summer of 1998), press equipment and rebuilds, safety and maintenance equipment, automation and other productivity improvement expenditures, and other items including computers and welding equipment. For fiscal 1999, the Company's capital expenditures are expected to be $34.7 million; consisting of a $15.8 million investment to support new business and increase capacity; $4.2 million for tooling and quality projects; $5.3 million for press automation, rebuilds and improvements; $3.7 million in productivity and cost improvements; and $5.7 million in other expenditures, including health, safety, environmental and maintenance items. 20 21 The Company believes that the operations of the Suspension Division will enhance the Company's ability to develop key suspension components. The Company believes that the acquisition of the Suspension Division will have a positive impact on the Company's results of operations for the fiscal year ending March 31, 1999 and thereafter. The Company believes that cash generated from operations, together with amounts available under the Senior Credit Facility will be adequate to meet its debt service requirements, capital expenditures and working capital needs for the foreseeable future, although no assurance can be given in this regard. The Company's future operating performance and ability to service or refinance the Series A and Series B Notes and to extend or refinance its other indebtedness will be subject to future economic conditions and to financial, business and other factors that are beyond the Company's control. IMPACT OF GENERAL MOTORS STRIKE A substantial portion of General Motors vehicle production has been shut down due to two local strikes in Flint, Michigan. GM is a significant customer of the Company and any prolonged shutdown would have a material adverse effect on the Company's results of operations for the fiscal year ended March 31, 1999. While the Company is unable to predict the duration and ultimate impact of these strikes, it is currently taking necessary actions to minimize the adverse impact. YEAR 2000 The Company is currently working to resolve any potential impact of the Year 2000 on the processing of information by the Company's information systems. The Year 2000 problem is a result of a date problem , where computer hardware and/or computer programs rely on a two-digit year for processing. Incorrect calculations, system failures, or misrepresentations resulting from the change in century are being addressed by following a process defined by the Auto Industry Action Group (AIAG). This process includes creating an inventory of all computer-related equipment and software programs, determining their compliance to proper Year 2000 processing capabilities, remediating any identifiable problems, and testing each item for compliance. The Company is utilizing both internal employees and external contractors for inventory, remediation, and testing activities. Having completed the inventory, the Company believes that the Year 2000 remediation and testing activities will not have a material impact on the Company's financial position, results of operations, or cash flows in future periods. Software and hardware upgrades and updates will be expensed, while any major replacements will be leased or capitalized and amortized over the useful life of the equipment. Most of these potential hardware upgrades occur regularly as a normal part of business through technology changes. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements and schedules filed herewith are set forth on the Index to Financial Statements and Financial Statement Schedules on page F-1 of the separate financial section of this Report and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. The information relating to changes in accountants was previously filed by the Company in its Registration Statement on Form S-4, Registration No. 333-32975. 21 22 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the name, age and position of each of the directors and executive officers of Oxford Automotive. Each director of Oxford Automotive will hold office until the next annual meeting of shareholders or until his successor has been elected and qualified. Officers of Oxford Automotive serve at the discretion of the Board of Directors.
NAME AGE POSITIONS - ---- --- --------- Selwyn Isakow........... 46 Chairman of the Board of Directors Rex E. Schlaybaugh, Jr.. 49 Vice Chairman of the Board of Directors and Secretary Steven M. Abelman....... 47 Director, President and Chief Executive Officer Manfred J. Walt......... 45 Director Donald C. Campion....... 49 Senior Vice President-Chief Financial Officer Larry C. Cornwall....... 51 Senior Vice President-Sales and Engineering John H. Ferguson........ 50 Vice President-Financial Operations and Assistant Secretary
Selwyn Isakow, Chairman of the Board of Directors. Mr. Isakow has been and a director of Oxford Automotive since its inception in 1995, was the President of Oxford Automotive from 1995 to May 1997, and was appointed Chairman of the Board in May 1997. Since 1985, Mr. Isakow has been the President of The Oxford Investment Group, Inc. ("Oxford Investment"), a private investment and corporate development company that acquires majority equity positions on behalf of its principals in industrial products manufacturing, financial services, niche distribution and other selected companies. Mr. Isakow generally serves as Chairman of the Board and a director of all such portfolio companies. Mr. Isakow is also a director of Champion Enterprises, Inc. and Ramco Gershenson Properties Trust, and serves on the boards of numerous community organizations. From 1982 to 1985, Mr. Isakow was the Executive Vice President of Comerica Incorporated, a regional bank holding company, and from 1978 to 1982, was a principal at Booz, Allen and Hamilton, management consultants. Rex E. Schlaybaugh, Jr., Vice Chairman of the Board of Directors and Secretary. Mr. Schlaybaugh has been the Secretary and a director of Oxford Automotive since its inception in 1995 and was appointed Vice Chairman of the Board in May 1997. Mr. Schlaybaugh was appointed the Vice Chairman of Oxford Investment in May 1997. Mr. Schlaybaugh has been a member of the firm of Dykema Gossett PLLC since 1985. Mr. Schlaybaugh is also a director of certain other portfolio companies of Oxford Investment. Mr. Schlaybaugh is currently the Chairman of the Board of Trustees of Oakland University. Steven M. Abelman, Director, President and Chief Executive Officer. Mr. Abelman was appointed President and Chief Executive Officer of Oxford Automotive in May 1997. Prior to joining Oxford Automotive, Mr. Abelman was Deputy Chief Executive Officer of Bundy North America ("Bundy"), an automotive supplier of brake and fuel 22 23 delivery systems, from February 1996 until May 1997 and prior to that he was President of Bundy from September 1995 until February 1996. From December 1991 to September 1995, Mr. Abelman was Vice President and General Manager of Augat Wiring Systems, a manufacturer of automotive wiring systems and components. Manfred J. Walt, Director. Mr. Walt has been a director of Oxford Automotive since May 1997. Mr. Walt has been the Executive Vice President and Chief Financial Officer of Central Park Lodges Ltd., a Canadian assisted living company located in Toronto, Canada, since May 1998. From October 1997 to May 1998, Mr. Walt was the Sr. Vice President of Gentra, Inc., a Real Estate Company based in Toronto, Canada. From 1989 to September 1997, Mr. Walt was the Managing Partner-Financial Services of Edper Brascan Corporation ("Edper"), a diversified natural resources, energy and property development company. Gentra, Inc. is an affiliate of Edper. From 1980 to 1989, Mr. Walt served in various capacities with Edper. Donald C. Campion, Senior Vice President-Chief Financial Officer. Mr. Campion was appointed Senior Vice President-Chief Financial Officer of Oxford Automotive in July 1997. From June 1996 to March 1997, Mr. Campion was the Senior Vice President and Chief Financial Officer at Delco Electronics Corporation. From November 1993 to May 1996, Mr. Campion was the Chief Financial Officer for the services parts division of GM, and from August 1992 to October 1993 was the Financial Director of Performance Analysis for the North American Operations of GM. Larry C. Cornwall, Senior Vice President-Sales and Engineering. Mr. Cornwall was appointed Vice President-Sales and Engineering of Oxford Automotive in May 1997. From October 1995 to May 1997, Mr. Cornwall was the Senior Vice President-Sales and Engineering at BMG. From 1991 to 1995, Mr. Cornwall was Vice President of Sales and Engineering at Veltri International, an automotive stamper. John H. Ferguson, Vice President-Financial Operations and Assistant Secretary. Mr. Ferguson was appointed as a Vice President-Financial Operations and Assistant Secretary of Oxford Automotive in May 1997. Mr. Ferguson is also the Chief Financial Officer of BMG, a position he has held since April 1996. Prior to that time, Mr. Ferguson was with Bundy, where he acted as Group Plant Manager from 1994 to 1996 and as Corporate Controller from 1992 to 1994. From 1984 to 1992, Mr. Ferguson held several positions with GenCorp. Inc., an automotive tire supplier, including Controller of the Automotive Products Group. Certain of the officers and directors of Oxford Automotive are also directors or officers of Oxford Automotive subsidiaries. BOARD COMMITTEES In the past, the Company has not maintained any committees of the Board of Directors. On August 4, 1997, the Board of Directors established an Audit Committee and a Compensation Committee. The Audit Committee will be responsible for reviewing with management the financial controls and accounting and reporting activities of the Company. The Audit Committee will review the qualifications of the Company's independent auditors, make recommendations to the Board of Directors regarding the selection of independent auditors, review the scope, fees and results of any audit and review non-audit services and related fees. The Audit Committee consists of Messrs. Schlaybaugh and Walt. The Compensation Committee will be responsible for the administration of all salary and incentive compensation plans for the officers and key employees of the Company, including bonuses. Salaries and bonuses will be reviewed by the Compensation Committee and will be adjusted in light of performance of the Company, the responsibilities of each of the Company's officers in meeting corporate performance objectives and other 23 24 factors, such as length of service and subjective assessments. The Compensation Committee consists of Messrs. Isakow and Walt. ITEM 11. EXECUTIVE COMPENSATION. The following table sets forth certain information as to the compensation earned by the Company's Chief Executive Officer and the Company's four other most highly paid officers (the "Named Executive Officers") for the last three fiscal years. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION (1) -------------------------------------------------------- OTHER ANNUAL ALL OTHER NAME AND TITLE YEAR SALARY BONUS COMPENSATION COMPENSATION -------------- ---- ------ ----- ------------ ------------ Selwyn Isakow, Chairman(2) 1998 $ 95,577 $101,250 $ -- $ -- 1997 -- -- -- -- Steven M. Abelman, President and 1998 $230,769 $150,000 $ -- $ -- Chief Executive Officer(3) Donald C. Campion, Senior Vice 1998 $147,808 $52,500 $ -- $ -- President-Chief Financial Officer(4) 1997 -- -- -- -- Larry C. Cornwall, Senior Vice 1998 $161,846 $68,000 $ -- President-Sales and Engineering(5) 1997 124,196 36,000 -- -- 1996 31,504 24,200 -- -- John H. Ferguson, Vice President- 1998 $131,500 $39,000 $ -- $ -- Financial Operations and Assistant 1997 101,250 -- -- -- Secretary (6) Rex E. Schlaybaugh, Jr., 1998 $138,462 $101,250 $ -- $ -- Vice Chairman (7) 1997 -- -- -- --
- ---------------- (1) The Company was formed in October 1995 and executive officers of the Company did not receive any compensation prior to 1997. (2) Mr. Isakow was the President of the Company from its inception until May 1997, for which he did not receive any compensation from the Company. Steven M. Abelman was appointed President and Chief Executive Officer in May 1997. Mr. Isakow received compensation during the last fiscal year in connection with his position as Chairman of the Board of the Company. (3) Mr. Abelman was appointed President and Chief Executive Officer in May 1997. See "-Employment Agreements." (4) Mr. Campion was appointed Senior Vice President-Chief Financial Officer of Oxford Automotive in July 1997. See "--Employment Agreements." 24 25 (5) Mr. Cornwall joined the Company in October 1995 and only received compensation from the Company for a full fiscal year in 1997 and 1998. (6) Mr. Ferguson joined the Company in April 1996 and only received compensation from the Company for a full fiscal year in 1998. (7) Mr. Schlaybaugh did not receive any compensation from the Company prior to the last fiscal year. EMPLOYMENT AGREEMENTS As of May 1, 1997, Oxford Automotive and Steven M. Abelman entered into an Employment and Noncompetition Agreement. The agreement provides that Mr. Abelman will serve as President and Chief Executive Officer of Oxford Automotive on an "at-will" basis. The agreement provides that Mr. Abelman will receive an annual base salary, will be eligible to receive a bonus of up to 60% of his salary as determined by the Board of Directors of Oxford Automotive, and will be entitled to certain fringe benefits. Mr. Abelman has also agreed not to compete with the Company during the period of his employment and for two years following the termination of his employment. Upon the termination of his employment without cause, Mr. Abelman is entitled to severance payments equal to (a) his annual base salary, if such termination is prior to May 1, 1999 or (b) 1.5 times his annual base salary, if such termination is after May 1, 1999. On November 24, 1995, BMG and Larry C. Cornwall entered into an Employment Agreement. The agreement provides that Mr. Cornwall will serve as Senior Vice President-Sales and Marketing of BMG on an "at-will" basis. Mr. Cornwall has subsequently been appointed as Senior Vice President-Sales and Engineering of Oxford Automotive. The agreement provides that Mr. Cornwall will receive an annual base salary, will be eligible to receive a bonus of up to 50% of his salary as determined by the Board of Directors of BMG, will be eligible to participate in the Company's profit sharing plan, and will be entitled to certain fringe benefits. Upon the termination of the agreement, Mr. Cornwall will be entitled to continue to receive his base salary for the longer of three months or the Canadian statutory requirement. As of July 21, 1997, Oxford Automotive and Donald C. Campion entered into an Employment and Noncompetition Agreement. The agreement provides that Mr. Campion will serve as Senior Vice President-Chief Financial Officer of Oxford Automotive on an "at-will" basis. The agreement provides that Mr. Campion will receive an annual base salary, will be eligible to receive a bonus of up to 50% of his salary as determined by the Board of Directors of Oxford Automotive, and will be entitled to certain fringe benefits. Mr. Campion has also agreed not to compete with the Company during the period of his employment and for two years following the termination of his employment. Upon termination of his employment without cause, Mr. Campion is entitled to a severance payment of 50% of his annual base salary, payable over six months, plus the continuation of certain benefits during this six-month period. See also "Certain Relationships and Related Transactions." DIRECTOR COMPENSATION AND ARRANGEMENTS The Company pays fees to its non-employee directors of $1,000 for each meeting and reimburses the out-of-pocket expenses related to directors' attendance at each Board and committee meeting. In addition, the Company may elect to adopt a non-employee director option plan or other similar plan to provide for grants of stock options or other benefits as a means of attracting and retaining highly qualified independent directors for the Company. Members of the Board of Directors are elected pursuant to certain shareholder agreements by and among the Company and certain of its shareholders. See "Security Ownership of Certain Beneficial Owners and Management -- Shareholder Agreements." 25 26 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Company did not have a Compensation Committee prior to August 4, 1997. Accordingly, all determinations with respect to executive compensation were made by the Board of Directors. Prior to August 4, 1997, Messrs. Isakow and Schlaybaugh participated in deliberations of the Company's Board of Directors concerning executive officers compensation. On August 4, 1997 a Compensation Committee, whose members are Selwyn Isakow and Manfred Walt, was appointed by the Board of Directors. Mr. Isakow is the Chairman of the Company and was the President of the Company from its inception in 1995 to May 1997. Mr. Isakow controls Oxford Investment, a private investment and corporate development company and Mr. Schlaybaugh is the Vice Chairman of Oxford Investment. At the time the Company acquired Lobdell (January 10, 1997), Oxford Investment entered into a management agreement with Lobdell (the "Lobdell Agreement"). At the time the Company acquired BMG (October 25, 1995), Oxford Investment entered into a management agreement with BMG (the "BMG Agreement"). The Lobdell Agreement and the BMG Agreement were terminated on June 24, 1997. The Company entered into a new management agreement with Oxford Investment upon the termination of the Lobdell Agreement and the BMG Agreement. Pursuant to the terms of this management agreement, Oxford Investment will perform various consulting, management and financial advisory services on behalf of the Company. The Company will pay Oxford Investment a monthly management fee of $83,334 and will pay an investment banking fee, for acquisitions of $2.5 million or more, of 1.0% or 1.25% (for acquisitions outside of North America) of the aggregate acquisition cost for advice and assistance in connection with such acquisition, with a minimum fee of $200,000. No investment banking fee will be paid to Oxford Investment in connection with acquisitions for aggregate consideration of less than $2.5 million. The initial term of the agreement will end on December 31, 2001, but will automatically extend for additional one-year periods thereafter unless either party terminates the agreement. In addition, pursuant to the management agreement, Oxford Investment will license to the Company the name "Oxford Automotive" which is owned by Oxford Investment. During the fiscal year ended March 31, 1998, the Company paid Oxford Investment management fees of approximately $1.0 million and investment banking fees of approximately $230,000. In connection with the acquisition of the Suspension Division, the Company paid Oxford Investment an investment banking fee of approximately $550,000 during the first quarter of fiscal 1999. On November 25, 1997, the Company acquired all of the issued and outstanding shares of the common stock of RPIH, the parent of RPI for approximately $2.5 million. The shareholders of RPIH received approximately $2.5 million in the aggregate for all outstanding RPIH shares. In addition, the shareholders of RPIH received approximately $402,788 as payment of the principal and accrued interest on certain outstanding loans to RPIH. Certain officers, directors, and shareholders of the Company were also officers, directors, or shareholders of RPIH prior to the transaction. Messrs. Isakow and Schlaybaugh were officers, directors and shareholders of RPIH. Robert H. Orley was also an officer, director and shareholder of RPIH and is a shareholder of the Company. Mr. Isakow, directly and indirectly, received $753,150, which included the payment of $117,971 for the principal and accrued interest on certain outstanding loans to RPIH. Mr. Schlaybaugh received $91,296, which included the payment of $13,120 for the principal and accrued interest on an outstanding loan to RPIH. Messrs. Robert H. and Gregg L. Orley, each beneficial owners of more than 5% of the Company's outstanding Common Stock, each received $252,248, which included the payment of $50,293 to each for the principal and accrued interest on an outstanding loan to RPIH. RPIH's wholly owned subsidiary, RPI, Inc. ("RPI"), a Michigan corporation, issued various demand notes to Lobdell in the aggregate principal amount of $1.4 million during the year ended March 31, 1998, each bearing interest at the prime rate plus 1.0% per annum. The notes were issued in connection with ongoing discussions between RPIH and the Company regarding a possible merger or other similar transaction in consideration for 26 27 which RPIH had agreed to deal exclusively with the Company and its affiliates until December 31, 1997. This agreement to deal exclusively with the Company allowed the Company to negotiate a transaction with RPIH without undue interference from a third party. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. As of June 1, 1998, there were 309,750 issued and outstanding shares of the Common Stock of the Company (the "Common Stock"). The following table sets forth information as of June 1, 1998 with respect to the Common Stock beneficially owned by each director of the Company, the Named Executive Officers, all directors and executive officers of the Company as a group, and by other holders known to the Company as having beneficial ownership of more than 5% of the Common Stock. Selwyn Isakow and the Company's other shareholders have entered into certain agreements, each of which contain substantially identical terms, the result of which gives Mr. Isakow voting control of 100% of the Company's Common Stock, except under certain circumstances. See "-- Shareholder Agreements." Unless otherwise specified, the address for each person is 1250 Stephenson Highway, Troy, Michigan 48083.
NUMBER OF PERCENT NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS - ------------------------------------ --------- ------------ Selwyn Isakow (1) . . . . . . . . . . . . . . . . . 155,724 50.27% 2000 N. Woodward Avenue, Suite 130, Bloomfield Hills, Michigan 48304 Rex E. Schlaybaugh, Jr . . . . . . . . . . . . . . . 20,900 6.75% 2000 N. Woodward Avenue, Suite 130, Bloomfield Hills, Michigan 48304 Steven M. Abelman (2) . . . . . . . . . . . . . . . 12,326 3.98% Manfred J. Walt . . . . . . . . . . . . . . . . . . 2,300 * 175 Boor St., E., S. Tower, Suite 601 Toronto, Ontario, Canada M4W 3R8 Donald C. Campion (2) . . . . . . . . . . . . . . 4,000 1.29% John H. Ferguson . . . . . . . . . . . . . . . . . . 6,180 2.0% Larry C. Cornwall . . . . . . . . . . . . . . . . . 7,000 2.26% Robert H. Orley . . . . . . . . . . . . . . . . . . 20,600 6.65% 2000 N. Woodward Avenue, Suite 130, Bloomfield Hills, Michigan 48304 Gregg L. Orley . . . . . . . . . . . . . . . . . . . 20,600 6.65% 2000 N. Woodward Avenue, Suite 130, Bloomfield Hills, Michigan 48304 All directors and officers as a group (7 persons) 208,430 67.29% (1)(2)
- ------------------------------ *Less than 1.0% (1) Includes 140,124 shares owned by Hilsel Investment Company Limited Partnership, of which Tridec Management, Inc. is General Partner. Mr. Isakow is the President and a shareholder of Tridec Management, 27 28 Inc. In addition, Mr. Isakow may be deemed to be the beneficial owner of all of the outstanding shares of Common Stock as a result of certain voting power over such shares pursuant to the shareholder agreements described below and certain purchase options that may be exercised by Mr. Isakow with respect to 52,400 outstanding shares of Common Stock. (2) Each of Mr. Abelman's and Mr. Campion's Employment and Noncompetition Agreement with Oxford Automotive provides Oxford Automotive with the right to repurchase their respective shares of Common Stock if their employment is terminated for any reason. SHAREHOLDER AGREEMENTS Each holder of Common Stock is a party to a shareholder agreement which provides for certain restrictions on transfer by shareholders and grants certain other shareholders the option to purchase the shares of a shareholder upon his death. Each surviving shareholder has the right to exercise this option within 30 days of the death of a shareholder. The exercising shareholders will divide the deceased shareholder's shares as they agree or, if they are not able to agree, pro rata. If the exercising shareholders are not able to agree on a purchase price with the estate of the deceased shareholder, then the per share purchase price shall be the per share value of the Company based on the greater of the value of the Company as a going concern or on a liquidation basis, as determined by an independent appraisal. The purchase price shall be paid by an initial cash payment of up to 20% of the purchase price with the balance paid pursuant to a five-year, unsecured promissory note bearing interest at the prime rate. The agreements also provide that each shareholder will grant a proxy to Mr. Isakow to vote all of the shareholder's shares at any meeting of the Company; provided, however, that if holders of shares having a majority in interest of the shares of Common Stock determine that it is in the best interest of all of the shareholders to sell all or substantially all of the assets of the Company or to cause the Company to merge or consolidate with or into another corporation, Mr. Isakow shall exercise the proxies provided to him consistent with that decision. As a result, except as described above, Mr. Isakow has voting control of 100% of the Company's Common Stock. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. As of March 31, 1997, Mr. Abelman issued a note to the Company in connection with his acquisition of shares of the Company's Common Stock. The principal amount of the note was $130,000 and the note bears interest at the prime rate plus 1.0%, which rate is adjusted on March 31 of each year to reflect the then current prime rate. Principal and interest on the note is payable in equal annual installments with interest on the unpaid principal, with the final payment due May 31, 2002. As of March 31, 1997, the Company issued a subordinated demand note to Mr. Robert H. Orley in connection with the redemption of certain shares of the Company's Common Stock. The principal amount of the note was $108,203 and was paid in full subsequent to March 31, 1997. See also "Compensation Committee Interlocks and Insider Participation." LEGAL Rex E. Schlaybaugh, Jr. is a shareholder, the Vice Chairman of the Board and a director of the Company. Dykema Gossett PLLC, of which Mr. Schlaybaugh is a member, has performed legal services for the Company since its inception. The Company expects to continue to retain the firm as general counsel. 28 29 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The financial statements, supplementary financial information, and financial statement schedules filed herewith are set forth on the Index to Financial Statements and Financial Statement Schedules on page F-1 of the separate financial section of this Report, which is incorporated herein by reference. A list of Exhibits included as part of this report is set forth in the Exhibit Index which immediately precedes such exhibits and is incorporated herein by reference. (b) The following reports on Form 8-K were filed by the Company during the quarter ended March 31, 1998: (i) Report on Form 8-K/A, dated February 9, 1998, was filed by the Company on February 9, 1998; such report amended a Report on Form 8-K dated November 25, 1997 and contained information under Item 7 relating to RPI Holdings, Inc. and the related proforma financial information. (ii) Report Form 8-K, dated March 13, 1998, was filed by the Company on March 16, 1998; such report contained information under Item 5 with respect to the signing of an Asset Purchase Agreement relating to the acquisition of the Suspension Division from Eaton Corporation. (iii) Report on Form 8-K/A, dated March 13, 1998, was filed by the Company on March 20, 1998; such report amended information under Item 5 of the Form 8-K filed on March 16, 1998. (iv) Report on Form 8-K/A, dated March 20, 1998, was filed by the Company on March 20, 1998; such report amended information under Item 7 of the Form 8-KA filed on February 9, 1998. 29 30 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 by the undersigned, thereunto duly authorized on June 25, 1998. OXFORD AUTOMOTIVE, INC. By: /s/ Steven M. Abelman ------------------------------- Steven M. Abelman President 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 indicated on June 25, 1998.
SIGNATURE TITLE --------- ----- /s/ Selwyn Isakow Chairman of the Board and Director - ------------------------------------- Selwyn Isakow /s/ Rex E. Schlaybaugh, Jr. Vice Chairman of the Board and Director - ------------------------------------- Rex E. Schlaybaugh, Jr. /s/ Steven M. Abelman President, Chief Executive Officer and - ------------------------------------- Director Steven M. Abelman /s/ Donald C. Campion Senior Vice President-Chief Financial - ------------------------------------- Officer (Principal Accounting and Donald C. Campion Financial Officer) /s/ Manfred J. Walt Director - ------------------------------------- Manfred J. Walt
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT. No Annual Report or Proxy Materials have been or will be sent to security holders. 30 31 OXFORD AUTOMOTIVE, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Description Page Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2 Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3 Consolidated Balance Sheets as of March 31, 1998, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . F-4 Consolidated Statements of Operations for the years ended March 31, 1998 and 1997, and the period from October 28, 1995 through March 31, 1996 for the Company; and for the period from April 1, 1995 through October 27, 1995 for the Predecessor . . . . . . . . . . . . . . . . . . . . F-5 Consolidated Statements of Changes in Shareholders' Equity for the years ended March 31, 1998 and 1997, and the period from October 28, 1995 through March 31, 1996 for the Company; and for the period from April 1, 1995 through October 27, 1995 for the Predecessor . . . . . . . . . . . . . F-6 Consolidated Statements of Cash Flows for the years ended March 31, 1998 and 1997, and the period from October 28, 1995 through Mach 31, 1996 for the Company; and for the period from April 1, 1995 through October 27, 1995 for the Predecessor . . . . . . . . . . . . . . . . . . . . . F-7 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8 Financial Statement Schedules II - Valuation and Qualifying Accounts
F-1 32 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Oxford Automotive, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of changes in shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Oxford Automotive, Inc. and its subsidiaries (the Company) at March 31, 1998 and 1997 and the results of their operations and their cash flows for the years ended March 31, 1998 and 1997 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. The financial statements of the Company as of March 31, 1996 and for the period from October 28, 1995 through March 31, 1996 and the financial statements of BMG North America Limited (the Predecessor) for the period from April 1, 1995 through October 27, 1995 were audited by other independent accountants whose report dated May 21, 1996 expressed an unqualified opinion on those statements. PRICE WATERHOUSE LLP Bloomfield Hills, Michigan June 22, 1998 F-2 33 INDEPENDENT AUDITORS' REPORT To the Directors of Oxford Automotive, Inc. and BMG North America Limited We have audited the consolidated balance sheet of Oxford Automotive, Inc. as at March 31, 1996 and the consolidated statements of operations, changes in shareholders' equity and cash flows for the period from October 28, 1995 to March 31, 1996 for Oxford Automotive, Inc. and the consolidated statements of operations, changes in shareholders' equity and cash flows for the period from April 1, 1995 to October 27, 1995 for BMG North America Limited. These financial statements are the responsibility of the management of Oxford Automotive, Inc. and BMG North America Limited. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance 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, these consolidated financial statements present fairly, in all material respects, the financial position of Oxford Automotive, Inc., as at March 30, 1996 and the results of its operations and its cash flows for the period from October 28, 1995 to March 31, 1996 and the results of BMG North America Limited's operations and its cash flows for the period from April 1, 1995 to October 27, 1995 in accordance with U.S. generally accepted accounting principles. DELOITTE & TOUCHE Chartered Accountants Kitchener, Ontario May 21, 1996 F-3 34 OXFORD AUTOMOTIVE, INC. CONSOLIDATED BALANCE SHEETS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - --------------------------------------------------------------------------------
MARCH 31, 1998 1997 1996 ASSETS Current assets Cash and cash equivalents $ 18,321 $ 9,671 $ - Trade receivables, net 65,273 47,626 8,338 Inventories 21,305 13,411 3,719 Refundable income taxes 1,601 1,641 Reimbursable tooling 13,315 4,968 3,298 Deferred income taxes 4,399 4,633 Unexpended bond proceeds 4,159 Prepaid expenses and other current assets 2,803 1,354 1,181 ---------- -------- ---------- TOTAL CURRENT ASSETS 131,176 83,304 16,536 Unexpended bond proceeds 3,937 Marketable securities 8,627 Other noncurrent assets 10,116 4,588 6,734 Deferred income taxes 6,405 5,087 6,139 Property, plant and equipment, net 163,708 146,778 19,791 ---------- -------- ---------- TOTAL ASSETS $ 320,032 $243,694 $ 49,200 ========== ======== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Trade accounts payable $ 52,214 $ 31,421 $ 14,570 Employee compensation 4,808 4,986 1,883 Restructuring reserve 6,363 7,050 608 Accrued expenses and other current liabilities 12,242 9,040 3,299 Current portion of borrowings 10,965 24,274 11,258 ---------- -------- ---------- TOTAL CURRENT LIABILITIES 86,592 76,771 31,618 Pension liability 4,727 3,631 1,080 Postretirement medical benefits liability 35,992 33,467 Deferred income taxes 15,332 10,442 Other noncurrent liabilities 2,596 2,187 67 Long-term borrowings -- less current portion 128,483 75,555 15,500 ---------- -------- ---------- TOTAL LIABILITIES 273,722 202,053 48,265 ---------- -------- ---------- Commitments and contingent liabilities (Note 15) Redeemable Series A $3.00 Cumulative Preferred Stock, $100 stated value -- 457,541 shares authorized, 397,539 shares issued and outstanding in 1998 and 457,541 shares issued and outstanding in 1997 (Notes 3 and 13) 40,192 36,012 ---------- -------- Redeemable Series B Preferred Stock, $100 stated value -- 49,938 shares authorized, no shares issued and outstanding in 1998 and 49,938 shares issued and outstanding in 1997 (Notes 3 and 13) 3,288 ---------- -------- SHAREHOLDERS' EQUITY Common stock, 400,000 shares authorized; 309,750 shares issued and outstanding at March 31, 1998 and 1997 and 75,000 shares issued and outstanding at March 31, 1996 1,050 1,050 750 Foreign currency translation adjustment (651) (28) 5 Retained earnings 4,750 1,572 415 Net unrealized gain on marketable securities 969 Equity adjustment for minimum pension liability (253) (235) ---------- -------- ---------- 6,118 2,341 935 ---------- -------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 320,032 $ 243,694 $ 49,200 ========== ========= ==========
The accompanying notes are an integral part of the financial statements. F-4 35 OXFORD AUTOMOTIVE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - --------------------------------------------------------------------------------
COMPANY PREDECESSOR ------------------------------------------------------- ---------------- PERIOD FROM PERIOD FROM YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995 MARCH 31, MARCH 31, THROUGH THROUGH 1998 1997 MARCH 31, 1996 OCTOBER 27, 1995 Net sales $ 410,321 $ 136,861 $ 35,572 $ 49,043 Cost of sales 368,420 125,375 31,624 46,895 ----------- ---------- ---------- ---------- GROSS PROFIT 41,901 11,486 3,948 2,148 Selling, general and administrative 21,839 7,685 2,235 3,922 Restructuring provision 1,610 Gain on sale of equipment (1,602) OPERATING INCOME 20,054 3,801 1,713 (1,774) Other income (expense) Interest expense (10,710) (3,388) (1,096) (1,048) Other 321 2,201 ----------- ---------- INCOME BEFORE BENEFIT (PROVISION) FOR INCOME TAXES 9,665 2,614 617 (2,822) Benefit (provision) for income taxes (4,074) (1,065) (202) 938 ----------- ---------- ---------- ---------- NET INCOME 5,591 1,549 415 $ (1,884) =========== Accrued dividends and accretion on Redeemable preferred stock 1,334 300 ----------- ---------- ---------- NET INCOME APPLICABLE TO COMMON STOCK $ 4,257 $ 1,249 $ 415 =========== ========== ========== NET INCOME PER SHARE (BASIC AND DILUTED) $ 13.74 $ 9.37 $ 9.10 =========== ========== ==========
The accompanying notes are an integral part of the financial statements. F-5 36 OXFORD AUTOMOTIVE, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------
PREDECESSOR ------------------------------------------------------------------------------------ FOREIGN NET EQUITY CURRENCY RETAINED UNREALIZED GAIN ADJUSTMENT FOR COMMON TRANSLATION EARNINGS ON MARKETABLE MINIMUM PENSION STOCK ADJUSTMENT (DEFICIT) SECURITIES LIABILITY TOTAL BALANCES AT APRIL 1, 1995 $ 14,262 $ 40 $ (3,469) $ - $ - $ 10,833 Net loss (1,884) (1,884) Foreign currency translation adjustments 575 (155) 420 Issuance of common stock, net of redemptions (40) (40) --------- ------- --------- ----- ----- --------- BALANCES AT OCTOBER 27, 1995 $ 14,797 $ (115) $ (5,353) $ - $ - $ 9,329 ======== ======== ========== ===== ===== ========= COMPANY ------------------------------------------------------------------------------------ FOREIGN NET EQUITY CURRENCY UNREALIZED GAIN ADJUSTMENT FOR COMMON TRANSLATION RETAINED ON MARKETABLE MINIMUM PENSION STOCK ADJUSTMENT EARNINGS SECURITIES LIABILITY TOTAL BALANCES AT OCTOBER 28, 1995 $ 750 $ - $ - $ - $ - $ 750 Net income 415 415 Foreign currency translation adjustments 5 5 Equity adjustment for Minimum pension liability (235) (235) ------- ----- --------- ----- ----- -------- BALANCES AT MARCH 31, 1996 750 5 415 - (235) 935 Net income 1,549 1,549 Foreign currency translation Adjustments (33) (33) Equity adjustment for Minimum pension liability (18) (18) Accrued dividends and Accretion of redeemable Preferred stock (300) (300) Issuance of common stock, net of redemptions 300 (92) 208 ------- ----- --------- ----- ----- -------- BALANCES AT MARCH 31, 1997 1,050 (28) 1,572 - (253) 2,341 Net income 5,591 5,591 Excess of purchase price over Predecessor basis (1,079) (1,079) Foreign currency translation Adjustments (623) (623) Unrealized gain on marketable securities 969 969 Equity adjustment for minimum pension liability 253 253 Dividends and accretion on redeemable preferred stock (1,334) (1,334) ------ ---- --------- ----- ----- -------- BALANCES AT MARCH 31, 1998 $ 1,050 $(651) $ 4,750 $ 969 $ $ 6,118 ======= ===== ========= ===== ===== ========
The accompanying notes are an integral part of the financial statements. F-6 37 OXFORD AUTOMOTIVE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLAR AMOUNTS IN THOUSANDS) - --------------------------------------------------------------------------------
COMPANY PREDECESSOR ------------------------------------------------------ ----------------- PERIOD FROM PERIOD FROM YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995 MARCH 31, MARCH 31, THROUGH THROUGH 1998 1997 MARCH 31, 1996 OCTOBER 27, 1995 OPERATING ACTIVITIES Net income (loss) $ 5,591 $ 1,549 $ 415 $ (1,884) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Depreciation and amortization 20,279 5,041 687 919 Deferred income taxes 137 2,136 230 (1,036) Gain on sale of equipment (1,586) (195) (2) Changes in operating assets and liabilities affecting cash Trade receivables (4,615) (8,953) 6,617 (3,311) Inventories 1,496 (299) (277) (259) Reimbursable tooling (7,368) (1,601) 1,824 (760) Prepaid expenses and other assets 569 129 1,592 (1,768) Other noncurrent assets (836) 3,544 Trade accounts payable 11,416 (605) (6,501) 6,417 Employee compensation 169 (6,072) 309 (493) Restructuring reserve (745) (398) Accrued expenses and other liabilities (3,166) (1,885) (1,716) 3,504 Income taxes payable/refundable 2,914 (199) Other noncurrent liabilities 1,731 (39) ---------- ---------- ----------- ----------- NET CASH PROVIDED BY (USED IN)OPERATING ACTIVITIES 25,986 (7,847) 3,178 1,329 ---------- ---------- ----------- ----------- INVESTING ACTIVITIES Purchase of businesses, net of cash acquired (24,219) (9,309) (1,983) Purchase of property, plant and equipment (16,723) (3,326) (3,466) (5,111) Proceeds from sale of equipment 5,433 341 33 11 Purchases of marketable securities (7,658) NET CASH USED IN INVESTING ACTIVITIES (43,167) (12,294) (5,416) (5,100) ---------- ---------- ----------- ----------- FINANCING ACTIVITIES Issuance of share capital 300 750 Proceeds from borrowing arrangements 126,653 78,823 23,814 921 Principal payments on borrowing arrangements (93,782) (49,186) (16,482) (7,477) Payment of preferred stock dividends (1,193) Debt financing costs (5,372) Redemption and retirement of common stock (92) (40) Obligation under capital lease - net (6) (3) ---------- ---------- ----------- ----------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 26,306 29,845 8,076 (6,599) ---------- ---------- ----------- ----------- Effect of exchange rate changes on cash (475) (33) ---------- ---------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,650 9,671 5,838 (10,370) Cash and cash equivalents at beginning of Period 9,671 (11,238) (868) ---------- ---------- ----------- ----------- Cash and cash equivalents at end of period $ 18,321 $ 9,671 $ (5,400) $ (11,238) ========== ========== =========== =========== Cash paid for interest $ 7,338 $ 3,033 $ 1,096 $ 1,048 ========== ========== =========== =========== Cash paid for income taxes $ 4,670 $ - $ 42 $ 79 ========== ========== =========== ===========
The accompanying notes are an integral part of the financial statements. F-7 38 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 1. NATURE OF OPERATIONS Oxford Automotive, Inc. (the Company) is a full-service supplier of metal stampings and welded assemblies used as original equipment components primarily by North American original equipment automotive manufacturers. The Company's products are used in a wide variety of sport utility vehicles, light and medium trucks, vans and passenger cars. The Company primarily operates from thirteen plants located in the United States, Canada and Mexico. The Company's hourly workforce is represented by various unions. Net sales to the Company's three primary customers as a percentage of total sales are as follows:
PERIOD FROM OCTOBER 28, 1995 YEAR ENDED YEAR ENDED THROUGH MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 General Motors Corporation 54% 62% 67% Ford Motor Company 31% 17% - Chrysler Corporation 9% - -
Accounts receivable from General Motors Corporation, Ford Motor Company and Chrysler Corporation represent approximately 39%, 39% and 13%, respectively, of the March 31, 1998 accounts receivable balance. Although the Company is directly affected by the economic well being of the automotive industry and customers referred to above, management does not believe significant credit risk exists at March 31, 1998. The Company does not require collateral to reduce such risk and historically has not experienced significant losses related to receivables from individual customers or groups of customers in the automotive industry. 2. SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The financial statements for the period from April 1, 1995 through October 27, 1995 are those of BMG North America Limited (the Predecessor), which was acquired by Oxford Automotive, Inc. (formerly BMG-MI, Inc.) on October 28, 1995. The consolidated financial statements as of March 31, 1998 and 1997 and for the years then ended and for the period from October 28, 1995 through March 31, 1996 are those of the Company and its subsidiaries. The financial statements of the Company and the Predecessor are not comparable in certain respects due to differences between the cost bases of certain assets held by the Company versus that of the Predecessor, resulting in reduced depreciation and amortization charges subsequent to October 27, 1995, changes in accounting policies and the recording of certain liabilities at the date of acquisition in connection with the purchase of the Predecessor by the Company, as well as the Company's acquisitions subsequent to October 28, 1995 discussed further in Note 3. F-8 39 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PRINCIPLES OF CONSOLIDATION The consolidated financial statements of the Company include the accounts of Oxford Automotive, Inc. and its wholly-owned subsidiaries, BMG Holdings, Inc. (BMGH), Howell Industries, Inc. (Howell), Lobdell Emery Corporation (Lobdell), RPI Holdings, Inc. (RPIH) and Oxford Automotriz de Mexico S.A. de C.V. (Oxford Mexico). Intercompany accounts and transactions have been eliminated. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent 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. REVENUE RECOGNITION Revenue is recognized by the Company upon shipment of product to the customer. FINANCIAL INSTRUMENTS At March 31, 1998 and 1997, the carrying amount of financial instruments such as cash and cash equivalents, trade receivables and payables and unexpended bond proceeds, approximated their fair values. The carrying amount of the long-term customer receivables and borrowings at March 31, 1998 and 1997, approximated their fair values based on the variable interest rates available to the Company for similar arrangements. CASH EQUIVALENTS The Company considers all highly-liquid investments with maturity of three months or less when purchased to be cash equivalents. INVENTORIES Inventories are stated at the lower of cost or market. Cost is principally determined by the last-in, first-out (LIFO) method for the Company's United States operations and by the first-in first-out (FIFO) method for the Company's Canadian operations. REIMBURSABLE TOOLING Reimbursable tooling represents net costs incurred on tooling projects for which the Company expects to be reimbursed by customers. Ongoing estimates of total costs to be incurred on each tooling project are made by management. Losses, if any, are recorded when known and in cases where billings exceed costs incurred, the related tooling gain is recognized upon acceptance of the tooling by the customer. Certain of the Company's tooling costs are financed through lending institutions and are reimbursed by customers on a piece price basis. These tooling assets are classified as either accounts receivable ($2,676, $3,695, and $1,809 at March 31, 1998, 1997, and 1996 respectively), other noncurrent assets (none, $3,800 and $6,734 at March 31, 1998, 1997, and 1996 respectively) or equipment depending upon the ultimate title holder of the tooling assets. F-9 40 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) UNEXPENDED BOND PROCEEDS Unexpended bond proceeds in the accompanying consolidated balance sheet represent unexpended proceeds from the issuance of industrial development revenue bonds by Creative Fabrication Corporation (Creative), a wholly-owned subsidiary of Lobdell, as discussed in Note 8, and are invested in allowable money market accounts and commercial paper with a maturity of 90 days or less. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated on the basis of cost and include expenditures for improvements which materially increase the useful lives of existing assets. Expenditures for normal repair and maintenance are charged to operations as incurred. For federal income tax purposes, depreciation is computed using accelerated and straight-line methods. For financial reporting purposes, depreciation is computed principally using the straight-line method over the following estimated useful lives:
YEARS Land improvements 15 Buildings and improvements 30-40 Machinery and equipment 3-20
IMPAIRMENT OF LONG-LIVED ASSETS The Company accounts for long-lived assets in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This Statement requires that long-lived assets and certain identifiable intangibles to be held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company recognizes impairment losses for assets or groups of assets where the sum of the estimated future cash flows (undiscounted and without interest charges) is less than the carrying amount of the related asset or group of assets. The amount of the impairment loss recognized is the excess of the carrying amount over the fair value of the asset or group of assets being measured. MARKETABLE SECURITIES Marketable securities at March 31, 1998, mainly composed of equity securities, are classified as available-for-sale securities and are reported at fair value using quoted market prices. Unrealized holding gains and losses are included as a separate component of shareholders' equity until realized. F-10 41 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ENVIRONMENTAL COMPLIANCE AND REMEDIATION Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations which do not contribute to current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Estimated costs are based upon enacted laws and regulations, existing technology and the most probable method of remediation. The costs determined are not discounted and exclude the effects of inflation and other social and economic factors. INCOME TAXES Deferred taxes are provided to give recognition to the effect of expected future tax consequences of temporary differences between the carrying amounts for financial reporting purposes and the tax bases for income tax purposes of assets and liabilities. FOREIGN EXCHANGE CONTRACTS Gains and losses of foreign currency firm commitment hedges are deferred and included in the basis of the transactions underlying the commitments. During fiscal 1997, the Company recognized a gain of approximately $2,000 related to certain foreign currency exchange transactions terminated during the year. The gain is included as a component of other income in the accompanying March 31, 1997 statement of operations. Had the foreign currency exchange transactions not been terminated, the recognized gain would normally have been recorded as a component of sales. FOREIGN CURRENCY TRANSLATION The foreign currency financial statements of BMGH and Oxford Mexico, where the local currency is the functional currency, are translated using exchange rates in effect at period end for assets and liabilities and at weighted average exchange rates during the period for operating statement accounts. The resulting foreign currency translation adjustments are recorded as a separate component of shareholders' equity. Exchange gains and losses resulting from foreign currency transactions are included in operating results during the period in which they occur. PER SHARE AMOUNTS The per share amounts of the Predecessor have not been presented as the Company's capital structure is not comparable to that of the Predecessor. RECLASSIFICATIONS Certain amounts from the prior year have been reclassified to conform with the current year presentation. F-11 42 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 3. ACQUISITIONS On October 28, 1995, the Company acquired all of the outstanding common stock of BMG North America Limited (BMGNA). The acquisition was financed through a $750 Series A promissory note. The acquisition has been recorded in accordance with the purchase method of accounting. Accordingly, the purchase price plus direct cost of the acquisition have been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. On January 10, 1997, pursuant to an Agreement and Plan of Merger among Lobdell Emery Corporation, certain shareholders of Lobdell Emery Corporation, BMG-MI, Inc. and L-E Acquisition, Inc. as amended (the Agreement), certain Lobdell Emery Corporation shareholders and option holders had their respective shares and options redeemed for cash of approximately $8,500 and all outstanding shares of common stock of Lobdell Emery Corporation (Oldco) were exchanged for shares of preferred stock of Oldco with a face value of approximately $40,700. In addition, approximately $3,500 of expenses incurred by Oldco were reimbursed by L-E Acquisition, Inc. In connection with the exchange of Oldco's common stock for preferred stock, L-E Acquisition, Inc. was merged with and into Lobdell Emery Corporation (Newco). The acquisition was financed through the issuance of preferred stock described in Note 13 and a term loan, which was subsequently refinanced, as described in Note 8. The acquisition has been recorded in accordance with the purchase method of accounting. Accordingly, the purchase price plus direct cost of the acquisition have been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The fair market value of assets acquired and liabilities assumed, after giving effect to the settlement described in Note 13, is summarized as follows: Current assets $ 56,993 Property, plant and equipment 129,966 Noncurrent assets 9,953 Current liabilities (50,028) Long-term liabilities (107,130) ------------ Fair value of preferred stock $ 39,754 ============
In accordance with the purchase method of accounting, Lobdell's operating results have been included with those of the Company since the date of acquisition. On August 13, 1997, the Company acquired all of the outstanding common stock of Howell for approximately $23,700 in cash, including acquisition costs. The acquisition was financed through the proceeds of the subordinated notes described in Note 8. The acquisition has been recorded in accordance with the purchase method of accounting. Accordingly, the purchase price plus direct cost of the acquisition have been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. F-12 43 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 3. ACQUISITIONS (CONTINUED) The fair market value of assets acquired and liabilities assumed is summarized as follows: Current assets $ 22,900 Property, plant and equipment 18,100 Current liabilities (14,100) Long-term liabilities (3,200) ------------ $ 23,700 ============
On November 25, 1997, Oxford purchased all of the outstanding common stock of RPIH for $2,500 in cash. The acquisition was financed through the proceeds of the subordinated notes described in Note 8. The acquisition has been recorded in accordance with the purchase method of accounting. Accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The majority shareholder of Oxford was also the majority shareholder of RPIH. The fair market value of assets acquired and liabilities assumed is summarized as follows: Current assets $ 3,900 Property, plant and equipment 5,000 Noncurrent assets 1,600 Current liabilities (5,400) Long-term liabilities (3,700) Excess of purchase price over predecessor basis 1,100 ------------ $ 2,500 ============
The excess of purchase price over predecessor basis is a result of the common ownership by the majority shareholder of Oxford and represents the portion of the fair value of the net assets acquired in excess of their book value, multiplied by the majority shareholder's ownership percentage in RPIH. The Company has recorded this amount as a deduction from retained earnings in the accompanying statement of changes in shareholders' equity. The following unaudited pro forma combined results of operations of the Company have been prepared as if the acquisitions of Lobdell, Howell and RPIH had occurred at the beginning of fiscal 1998 and 1997.
YEAR ENDED MARCH 31, 1998 MARCH 31, 1997 Net sales $ 453,685 $ 433,443 Net income $ 4,692 $ 2,364 Net income applicable to common shares $ 3,358 $ 1,052 Net income per common share $ 10.84 $ 3.40
The pro forma information is not intended to be a projection of future results. F-13 44 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 3. ACQUISITIONS (CONTINUED) The foregoing unaudited pro forma results of operations reflect adjustments for additional interest expense related to the financing of the acquisitions and the additional depreciation expense, as a result of the write-up of property, plant and equipment, net of the related tax benefit. 4. ACCOUNTS RECEIVABLE Accounts receivable are comprised of the following at March 31:
1998 1997 1998 Trade receivables $ 65,673 $ 48,898 $ 8,377 Less - allowance for doubtful accounts (400) (1,272) (39) --------- --------- -------- Trade receivables, net $ 65,273 $ 47,626 $ 8,338 ========= ========= ========
5. INVENTORIES Inventories are comprised of the following at March 31:
1998 1997 1996 Raw materials $ 6,737 $ 5,688 $ 1,557 Finished goods and work-in-process 15,135 7,994 2,162 --------- --------- --------- 21,872 13,682 3,719 LIFO and other reserves (567) (271) --------- --------- --------- $ 21,305 $ 13,411 $ 3,719 ========= ========= =========
The Company does not separately identify finished goods from work-in-process. 6. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are comprised of the following at March 31:
1998 1997 1996 Land and land improvements $ 5,432 $ 5,073 $ 779 Buildings and improvements 29,126 24,697 3,171 Machinery and equipment 140,095 117,535 7,394 Construction-in-process 12,204 4,393 8,914 ----------- --------- -------- 186,857 151,698 20,258 Less - accumulated depreciation (23,149) (4,920) (467) ----------- --------- -------- $ 163,708 $ 146,778 $ 19,791 =========== ========= ========
F-14 45 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 6. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Certain machinery and equipment with a net book value of $9,900 was idle at March 31, 1998. Management intends to redeploy these assets amongst its operating facilities and does not believe that the net book value of these assets is impaired at March 31, 1998. In addition, in connection with the restructuring activities described in Note 10, management expects that additional assets, mainly land and buildings with a net book value of $7,300 at March 31, 1998, will be idled next year. In March 1998, the Company sold assets acquired in connection with the acquisition of Lobdell and recorded a gain on the sale of these assets of $1,602. As discussed in Note 10, certain of the Company's facilities were closed during the year ended March 31, 1998. As management intends to sell these facilities, the net book value of the land and buildings, approximating $1,815, is classified in prepaid expenses and other current assets as of March 31, 1998 in the accompanying consolidated balance sheet. 7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities are comprised of the following at March 31:
1998 1997 1996 Accrued interest $ 3,627 $ 103 $ - Accrued workers' compensation 3,287 3,071 544 Accrued property taxes 1,454 2,350 Accrued medical benefits 1,040 1,827 Foreign exchange gain 1,975 Other 2,834 1,689 780 -------- -------- ------- $ 12,242 $ 9,040 $ 3,299 ======== ======== =======
F-15 46 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 8. BORROWING ARRANGEMENTS Borrowings consist of the following at March 31:
1998 1997 1996 SERIES A 10.125% SENIOR SUBORDINATED NOTES DUE 2007, OXFORD $ 124,827 $ - $ - INDUSTRIAL DEVELOPMENT REVENUE BONDS, CREATIVE $8,500 issued September 27, 1995, floating rate interest (3.85% at March 31, 1998). Quarterly principal payments based on graduated maturity schedule. Backed by NBD Bank letter of credit 7,600 8,300 EDC TOOLING LOAN, BMGNA Interest at a fixed rate of 7.36%. Payments based on parts shipped, matures September 30, 1999 2,967 5,110 BANK SYNDICATE--REVOLVING CREDIT LINE, OXFORD Interest at prime rate (8.5% at March 31, 1998), matures June 24, 2003 1,825 BANK-- TERM LOAN, LOBDELL Interest at .625% over 90-day LIBOR (6.435% at March 31, 1998). Quarterly principal payments of approximately $400, matures October 1, 1998 1,233 2,833 IRDP LOAN, BMGNA Interest at 6%. Monthly principal payments of $7 to October 31, 2000 and $11 thereafter, matures September 1, 2002 396 467 534 BANK SYNDICATE -- TERM LOAN, LOBDELL Interest at variable spread over prime. Quarterly principal payments ranging from $1,250-$2,750 plus interest, repaid in full during 52,750 fiscal 1998 BANK SYNDICATE -- REVOLVING CREDIT LINE, LOBDELL Interest at variable spread over prime, repaid in full during fiscal 1998 1,250 BANK SYNDICATE -- TERM LOAN, BMGNA Interest at prime rate plus 1.25%. Quarterly payments of $755 plus interest, repaid in full during fiscal 1998 14,447 REVOLVING CREDIT LINE, BMGNA Interest at prime rate plus 1.25%, repaid in full during fiscal 1998 10,376 NATIONS BANK -- SATURN TOOLING, BMGNA Interest at a variable spread over prime (8.71% at March 31, 1997). Payments based on parts shipped, repaid in full during fiscal 1998 1,380 7,047 CCFL LOAN, BMGNA Interest at 11.11%. Monthly principal payments of $21, repaid in full during fiscal 1998 2,475 2,768 TERM LOAN, BMGNA Interest at Canadian Index Rate plus 3% or Canadian Banker's Acceptance Rate plue 3.95%. Quarterly principal payments based on graduated schedule, repaid in full during fiscal 1997 7,765 REVOLVING CREDIT LINE, BMGNA Interest at Canadian Banker's Acceptance Rate plue 3.7%, repaid in full during fiscal 1997 2,803 BANK LOAN, BMGNA Interest at either the Canadian Index Rate plue 2.5% or BA rate plus 3.45%, reapid in full during fiscal 1997 2,650 TOOLING LINE, BMGNA Interest at the Canadian Index Rate plue 3% or the Canadian Banker's Acceptance Rate plus 3.95%, repaid in full during fiscal 1997 2,750 SERIES A PROMISSORY NOTE, BMGH Interest at 7%, repaid in full during fiscal 1998 441 441 OTHER 600 ---------- --------- -------- Total 139,448 99,829 26,758 Less - current portion of long-term borrowings (10,965) (24,274) (11,258) ---------- --------- -------- Long-term borrowings-- less current portion $ 128,483 $ 75,555 $ 15,500 ========== ========= ========
F-16 47 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 8. BORROWING ARRANGEMENTS (CONTINUED) On June 24, 1997, the Company issued $125,000 of Series A 10.125% Senior Subordinated Notes Due 2007 (the Notes). The Notes mature on June 15, 2007 and require semi-annual interest payments of approximately $6,300. The proceeds from the Notes were primarily used to repay certain of the Company's indebtedness and finance the Company's acquisitions of Howell and RPIH described in Note 3, as well as the acquisition of the assets of the Suspension Division of Eaton Corporation described in Note 17. The Notes are unsecured and are guaranteed by Oxford and certain of its wholly-owned subsidiaries. See Note 18. On April 1, 1997, the Company issued $35,000 of Series B 10.125% Senior Subordinated Notes Due 2007 as discussed in Note 17. Concurrent with the issuance of the Notes, the Company entered into a credit agreement with a syndicate of banks (the Oxford Credit Agreement), under which the Company may borrow up to $110,000, of which a maximum of $15,000 is available for letters of credit. At March 31, 1998, $1,825 was outstanding under the revolving line of credit and $9,437 was outstanding under letters of credit, leaving $98,738 unused and available. The terms of the Oxford Credit Agreement contain, amount other provisions, requirements for maintaining defined levels of tangible net worth, total debt to cash flows, interest coverage and fixed charge coverage. The Oxford Credit Agreement also contains certain restrictions on the payment of dividends. Quarterly commitment fees on the unused amounts of the revolving credit line range from .25% to .50% of the unused portion. Borrowings are secured by substantially all of the assets of Oxford. The proceeds of the industrial development revenue bonds were used to finance the real and personal property of Creative. These bonds are backed by an NBD letter of credit, which carries a rate of 1.50% and is collateralized by substantially all assets of Creative. The letter of credit reimbursement agreement includes covenants requiring minimum tangible capital, debt service coverage and limitations on other indebtedness. The Bank--term loan, Lobdell and EDC tooling loan, BMGNA are used to finance customer tooling. These loans are collateralized by either a customer purchase order or the tooling assets. Aggregate maturities of long-term borrowings at March 31, 1998 are as follows: 1999 $ 10,965 2000 2,032 2001 1,048 2002 93 2003 93 Thereafter 125,217 ----------- $ 139,448 ===========
F-17 48 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 9. INCOME TAXES The Company's income tax provision (benefit) consists of the following:
COMPANY PREDECESSOR ------------------------------------------------------------ ---------------- PERIOD FROM PERIOD FROM OCTOBER 28, 1995 APRIL 1, 1995 YEAR ENDED YEAR ENDED THROUGH THROUGH MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 OCTOBER 27, 1995 Current Federal $ 3,116 $ (821) $ - $ - State 1,098 (124) Foreign 34 46 --------- -------- -------- -------- 4,214 (945) 34 46 --------- -------- -------- -------- Deferred Federal 2,300 899 State (608) 137 Foreign (1,832) 974 168 (984) --------- -------- -------- -------- (140) 2,010 168 (984) --------- -------- -------- -------- $ 4,074 $ 1,065 $ 202 $ (938) ========= ======== ======== ========
The difference between the statutory rate and the Company's effective rate was as follows:
COMPANY PREDECESSOR --------------------------------------------------------- ---------------- PERIOD FROM PERIOD FROM APRIL 1, 1995 OCTOBER 28, 1995 THROUGH YEAR ENDED YEAR ENDED THROUGH OCTOBER 27, MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 1995 Statutory rate 35.0% 34.0% 36.0% 36.0% Foreign rates varying from 34% (0.5) 1.8 Large corporation tax (2.8) (1.6) State taxes, net of federal benefit 3.3 0.3 Nondeductible items 1.9 4.1 (0.5) (1.2) Other 2.5 0.5 ------ ------ Effective income tax rate 42.2% 40.7% 32.7% 33.2% ====== ====== ====== ======
F-18 49 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 9. INCOME TAXES (CONTINUED Significant components of the Company's deferred tax assets and (liabilities) are as follows at March 31:
1998 1997 1996 Deferred tax liabilities Tax depreciation in excess of book $ (30,930) $ (30,065) $ - Inventory reserve (1,581) (1,292) Other (170) ---------- --------- --------- Gross deferred tax liabilities (32,681) (31,357) ---------- --------- --------- Deferred tax assets Postretirement medical benefits 14,397 13,387 Impairment reserve 22 1,200 Workers' compensation 1,345 1,089 Medical benefits accrual 473 702 Allowance for bad debts 97 502 AMT credit carryforward 3,000 Pension benefits 2,514 1,606 498 Net operating loss carryforwards 2,381 2,905 3,066 Book depreciation in excess of tax 989 Restructuring reserve 3,698 3,927 311 Foreign exchange 127 46 696 Other 3,299 2,471 579 ---------- --------- --------- Gross deferred tax assets 28,353 30,835 6,139 ---------- --------- --------- Valuation allowance (200) (200) ---------- --------- --------- Net deferred tax asset (liability) $ (4,528) $ (722) $ 6,139 ========== ========= =========
A valuation allowance is provided on the tax benefits otherwise associated with certain tax attributes unless it is considered more likely than not that the benefit will be realized. The Company has net operating loss carryforwards for federal income tax purposes with potential future tax benefits of approximately $2,147 at March 31, 1998. The federal net operating losses expire during 2011. The Company has net operating loss carryforwards for Canadian income tax purposes with potential future tax benefits of approximately $2,950 at March 31, 1998. The Canadian net operating losses expire during 2004 and 2005. In addition, the Company has net operating loss carryforwards for Mexican income tax purposes with potential future tax benefits of approximately $1,695 at March 31, 1998. The Mexican net operating losses expire in seven to ten years. The Company has net operating loss carryforwards with a potential future tax benefit of approximately $202 for state income tax purposes and Tennessee Jobs Tax Credit carryforwards of approximately $200 at March 31, 1998, both of which expire during 2010 and 2011. F-19 50 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 10. RESTRUCTURING RESERVES In connection with the acquisition of Lobdell described in Note 3, management began to formulate and assess a plan to exit certain activities of Lobdell and, accordingly, established certain restructuring reserves aggregating $7,050 in Lobdell's opening balance sheet. Management's restructuring plan included the sale of certain subsidiaries, closure of a Lobdell owned manufacturing facility and sale of the current Lobdell owned corporate offices. Included in the restructuring reserves at March 31, 1997 were costs for severance and benefits for employees to be relocated and terminated ($5,052) and other restructuring related costs ($1,998). During the year ended March 31, 1998, total payments to employees that were terminated were $1,979. As a result of management's plans, approximately 375 employees were terminated. In connection with management's plans to reduce costs and improve operating efficiencies at other facilities, the Company recorded a provision for restructuring of $1,610 during the year ended March 31, 1998 and established restructuring reserves aggregating $1,339 in Howell's opening balance sheet. A summary of the restructuring activity is presented below. There was no activity during the period from January 10, 1997 to March 31, 1997. Balance at March 31, 1997 $ 7,050 1998 provision 1,610 1998 activity: Restructuring accrual associated with the acquisition of Howell 1,339 Reduction in workforce and other cash outflows (2,355) Reversal of excess accruals to noncurrent assets (1,281) ---------- Balance at March 31, 1998 $ 6,363 ==========
The provision for restructuring recorded during the year ended March 31, 1998 represents costs associated with management's plans to close three Company facilities. Management expects that, as a result of these closures, approximately 160 employees will be permanently separated. Severance costs for these employees will be recorded in 1999. Costs recorded in 1998 primarily relate to fixed assets. The restructuring reserve established in Howell's opening balance sheet represents management's best estimate of the costs to be incurred in connection with the closure of a leased Howell facility. As a result of this closure, no employees are expected to be terminated. Management continues to assess the future manufacturing capacity of Howell and expects to complete its assessment and finalization of the restructuring plan within one year of the acquisition date of Howell. The reversal of excess accruals recorded during the year ended March 31, 1998 is due to management's finalization of its restructuring plans for Lobdell. No future requirement for this accrual exists. These reversals were recorded as a reduction of noncurrent assets. F-20 51 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 10. RESTRUCTURING RESERVES (CONTINUED) In connection with the Company's restructuring activities related to Lobdell, certain employees of Lobdell were terminated. The termination of certain of these employees resulted in a postretirement medical benefit curtailment gain of $957 which, in accordance with the purchase method of accounting, was treated as a reduction in liabilities assumed at the acquisition date. Accordingly, no postemployment medical benefit curtailment gain has been recognized in the Company's statement of operations for the year ended March 31, 1997. 11. BENEFIT PLANS The Company sponsors twelve noncontributory plans covering substantially all employees meeting the age and length of service requirements as specified in the plans. The plan covering salaried employees provides pension benefits that are based on a percentage of the employee's average monthly compensation during the five highest consecutive years out of their last ten years, and their years of credited service up to a maximum of 30 years. The hourly plans do not provide for increases in future compensation levels. The Company's funding policy for the plan covering salaried employees is to make contributions in amounts sufficient to annually fund the plan's current service cost and the initial past service cost, plus interest, over a period of 30 years. Plans covering hourly employees generally provide benefits of stated amounts based on their unique labor agreements for each year of service. The Company's funding policy for these plans is to make at least the minimum annual contributions required by applicable regulations. The following table sets forth the plans' funded status and amounts recognized on the Company's balance sheets at March 31:
OVERFUNDED PLANS UNDERFUNDED PLANS 1998 1997 1996 1998 1997 1996 Actuarial present value of benefit obligation Vested benefits $ 20,132 $17,573 $ 2,376 $ 43,620 $ 34,106 $ 11,539 Nonvested benefits 659 1,170 74 2,602 1,853 356 -------- ------- ------- -------- -------- -------- 20,791 18,743 2,450 46,222 35,959 11,895 Effect of projected future compensation levels 2,329 4,060 1,285 3,187 -------- ------- ------- -------- -------- -------- Projected benefit obligation for service rendered 23,120 22,803 3,735 49,409 35,959 11,895 Plan assets at fair value (primarily U.S. government (23,740) (22,854) (4,155) (47,484) (32,280) (10,525) -------- ------- ------- -------- -------- -------- securities, bonds and notes and mutual funds) Plan assets less (greater) than projected benefit (620) (51) (420) 1,925 3,679 1,370 obligation Unrecognized net loss, including asset gains/losses not (1,663) 10 2,723 (21) yet reflected in market values Unrecognized prior service cost 44 (20) Unrecognized net obligation being recognized over 15-20 years 15 Experience gains (losses) (61) 125 (392) (363) Adjustment required to recognize minimum liability 35 472 368 -------- ------- ------- -------- -------- -------- (Prepaid) accrued pension cost $ (2,283) $ (87) $ (295) $ 4,727 $ 3,718 $ 1,375 ======== ======= ======= ======== ======== ========
The minimum pension liability in excess of the allowable intangible asset has been recorded as a separate component of equity, net of tax. F-21 52 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 11. BENEFIT PLANS (CONTINUED) Net periodic pension cost for each year and the actuarial assumptions used in determining the projected benefit obligation were as follows:
COMPANY PREDECESSOR ------------------------------------------------- ----------------- PERIOD FROM PERIOD FROM YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995 MARCH 31, MARCH 31, THROUGH THROUGH 1998 1997 MARCH 31, 1996 OCTOBER 27, 1995 Service cost $ 2,143 $ 1,074 $ 266 $ 344 Interest cost 4,808 2,127 530 697 Actual return on assets (12,528) (2,138) (425) (533) Net amortization and deferral 7,505 15 60 ---------- --------- --------- --------- Net periodic pension cost $ 1,928 $ 1,078 $ 371 $ 568 ========== ========= ========= ========= Discount rate U.S. plans 7.25% 7.75% Canadian plans 6.50% 8.00% 8.50% 8.75% Expected return on assets U.S. plans 8.50-9.00% 9.00% Canadian plans 8.50% 8.50% 8.50% 7.50% Salary progression U.S. plans 4.50% 4.50% Canadian plans 5.50% 5.50% 5.50% 5.50%
The Company sponsors seven defined contribution 401(k) plans. The Company generally contributes 25% of the first 6% of the base compensation that a participant contributes to the plans. 12. POSTRETIREMENT MEDICAL BENEFITS In addition to the Company's defined benefit pension plans, Lobdell sponsors unfunded defined benefit medical plans that provide postretirement medical benefits to certain full-time employees meeting the age, length of service and contractual requirements as specified in the plans. The plan covering salaried employees is a contributory plan providing medical benefits to those hired before July 1, 1993. The percentage of cost paid by the retiree currently ranges from 10% for 30 or more years of service at retirement to 55% for 15 years of service at retirement, with Company contributions commencing upon attainment of age 62. Those retiring with less than 15 years of service and those hired after June 30, 1993 may participate in the plan at their own cost. The plan is currently noncontributory for those employees who retired prior to July 1, 1993. The plans covering hourly employees provide medical benefit plan options that are similar to those offered to active hourly employees, with Lobdell contributions limited either to that available under traditional coverage for Alma hourly retirees or to 87% of the total applicable premium for Greencastle retirees. F-22 53 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 12. POSTRETIREMENT MEDICAL BENEFITS (CONTINUED) The following table presents the plan's funded status reconciled with amounts recognized in the Company's balance sheet at March 31.
1998 1997 Accumulated postretirement benefit obligation Retirees $ 16,332 $ 14,479 Full eligible active plan participants 6,195 4,287 Other active plan participants 18,134 13,510 ---------- ---------- Total unfunded obligation 40,661 32,276 Unrecognized gain (loss) (4,669) 1,191 ---------- ---------- Postretirement medical benefits liability $ 35,992 $ 33,467 ========== ==========
Net periodic postretirement benefit cost included the following components:
FOR THE PERIOD FROM FOR THE YEAR JANUARY 10, 1997 ENDED THROUGH MARCH 31, 1998 MARCH 31, 1997 Service cost-- benefits earned during the period $ 1,025 $ 272 Interest cost on the accumulated postretirement benefit obligation 2,711 623 ---------- ---------- Net periodic postretirement benefit cost $ 3,736 $ 895 ========== ==========
The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.25% and 7.75% at March 31, 1998 and 1997, respectively. The weighted average annual assumed rate of increase in the per capita cost of covered benefits (i.e., healthcare cost trend rate) is 8.5% in 1998 trending to 6.5% in 2008 and thereafter for retirees less than 65 years of age. For retirees 65 years of age and over, the rate is 8.3% in 1998 trending to 6.5% in 2008 and thereafter. The healthcare cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed healthcare cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of March 31, 1998 by approximately $5,919 and net periodic postretirement benefit cost for the year ended March 31, 1998 by approximately $573. F-23 54 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 13. REDEEMABLE PREFERRED STOCK In connection with the acquisition of Lobdell described in Note 3, redeemable preferred stock with a face value of $50,748 was issued. Redeemable preferred stock with a face value of $40,748 was delivered to the former shareholders of Lobdell on January 10, 1997. The remaining redeemable preferred stock with a face value of $10,000 was placed in escrow pending final determination of the purchase price. The preferred stock issuance consisted of 457,541 shares of Series A $3.00 Cumulative Preferred Stock (Series A Preferred) and 49,938 shares of Series B Preferred Stock (Series B Preferred). On July 15, 1997, the Company entered into a Settlement Agreement and Mutual Release with the preferred shareholders of Lobdell (the Settlement Agreement). Pursuant to the Settlement Agreement, 60,002 shares of Series A Preferred held in escrow and all Series B Preferred previously issued were canceled. The remaining 39,938 shares of Series A Preferred held in escrow were released to the preferred shareholders of Lobdell. The annual dividend on the Series A Preferred is $3.00 per share, payable semi-annually. Dividends on the Series A Preferred are cumulative, but do not bear interest. Under the terms of the issuance of the Series A Preferred (the Stock Agreement), the holders of the Series A Preferred maintain limited voting rights. Holders are entitled to vote on any provisions that would adversely affect their rights or privileges or management's plans to issue any equity securities that would rank prior to the Series A Preferred. Holders are also entitled to elect at least one director of Lobdell, which, under certain provisions of the Stock Agreement, may increase to two. Lobdell is required to redeem all shares of Series A Preferred on December 31, 2006 at a price of $100 per share, plus all declared or accumulated but unpaid dividends. If Oxford does not commence an initial public offering of common stock (IPO) prior to June 30, 2006, then the redemption price of the Series A Preferred is $103 per share. If an IPO does not occur by December 31, 2001, each holder of Series A Preferred has the option to redeem annually a maximum of 20 percent of the shares held at a price of $100 per share on each December 31, beginning in 2002. Series A Preferred holders are not allowed to transfer, sell or assign the shares prior to February 1, 1999. Subsequent to that date, Lobdell has the right of first refusal to purchase any of the shares transferred, sold or assigned by a holder of Series A Preferred. Holders of Series A Preferred are entitled to convert their shares to Oxford common stock issued in connection with an IPO. Individual holders may convert a maximum of 50% of their shares, but the total of all Series A Preferred shares converted may not exceed 25% of the total Series A Preferred shares outstanding. The Series A Preferred has been included in the accompanying consolidated balance sheet at its fair value at the date of issuance of $39,754, and has been adjusted for accrued dividends and accretion totaling $438 and $258 for the years ended March 31, 1998 and 1997, respectively. F-24 55 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 14. RELATED PARTY TRANSACTIONS The Company is charged a fee by a related party, The Oxford Investment Group, Inc., for consulting, finance and management services. Fees charged to the Company by The Oxford Investment Group, Inc. approximated $1,005 and $275 for the years ended March 31, 1998 and 1997, respectively. In connection with the acquisitions of BMGNA, Lobdell and Howell, investment banking fees of $200, $300 and $230, respectively, were paid to The Oxford Investment Group, Inc., during the periods ended March 31, 1996, 1997 and 1998, respectively. As described in Note 3, the majority shareholder of the Company was also the majority shareholder of RPIH. 15. COMMITMENTS AND CONTINGENCIES OPERATING LEASES As of March 31, 1998, the Company had long-term operating leases covering certain machinery and equipment. The minimum rental commitments under noncancellable operating leases with lease terms in excess of one year are as follows as of March 31, 1998: 1999 $ 3,422 2000 3,480 2001 1,380 2002 3,370 2003 142 ----------- $ 11,794 ===========
ENVIRONMENTAL MATTERS The Company is subject to federal, state and local laws and regulations which govern environmental matters. These laws regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances. The Company has identified several environmental matters resulting from prior operations. Due to the relatively early stage of investigation of certain of these identified matters as well as potential indemnification by other potentially responsible parties, management is unable to reasonably estimate the ultimate cost of remediating certain of these identified environmental matters. The Company has recorded a liability of approximately $1,746 and $880 at March 31, 1998 and 1997, respectively, for estimated costs of known environmental matters. GENERAL The Company is subject to various claims, lawsuits and administrative proceedings related to matters arising out of the normal course of business. In the opinion of management, after reviewing the information which is currently available with respect to such matters and consulting with legal counsel, any liability which may ultimately be incurred with respect to these matters will not materially affect the financial position, results of operations or cash flows of the Company. F-25 56 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 16. SEGMENT INFORMATION The Company operates in one industry segment and all sales are to unaffiliated customers. Net sales represent all sales to unaffiliated customers. Net export sales represent sales to unaffiliated customers outside of the enterprise's home country. The Company's home country is the United States and the Predecessor's home country was Canada. Accordingly, for the period from April 1, 1995 through October 27, 1995, net export sales represent sales to unaffiliated customers outside of Canada. For the period from October 28, 1995 to March 31, 1996 and for the years ended March 31, 1997 and 1998, net export sales represent sales to unaffiliated customers outside of the United States. Net sales by geographic area, identifiable assets by geographic area and net export sales by geographic area are as follows:
COMPANY PREDECESSOR ------------------------------------------------- ----------------- PERIOD FROM PERIOD FROM YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995 MARCH 31, MARCH 31, THROUGH THROUGH 1998 1997 MARCH 31, 1996 OCTOBER 27, 1995 Net Sales United States $ 324,335 $ 54,660 $ - $ - Canada 85,030 82,201 35,572 49,043 Mexico 956 ----------- ----------- ---------- --------- $ 410,321 $ 136,861 $ 35,572 $ 49,043 =========== =========== ========== ========= Operating Income (Loss) United States $ 22,234 $ 1,101 $ - $ Canada (462) 2,700 1,713 (1,774) Mexico (1,718) ----------- ----------- ---------- --------- $ 20,054 $ 3,801 $ 1,713 $ (1,774) =========== =========== ========== ========= Identifiable Assets United States $ 275,039 $ 189,308 $ - Canada 40,634 57,153 49,200 Mexico 4,948 ----------- ----------- ---------- $ 320,621 $ 246,461 $ 49,200 =========== =========== ========== Net Export Sales Canada $ 63,985 $ 41,846 $ 16,476 $ - United States 25,397 Mexico 52,834 13,573 1,366 664 Other 4,893 2,120 ----------- ----------- ---------- --------- $ 121,712 $ 57,539 $ 17,842 $ 26,061 =========== =========== ========== =========
F-26 57 OXFORD AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) - -------------------------------------------------------------------------------- 17. SUBSEQUENT EVENT On April 1, 1998, the Company purchased the assets of the Suspension Division of Eaton Corporation (Suspension) for cash of approximately $53,500, including the investment in the Metalcar joint venture. The acquisition was financed through the proceeds of the Notes described in Note 8 and the issuance of $35,000 of Series B 10.125% Senior Subordinated Notes Due 2007. The acquisition will be recorded in accordance with the purchase method of accounting. Accordingly, the purchase price plus direct cost of the acquisition will be allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The estimated fair market value of assets acquired and liabilities assumed is summarized as follows: Current assets $ 22,700 Property, plant and equipment 47,200 Current liabilities (11,300) Long-term liabilities (5,100) ------------ $ 53,500 ============
The unaudited pro forma combined results of operations of the Company and Suspension for the year ended March 31, 1998 including Howell and RPIH as if the acquisitions had occurred at the beginning of fiscal 1998 and after giving effect to certain pro forma adjustments are as follows: Net sales $ 576,163 =========== Net income $ 2,261 =========== Net income applicable to common shares $ 927 =========== Net income per common share $ 2.99 ===========
The pro forma information is not intended to be a projection of future results. The foregoing unaudited pro forma results of operations reflect adjustments for additional interest expense related to the financing of the acquisitions and the additional depreciation expense, as a result of the write-up of property, plant and equipment, net of the related tax benefit. 18. CONDENSED CONSOLIDATING INFORMATION The Notes are guaranteed by Oxford Automotive, Inc. and certain of its wholly-owned subsidiaries, including Lobdell, Howell, BMGH and RPIH (the Guarantor Subsidiaries). The Notes are not guaranteed by the Company's other consolidated subsidiary, Oxford Mexico (the Non-guarantor Subsidiary). The guarantee of the Notes by the Company and the Guarantor Subsidiaries is full and unconditional. The following condensed consolidated financial information presents the financial position, results of operations and cash flows of (i) the Company as if it accounted for its subsidiaries on the equity method, (ii) the Guarantor Subsidiaries on a combined basis and (iii) the Non-guarantor Subsidiary. F-27 58 OXFORD AUTOMOTIVE, INC. CONDENSED CONSOLIDATING BALANCE SHEETS MARCH 31, 1998 (DOLLAR AMOUNTS IN THOUSANDS) - --------------------------------------------------------------------------------
NON-GUARANTOR GUARANTOR ELIMINATIONS/ PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED (DOLLARS IN THOUSANDS) ASSETS Current assets Cash $ 13,673 $ 322 $ 4,326 $ $ 18,321 Receivables (net) 7,206 868 64,652 (7,453) 65,273 Inventories 40 21,265 21,305 Reimbursable tooling 13,315 13,315 Income taxes refundable 1,601 1,601 Deferred income taxes 92 4,307 4,399 Prepaid expenses and other 172 10 8,443 (1,663) 6,962 ---------- -------- --------- -------- ---------- TOTAL CURRENT ASSETS 21,143 1,240 117,909 (9,116) 131,176 Other noncurrent assets 14,626 45 10,477 25,148 Property, plant and equipment (net) 2,141 3,663 157,904 163,708 Investment in consolidated subsidiaries 31,861 (31,861) ---------- -------- --------- -------- ---------- TOTAL ASSETS $ 69,771 $ 4,948 $ 286,290 $(40,977) $ 320,032 ========== ======== ========= ======== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 746 $ 351 $ 50,956 $ 161 $ 52,214 Employee compensation 1,330 3,478 4,808 Intercompany accounts (65,132) 6,041 52,986 6,105 Restructuring reserve 6,363 6,363 Accrued expenses and other 951 104 20,505 (9,318) 12,242 Current portion of borrowings 10,965 10,965 ---------- -------- --------- -------- ---------- TOTAL CURRENT LIABILITIES (62,105) 6,496 145,253 (3,052) 86,592 Pension liability 4,727 4,727 Postretirement medical benefits 35,992 35,992 Deferred income taxes and other 279 (576) 18,225 17,928 Long-term borrowings 124,828 3,655 128,483 ---------- -------- --------- -------- ---------- TOTAL LIABILITIES 63,002 5,920 207,852 (3,052) 273,722 ---------- -------- --------- -------- ---------- Redeemable preferred stock 40,192 40,192 ---------- -------- --------- -------- ---------- Shareholders' equity Common stock 1,050 32,974 (32,974) 1,050 Foreign currency translation 147 (798) (651) Retained earnings (accumulated deficit) 4,750 (1,119) 6,070 (4,951) 4,750 Unrealized gain on marketable securities 969 969 Equity adjustment for minimum pension TOTAL SHAREHOLDERS' EQUITY 6,769 (972) 38,246 (37,925) 6,118 ---------- -------- --------- -------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 69,771 $ 4,948 $ 286,290 $(40,977) $ 320,032 ========== ======== ========= ======== ==========
F-28 59 OXFORD AUTOMOTIVE, INC. CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS YEAR ENDED MARCH 31, 1998 (DOLLAR AMOUNTS IN THOUSANDS) - --------------------------------------------------------------------------------
NON-GUARANTOR GUARANTOR ELIMINATIONS/ PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED (DOLLARS IN THOUSANDS) Sales $ - $ 956 $ 409,365 $ - $ 410,321 Cost of sales 2,674 365,746 368,420 ---------- -------- --------- -------- ---------- GROSS PROFIT (1,718) 43,619 41,901 Selling, general and administrative expenses (665) 22,504 21,839 Restructuring provision 1,610 1,610 Gain on sale of equipment (1,602) (1,602) ---------- -------- --------- -------- ---------- OPERATING INCOME 665 (1,718) 21,107 20,054 Other income (expense) Interest expense (467) 2 (10,245) (10,710) Other 21 300 321 ---------- -------- --------- -------- ---------- INCOME BEFORE BENEFIT (PROVISION) FOR INCOME TAXES 198 (1,695) 11,162 9,665 Benefit (provision) for income taxes (314) 576 (4,336) (4,074) ---------- -------- --------- -------- ---------- INCOME BEFORE EQUITY IN INCOME OF CONSOLIDATED SUBSIDIARIES (116) (1,119) 6,826 5,591 Equity in income of consolidated subsidiaries 5,707 (5,707) ---------- -------- --------- -------- ---------- NET INCOME $ 5,591 $ (1,119) $ 6,826 $ (5,707) $ 5,591 ========== ======== ========= ======== ==========
F-29 60 OXFORD AUTOMOTIVE, INC. CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS YEAR ENDED MARCH 31, 1998 (DOLLAR AMOUNTS IN THOUSANDS) - --------------------------------------------------------------------------------
NON-GUARANTOR GUARANTOR PARENT SUBSIDIARY SUBSIDIARIES CONSOLIDATED (DOLLARS IN THOUSANDS) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (71,916) $ 3,801 $ 94,101 $ 25,986 --------- --------- ---------- --------- INVESTING ACTIVITIES Purchase of businesses, net of cash acquired (24,219) (24,219) Purchase of property, plant and equipment (2,228) (3,774) (10,721) (16,723) Proceeds from sale of equipment 5,433 5,433 Purchases of marketable securities (7,658) (7,658) --------- --------- ---------- ---------- NET CASH USED IN INVESTING ACTIVITIES (34,105) (3,774) (5,288) (43,167) --------- --------- ---------- ---------- FINANCING ACTIVITIES Proceeds from borrowing arrangements 124,828 1,825 126,653 Principal payments on borrowing arrangements (93,782) (93,782) Payment of preferred stock dividends (1,193) (1,193) Debt financing costs (5,372) (5,372) --------- --------- ---------- ---------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 119,456 (93,150) 26,306 --------- --------- ---------- ---------- Effect of foreign currency rate fluctuations on cash 295 (770) (475) --------- --------- ---------- ---------- NET INCREASE (DECREASE) IN CASH 13,435 322 (5,107) 8,650 Cash at beginning of period 238 9,433 9,671 --------- --------- ---------- ---------- Cash at end of period $ 13,673 $ 322 $ 4,326 $ 18,321 ========= ========= ========== ==========
F-30 61 OXFORD AUTOMOTIVE, INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS (DOLLAR AMOUNTS IN THOUSANDS)
PERIOD FROM PERIOD FROM OCTOBER 28, APRIL 1, 1995 1995 YEAR ENDED YEAR ENDED THROUGH THROUGH MARCH 31, MARCH 31, MARCH 31, OCTOBER 27, 1998 1997 1996 1995 ---------- ---------- ---------- ----------- Balance, beginning of period 1,272 39 31 25 Additions Acquisition 200 1,254 -- -- Provision for additional allowance 12 8 5 Deductions Currency translation adjustments (1) -- -- 1 Reversals (644) -- -- -- Doubtful accounts (charged) recovered (427) (33) -- -- ---- ----- -- -- Balance, end of period 400 1,272 39 31 ==== ===== == ==
F-31 62 EXHIBIT INDEX The following exhibits are filed as part of this Report. Those exhibits with an asterisk (*) designate the Registrant's management contracts or compensation plans or arrangements for its executive officers. Exhibit No. Description - ----------- ----------- 2.1 Agreement and Plan of Merger by and among Howell Industries, Inc., the Company and HI Acquisition, Inc., dated May 21, 1997 (previously filed as Exhibit 2.1 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference). 2.2 Shareholders Agreement by and among the Company, HI Acquisition, Inc., and NBD Bank and Morton Schiff, co-trustees of the Herbert H. Freedland Marital Trusts, dated May 21, 1997 (previously filed as Exhibit 2.2 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference). 2.3 Agreement and Plan of Merger dated as of November 14, 1996, by and between Lobdell Emery Corporation, BMG-MI, Inc. (now known as "Oxford Automotive, Inc."), L-E Acquisition, Inc., the Shareholders of Lobdell Emery Corporation, and D. Kennedy Fesenmyer, as Shareholders' Agent (previously filed as Exhibit 2.3 to the Registrant's Registration Statement on Form S-4, Registration No. 333-32975). 2.4 Amendment to Agreement and Plan of Merger, dated December 27, 1996 by and among Lobdell Emery Corporation, BMG-MI, Inc. (now known as "Oxford Automotive, Inc."), L-E Acquisition, Inc., D. Kennedy Fesenmyer, as Shareholders' Agent, and Lobdell Holdings, Inc. (previously filed as Exhibit 2.4 to the Registrant's Registration Statement on Form S-4, Registration No. 333-32975) 2.5 Agreement and Plan of Merger, dated as of January 8, 1997 among Lobdell Holdings, Inc. and BMG-MI, Inc. (now known as "Oxford Automotive, Inc.") (previously filed as Exhibit 2.5 to the Registrant's Registration Statement on Form S-4, Registration No. 333-32975). 2.6 Stock Purchase Agreement, dated as of November 25, 1997, by and among Oxford Automotive, Inc. and the Shareholders of RPI Holdings, Inc. (previously filed as Exhibit 2.1 to the Registrant's Form 8-K dated November 25, 1997, and incorporated herein by reference) 2.7 Asset Purchase Agreement, dated as of March 13, 1998, between Oxford Automotive, Inc. and Eaton Corporation. (previously filed as Exhibit 2.1 to the Registrant's Form 8-K dated April 1, 1998, and incorporated herein by reference) 3.1 Articles of Incorporation of the Company (previously filed as Exhibit 3.1 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference) 3.2 Bylaws of the Company (previously filed as Exhibit 3.11 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference) 63 4.1 Indenture, dated as of June 15, 1997, by and among the Company, the Subsidiary Guarantors and First National Trust Association, as Trustee (including form of the 10 1/8% Senior Subordinated Notes Due 2007, form of the Guaranty and form of Supplemental Indenture) (previously filed as Exhibit 4.1 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference) 4.2 Credit Agreement between the Company and NBD Bank, as agent, dated June 24, 1997 (previously filed as Exhibit 4.2 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference) 4.3 +Registration Rights Agreement dated April 1, 1998 by and among the Company, certain of its subsidiaries and the initial purchaser of its 10 1/8% Senior Subordinated Notes Due 2007, Series B 10.1 Form of RPI Note (previously filed as Exhibit 10.1 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference) 10.2 *Form of Director Indemnification Agreement (previously filed as Exhibit 10.2 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference) 10.3 *Employment and Noncompetition Agreement between the Company and Steven M. Abelman (previously filed as Exhibit 10.3 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference) 10.4 *Employment and Noncompetition Agreement between the Company and Donald C. Campion (previously filed as Exhibit 10.4 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference) 10.5 *Employment Agreement between BMG North America and Larry C. Cornwall (previously filed as Exhibit 10.5 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference) 10.6 Shareholders Agreement among certain of the Shareholders of the Company and BMG-MI, Inc. (now known as Oxford Automotive, Inc.), dated October 23, 1995 (previously filed as Exhibit 10.6 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference) 10.7 Shareholders Agreement among certain of the Shareholders of the Company and the Company dated January 10, 1997 (previously filed as Exhibit 10.7 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference) 10.8 Management and Consulting Agreement ("Management Agreement") between the Company and The Oxford Investment Group, Inc., dated June 24, 1997 (previously filed as Exhibit 10.8 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference) 10.9 Settlement Agreement and Mutual Release, dated July 15, 1997, regarding Lobdell Preferred Shareholders (previously filed as Exhibit 10.9 to the Registrant's Registration Statement on Form S-4, File No. 333-32975, and incorporated herein by reference) 64 10.10 +Amendment to Management Agreement, dated November 24, 1997 10.11 +Form of Purchase Agreement among the Company and the initial purchasers of its 10 1/8% Senior Subordinated Notes Due 2007 12 +Statement regarding computation of ratios 21 +Subsidiaries of the Company 27 +Financial Data Schedule - ------- +Filed herewith EX-4.3 2 EXHIBIT 4.3 1 EXHIBIT 4.3 OXFORD AUTOMOTIVE, INC. Senior Subordinated Notes Due 2007 REGISTRATION RIGHTS AGREEMENT April 1, 1998 Salomon Brothers Inc Seven World Trade Center New York, New York 10048 Ladies and Gentlemen: Oxford Automotive, Inc., a Michigan corporation (the "Company"), proposes to issue and sell to Salomon Brothers Inc. (the "Purchaser"), upon the terms set forth in a purchase agreement of even date herewith (the "Purchase Agreement") $35,000,000 aggregate principal amount of its 10-1/8% Senior Subordinated Notes due 2007 (the "Securities"), which Securities will be guaranteed on a senior subordinated basis (the "Subsidiary Guarantees") by BMG North America Limited, an Ontario corporation; BMG Holdings, Inc., an Ontario corporation; Lobdell Emery Corporation, a Michigan corporation; Winchester Fabrication Corporation, a Michigan corporation; Creative Fabrication Corporation, a Tennessee corporation; Parallel Group International, Inc., an Indiana corporation; Laserweld International LLC, an Indiana corporation; Concept Management Corporation, a Michigan corporation and Lewis Emery Capital Corporation, a Michigan corporation, RPI Holdings, Inc., a Michigan corporation and Howell Industries, Inc., a Michigan corporation (each a "Subsidiary Guarantor" and collectively the "Subsidiary Guarantors") (the "Initial Placement"). The Company and the Subsidiary Guarantors are collectively referred to herein as the "Issuers." As an inducement to the Purchaser to enter into the Purchase Agreement and in satisfaction of a condition to your obligations thereunder, the Issuers agree with you, (i) for your benefit and (ii) for the benefit of the holders from time to time of the Securities (including you) (each of the foregoing, a "Holder" and, together, the "Holders"), as follows: 1. Definitions. Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: 2 2 "Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Affiliate" of any specified person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Closing Date" has the meaning set forth in the Purchase Agreement. "Commission" means the Securities and Exchange Commission. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Exchange Offer Registration Period" means the one year period following the consummation of the Registered Exchange Offer, exclusive of any period during which any stop order shall be in effect suspending the effectiveness of the Exchange Offer Registration Statement. "Exchange Offer Registration Statement" means a registration statement of the Company on an appropriate form under the Act with respect to the Registered Exchange Offer, all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchanging Dealer" means any Holder (which may include the Purchaser) which is a broker-dealer, electing to exchange Securities acquired for its own account as a result of market-making activities or other trading activities, for New Securities. "Final Memorandum" means the Offering Memorandum dated March 24, 1998 including and any documents incorporated by reference therein. "Holder" has the meaning set forth in the preamble hereto. "Indenture" means the Indenture relating to the Securities 3 3 dated as of June 15, 1997, between the Company, the Subsidiary Guarantors and First Trust National Association, as trustee, as the same may be amended from time to time in accordance with the terms thereof. "Initial Placement" has the meaning set forth in the preamble hereto. "Majority Holders" means the Holders of a majority of the aggregate principal amount of securities registered under a Registration Statement. "Managing Underwriters" means the investment banker or investment bankers and manager or managers that shall administer an underwritten offering. "New Securities" means debt securities of the Company identical in all material respects to the Securities (except that the cash interest and interest rate step-up provisions and the transfer restrictions will be modified or eliminated, as appropriate) to be issued under the Indenture or the New Securities Indenture. "New Securities Indenture" means an indenture between the Company, the Subsidiary Guarantors and the New Securities Trustee, identical in all material respects with the Indenture (except that the cash interest and interest rate step-up provisions will be modified or eliminated, as appropriate). "New Securities Trustee" means a bank or trust company reasonably satisfactory to the Purchaser, as trustee with respect to the New Securities under the New Securities Indenture. "Prospectus" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Securities or the New Securities, covered by such Registration Statement, and all amendments and supplements to the Prospectus, including post-effective amendments. "Registered Exchange Offer" means the proposed offer to the Holders to issue and deliver to such Holders, in exchange for the securities, a like principal amount of the New Securities. 4 4 "Registration Statement" means any Exchange Offer Registration Statement or Shelf Registration Statement that covers any of the Securities or the New Securities pursuant to the provisions of this Agreement, amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Securities" has the meaning set forth in the preamble hereto. "Shelf Registration" means a registration effected pursuant to Section 3 hereof. "Shelf Registration Period" has the meaning set forth in Section 3(b) hereof. "Shelf Registration Statement" means a "shelf" registration statement of the Company pursuant to the provisions of Section 3 hereof which covers some or all of the Securities or New Securities, as applicable, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Trustee" means the trustee with respect to the Securities under the Indenture. "Underwriter" means any underwriter of Securities in connection with an offering thereof under a Shelf Registration Statement. 2. Registered Exchange Offer; Resales of New Securities by Exchanging Dealers; Private Exchange. (a) The Issuers shall prepare and, not later than 90 days following the Closing Date, shall file with the Commission the Exchange Offer Registration Statement with respect to the Registered Exchange Offer. The Issuers shall cause the Exchange Offer Registration Statement to become effective under the Act within 150 days of the Closing Date. (b) Upon the effectiveness of the Exchange Offer Registration Statement, the Issuers shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to 5 5 exchange Securities for New Securities (assuming that such Holder is not an affiliate of the Issuers within the meaning of the Act, acquires the New Securities in the ordinary course of such Holder's business and has no arrangements with any person to participate in the distribution of the New Securities) to trade such New Securities from and after their receipt without any limitations or restrictions under the Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. (c) In connection with the Registered Exchange Offer, the Issuers shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) keep the Registered Exchange Offer open for not less than 30 days and not more than 45 days after the date notice thereof is mailed to the Holders (or longer if required by applicable law); (iii) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; and (iv) comply in all respects with all applicable laws. (d) As soon as practicable after the close of the Registered Exchange Offer, the Issuers shall: (i) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (ii) deliver to the Trustee for cancellation all securities so accepted for exchange; and (iii) cause the Trustee or the New Securities Trustee, as the case may be, promptly to authenticate and deliver to each Holder of Securities, New Securities equal in principal amount to the Securities of such Holder so accepted for exchange. (e) The Purchaser and the Issuers acknowledge that, pursuant to interpretations by the Commission's staff of Section 5 of the Act, and in the absence of an applicable exemption 6 6 therefrom, each Exchanging Dealer is required to deliver a Prospectus in connection with a sale of any New Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer in exchange for Securities acquired for its own account as a result of market-making activities or other trading activities. Accordingly, the Issuers shall: (i) include the information set forth in Annex A hereto on the cover of the Exchange Offer Registration Statement, in Annex B hereto in the forepart of the Exchange Offer Registration Statement in a section setting forth details of the Exchange Offer, and in Annex C hereto in the underwriting or plan of distribution section of the Prospectus forming a part of the Exchange Offer Registration Statement, and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (ii) use their best efforts to keep the Exchange Offer Registration Statement continuously effective under the Act during the Exchange Offer Registration Period for delivery by Exchanging Dealers in connection with sales of New Securities received pursuant to the Registered Exchange Offer, as contemplated by Section 4(h) below. (f) In the event that any Purchaser determines that it is not eligible to participate in the Registered Exchange Offer with respect to the exchange of Securities constituting any portion of an unsold allotment, at the request of such Purchaser, the Issuers shall issue and deliver to such Purchaser or the party purchasing New Securities registered under a Shelf Registration Statement as contemplated by Section 3 hereof from such Purchaser, in exchange for such Securities, a like principal amount of New Securities. The Issuers shall seek to cause the CUSIP Service Bureau to issue the same CUSIP number for such New Securities as for New Securities issued pursuant to the Registered Exchange Offer. 3. Shelf Registration. If (i) because of any change in law or applicable interpretations thereof by the Commission's staff, the Issuers determine upon advice of their outside counsel that they are not permitted to effect the Registered Exchange Offer as contemplated by Section 2 hereof, or (ii) for any other reason the Registered Exchange Offer is not consummated within 180 days of the date hereof, or (iii) any Purchaser so requests with respect to Securities held by it following consummation of the Registered Exchange Offer, or (iv) any Holder (other than a Purchaser) is not eligible to participate in the Registered 7 7 Exchange Offer or (v) in the case of any Purchaser that participates in the Registered Exchange Offer or acquires New Securities pursuant to Section 2(f) hereof, such Purchaser does not receive freely tradeable New Securities in exchange for Securities constituting any portion of an unsold allotment (it being understood that, for purposes of this Section 3, (x) the requirement that a Purchaser deliver a Prospectus containing the information required by Items 507 and/or 508 of Regulation S-K under the Act in connection with sales of New Securities acquired in exchange for such Securities shall result in such New Securities being not "freely tradeable" but (y) the requirement that an Exchanging Dealer deliver a Prospectus in connection with sales of New Securities acquired in the Registered Exchange Offer in exchange for Securities acquired as a result of market-making activities or other trading activities shall not result in such New Securities being not "freely tradeable"), the following provisions shall apply: (a) The Issuers shall as promptly as practicable (but in no event more than 45 days after so required or requested pursuant to this Section 3), file with the Commission and thereafter shall cause to be declared effective under the Act a Shelf Registration Statement relating to the offer and sale of the Securities or the New Securities, as applicable, by the Holders from time to time in accordance with the methods of distribution elected by such Holders and set forth in such Shelf Registration Statement; provided that, with respect to New Securities received by a Purchaser in exchange for securities constituting any portion of an unsold allotment, the Issuers may, if permitted by current interpretations by the Commission's staff, file a post-effective amendment to the Exchange Offer Registration Statement containing the information required by Regulation S-K Items 507 and/or 508, as applicable, in satisfaction of its obligations under this paragraph (a) with respect thereto, and any such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement. (b) The Issuers shall use their best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the date the Shelf Registration Statement is declared effective by the Commission or such shorter period that will terminate when all the Securities or New Securities, as applicable, covered by the Shelf Registration Statement have been sold 8 8 pursuant to the Shelf Registration Statement (in any such case, such period being called the "Shelf Registration Period"). The Issuers shall be deemed not to have used their best efforts to keep the Shelf Registration Statement effective during the requisite period if any Issuer voluntarily takes any action that would result in Holders of securities covered thereby not being able to offer and sell such securities during that period, unless (i) such action is required by applicable law, or (ii) such action is taken by such Issuer in good faith and for valid business reasons (not including avoidance of such Issuer's obligations hereunder), including the acquisition or divestiture of assets, so long as such Issuer promptly thereafter complies with the requirements of Section 4(k) hereof, if applicable. 4. Registration Procedures. In connection with any Shelf Registration Statement and, to the extent applicable, any Exchange Offer Registration Statement, the following provisions shall apply: (a) The Issuers shall furnish to you, prior to the filing thereof with the Commission, a copy of any Shelf Registration Statement and any Exchange Offer Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein and shall use their best efforts to reflect in each such document, when so filed with the Commission, such comments as you reasonably may propose. (b) The Issuers shall ensure that (i) any Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto complies in all material respects with the Act and the rules and regulations thereunder, (ii) any Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Registration Statement, and any amendment or supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading. (c) (1) The Issuers shall advise you or your representative and, in the case of a Shelf Registration Statement, the Holders of securities covered thereby, and, 9 9 if requested by you or your representative or any such Holder, confirm such advice in writing: (i) when a Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; and (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus included therein or for additional information. (2) The Issuers shall advise you or your representative and, in the case of a Shelf Registration Statement, the Holders of securities covered thereby, and, in the case of an Exchange Offer Registration Statement, any Exchanging Dealer which has provided in writing to the Company a telephone or facsimile number and address for notices, and, if requested by you or your representative or any such Holder or Exchanging Dealer, confirm such advice in writing: (i) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (ii) of the receipt by the Issuers of any notification with respect to the suspension of the qualification of the securities included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (iii) of the happening of any event that requires the making of any changes in the Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading (which advice shall be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made). (d) The Issuers shall use their best efforts to obtain 10 10 the withdrawal of any order suspending the effectiveness of any Registration Statement at the earliest possible time. (e) The Issuers shall furnish to each Holder of securities included within the coverage of any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits (including those incorporated by reference). (f) The Issuers shall, during the Shelf Registration Period, deliver to each Holder of securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Issuers consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of securities in connection with the offering and sale of the securities covered by the Prospectus or any amendment or supplement thereto. (g) The Issuers shall furnish to each Exchanging Dealer which so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, any documents incorporated by reference therein, and, if the Exchanging Dealer so requests in writing, all exhibits (including those incorporated by reference). (h) The Issuers shall, during the Exchange Offer Registration Period, promptly deliver to each Exchanging Dealer, without charge, as many copies of the Prospectus included in such Exchange Offer Registration Statement and any amendment or supplement thereto as such Exchanging Dealer may reasonably request for delivery by such Exchanging Dealer in connection with a sale of New Securities received by it pursuant to the Registered Exchange Offer; and the Issuers consent to the use of the Prospectus or any amendment or supplement thereto by any such Exchanging Dealer, as aforesaid. (i) Prior to the Registered Exchange Offer or any other offering of securities pursuant to any Registration Statement, the Issuers shall register or qualify or 11 11 cooperate with the Holders of securities included therein and their respective counsel in connection with the registration or qualification of such securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holders reasonably request in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the securities covered by such Registration Statement; provided, however, that the Issuers will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (j) The Issuers shall cooperate with the Holders of Securities to facilitate the timely preparation and delivery of certificates representing Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request prior to sales of securities pursuant to such Registration Statement. (k) Upon the occurrence of any event contemplated by paragraph (c)(2)(iii) above, the Issuers shall promptly prepare a post-effective amendment to any Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to purchasers of the Securities included therein, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (l) Not later than the effective date of any such Registration Statement hereunder, the Issuers shall provide a CUSIP number for the Securities or New Securities, as the case may be, registered under such Registration Statement, and provide the applicable trustee with printed certificates for such Securities or New Securities, in a form eligible for deposit with The Depository Trust Company. (m) The Issuers shall use their best efforts to comply with all applicable rules and regulations of the Commission and shall make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earnings statement 12 12 satisfying the provisions of Section 11(a) of the Act. (n) The Issuers shall cause the Indenture or the New Securities Indenture, as the case may be, to be qualified under the Trust Indenture Act in a timely manner. (o) The Issuers may require each Holder of Securities to be sold pursuant to any Shelf Registration Statement to furnish to the Issuers such information regarding the Holder and the distribution of such Securities as the Issuers may from time to time reasonably require for inclusion in such Registration Statement. No Holder may include any of its Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Issuers in writing, within 20 days after receipt of a written request therefor, such information as the Issuers may reasonably request, including, but not limited to, information specified by Regulation S-K or otherwise required by the Commission for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Issuers all information required to be disclosed in order to make the information previously furnished to the Issuers by such Holder not materially misleading. (p) The Issuers shall, if requested, promptly incorporate in a Prospectus supplement or post-effective amendment to a Shelf Registration Statement, such information as the Managing Underwriters and Majority Holders reasonably agree should be included therein and shall make all required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment. (q) In the case of any Shelf Registration Statement, the Issuers shall enter into such agreements (including underwriting agreements) and take all other appropriate actions in order to expedite or facilitate the registration or the disposition of the Securities, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 6 (or such other provisions and procedures acceptable to the Majority Holders and the Managing Underwriters, if any,) with respect to all parties to be indemnified pursuant to 13 13 Section 6 from Holders of Securities to the Company. (r) In the case of any Shelf Registration Statement, the Issuers shall (i) make reasonably available for inspection by the Holders of Securities to be registered thereunder, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by the Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Issuers and their subsidiaries; (ii) cause the Issuers', officers, directors and employees to supply all relevant information reasonably requested by the Holders or any such underwriter, attorney, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations; provided, however, that any information that is designated in writing by the Issuers, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; (iii) make such representations and warranties to the Holders of Securities registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; (iv) obtain opinions of counsel to the Issuers and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any) addressed to each selling Holder of Securities registered thereunder and the underwriters, if any, in customary form and covering such matters as are customarily covered in opinions requested in underwritten offerings; (v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Issuers (and, if necessary, any other independent certified public accountants of any subsidiary of the Issuers or of any business acquired by the Issuers for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each selling Holder of securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and (vi) 14 14 deliver such documents and certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, including those to evidence compliance with Section 4(k) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Issuers. The foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of this Section 4(r) shall be performed at (A) the effectiveness of such Registration Statement and each post-effective amendment thereto and (B) each closing under any underwriting or similar agreement as and to the extent required thereunder. (s) In the case of any Exchange Offer Registration Statement, the Issuers shall, to the extent requested by any Purchaser, (i) make reasonably available for inspection by such Purchaser, and any attorney, accountant or other agent retained by such Purchaser, all relevant financial and other records, pertinent corporate documents and properties of the Issuers and their subsidiaries; (ii) cause the Issuers' officers, directors and employees to supply all relevant information reasonably requested by such Purchaser or any such attorney, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations; provided, however, that any information that is designated in writing by the Issuers, in good faith, as confidential at the time of delivery of such information shall be kept confidential by such Purchaser or any such attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; (iii) make such representations and warranties to such Purchaser, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; (iv) obtain opinions of counsel to the Issuers and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to such Purchaser and its counsel, addressed to such Purchaser, covering such matters as are customarily covered in opinions requested in underwritten offerings;(v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Issuers(and, if necessary, any other independent certified public accountants of any subsidiary of the Issuers or of any business acquired by the Issuers for which financial statements and financial data are, or are required to be, 15 15 included in the Registration Statement), addressed to such Purchaser, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings, or if requested by such Purchaser or its counsel in lieu of a "cold comfort" letter, an agreed-upon procedures letter under Statement on Auditing Standards No. 35, covering matters requested by such Purchaser or its counsel; and (vi) deliver such documents and certificates as may be reasonably requested by such Purchaser or its counsel, including those to evidence compliance with Section 4(k) and with conditions customarily contained in underwriting agreements. The foregoing actions set forth in clauses (iii), (iv), (v), and (vi) of this Section 4(s) shall be performed at the close of the Registered Exchange Offer and the effective date of any post-effective amendment to the Exchange Offer Registration Statement. 5. Registration Expenses. The Issuers shall bear all expenses incurred in connection with the performance of their obligations under Sections 2, 3 and 4 hereof and, in the event of any Shelf Registration Statement, will reimburse the Holders for the reasonable fees and disbursements of one firm or counsel designated by the Majority Holders to act as counsel for the Holders in connection therewith, and, in the case of any Exchange Offer Registration Statement, will reimburse the Purchasers for the reasonable fees and disbursements of one firm or counsel acting in connection therewith. 6. Indemnification and Contribution. (a) In connection with any Registration Statement, the Issuers, jointly and severally, agree to indemnify and hold harmless each Holder of Securities covered thereby (including the Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer), the directors, officers, employees and agents of each such Holder and each person who controls any such Holder within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission 16 16 to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Issuers will not be liable in any case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Issuers by or on behalf of any such Holder specifically for inclusion therein and provided, further, with respect to any untrue statement or omission of a material fact made in any Preliminary Prospectus, the indemnity agreement contained in this Section 6(a) shall not inure to the benefit of any Holder (or any of the directors, officers and employees of such Holder or any controlling person of such Holder) from whom the person asserting any such loss, claim, damage or liability purchased the Securities concerned, to the extent that any such loss, claim, damage or liability of such Holder occurs under circumstances where it shall have been determined by a court of competent jurisdiction by final and nonappealable judgment that (x) the Issuers had previously furnished copies of the Prospectus to the Holder, (y) the untrue statement or omission of a material fact contained in the Preliminary Prospectus was corrected in the Prospectus and (z) there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the Prospectus. This indemnity agreement will be in addition to any liability which the Company may otherwise have. The Issuers, jointly and severally, also agree to indemnify or contribute to Losses of, as provided in Section 6(d), any underwriters of Securities registered under a Shelf Registration Statement, their officers and directors and each person who controls such underwriters on substantially the same basis as that of the indemnification of the Purchaser and the selling Holders provided in this Section 6(a) and shall, if requested by any Holder, enter into an underwriting agreement reflecting such agreement as provided in Section 4(q) hereof. (b) Each Holder of Securities covered by a Registration Statement (including each Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer) severally agrees to indemnify and hold harmless (i) the Issuers, (ii) each of their directors, (iii) 17 17 each of their respective officers who signs such Registration Statement and (iv) each person who controls the Issuers within the meaning of either the Act or the Exchange Act to the same extent as the foregoing indemnity from the Issuers to each such Holder, but only with reference to written information relating to such Holder furnished to the Issuers by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any such Holder may otherwise have. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 6, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel (and local counsel) if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and counsel to the indemnified party shall have reasonably concluded that there may be legal defenses available to such indemnified party and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time 18 18 after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 6 is unavailable to or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively, "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Initial Placement and the Registration Statement which resulted in such Losses; provided, however, that in no case shall any Purchaser or any subsequent Holder of any Security or New Security be responsible, in the aggregate, for any amount in excess of the purchase discount or commission applicable to such Security, or in the case of a New Security, applicable to the Security which was exchangeable into such New Security, as set forth on the cover page of the Final Memorandum, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the Securities purchased by such underwriter under the Registration Statement which resulted in such Losses. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Issuers shall be deemed to be equal to the proceeds from the Initial Placement net of purchase discounts and commissions (before deducting 19 19 expenses) as set forth on the cover page of the Final Memorandum. Benefits received by the Purchasers shall be deemed to be equal to the total purchase discounts and commissions as set forth on the cover page of the Final Memorandum, and benefits received by any other Holders shall be deemed to be equal to the value of receiving Securities or New Securities, as applicable, registered under the Act. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Registration Statement which resulted in such Losses. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 6, each person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Issuers within the meaning of either the Act or the Exchange Act, each officer of the Issuers who shall have signed the Registration Statement and each director of the Issuers shall have the same rights to contribution as the Company or the Subsidiary Guarantors respectively, subject in each case to the applicable terms and conditions of this paragraph (d). (e) The provisions of this Section 6 will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Issuers or any of the officers, directors or controlling persons referred to in Section 6 hereof, and will survive the sale by a Holder of securities covered by a Registration Statement. 7. Miscellaneous. (a) No Inconsistent Agreements. The Issuers have not, as of the date hereof, entered into, nor shall any of them, on or after the date hereof, enter into, any agreement with respect to their securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. 20 20 (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Issuers have obtained the written consent of the Holders of at least a majority of the then outstanding aggregate principal amount of Securities (or, after the consummation of any Exchange Offer in accordance with Section 2 hereof, of New Securities); provided that, with respect to any matter that directly or indirectly affects the rights of any Purchaser hereunder, the Issuers shall obtain the written consent of each such Purchaser against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Majority Holders, determined on the basis of securities being sold rather than registered under such Registration Statement. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand- delivery, first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery: (1) if to a Holder, at the most current address given by such holder to the Issuers in accordance with the provisions of this Section 7(c), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to Salomon Brothers Inc.; (2) if to you, initially at the respective addresses set forth in the Purchase Agreement; and (3) if to the Issuers, initially at the address of the Company set forth in the Purchase Agreement with copies as indicated therein. All such notices and communications shall be deemed to have been duly given when received. The Purchasers or the Issuers by notice to the other may designate additional or different addresses for subsequent notices or communications. 21 21 (d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without the need for an express assignment or any consent by the Issuers thereto, subsequent Holders of Securities and/or New Securities. The Issuers hereby agree to extend the benefits of this Agreement to any Holder of Securities and/or New Securities and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto. (e) Counterparts. This agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (f) Headings. The headings in this agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) Governing Law. This agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed in said State. (h) Severability. In the event that any one of more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (i) Securities Held by the Issuers, etc. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities or New Securities is required hereunder, Securities or New Securities, as applicable, held by the Issuers or their Affiliates (other than subsequent Holders of Securities or New Securities if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Securities or New Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. Please confirm that the foregoing correctly sets forth the agreement between the Issuers and you. 22 22 Very truly yours, OXFORD AUTOMOTIVE, INC. By: /s/ Donald C. Campion ----------------------------------- Name: Donald C. Campion Title: Senior Vice President BMG NORTH AMERICA LIMITED By: /s/ Donald C. Campion ----------------------------------- Name: Donald C. Campion Title: Treasurer LOBDELL EMERY CORPORATION By: /s/ Donald C. Campion ----------------------------------- Name: Donald C. Campion Title: Treasurer WINCHESTER FABRICATION CORPORATION By: /s/ Donald C. Campion ----------------------------------- Name: Donald C. Campion Title: Treasurer CREATIVE FABRICATION CORPORATION By: /s/ Donald C. Campion ----------------------------------- Name: Donald C. Campion Title: Treasurer PARALLEL GROUP INTERNATIONAL, INC. By: /s/ Donald C. Campion ----------------------------------- Name: Donald C. Campion Title: Treasurer 23 23 CONCEPT MANAGEMENT CORPORATION By: /s/ Donald C. Campion ----------------------------------- Name: Donald C. Campion Title: Treasurer LEWIS EMERY CAPITAL CORPORATION By: /s/ Donald C. Campion ----------------------------------- Name: Donald C. Campion Title: Treasurer RPI HOLDINGS, INC. By: /s/ Donald C. Campion ----------------------------------- Name: Donald C. Campion Title: Treasurer HOWELL INDUSTRIES, INC. By: /s/ Donald C. Campion ----------------------------------- Name: Donald C. Campion Title: Treasurer BMG HOLDINGS INC. By: /s/ Donald C. Campion ----------------------------------- Name: Donald C. Campion Title: Treasurer LASERWELD INTERNATIONAL, L.L.C By: Lobdell Emery Corporation, Its Sole Member By: /s/ Donald C. Campion ----------------------------------- Name: Donald C. Campion Title: Treasurer 24 24 Accepted April 1, 1998 SALOMON BROTHERS INC By: /s/ Thomas J. Spoto ----------------------------------- Name: Thomas J. Spoto Title: Associate 25 ANNEX A Annex A Each broker-dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Securities received in exchange for Securities where such New Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Issuers have agreed that, starting on the Expiration Date (as defined herein) and ending on the close of business on the first anniversary of the Expiration Date, they will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." 26 ANNEX B Annex B Each broker-dealer that receives New Securities for its own account in exchange for Securities, where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. See "Plan of Distribution." 27 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Issuers have agreed that, starting on the Expiration Date and ending on the close of business on the first anniversary of the Expiration Date, they will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until ________, 199_, all dealers effecting transactions in the New Securities may be required to deliver a prospectus. The Issuers will not receive any proceeds from any sale of New Securities by broker-dealers. New Securities received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Securities. Any broker-dealer that resells New Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit of any such resale of New Securities and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of one year after the Expiration Date, the Issuers will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of 28 Transmittal. The Issuers have agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holders of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. If applicable, add information required by Regulation S-K Items 507 and/or 508. 29 ANNEX D Rider A CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ____________________________________ Address: _________________________________ _________________________________ Rider B If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Securities. If the undersigned is a broker-dealer that will receive New Securities for its own account in exchange for securities, it represents that the Securities to be exchanged for New securities were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus in connection with any resale of such New Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. EX-10.10 3 EXHIBIT 10.10 1 EXHIBIT 10.10 AMENDMENT TO MANAGEMENT AND CONSULTING AGREEMENT AMENDMENT TO MANAGEMENT AND CONSULTING AGREEMENT (this "Amendment") made this 24th day of November, 1997 by and between Oxford Automotive, Inc., a Michigan corporation the ("Company"), and The Oxford Investment Group, Inc., a Michigan corporation ("Consultant"). A. Consultant and the Company entered into a Management and Consultant Agreement dated June 24, 1997 (the "Agreement"). B. Since entering into the Agreement, the parties negotiated and agreed to certain changes to the Agreement set forth herein. NOW, THEREFORE, the Company and Consultant, in consideration of the premises, agreements and covenants contained herein, hereby agree to the following modifications of the Agreement: 1. All references to capitalized terms contained herein which are not otherwise defined in this Amendment shall have the meanings ascribed to them in the Agreement. 2. Section 11(d) of the Agreement is amended and restated as follows: "(d) Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes all other agreements or arrangements, oral and written, between the parties hereto relating to the matters set forth herein. No representations, inducement, agreement, amendment, promise or understanding will have any force or effect unless the same is in writing and validly executed by the parties hereto. Notwithstanding the forgoing, Schedule A may be modified from time to time by Consultant to reflect any additional Marks that shall be subject to this Agreement and the registrations (and applications therefor) relating to such Marks." 3. Except as specifically amended by this Amendment, all provisions of the Agreement shall remain in full force and effect. This Amendment shall govern in the event that there is a conflict between the Agreement and this Amendment. 2 IN WITNESS WHEREOF, the parties have executed this Agreement on the date first written above. OXFORD AUTOMOTIVE, INC. By: Steven M. Abelman ---------------------------- Its: President --------------------------- STATE OF MICHIGAN ) ) SS. COUNTY OF OAKLAND ) On this 3rd day of December, 1997, before me, a Notary Public in and for said County, the foregoing instrument was executed by Steven M. Abelman, the President of, Oxford Automotive, Inc. a Michigan corporation, on behalf of said corporation. Kelly M. Kotsull -------------------------------- Notary Public, Oakland County, Michigan My Commission Expires: ---------- KELLY M. KOTSULL NOTARY PUBLIC - OAKLAND COUNTY, MI MY COMMISSION EXPIRES 09/06/00 2 3 THE OXFORD INVESTMENT GROUP, INC. By: Selwyn Isakow ---------------------------- Its: Chairman --------------------------- STATE OF MICHIGAN ) ) SS. COUNTY OF OAKLAND ) On this 3 day of December, 1997, before me, a Notary Public in and for said County, the foregoing instrument was acknowledged by Selwyn Isakow, the Chairman, of The Oxford Investment Group, Inc., a Michigan corporation, on behalf of said corporation. Kelly M. Kotsull -------------------------------- Notary Public, Oakland County, Michigan My Commission Expires: ---------- KELLY M. KOTSULL NOTARY PUBLIC - OAKLAND COUNTY, MI MY COMMISSION EXPIRES 09/06/00 3 EX-10.11 4 EXHIBIT 10.11 1 EXHIBIT 10.11 OXFORD AUTOMOTIVE, INC. $35,000,000 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007 PURCHASE AGREEMENT New York, New York March 24, 1998 Salomon Brothers Inc Seven World Trade Center New York, New York 10048 Ladies and Gentlemen: Oxford Automotive, Inc., a Michigan corporation (the "Company"), proposes to issue and sell to Salomon Brothers Inc (the "Initial Purchaser"), $35,000,000 principal amount of its 10 1/8% Senior Subordinated Notes Due 2007 (the "Securities"), to be guaranteed on a senior subordinated basis (the "Subsidiary Guarantees") by BMG North America Limited, an On- tario corporation; BMG Holdings Inc., an Ontario corporation; Lobdell Emery Corporation, a Michigan corporation; Winchester Fabrication Corporation, a Michigan corporation; Creative Fabrication Corporation, a Tennessee corporation; Parallel Group International, Inc., an Indiana corporation; Laserweld International LLC, an Indiana corporation; Concept Management Corporation, a Michigan corporation, Lewis Emery Capital Corporation, a Michigan corporation, RPI Holdings, Inc., a Michigan corporation and Howell Industries, Inc., a Michigan corporation (each a "Subsidiary Guarantor" and collectively the "Subsidiary Guarantors"), and to be issued under an indenture (the "Indenture") dated as of June 15, 1997 between the Company, the Subsidiary Guarantors and First Trust National Association, as trustee (the "Trustee"). The sale of the Securities to the Initial Purchaser will be made without registration of the Securities under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon exemptions from the registration requirements of the Securities Act. You have advised the Company that the Initial Purchaser will offer and sell the Securities purchased hereunder in accordance with Section 4 hereof as soon as you deem advisable. In connection with the sale of the Securities, the Company has prepared a final offering memorandum, dated March 24, 1998 (including any and all exhibits thereto and any information or documents incorporated by reference therein, the "Final Memorandum"). The Final Memorandum sets forth certain information concerning the Company, the Subsidiary Guarantors and the Securities. The Company and the Subsidiary Guarantors, jointly and severally, hereby confirm that they 2 2 have authorized the use of the Final Memorandum, and any amendment or supplement thereto, in connection with the offer and sale of the Securities by the Initial Purchaser. Unless stated to the contrary, all references herein to the Final Memorandum are to the Final Memorandum at the Execution Time (as defined below) and are not meant to include any amendment or supplement, or any information incorporated by reference therein, subsequent to the Execution Time and any references herein to the terms "amend," "amendment" or "supplement" with respect to the Final Memorandum shall be deemed to refer to and include any information filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), subsequent to the Execution Time which is incorporated by reference therein. The holders of the Securities will be entitled to the benefits of the Registration Agreement dated the date hereof, among the Company, the Subsidiary Guarantors and the Initial Purchaser (the "Registration Agreement"). Capitalized terms used herein without definitions have the respective meanings assigned to them in the Final Memorandum. 1. Representations and Warranties. The Company and the Subsidiary Guarantors, jointly and severally, represent and warrant to, and agree with the Initial Purchaser as set forth below in this Section 1. (a) Each of the Company, the Subsidiary Guarantors and their respective subsidiaries is a corporation, a limited liability company or a partnership, duly incorporated or formed, and is validly existing as a corporation, a limited liability company or a partnership in good standing under the laws of the jurisdiction in which it is chartered, organized or formed and is duly qualified to do business as a foreign corporation, limited liability company or partnership and is in good standing under the laws of each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business, except in such jurisdictions in which the failure to so qualify would not have a material adverse effect on the Company, the Subsidiary Guarantors and their respective subsidiaries taken as a whole. (b) Each of the Company, the Subsidiary Guarantors and their respective subsidiaries has full power (corporate and other) to own or lease its properties and conduct its business as described in the Final Memorandum; and each of the Company and the Subsidiary Guarantors has full power (corporate and other) to issue 3 3 the Securities and to enter into this Agreement, the Indenture, the Subsidiary Guarantees and the Registration Agreement (collectively, the "Transaction Documents") to which it is a party and to carry out all the terms and provisions hereof and thereof to be carried out by it, including, without limitation, the issuance, sale and delivery of the Securities. (c) The issued shares of capital stock of each of the Company's subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and, except as otherwise set forth in the Final Memorandum, are owned beneficially, directly or indirectly, by the Company free and clear of any security interests, liens, encumbrances, preemptive rights or claims. (d) The Company's authorized capital stock consists of 400,000 shares of common stock, of which 309,750 shares are issued and outstanding. Except as set forth in the Final Memorandum, no holders of outstanding shares of capital stock of the Company are entitled as such to any preemptive or other rights to subscribe for any of the Securities. (e) The consolidated financial statements and schedules of the Company and its consolidated subsidiaries included in the Final Memorandum present fairly in all material respects the financial position of the Company and its consolidated subsidiaries and the results of operations and changes in financial condition as of the dates and periods therein specified. Such financial statements and schedules have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved (except as otherwise noted therein). The pro forma financial statements of the Company and its subsidiaries and the related notes thereto included in the Final Memorandum have been properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein and to the knowledge of the Company such pro forma financial statements and the related notes thereto have been prepared in accordance with the Securities and Exchange Commission's (the "Commission") rules and guidelines with respect to pro forma financial statements, except as may be required with respect to the proposed acquisition of the Eaton Suspension Division. The selected financial data set forth under the caption "Selected Consolidated Historical Financial Data" and "Pro Forma Combined Financial Data" in the Final Memorandum present fairly in 4 4 all material respects, on the basis stated in the Final Memorandum, the information included therein. (f) Each of Price Waterhouse LLP, who have certified certain financial statements of the Company and its consolidated subsidiaries and Deloitte & Touche, who have certified certain financial statements of BMG North America Limited and delivered their respective reports with respect to the audited consolidated financial statements and schedules included in or incorporated by reference in the Final Memorandum, are independent public accountants within the meaning of the Securities Act and the applicable rules and regulations thereunder. (g) The execution, delivery and performance of this Agreement have been duly authorized by the Company and the Subsidiary Guarantors, this Agreement has been duly executed and delivered by the Company and the Subsidiary Guarantors and, upon the due execution and delivery by the other parties hereto, this Agreement will constitute a legal, valid and binding obligation of the Company and the Subsidiary Guarantors, enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or other similar laws or court decisions relating to or affecting the rights of creditors generally or of general principles of equity (whether considered in a proceeding in equity or at law) and the unenforceability under certain circumstances under law or court decisions of provisions providing for the indemnification of or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy. This Agreement conforms in all material respects to the description thereof contained in the Final Memorandum. (h) No legal or governmental proceedings are pending to which the Company or any of its subsidiaries is a party or to which the property of the Company or any of its subsidiaries is subject that are not described in the Final Memorandum, and no such proceedings have been threatened against the Company or any of its subsidiaries or with respect to any of their respective properties, except in each case for such proceedings that, if the subject of an unfavorable decision, ruling or finding, would not, individually or in the aggregate, result in a material adverse effect on the condition (financial or otherwise), business prospects, net worth or results of operations of the Company and its subsidiaries, taken as a whole (a "Material Adverse Effect"), or have a Material Adverse Effect on the ability of the Company or any Subsidiary Guarantor to perform its obligations under any 5 5 of the Transaction Documents. (i) The issuance, offering and sale of the Securities to the Initial Purchaser by the Company and the Subsidiary Guarantors pursuant to this Agreement, the compliance by the Company and the Subsidiary Guarantors with the other provisions of this Agreement and the authorization, execution and delivery by the Company and the Subsidiary Guarantors of this Agreement and the other Transaction Documents to which it is a party and the consummation of the other transactions contemplated herein and therein do not (i) require the consent, approval, authorization, registration or qualification of or with any governmental authority, except such as have been obtained and such as may be required under state securities or blue sky laws or, with respect to the obligations under the Registration Agreement, except such as may be required under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), or as may be required to register the Securities under the Securities Act or (ii) conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under, (A) any indenture, mortgage, deed of trust, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of their respective properties are bound, or (B) the charter documents or bylaws of the Company or any of its subsidiaries or (C) any statute or any judgment, decree, order, rule or regulation of any court or other governmental authority or any arbitrator applicable to the Company or any of its subsidiaries, except in each case for such conflicts, breaches or violations that would not, individually or in the aggregate, result in a Material Adverse Effect. (j) The Company and each of its subsidiaries have good and marketable title to all items of real property and good title to all material personal property owned by each of them, in each case free and clear of any security interests, liens, encumbrances, equities, claims and other defects, except such as do not materially and adversely affect the value of such property and do not interfere with the use made or proposed to be made of such property by the Company or its subsidiaries, and the Company and its subsidiaries have valid, subsisting and enforceable leases for the properties described in the Final Memorandum as leased by them, with exceptions in each case as are not material and do not interfere with the business of the Company and its subsidiaries, taken as a whole, in each case except as described in or contemplated by the Final Memorandum. 6 6 (k) No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company or any of its Subsidiary Guarantors, is threatened or imminent that would result in a Material Adverse Effect, except as described in or contemplated by the Final Memorandum. (l) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; and neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not result in a Material Adverse Effect, except as described in or contemplated by the Final Memorandum. (m) No subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary's capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary's property or assets to the Company, except as described in the Final Memorandum. (n) The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities required to conduct their respective businesses except for those the failure to possess which, individually or in the aggregate, would not have a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect, except as described in or contemplated by the Final Memorandum. (o) The Company and its subsidiaries have filed all foreign, federal, state and local tax returns that are required to be filed through the date hereof or have requested extensions thereof and have paid all taxes (other than immaterial amounts of franchise taxes with respect to immaterial subsidiaries and immaterial amounts of severance taxes) required to be paid by them and any other assessment, fine or penalty levied against them, to 7 7 the extent that any of the foregoing is due and payable, except where the failure to pay such assessment, fine or penalty levied against them would not singly or in the aggregate have a Material Adverse Effect and except for any such assessment, fine or penalty that is currently being contested in good faith or as described in or contemplated by the Final Memorandum. (p) Neither the Company nor any of its subsidiaries is in violation of any federal or state law or regulation relating to occupational safety and health or to the storage, handling or transportation of hazardous or toxic materials, and the Company and its subsidiaries have received all permits, licenses or other approvals required of them under applicable federal and state occupational safety and health and environmental laws and regulations to conduct their respective businesses, and the Company and its subsidiaries are in compliance with all terms and conditions of any such permit, license or approval, except any such violation of law or regulation, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals which would not, singly or in the aggregate, result in a Material Adverse Effect, except as described in or contemplated by the Final Memorandum. (q) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (r) No default exists, and no event has occurred which, with notice or lapse of time or both, would constitute a default in the due performance and observance of any terms, covenant or condition of any indenture, mortgage, deed of trust, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of their respective properties is bound or may be affected in any material adverse respect with regard to property, business or 8 8 operations of the Company and its subsidiaries, taken as a whole, except for such defaults that would not result in a Material Adverse Effect. (s) The Indenture has been duly and validly authorized and the Registration Agreement, the Securities and the Subsidiary Guarantees have been duly and validly authorized and, in the case of the Registration Agreement, when duly executed and delivered by the parties thereto and, in the case of the Securities, when duly issued, authenticated and delivered in accordance with the terms of the Indenture, endorsed by each Subsidiary Guarantor and paid for in accordance with the terms of this Agreement, (A) the Securities will be validly issued and outstanding and will constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture and the Registration Agreement and (B) the Subsidiary Guarantees will constitute valid and binding obligations of the Subsidiary Guarantors enforceable against the Subsidiary Guarantors in accordance with their terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or other similar laws or court decisions relating to or affecting the rights of creditors generally or of general principles of equity (whether considered in a proceeding in equity or at law). The Securities, the Subsidiary Guarantees, the Indenture and the Registration Agreement conform in all material respects to the description thereof contained in the Final Memorandum. (t) Except as may otherwise be disclosed in the Final Memorandum, the Company and its subsidiaries conduct their business in compliance with all applicable laws, rules and regulations of the jurisdictions in which they are conducting business, except where the failure to be so in compliance would not have a Material Adverse Effect. (u) The Final Memorandum, at the date hereof, does not, and at the Closing Date (as defined below) will not (and any amendment or supplement thereto, at the date thereof and at the Closing Date, will not), contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that no representation or warranty is made by the Company and its subsidiaries with respect to the information contained in or omitted from the Final Memorandum, or any amendment or supplement thereto, in reliance upon and in conformity 9 9 with information furnished in writing to the Company or the Subsidiary Guarantors by or on behalf of the Initial Purchaser specifically for inclusion therein. (v) Neither the Company, the Subsidiary Guarantors nor any of their respective Affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation D")), nor any person acting on its or their behalf (provided that no representation is made as to the Initial Purchaser or any person acting on its behalf), has, directly or indirectly, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of any security (as defined in the Securities Act) which is or will be integrated with the sale of the Securities and requires registration of the Securities under the Securities Act or (ii) engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offering of the Securities. (w) Assuming the Securities are issued, sold and delivered as contemplated by the Final Memorandum and this Agreement; that each of the representations, warranties and covenants of the Initial Purchaser contained in this Agreement are true, correct and complete; and that the Initial Purchaser complies with the covenants in this Agreement, it is not necessary in connection with the offer and sale and delivery of the Securities in the manner contemplated by this Agreement and the Final Memorandum to register the Securities or the Subsidiary Guarantees under the Securities Act or to qualify the Indenture under the Trust Indenture Act. (x) The Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act. (y) None of the Company, the Subsidiary Guarantors nor any of their respective Affiliates, nor any person acting on its or their behalf (provided that no representation is made as to the Initial Purchaser or any person acting on its behalf), has engaged in any directed selling efforts with respect to the Securities, and each of them has complied with the offering restrictions requirement of Regulation S ("Regulation S") under the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S. (z) The Company has been advised by the National Association of Securities Dealers, Inc. PORTAL Market that the Securities have been designated PORTAL eligible securities in accordance with the rules and regulations of the National Association of Securities Dealers, Inc. 10 10 (aa) Neither the Company nor any Subsidiary Guarantor is an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"), without taking account of any exemption arising out of the number of holders of the Company's or the Subsidiary Guarantors' securities. (bb) Neither the Company nor any Subsidiary Guarantor has paid or agreed to pay to any person any compensation for soliciting another to purchase any securities of the Company or the Subsidiary Guarantors (except as contemplated by this Agreement). (cc) The information provided by the Company pursuant to Section 5(h) hereof will not, at the date thereof, contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (dd) To the knowledge of the Company and each of the Subsidiary Guarantors, except as described in the Final Memorandum and except as would not reasonably be expected to result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of, or has received any notice that it is subject to liability under, any federal, state, local or foreign statute, law, rule, regulation, ordinance, code or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, decree, judgment or injunction relating to pollution or protection of human health or the environment (including, without limitation, ambient air, indoor air, surface water, groundwater, land surface or subsurface strata and natural resources), including, without limitation, those relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances or constituents, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, "Environmental Laws"), (B) the Company and its subsidiaries have all permits, licenses, authorizations and approvals required under any applicable Environmental Laws, all of which are in full force and effect, and are each in compliance with any applicable Environmental Laws, (C) neither the Company nor any subsidiary has received notice that there are any pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance, violation or potential 11 11 responsibility or liability, investigation or proceedings pursuant to any Environmental Laws against the Company or of its subsidiaries, or any of their respective predecessors-in-interest for which the Company or any of its subsidiaries is liable and (D) neither the Company nor any subsidiary has received notice that there are any past or present events, conditions or circumstances which have been alleged to form the basis of an order to conduct responsive or corrective action, or an action, suit or proceeding by any private party or governmental agency, against or affecting, or requiring capital or operating expenditures by, the Company or any of the subsidiaries pursuant to any Environmental Laws. 2. Purchase and Sale. Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company agrees to sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from the Company, at a purchase price of 104.59% of the principal amount thereof, $35,000,000 aggregate principal amount of Securities. 3. Delivery and Payment. Delivery of and payment for the Securities shall be made at 10:00 AM, New York City time, on April 1, 1998, or such later date as the Initial Purchaser shall designate, which date and time may be postponed by agreement between the Initial Purchaser and the Company (such date and time of delivery and payment for the Securities being herein called the "Closing Date"). Delivery of the Securities shall be made to the Initial Purchaser against payment by the Initial Purchaser of the purchase price thereof to or upon the order of the Company by wire transfer in federal (same-day) funds or such other manner of payment as may be agreed by the Company and the Initial Purchaser. Delivery of the Securities shall be made at such location as the Initial Purchaser shall reasonably designate at least one business day in advance of the Closing Date and payment for the Securities shall be made at the office of Cahill Gordon & Reindel ("Counsel for the Initial Purchaser"), 80 Pine Street, New York, New York or such other place as the parties may otherwise agree. Certificates for the Securities shall be registered in such names and in such denominations as the Initial Purchaser may request not less than three full business days in advance of the Closing Date. The Company agrees to have the Securities available for inspection, checking and packaging by the Initial Purchaser in New York, New York, not later than 1:00 PM, New York City time, on the business day prior to the Closing Date. 12 12 4. Offering of Securities. The Initial Purchaser represents and warrants to and agrees with the Company that: (a) It has not offered or sold, and will not offer or sell, any Securities except (i) to those it reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the Securities Act) and that, in connection with each such sale, it has taken or will take reasonable steps to ensure that the purchaser of such Securities is aware that such sale is being made in reliance on Rule 144A, or (ii) in accordance with the restrictions set forth in Exhibit A hereto. (b) Neither it nor any person acting on its behalf has made or will make offers or sales of the Securities in the United States by means of any form of general solicitation or general advertising within the meaning of Regulation D in the United States. 5. Agreements. The Company and each of the Subsidiary Guarantors agree with the Initial Purchaser that: (a) The Company will furnish to the Initial Purchaser and to Counsel for the Initial Purchaser, without charge, during the period referred to in paragraph (c) below, as many copies of the Final Memorandum (including any documents incorporated by reference therein) and any amendments and supplements thereto as it may reasonably request. The Company will pay the expenses of printing or other production of all documents relating to the offering. (b) The Company will not amend or supplement the Final Memorandum without the prior written consent of the Initial Purchaser. (c) If at any time prior to the completion of the sale of the Securities by the Initial Purchaser, any event occurs as a result of which the Final Memorandum, as then amended or supplemented, would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it should be necessary to amend or supplement the Final Memorandum to comply with applicable law, the Company will promptly notify the Initial Purchaser of the same and, subject to the requirements of paragraph (b) of this Section 5, will prepare and provide to the Initial Purchaser pursuant to paragraph (a) of this Section 5 an amendment or supplement which will correct such statement or omission or effect such compliance. 13 13 (d) The Company will arrange for the qualification of the Securities for sale by the Initial Purchaser under the laws of such jurisdictions as the Initial Purchaser may designate and will maintain such qualifications in effect so long as required for the sale of the Securities. Each of the Company and the Subsidiary Guarantors will promptly advise the Initial Purchaser of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. (e) The Company and the Subsidiary Guarantors will not, and will not permit any of their respective Affiliates to, resell any Securities which constitute "restricted securities" under Rule 144 that have been acquired by any of them. (f) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf will, directly or indirectly, make offers or sales of any security, or solicit offers to buy any security, under circumstances the offering of which security will be integrated with the sale of the Securities in a manner that would require the registration of the Securities under the Securities Act. (g) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf will engage in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of the Securities in the United States. (h) So long as any of the Securities are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, the Company will, during any period in which it is not subject to and in compliance with Section 13 or 15(d) of the Exchange Act, provide to each holder of such restricted securities and to each prospective purchaser (as designated by such holder) of such restricted securities, upon the request of such holder or prospective purchaser, any information required to be provided by Rule 144A(d)(4) under the Securities Act. This covenant is intended to be for the benefit of the holders, and the prospective purchasers designated by such holders, from time to time of such restricted securities. (i) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf will engage in any directed selling efforts with respect to the 14 14 Securities, and each of them will comply with the offering restrictions requirement of Regulation S. Terms used in this paragraph have the meanings given to them by Regulation S. (j) The Company will cooperate with the Initial Purchaser and use its best efforts to permit the Securities to be eligible for clearance and settlement through The Depository Trust Company. (k) The Company will not, until 90 days following the Closing Date, without the prior written consent of the Initial Purchaser, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce the offering of, any debt securities issued or guaranteed by the Company or any of its subsidiaries (other than the Securities); provided, however, that the foregoing will not apply to borrowings from banks under bank credit facilities or to the issuance of debt securities to the seller of assets or businesses acquired by the Company or subsidiaries as part of the purchase price therefor provided that each seller agrees not to resell such debt securities for a period of 90 days following the Closing Date. (l) The Company will apply the net proceeds from the sale of the Securities sold by it substantially in accordance with its statements under the caption "Use of Proceeds" in the Final Memorandum. (m) The Company shall include information substantially in the form set forth in Exhibit A in the Final Memorandum. 6. Conditions to the Obligations of the Initial Purchaser. The obligations of the Initial Purchaser to purchase the Securities shall be subject to the accuracy, in all material respects, of the representations and warranties on the part of the Company and the Subsidiary Guarantors contained herein at the date and time that this Agreement is executed and delivered by the parties hereto (the "Execution Time"), and the Closing Date, to the accuracy of the statements of the Company and the Subsidiary Guarantors made in any certificates pursuant to the provisions hereof, to the performance by the Company and the Subsidiary Guarantors of their obligations hereunder and to the following additional conditions: (a) The Company shall have furnished to the Initial Purchaser the opinion of Dykema Gossett PLLC, counsel for the Company and the Subsidiary Guarantors, dated the Closing Date, to the effect that 15 15 (i) each of the Company and the Subsidiary Guarantors and each other subsidiary of the Company has been duly incorporated or organized and is validly existing as a corporation or limited liability company in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate power and authority to own its properties and conduct its business as described in the Final Memorandum, and is duly qualified to do business as a foreign corporation or limited liability company and is in good standing under the laws of each jurisdiction listed on Schedule I hereto; (ii) the Indenture has been duly authorized, executed and delivered, and constitutes a legal, valid and binding instrument enforceable against the Company and the Subsidiary Guarantors in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect) except that such counsel shall express no opinion concerning the enforceability of waivers or defenses therein; the Securities and the Subsidiary Guarantees are in the form contemplated by the Indenture and have been duly and validly authorized and, when the Securities are executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchaser pursuant to this Agreement, will constitute legal, valid and binding obligations of the Company and the Subsidiary Guarantors entitled to the benefits of the Indenture, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or other similar laws or court decisions relating to or affecting the rights of creditors generally or of general principles of equity (whether considered in a proceeding in equity or at law); (iii) insofar as the Final Memorandum contains a discussion of specific legal proceedings or regulatory matters, including the information contained in the Final Memorandum under the headings "Business - Legal Proceedings," "Business Regulatory Matters" and "Description of Certain Indebtedness," to such counsel's knowledge such discussion fairly summarizes the matters therein described; (iv) this Agreement has been duly authorized, 16 16 executed and delivered by the Company and the Subsidiary Guarantors; (v) to such counsel's knowledge, no consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated herein, except such as may be required under the blue sky or securities laws of any jurisdiction in connection with the purchase and sale of the Securities by the Initial Purchaser; (vi) none of the issue and sale of the Securities, the execution and delivery of the Indenture, the issuance of the Subsidiary Guarantees, the consummation of any other of the transactions herein or therein contemplated nor the fulfillment of the terms hereof or thereof will conflict with, result in a breach or violation of, or constitute a default under any Law applicable to the Company or the charter or by-laws of the Company or the Subsidiary Guarantors or the terms of any indenture or other agreement or instrument known to such counsel and to which the Company or any of its subsidiaries is a party or bound or any judgment, order or decree known to such counsel to be applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Company or any of its subsidiaries except to the extent any such breach, violation or default will not have a Material Adverse Effect; (vii) assuming the accuracy of the representations and warranties and compliance with the agreements contained herein, no registration of the Securities or the Subsidiary Guarantees under the Securities Act is required, and no qualification of the Indenture or the Subsidiary Guarantees under the Trust Indenture Act is necessary, for the offer and sale by the Initial Purchaser of the Securities in the manner contemplated by this Agreement; (viii) neither the Company nor any of the Subsidiary Guarantors is an "investment company" within the meaning of the Investment Company Act without taking account of any exemption arising out of the number of holders of the Company's or the Subsidiary Guarantors' securities; and (ix) to the best of such counsel's knowledge, 17 17 there are no legal or governmental actions, suits or proceedings pending or threatened to which the Company or any of its subsidiaries is or is threatened to be made a party or of which property owned or leased by the Company or any of its subsidiaries is or is threatened to be made the subject, which actions, suits or proceedings could, individually or in the aggregate, prevent or adversely affect the transactions contemplated by the Transaction Documents or the Securities or result in a Material Adverse Effect in the condition (financial or otherwise) of the Company; and except as may otherwise be described in the Final Memorandum, neither the Company nor any of its subsidiaries is a party or subject to the provisions of any injunction, judgment, decree or order of any court, regulatory body, administrative agency or other governmental body which could have a Material Adverse Effect on the condition (financial or otherwise) of the Company. Such counsel shall also state that although such counsel has not undertaken, except as otherwise indicated in their opinion, to determine independently, and does not assume any responsibility for, the accuracy, completeness or fairness of the statements contained or incorporated by reference in the Final Memorandum, such counsel has participated in the preparation of the Final Memorandum, including review and discussion of the contents thereof, and nothing has come to the attention of such counsel that has caused them to believe that at the Execution Time the Final Memorandum, including the documents incorporated by reference therein, contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or that any amendment or supplement to the Final Memorandum, as of its respective date, and as of the Closing Date contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and the notes thereto and the schedules and other financial and statistical data included or incorporated by reference in the Final Memorandum). In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any 18 18 jurisdiction other than the State of New York, the State of Michigan or the United States, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they reasonably believe to be reliable and who are satisfactory to counsel for the Initial Purchaser and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. All references in this Section 6(a) to the Final Memorandum shall be deemed to include any amendment or supplement thereto at the Closing Date. (b) The Initial Purchaser shall have received from Counsel for the Initial Purchaser such opinion or opinions, dated the Closing Date, with respect to the issuance and sale of the Securities, the Final Memorandum (as amended or supplemented at the Closing Date) and other related matters as the Initial Purchaser may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (c) The Company shall have furnished to the Initial Purchaser a certificate of the Company, signed by the Chairman of the Board or the President and the principal financial or accounting officer of the Company, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Final Memorandum, any amendment or supplement to the Final Memorandum and this Agreement and that: (i) the representations and warranties of the Company and the Subsidiary Guarantors in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date, and the Company and the Subsidiary Guarantors have complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; and (ii) since the date of the most recent financial statements included in the Final Memorandum, there has been no material adverse change in the condition (financial or other), earnings, business or properties of the Company and its subsidiaries, whether or not arising from transactions in the ordinary course of business, except at set forth in or contemplated by the Final Memorandum (exclusive of any amendment or supplement 19 19 thereto). (d) At the Execution Time and at the Closing Date, Price Waterhouse LLP shall have furnished to the Initial Purchaser a letter or letters, dated respectively as of the Execution Time and as of the Closing Date, in form and substance satisfactory to the Initial Purchaser. (e) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Final Memorandum, there shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraph (d) of this Section 6 or (ii) any change, or any development involving a prospective change, in or affecting the business or properties of the Company and its subsidiaries the effect of which, in any case referred to in clause (i) or (ii) above, is, in the reasonable judgment of the Initial Purchaser, so material and adverse as to make it impractical or inadvisable to market the Securities as contemplated by the Final Memorandum. (f) The Company shall have furnished to the Initial Purchaser the opinion of Fasken Campbell Godfrey, special Canadian counsel for the Company and the Subsidiary Guarantors, dated the Closing Date, substantially in the form of Exhibit B hereto. (g) On or prior to the Closing Date, the Company and the Subsidiary Guarantors shall have furnished to the Initial Purchaser such further information, certificates and documents as the Initial Purchaser may reasonably request. (h) On or prior to the Closing Date, the Registration Agreement shall have been executed substantially in the form hereto delivered to you and shall have been delivered to you and the Trustee. If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Initial Purchaser and Counsel for the Initial Purchaser, this Agreement and all obligations of the Initial Purchaser hereunder may be canceled at, or at any time prior to, the Closing Date by the Initial Purchaser. Notice of such cancellation shall be given to the Company in writing or by telephone or telegraph confirmed in writing. 20 20 The documents required to be delivered by this Section<0- 95>6 will be delivered at the office of Counsel for the Initial Purchaser, at 80 Pine Street, New York, New York, on the Closing Date. 7. Reimbursement of Expenses. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Initial Purchaser set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 9 hereof or because of any refusal, inability or failure on the part of the Company or the Subsidiary Guarantors to perform any agreement herein or comply with any provision hereof other than by reason of a default by the Initial Purchaser in payment for the Securities on the Closing Date, the Company and the Subsidiary Guarantors will, jointly and severally, reimburse the Initial Purchaser severally upon demand for all reasonable out-of-pocket expenses (including reasonable fees and disbursements of Cahill Gordon & Reindel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities. 8. Indemnification and Contribution. (a) The Company and the Subsidiary Guarantors, jointly and severally, agree to indemnify and hold harmless the Initial Purchaser, the directors, officers, employees and agents of the Initial Purchaser and each person who controls the Initial Purchaser within the meaning of either the Securities Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Final Memorandum or any information provided by the Company to any holder or prospective purchaser of the Securities pursuant to Section 5(h) hereof, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that neither the Company nor the Subsidiary Guarantors will be liable in any such case to the extent 21 21 that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in the Final Memorandum, or in any amendment thereof or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Initial Purchaser specifically for inclusion therein. (b) he Initial Purchaser agrees to indemnify and hold harmless each of the Company and the Subsidiary Guarantors, their respective directors, officers and each person who controls the Company or a Subsidiary Guarantor within the meaning of either the Securities Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company and the Subsidiary Guarantors to the Initial Purchaser, but only with reference to written information relating to the Initial Purchaser furnished to the Company by or on behalf of the Initial Purchaser specifically for inclusion in the Final Memorandum (or in any amendment or supplement thereto). This indemnity agreement will be in addition to any liability which the Initial Purchaser may otherwise have. The Company and the Subsidiary Guarantors acknowledge that the statements set forth in the last paragraph of the cover page and under the heading "Plan of Distribution" in the Final Memorandum constitute the only information furnished in writing by or on behalf of the Initial Purchaser for inclusion in the Final Memorandum (or in any amendment or supplement thereto). (c) romptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the 22 22 indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded on the advice of counsel that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company and the Subsidiary Guarantors on the one hand and the Initial Purchaser on the other hand agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively, "Losses") to which the Company and the Subsidiary Guarantors or the Initial Purchaser, as applicable, may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company and the Subsidiary Guarantors on the one hand or the Initial Purchaser on the other hand from the offering of the Securities; 23 23 provided, however, that in no case shall the Initial Purchaser be responsible for any amount in excess of the purchase discount or commission applicable to the Securities purchased by the Initial Purchaser hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Subsidiary Guarantors on one hand and the Initial Purchaser on the other hand shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Subsidiary Guarantors or the Initial Purchaser, as applicable, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company and the Subsidiary Guarantors shall be deemed to be equal to the proceeds from the offering net of purchase discounts and commissions (before deducting expenses), and benefits received by the Initial Purchaser shall be deemed to be equal to the total purchase discounts and commissions received by the Initial Purchaser from the Company in connection with the purchase of the Securities hereunder. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the Company, the Subsidiary Guarantors or the Initial Purchaser. The Company, the Subsidiary Guarantors and the Initial Purchaser agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls the Initial Purchaser within the meaning of either the Securities Act or the Exchange Act and each director, officer, employee and agent of the Initial Purchaser shall have the same rights to contribution as the Initial Purchaser, and each person who controls the Company or the Subsidiary Guarantors within the meaning of either the Securities Act or the Exchange Act and each officer and director of the Company or the Subsidiary Guarantors shall have the same rights to contribution as the Company and the Subsidiary Guarantors, subject in each case to the applicable terms and conditions of this paragraph (d). 9. Termination. This Agreement shall be subject to termination in the absolute discretion of the Initial 24 24 Purchaser, by notice given to the Company prior to delivery of and payment for the Securities, if prior to such time (i) any of the Company's securities shall have been suspended by the Commission or trading in securities generally on the New York Stock Exchange or the NASDAQ National Market shall have been suspended or limited or minimum prices shall have been established on either of such exchanges, (ii) a banking moratorium shall have been declared either by Federal or New York State authorities or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war or other calamity or crisis the effect of which on financial markets is such as to make it, in the judgment of the Initial Purchaser, impracticable or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Final Memorandum. 10. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company, the Subsidiary Guarantors or their respective officers and of the Initial Purchaser set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Initial Purchaser or the Company, the Subsidiary Guarantors or any of their respective officers, directors or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 7 and 8 hereof shall survive the termination or cancellation of this Agreement. 11. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Initial Purchaser, will be mailed, delivered or telegraphed and confirmed to them, care of Salomon Brothers Inc, at Seven World Trade Center, New York, New York 10048; or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at Oxford Automotive, Inc., 1250 Stephenson Highway, Troy, Michigan 48083. 12. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 8 hereof, and, except as expressly set forth in Section 5(h) hereof, no other person will have any right or obligation hereunder. 13. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New 25 25 York without regard to principles of conflicts of law thereof. 14. Business Day. For purposes of this Agreement, "business day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in the City of New York, New York are authorized or obligated by law, executive order or regulation to close. 15. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all such counterparts will together constitute one and the same instrument. 26 26 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this Agreement and your acceptance shall represent a binding agreement among the Company, the Subsidiary Guarantors and the Initial Purchaser. Very truly yours, OXFORD AUTOMOTIVE, INC. By: /s/ Donald C. Campion ------------------------------------- Name: Donald C. Campion Title: Senior Vice President and Chief Financial Officer BMG NORTH AMERICA LIMITED By: /s/ Donald C. Campion ------------------------------------- Name: Donald C. Campion Title: Vice President, Chief Financial Officer and Treasurer LOBDELL EMERY CORPORATION By: /s/ Donald C. Campion ------------------------------------- Name: Donald C. Campion Title: Vice President, Chief Financial Officer and Treasurer WINCHESTER FABRICATION CORPORATION By: /s/ Donald C. Campion ------------------------------------- Name: Donald C. Campion Title: Vice President, Chief Financial Officer and Treasurer CREATIVE FABRICATION CORPORATION By: /s/ Donald C. Campion ------------------------------------- Name: Donald C. Campion Title: Vice President, Chief Financial Officer and Treasurer 27 27 BMG HOLDINGS INC. By: /s/ Donald C. Campion ------------------------------------- Name: Donald C. Campion Title: Vice President, Chief Financial Officer and Treasurer LASERWELD INTERNATIONAL, L.L.C. By: /s/ Donald C. Campion ------------------------------------- Name: Donald C. Campion Title: Vice President, Chief Financial Officer and Treasurer PARALLEL GROUP INTERNATIONAL, INC. By: /s/ Donald C. Campion ------------------------------------- Name: Donald C. Campion Title: Vice President, Chief Financial Officer and Treasurer CONCEPT MANAGEMENT CORPORATION By: /s/ Donald C. Campion ------------------------------------- Name: Donald C. Campion Title: Vice President, Chief Financial Officer and Treasurer LEWIS EMERY CAPITAL CORPORATION By: /s/ Donald C. Campion ------------------------------------- Name: Donald C. Campion Title: Vice President, Chief Financial Officer and Treasurer RPI HOLDINGS, INC. By: /s/ Donald C. Campion ------------------------------------- Name: Donald C. Campion Title: Vice President, Chief Financial Officer and Treasurer 28 28 HOWELL INDUSTRIES, INC. By: /s/ Donald C. Campion ------------------------------------- Name: Donald C. Campion Title: Vice President, Chief Financial Officer and Treasurer 29 29 The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Salomon Brothers Inc By /s/ Thomas J. Spoto ------------------------------- Name: Thomas J. Spoto Title: Associate 30 30 SCHEDULE I 1. Lobdell Emery Corporation, a Michigan corporation, is authorized to transact business in the State of Indiana. 2. Howell Industries, Inc., a Michigan corporation, is authorized to transact business in the State of Ohio. 31 EXHIBIT A Selling Restrictions for Offers and Sales Outside the United States (1) (a) The Securities have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act. The Initial Purchaser represents and agrees that, except as otherwise permitted by Section 4(a)(i) or (ii) of the Agreement to which this is an exhibit, it has offered and sold the Securities, and will offer and sell the Securities, (i) as part of their distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, only in accordance with Rule 903 of Regulation S under the Securities Act. Accordingly, the Initial Purchaser represents and agrees that neither it nor any of its affiliates nor any person acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the Securities, and that it and they have complied and will comply with the offering restrictions requirement of Regulation S. The Initial Purchaser agrees that, at or prior to the confirmation of sale of Securities (other than a sale of Securities pursuant to Section 4(a)(i) or (ii) of the Agreement to which this is an exhibit), it shall have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and [specify closing date of the offering], except in either case in accordance with Regulation S or Rule 144A under the Securities Act. Terms used above have the meanings given to them by Regulation S." (b) The Initial Purchaser also represents and agrees that it has not entered and will not enter into any contractual arrangement with any distributor with respect to the distribution of the Securities, except with its affiliates A-1 32 or with the prior written consent of the Company. (c) Terms used in this section have the meanings given to them by Regulation S. (2) The Initial Purchaser represents and agrees that (i) it has not offered or sold and will not offer or sell, in the United Kingdom, by means of any document, any Securities other than to persons whose ordinary business it is to buy or sell shares or debentures, whether as principal or as agent (except in circumstances which do not constitute an offer to the public within the meaning of the Companies Act 1985 of Great Britain), (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 of the United Kingdom with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom, and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Securities to a person who is of a kind described in Article 9(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988 or is a person to whom the document may otherwise lawfully be issued or passed on. A-2 33 Annex 1 [SALOMON BROTHERS INC LETTERHEAD] ___________, 1998 Price Waterhouse LLP 2301 West Big Beaver Troy, Michigan 48084 Ladies and Gentlemen: Reference is hereby made to the Purchase Agreement (the "Purchase Agreement") dated February [_____], 1998 among the undersigned (the "Initial Purchasers") and Oxford Automotive, Inc. (the "Company") and the Subsidiary Guarantors listed therein pursuant to which the Company will sell to the Initial Purchaser, and the Initial Purchaser will purchase from the Company, $35,000,000 principal amount of the Company's [_____]% Senior Subordinated Notes Due 2007 (the "Securities"). Pursuant to Section 6(d) of the Purchase Agreement, you are required to deliver certain letters, in form and substance satisfactory to us, setting forth the matters described in such Section (the "Auditor's Letters"). In connection with your delivery of the Auditor's Letters, we confirm to you that: (i) we are knowledgeable with respect to the due diligence review process that would be performed if this placement of Securities were being registered pursuant to the Securities Act of 1933, as amended (the "Act"); and (ii) we will be reviewing certain information relating to the Company and the Subsidiary Guarantors that will be included or incorporated by reference in the Final Memorandum (as defined in the Purchase Agreement) and this review process, applied to the information relating to the Company and the Subsidiary Guarantors, will be substantially consistent with the due diligence review process that we would perform if this placement of Securities were being registered pursuant to the Act. In accordance with the foregoing, we hereby request that you deliver to us the Auditor's Letters. 34 -2- This letter is being furnished to you solely for the purpose of obtaining the Auditor's Letters and may not be relied upon or used by you for any other purpose, or given or shown to any other person, without our prior written consent. Very truly yours, SALOMON BROTHERS INC By: -------------------------- Name: Title: EX-12 5 EXHIBIT 12 1 EXHIBIT 12 COMPUTATION OF RATIOS COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
10/28/95- 4/1/95- 3/31/98 3/31/97 3/31/96 10/27/95 3/31/95 3/31/94 ------------------------------------------------------------------------ Income (loss) before income taxes $ 9,665 $2,614 $ 617 ($2,822) ($1,615) $2,133 ADD: Portion of rents representative of interest factor 1,736 440 54 73 143 105 Interest on indebtedness 10,710 3,388 1,096 1,048 1,267 1,658 ------- ------ ------ ------- ------- ------ $22,111 $6,442 $1,767 ($1,701) ($205) $3,896 ======= ====== ====== ======= ======= ====== FIXED CHARGES Portion of rents representative of interest factor 1,736 440 54 73 143 105 Interest on indebtedness 10,710 3,388 1,096 1,048 1,267 1,658 ------- ------ ----- ------- ------- ------ $12,446 $3,828 $1,150 $ 1,121 $ 1,410 $1,763 ======= ====== ====== ======= ======= ====== Ratio of Earnings to Fixed Charges $ 1.8 1.7 1.5 -- -- 2.2 ======= ====== ====== ======= ======= ====== Deficiency of Earnings over fixed charges -- -- -- ($2,822) ($1,615) -- ======= =======
EX-21 6 EXHIBIT 21 1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY
Jurisdiction of Percent Assumed Name of Subsidiary Incorporation Owned Names ------------------ ------------- ------- ------- Lobdell Emery Corporation ("Lobdell) Michigan 100% The Lobdell-Emery Manufacturing Company Laserweld International, L.L.C. Indiana 100%-Lobdell Concept Management Corporation ("CMC") Michigan 100%-Lobdell Creative Fabrication Corporation Tennessee 100%-CMC Oxford Automotive BMG Holdings, Inc. ("BMGH") Ontario, Canada 100% BMG North America Limited ("BMG") Ontario, Canada 100%-BMGH 829500 Ontario Limited Ontario, Canada 100%-BMG 976459 Ontario Limited Ontario, Canada 100%-BMG Howell Industries, Inc. Michigan 100% Oxford Suspension Ltd. Ontario, Canada 100% Oxford Suspension, Inc. ("OSI") Michigan 100% Metalurgica Carabobo S.A. Venezuela 49%-OSI RPI Holdings, Inc. ("RPIH") Michigan 100% RPI, Inc. Michigan 100%-RPIH Prudenville Manufacturing, Inc. Michigan 100%-RPIH Oxford Automotriz de Mexico S.A. de C.V. ("OAM") Mexico, D.F. 100% Oxford Automotriz Silao S.A. de C.V. Mexico, D.F. 100% - OAM Oxford Automotriz Saltillo S.A. de C.V. Mexico, D.F. 100% - OAM Oxford Automotriz Administrativos S.A. de C.V. Mexico, D.F. 100% - OAM
EX-27 7 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S AUDITED FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED MARCH 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 12-MOS MAR-31-1998 APR-01-1998 MAR-31-1998 18,321 0 65,273 400 21,305 131,176 163,708 23,149 320,032 86,592 124,827 40,192 0 1,050 5,068 320,032 410,321 410,321 368,420 368,420 21,847 0 10,710 9,665 4,074 5,591 0 0 0 5,591 13.74 13.74
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