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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 21, 1999
REGISTRATION NO. 333-82617
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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VENTURE HOLDINGS COMPANY LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MICHIGAN 3714 38-3470015
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
33662 JAMES J. POMPO DRIVE
FRASER, MICHIGAN 48026
810-294-1500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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JAMES E. BUTLER, JR.
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
VENTURE HOLDINGS COMPANY LLC
33662 JAMES J. POMPO DRIVE
FRASER, MICHIGAN 48026
810-294-1500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
FREDRICK M. MILLER, ESQ. PAUL LIEBERMAN, ESQ.
DYKEMA GOSSETT PLLC PAUL LIEBERMAN, P.C.
400 RENAISSANCE CENTER 1471 S. WOODWARD AVENUE, SUITE 250
DETROIT, MICHIGAN 48243-1668 BLOOMFIELD HILLS, MICHIGAN 48302
(313) 568-6975 (248)335-4000
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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TABLE OF ADDITIONAL REGISTRANTS
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EXACT NAME OF GUARANTOR REGISTRANT JURISDICTION OF PRIMARY STANDARD INDUSTRIAL
AS SPECIFIED IN ITS CHARTER INCORPORATION IRS EMPLOYER IDENTIFICATION NO. CLASSIFICATION CODE NUMBER
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Vemco, Inc. Michigan 38-2737797 3714
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Venture Industries Corporation Michigan 38-2034680 3714
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Venture Mold & Engineering
Corporation Michigan 38-2556799 3714
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Venture Leasing Company Michigan 38-2777356 3714
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Vemco Leasing, Inc. Michigan 38-2777324 3714
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Venture Holdings Corporation Michigan 38-2793543 3714
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Venture Service Company Michigan 38-3024165 3714
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Experience Management LLC Michigan 38-3382308 3714
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Venture Europe, Inc. Michigan 38-3464213 3714
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Venture EU Corporation Michigan 38-3470019 3714
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PROSPECTUS
VENTURE HOLDINGS COMPANY LLC [VENTURE LOGO]
OFFER TO EXCHANGE
11% SENIOR NOTES DUE 2007 12% SENIOR SUBORDINATED NOTES DUE 2009
FOR ALL OF ITS FOR ALL OF ITS OUTSTANDING
OUTSTANDING AND 12% SENIOR SUBORDINATED NOTES DUE 2009
11% SENIOR NOTES DUE 2007
TERMS OF THE EXCHANGE OFFER
- Expires 5:00 p.m. New York City time, November 23, 1999, unless extended.
- All outstanding notes that are validly tendered and not validly withdrawn
will be exchanged.
- Tenders of the outstanding notes may be withdrawn any time prior to the
expiration of the exchange offer.
- Not subject to any condition, other than that the exchange offer not
violate applicable law or any applicable interpretation of the staff of
the Securities and Exchange Commission.
- Venture will not receive any proceeds from the exchange offer.
- The exchange of notes will not be a taxable exchange for U.S. federal
income tax purposes.
- The terms of the exchange notes and the outstanding notes are
substantially identical, except for certain transfer restrictions and
registration rights relating to the outstanding notes.
- There is no existing market for the exchange notes, and Venture does not
intend to apply for their listing on any securities exchange.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS
PRIOR TO TENDERING THEIR OUTSTANDING NOTES IN THE EXCHANGE OFFER, SEE "RISK
FACTORS" BEGINNING ON PAGE 16.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE NOTES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
October 22, 1999
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TABLE OF CONTENTS
PAGE
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Summary..................................................... 1
Risk Factors................................................ 16
The Exchange Offer.......................................... 27
The Peguform Acquisition.................................... 35
Use of Proceeds............................................. 35
Capitalization.............................................. 37
Unaudited Pro Forma Financial Statements.................... 38
Selected Consolidated Financial Data of Venture............. 45
Selected Consolidated Financial Data of Peguform............ 47
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 49
Quantitative and Qualitative Disclosures About Market
Risk...................................................... 58
Business.................................................... 59
Management.................................................. 82
Stock Ownership............................................. 86
Certain Transactions........................................ 86
Description of Certain Indebtedness......................... 90
Description of Exchange Notes............................... 93
Material U.S. Federal Income Tax Considerations............. 151
Plan of Distribution........................................ 155
Legal Matters............................................... 156
Experts..................................................... 156
Index to Consolidated Financial Statements.................. F-1
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EXCHANGE RATES
Except as we say otherwise in this prospectus, conversion of German Marks
have been translated to United States dollars in the financial statements and
other information we have included in this prospectus at the rate of DEM 1.6767
per United States dollar, the noon buying rate, as described below, as of
December 31, 1998. You should not interpret these conversions as expectations
that the German Mark amounts actually represent these United States dollar
amounts or could be converted into United States dollar amounts at the rates
indicated or used, or at any other rates.
Our debt structure may cause us to encounter currency or exchange risks.
Any devaluation of any local currency used by us against the United States
dollar may have an adverse effect on us, which may be material. See "Risk
Factors -- Substantial Foreign Operations."
The following table provides the German Mark, or DEM, exchange rate set
forth in DEMs per dollar, solely for your convenience. We do not represent that
the DEM amounts shown in this prospectus could be converted into United States
dollars at this rate or any other rate.
DEMS PER UNITED STATES DOLLAR
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YEAR/PERIOD
CALENDAR PERIOD END HIGH LOW AVERAGE(1)
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1997............................................ 1.7987 1.8905 1.5380 1.7347
1998............................................ 1.6767 1.8565 1.5872 1.7597
1999 (through May 28, 1999)..................... 1.8680 1.8774 1.6524 1.7800
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(1) Average of the noon buying rate in New York City for cable transfers in
DEMs, as certified for customs purposes by the Federal Reserve Bank of New
York, during the period. On May 28, 1999, the noon buying rate for the DEM
was $1.00 = 1.8680 DEM.
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SUMMARY
On May 28, 1999, Venture Holdings Trust and two of its subsidiaries,
Venture Beteiligungs GmbH and Venture Verwaltungs GmbH, acquired Peguform GmbH
for a purchase price of DEM 850.0 million, approximately $463.0 million as of
May 28, 1999, subject to adjustments. The purchase price was funded with the
proceeds of the sale of the outstanding notes together with borrowings under the
new senior credit facility provided to Venture Holdings Trust by a syndicate of
bank lenders.
Following the closing of the offering of the outstanding notes on May 27,
1999, Venture Holdings Trust effected a trust contribution, as described in the
indentures governing the outstanding notes, by contributing its assets,
including the capital stock of the guarantor subsidiaries owned by it other than
the membership interest in Venture Holdings Company LLC, to Venture Holdings
Company LLC. Venture Holdings Company LLC, a wholly owned subsidiary of Venture
Holdings Trust, assumed all of Venture Holdings Trust's obligations under the
outstanding notes and the indentures. Venture Holdings Trust was released from
these obligations.
This summary highlights the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this prospectus.
It may not contain all of the information that you should consider. You should
carefully consider the matters discussed under the caption "Risk Factors." As
used in this prospectus, unless otherwise stated, when describing the business
of Venture and Peguform, "our," "us," and "we" refer to Venture and Peguform
after Venture's acquisition of Peguform.
THE EXCHANGE OFFER
On May 27, 1999, we privately placed $125.0 million of 11% Senior Notes due
2007 and $125.0 million of 12% Senior Subordinated Notes due 2009. The
outstanding notes are, and the exchange notes will be, fully and unconditionally
guaranteed on a joint and several basis by all of our wholly-owned domestic
subsidiaries.
Simultaneously with the private placement, the subsidiary guarantors and
Venture entered into a Registration Rights Agreement with the initial purchasers
of the outstanding notes. Under the Registration Rights Agreement, we must
deliver this prospectus to the holders of the outstanding notes and must
complete the exchange offer on or before December 8, 1999. If the exchange offer
does not take place on or before December 8, 1999, we must pay liquidated
damages to the holders of the outstanding notes until the exchange offer is
completed. You may exchange your outstanding notes for exchange notes with
substantially the same terms in this exchange offer. You should read the
discussion under the heading "Summary of Terms of the Exchange Notes" and
"Description of Exchange Notes" for further information regarding the exchange
notes.
We believe that holders of the outstanding notes may resell the exchange
notes without complying with the registration and prospectus delivery provisions
of the Securities Act of 1933, if certain conditions are met. You should read
the discussion under the headings "Summary of the Exchange Offer" and "The
Exchange Offer" for further information regarding the exchange offer and resales
of the exchange notes.
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VENTURE
We are a leading worldwide full-service supplier of high quality molded and
painted plastic parts for automotive original equipment manufacturers, commonly
known as OEMs, and other direct, or "Tier I," suppliers to the OEMs. We rank
among the largest designers and manufacturers of interior and exterior plastic
components and systems to the North American and European automotive markets.
Exterior products include such items as front and rear bumper fascias and
systems, body side moldings, hatchback doors, fenders, grille opening panels and
reinforcements, farings, wheel lips, spoilers and large body panels such as
hoods, sunroofs, doors and convertible hardtops. Interior products include
instrument panel systems, door panels, airbag covers, side wall trim,
garnishment molding systems and consoles.
Our principal customers include every major North American OEM, eleven of
the twelve major European OEMs, several major Japanese OEMs, and leading Tier I
suppliers, as detailed below:
OEMS TIER I SUPPLIERS
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AB Volvo Ford Motor Company PSA Peugeot Citroen Autoliv, S.A.
Adam Opel AG General Motors Renault SA TRW Inc.
Corporation
Audi AG Isuzu Motors Limited Seat, S.A.
Bayerische Motoren Mitsubishi Motors Skoda Automobilova
Werke AG (BMW) Corporation
DaimlerChrysler AG Nissan Motor Co., Ltd Volkswagen AG
Porsche AG
We are a full-service supplier and an industry leader in manufacturing
plastic components, modules and systems and in applying new design and
engineering technology to develop innovative products, create new applications
and reduce product development time. We, and our affiliated companies, have the
capability to provide our customers state-of-the-art design and advanced
engineering services 24 hours a day around the world. We operate 57 facilities
in 9 countries, including the United States, Canada, Germany, Spain, France,
Hungary, the Czech Republic, Mexico, and the Netherlands, and expect to start
operations in Brazil in the third quarter of 1999. Our comprehensive
manufacturing capabilities include custom injection molding, automated painting
and assembly, and material and product testing. We also have extensive tool
making capabilities. Our engineering focuses on anticipating actual production
issues and integrating part design with tool design to create an efficient
manufacturing process. We refer to this emphasis as "design for manufacture."
OUR INDUSTRY
The automotive industry has been, and continues to be, significantly
influenced by several trends which we believe will enhance our strategic
position and growth prospects:
- INCREASED OUTSOURCING BY OEMS. OEMs have increasingly outsourced the
manufacture of many components and integrated systems, and suppliers like
us have benefited from this outsourcing trend.
- CONSOLIDATION OF SUPPLIER BASE BY OEMS. Since the 1980s, OEMs have been
reducing the number of suppliers that may bid for business.
- INCREASED EMPHASIS ON PROGRAM MANAGEMENT AND INTEGRATED SYSTEMS. In
conjunction with the supplier base consolidation, OEMs are transitioning
from merely purchasing components to
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placing responsibility for design, engineering and manufacturing of full
component systems on their preferred Tier I suppliers.
- INCREASING UTILIZATION OF PLASTIC. OEMs have continued to increase the
use of plastics in their vehicles due to its lighter weight, greater
design flexibility and cost advantage on many models.
- GLOBALIZATION OF THE OEM SUPPLIER BASE. OEMs are increasingly seeking to
identify preferred suppliers that can meet their needs on a global scale
and not just regionally.
THE PEGUFORM ACQUISITION
Venture has, for many years, been a key supplier to North American OEMs.
Venture's extensive design and manufacturing expertise, coupled with strategic
acquisitions, has enabled it to diversify its customer base and technological
capabilities. As a result, Venture has become a leading participant in the
supply of molded and painted interior and exterior plastic components and
systems to North American OEMs. For the five year period ended December 31,
1998, Venture's net sales grew from $205.6 million to $645.2 million, a
compounded annual growth rate of 25.7%. In 1996, Venture expanded its customer
relationships and technological capabilities through strategic acquisitions of
Bailey Corporation and of certain assets of AutoStyle Plastics, Inc.
A key element of Venture's business strategy has been to increase its
global presence to meet its OEM customers' global needs. Venture considers the
Peguform acquisition an attractive opportunity to further this strategy.
Peguform has been a leading international designer and manufacturer of complete
interior modules, door panels and dashboards and of exterior modules and other
structural plastic body parts, including bumper fascias and hatchback doors. As
a result of the Peguform acquisition, we now operate manufacturing facilities in
Germany, Spain, France and the Czech Republic. In addition, Peguform had
recently followed certain of its key OEM customers into Mexico and Brazil. Our
manufacturing network is enhanced by 9 module centers across Europe, serving as
final assembly units located directly at, or very close to, selected customers'
car assembly plants. Peguform's proven ability to gain development orders for
new and successor models is enhanced by its product engineering efforts,
including such innovations as thermoplastic bumpers, a proprietary slush molding
process, a thermoplastic hatchback door and painting technologies such as
electro-static painting and the use of water-based paint. For the twelve months
ended December 31, 1998, Peguform had net sales of $1,260.6 million.
We now have an established and significant presence in Europe as a result
of the Peguform acquisition, which complements our strengths in North America,
giving us the ability to service existing OEM customers much more broadly than
either Venture or Peguform could individually. Additionally, we believe that the
Peguform acquisition enhances the businesses of both Venture and Peguform in
additional ways, representing mutually beneficial synergies that go beyond the
expansion of geographic reach, including the following:
- EXPANDED ENGINEERING CAPABILITIES;
- COMPLEMENTARY TECHNOLOGY;
- STRENGTHENED AND EXPANDED CUSTOMER RELATIONSHIPS; AND
- OPERATIONAL EFFICIENCIES.
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COMPETITIVE STRENGTHS
We believe we have the following key competitive strengths, which enhance
our ability to compete successfully in our industry:
- LEADING MARKET POSITION. We are among the largest suppliers of interior
and exterior plastic components and systems to the North American and
European automotive markets.
- DIVERSIFIED GLOBAL CUSTOMER BASE. Our principal customers include every
major North American OEM, 11 of the 12 major European OEMs, several major
Japanese OEMs, and leading Tier I suppliers.
- WORLDWIDE FULL-SERVICE PROGRAM MANAGEMENT CAPABILITIES. We are
successful in meeting the increased demands by OEMs for their suppliers
to provide full-service program management because of our expertise in
design and engineering, tooling, and multiple manufacturing processes.
- MULTIPLE EXTERIOR AND INTERIOR PLASTIC TECHNOLOGIES. We believe that we
are one of only a small number of automotive suppliers that can provide
its customers with both full-service program management capability and a
wide array of alternative plastic molding and painting technologies on a
global basis.
- JUST-IN-TIME/SEQUENTIAL SHIPPING CAPABILITIES. To service our customers
more effectively, we utilize just-in-time manufacturing and sourcing
systems, and our international production facilities and module centers
are strategically located close to our OEM customers' facilities. We also
offer our customers sequential shipping, in which components are sent to
the OEMs in the specific order in which vehicles are to be assembled,
based on as little as two hours lead time.
- EXPERIENCED MANAGEMENT TEAM. We believe our management's long history of
mutually successful relationships with a wide variety of OEM and Tier I
customers will provide a competitive advantage as the industry trends of
consolidation, outsourcing and globalization continue.
BUSINESS STRATEGY
Our business strategy is to use our competitive strengths to further our
position as a leading automotive supplier. The principal components of this
strategy are as follows:
- INVEST IN LEADING-EDGE DESIGN, ENGINEERING AND MANUFACTURING
TECHNOLOGIES. We have made a substantial commitment to new product
technology and design, including establishing an advanced engineering
center and offering the capability to provide 24-hour-a-day global design
and engineering services to our customers.
- CONTINUE TO DEVELOP AND MANUFACTURE HIGH QUALITY PRODUCTS. We believe we
maintain an excellent reputation with the OEMs for providing high quality
products and customer service at competitive prices.
- EMPHASIZE CONTINUOUS IMPROVEMENT PROCESSES. Venture follows "lean
manufacturing" and "Kaizen," or continuous improvement, philosophies that
seek to identify and eliminate waste in our own operations and in those
of our customers and suppliers.
- MAXIMIZE OPERATING EFFICIENCIES AND LOWER COST STRUCTURE AT ACQUIRED
COMPANIES. We have successfully effected significant cost savings in
past acquisitions and we believe there are
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a number of areas in which we can achieve annual cost savings related to the
Peguform acquisition.
- STRATEGIC EXPANSION. We are committed to continue our strategic,
geographic expansion in order to serve our customer base globally.
SUMMARY OF THE EXCHANGE OFFER
REGISTRATION RIGHTS
AGREEMENT..................... We sold the outstanding notes on May 27, 1999
to the initial purchasers -- Banc One Capital
Markets, Inc. and Goldman, Sachs & Co. The
initial purchasers then sold the outstanding
notes to institutional investors.
Simultaneously with the initial sale of the
outstanding notes, we entered into a
Registration Rights Agreement, which provides
for the exchange offer.
You may exchange your outstanding notes for
exchange notes, which have substantially
identical terms. The exchange offer satisfies
your rights under the Registration Rights
Agreement. After the exchange offer is over,
you will not be entitled to any exchange or
registration rights for your outstanding notes.
THE EXCHANGE OFFER............ We are offering to exchange $125.0 million
total principal amount of our 11% Senior Notes
due 2007 and $125.0 million total principal
amount of our 12% Senior Subordinated Notes due
2009, which have been registered under the
Securities Act, for your 11% Outstanding Senior
Notes due 2007 or your 12% Outstanding Senior
Subordinated Notes due 2009 sold in the May
1999 private offering. To exchange your
outstanding notes, you must properly offer or
tender them, and we must accept them. We will
exchange all outstanding notes that you validly
tender and do not validly withdraw. We will
issue registered exchange notes at or promptly
after the end of the exchange offer.
RESALES....................... We believe that you can offer for resale,
resell and otherwise transfer the exchange
notes without complying with the registration
and prospectus delivery requirements of the
Securities Act if:
- you acquire the exchange notes in the
ordinary course of your business;
- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate,
in the distribution of the exchange notes;
and
- you are not an "affiliate" of ours, as the
term affiliate is defined in Rule 405 of the
Securities Act and which may include our
executive officers, another person having
control over our operations or a person or
entity we control.
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If any of these conditions is not satisfied and
you transfer any Exchange Note without
delivering a proper prospectus or without
qualifying for a registration exemption, you
may incur liability under the Securities Act.
We do not assume or indemnify you against this
liability
Each broker-dealer, those persons engaged in
the business of buying and selling securities,
acquiring exchange notes for its own account in
exchange for Outstanding Notes, which it
acquired through market-making or other trading
activities, must acknowledge that it will
deliver a proper prospectus when any exchange
notes are transferred. A broker-dealer may use
this prospectus for an offer to resell, a
resale or other retransfer of the Exchange
Notes
EXPIRATION DATE............... The exchange offer expires at 5:00 p.m., New
York City time, November 23, 1999, unless we
extend the expiration date.
CONDITIONS TO THE EXCHANGE
OFFER......................... The exchange offer is subject to customary
conditions, some of which we may waive.
PROCEDURES FOR TENDERING
OUTSTANDING NOTES............. We issued the outstanding notes as global
securities. When the outstanding notes were
issued, we deposited them with The Huntington
National Bank, as book-entry depositary. The
Huntington National Bank issued a
certificateless depositary interest in each
note, which represents a 100% interest in the
notes, to The Depositary Trust Company,
commonly referred to as DTC. Beneficial
interests in the outstanding notes, which are
held by direct or indirect participants in DTC
through the certificateless depositary
interest, are shown on records maintained in
book-entry form by DTC.
You may tender your outstanding notes through
book-entry transfer in accordance with DTC's
Automated Tender Offer Program. To tender your
outstanding notes by a means other than
book-entry transfer, a Letter of Transmittal
must be completed and signed according to the
instructions contained in the letter. The
Letter of Transmittal and any other documents
required by the Letter of Transmittal must be
delivered to the Exchange Agent by mail,
facsimile, hand delivery or overnight courier.
In addition, you must deliver the outstanding
notes to the Exchange Agent or comply with the
procedures for guaranteed delivery. See "The
Exchange Offer -- Procedures for Tendering
Outstanding Notes" for more information.
Do not send Letters of Transmittal and
certificates representing outstanding notes to
Venture. Send these documents only to the
Exchange Agent. See "The Exchange
Offer -- Exchange Agent" for more information.
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SPECIAL PROCEDURES FOR
BENEFICIAL
OWNERS........................ Your outstanding notes may be held by and
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
on your behalf. If you are a beneficial owner
whose notes are held in this manner and wish to
tender your outstanding notes in the exchange
offer, please contact the registered holder as
soon as possible and instruct it to tender on
your behalf and comply with our instructions
set forth elsewhere in this prospectus. A
registered holder is any person or entity that
is the holder of record of the notes.
WITHDRAWAL RIGHTS............. You may withdraw the tender of your outstanding
notes at any time before 5:00 p.m. New York
City time on November 23, 1999, unless we
extend the date.
APPRAISAL OR DISSENTERS'
RIGHTS........................ Holders of outstanding notes do not have any
appraisal or dissenters' rights in the exchange
offer. If you do not tender your outstanding
notes or Venture rejects your tender, you will
not be entitled to any further registration
rights under the Registration Rights Agreement,
except under limited circumstances. However,
your notes will remain outstanding and entitled
to the benefits of the Indentures. Holders
should read the discussion under the heading
"Risk Factors -- Consequences of a Failure to
Exchange Outstanding Notes" for further
information.
FEDERAL INCOME TAX
CONSIDERATIONS................ The exchange of notes is not a taxable exchange
for United States federal income tax purposes.
You will not recognize any taxable gain or loss
or any interest income as a result of the
exchange. For additional information regarding
federal income tax considerations, you should
read the discussion under the heading "Material
U.S. Federal Income Tax Considerations."
USE OF PROCEEDS............... We will not receive any proceeds from the
issuance of the exchange notes, and we will pay
the expenses of the exchange offer.
EXCHANGE AGENT................ The Huntington National Bank is serving as the
Exchange Agent in the exchange offer. The
Exchange Agent's address, and telephone and
facsimile numbers are listed in the section of
this prospectus entitled "The Exchange
Offer -- Exchange Agent" and in the Letter of
Transmittal.
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SUMMARY OF TERMS OF THE EXCHANGE NOTES
The form and terms of the exchange notes are the same as the form and terms
of the outstanding notes, except that the exchange notes will be registered
under the Securities Act. As a result, the exchange notes will not bear legends
restricting their transfer and will not contain the registration rights and
liquidated damage provisions contained in the outstanding notes. The exchange
notes represent the same debt as the outstanding notes. Both the outstanding
notes and the exchange notes are governed by the same Indentures.
TOTAL AMOUNT OF NOTES......... $125.0 million in principal amount of 11%
Senior Notes due 2007 and $125.0 million in
principal amount of 12% Senior Subordinated
Notes due 2009.
MATURITY...................... June 1, 2007 for the senior exchange notes and
June 1, 2009 for the senior subordinated
exchange notes.
INTEREST...................... Annual rate -- 11% for the senior exchange
notes.
Annual rate -- 12% for the senior subordinated
exchange notes.
Payment frequency -- every 6 months on June 1
and December 1.
First payment -- December 1, 1999.
ISSUER........................ Venture Holdings Company LLC, as successor to
Venture Holdings Trust.
GUARANTORS.................... Each of the following wholly owned domestic
subsidiaries of Venture: Vemco, Inc.; Vemco
Leasing, Inc.; Venture Industries Corporation;
Venture Holdings Corporation; Venture Leasing
Company; Venture Mold & Engineering
Corporation; Venture Service Company;
Experience Management LLC; Venture Europe,
Inc.; and Venture EU Corporation. The
guarantees are full and unconditional, joint
and several.
RANKING....................... The senior exchange notes are general unsecured
debts. They rank senior in right of payment to
all of our subordinated debts, including the
senior subordinated exchange notes. The senior
exchange notes will rank equally in right of
payment with all of our current and future
unsecured senior indebtedness. As of June 30,
1999, the outstanding senior notes were
effectively subordinated to $402.8 million of
secured debt of Venture and the guarantors.
The senior subordinated exchange notes are
senior subordinated debts. They rank behind all
of our current and future senior indebtedness,
and equally with all of our current and future
subordinated indebtedness. As of June 30, 1999,
the outstanding senior subordinated notes were
subordinated to $732.8 million of senior debt
of Venture and the guarantors, including the
outstanding senior notes.
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In addition, the exchange notes will be
effectively subordinated to all of the debt of
non-guarantor subsidiaries.
OPTIONAL REDEMPTION........... On or after June 1, 2003 we may redeem some or
all of the senior exchange notes at any time at
the redemption prices listed in the section
"Description of Exchange Notes" under the
heading "Optional Redemption." On or after June
1, 2004 we may redeem some or all of the senior
subordinated exchange notes at any time at the
redemption prices listed in that section.
Before June 1, 2002, we may redeem up to 35% of
the exchange notes with the proceeds of certain
offerings of equity as described in
"Description of Exchange Notes -- Optional
Redemption."
MANDATORY OFFER TO
REPURCHASE.................... If we sell certain assets or experience
specific kinds of changes of control, we must
offer to repurchase the exchange notes at the
prices listed in the section "Description of
Exchange Notes."
BASIC COVENANTS OF
INDENTURES.................... We issued the outstanding notes and we will
issue the exchange notes under separate
indentures, with The Huntington National Bank
as trustee. The indentures, among other things,
restrict our ability and the ability of our
subsidiaries to:
- borrow money;
- pay dividends on stock or purchase stock;
- make investments;
- use assets as security in other transactions;
and
- sell certain assets or merge with or into
other companies.
For more details, see "Description of Exchange
Notes."
USE OF PROCEEDS............... We will not receive any cash proceeds in the
exchange offer.
RISK FACTORS
For a discussion of certain factors that should be considered in connection
with an investment in the notes, see "Risk Factors."
9
15
SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL
AND OPERATING DATA OF VENTURE
The following table sets forth summary unaudited consolidated pro forma
financial and operating data of Venture. The summary unaudited consolidated pro
forma statement of operations and other data for the year ended December 31,
1998 give effect to the Peguform acquisition, the offering of the outstanding
notes and the new credit facility, as if they had occurred as of January 1,
1998. The summary unaudited consolidated pro forma statement of operations and
other data for the six months ended June 30, 1999 give effect to the Peguform
acquisition, the offering of the outstanding notes and the new credit facility,
as if they had occurred as of January 1, 1999. The unaudited consolidated pro
forma statement of operations does not include pro forma adjustments for certain
non-recurring costs and charges, consisting of (1) the prepayment charge of $3.9
million on the redemption of our $78.9 million of 9 3/4% Senior Subordinated
Notes due 2004, issued in 1994 and (2) the related $1.9 million write-off of
deferred financing costs. See "Use of Proceeds" and "Capitalization." The
summary unaudited pro forma financial data do not purport to represent what
Venture's results of operations actually would have been if the Peguform
acquisition had occurred as of these dates and are not necessarily indicative of
future operating results or financial position. The information contained in
this table should be read in conjunction with "Selected Consolidated Financial
Data of Venture," "Selected Consolidated Financial Data of Peguform," "Unaudited
Pro Forma Financial Statements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements of
Venture and Peguform, including the notes thereto, appearing elsewhere in this
prospectus.
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1998(1) 1999(2)
------------ ----------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales................................................... $1,933,452 $1,035,485
Gross profit................................................ 254,903 128,681
Income from operations...................................... 59,383 28,478
Interest expense(3)......................................... 72,726 41,140
Other income................................................ 0 21,249
Net income (loss) before taxes.............................. (9,979) 9,767
Net income.................................................. 1,011 16,795
OTHER FINANCIAL DATA:
EBITDA(4)................................................... $ 169,003 $ 89,162
Depreciation and amortization............................... 102,948 56,258
Capital Expenditures........................................ 102,377 39,232
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SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1998(1) 1999(2)
------------ ----------
(DOLLARS IN THOUSANDS)
SELECTED RATIOS:
EBITDA to Interest Expense.................................. 2.3x
Total debt to EBITDA........................................ 5.2x
- -------------------------
(1) Operating data for Peguform is based on the 12-month period ended December
31, 1998.
(2) Operating data for Peguform is based on the 6-month period ended March 31,
1999.
(3) Represents gross interest expense and does not include interest income of
$3,364 at Peguform for the 12-months ended December 31, 1998 and $1,180 at
Peguform for the 6-months ended March 31, 1999. See "Unaudited Consolidated
Pro Forma Statement of Operations."
(4) EBITDA represents income from operations, net of minority interest, before
deducting taxes (including the Michigan single business tax), depreciation,
amortization, interest and payment to beneficiary in lieu of taxes. EBITDA
has not been adjusted to account for a non-recurring charge of $11,093 at
Peguform related to start-up production costs on the Mercedes A class
hatchback program. EBITDA is not presented as an alternative to net income,
as a measure of operating results or as an indicator of Venture's
performance, nor is it presented as an alternative to cash flow or as a
measure of liquidity, but rather to provide additional information related
to debt service capacity. EBITDA should not be considered in isolation or as
a substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of a company's
profitability. EBITDA, while commonly used, is not calculated uniformly by
all companies and should not be used as a comparative measure without
further analysis, nor does EBITDA necessarily represent funds available for
discretionary use. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a discussion of liquidity and
operating results.
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SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA OF VENTURE
The following table sets forth summary historical financial and operating
data of Venture. The summary income statement data and balance sheet data as of
and for each of the fiscal years in the five-year period ended December 31, 1998
were derived from the audited consolidated financial statements of Venture. The
summary historical financial data for the six months ended June 30, 1999 and
1998 have been derived from Venture's unaudited condensed consolidated financial
statements. The information contained in this 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 Venture,
including the notes thereto, appearing elsewhere in this prospectus.
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
--------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- -------- ---- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
INCOME STATEMENT DATA(1)(2)(3):
Net sales.................................... $ 439,795 $344,591 $645,196 $624,113 $351,777 $251,142 $244,112
Cost of products sold........................ 379,756 284,685 532,809 521,361 302,940 211,262 199,717
---------- -------- -------- -------- -------- -------- --------
Gross profit................................. 60,039 59,906 112,387 102,752 48,837 39,880 44,395
Selling, general and administrative
expense.................................... 34,224 30,099 59,689 57,217 26,588 20,129 19,200
Payment to beneficiary in lieu of taxes...... 77 360 535 472 666 577 3,405
---------- -------- -------- -------- -------- -------- --------
Income from operations..................... 25,738 29,447 52,163 45,063 21,583 19,174 21,790
Interest expense............................. 25,028 17,842 36,641 30,182 19,248 15,032 14,345
Other income................................. (19,900) -- -- -- -- -- --
---------- -------- -------- -------- -------- -------- --------
Net income before extraordinary items and
taxes.................................... 20,610 11,605 15,522 14,881 2,335 4,142 7,445
Tax provision(4)............................. 405 1,052 1,954 3,358 336 -- --
Minority interest............................ 29 -- -- -- -- --
---------- -------- -------- -------- -------- -------- --------
Net income before extraordinary items........ 20,176 10,553 13,568 11,523 1,999 4,142 7,445
Extraordinary loss on early extinguishment of
debt....................................... 5,569 -- 2,738
---------- -------- -------- -------- -------- -------- --------
Net income (loss)............................ 14,607 10,553 13,568 11,523 (739) 4,142 7,445
OTHER FINANCIAL DATA:
EBITDA(5).................................... $ 53,501 $ 49,093 $ 94,216 $ 80,391 $ 46,123 $ 37,001 $ 41,021
Depreciation and amortization................ 26,031 18,305 39,320 32,147 22,628 16,068 14,070
Capital expenditures......................... 13,177 15,035 24,706 33,012 64,593 20,339 22,798
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.............................. $ 342,321 $163,605 $168,655 $125,101 $ 83,404 $ 74,354 $ 85,258
Property, plant and equipment -- net......... 601,162 205,507 200,544 205,765 203,975 116,299 111,472
Total assets................................. 1,379,115 538,821 541,315 524,122 498,067 231,602 234,435
Total debt................................... 961,321 366,174 364,939 336,188 299,996 152,463 153,118
Trust principal.............................. 68,929 74,835 77,113 64,282 52,759 53,498 49,356
- -------------------------
(1) Venture operates as a holding company and has no independent operations of
its own. Separate financial statements of Venture's subsidiaries have not
been presented because we do not believe that this information would be
material to a decision to exchange your outstanding notes.
(2) The results for the six months ended June 30, 1999 include the operations of
Peguform from May 28, 1999.
(3) The results for 1996 include the operations of Bailey from August 26, 1996,
and of AutoStyle from June 3, 1996.
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18
(4) This provision relates solely to Venture Holdings Corporation, which
operates Bailey, and its subsidiaries (see Note 2 above). Other significant
subsidiaries and Venture have elected "S" corporation status under the
Internal Revenue Code of 1986, as amended, or are limited liability
companies, taxed as partnerships, and, consequently, do not incur liability
for federal and certain state income taxes.
(5) EBITDA represents income from operations before deducting taxes, including
the Michigan single business tax, depreciation, amortization, interest and
payment to beneficiary in lieu of taxes. EBITDA is not presented as an
alternative to net income, as a measure of operating results or as an
indicator of Venture's performance, nor is it presented as an alternative to
cash flow or as a measure of liquidity, but rather to provide additional
information related to debt service capacity. EBITDA should not be
considered in isolation or as a substitute for net income or cash flow data
prepared in accordance with generally accepted accounting principles or as a
measure of a company's profitability. EBITDA, while commonly used, is not
calculated uniformly by all companies and should not be used as a
comparative measure without further analysis, nor does EBITDA necessarily
represent funds available for discretionary use. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
for a discussion of liquidity and operating results.
13
19
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA OF PEGUFORM
The following table sets forth summary historical financial and operating
data of Peguform. The summary income statement data and balance sheet data as of
and for the two year period ended September 30, 1998 were derived from the
audited consolidated financial statements of Peguform. The summary income
statement data and balance sheet data as of and for the six month period ended
March 31, 1998 and 1999 are derived from unaudited financial statements of
Peguform. The information contained in this 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 Peguform, including the
notes thereto, appearing elsewhere in this prospectus.
Solely for the convenience of the readers, the consolidated financial
statements as of and for the year ended September 30, 1998 and as of and for the
six months ended March 31, 1999 have been translated to United States dollars at
the rate of DEM 1.6767 per United States dollar, the Noon Buying Rate as of
December 31, 1998. The translation should not be construed as a representation
that the amounts shown could be converted into United States dollars at this
rate or any other rate.
THOUSANDS OF
THOUSANDS OF U.S. DOLLARS
U.S. DOLLARS (CONVENIENCE
(CONVENIENCE TRANSLATION)
YEAR ENDED TRANSLATION) SIX MONTHS ENDED SIX MONTHS
SEPTEMBER 30, YEAR ENDED MARCH 31, ENDED
----------------------- SEPTEMBER 30, ---------------------------- MARCH 31,
1997 1998 1998 1998 1999 1999
---------- ---------- ------------- ----------- -------------- --------------
(DEM IN THOUSANDS) (DEM IN THOUSANDS)
INCOME STATEMENT
DATA:
Net sales............ 1,664,884 1,977,698 $ 1,179,518 935,225 1,174,403 $ 700,425
Other revenues....... 17,717 45,728 27,272 13,732 11,138 6,643
---------- ---------- ----------- --------- ---------- ---------
Total revenues....... 1,682,601 2,023,426 1,206,790 948,957 1,185,541 707,068
Cost of products
sold............... (1,482,448) (1,806,115) (1,077,184) (855,447) (1,056,225) (629,943)
---------- ---------- ----------- --------- ---------- ---------
Gross profit......... 200,153 217,311 129,606 93,510 129,316 77,125
Selling, general and
administrative
expenses........... (154,427) (201,040) (119,902) (101,222) (104,744) (62,470)
Other expenses....... (7,524) (2,408) (1,436) (1,743) (8,668) (5,170)
Interest expense
(net).............. (23,267) (23,992) (14,309) (13,444) (11,980) (7,145)
---------- ---------- ----------- --------- ---------- ---------
Income (loss)
before income
taxes............ 14,935 (10,129) (6,041) (22,899) 3,924 2,340
Taxes on income...... (6,029) (6,060) (3,614) (3,210) (1,340) (799)
Minority interest.... (618) 505 301 350 226 135
---------- ---------- ----------- --------- ---------- ---------
Net income (loss).... 8,288 (15,684) $ (9,354) (25,759) 2,810 $ 1,676
OTHER FINANCIAL DATA:
EBITDA(1)............ 129,572 108,896 $ 64,947 37,617 66,868 $ 39,881
Depreciation and
Amortization....... 87,828 88,734 52,922 46,722 48,759 29,080
Capital
Expenditures....... 102,014 143,552 85,616 74,109 52,299 31,192
14
20
THOUSANDS OF
THOUSANDS OF U.S. DOLLARS
U.S. DOLLARS (CONVENIENCE
(CONVENIENCE TRANSLATION)
AS OF TRANSLATION) AS OF SIX MONTHS
SEPTEMBER 30, YEAR ENDED MARCH 31, ENDED
----------------------- SEPTEMBER 30, ---------------------------- MARCH 31,
1997 1998 1998 1998 1999 1999
---------- ---------- ------------- ----------- -------------- --------------
(DEM IN THOUSANDS) (DEM IN THOUSANDS)
BALANCE SHEET DATA
(AT END OF PERIOD):
Working capital(2)... 76,573 72,199 $ 43,061 101,900 139,103 $ 82,962
Property, plant and
equipment-- net.... 488,218 535,199 319,198 512,487 539,398 321,702
Total assets......... 1,048,686 1,112,028 663,224 1,095,810 1,196,732 713,742
Total debt........... 411,570 458,220 273,287 496,840 549,935 327,986
Total stockholders
equity............. 218,371 214,636 128,011 190,600 208,699 124,470
- -------------------------
(1) EBITDA represents income from operations, net of minority interest, before
deducting taxes, depreciation, amortization, and interest. EBITDA is not
presented as an alternative to net income, as a measure of operating results
or as an indicator of Peguform's performance, nor is it presented as an
alternative to cash flow or as a measure of liquidity, but rather to provide
additional information related to debt service capacity. EBITDA should not
be considered in isolation or as a substitute for net income or cash flow
data prepared in accordance with generally accepted accounting principles or
as a measure of a company's profitability. EBITDA, while commonly used, is
not calculated uniformly by all companies and should not be used as a
comparative measure without further analysis, nor does EBITDA necessarily
represent funds available for discretionary use. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
for a discussion of liquidity and operating results. EBITDA has not been
adjusted to account for a non-recurring charge of $11,093 at Peguform
related to start-up production costs on the Mercedes A class hatchback
program.
(2) Working capital does not include loans payable to Peguform's parent of DEM
264,972 at September 30, 1997, DEM 308,440 at September 30, 1998 and DEM
391,575 at March 31, 1999. All outstanding intercompany loans were repaid as
part of the purchase price upon consummation of the Peguform acquisition.
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21
RISK FACTORS
This prospectus includes forward-looking statements including, in
particular, the statements about Venture's plans, strategies, and prospects
under the headings "Summary," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Business." Although we believe that
our plans, intentions and expectations reflected in or suggested by these
forward-looking statements are reasonable, we can give no assurance that these
plans, intentions or expectations will be achieved. Important factors that could
cause actual results to differ materially from the forward-looking statements we
make in this prospectus are set forth below and elsewhere in this prospectus.
- our substantial leverage;
- our ability to service our debt;
- our ability to properly integrate our acquisitions, including:
-- our ability to negotiate more favorable supplier terms;
-- our ability to achieve future sales levels that will support
anticipated cost savings; and
-- our ability to eliminate operational inefficiencies in our facilities;
- business disruptions;
- demographic changes;
- the size and growth of the automobile market or the plastic automobile
component market;
- our ability to sustain, manage or forecast our own growth;
- the size, timing and mix of purchases of our products;
- new product development and introduction;
- adverse publicity;
- our dependence upon original equipment manufacturers;
- liability and other claims asserted against us;
- competition;
- the loss of significant customers or suppliers;
- work stoppages and other labor relations matters;
- fluctuations and difficulty in forecasting operating results;
- international, national and local general economic and market conditions;
- changes in business strategy or development plans;
- product recalls;
- existing government regulations and changes in, or the failure to comply
with, government regulations;
- warranty costs;
- the ability to attract and retain qualified personnel;
- the ability to protect technology;
- retention of earnings; and
- control and the level of affiliated transactions.
All forward-looking statements attributable to Venture or persons acting on
our behalf are expressly qualified in their entirety by the following cautionary
statements.
16
22
SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT THE
FINANCIAL HEALTH OF VENTURE AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER
THESE NOTES.
We have now and will continue to have a significant amount of indebtedness.
The following chart shows certain important credit statistics:
AT JUNE 30, 1999
----------------
(DOLLARS IN
THOUSANDS)
Total indebtedness (excludes $2,975 of outstanding letters
of credit)................................................ $961,321
Trust principal............................................. 68,929
Debt to equity ratio........................................ 13.9x
On a pro forma basis for the year ended December 31, 1998, our earnings
were insufficient to cover fixed charges by $8.6 million. On a pro forma basis
for the six months ended June 30, 1999, the ratio of earnings to fixed charges
was 1.2x.
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations concerning the
exchange notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, research and development efforts and other general
corporate purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- place us at a competitive disadvantage compared to our competitors that
have less debt; and
- limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional funds;
specifically our new credit facility and the indenture governing our $205
million of 9 1/2% Senior Notes due 2005, issued in 1997, contain many
covenants that are more restrictive than those applicable to these Notes.
Failing to comply with those covenants could result in an event of
default which, if not cured or waived, could have a material adverse
effect on us.
REFINANCING DEBT -- WE WILL BE REQUIRED TO REFINANCE A PORTION OF OUR CREDIT
FACILITY.
We are required to refinance $125.0 million principal amount outstanding
under the new credit facility within 18 months from May 27, 1999, utilizing the
proceeds from the sale of securities that are pari passu in right of payment
with, or junior to, the senior subordinated exchange notes. We cannot assure you
that we will be able to refinance this amount on favorable terms or at all. If
we do not refinance the $125.0 million principal amount, we will be in default
under the new credit facility and the indentures for the exchange notes.
See "Description of Exchange Notes" and "Description of Certain
Indebtedness."
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23
ABILITY TO SERVICE DEBT -- TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A
SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS
BEYOND OUR CONTROL.
Our ability to make payments on and to refinance our indebtedness,
including the exchange notes, and to fund planned capital expenditures and
research and development efforts will depend on our ability to generate cash in
the future. This, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond our control.
Based on our current level of operations and anticipated cost savings and
operating improvements, we believe our cash flow from operations, available cash
and available borrowings under the new credit facility, together with the $125.0
million to be refinanced, will be adequate to meet our future liquidity needs
for at least the next 10 years.
We cannot assure you, however, that our business will generate sufficient
cash flow from operations, that currently anticipated cost savings and operating
improvements will be realized as anticipated or that future borrowings will be
available to us under the new credit facility in an amount sufficient to enable
us to pay our indebtedness, including these exchange notes, or to fund our other
liquidity needs. We may need to refinance all or a portion of our indebtedness,
including these exchange notes, on or before maturity. We cannot assure you that
we will be able to refinance any of our indebtedness, including the new credit
facility, the 1997 senior notes or these exchange notes, on commercially
reasonable terms or at all.
COMPANY STRUCTURE -- VENTURE IS LIMITED IN ITS ACCESS TO ITS SUBSIDIARIES' CASH
FLOWS.
Venture must rely entirely upon distributions from its domestic and foreign
subsidiaries and repayment of principal and interest on intercompany loans made
by Venture to its subsidiaries to generate the funds necessary to meet its
obligations, including payment of principal and interest on Venture's notes. We
expect payments of interest by our foreign subsidiaries on these intercompany
loans to result in the repatriation of a portion of their cash flow. We cannot
predict whether these interest payments will be recharacterized in a way that
has adverse tax or other consequences for us, or whether they will become
subject to restrictions on the transfer of funds into or out of foreign
countries, which would adversely affect our ability to pay our outstanding
indebtedness, including the exchange notes. The ability of Venture's
subsidiaries to pay dividends and make other payments or advances to Venture
will depend upon their operating results and will be subject to applicable laws
and contractual restrictions contained in the instruments governing any
indebtedness of these subsidiaries. Although the indentures governing the
exchange notes limit the ability of these subsidiaries to enter into consensual
restrictions on their ability to pay dividends and make other payments to
Venture, these limitations are subject to a number of significant
qualifications. In addition, certain countries in which our subsidiaries are
organized place limits on the remittance of dividends, and these limitations may
limit the amount of cash available from our foreign subsidiaries to service our
debt. See "Description of Exchange Notes -- Certain Covenants -- Dividend and
Other Payment Restrictions Affecting Subsidiaries."
NOT ALL SUBSIDIARIES ARE GUARANTORS -- YOUR RIGHT TO RECEIVE PAYMENTS ON THESE
EXCHANGE NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR NON-GUARANTOR
SUBSIDIARIES DECLARE BANKRUPTCY, LIQUIDATE, OR REORGANIZE.
Some but not all of our subsidiaries will be guarantors of the exchange
notes. Note 8 on page F-34 sets forth condensed consolidating financial
information regarding Venture, the guarantor subsidiaries and the non-guarantor
subsidiaries which is in the form in which this information will be provided in
future filings with the SEC. In the event of a bankruptcy, liquidation or
reorganization of any of the non-guarantor subsidiaries, holders of their
indebtedness and their trade creditors will generally be entitled to payment of
their claims from the assets of those subsidiaries before any assets
18
24
are made available for distribution to us. On June 30, 1999, the outstanding
notes were effectively junior to all indebtedness and other liabilities of these
non-guarantor subsidiaries. The non-guarantor subsidiaries generated 66.9% of
our consolidated revenues in the twelve-month period ended December 31, 1998, on
a pro forma basis, and 68.6% of our consolidated revenues in the six-month
period ended June 30, 1999, on a pro forma basis. The non-guarantor subsidiaries
held 57.0% of our consolidated assets as of December 31, 1998, on a pro forma
basis, and 56.0% of our consolidated assets as of June 30, 1999.
The new credit facility grants to the lenders thereunder security interests
in the assets of the domestic subsidiaries of Venture that are guarantors of the
exchange notes, including the capital stock of certain subsidiaries of Venture
that will not guarantee the exchange notes. As a result, if an event of default
occurs under the new credit facility, the lenders thereunder would be entitled
to exercise certain remedies which would have the effect of preventing these
subsidiaries from making payments in respect of the Notes. See "Description of
Certain Indebtedness."
ADDITIONAL BORROWINGS AVAILABLE -- DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND
OUR SUBSIDIARIES MAY STILL BE ABLE TO INCUR SUBSTANTIALLY MORE DEBT. THIS COULD
FURTHER EXACERBATE THE RISKS DESCRIBED ABOVE.
We may be able to incur substantial additional indebtedness in the future.
The terms of the indentures do not fully prohibit us or our subsidiaries from
doing so. As of June 30, 1999, our new credit facility permitted additional
borrowing of up to $153.5 million, and all of those borrowings were senior to
the outstanding senior subordinated exchange notes and the subsidiary guarantees
thereof, and effectively senior to the Senior Exchange Notes and the subsidiary
guarantees thereof. If new debt is added to our current debt levels, the related
risks that we now face could intensify.
See "Capitalization," "Selected Consolidated Financial Data of Venture,"
"Selected Consolidated Financial Data of Peguform" and "Description of Exchange
Notes -- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock" and "Description of Certain Indebtedness -- New Credit
Facility."
RISKS ASSOCIATED WITH THE PEGUFORM ACQUISITION; ABILITY TO ACHIEVE ANTICIPATED
COST SAVINGS -- WE MAY NOT RECEIVE THE DESIRED BENEFITS FROM THE PEGUFORM
ACQUISITION.
We cannot assure you that Venture will realize the expected benefits of the
Peguform acquisition. Also, we may experience difficulty integrating Peguform's
operations with Venture's, and we may not derive the expected cost savings from
the integration. The integration of Peguform into Venture's business will
require the expertise of several key managers who are remaining with us, but may
not remain during the entire period of integration.
We estimate that we will realize certain cost savings from the Peguform
acquisition, including: (1) materials cost savings; (2) tooling cost savings;
and (3) operating efficiencies. See "Summary -- Business Strategy." The expected
cost savings from the integration of Peguform's operation with Venture's,
including any materials cost savings, are based on our estimates and
assumptions, which are inherently uncertain and are subject to significant
business, economic and other uncertainties and contingencies, all of which are
difficult to predict and many of which are beyond our control. A portion of the
materials cost savings and operating efficiencies are premised on the assumption
that certain purchasing costs and levels of efficiency realized by either
Venture or Peguform prior to the Peguform acquisition will continue to be
achieved. Other estimates were based on a management consensus as to what levels
of purchasing and similar efficiencies should be achievable by an entity our
size. Estimates of potential cost savings are forward-looking statements that
are inherently uncertain. A portion of our anticipated cost savings, in
particular a portion of anticipated tooling cost
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25
savings, will not be realized for one or more years. Actual cost savings, if
any, could differ materially from those projected.
SUBORDINATION OF SENIOR SUBORDINATED EXCHANGE NOTES -- YOUR RIGHT TO RECEIVE
PAYMENTS ON THE SENIOR SUBORDINATED EXCHANGE NOTES IS JUNIOR TO OUR EXISTING
INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS. FURTHER, THE GUARANTEES
OF THE SENIOR SUBORDINATED EXCHANGE NOTES ARE JUNIOR TO ALL OUR GUARANTORS'
EXISTING INDEBTEDNESS AND POSSIBLY ALL THEIR FUTURE BORROWINGS.
The senior subordinated exchange notes and related guarantees rank behind
all of Venture's and the guarantors' existing indebtedness and all of Venture's
and the guarantors' existing and future borrowings, except any future
indebtedness that expressly provides that it ranks equal with, or is
subordinated in right of payment to, the senior subordinated exchange notes and
the related guarantees. As a result, upon any distribution to Venture's or the
guarantors' creditors in a bankruptcy, liquidation or reorganization or similar
proceeding relating to Venture or the guarantors or their property, the holders
of their senior debt will be entitled to be paid in full in cash before any
payment may be made on the senior subordinated exchange notes or the related
guarantees.
In addition, all payments on the senior subordinated exchange notes and
related guarantees will be blocked in the event of a payment default on senior
debt and may be blocked for up to 179 of 360 consecutive days in the event of
certain non-payment defaults on senior debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to Venture or the guarantors, holders of the senior
subordinated exchange notes will participate with trade creditors and all other
holders of Venture's and the guarantors' subordinated indebtedness in the assets
remaining after Venture and the guarantors have paid all of the senior debt.
However, because the Senior Subordinated Note indenture requires that amounts
otherwise payable to holders of the senior subordinated exchange notes in a
bankruptcy or similar proceeding be paid to holders of senior debt instead,
holders of the senior subordinated exchange notes may receive less, ratably,
than holders of trade payables in this type of proceeding. In any of these
cases, Venture and the guarantors may not have sufficient funds to pay all of
their respective creditors, and holders of senior subordinated exchange notes
may not receive any funds.
On June 30, 1999, the outstanding senior subordinated notes and guarantees
were subordinated to $726.3 million of senior debt (excluding $3.0 million of
outstanding letters of credit) of Venture and the guarantors, including the
outstanding senior notes, and approximately $153.5 million was available for
borrowing as additional senior secured debt under our new credit facility. We
are permitted to borrow substantial additional indebtedness, including senior
debt, in the future under the terms of the indentures.
EFFECTIVE SUBORDINATION OF SENIOR EXCHANGE NOTES TO SECURED SENIOR DEBT
-- ALTHOUGH YOUR RIGHT TO RECEIVE PAYMENTS ON THE SENIOR EXCHANGE NOTES IS
SENIOR OR PARI PASSU TO OUR EXISTING INDEBTEDNESS, THE SENIOR EXCHANGE NOTES ARE
UNSECURED. THEREFORE, YOUR RIGHTS MAY EFFECTIVELY BE SUBORDINATED TO THE RIGHTS
OF HOLDERS OF SECURED INDEBTEDNESS.
Holders of any secured indebtedness of Venture will have claims that are
prior to the claims of the holders of the senior exchange notes regarding the
assets securing this other indebtedness. Notably, Venture is a party to the new
credit facility which is secured by liens on all domestic assets. The senior
exchange notes will be effectively subordinated to all such secured
indebtedness. In the event of any distribution or payment of the assets of
Venture or the guarantors in any foreclosure, dissolution, winding-up,
liquidation, reorganization, or other bankruptcy proceeding, holders of secured
indebtedness will have a prior claim to the assets of Venture and the guarantors
that constitute their collateral. Holders of the senior exchange notes will
participate ratably with all holders of unsecured
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indebtedness of Venture that is deemed to be of the same class as the senior
exchange notes, and potentially with all other general creditors of Venture and
the guarantors, based upon the respective amounts owed to each holder or
creditor, in the remaining assets. In any of the foregoing events, there can be
no assurance that there would be sufficient assets to pay amounts due on the
senior exchange notes. As a result, holders of the senior exchange notes may
receive less, ratably, than holders of secured indebtedness.
On June 30, 1999, the aggregate amount of secured indebtedness of Venture
and the guarantors, including borrowings under the new credit facility, was
approximately $453.7 million, and approximately $153.5 million was available for
additional borrowing under the new credit facility. The indentures permit the
incurrence of substantial additional secured indebtedness by Venture and the
guarantors.
RELIANCE ON MAJOR CUSTOMERS; THE OEM SUPPLIER INDUSTRY -- WE ARE DEPENDENT UPON
A GROUP OF CUSTOMERS WHOSE NEEDS ARE CYCLICAL AND LARGELY DEPENDENT UPON
CUSTOMER DEMAND.
We compete in the global OEM automobile supplier industry in which OEMs may
exert considerable pressure on suppliers such as us. Our sales to our major OEM
customers for the year ended December 31, 1998 on a pro forma basis, were
approximately:
YEAR ENDED
DECEMBER 31, 1998
-----------------
- - Volkswagen Group: (including Audi AG, Skoda Automobilova,
Seat, S.A. and Volkswagen AG) 30.1%
- - General Motors Corporation: 12.6%
- - DaimlerChrysler AG: 10.5%
- - Ford Motor Company: 8.2%
- - PSA Peugeot Citroen: 5.8%
Sales to these customers consist of large numbers of different parts,
tooling and other services, which are sold to separate operating groups within
each customer's organization. Purchase orders from these customers generally
cover a particular model year rather than a specific quantity of products. The
loss of a significant number of operating groups or purchase orders, or a
decrease in demand for certain models could have a material adverse affect on
us. The failure to obtain purchase orders for new models or the failure to
continue business on redesigned existing models could also adversely affect us.
Furthermore, the OEMs can exert considerable pressure on their suppliers for
increased quality standards, price reductions or additional engineering
capabilities. Increased costs may result from these changes and adversely affect
Venture.
Finally, the OEM supplier industry is very cyclical and dependent upon the
overall strength of consumer demand for light trucks and passenger cars. The
industry is also subject to regulatory requirements, trade agreements and other
factors beyond our control. The automotive industry, for which we supply
components and systems, may experience downturns. An economic recession
generally has a greater impact on highly leveraged companies like us. A decrease
in overall consumer demand for motor vehicles in general, or specific segments,
could adversely affect us.
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UNIONIZED WORKFORCE -- WE MAY BE ADVERSELY IMPACTED BY WORK STOPPAGES AND OTHER
LABOR RELATIONS MATTERS.
Certain of our North American employees, most of our European employees,
and many employees of the OEMs and our other customers are unionized. Work
stoppages, slow-downs or other labor disputes could adversely affect our output.
In the year ended December 31, 1998, for example, our operations were affected
by a prolonged labor dispute at General Motors. In addition, collective
bargaining agreements with unionized employees at each of the three major U.S.
OEMs expire in the Fall of 1999, and any disputes arising from the negotiation
of new agreements could adversely affect our operations. We have recently
negotiated a new collective bargaining agreement with the employees at our
Seabrook, New Hampshire facility. The new agreement expires in June 2002.
Employees at our Conneaut, Ohio facility have recently voted to be represented
by the Teamsters union. Negotiations regarding a new collective bargaining
agreement with these employees has not yet begun.
COMPETITION -- WE MAY NOT CONTINUE TO PERFORM SUCCESSFULLY IN OUR HIGHLY
COMPETITIVE INDUSTRY.
We compete in a highly competitive industry. Many actual or potential
competitors exist, including the internal component operations of the OEMs as
well as independent suppliers. Many of these competitors are larger than us. The
industry is becoming increasingly competitive due to supplier consolidations and
the spin-off of formerly in-house OEM plastics manufacturing facilities. We
compete on the basis of geographic presence, quality, cost, timely delivery and
customer service and, increasingly, design and engineering capability, painting
capability, new product innovation, broad product offerings, product testing
capability and ability to reduce the time from concept to mass production. As
the OEMs strive to reduce new model development cost and timing, innovation,
design and engineering will become increasingly important in distinguishing
competitors. We may not be able to continue to compete successfully in this
environment.
RAW MATERIALS -- WE MAY EXPERIENCE SHORTAGES OF RAW MATERIALS NECESSARY TO OUR
MANUFACTURING PROCESSES.
Our manufacturing processes use a variety of raw materials, principally
engineered plastic resins such as nylon, polypropylene (including
thermoplastics) polycarbonate, acrylonitrile-butadiene-styrene, fiberglass
reinforced polyester, polyethylene terephthalate, commonly referred to as PET,
and thermoplastic polyurethane; a variety of ingredients used in compounding
materials used in the compression molding process; paint related products; and
steel for production molds. Our customers usually specify materials and
suppliers to be used for a specific program, but we cannot assure you that the
specified suppliers will always be able to supply the specified materials or
that alternative sources will be available. We obtain most of our raw materials
from 1 year supply agreements in which we estimate our annual needs. We
generally issue releases against these agreements only when we receive
corresponding orders from our customers. Although we have not historically
experienced raw material shortages, we could face shortages in the future.
CONTROL -- LARRY J. WINGET EFFECTIVELY CONTROLS US BECAUSE HE IS THE SOLE
BENEFICIARY AND TRUSTEE OF VENTURE HOLDINGS TRUST, AND VENTURE HOLDINGS TRUST IS
THE SOLE MEMBER OF VENTURE.
Venture is the sole issuer of these exchange notes and owns the capital
stock of each guarantor. Mr. Winget is the sole beneficiary and trustee of
Venture Holdings Trust, which is the sole member of Venture. Therefore, Mr.
Winget may elect or remove the directors of the guarantor and non-guarantor
corporate subsidiaries and the management of the limited liability company
subsidiaries and exercise other control over their operations.
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AFFILIATED TRANSACTIONS -- WE RELY ON NON-ARMS'-LENGTH TRANSACTIONS ENTERED INTO
WITH MR. WINGET AND AFFILIATED ENTITIES HE CONTROLS.
Venture makes distributions to Venture Holdings Trust, which then makes
distributions to Mr. Winget, and compensates him as an executive officer of
Venture. Also, we have entered into many agreements with Mr. Winget and the
entities he owns or controls. We depend on these entities to provide necessary
facilities, machinery, equipment, technology and services. Since we operate for
the benefit of Mr. Winget, the terms of these transactions are not necessarily
the result of "arms'-length" bargaining, but we believe that the transactions
are on terms no less favorable to us than would be obtained if these
transactions or arrangements were arms'-length transactions with non-affiliated
persons. The indenture governing the 1997 senior notes and the indentures
governing these exchange notes require us to have a "Fairness Committee" with at
least one independent member to approve this type of transaction. Also, these
indentures restrict distributions to Mr. Winget and contain an agreement with
Mr. Winget which requires him to offer corporate opportunities to us before he
pursues these opportunities individually or through other companies he owns or
controls.
See "Description of Certain Indebtedness" and "Certain Transactions."
RISKS ASSOCIATED WITH ACQUISITIONS -- WE MAY NOT BE ABLE TO IMPLEMENT OUR
STRATEGY OF SUCCESSFULLY COMPLETING FUTURE ACQUISITIONS. COMPLETED ACQUISITIONS
MAY LEAD TO UNEXPECTED LIABILITIES.
Our business strategy allows for growth through selected acquisitions in
order to expand our markets and take advantage of the consolidating trend in the
automotive supplier industry. The full benefits of these acquisitions require
integration of administrative, finance, sales and marketing approaches, and
coordination of administration, marketing and sales organizations. Occasionally
a completed acquisition may adversely affect our financial condition and
reporting results, including our capital requirements and the accounting
treatment of these acquisitions. Completed acquisitions may also lead to
significant unexpected liabilities after the consummation of these acquisitions.
See "Risks Associated with the Peguform acquisition; Ability to Achieve
Anticipated Cost Savings."
ENVIRONMENTAL -- VENTURE MAY BE ADVERSELY AFFECTED BY ENVIRONMENTAL CLAIMS
RESULTING FROM OUR METHODS OF OPERATIONS.
Our operations are subject to federal, state and local environmental, and
occupational safety and health laws and regulations in the United States and
other countries. Venture has been subject to claims for environmental matters
relating to the disposal of hazardous substances and wastes. In addition, we
anticipate capital expenditures at certain of our manufacturing facilities to
decrease the release of certain compounds into the air resulting from our
painting process. Also, fines may be levied against us for the release of these
compounds. Although we have taken steps to minimize the environmental risks of
our operations, we cannot assure you that our activities will not result in
further environmental claims. However, we believe that our current environmental
liabilities will not result in material adverse effects upon Venture.
See "Business -- Environmental Matters" and "-- Legal Proceedings."
FINANCING CHANGE OF CONTROL -- WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS
NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURES.
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding exchange notes.
However, it is possible that we will not have
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sufficient funds at the time of the change of control to make the required
repurchase of exchange notes or that restrictions in the new credit facility and
other senior debt will not allow these repurchases. In addition, certain
important corporate events, such as leveraged recapitalizations that would
increase the level of our indebtedness, would not constitute a "Change of
Control" under the indentures.
See "Description of Exchange Notes -- Repurchase at the Option of Holders."
YEAR 2000 -- WE CANNOT ASSURE YOU THAT WE, OR OUR CUSTOMERS AND SUPPLIERS, WILL
BE YEAR 2000 COMPLIANT. PROBLEMS ASSOCIATED WITH THE YEAR 2000 MAY ADVERSELY
AFFECT OUR OPERATIONS.
We cannot assure you that our computer systems or software products or
those of our suppliers and customers will accept input of, store, manipulate and
output dates prior to the year 2000 or thereafter without error or interruption.
We are assessing the issues related to the year 2000 problem, and we have
implemented a readiness program to mitigate the problem of business interruption
or other risks. We are also requesting assurances from our significant suppliers
and customers that their systems are year 2000 compliant or that they are
identifying and addressing problems to ready themselves for the year 2000. We
cannot assure you that we will identify all year 2000 problems in advance of
their occurrence, or that we will be able to successfully remedy problems that
are discovered. The expense of our efforts to identify and address these
problems, or the expenses or liabilities to which we may become subject to as a
result of these problems, could have a material adverse effect on Venture.
SUBSTANTIAL FOREIGN OPERATIONS -- OUR SIGNIFICANT INTERNATIONAL OPERATIONS MAKE
US SUSCEPTIBLE TO FLUCTUATIONS IN CURRENCY EXCHANGE RATES AND SEVERAL OTHER
RISKS THAT ARE BEYOND OUR CONTROL.
Over two-thirds of our revenue and over one-half of our net assets are
derived from operations outside of the United States. We are therefore subject
to risks associated with operations in foreign countries, including fluctuations
in currency exchange rates, tariffs and other trade barriers, longer accounts
payable cycles and limits on conversion of foreign currencies into dollars. In
addition, certain countries place limits on the remittance of dividends by
companies organized in these countries to their shareholders. These dividend
payment restrictions may limit the amount of cash available from our foreign
subsidiaries to service our debt. See "Company Structure; Not all Subsidiaries
are Guarantors." Our financial condition and results of operations, reported in
United States dollars, may be affected by fluctuations in the value of
currencies in which we transact business, particularly the euro, and for such
period of time as those currencies remain in existence, the German Mark, the
French Franc, the Spanish Peseta, the Czech Republic Koruna and the Brazilian
Real. Exchange rate fluctuations could have a material adverse effect on us. In
addition, we incur additional costs of compliance with local regulations by
operating in a number of countries. Changes in local economic or political
conditions could impact our manufacturing, assembly and distribution
capabilities. We intend to hedge currency exchange risks, but these hedges may
not eliminate the risk completely. The costs related to these international
operations could adversely affect Venture.
Under the European Union Treaty, the "euro" was introduced on January 1,
1999 which, subject to the fulfillment of certain conditions, will replace the
currencies of certain member states of the European Union. There can be no
assurance that the introduction of the euro will not increase the volatility of
exchange rates and intensify other risks associated with currency fluctuations.
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FRAUDULENT CONVEYANCE MATTERS -- FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER
SPECIFIC CIRCUMSTANCES, TO VOID THE EXCHANGE NOTES AND GUARANTEES AND REQUIRE
NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM US.
Any of our creditors may file a lawsuit objecting to our obligations under
the exchange notes or the use of the proceeds from the outstanding notes. A
court could void our obligations under the exchange notes, subordinate the
exchange notes to our other debt or order the holders to return any amounts paid
for the outstanding notes to us or to a fund benefitting the creditors if the
court finds that we:
(1) intended to defraud a creditor or
(2) did not receive fair value for the outstanding notes and we either (A)
were insolvent or became insolvent by offering the outstanding notes,
(B) did not have enough capital to engage in the Peguform acquisition
or (C) intended to or believed that we overextended our debt
obligations.
Creditors of the subsidiary guarantors may also object to their guarantee
of the exchange notes, and a court could order the relief outlined above for the
same reasons outlined above. In addition, the guarantors' creditors could claim
that since the guarantees were made for the benefit of Venture, the guarantors
did not receive fair value for the guarantees.
The measure of insolvency for fraudulent transfer purposes will vary
depending upon the law of the jurisdiction that is being applied in any
proceeding. Generally, however, Venture or a subsidiary guarantor would be
considered insolvent if, at the time it incurred the debt, either:
(1) the sum of its debts (including contingent liabilities) is greater than
its assets, at a fair valuation, or
(2) the present fair salable value of its assets is less than the amount
required to pay the probable liability on its total existing debts and
liabilities, including contingent liabilities, as they become absolute
and matured.
We cannot give any assurance as to what standards a court would use to
determine whether Venture or a subsidiary guarantor was solvent at the relevant
time, or whether, whatever standard was used, the exchange notes would not be
voided or further subordinated on another of the grounds set forth above.
On the basis of historical financial information, recent operating history
and other factors, we believe that at the time we incurred the debt constituting
the outstanding notes and guarantees, that we were not insolvent, did not have
unreasonably small capital for our business and had not incurred debts beyond
our ability to pay these debts as they mature. We cannot assure you, however, as
to what standard a court would apply in making these determinations or that a
court would agree with our conclusions in this regard.
CONSEQUENCES OF A FAILURE TO EXCHANGE OUTSTANDING NOTES -- IF HOLDERS OF THE
OUTSTANDING NOTES DO NOT EXCHANGE THEIR NOTES, THEY LOSE THEIR RIGHTS TO HAVE
THESE NOTES REGISTERED.
We did not register the outstanding notes under the Securities Act or any
state securities laws, nor do we intend to after the exchange offer. As a
result, the outstanding notes may only be transferred in limited circumstances
under the securities laws. If the holders of the outstanding notes do not
exchange their notes in the exchange offer, they lose their right to have the
outstanding notes registered under the Securities Act, subject to certain
limitations. A holder of outstanding notes after the exchange offer may be
unable to sell the notes.
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LACK OF PUBLIC MARKET FOR EXCHANGE NOTES -- WE CANNOT MAKE ANY ASSURANCE
REGARDING THE LIQUIDITY OF THE MARKET FOR THE EXCHANGE NOTES.
While the outstanding notes are presently eligible for trading in the
PORTAL market of the NASD by qualified institutional buyers, there is no
existing market for the exchange notes. The initial purchasers of the
outstanding notes have advised us that they currently intend to make a market in
the exchange notes following the exchange offer, but they are not obligated to
do so, and any market-making may be stopped at any time without notice. We do
not intend to apply for a listing of the exchange notes on any securities
exchange. We do not know if an active public market for the exchange notes will
develop or, if developed, will continue. If an active public market does not
develop or is not maintained, the market price and liquidity of the exchange
notes may be adversely affected. We cannot make any assurances regarding the
liquidity of the market for the exchange notes, the ability of holders to sell
their exchange notes or the price at which holders may sell their exchange
notes.
PROCEDURES FOR TENDERING OF OUTSTANDING NOTES -- IF YOU DO NOT PROPERLY TENDER
YOUR OUTSTANDING NOTES, THEY WILL CONTINUE TO BE SUBJECT TO THE EXISTING
TRANSFER RESTRICTIONS.
The exchange notes will be issued in exchange for the outstanding notes
only after timely receipt by the Exchange Agent of the outstanding notes, a
properly completed and executed Letter of Transmittal and all other required
documentation. If you want to tender your outstanding notes in exchange for
exchange notes, you should allow sufficient time to ensure timely delivery.
Neither the Exchange Agent nor Venture is under any duty to give you
notification of defects or irregularities regarding tenders of outstanding notes
for exchange. Outstanding notes that are not tendered or are tendered but not
accepted will, following the exchange offer, continue to be subject to the
existing transfer restrictions. In addition, if you tender the outstanding notes
in the exchange offer to participate in a distribution of the exchange notes,
you will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
For additional information, please refer to the sections entitled "The Exchange
Offer" and "Plan of Distribution" later in this prospectus.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
Simultaneously with the sale of the outstanding notes, we entered into a
Registration Rights Agreement with the initial purchasers of the outstanding
notes -- Banc One Capital Markets, Inc. and Goldman, Sachs & Co. Under the
Registration Rights Agreement, we agreed to file a registration statement
regarding the exchange of the outstanding notes for notes with terms
substantially identical in all material respects. We also agreed to use our best
efforts to cause that registration statement to become effective with the
Securities and Exchange Commission. A copy of the Registration Rights Agreement
has been filed as an exhibit to the Registration Statement of which this
prospectus is a part.
We are conducting the exchange offer to satisfy our contractual obligations
under the Registration Rights Agreement. The form and terms of the exchange
notes are the same as the form and terms of the outstanding notes, except that
the exchange notes will be registered under the Securities Act, and holders of
the exchange notes will not be entitled to liquidated damages. The outstanding
notes provide that, if a registration statement relating to the exchange offer
has not been filed by August 25, 1999 and declared effective by October 24,
1999, we will pay liquidated damages on the outstanding notes. Upon the
completion of the exchange offer, holders of outstanding notes will not be
entitled to any liquidated damages on the outstanding notes or any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors -- Consequences of a Failure to
Exchange Outstanding Notes" and "Description of Exchange Notes" for further
information regarding the rights of Outstanding Note holders after the exchange
offer. The exchange offer is not extended to Outstanding Note holders in any
jurisdiction where the exchange offer does not comply with the securities or
blue sky laws of that jurisdiction.
In the event that applicable interpretations of the staff of the SEC do not
permit Venture to effect the exchange offer, or if for any other reason the
exchange offer is not consummated within 180 days of May 27, 1999, we will use
our best efforts to cause to become effective a shelf registration statement for
the resale of the outstanding notes. We also agreed to use our best efforts to
keep the shelf registration statement effective until the earlier of May 27,
2001 and such time as all the outstanding notes have been sold pursuant to this
registration or are otherwise not restricted securities.
The term "holder" as used in this section of the prospectus entitled "The
Exchange Offer" means (1) any person in whose name the outstanding notes are
registered on the books of Venture, or (2) any other person who has obtained a
properly completed bond power from the registered holder, or (3) any person
whose outstanding notes are held of record by DTC and who wants to deliver these
outstanding notes by book-entry transfer at DTC.
TERMS OF THE EXCHANGE OFFER
We are offering to exchange up to $125.0 million total principal amount of
senior exchange notes for a like total principal amount of Outstanding Senior
Notes. The Outstanding Senior Notes must be tendered properly on or before the
Expiration Date and not withdrawn. In exchange for Outstanding Senior Notes
properly tendered and accepted, Venture will issue a like total principal amount
of up to $125.0 million in senior exchange notes. In addition, Venture is
offering to exchange up to $125.0 million total principal amount of senior
subordinated exchange notes for a like total principal amount of Outstanding
Senior Subordinated Notes. The outstanding senior subordinated notes also must
be tendered properly on or before the Expiration Date and not withdrawn. In
exchange for
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outstanding senior subordinated notes properly tendered and accepted, Venture
will issue a like total principal amount of up to $125.0 million in senior
subordinated exchange notes.
The exchange offer is not conditioned upon holders tendering a minimum
principal amount of outstanding notes. As of the date of this prospectus, $125.0
million aggregate principal amount of Senior Notes are outstanding and $125.0
million aggregate principal amount of Senior Subordinated Notes are outstanding.
Holders of the outstanding notes do not have any appraisal or dissenters'
rights in the exchange offer. If holders do not tender outstanding notes or
tender outstanding notes that Venture does not accept, their outstanding notes
will remain outstanding. Any outstanding notes will be entitled to the benefits
of the Senior Note Indenture and Senior Subordinated Note Indenture, as
applicable, but will not be entitled to any further registration rights under
the Registration Rights Agreement, except under limited circumstances. See "Risk
Factors -- Consequences of a Failure to Exchange Outstanding Notes" for more
information regarding notes outstanding after the exchange offer.
After the Expiration Date, we will return to the holder any tendered
outstanding notes that we did not accept for exchange.
Holders exchanging outstanding notes will not have to pay brokerage
commissions or fees or transfer taxes if they follow the instructions in the
Letter of Transmittal. Venture will pay the charges and expenses, other than
certain taxes described below, in the exchange offer. See "-- Fees and Expenses"
for further information regarding fees and expenses.
WE DO NOT MAKE ANY RECOMMENDATION AS TO THE TENDER OF OUTSTANDING NOTES IN
THE EXCHANGE OFFER. IN ADDITION, WE HAVE NOT AUTHORIZED ANYONE TO MAKE ANY
RECOMMENDATION. YOU MUST DECIDE WHETHER TO TENDER IN THE EXCHANGE OFFER AND, IF
SO, THE AGGREGATE AMOUNT OF OUTSTANDING NOTES TO TENDER.
The Expiration Date is 5:00 p.m., New York City time, on November 23, 1999
unless we extend the exchange offer, in our sole discretion.
We have the right, in our sole discretion, in accordance with applicable
law, at any time:
- to delay the acceptance of the outstanding notes;
- to terminate the exchange offer if Venture determines that any of the
conditions to the exchange offer have not occurred or have not been
satisfied;
- to extend the Expiration Date of the exchange offer and keep all
outstanding notes tendered other than those notes properly withdrawn; and
- to waive any condition or amend the terms of the exchange offer.
If we materially change the exchange offer, we will promptly disclose this
amendment in a manner reasonably calculated to inform holders of the outstanding
notes of this amendment. We also will extend the exchange offer to the extent
required by Rule 14e-1 under the Securities Exchange Act of 1934, as amended.
If we exercise any of the rights listed above, we will promptly give oral
notice, promptly confirmed in writing, to the Exchange Agent and will issue an
appropriate public announcement. In the case of an extension, we will notify the
Exchange Agent and make an appropriate announcement no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
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ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE NOTES
We will issue exchange notes to the Exchange Agent for outstanding notes
tendered and accepted and not withdrawn promptly after the Expiration Date. The
Exchange Agent might not deliver the exchange notes to all tendering holders at
the same time. The timing of delivery depends upon when the Exchange Agent
receives and processes the required documents.
We will be deemed to have exchanged outstanding notes validly tendered and
not withdrawn when we give oral or written notice to the Exchange Agent of their
acceptance. The Exchange Agent is our agent for receiving tenders of outstanding
notes, Letters of Transmittal and related documents. The Exchange Agent is also
an agent for tendering holders for receiving outstanding notes, Letters of
Transmittal and related documents and transmitting exchange notes to validly
tendering holders. If, for any reason, we: (1) delay the acceptance or exchange
of any outstanding notes; (2) extend the exchange offer; or (3) are unable to
accept or exchange notes, then the Exchange Agent may, on behalf of Venture and
subject to Rule 14e-1(c) under the Exchange Act, retain tendered notes. Notes
retained by the Exchange Agent may not be withdrawn, except according to the
withdrawal procedures outlined in the section entitled "-- Withdrawal Rights"
below.
In tendering outstanding notes, you must warrant in the Letter of
Transmittal or in an Agent's Message (described below) that (1) you have full
power and authority to tender, exchange, sell, assign and transfer outstanding
notes, (2) Venture will acquire good, marketable and unencumbered title to the
tendered outstanding notes, free and clear of all liens, restrictions, charges
and other encumbrances, and (3) the outstanding notes tendered for exchange are
not subject to any adverse claims or proxies. You also must warrant and agree
that you will, upon request, execute and deliver any additional documents
requested by Venture or the Exchange Agent to complete the exchange, sale,
assignment, and transfer of the outstanding notes.
VALID TENDER
You may tender your outstanding notes by book-entry transfer or by other
means. For book-entry transfer, you must deliver to the Exchange Agent either
(1) a completed and signed Letter of Transmittal or (2) an Agent's Message,
meaning a message transmitted to the Exchange Agent by DTC stating that you
agree to be bound by the terms of the Letter of Transmittal. You must deliver
your Letter of Transmittal or the Agent's Message by mail, facsimile, hand
delivery or overnight courier to the Exchange Agent on or before the Expiration
Date. In addition, to complete a book-entry transfer, you must also either (1)
have DTC transfer the outstanding notes into the Exchange Agent's account at DTC
using the automated tender offer program procedures for transfer, and obtain a
confirmation of such a transfer, or (2) follow the guaranteed delivery
procedures described below under "-- Guaranteed Delivery Procedures."
If you tender fewer than all of your outstanding notes, you should fill in
the amount of notes tendered in the appropriate box on the Letter of
Transmittal. If you do not indicate the amount tendered in the appropriate box,
Venture will assume you are tendering all outstanding notes that you hold.
For tendering your outstanding notes other than by book-entry transfer, you
must deliver a completed and signed Letter of Transmittal to the Exchange Agent.
Again, you must deliver the Letter of Transmittal by mail, facsimile, hand
delivery or overnight carrier to the Exchange Agent on or before the Expiration
Date. In addition, to complete a valid tender you must either (1) deliver your
outstanding notes to the Exchange Agent on or before the Expiration Date, or (2)
follow the guaranteed delivery procedures set forth below under "-- Guaranteed
Delivery Procedures."
Delivery of required documents by whatever method you choose is at your
sole risk. Delivery is complete when the Exchange Agent actually receives the
items to be delivered. Delivery of
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documents to DTC in accordance with DTC's procedures does not constitute
delivery to the Exchange Agent. If delivery is by mail, registered mail, return
receipt requested, properly insured, or an overnight delivery service is
recommended. In all cases, you should allow sufficient time to ensure timely
delivery.
SIGNATURE GUARANTEES
You do not need to endorse certificates for the outstanding notes or
provide signature guarantees on the Letter of Transmittal, unless (a) someone
other than the registered holder tenders the certificate or (b) you complete the
box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
in the Letter of Transmittal. In the case of (a) or (b) above, you must sign
your Outstanding Note or provide a properly executed bond power, with the
signature on the bond power and on the Letter of Transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution." Eligible Guarantor Institutions include: (1) a
bank; (2) a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer; (3) a credit union; (4) a national securities
exchange, registered securities association or clearing agency; or (5) a savings
association that is a participant in a securities transfer association.
GUARANTEED DELIVERY
If a holder wants to tender outstanding notes in the exchange offer and (1)
the certificates for the outstanding notes are not immediately available or all
required documents are unlikely to reach the Exchange Agent on or before the
Expiration Date, or (2) a book-entry transfer cannot be completed in time, the
outstanding notes may be tendered if the holder complies with the following
guaranteed delivery procedures:
(a) the tender is made by or through an Eligible Institution;
(b) you deliver a properly completed and signed Notice of Guaranteed
Delivery, like the form provided with the Letter of Transmittal, to the
Exchange Agent on or before the Expiration Date; and
(c) you deliver the certificates or a confirmation of book-entry
transfer and a properly completed and signed Letter of Transmittal to the
Exchange Agent within three New York Stock Exchange trading days after the
Notice of Guaranteed Delivery is executed.
You may deliver the Notice of Guaranteed Delivery by hand, facsimile or
mail to the Exchange Agent and must include a guarantee by an Eligible
Institution in the form described in the notice.
Our acceptance of properly tendered outstanding notes is a binding
agreement between the tendering holder and us upon the terms and subject to the
conditions of the exchange offer.
DETERMINATION OF VALIDITY
We will resolve all questions regarding the form of documents, validity,
eligibility (including time of receipt) and acceptance for exchange of any
tendered outstanding notes. Our resolution of these questions as well as our
interpretation of the terms and conditions of the exchange offer (including the
Letter of Transmittal) is final and binding on all parties. A tender of
outstanding notes is invalid until all irregularities have been cured or waived.
Neither Venture, any affiliates or assigns of Venture, the Exchange Agent nor
any other person is under any obligation to give notice of any irregularities in
tenders nor will they be liable for failing to give any such notice. We reserve
the absolute right, in our sole and absolute discretion, to reject any tenders
determined to be in improper
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form or unlawful. We also reserve the absolute right to waive any of the
conditions of the exchange offer or any condition or irregularity in the tender
of outstanding notes by any holder. We need not waive similar conditions or
irregularities in the case of other holders.
If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
that person must indicate that capacity when signing. In addition, unless waived
by us, the person must submit proper evidence satisfactory to us, in our sole
discretion, of his or her authority to so act.
A beneficial owner of outstanding notes that are held by or registered in
the name of a broker, dealer, commercial bank, trust company or other nominee or
custodian should contact that entity promptly if the holder wants to participate
in the exchange offer.
RESALES OF EXCHANGE NOTES
We are exchanging the outstanding notes for exchange notes based upon the
Staff of the Securities and Exchange Commission's position, set forth in
interpretive letters to third parties in other similar transactions. We will not
seek our own interpretive letter. As a result, we cannot assure you that the
Staff will take the same position on this exchange offer as it did in
interpretive letters to other parties. Based on the Staff's letters to other
parties, we believe that holders of exchange notes, other than broker-dealers,
can offer the notes for resale, resell and otherwise transfer the exchange notes
without delivering a prospectus to prospective purchasers. However, prospective
purchasers must acquire the exchange notes in the ordinary course of business
and have no intention of engaging in a distribution of the notes, as a
"distribution" is defined by the Securities Act.
Any holder of outstanding notes who is an "affiliate" of Venture or who
intends to distribute exchange notes, or any broker-dealer who purchased
outstanding notes from Venture to resell pursuant to any available exemption
under the Securities Act:
- cannot rely on the Staff's interpretations in the above mentioned
interpretive letters;
- cannot tender outstanding notes in the exchange offer; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act to transfer the outstanding notes, unless the sale is
exempt.
In addition, if any broker-dealer acquired outstanding notes for its own
account as a result of market-making or other trading activities and exchanges
the outstanding notes for exchange notes, the broker-dealer must deliver a
prospectus with any resales of the exchange notes.
If you want to exchange your outstanding notes for exchange notes, you will
be required to affirm that:
- you are not an "affiliate" of Venture;
- you are acquiring the exchange notes in the ordinary course of your
business;
- you have no arrangement or understanding with any person to participate
in a distribution of the exchange notes, within the meaning of the
Securities Act; and
- you are not a broker-dealer, not engaged in, and do not intend to engage
in, a distribution of the exchange notes, within the meaning of the
Securities Act.
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In addition, we may require you to provide information regarding the number
of "beneficial owners," within the meaning of Rule 13d-3 under the Exchange Act,
of the outstanding notes. Each broker-dealer that receives exchange notes for
its own account must acknowledge that it acquired the outstanding notes for its
own account as the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of exchange
notes. By making this acknowledgment and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" under the
Securities Act. Based on the Staff's position in certain interpretive letters,
we believe that broker-dealers who acquired outstanding notes for their own
accounts as a result of market-making activities or other trading activities may
fulfill their prospectus delivery requirements for the exchange notes with a
prospectus meeting the requirements of the Securities Act. Accordingly, a
broker-dealer may use this prospectus to satisfy these requirements. We have
agreed that a broker-dealer may use this prospectus for a period ending 270 days
after the Expiration Date or, if earlier, when a broker-dealer has disposed of
all exchange notes. See "Plan of Distribution" for further information. A
broker-dealer intending to use this prospectus in the resale of exchange notes
must notify us, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. This notice may be given in the Letter of Transmittal or may be
delivered to the Exchange Agent. Any Participating Broker-Dealer who is an
"affiliate" of Venture may not rely on the Staff's interpretive letters and must
comply with the registration and prospectus delivery requirements of the
Securities Act when reselling exchange notes.
Each Participating Broker-Dealer exchanging outstanding notes for exchange
notes agrees that, upon receipt of notice from Venture:
(a) of any statement contained or incorporated by reference in this
prospectus that makes the prospectus untrue in any material respect or that
this prospectus omits to state a material fact necessary to make the
statements contained or incorporated by reference herein, in light of the
circumstances under which they were made, not misleading or
(b) of the occurrence of certain other events specified in the
Registration Rights Agreement, the Participating Broker-Dealer will suspend
the sale of exchange notes. A Participating Broker-Dealer will not resell
the exchange notes until (1) Venture has amended or supplemented this
prospectus to correct the misstatement or omission and Venture furnishes
copies to the Participating Broker-Dealer or (2) Venture gives notice that
the sale of the exchange notes may be resumed.
If Venture gave notice suspending the sale of exchange notes, it shall
extend the 270-day period by the number of days between the date Venture gives
notice of suspension and the date Participating Broker-Dealers receive copies of
the amended or supplemented prospectus or the date Venture gives notice resuming
the sale of exchange notes.
WITHDRAWAL RIGHTS
You can withdraw tenders of outstanding notes at any time prior to 5:00
p.m., New York City time on or before the Expiration Date.
For a withdrawal to be effective, you must deliver a written or facsimile
transmission of a Notice of Withdrawal to the Exchange Agent on or before the
Expiration Date. The Notice of Withdrawal must specify the name of the person
tendering the outstanding notes to be withdrawn, the total principal amount of
outstanding notes withdrawn, and the name of the registered holder of the
outstanding notes if different from the person tendering the outstanding notes.
If you delivered outstanding notes to the Exchange Agent, you must submit the
serial numbers of the outstanding notes to be withdrawn and the signature on the
Notice of Withdrawal must be guaranteed by an Eligible Institution, except in
the case of outstanding notes tendered for the account of an Eligible
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Institution. If you tendered outstanding notes as a book-entry transfer, the
Notice of Withdrawal must specify the name and number of the account at DTC to
be credited with the withdrawal of outstanding notes and you must deliver the
Notice of Withdrawal to the Exchange Agent by written or facsimile transmission.
Outstanding notes properly withdrawn may again be tendered at any time on or
before the Expiration Date.
We will determine all questions regarding the validity, form and
eligibility of withdrawal notices. Our determination will be final and binding
on all parties. Neither Venture, any affiliate or assign of Venture, the
Exchange Agent nor any other person is under any obligation to give notice of
any irregularities in any Notice of Withdrawal, nor will they be liable for
failing to give any such notice. Withdrawn outstanding notes will be returned to
the holder after withdrawal.
INTEREST ON EXCHANGE NOTES
The senior exchange notes will bear interest at a rate of 11% per annum and
the senior subordinated exchange notes will bear interest at a rate of 12% per
annum, both payable semi-annually, on June 1 and December 1 of each year,
commencing December 1, 1999. Holders of exchange notes will receive interest on
December 1, 1999 from the date of initial issuance of the exchange notes, plus
an amount equal to the accrued interest on the outstanding notes. Interest on
the outstanding notes accepted for exchange will cease to accrue upon issuance
of the exchange notes.
CONDITIONS TO THE EXCHANGE OFFER
We need not exchange any outstanding notes, may terminate the exchange
offer or may waive any conditions to the exchange offer or amend the exchange
offer, if any of the following conditions have occurred:
(a) the Staff no longer allows the exchange notes to be offered for resale,
resold and otherwise transferred by certain holders without compliance
with the registration and prospectus delivery provisions of the
Securities Act; or
(b) a governmental body passes any law, statute, rule or regulation which,
in Venture's opinion, prohibits or prevents the exchange offer; or
(c) the Securities and Exchange Commission or any state securities
authority issues a stop order suspending the effectiveness of the
registration statement or initiates or threatens to initiate a
proceeding to suspend the effectiveness of the registration statement;
or
(d) We are unable to obtain any governmental approval that we believe is
necessary to complete the exchange offer.
If we reasonably believe that any of the above conditions has occurred, we
may (1) terminate the exchange offer, whether or not any outstanding notes have
been accepted for exchange, (2) waive any condition to the exchange offer or (3)
amend the terms of the exchange offer in any respect. If our waiver or amendment
materially changes the exchange offer, we will promptly disclose the waiver or
amendment in a manner reasonably calculated to inform the registered holders of
the outstanding notes. We will also extend the exchange offer to the extent
required by Rule 14e-1 of the Exchange Act.
EXCHANGE AGENT
We have appointed The Huntington National Bank as Exchange Agent for the
exchange offer. You should direct questions and requests for assistance,
requests for additional copies of this
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prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed
Delivery to the Exchange Agent addressed as follows:
By Registered or Certified Mail: Facsimile Transmissions:
The Huntington National Bank The Huntington National Bank
41 South High Street -- HC1112 Attention: Corporate Trust Department
Columbus, Ohio 43215 (614) 480-5223
Attention: Corporate Trust Department
By Hand or Overnight Delivery: New York Drop Agent:
The Huntington National Bank The Bank of New York
41 South High Street -- HC1112 101 Barclay Street
Columbus, Ohio 43215 New York, New York 10286
Attention: Corporate Trust Department
If you deliver Letters of Transmittal and any other required documents to
an address or facsimile number other than those listed above, your tender is
invalid.
FEES AND EXPENSES
We will pay all fees and expenses of soliciting tenders for the outstanding
notes. We will also pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses.
We will pay the transfer taxes for the exchange of the outstanding notes in
the exchange offer. If, however, exchange notes are delivered to or issued in
the name of a person other than the registered holder, or if a transfer tax is
imposed for any reason other than for the exchange of outstanding notes in the
exchange offer, then the tendering holder will pay the transfer taxes. If a
tendering holder does not submit satisfactory evidence of payment of taxes or
exemption from taxes with the Letter of Transmittal, the taxes will be billed
directly to the tendering holder.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payment to brokers, dealers or other nominees
soliciting acceptances in the exchange offer.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the
outstanding notes. Accordingly, we will not recognize any gain or loss for
accounting purposes. We intend to amortize the expenses of the exchange offer
and issuance of the outstanding notes over the respective terms of the senior
exchange notes and senior subordinated exchange notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
If you do not exchange your outstanding notes for exchange notes pursuant
to the exchange offer, you will continue to be subject to the restrictions on
transfer of these outstanding notes, as set forth in the legend contained in
these notes as a consequence of the issuance of the outstanding notes pursuant
to the exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, you may not offer or sell the outstanding notes unless they are
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. We do not currently anticipate registering the outstanding notes under the
Securities Act. Based
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on interpretations by the staff of the Commission, you may offer for resale,
sell or otherwise transfer the exchange notes issued pursuant to the exchange
offer (unless you are an "affiliate" of Venture within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that you acquired
these exchange notes in the ordinary course of your business and you have no
arrangement or understanding regarding the distribution of the exchange notes to
be acquired pursuant to the exchange offer.
If you tender in the exchange offer for the purpose of participating in a
distribution of the exchange notes, you:
- may not rely on the applicable interpretations of the staff of the
Commission and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, you may not offer or sell the exchange notes unless the notes have
been registered or the laws have been complied with. We have agreed, pursuant to
the Registration Rights Agreement and subject to certain specified limitations
in such agreement, to register or qualify the exchange notes for offer or sale
under the securities or blue sky laws of these jurisdictions as are necessary to
consummate the exchange offer.
THE PEGUFORM ACQUISITION
Pursuant to the terms of the definitive agreements relating to the Peguform
acquisition, Venture acquired all of the outstanding capital stock of Peguform
GmbH from its parent, Klockner Mercator Maschinenbau GmbH, a wholly-owned
subsidiary of Klockner-Werke AG, and another, nominal shareholder on May 28,
1999. The aggregate purchase price for the Peguform acquisition was DEM 850.0
million, approximately $463.0 million as of May 28, 1999, subject to
adjustments. The purchase price was paid in cash. See "Business -- The Peguform
Acquisition."
USE OF PROCEEDS
The exchange offer will not generate cash proceeds for Venture. We used the
proceeds from the offering of the outstanding notes together with $418.4 million
drawn under the new credit facility, as follows: (1) approximately $462.8
million was used to fund the cash consideration paid in the Peguform
acquisition; (2) approximately $82.8 million was used to redeem our 9 3/4%
senior subordinated notes due 2004, issued in 1994, including prepayment
premium; (3) approximately $93.5 million was used to refinance Venture's
revolving senior credit facility, with interest at 8.75%; and (4) approximately
$29.3 million was used to pay certain fees and expenses related to the Peguform
acquisition and the offering of the outstanding notes. For a description of the
Peguform acquisition, see "Business -- The Peguform Acquisition."
On May 27, 1999, Venture entered into the new credit facility. The new
credit facility, as amended, provides for credit facilities in the principal
amount of $575.0 million, including a $175.0 million Revolving Credit Facility
and Term Loans aggregating $400.0 million.
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The following table summarizes the sources and uses of funds from the new
credit facility and the sale of the outstanding notes.
SOURCES OF FUNDS:
New Credit Facility(1):
Revolving Credit Facility................................. $ 43,400
Term Loans................................................ 375,000
Senior Notes................................................ 125,000
Senior Subordinated Notes................................... 125,000
--------
Total Sources............................................. $668,400
========
USES OF FUNDS:
Peguform Acquisition........................................ $462,800
Venture's prior senior credit facility...................... 93,500
1994 senior notes(2)........................................ 82,800
Fees and Expenses........................................... 29,300
--------
Total Uses................................................ $668,400
========
- -------------------------
(1) As of June 4, 1999 we entered into an amendment to the new credit facility,
which increased the Term Loans from $375.0 million to $400.0 million and
reduced the Revolving Credit Facility from $200.0 million to $175.0 million.
See "Description of Certain Indebtedness -- New Credit Facility."
(2) Includes the redemption of the 1994 senior notes in the aggregate principal
amount of $78.9 million, and a prepayment premium of approximately $3.9
million.
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CAPITALIZATION
The following table sets forth cash and cash equivalents and the actual
capitalization of Venture at June 30, 1999. This information should be read in
conjunction with the consolidated financial statements and the notes thereto of
Venture and Peguform and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this prospectus.
JUNE 30, 1999
--------------
(IN THOUSANDS)
Cash and cash equivalents................................... $ 40,295
==========
Long-term debt (including current portion)
New Credit Facility:
Revolving Credit Facility.............................. 18,500
Term Loans............................................. 400,000
Capital leases............................................ 33,695
Installment Notes payable................................. 1,544
Bank debt(1).............................................. 52,582
1997 Senior Notes......................................... 205,000
11% Senior Notes due 2007................................. 125,000
12% Senior Subordinated Notes due 2009.................... 125,000
----------
Total long-term debt................................... $ 961,321
Trust principal............................................. 68,929
----------
Total capitalization................................... $1,030,250
==========
- -------------------------
(1) Represents acquired indebtedness included in the $462.8 million purchase
price.
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UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The Unaudited Consolidated Pro Forma Statement of Operations for the year
ended December 31, 1998 gives effect to:
(1) the Peguform acquisition;
(2) the refinancing of Venture's prior senior credit facility and
redemption of the 1994 senior notes; and
(3) the offering of the outstanding notes and borrowings under the new
credit facility, and the application of the net proceeds therefrom to
Venture as described in "Use of Proceeds," as if these transactions had
occurred on January 1, 1998.
The Unaudited Consolidated Pro Forma Statement of Operations for the six
months ended June 30, 1999 (six months ended March 31, 1999 for Peguform) gives
effect to:
(1) the Peguform acquisition;
(2) the refinancing of Venture's prior senior credit facility and
redemption of the 1994 senior notes; and
(3) the offering of the outstanding notes and borrowings under the new
credit facility, and the application of the net proceeds therefrom to
Venture as described in "Use of Proceeds," as if these transactions had
occurred on January 1, 1998.
The Unaudited Pro Forma Consolidated Statement of Operations does not
include pro forma adjustments for certain non-recurring costs and charges,
consisting of (1) the prepayment charge of $3.9 million on the redemption of the
1994 senior notes and (2) the $1.8 million write-off of deferred financing
costs.
The Unaudited Pro Forma Financial Statements do not reflect any of the
anticipated cost savings which Venture expects to achieve through integration of
the operations of Peguform and Venture. See "Business -- The Peguform
Acquisition" and "-- Business Strategy."
Solely for the convenience of the readers, the historical financial
information for Peguform has been translated to United States dollars at the
rate of DEM 1.6767 per United States dollar, the Noon Buying Rate as of December
31, 1998. The translation should not be construed as a representation that the
amounts shown could be converted into United States dollars at this rate or any
other rate.
The unaudited pro forma financial data presented in this prospectus are
based on the assumptions and adjustments described in the accompanying notes.
The Unaudited Consolidated Pro Forma Statement of Operations does not purport to
represent what Venture's results of operations actually would have been if the
events described above had occurred as of the dates indicated or what these
results will be for any future periods. The Unaudited Pro Forma Financial
Statements are based upon assumptions and adjustments that we believe are
reasonable. The Unaudited Pro Forma Financial Statements and the accompanying
notes should be read in conjunction with the historical financial statements of
Venture and of Peguform, including the notes thereto, included elsewhere in this
prospectus.
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VENTURE HOLDINGS COMPANY LLC
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
HISTORICAL
---------------------- PRO FORMA
VENTURE PEGUFORM(A) ADJUSTMENTS PRO FORMA
-------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS)
Net sales....................... $645,196 $1,288,256 $ $1,933,452
Cost of products sold........... 532,809 1,145,740 -- 1,678,549
-------- ---------- -------- ----------
Gross profit.................... 112,387 142,516 254,903
Selling, general and
administrative expense........ 59,689 125,038 278(C) 194,985
6,685(D)
3,295(E)
Payments to beneficiary in lieu
of trust distributions........ 535 -- -- 535
-------- ---------- -------- ----------
Income (loss) from operations... 52,163 17,478 (10,258) 59,383
Interest expense (net).......... 36,641 14,022(B) 18,699(F) 69,362(B)
-------- ---------- -------- ----------
Net income (loss) before
taxes......................... 15,522 3,456 (28,957) (9,979)
Tax provision (benefit)......... 1,954 3,556 (15,926)(G) (10,416)
Minority interest............... -- (574) -- (574)
-------- ---------- -------- ----------
Net income (loss)............... $ 13,568 $ 474 $(13,031) $ 1,011
======== ========== ======== ==========
See notes to the Unaudited Consolidated Pro Forma Statement of Operations
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VENTURE HOLDINGS COMPANY LLC
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
(A) The Peguform statement of operations represents the 12-months ended December
31, 1998. Amounts were derived from Peguform's audited financial statements
for the year ended September 30, 1998, and from unaudited financial
statements for the 3 months ended December 31, 1998, less the amounts from
unaudited financial statements for the 3 months ended December 31, 1997.
For purposes of the Unaudited Consolidated Pro Forma Statement of
Operations, certain items included in Peguform's historical financial data
have been reclassified to conform to Venture's historical statement of
operations presentations as follows:
(1) "Net sales" includes the sum of "net sales" and "other revenues" as
classified in and calculated from Peguform's Consolidated Statements of
Income; and
(2) "Selling, general and administrative expense" includes the sum of
"Selling, general and administrative expenses" and "Other expenses" as
classified in and calculated from Peguform's Consolidated Statements of
Income.
(B) The Peguform historical and pro forma amounts are net of interest income of
$3,364 at Peguform for the 12 months ended December 31, 1998.
(C) The pro forma adjustment represents the amortization of goodwill resulting
from the Peguform acquisition over a 30 year period. The excess of the
purchase price over the fair market value of the net assets acquired
(goodwill) was approximately $8,000 and is being amortized on a
straight-line basis. Adjustments to the purchase price and related
allocation may occur as a result of obtaining more information regarding
property valuations, liabilities assumed, the outcome of final negotiations
with the former owner and revisions of preliminary estimates of fair values
made at the date of purchase. We can provide no assurances as to whether any
revisions to the original purchase price allocation will be significant.
These uncertainties could result in an adjustment to goodwill of up to
$60,000.
(D) The pro forma adjustment represents the incremental depreciation expense of
the fixed assets acquired resulting from the $140,917 mark-up to estimated
fair market value of the assets acquired. The estimated useful lives of the
fixed assets acquired for purposes of calculating depreciation expense are
as follows:
Buildings and improvements.................................. 10-40 years
Machinery and equipment..................................... 3-20 years
We are in the process of obtaining appraisals for purposes of computing the
final amount of fixed asset values.
(E) The pro forma adjustment represents the amortization of financing costs
resulting from the financing of the Peguform acquisition, including the new
credit facility and the outstanding notes, over the respective maturities of
the additional debt. The maturities of the new credit facility range from 18
months to 6 years, and maturities on the 11% Senior Notes due 2007 and 12%
Senior Subordinated Notes due 2009 are assumed to be 8 and 10 years,
respectively.
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(F) The pro forma adjustment represents the incremental interest expense
necessary to reflect the total interest expense on the outstanding debt of
the combined company for the period.
Elimination of historical interest expense.................. $(31,022)
Interest expense for the new credit facility(1)(4).......... 32,215
Interest expenses for the notes(2)(4)....................... 22,500
Reduction in interest expense for the 1997 senior
notes(3)(4)............................................... (4,994)
--------
Total incremental interest(5)............................. $ 18,699
========
(1) Assumes that loans under the new credit facility (which bear interest
at floating rates) bear interest at a weighted average interest rate of
8.05% per annum, including the impact of existing interest rate swap
agreements, and that the new credit facility maintains an average
outstanding balance of $400,000.
(2) We entered into interest rate swaps with 5 year terms which effectively
convert our United States dollar fixed rate coupon on the outstanding
notes to a euro fixed rate coupon. We entered into this arrangement to
take advantage of lower interest rates in Europe and to hedge our
exchange rate risk. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." Interest expense on the outstanding notes reflects these
interest rate swaps, with a weighted average interest rate of 11.50% on
the 11% Senior Notes due 2007 and 12% Senior Subordinated Notes due
2009 converted into a weighted average euro interest rate of 9.00%.
These instruments may not qualify for hedge accounting, which may
result in non-cash charges to earnings related to the mark to market on
the swaps.
(3) We entered into interest rate swaps with 3-year terms which effectively
convert our United States dollar fixed rate coupon on the 1997 senior
notes to a euro fixed rate coupon. We entered into this arrangement to
take advantage of lower interest rates in Europe and to hedge our
exchange rate risk. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." Interest expense on the 1997 senior notes reflects these
interest rate swaps with an interest rate of 9.50% converted into a
euro interest rate of 7.09%. These instruments may not qualify for
hedge accounting, which may result in non-cash charges to earnings
related to the mark to market on the swaps.
(4) Under the terms of the new credit agreement, the administrative agent
had to be satisfied with the form and structure of all aspects of the
Peguform acquisition, including the interest rate swaps which were part
of the overall financing structure. The new credit facility expressly
required that Venture enter into interest rate swaps with respect to
borrowings under the new credit facility and the 1997 senior notes, and
effectively required the interest rate swaps on the new notes as part
of the acquisition financing.
(5) Our actual interest expense could differ from the above amounts based
on increases in interest rates on floating rate debt. An increase of
0.25% in interest rates on anticipated borrowings under the new credit
facility would have the effect of increasing interest expense by $0.9
million.
(G) The pro forma adjustment represents the tax impact at the applicable
statutory rates for Peguform of (55%).
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VENTURE HOLDINGS COMPANY LLC
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(SIX MONTHS ENDED MARCH 31, 1999 FOR PEGUFORM)
HISTORICAL
----------------------- PRO FORMA
VENTURE PEGUFORM(A) ADJUSTMENTS PRO FORMA
-------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS)
Net sales.............................. $439,795 $707,068 $(111,378)(C) $1,035,485
Cost of products sold.................. 379,756 629,943 (102,895)(C) 906,804
-------- -------- --------- ----------
Gross profit........................... 60,039 77,125 (8,483) 128,681
Selling, general and administrative
expense.............................. 34,224 67,640 (7,376)(C) 100,126
139(D)
3,342(E)
2,157(F)
Payments to beneficiaries in lieu of
trust distributions.................. 77 -- -- 77
-------- -------- --------- ----------
Income (loss) from operations.......... 25,738 9,485 (6,745) 28,478
Interest expense (net)................. 25,028 7,145(B) (822)(C) 39,960
8,609(G)
Other income........................... (19,900) -- (1,349)(C) (21,249)
-------- -------- --------- ----------
Net income (loss) before taxes......... 20,610 2,340 (13,183) 9,767
Tax provision (benefit)................ 405 799 (261)(C) (6,893)
(7,836)(H)
Minority interest...................... 29 (135) (29)(C) (135)
-------- -------- --------- ----------
Net income (loss)...................... $ 20,176 $ 1,676 $ (5,057) $ 16,795
======== ======== ========= ==========
See notes to the Unaudited Consolidated Pro Forma Statement of Operations
42
48
VENTURE HOLDINGS COMPANY LLC
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(SIX MONTHS ENDED MARCH 31, 1999 FOR PEGUFORM)
(DOLLARS IN THOUSANDS)
(A) The Peguform statement of operations represents the 6-months ended March 31,
1999. Amounts were derived from Peguform's unaudited financial statements
for the 6-months ended March 31, 1999.
For purposes of the Unaudited Consolidated Pro Forma Statement of
Operations, certain items included in Peguform's historical financial data
have been reclassified to conform to Venture's historical statement of
operations presentations as follows:
(1) "Net sales" includes the sum of "net sales" and "other revenues" as
classified in and calculated from Peguform's Consolidated Statements of
Income; and
(2) "Selling, general and administrative expense" includes the sum of
"Selling, general and administrative expenses" and "Other expenses" as
classified in and calculated from Peguform's Consolidated Statements of
Income.
(B) The Peguform historical and pro forma amounts are net of interest income of
$1,180 at Peguform for the 6-months ended March 31, 1999.
(C) The pro forma adjustments represent the elimination of Peguform's results of
operations since May 28, 1999 which are consolidated with Venture's results
of operations for the six months ended June 30, 1999.
(D) The pro forma adjustment represents the amortization of goodwill resulting
from the Peguform acquisition over a 30 year period. The excess of the
purchase price over the fair market value of the net assets acquired
(goodwill) was approximately $8,000 and is being amortized on a
straight-line basis. Adjustments to the purchase price and related
allocation may occur as a result of obtaining more information regarding
property valuations, liabilities assumed, the outcome of final negotiations
with the former owner and revisions of preliminary estimates of fair values
made at the date of purchase. We can provide no assurances as to whether any
revisions to the original purchase price allocation will be significant.
These uncertainties could result in an adjustment to goodwill of up to
$60,000.
(E) The pro forma adjustment represents the incremental depreciation expense of
the fixed assets acquired resulting from the $140,917 mark-up to estimated
fair market value of the assets acquired. The estimated useful lives of the
fixed assets acquired for purposes of calculating depreciation expense are
as follows:
Buildings and improvements.................................. 10-40 years
Machinery and equipment..................................... 3-20 years
We are in the process of obtaining appraisals for purposes of computing the
final amount of fixed asset values.
(F) The pro forma adjustment represents the incremental amortization of
financing costs resulting from the financing of the Peguform acquisition,
including the new credit facility and the outstanding notes, over the
respective maturities of the additional debt. The maturities of the new
credit facility range from 18 months to 6 years, and maturities on the 11%
Senior Notes due
43
49
2007 and 12% Senior Subordinated Notes due 2009 are assumed to be 8 and 10
years, respectively.
(G) The pro forma adjustment represents the incremental interest expense
necessary to reflect the total interest expense on the outstanding debt of
the combined company for the period.
Elimination of historical interest expense.................. $(18,117)
Interest expense for the new credit facility(1)(4).......... 17,913
Interest expenses for the notes(2)(4)....................... 11,250
Reduction in interest expense for the 1997
Senior Notes(3)(4)........................................ (2,437)
--------
Total incremental interest(5)..................... $ 8,609
========
(1) Assumes that loans under the new credit facility (which bear interest
at floating rates) bear interest at a weighted average interest rate of
7.88% per annum, including the impact of existing interest rate swap
agreements, and that the new credit facility maintains an average
outstanding balance of $443,400.
(2) We entered into interest rate swaps with 5 year terms which effectively
convert our United States dollar fixed rate coupon on the notes to a
euro fixed rate coupon. We entered into this arrangement to take
advantage of lower interest rates in Europe and to hedge our exchange
rate risk. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital
Resources." Interest expense on the notes reflects these interest rate
swaps, with a weighted average interest rate of 11.50% on the 11%
Senior Notes due 2007 and 12% Senior Subordinated Notes due 2009
converted into a weighted average euro interest rate of 9.00%. These
instruments may not qualify for hedge accounting, which may result in
non-cash charges to earnings related to the mark to market on the
swaps.
(3) We entered into interest rate swaps with 3 year terms which effectively
convert our United States dollar fixed rate coupon on the 1997 senior
notes to a euro fixed rate coupon. We entered into this arrangement to
take advantage of lower interest rates in Europe and to hedge our
exchange rate risk. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." Interest expense on the 1997 senior notes reflects these
interest rate swaps with an interest rate of 9.50% converted into a
euro interest rate of 7.09%. These instruments may not qualify for
hedge accounting, which may result in non-cash charges to earnings
related to the mark to market on the swaps.
(4) Under the terms of the new credit agreement, the administrative agent
had to be satisfied with the form and structure of all aspects of the
Peguform acquisition, including the interest rate swaps which were part
of the overall financing structure. The new credit facility expressly
required that Venture enter into interest rate swaps with respect to
borrowings under the new credit facility and the 1997 senior notes, and
effectively required the interest rate swaps on the new notes as part
of the acquisition financing.
(5) Our actual interest expense could differ from the above amounts based
on increases in interest rates on floating rate debt. An increase of
0.25% in interest rates on anticipated borrowings under the new credit
facility would have the effect of increasing interest expense by $0.5
million.
(H) The pro forma adjustment represents the tax impact at the applicable
statutory rates for Peguform of (55%).
44
50
SELECTED CONSOLIDATED FINANCIAL DATA OF VENTURE
The selected consolidated balance sheet data and income statement data
presented below as of December 31, 1998 and 1997 and for the years ended
December 31, 1998, 1997 and 1996, are derived from Venture's consolidated
financial statements, audited by Deloitte & Touche LLP, independent auditors,
and should be read in conjunction with Venture's audited consolidated financial
statements and notes thereto included elsewhere in this prospectus. The selected
consolidated income statement data and balance sheet data presented below as of
December 31, 1996, 1995 and 1994 and for the years ended December 31, 1995 and
1994, are derived from Venture's audited consolidated financial statements not
included in this prospectus. The selected consolidated income statement data and
balance sheet data as of June 30, 1998 and 1999 and for the six months then
ended, are derived from unaudited financial statements but, in the opinion of
management, reflect all adjustments, consisting of only normal recurring
adjustments, necessary for a fair statement of the results for these periods and
as of these dates. The results for the six months ended June 30, 1999 are not
necessarily indicative of the results to be expected for the full fiscal year.
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
--------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- -------- -------- -------- -------- -------- --------
(DOLLARS IN
THOUSANDS) (DOLLARS IN THOUSANDS)
INCOME STATEMENT DATA(1)(2):
Net sales.............................. $ 439,795 $344,591 $645,196 $624,113 $351,777 $251,142 $244,112
Cost of products sold.................. 379,756 284,685 532,809 521,361 302,940 211,262 199,717
---------- -------- -------- -------- -------- -------- --------
Gross profit......................... 60,039 59,906 112,387 102,752 48,837 39,880 44,395
Selling, general and administrative
expense.............................. 34,224 30,099 59,689 57,217 26,588 20,129 19,200
Payments to beneficiary in lieu of
taxes................................ 77 360 535 472 666 577 3,405
---------- -------- -------- -------- -------- -------- --------
Income from operations................. 25,738 29,447 52,163 45,063 21,583 19,174 21,790
Interest expense....................... 25,028 17,842 36,641 30,182 19,248 15,032 14,345
Other income........................... (19,900) -- -- -- -- -- --
Net income before extraordinary items
and taxes............................ 20,610 11,605 15,522 14,881 2,335 4,142 7,445
Tax provision(3)....................... 405 1,052 1,954 3,358 336 -- --
Minority interest...................... 29 -- -- -- -- -- --
---------- -------- -------- -------- -------- -------- --------
Net income before extraordinary item... 20,176 10,553 13,568 11,523 1,999 4,142 7,445
Net extraordinary loss on early
retirement of debt................... 5,569 -- -- -- 2,738 -- --
---------- -------- -------- -------- -------- -------- --------
Net income (loss)...................... $ 14,607 $ 10,553 $ 13,568 $ 11,523 $ (739) $ 4,142 $ 7,445
Ratio of earnings to fixed
charges(4)........................... 1.8x 1.4x 1.4x 1.5x 1.2x 1.3x 1.7x
OTHER FINANCIAL DATA:
EBITDA(5).............................. $ 53,501 $ 49,093 $ 94,216 $ 80,391 $ 46,123 $ 37,001 $ 41,021
Depreciation and amortization.......... 26,031 18,305 39,320 32,147 22,628 16,068 14,070
Capital expenditures................... 13,177 15,035 24,706 33,012 64,593 20,339 22,798
Net cash provided by (used in):
Operating activities................. 31,762 (3,825) (5,393) (13,058) 35,003 10,950 (3,066)
Investing activities................. (457,189) (15,035) (24,706) (37,093) (121,547) (20,339) (22,798)
Financing activities................. 467,588 29,986 28,752 36,192 82,976 (655) 53,643
45
51
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
--------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- -------- -------- -------- -------- -------- --------
(DOLLARS IN
THOUSANDS) (DOLLARS IN THOUSANDS)
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital........................ $ 342,321 $163,605 $168,655 $125,101 $ 83,404 $ 74,354 $ 85,258
Property, plant and equipment -- net... 601,162 205,507 200,544 205,765 203,975 116,299 111,472
Total assets........................... 1,379,115 538,821 541,315 524,122 498,067 231,602 234,435
Total debt............................. 961,321 366,174 364,939 336,188 299,996 152,463 153,118
Trust principal........................ 68,929 74,835 77,113 64,282 52,759 53,498 49,356
- -------------------------
(1) Venture operates as a holding company and has no independent operations of
its own. Separate financial statements of Venture's subsidiaries have not
been presented because we do not believe that this information would be
material.
(2) The results for 1996 include the operations of Bailey from August 26, 1996,
and of AutoStyle from June 3, 1996.
(3) This provision relates solely to Venture Holdings Corporation, which
operates Bailey, and its subsidiaries. See Note 2 above. Other significant
subsidiaries and Venture have elected "S" corporation status under the
Internal Revenue Code or are limited liability companies, taxed as
partnerships, and, consequently, do not incur liability for federal and
certain state income taxes.
(4) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of net income before extraordinary items and fixed charges. Fixed
charges consist of (1) interest, whether expensed or capitalized; (2)
amortization of debt discount and debt financing costs; and (3) the portion
of rental expense that management believes is representative of the interest
component of rental expense.
(5) EBITDA represents income from operations before deducting taxes, including
the Michigan single business tax, depreciation, amortization, interest and
payment to beneficiary in lieu of taxes. EBITDA is not presented as an
alternative to net income, as a measure of operating results or as an
indicator of Venture's performance, nor is it presented as an alternative to
cash flow or as a measure of liquidity, but rather to provide additional
information related to debt service capacity. EBITDA should not be
considered in isolation or as a substitute for net income or cash flow data
prepared in accordance with generally accepted accounting principles or as a
measure of a company's profitability. EBITDA, while commonly used, is not
calculated uniformly by all companies and should not be used as a
comparative measure without further analysis, nor does EBITDA necessarily
represent funds available for discretionary use. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
for a discussion of liquidity and operating results.
46
52
SELECTED CONSOLIDATED FINANCIAL DATA OF PEGUFORM
The selected consolidated balance sheet data and income statement data
presented below as of September 30, 1997 and 1998 and for the years ended
September 30, 1997 and 1998, are derived from Peguform's audited financial
statements, audited by BDO International GmbH Wirtschaftsprufungsgesellschaft,
independent auditors, and should be read in conjunction with the audited
consolidated financial statements and notes thereto included elsewhere in this
prospectus. The selected condensed consolidated financial data as presented
below as of and for the six month periods ended March 31, 1998 and 1999 are
derived from unaudited financial statements but, in the opinion of management,
reflect all adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement of the results for these periods and as of these
dates. The results for the six months ended March 31, 1999 are not necessarily
indicative of results to be expected for the full fiscal year.
Solely for the convenience of the readers, the consolidated financial
statements as of and for the year ended September 30, 1998 and as of and for the
six months ended March 31, 1999 have been translated to United States dollars at
the rate of DEM 1.6767 per United States dollar, the Noon Buying Rate as of
December 31, 1998. The translation should not be construed as a representation
that the amounts shown could be converted into United States dollars at this
rate or any other rate.
THOUSANDS OF
THOUSANDS OF U.S. DOLLARS
U.S. DOLLARS (CONVENIENCE
(CONVENIENCE TRANSLATION)
YEAR ENDED TRANSLATION) SIX MONTHS ENDED SIX MONTHS
SEPTEMBER 30, YEAR ENDED MARCH 31, ENDED
----------------------- SEPTEMBER 30, ------------------------- MARCH 31,
1997 1998 1998 1998 1999 1999
---------- ---------- ------------- ----------- ----------- ---------------
(DEM IN THOUSANDS) (DEM IN THOUSANDS)
INCOME STATEMENT DATA:
Net sales.............. 1,664,884 1,977,698 $ 1,179,518 935,225 1,174,403 $ 700,425
Other revenues......... 17,717 45,728 27,272 13,732 11,138 6,643
---------- ---------- ----------- --------- ---------- ---------
Total revenues......... 1,682,601 2,023,426 1,206,790 948,957 1,185,541 707,068
Cost of products
sold................. (1,482,448) (1,806,115) (1,077,184) (855,447) (1,056,225) (629,943)
---------- ---------- ----------- --------- ---------- ---------
Gross profit........... 200,153 217,311 129,606 93,510 129,316 77,125
Selling, general and
administrative
expenses............. (154,427) (201,040) (119,902) (101,222) (104,744) (62,470)
Other expenses......... (7,524) (2,408) (1,436) (1,743) (8,668) (5,170)
Interest expense
(net)................ (23,267) (23,992) (14,309) (13,444) (11,980) (7,145)
---------- ---------- ----------- --------- ---------- ---------
Income (loss) before
income taxes....... 14,935 (10,129) (6,041) (22,899) 3,924 2,340
Taxes on income........ (6,029) (6,060) (3,614) (3,210) (1,340) (799)
Minority interest...... (618) 505 301 350 226 135
---------- ---------- ----------- --------- ---------- ---------
Net income (loss)...... 8,288 (15,684) $ (9,354) (25,759) 2,810 $ 1,676
47
53
THOUSANDS OF
THOUSANDS OF U.S. DOLLARS
U.S. DOLLARS (CONVENIENCE
(CONVENIENCE TRANSLATION)
YEAR ENDED TRANSLATION) SIX MONTHS ENDED SIX MONTHS
SEPTEMBER 30, YEAR ENDED MARCH 31, ENDED
----------------------- SEPTEMBER 30, ------------------------- MARCH 31,
1997 1998 1998 1998 1999 1999
---------- ---------- ------------- ----------- ----------- ---------------
(DEM IN THOUSANDS) (DEM IN THOUSANDS)
OTHER FINANCIAL DATA:
EBITDA(1).............. 129,572 108,896 $ 64,947 37,617 66,868 $ 39,881
Depreciation and
amortization......... 87,828 88,734 52,922 46,722 48,759 29,080
Capital Expenditures... 102,014 143,552 85,616 74,109 52,299 31,192
BALANCE SHEET DATA
(AT END OF PERIOD):
Working capital(2)..... 76,573 72,199 $ 43,061 101,900 139,103 $ 82,962
Property, plant and
equipment -- net..... 488,218 535,199 319,198 512,487 539,398 321,702
Total assets........... 1,048,686 1,112,028 663,224 1,095,810 1,196,732 713,742
Total debt............. 411,570 458,220 273,287 496,840 549,935 327,986
Total stockholders
equity............... 218,371 214,636 128,011 190,600 208,699 124,470
- -------------------------
(1) EBITDA represents income from operations, net of minority interest, before
deducting taxes, depreciation, amortization, and interest. EBITDA is not
presented as an alternative to net income, as a measure of operating results
or as an indicator of Peguform's performance, nor is it presented as an
alternative to cash flow or as a measure of liquidity, but rather to provide
additional information related to debt service capacity. EBITDA should not
be considered in isolation or as a substitute for net income or cash flow
data prepared in accordance with generally accepted accounting principles or
as a measure of a company's profitability. EBITDA, while commonly used, is
not calculated uniformly by all companies and should not be used as a
comparative measure without further analysis, nor does EBITDA necessarily
represent funds available for discretionary use. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
for a discussion of liquidity and operating results. EBITDA has not been
adjusted to account for a non-recurring charge of $11,093 at Peguform
related to start-up production costs on the Mercedes A class hatchback
program.
(2) Working capital does not include loans payable to Peguform's parent of DEM
264,972 at September 30, 1997, DEM 308,440 at September 30, 1998, DEM
341,665 at March 31, 1998 and DEM 391,575 at March 31, 1999. All outstanding
intercompany loans were be repaid as part of the purchase price for the
Peguform acquisition.
48
54
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, Venture's
consolidated statements of income expressed as a percentage of net sales. This
table and the subsequent discussion should be read in conjunction with Venture's
consolidated financial statements and notes thereto included elsewhere in this
prospectus.
AS A PERCENTAGE OF NET SALES
-----------------------------------------
SIX MONTHS
YEARS ENDED ENDED
DECEMBER 31, JUNE 30,
----------------------- --------------
1998 1997 1996 1999 1998
----- ----- ----- ----- -----
Net sales....................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of products sold........................... 82.6 83.5 86.1 86.3 82.5
----- ----- ----- ----- -----
Gross profit.................................... 17.4 16.5 13.9 13.7 17.5
Selling, general and administrative expenses.... 9.2 9.2 7.6 7.8 8.7
Payments to beneficiary in lieu of trust
distributions................................. 0.1 0.1 0.2 0.0 0.2
----- ----- ----- ----- -----
Income from operations.......................... 8.1 7.2 6.1 5.9 8.6
Interest expense................................ 5.7 4.8 5.4 5.7 5.2
Other Income.................................... -- -- -- (4.5) --
----- ----- ----- ----- -----
Income before extraordinary items and taxes..... 2.4 2.4 0.7 4.7 3.4
Extraordinary loss on retirement of debt........ -- -- 0.8 -- --
----- ----- ----- ----- -----
Income (loss) before taxes...................... 2.4 2.4 (0.1) 4.7 3.4
Tax provision................................... 0.3 0.5 0.1 0.1 0.3
----- ----- ----- ----- -----
Net income (loss)............................... (2.1)% 1.9% (0.2)% 3.3% 3.1%
===== ===== ===== ===== =====
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Net sales for the first six months of 1999 increased $95.2 million, or
27.6% from the first six months of 1998. This increase was largely due to the
addition of Peguform's sales during the month of June. Domestically, sales
decreased $16.2 million, or 4.7%, due primarily to lower tooling sales as
compared to the comparable period in the prior year. Net sales for the period
were also reduced by a $3.0 million sales price reduction negotiated with a
major customer. This customer has awarded Venture with a significant new program
with production scheduled to begin in 2001.
Gross profit for the first six months of 1999 increased $0.1 million to
$60.0 million compared to $59.9 million for the first six months of 1998. As a
percentage of net sales, gross profit decreased to 13.7% for the first six
months of 1999 from 17.5% for the first six months of 1998. The decrease was
largely due to the contribution of Peguform's lower margin business being
included in the consolidated sales for the month of June. The 7.6% gross profit
margin on Peguform's sales was further reduced by approximately $1.0 million
because only value added to the acquired inventory subsequent to the acquisition
date could be recognized in gross profit. Domestically, the gross profit
49
55
margin decreased to 15.7% for the first six months of 1999 from 17.5% in the
first six months of 1998 primarily due to a decrease in tooling sales, which
generally account for higher margins than sales of components. Gross margin was
also reduced by a $3.0 million retroactive sales price reduction negotiated with
a major customer in return for substantial program opportunities.
Selling, general and administrative expense for the first six months of
1999 increased $4.1 million, or 13.7%, to $34.2 million compared to $30.1
million for the first six months of 1998. As a percentage of net sales, selling,
general and administrative expense decreased to 7.8% for the second quarter of
1999 as compared to 8.7% for the first six months of 1998. The decrease is
attributable to the impact of Peguform's lower selling, general and
administrative expense as a percentage of net sales, relative to Venture's,
being included in the operating results for the month of June.
As a result of the foregoing, income from operations for the first six
months of 1999 decreased $3.7 million, or 12.6%, to $25.7 million, compared to
$29.4 million for the first six months of 1998. As a percentage of net sales,
income from operations decreased to 5.9% for the first six months of 1999 from
8.6% for the first six months of 1998.
Interest expense for the first six months of 1999 increased $7.2 million,
or 40.3%, to $25.0 million in 1999 as compared to 1998. The increase is the
result of the increased debt associated with the acquisition of Peguform
partially offset by a reduced overall cost of capital under the new capital
structure, after consideration of interest rate swaps.
Other income is primarily comprised of $19.5 million non-cash,
mark-to-market adjustments on various currency and interest rate swaps entered
into during the second quarter of 1999 to economically hedge Venture's exposure
to foreign exchange and interest rate risk associated with the acquisition of
Peguform. These cross currency and interest rate swaps serve to reduce the
overall cost of capital of Venture, while also providing an economic hedge to
fluctuations in foreign exchange rates.
In connection with the issuance of the outstanding notes, Venture redeemed
its 9 3/4% senior subordinated notes due 2004 at the redemption price of
104.875% plus accrued interest which resulted in an extraordinary loss of $5.6
million ($3.8 million prepayment penalty plus unamortized deferred financing
costs of $1.8 million).
Due to the foregoing, net income for the first six months of 1999 increased
$4.1 million to $14.6 million compared to $10.6 million for the first six months
of 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net sales increased $21.1 million for the year ended December 31, 1998, or
3.4%, to $645.2 million, compared to net sales of $624.1 million for the year
ended December 31, 1997. The increase in net sales in 1998 is primarily a result
of increased volumes in the comparable business offset by planned price
reductions mandated by customers under sole-source arrangements for product life
cycles. Venture's productivity improvements for these products partially offset
the planned price reductions. Net sales during the second and third quarters of
1998 were impacted negatively due to strikes at certain General Motors plants.
Venture believes that a portion of these lost sales were recouped in the fourth
quarter of 1998 as GM accelerated production to refill its distribution
channels.
Gross profit for the year ended December 31, 1998 increased $9.7 million,
or 9.4%, to $112.4 million compared to $102.7 million for the year ended
December 31, 1997. As a percentage of net sales, gross profit increased from
16.5% to 17.4% for the year ended December 31, 1998, which was in part due to
the increased volumes associated with product rationalizations among the
facilities
50
56
and continued cost cutting efforts. During the fourth quarter of 1998, Venture
resolved several commercial issues which resulted in the recovery of gross
profit lost during current and prior years. The resolution of these issues
resulted in an additional $7.4 million of gross profit. Gross profits continue
to be under pressure attributable to selling price reductions, as OEMs continue
to expect annual productivity improvements on the part of their suppliers.
Selling, general and administrative expense for 1998 of $59.7 million, or
9.3% of net sales, is comparable with selling, general and administrative
expense of $57.2 million, or 9.2% of net sales, for 1997.
Payments to the beneficiary of Venture Holdings Trust, in amounts generally
equal to taxes incurred by the beneficiary as a result of the activities of
Venture Holdings Trust's subsidiaries which have elected "S" corporation status
under the Internal Revenue Code or are limited liability companies (taxed as
partnerships), totaled $0.5 million in 1998 and 1997. These amounts were paid as
compensation rather than as distributions of Trust principal.
As a result of the foregoing, income from operations in the year ended
December 31, 1998 increased $7.1 million, or 15.8%, to $52.2 million, compared
to $45.1 million in fiscal 1997. As a percentage of net sales, income from
operations increased to 8.1% in fiscal 1998 from 7.2% in fiscal 1997.
Interest expense increased $6.4 million, or 21.2%, to $36.6 million in
fiscal 1998 compared to $30.2 million in fiscal 1997. The increase is the result
of additional borrowing under Venture's prior senior credit facility to fund
increased working capital needs.
Due to the foregoing, net income for the year ended December 31, 1998
increased $2.1 million, to $13.6 million compared to $11.5 million for the year
ended December 31, 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
The period to period comparisons are substantially effected by the
acquisitions of Bailey and AutoStyle.
Net sales increased $272.3 million for the year ended December 31, 1997, or
77.4%, to $624.1 million, compared to net sales of $351.8 million for the year
ended December 31, 1996. The increase in net sales was primarily the result
having the benefit of a full year of the Bailey and AutoStyle operating sales.
The operating sales for 1996 represented only the activities subsequent to the
acquisitions of Bailey and AutoStyle (AutoStyle in June 1996, Bailey in August
1996). The following table explains the changes (in millions).
NET SALES
YEAR ENDED
DECEMBER 31,
----------------
1997 1996 INCREASE
------ ------ --------
Bailey...................................................... $224.8 $ 72.6 $152.2
AutoStyle................................................... 96.5 38.9 57.6
Comparable.................................................. 302.8 240.3 62.5
------ ------ ------
Total.................................................. $624.1 $351.8 $272.3
====== ====== ======
Sales were less in the last half of the year than were expected for the
Chrysler LH due to a slow new model changeover.
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Gross profit for the year ended December 31, 1997 increased $53.9 million,
or 110.4%, to $102.7 million compared to $48.8 million for the year ended
December 31, 1996. As a percentage of net sales, gross profit increased from
13.9% to 16.5% for the year ended December 31, 1997, which was in part due to
the increased volumes associated with product rationalizations among the
facilities and cost cutting efforts at Bailey. However, gross profit was
unfavorably impacted by new model introductions and launch costs in the third
and fourth quarter. Gross profits continued to be under pressure attributable to
selling price reductions, as OEMs continued to expect annual productivity
improvements on the part of their suppliers. In addition, Venture's sales were
shifting more to products produced using the injection molding process, which
traditionally have had higher margins. During the fourth quarter of 1997 certain
reserves were reevaluated and reduced by $2.8 million reflecting changes in
circumstances and estimates and were recorded as reductions in cost of products
sold.
Selling, general and administrative expenses increased $30.6 million, or
115.2%, for fiscal 1997 to $57.2 million, compared to $26.6 million in fiscal
1996. As a percentage of net sales, selling, general and administrative expenses
increased to 9.2% for the year ended December 31, 1997, compared to 7.6% in
1996. The increase was generally due to the acquisition of Bailey and the
attendant cost of its operations.
Payments to the beneficiary of Venture Holdings Trust, in the amounts
generally equal to taxes incurred by the beneficiary as a result of the
activities of Venture Holdings Trust's subsidiaries which have elected "S"
corporation status under the Internal Revenue Code or are limited liability
companies (taxed as partnerships), totaled $0.5 million and $0.7 million in
fiscal 1997 and 1996, respectively. These amounts were paid as compensation
rather than as distributions of Trust principal.
As a result of the foregoing, income from operations in the year ended
December 31, 1997 increased $23.5 million, or 108.8%, to $45.1 million, compared
to $21.6 million in fiscal 1996. As a percentage of net sales, income from
operations increased to 7.2% in fiscal 1997 from 6.1% in fiscal 1996.
Interest expense increased $10.9 million, or 56.8%, to $30.2 million in
fiscal 1997 compared to $19.2 million in fiscal 1996. The increase was the
result of the senior credit agreement entered into on August 26, 1996 to fund
the Bailey acquisition, subsequent refinancing and issuance of $205.0 million
1997 senior notes in the third quarter of 1997 and increased working capital
needs.
Due to the foregoing, net income for the year ended December 31, 1997
increased $12.2 million, to $11.5 million compared to $(0.7) million for the
year ended December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Venture's consolidated working capital was $168.7 million at December 31,
1998, compared to $125.1 million at December 31, 1997, an increase of $43.6
million. Venture's working capital ratio increased to 3.1x at December 31, 1998
from 2.3x at December 31, 1997, as a result of increased receivables, primarily
from related parties, and a reduction in accounts payable. At June 30, 1999,
working capital was $342.3 million and Venture's working capital ratio was
2.12x.
Venture's principal sources of liquidity are internally generated funds,
cash equivalent investments and borrowings under its credit facility. Net cash
used in operating activities was $5.4 million for 1998, and $13.1 million for
1997. Net cash provided by operating activities was $35.0 million for 1996, and
$31.8 million for the six months ended June 30, 1999. The decrease in cash used
in operations from 1997 to 1998 is due primarily to higher net income, increases
in non-cash charges, such as depreciation and amortization, and reductions in
the net increase in current assets. Peguform's principal source of liquidity
historically has been cash from operations and funding from its parent.
Peguform's net cash flows provided by operating activities were $44.7 million
and
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$38.0 million for the years ended September 30, 1997 and 1998, respectively.
Peguform's net cash flows used in operating activities was $16.9 million for the
six months ended March 31, 1999.
Net cash used in investing activities by Venture was $24.7 million, $37.1
million and $121.6 million in 1998, 1997 and 1996, respectively, and $457.0
million for the six months ended June 30, 1999. The 1996 amount is primarily for
the acquisition of Bailey. Venture's capital expenditures for the six months
ended June 30, 1999, and for years ended 1998 and 1997 were for the purchase of
machinery and equipment, leasehold improvements and the expansion of facilities
to accommodate increased volumes and for general refurbishment. The amount for
the six months ended June 30, 1999 is primarily for the acquisition of Peguform.
Peguform's capital expenditures for the year ending September 30, 1998 were
approximately $85.6 million, including $14.2 million and $9.4 million relating
to the start-up of Peguform's Brazilian facility and Mexican facility,
respectively. Peguform's capital expenditures for the six-month period ended
March 31, 1999 were approximately $31.2 million, including $2.0 million relating
to the start-up of Peguform's Brazilian facility. Venture believes that it has
sufficient capacity to meet current manufacturing production needs through the
2001 model year.
In the ordinary course of business, Venture seeks additional business with
existing and new customers. Venture continues to compete for the right to supply
new components which could be material to it and require substantial capital
investment in machinery, equipment, tooling and facilities. As of the date
hereof, however, Venture has no formal commitments for any such material
business, other than business acquired as a consequence of the Peguform
acquisition and as noted below, and there is no assurance that Venture will be
awarded any such business.
Net cash from financing activities by Venture was $28.8 million in 1998 and
$36.2 million in 1997. In 1997, Venture issued the 1997 senior notes. The net
proceeds of $199.0 million from the sale of the 1997 senior notes was used to
repay term loans and amounts outstanding under the revolving credit portion of
Venture's prior senior credit facility. As a result, less cash was provided by
financing activities during 1998 as compared with 1997. Net cash provided by
financing activities for the six months ended June 30, 1999 was $467.6 million,
relating primarily to the refinancing of certain existing debt and the issuance
of new debt in connection with the acquisition of Peguform.
Venture's debt obligations contain various restrictive covenants that
require it to maintain stipulated financial ratios, including a minimum
consolidated net worth (adjusted yearly), fixed charge coverage ratio, interest
coverage ratio and total indebtedness ratio. As of each of December 31, 1998 and
June 30, 1999, Venture was in compliance with all debt covenants.
The aggregate purchase price of Peguform was approximately DEM 850.0
million (approximately $463.0 million), reduced by the amount of certain
indebtedness for borrowed money, and subject to post-closing adjustments. In
addition, Venture had an additional $29.3 million of fees and expenses
associated with the Peguform acquisition. Venture completed the Peguform
acquisition on May 28, 1999. The Peguform acquisition is accounted for as a
purchase.
In connection with the Peguform acquisition, we entered into a new credit
facility. The new credit facility, as amended, provides for borrowings of (1) up
to $175.0 million under the revolving credit facility, which, in addition to
those matters described below, will be used for working capital and general
corporate purposes; (2) $75.0 million under a five-year term loan A; (3) $200.0
million under a six-year term loan B; and (4) $125.0 million under an
eighteen-month interim term loan. The new credit facility requires that $125.0
million principal amount outstanding thereunder be refinanced within 18 months
from the closing date utilizing the proceeds from the sale of securities that
rank pari passu in right of payment with, or are junior to, the 12% Senior
Subordinated Notes due 2009. See "Risk Factors -- Substantial Leverage." The
revolving credit facility will permit us to borrow up to the lesser of a
borrowing base computed as a percentage of accounts receivable and
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inventory, or $175.0 million less the amount of any letter of credit issued
against the new credit facility. At June 30, 1999, we had $18.5 million
outstanding with $156.5 million still available under the revolving credit
facility.
Interest rates under the new credit facility are based on the London
Interbank Offer Rate ("LIBOR"), or an Alternate Base Rate ("ABR"), which is the
larger of the bank's corporate base rate of interest announced from time-to-time
or the federal funds rate plus 1/2% per annum, and, in the case of non-dollar
denominated loans, a euro currency reference rate. Interest rates will be
determined by reference to the relevant interest rate option, plus an Applicable
Margin (as defined) based on Venture's Consolidated Ratio of Total Debt to
EBITDA. Obligations under the new credit facility are jointly and severally
guaranteed by Venture's domestic subsidiaries and are secured by first priority
security interests in substantially all of the assets of Venture and its
domestic subsidiaries. The new credit facility contains certain restrictive
covenants, which are similar in nature to those in Venture's prior senior credit
facility. See "Description of Certain Indebtedness -- New Credit Facility."
Proceeds from the offering of the outstanding notes, together with
borrowings under the new credit facility were used to (1) fund cash
consideration paid in the Peguform acquisition; (2) redeem the 1994 senior
notes, including prepayment premium; (3) refinance Venture's prior senior credit
facility; (4) pay certain fees and expenses related to the Peguform acquisition
and the offering of the outstanding notes; and (5) fund working capital and
other general corporate purposes.
We expect our budget for capital expenditures during the remainder of 1999
to be approximately $70.0 million, which is expected to be financed either with
cash generated from operations or borrowings under the new credit facility.
Venture has just been awarded a letter of intent for a significant new program
for one of its major customers with projected annual revenues of approximately
$100 million, with production scheduled to start in late 2001. As a result of
this award, Venture may be required to make aggregate capital expenditures in
the range of $40.0 million to $80.0 million payable over the next several years
in addition to its normal capital expenditures. The size and scope of the
expenditures associated with this new program are still being defined.
Venture must rely upon distributions from its subsidiaries and repayment of
principal and interest on intercompany loans made by Venture to its subsidiaries
to generate funds necessary to meet its obligations, including payment of
principal and interest on the exchange notes. The ability of Venture's
subsidiaries to pay dividends and make other payments or advances to Venture may
be limited. See "Risk Factors -- Company Structure; Not all Subsidiaries are
Guarantors."
As part of the Peguform acquisition, to take advantage of lower interest
rates in Europe and to hedge exchange rate risk, we entered into currency, US
dollar versus Euro, and interest rate swaps. The currency swaps are in notional
amounts of $205.0 million and $250.0 million, which mature in 2002 and 2004,
respectively. The interest rate swaps are in notional amounts of $410.0 million
and $500.0 million also maturing in 2002 and 2004, respectively. These currency
and interest rate swaps effectively converted our United States dollar fixed
rate coupon on the 1997 senior notes and the outstanding notes to a Euro fixed
rate coupon. These instruments only partially qualified for hedge accounting,
which resulted in a non-cash increase in earnings related to the mark to market
on the swaps in the amount of $19.5 million as of June 30, 1999, which was
recorded as other income on the income statement and in investments on the
balance sheet. The hedge accounting impact of these interest rate swaps was to
reduce interest expense by $142,000 in the three months ended June 30, 1999. The
non-cash impact of the mark to market adjustments each quarter to earning and
current assets associated with these swaps may be significant, both positively
and negatively, in the future depending on currency and interest rate movements.
See "Quantitative and Qualitative Disclosure about Market Risk" for a further
discussion.
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Venture's ability to make scheduled payments of principal of, or to pay the
interest or Liquidated Damages, if any, on, or to refinance, its indebtedness
(including the exchange notes), finance its working capital requirements and
other operating needs or to fund planned capital expenditures will depend on its
future performance, which, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond its control. Based upon the current level of operations, management
believes that cash flow from operations and available cash, together with
available borrowings under the new credit facility, will be adequate to meet
Venture's future liquidity needs for at least the next several years. Venture
may, however, need to refinance all or a portion of the principal of the
exchange notes on or prior to maturity. There can be no assurance that Venture's
business will generate sufficient cash flow from operations, or that future
borrowings will be available under the new credit facility in an amount
sufficient to enable Venture to service its indebtedness, including the exchange
notes, or to fund its other liquidity needs. The new credit facility requires
Venture to refinance $125.0 million principal amount outstanding under the New
credit facility within 18 months from the closing date, utilizing the proceeds
from the sale of securities that are pari passu in right of payment with, or
junior to, the 12% Senior Subordinated Notes 2009. There can be no assurance
that Venture will be able to effect any such refinancing on commercially
reasonable terms or at all.
YEAR 2000 COMPLIANCE
As is the case with most companies using computers in their operations, we
are in the process of addressing the year 2000 problem. The year 2000 issue is
the result of computer programs being written using two digits rather than four
digits to define the applicable year. Any of our systems, equipment, or hardware
that have date sensitive software or embedded chips may recognize a date using
"00" as the year 1900 rather than year 2000. This could result in a system
failure or miscalculations causing disruption of operations, including among
other things, a temporary inability to properly manufacture products, process
transactions, send invoices or engage in similar normal business activities.
Based on our initial assessments, we determined that we needed to modify or
replace certain portions of our equipment, hardware, and software so that
affected systems will properly utilize dates beyond December 31, 1999. We
presently believe that, with modifications and some replacement of existing
equipment, hardware and software, the year 2000 issue will be reduced and we
will be year 2000 compliant.
Our plan to resolve the year 2000 issue is being implemented by each of our
facilities and involves six phases:
- inventory;
- risk assessment;
- prioritization and ownership assignment;
- compliance research;
- remediation; and
- testing.
The inventory, risk assessment, prioritization, and ownership assignment
phases were performed concurrently and are complete. The compliance research
phase is complete at all of our facilities. The remediation and testing phases
are approximately 95% complete in North America and are 99% complete at our
foreign operations, other than France. In France the remediation and testing
phases are expected to be completed by September 30, 1999. In North America, our
year 2000 plan is being
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completed on a facility by facility basis. For our foreign operations, it is
being completed on a country by country basis.
Our year 2000 inventory of potentially affected items is segregated into
four categories:
- business application (developed software, customized extensions to
purchased software and systems interfaces);
- tools and platforms (purchased commercial products, both hardware and
software);
- intelligent devices (manufacturing, laboratory, office and facilities
equipment); and
- external business partners (suppliers, customers and other service
providers).
Business applications and tools and platforms are considered information
technology ("IT") systems, while intelligent devices and external business
partners are considered non-IT systems.
Concerning IT systems, several of our facilities that share existing
applications will upgrade those applications to year 2000 compliant versions by
October 30, 1999. All other facilities have already made their systems year 2000
compliant. Our facilities in Germany and Spain have received "Status Green"
rating indicating year 2000 compliance with TUV standards. TUV is the European
equivalent of the Automotive Industry Action Group in the United States.
For non-IT systems, we have dedicated resources to assist in identifying
potentially affected intelligent devices. Determination of compliance status,
remediation, and testing of these devices may be more difficult than IT systems,
as some of the manufacturers of potentially affected equipment may no longer be
in business. We have completed compliance status, remediation and testing
phases. Based upon such testing, non-IT systems appear to be year 2000
compliant.
The external business partners category of potentially affected items
primarily includes the process of identifying and prioritizing critical
suppliers and customers, and communicating with them about their plans and
progress in addressing the year 2000 problem. We have developed a questionnaire
that we have used to obtain this information from key existing business
partners. We have contacted 100% of our key existing business partners and 85%
have responded with 98% of those who responded indicating that they are year
2000 compliant. Based on the responses to our questionnaires and other
alternative evidence obtained, we are not aware of any problems that would
materially impact results of operations, liquidity, or capital resources.
However, we have no means of ensuring that these parties will be year 2000 ready
and the inability of these parties to successfully complete their year 2000
compliance program could impact us. For key business partners, the initial
assessments are evaluated and, as deemed necessary, follow-up assessments are
made. We expect this process to be ongoing throughout 1999. We are in the
process of developing contingency plans to address potential year 2000 exposure,
which we expect to be complete by October 1999.
We have utilized both internal and external resources to repair or replace,
test, and implement software and operating equipment for year 2000
modifications. We are unable to estimate with any certainty the total cost of
the year 2000 project. We have not, however, seen a significant increase in our
IT cost nor in the normal overhead cost associated with our facilities.
Primarily all of the costs of the year 2000 project have been expensed and have
been funded through normal operating cash flow or bank borrowings.
The failure to remediate a material year 2000 problem could result in an
interruption in, or a failure of, certain of our normal business activities or
operations, including our ability to produce or deliver products to our
customers. These failures could materially or adversely affect our results of
operations, liquidity, and financial condition. Due to the general uncertainty
inherent in the year 2000 problem, we are unable to determine with certainty at
this time whether the consequences of
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year 2000 failure will have a material impact on us. Our year 2000 plan is
expected to significantly reduce our level of uncertainty about the year 2000
problem. We believe that by executing our year 2000 plan in a timely manner, the
possibility of significant interruptions to normal operations should be reduced.
We believe that our most reasonably likely worst case scenario is that certain
suppliers will not be able to supply Venture with key materials, thus disrupting
the manufacture and sale of products to our customers.
Our plans to complete the year 2000 project are based on our best
estimates, which were derived utilizing numerous assumptions of future events
including, but not limited to, the continued availability of certain resources
and other factors. Estimates of the status of completion and the expected
completion dates are based on tasks completed to date compared to all required
tasks. However, there can be no guarantee that expected completion dates will be
met, and actual results could differ materially for those forecasted. Specific
factors that might cause this material difference include, but are not limited
to, the availability and cost of personnel trained in certain areas, the ability
to locate and correct all relevant equipment, devices and computer codes, and
similar uncertainties.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board (FASB) approved SFAS
No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 130 establishes
accounting standards for reporting and displaying comprehensive income and its
components (revenues, expenses, gains and losses). Venture has adopted this
standard in the financial statements. SFAS No. 131 establishes accounting
standards for the way public enterprises report information about operating
segments in annual financial statements. This statement also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. Venture has adopted this accounting standard; however,
there was no impact on its December 31, 1998 financial statement presentation
and disclosures because Venture operates in only one segment, automotive
operations.
In February 1998, the FASB approved SFAS No. 132, "Employers' Disclosures
about Pensions and Other Post-retirement Benefits," which standardizes the
disclosure requirements for pension and other Post-retirement benefits. In
particular, the Standard requires additional information on changes in the
benefit obligation and fair values of plan assets. Venture has adopted this
Standard in the presentation of its financial statements (Note 10).
In June 1998, the FASB approved SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
Standard is effective for the first quarter of our fiscal year beginning January
1, 2000. Venture has not yet determined the impact of adopting this Standard on
its financial position or results of operations. In July 1999 the FASB approved
SFAS No. 137, which delayed the implementation date for SFAS No. 133 for one
year.
In March 1998, the Accounting Standards Executive committee published
accounting Statement of Position (SOP) 98-1, which provides guidance on
accounting for the costs of computer software developed or obtained for internal
use. The provisions of this SOP are applicable for our fiscal year beginning
January 1, 1999. Venture does not anticipate that adoption of this Standard will
have a material impact on its financial position or results of operations.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Venture is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. In order to manage the risk arising
from these exposures, Venture has entered into a variety of foreign exchange and
interest rate financial instruments. A discussion of Venture's accounting
policies for derivative financial instruments is included in the Organization
and Summary of Significant Accounting Policies and Financial Instruments
footnotes to the financial statements found in Item 8 of Venture's 1998 Annual
Report on Form 10-K.
FOREIGN CURRENCY EXCHANGE RATE RISK. Venture has foreign currency exposures
related to buying, selling, and financing in currencies other than the local
currencies in which it operates. Venture's most significant foreign currency
exposures relate to Germany, Spain, France, the Czech Republic, Mexico, Brazil
and Canada. As of June 30, 1999, the net fair value asset of financial
instruments with exposure to foreign currency risk was approximately $17.5
million. The potential loss in fair value for such financial instruments from a
hypothetical 10% adverse change in quoted foreign currency exchange rates would
be approximately $51.7 million. The model assumes a parallel shift in the
foreign currency exchange rates. Exchange rates rarely move in the same
direction. The assumption that exchange rates change in a parallel fashion may
overstate the impact of changing exchange rates on assets and liabilities
denominated in a foreign currency.
A portion of Venture's assets is based in its foreign operations and is
translated into U. S. dollars at foreign currency exchange rates in effect as of
the end of each period, with the effect of such translation reflected as a
separate component of member's equity. Accordingly, Venture's consolidated
member's equity will fluctuate depending upon the weakening or strengthening of
the U.S. dollar against the respective foreign currency.
INTEREST RATE RISK. Venture is subject to market risk from exposure to
changes in interest rates based on its financing, investing, and cash management
activities. Venture has entered into various financial instrument transactions
to maintain the desired level of exposure to the risk of interest rate
fluctuations and to minimize interest expense. As of June 30, 1999, the net fair
value liability of financial instruments with exposure to interest rate risk was
approximately $4.8 million. The potential loss in fair value for such financial
instruments from a hypothetical 10% adverse shift in interest rates would be
approximately $3.2 million.
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BUSINESS
GENERAL
We are a leading worldwide full-service supplier of high quality molded and
painted plastic parts for OEMs, and other Tier I suppliers. We rank among the
largest designers and manufacturers of interior and exterior plastic components
and systems to the North American and European automotive markets. Exterior
products include such items as front and rear bumper fascias and systems, body
side moldings, hatchback doors, fenders, grille opening panels and
reinforcements, farings, wheel lips, spoilers, and large body panels such as
hoods, sunroofs, doors and convertible hardtops. Interior products include
instrument panel systems, door panels, airbag covers, side wall trim,
garnishment molding systems and consoles. Our principal customers include every
major North American OEM, eleven of the twelve major European OEMs, several
major Japanese OEMs, and leading Tier I suppliers. On a pro forma basis for the
twelve months ended December 31, 1998, our net sales totaled $1,933.5 million,
our EBITDA totaled $169.0 million, and our net income was $1.0 million; and on a
pro forma basis for the six months ended June 30, 1999, our net sales totaled
$1,035.5 million, our EBITDA totaled $89.2 million, and our net income was $16.8
million.
We are a full-service supplier and an industry leader in manufacturing
plastic components, modules and systems and in applying new design and
engineering technology to develop innovative products, create new applications
and reduce product development time. We, and our affiliated companies, have the
capability to provide our customers state-of-the-art design and advanced
engineering services 24 hours a day around the world. We operate 57 facilities
in 9 countries, including the United States, Canada, Germany, Spain, France,
Hungary, the Czech Republic, Mexico and the Netherlands and expect to start
operations in Brazil in the third quarter of 1999. Our comprehensive
manufacturing capabilities include custom injection molding, automated painting
and assembly, and material and product testing. We also have extensive tool
making capabilities. Our engineering focuses on anticipating actual production
issues and integrating part design with tool design to create an efficient
manufacturing process. We refer to this emphasis as "design for manufacture."
We primarily emphasize the design and manufacture of components and
integrated systems, and manufacture those components and systems as a
sole-source supplier. We currently supply components or systems on over 150
models, including 4 out of 5 of the top selling models in both the United States
and Europe.
INDUSTRY TRENDS
The automotive industry has been and continues to be significantly
influenced by several trends which we believe will enhance our strategic
position and growth prospects.
- INCREASED OUTSOURCING BY OEMS. In an effort to reduce costs, speed
product design and simplify manufacturing, OEMs have increasingly
outsourced the manufacture of many components and integrated systems
which were previously manufactured internally. Independent suppliers
generally are able to design, manufacture and deliver components and
systems at a lower cost than the OEMs due to: (1) their lower direct
labor, fringe benefit and overhead costs; (2) the ability to spread R&D
and engineering costs over products provided to multiple OEMs; and (3)
the economies of scale inherent in product specialization. OEMs have
benefited because outsourcing has allowed them to reduce capital
expenditures, production costs and inventory levels and to focus on
overall vehicle design, product quality and consumer marketing. Although
outsourcing has not been as long standing a trend in Europe as it has in
North America, it has become increasingly prevalent. In certain of
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Peguform's main product lines, for instance, internal production by
European OEMs has declined significantly.
Suppliers like us have benefited from this outsourcing trend as the
aggregate number and value of components and integrated systems which we
manufacture have increased dramatically. In addition, the outsourcing
trend has been coupled with an increasing complexity of components which
are manufactured by independent suppliers. These factors have favored low
cost, full-service suppliers such as ourselves who can develop integrated
systems that OEMs can easily install.
- CONSOLIDATION OF SUPPLIER BASE BY OEMS. Since the 1980s, OEMs have
substantially reduced the number of suppliers that may bid for awards and
have been outsourcing an increasing percentage of their production
requirements. As a result of these trends, the OEMs have increasingly
focused on the development of long-term, sole-source relationships with
suppliers who can provide complex components and integrated systems 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 OEMs' supplier base as those suppliers who lack the
capital or production expertise to meet the OEMs' needs either exit the
business or are consolidated with larger suppliers. Both OEMs and
suppliers benefit from the consolidation trend. Suppliers are able to
devote the resources necessary for proprietary product development with
the expectation that they will have the opportunity to profit on this
investment over the multi-year life of a contract. OEMs benefit from
shared manufacturing cost savings that suppliers realize as a result of
long, multi-year production runs at high capacity utilization levels.
- INCREASED EMPHASIS ON PROGRAM MANAGEMENT AND INTEGRATED SYSTEMS. In
conjunction with the aforementioned consolidation trend, OEMs are
transitioning from purchasing components to placing responsibility for
design, engineering and manufacturing of full component systems on Tier I
suppliers. These expanded requirements can best be addressed by
full-service suppliers such as ourselves with sufficient technological
and manufacturing resources to meet these demands. Strategic combinations
have been pursued by many suppliers in order to add capabilities to
manufacture complementary components and systems and achieve more
complete systems capabilities. We believe that this trend toward
multi-component system integrators will compel further consolidation,
leaving the industry with fewer and more broad-based Tier I suppliers.
- INCREASING UTILIZATION OF PLASTIC. Plastic provides OEMs with a number
of advantages over metal, including increased design flexibility and
aesthetic appeal, resistance to corrosion and improved fuel-efficiency
performance due to lighter weight materials. Substituting plastic for
metal can also reduce manufacturing costs by eliminating machining costs,
reducing painting costs, facilitating assembly, minimizing tooling costs
and consolidating the number of parts used in a vehicle. While plastics
historically have been used for many interior trim components, they are
now being used more extensively in exterior and structural/functional
components and integrated systems. According to industry data, the
average plastic content per passenger vehicle has increased from
approximately 222 pounds in 1987 to approximately 242 pounds in 1997, and
is projected to grow to approximately 266 pounds per vehicle by 2007. We
believe our early involvement as a full-service supplier to OEMs of
plastic components and integrated systems, as well as our extensive
plastics manufacturing technologies, position us to benefit from the
expanded utilization of plastic.
- GLOBALIZATION OF THE OEM SUPPLIER BASE. OEMs are increasingly seeking to
identify preferred suppliers that can meet their needs on a global scale,
and not just regionally. To facilitate global expansion by these
preferred suppliers, in certain instances OEMs are
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committing to sole-source relationships to enhance the economic viability
of new production facilities. These relationships also facilitate the
efforts of OEMs to develop certain models for the world automotive
market. Our recent establishment of facilities in Mexico and Brazil will
further augment our already significant capabilities to design and
manufacture plastic components and systems worldwide.
THE PEGUFORM ACQUISITION
Venture has, for many years, been a key supplier to North American OEMs.
Venture's extensive design and manufacturing expertise, coupled with strategic
acquisitions, has enabled it to diversify its customer base and technological
capabilities, such that Venture has become a leading participant in the supply
of molded and painted interior and exterior plastic components and systems to
North American OEMs. For the five year period ended December 31, 1998, Venture's
net sales grew from $205.6 million to $645.2 million, a compound annual growth
rate of 25.7%, and EBITDA grew from $40.1 million to $94.2 million, a compound
annual growth rate of 18.6%. In 1996, Venture expanded its customer
relationships and technological capabilities through the acquisitions of Bailey
and AutoStyle.
A key element of Venture's business strategy has been to increase its
global presence to meet its OEM customers' global needs. Venture considers the
Peguform acquisition an attractive opportunity to further this strategy.
Peguform has been a leading international designer and manufacturer of complete
interior modules, door panels and dashboards; and of exterior modules and other
structural plastic body parts, including bumper fascias and hatchback doors.
Peguform operates manufacturing facilities in Germany, Spain, France and the
Czech Republic. In addition, Peguform had recently followed certain of its key
OEM customers into Mexico and Brazil. Our manufacturing network is enhanced by 9
module centers across Europe, serving as final assembly units located directly
at, or very close to, selected customers' car assembly plants. Peguform's proven
ability to gain development orders for new and successor models is enhanced by
its product engineering efforts, including such innovations as thermoplastic
bumpers, a proprietary slush molding process, a thermoplastic hatchback door and
painting technologies such as electro-static painting and the use of water-based
paint. For the twelve-months ended December 31, 1998, Peguform had net sales of
$1,260.6 million.
We now have an established and significant presence in Europe as a result
of the Peguform acquisition, which complements our strengths in North America,
giving us the ability to service existing OEM customers much more broadly than
either Venture or Peguform could individually. Additionally, we believe that the
Peguform acquisition enhances the businesses of both Venture and Peguform in
additional ways, representing mutually beneficial synergies that go beyond the
expansion of geographic reach, including the following:
- EXPANDED ENGINEERING CAPABILITIES. Venture's component research, design
and engineering expertise has focused on a manufacturing approach by
emphasizing prototype production and tooling with a view to shortening
design and production cycles and reducing design and production costs.
Peguform's engineering staff has focused on new product development and
validation to a degree not practiced previously by Venture. An example of
this capability is the development of technology for a thermoplastic
hatchback door that Peguform then validated and had designed into a
customer's vehicle production. Peguform will likewise benefit from
Venture's "design for manufacture" emphasis which is expected to enhance
Peguform's ability to anticipate production issues, thereby reducing
costs associated with new product launches and scrap rates. The
combination of these disciplines is expected to enhance our overall
capabilities.
- COMPLEMENTARY TECHNOLOGY. Peguform brings design and manufacturing
process technology that enhances Venture's capabilities to provide
innovative solutions to its customers. For
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example, Peguform's slush molding technology may provide opportunities
for cost savings and quality improvement over conventional molding
technologies in certain specialized applications. Moreover, Peguform's
use of water-based paint technology and robotized painting of components
enhances Venture's already sophisticated capabilities.
- STRENGTHENED AND EXPANDED CUSTOMER RELATIONSHIPS. The customer base of
each of Venture and Peguform are complementary, with little overlap,
presenting the combined company with significantly greater OEM
penetration. As a result, our opportunities to bid on new business is
enhanced, while dependence on any one customer or geographic segment is
reduced.
- OPERATIONAL EFFICIENCIES. The increased size of the combined operations
of Venture and Peguform is expected to reduce materials costs, as volumes
will be significantly increased. Moreover, the in-house tooling
manufacturing capability of Venture and its affiliates is expected to
reduce tooling expenses, due to their capacity to manufacture in-house a
portion of the tooling requirements which Peguform has traditionally
outsourced. These benefits, together with the advantages of increased
global presence, complementary engineering and technologies, and
expanding customer bases, discussed above, are expected to provide
opportunities to improve profitability of the combined company in a
manner that would not be possible if both companies had remained
independent.
COMPETITIVE STRENGTHS
We believe we have the following key competitive strengths, which enhance
our ability to compete successfully in our industry:
- LEADING MARKET POSITION. We are among the largest suppliers of interior
and exterior plastic components and systems to the North American and
European automotive markets. We currently supply components or systems on
over 150 models, including 4 out of 5 of the top selling models in both
the United States and Europe. We believe that OEMs increasingly favor
large, multi-national, integrated suppliers with whom they can establish
global strategic relationships. These strategic relationships require
suppliers to be able to offer their customers worldwide manufacturing,
and design and engineering resources.
- DIVERSIFIED GLOBAL CUSTOMER BASE. Our principal customers include every
major North American OEM, eleven of the twelve major European OEMs,
several major Japanese OEMs, and leading Tier I suppliers. As a result,
we are less dependent on revenues from any single geographic market than
competitors that are less diversified. We believe the geographic breadth
of our customer base and full-service capabilities position us to further
benefit from the current consolidation and globalization trends in the
automotive industry.
- WORLDWIDE FULL-SERVICE PROGRAM MANAGEMENT CAPABILITIES. As OEMs have
focused increasingly on shortening vehicle design and production cycles
and reducing design and production costs, suppliers who have the ability
to cost effectively take an idea or design from concept to mass
production are being involved at the initial stages of the process. We
are successful in meeting the increased demands by OEMs for their
suppliers to provide full-service program management because of our
expertise in design and engineering, tooling, and multiple manufacturing
processes. As a result, we have increasingly been selected as a sole-
source supplier for vehicle components and integrated systems. We believe
that the evolution of the OEM relationship into strategic partnerships
provides a significant advantage to us because of our ability to meet a
customer's art to part needs on a global basis.
- MULTIPLE EXTERIOR AND INTERIOR PLASTIC TECHNOLOGIES. We believe that we
are one of only a small number of automotive suppliers that can provide
its customers with both full-service program management capability and a
wide array of alternative plastic molding and painting
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technologies on a global basis. We possess the latest technologies
associated with thermoplastic injection molding, compression molding,
RIM, slush molding, sheet molding compounds, composite technologies, and
water-based paints. By possessing a wide range of plastic design and
manufacturing technologies, we are able to distinguish ourselves from our
competition by offering the process that will best meet the customers'
needs, while often lowering design and production costs and shortening
the product development cycle.
- JUST-IN-TIME/SEQUENTIAL SHIPPING CAPABILITIES. As OEMs have moved to
just-in-time inventory management, the timeliness and reliability of
shipments by their suppliers have become increasingly important. To
service our customers more effectively, we utilize just-in-time
manufacturing and sourcing systems, which enable us to meet our
customers' requirements for on-time deliveries while minimizing the
carrying levels of inventory. Our international production facilities and
module centers are strategically located close to our OEM customers'
facilities. We also offer our customers sequential shipping, in which
components are sent to the OEMs in the specific order in which vehicles
are to be assembled, based on as little as two hours lead time. We
believe we have established a reputation as a highly reliable and timely
supplier able to meet our customers' demanding delivery requirements.
- EXPERIENCED MANAGEMENT TEAM. We believe our management's long history of
mutually successful relationships with a wide variety of OEM and Tier I
customers will provide a competitive advantage as the industry trends of
consolidation, outsourcing and globalization continue. Our management
team is highly experienced and has significant expertise in the North
American, European and other automotive markets. We have gained
additional experience in global operations through affiliate companies of
Venture, including operations in Australia, Asia and Africa, all of which
share the Venture name. As evidenced by the acquisitions of Bailey and
AutoStyle, our management team has a proven track record of successfully
assimilating and integrating large, strategic acquisitions.
BUSINESS STRATEGY
Our business strategy is to use our competitive strengths to further our
position as a leading automotive supplier. The principal components of this
strategy are as follows:
- INVEST IN LEADING-EDGE DESIGN, ENGINEERING AND MANUFACTURING
TECHNOLOGIES. As OEMs worldwide continue to increasingly outsource
manufacturing of components and integrated systems, they have placed
greater reliance on the design and engineering capabilities of their
supplier base. We have made a substantial commitment to new product
technology and design, including establishing an Advanced Engineering
Center and offering the capability to provide 24-hour-a-day global design
and engineering services to our customers. The Advanced Engineering
Center integrates the use of CAD/CAM and utilizes the latest optical
design technology to rapidly and cost effectively replicate and modify
existing designs, as well as to design new prototypes, using reverse
engineering automated process for rapid prototyping. We also believe it
is highly important to be able to offer a broad range of manufacturing
processes and technologies to our customers for the production of a wide
array of plastic components and systems. Both the acquisitions of Bailey
and AutoStyle and the Peguform acquisition fit this strategy by enhancing
our ability to provide customers with multiple exterior and interior
technologies, specifically by adding expertise in sheet molding
compounds, slush molding and composite technologies, as well as
sophisticated painting processes. We intend to continue to invest
significantly in our design, engineering and manufacturing capabilities
in order to meet our customers' needs for innovation, quality,
reliability, lower costs and reduced lead times. We believe our continued
ability to design, engineer, tool and manufacture highly engineered
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components, modules and systems will provide additional opportunities to
supply an increasing number of products to existing customers and expand
our customer base.
- CONTINUE TO DEVELOP AND MANUFACTURE HIGH QUALITY PRODUCTS. We believe we
maintain an excellent reputation with the OEMs for providing high quality
products and customer service at competitive prices. Our reputation is
exemplified by our receipt of several major quality awards from our OEM
customers in both North America and Europe. Quality levels are currently
being standardized across OEMs through the QS-9000 program which is
expected to lower the cost of maintaining separate quality programs. All
of our manufacturing, tooling and design facilities historically operated
by Venture, and nine manufacturing facilities previously operated by
Peguform are QS-9000 certified.
- EMPHASIZE CONTINUOUS IMPROVEMENT PROCESSES. Venture follows "lean
manufacturing" and "Kaizen," or continuous improvement, philosophies that
seek to identify and eliminate waste in our own operations and in those
of our customers and suppliers. These philosophies emphasize employee
involvement in all phases of our operations by (1) empowering employees
at all levels with responsibility for their work, which leads to a
quicker identification of production issues; (2) forming cross-functional
teams to investigate opportunities for process improvements; and (3)
rewarding employee participation and involvement through financial
incentives. We have successfully implemented these philosophies in the
acquisitions of Bailey and AutoStyle, and are implementing these
philosophies throughout Peguform.
- MAXIMIZE OPERATING EFFICIENCIES AND LOWER COST STRUCTURE AT ACQUIRED
COMPANIES. We believe there are a number of areas in which we can
achieve annual cost savings related to the Peguform acquisition. We have
successfully effected significant cost savings in past acquisitions.
Regarding the acquisitions of Bailey and AutoStyle, we have been able to
employ our lean manufacturing process, which enables us to grow our
business with existing management assets and less capital expenditure.
These operational efficiencies, combined with our tooling and design
capabilities, have helped us to achieve substantial cost savings. We
expect the principal components of cost savings related to the recent
Peguform acquisition will be in the areas of material and tooling costs,
as further described below:
Materials Cost Savings. We believe there are many opportunities to
reduce materials costs in areas such as raw materials, paint and
other materials, due to the similarities in plastic components
manufactured by Venture and Peguform. In many cases, these materials
are currently purchased from the same suppliers. Additionally, we
expect to gain increased purchasing leverage due to the Peguform
acquisition, resulting in more favorable materials costs throughout
our entire operation. As a result of our analysis of the same or
comparable materials, and their respective costs and volumes at
Venture and Peguform, we believe we can achieve approximately $15.0
million in materials cost savings in our first full year of
operations following the Peguform acquisition.
Tooling Cost Savings. Peguform has historically outsourced all of
its tooling requirements. Venture has consistently invested in
maintaining a sophisticated, in-house tooling capability. We believe
Venture's tooling capabilities not only provide a competitive
advantage, but also typically result in lower tooling costs than
would otherwise be the case if tooling were outsourced to other
tooling manufacturers. We and our affiliated companies currently
have capacity to manufacture in-house a significant
portion of the tooling requirements which Peguform has traditionally
outsourced.
Other Operating Efficiencies. In addition to material and tooling
cost savings, we believe there are other opportunities to improve
Peguform's cost structure. Some of these opportunities include
elimination of redundant administrative expense items, shared
design,
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engineering and program management resources, manufacturing efficiencies
and production of certain components in-house that are currently
outsourced by Peguform.
- STRATEGIC EXPANSION. We are committed to continue our strategic,
geographic expansion in order to serve our customer base globally. In
addition, we expect to make selective acquisitions and investments, or
enter into strategic alliances, to broaden our service offerings and
further enhance our systems integration capability. We believe that the
consolidation of the automotive supplier base and geographic expansion of
our customers will present additional opportunities for growth.
PRINCIPAL PRODUCTS
We produce thermoplastic injection molded, compression molded, injection
compression molded, RIM and slush molded plastic parts primarily for OEMs and
other Tier I suppliers. We also emphasize complex products, such as instrument
and door panel assemblies, which require the integration of multiple components
into complete sub-assemblies.
Our primary exterior and interior products are detailed and illustrated
below:
The following sets forth information about our automotive products and
vehicle models on which they are used or for which we have been awarded
business.
AWARDED
BUSINESS ON
FUTURE
COMPONENT OEM/CUSTOMER CURRENT PRODUCTION(A) PRODUCTION(B)
- --------- ------------ --------------------- -------------
Interior Trim Audi A3, TT, A8 A3, A4
DaimlerChrysler A Class, Vito, B Van, Breeze, Cirrus, B Van, Breeze,
Concorde, Eagle, Grand Cherokee, LHS, 300M, Cherokee,
Intrepid, Neon, Stratus, Wrangler, Viper Cirrus, Neon,
Stratus, PT
DEPCO Bonneville
Finley Industries Beauville
Ford Continental, Escort, Mountaineer, Taurus
General Motors Achieva, Blazer, Cadillac S5S, Camaro, Bravada,
Cavalier, Century, Express/Savana Van, Blazer,
Lumina, Park Avenue, Regal, STS Skylark, Century, Jimmy,
Sunfire, Suburban, TransAm, Tahoe Regal, Envoy,
GMT 370, GMT
560
Lear Chrysler Ram 150/350 Pickup, Windstar
Nissan HM
Opel Corsa
Porsche Boxster, 911
Renault Espace
Seat Ibiza, Inca, Cordoba, Toledo
Skoda Felicia, Octavia
Volkswagen Polo, Passat, T4 Van Polo, VW 611
Instrument and
Door Panels/
Assemblies Audi A3, A4, A8, TT A2, A4, A8
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AWARDED
BUSINESS ON
FUTURE
COMPONENT OEM/CUSTOMER CURRENT PRODUCTION(A) PRODUCTION(B)
- --------- ------------ --------------------- -------------
DaimlerChrysler A Class, B Van, Vito, V Class
General Motors Corvette
Nissan Terrano, Serena
Opel Corsa, Tigra
Porsche Boxster, 911 911
Renault Twingo, Express
Seat Ibiza, Inca, Cordoba
Skoda Felicia
Volkswagen Passat, T4 Van VW 611, Passat
Airbag Covers Autoliv Accord, Alero Cobra, Caravan, Grand Am,
Grand Cherokee, Mazda 626, Mustang,
Mercedes, Navigator, S5S, Sable, Subaru,
Taurus, Town & Country, Volkswagen Voyager
Breed Suzuki Tracker, Wrangler Chrysler RS
DaimlerChrysler A Class
TRW Breeze, Cirrus, Mustang, Neon, Stratus,
PN96, Town Car, Ranger
Cladding/
Exterior Audi A6
BMW 3 Series, 5 Series, 7 Series 7 Series
DaimlerChrysler B Van, Dakota, Durango, Eclipse, Minivan, Dakota, M Class
Viper, Vito, V Class
Ford Econoline Van, Escort, Explorer, Navigator
Expedition, Explorer, F-Series Pickups,
Mustang, Navigator, Nissan, Quest, Ranger,
Villager, Windstar
Freightliner Truck
General Motors Achieva, Achieva GT, Astro Van, Blazer, Malibu
Bonneville, Cavalier, Century, Corvette,
Denali, DeVille, Eldorado, Escalade,
Express/Savana Van, Grand Am, Grand Am GT,
Grand Prix, Intrigue, Lumina, Monte Carlo,
Opel, Regal, Safari, Saturn, Silhouette,
Skylark, Sunfire, Transport, Yukon, Venture
Nissan Terrano, Serena HS
Opel Corsa
PSA Peugeot Xantia, Xsara, Saxo 806(V)
Renault Megane, Clio Megane
Seat Ibiza
Skoda Felicia
Volkswagen Polo, Beetle, Jetta Polo
Volvo V/S40
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AWARDED
BUSINESS ON
FUTURE
COMPONENT OEM/CUSTOMER CURRENT PRODUCTION(A) PRODUCTION(B)
- --------- ------------ --------------------- -------------
Fascias Audi A4, TT A3, A4
BMW 3 Series, 5 Series 3 Series, 5
Series
DaimlerChrysler Vito V Class Vito
Ford Expedition, F-Series Pick-up, Explorer,
Ranger
General Motors Astro, DeVille, Denali, Escalade, Eldorado,
LeSabre, Seville, Safari, Transport, Tahoe,
Opel, STS, Venture, Yukon
Isuzu Honda, Rodeo Rodeo
Karmann Golf Cabrio
Mitsubishi Carisma, Spacestar
Opel Omega, Catera
PSA Peugeot 106, 206, 306, Xsara, Berlingo, Saxo, 806,
Jumpy
Porsche Boxster, 911 Boxster, 911
Renault Twingo, Clio, Megane, Master, Express,
Kangoo, Laguna
Skoda Felicia, Octavia Felicia,
Octavia
Seat Ibiza, Inca, Cordoba, Toledo
Volvo V/S 40 V/S 40
Volkswagen Passat, Golf, Polo, Jetta, Vento, Caddy, Lupo GTI,
Bora, Lupo, LT2 Utility Passat, Polo,
Golf
Functional
Components DaimlerChrysler A Class, Vito
Ford Contour, Escort, F-Series Pickup, Jaguar, Econoline Van,
Lincoln LS, Mustang, Mystique, Navigator, Thunderbird
Ka
General Motors Blazer, Delphi-AC Spark Plug, G Van,
Express/ Savana Van, Seville, Skylark
Nissan Terrano, Serena
Opel Astra, Corsa
PSA Peugeot Belingo 306, Xantia,
806(V)
Renault Megane 4x4
Volvo V/S 40
Miscellaneous
Non-
Automotive Club Car Golf Cart bodies
Whirlpool Consumer white goods
- -------------------------
(a) Represents models for which we will produce and supply products in 1999 and,
in most cases, future years beyond 1999.
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(b) The amount of products produced under these awards is dependent on the
number of vehicles manufactured by the OEMs. Many of the models are versions
of vehicles not yet in production. See "Risk Factors -- Reliance on Major
Customers; the OEM Supplier Industry." There can be no assurance that any of
these vehicles will be produced or that we will generate certain revenues
under these awards even if the models are produced.
CUSTOMERS AND MARKETING
We rank among the largest suppliers of interior and exterior plastic
components and systems to the North American and European automotive markets.
Our principal customers include every major North American OEM, eleven of the
twelve major European OEMs, several major Japanese OEMs, and leading Tier I
suppliers, as detailed below:
OEMS TIER I SUPPLIERS
---- ----------------
AB Volvo Ford Motor Company PSA Peugeot Citroen Autoliv, S.A.
Adam Opel AG General Motors Renault SA TRW Inc.
Corporation
Audi AG Isuzu Motors Limited Seat, S.A.
Bayerische Motoren Mitsubishi Motors Skoda Automobilova
Werke AG (BMW) Corporation
DaimlerChrysler AG Nissan Motor Co., Ltd Volkswagen AG
PORSCHE AG
We primarily emphasize the design and manufacture of components and
integrated systems, and manufacture those components and systems as a
sole-source supplier. We currently supply components or systems on over 150
models, including 4 out of 5 of the top selling models in both the United States
and Europe. We supply components for many popular models, such as:
- Volvo V40 and S40;
- Audi A4 and TT;
- BMW 3 Series and 5 Series;
- DaimlerChrysler A-Class, "LH" cars -- Chrysler LHS, Concorde, 300M and
Dodge Intrepid, Dakota and Durango trucks and "JA" cars -- Cirrus,
Stratus and Breeze;
- Ford F-series truck, Explorer, Expedition, Mustang, Navigator and
Windstar;
- Chevrolet Corvette, General Motors "M" vans -- Astro and Safari, Yukon,
Tahoe, Suburban, Grand Am, Grand Prix and redesigned GMC and Chevrolet
full size vans -- Express and Savana;
- Porsche 986 and 996;
- Peugeot 206;
- Citroen Xsara;
- Renault Twingo;
- Seat Ibiza and Cordoba;
- Skoda Felicia and Octavia; and
- Volkswagen Golf, Passat and Bora.
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We believe that the depth of our product mix, the diversity of models for
which we are a supplier and our geographic coverage reduces our risks associated
with historical downturns in the automotive industry.
The approximate percentage of net sales to our principal customers and
customer categories, on a pro forma basis for the year ended December 31, 1998,
broken down geographically, is shown below. Also shown below is the approximate
percentage of net sales to principal customers (1) by Venture for the year ended
December 31, 1998, and (2) by Peguform for the 12-month period ended December
31, 1998.
PRO FORMA VENTURE PEGUFORM
CUSTOMER 1998(1) 1998 1998(1)
-------- --------- ------- --------
NORTH AMERICA:
General Motors Corporation............................... 12.6% 38.1% N/A
Ford Motor Company....................................... 8.2 24.8 N/A
Tier I Suppliers to OEMs................................. 5.0 15.1 N/A
DaimlerChrysler AG....................................... 4.5 13.6 N/A
Other Automotive......................................... 1.0 2.9 N/A
Non-Automotive........................................... 1.2 3.5 N/A
EUROPE:
Volkswagen AG............................................ 12.2% N/A 18.2%
Audi AG.................................................. 9.7 N/A 14.6
DaimlerChrysler AG....................................... 6.0 N/A 8.9
PSA Peugeot Citroen...................................... 5.8 N/A 8.7
Skoda Automobilova....................................... 5.0 N/A 7.5
Renault SA............................................... 3.7 N/A 5.6
Bayerische Motoren Werke AG (BMW)........................ 3.3 N/A 5.0
Seat, S.A................................................ 3.2 N/A 4.8
Porsche AG............................................... 2.6 N/A 3.9
Adam Opel AG............................................. 1.6 N/A 2.3
Other Automotive......................................... 12.5 N/A 18.8
Non-Automotive........................................... 1.2 N/A 1.7
OTHER:
Isuzu Motors Limited..................................... 0.7% 2.0% N/A
----- ----- -----
TOTAL.................................................... 100.0% 100.0% 100.0%
- ---------------
(1) Includes net sales to customers, including sales by Celulosa Fabril S.A., a
50% owned joint venture, the sales of which are not included as net sales in
Peguform's financial statements.
Venture's sales are made directly to the OEMs with marketing and customer
support assistance provided by an affiliated company, wholly owned by Mr.
Winget, and by other unaffiliated entities. See "Certain Transactions."
DESIGN AND ENGINEERING
Our engineering focuses on anticipating actual production issues and
integrating part design with tool design to create an efficient manufacturing
process. We refer to this emphasis as "design for manufacture." We strive to
maintain a technological advantage through investment in product development and
advanced engineering capabilities. As OEMs have increasingly focused on
shortening their design cycles and reducing their design and production costs,
we have been increasingly required to utilize advanced engineering resources
early in the planning process. As a
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result of the Peguform acquisition and through our affiliated companies, we now
have the capability to be a full-service supplier to our global OEM customers 24
hours a day.
Our engineering and technical staff works closely with our OEM customers to
help design and develop new products and line extensions, ensure high quality,
and coordinate development with the manufacture of new vehicles. In addition, we
maintain laboratories dedicated to product development, tryout, certification
and research which are certified for use by several or our OEM customers.
Given the increased demand for early involvement in the design and
engineering aspects of product development, we have made a substantial
commitment in technical centers. Through our Advanced Engineering Center and
pre-product engineering site in Botzingen, Germany, with additional regional
engineering centers in Pouance, France and Polinya, Spain, we continue to
enhance our comprehensive and customer-focused design and engineering
capabilities. Our design and engineering technologies include integrated
CAD/CAM; computer-aided optical scanning; reverse engineering automated process
for rapid prototyping; and gas-aided injection molding technology. With the aid
of our integrated computer design systems and the introduction of optical
scanning prototyping equipment, we have significantly reduced the amount of time
required to create a prototype part and ultimately a production component. This
process not only reduces development time but also improves the accuracy of
product and mold tolerances. Further, our advanced systems allow hundreds of
design solutions to be visualized and ergonomically tested quickly and easily,
facilitating product design and manufacturing.
Our advanced development capabilities have resulted in several innovations
that we believe have provided significant benefits to our customers. Peguform,
for instance, has a long history of developing innovative new designs both to
improve the quality and to lower the cost of its designs. Major innovations
include the first thermoplastic bumper developed in the late 1970s; a
proprietary slush molding process; the first thermoplastic hatchback door; and
the development of painting technologies. We believe that our design and
advanced engineering expertise is an important differentiating factor in
maintaining our relationships with and obtaining new business from our OEM
customers.
PRODUCTION CONTROL, MANUFACTURING AND QUALITY
Due to the evolving purchasing and manufacturing policies of the OEMs,
production control has emerged as the critical factor for coordinating and
integrating the customers' requirements with our scheduling and manufacturing
processes.
Responding to these changes, we have developed and incorporated the
principles of "lean manufacturing" and "Kaizen" into our manufacturing
operations. These programs establish a work environment which encourages
employee involvement in identifying and eliminating waste. Our operations are
structured flexibly to respond to the demands of different product runs and
changing product delivery requirements while increasing production efficiency.
Additionally, we rely on the quality and training of our work force and, when
appropriate, automation, to reduce costs.
We attempt to minimize our investment in inventory by coordinating our
purchasing and production activities with anticipated customer demands. Based
upon their production forecasts, the OEMs generally provide us with weekly
releases, four to thirteen weeks prior to actual delivery. To service our
customers more effectively, we have implemented "pull systems" at each of our
North American manufacturing locations, to help meet our customers' requirements
for on-time deliveries while reducing the carrying levels of inventory. Pursuant
to the "pull system," production is based primarily upon demand rather than on
forecasted need. Our European production facilities and module centers are all
located close to major OEM plants to accommodate just-in-time supply. With
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a highly developed software and logistics capability, we process orders at these
facilities with finished products and deliver to customers' premises within a
matter of hours.
We believe we maintain an excellent reputation with the OEMs for providing
world class quality and customer service at competitive prices. Our reputation
as a high-quality, full-service supplier is exemplified by our receipt of
several major quality awards from our OEM customers in both North America and
Europe. Quality levels are currently being standardized across OEMs through the
QS-9000 program which is expected to lower the cost of maintaining separate
quality programs. All of our manufacturing, tooling and design facilities
historically operated by Venture, and nine manufacturing facilities previously
operated by Peguform are QS-9000 certified.
The production of many of our components requires sophisticated technology
and considerable manufacturing expertise. We utilize two-component paint
technology, including soft-touch paints for interior applications, principally
air bag covers and interior consoles, as well as base coat and clear coat paints
applied to exterior components including fascias, fenders, lift gates, wheel
lips, spoilers and side moldings. Our side wall hard trim components, scuff
plates and seat back trims are molded in color. We also utilize water-based
paint and composite technologies, and produce slush molded instrument panels and
thermoplastic hatchback doors. Vinyl and cloth wrapping techniques are used to
manufacture our instrument panels, side wall hard trim components and door
panels.
Our plastic components have sophisticated tooling requirements, the costs
of which are generally billed to the customer at pre-authorized levels, although
there is a trend in the United States toward customers requiring this tooling to
be purchased by us and amortized over the life of the program. Development of
the tooling typically begins approximately two to three years before production,
after being selected by the customer to develop a particular component or
assembly. At that time, we commence our tooling design and development work.
Venture accumulates in inventory the costs incurred for this work. The
production tooling is ordered generally one year prior to production.
Venture supplies substantially all of its tooling requirements from its own
tooling operations. Peguform currently purchases substantially all of its
tooling requirements from outside suppliers. We believe that we will be able to
utilize our own in-house tooling capabilities to supply a portion of the tooling
requirements traditionally outsourced by Peguform, resulting in reduced costs to
Venture.
RAW MATERIALS
Our manufacturing processes use a variety of raw materials, principally
engineered plastic resins such as nylon, polypropylene (including
thermoplastics), polycarbonate, acrylonitrile-butadiene-styrene, fiberglass
reinforced polyester, PET and thermoplastic polyurethane; a variety of
ingredients used in compounding materials used in the compression molding
process; paint related products; and steel for production molds. Our customers
usually specify materials and suppliers to be used for a specific program, but
we cannot assure you that the specified suppliers will always be able to supply
the specified materials or that alternative sources will be available. We obtain
most of our raw materials from one-year supply agreements in which we estimate
our annual needs. We generally issue releases against these agreements only when
we receive corresponding orders from our customers. Although we have not
historically experienced raw material shortages, we could face shortages in the
future.
COMPETITION
Our business is highly competitive, and competition generally occurs on the
basis of product groups. A large number of actual or potential competitors
exist, including the internal component operations of the OEMs as well as
independent suppliers, many of which are larger than us. The competitive
environment has been affected in recent years by supplier consolidations
resulting from
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OEM supplier optimization policies and the spin-off by OEMs of formerly in-house
plastics manufacturing facilities. We believe these consolidations and
divestitures could benefit our future product pricing, as formerly marginal
competitors are removed and spun-off in-house manufacturing facilities are
forced to compete independently.
We compete primarily on the basis of quality, cost, timely delivery and
customer service and, increasingly, on the basis of design and engineering
capability, painting capability, new product innovation, product testing
capability and our ability to reduce the time from concept to mass production,
commonly referred to as "art to part". Some of the OEMs have adopted supplier
management policies, which designate preferred future suppliers and, in some
cases, encourage new suppliers to supply selected product groups. We believe
that as OEMs continue to strive to reduce new model development cost and timing,
innovation, and design and engineering capabilities will become more important
as a basis for distinguishing competitors. We believe that we have an
outstanding reputation among OEMs in these two areas which is enhanced as a
result of the Peguform acquisition.
We believe that in both North America and Europe, our two largest markets,
we maintain a competitive advantage due to our position as a full-service OEM
supplier. Our major North American competitors include Magna International,
Cambridge Industries, Inc., Buckeye Plastics, a division of Worthington
Industries, Textron Automotive division of Textron Corporation, Lear
Corporation, The Budd Company plastic division, and the Prince division of
Johnson Controls, Inc., plus a large number of smaller competitors.
The European market is best described in terms of interior and exterior
products. Our market position is enhanced as a result of the considerable
synergies between interior and exterior modules and by our technological
leadership in injection molding. In interior products, we focus on dashboard and
door panel modules. In both of these fragmented product markets we rank behind
market leader Sommer-Allibert, in a group which includes Plastic Omnium,
Faurecia, JCI/Becker, Magna, Lear, Commer, Irausa, Simoldes, Petri, Maione and
Textron. In exterior products, we focus on bumper systems, and have a favorable
market position relative to Plastic Omnium, Dynamit Nobel, Magna,
Sommer-Allibert and Rehau. In addition, we have extensive experience in
hatchback door design and production, specifically among new niche car models.
EMPLOYEES
We believe that our future success will continue to be enhanced by
rewarding and empowering employees. At June 30, 1999, we employed approximately
11,600 persons. We have 624 hourly persons at the Seabrook, New Hampshire and
Lancaster, Ohio facilities who are covered by collective bargaining agreements
with the United Auto Workers. Employees at our Conneaut, Ohio facility have
recently voted to be represented by the Teamsters union. The contract with our
Seabrook employees was recently renegotiated and expires in June 2002, and the
Lancaster contract expires in June 2001. Negotiations regarding a new collective
bargaining agreement at the Conneaut facility have just recently begun. We have
not experienced any work stoppages in North America and consider our relations
with our North American employees to be good.
For reasons of flexibility, part of our European workforce is employed on
short-term contracts. In addition, leased personnel are utilized in Europe on a
short-term basis to cover peak requirements.
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The European workforce is covered by collective bargaining agreements with the
following workers unions:
Germany: IG Bergbau, Chemie und Erden and IG Holz und Kunststoff
France: CFTC, CGC, CGT, CGT-FO and Syndicat National Autonome des
Plastiques
Spain: Comisiones Obreras, Union General Trabajadores and Central
Intersindical Galega
Czech Republic: KOVO
Although Peguform has experienced several minor work stoppages in France in
the past, we believe that our relationships with the European workers councils
and unions is good.
PATENTS
We have the right to use various patents which aid in maintaining our
competitive position. Patents licensed to Venture begin to expire in the next 15
years. The expiration of these patents is not expected to have a material
adverse effect on our operations. See "Certain Transactions."
PROPERTIES
Our executive offices are located in Fraser, Michigan. Our North American
molding operations are conducted at fourteen facilities in Michigan, Ohio,
Kentucky, Indiana and New Hampshire. As a result of the Peguform acquisition, we
operate nineteen plants in Europe, Mexico and Brazil. In addition, we have nine
module centers located in five European countries in order to meet our OEM's
requirements for just-in-time deliveries. The utilization and capacity of our
facilities may fluctuate based upon the mix of components we produce and the
vehicle models for which we are producing the components. We believe that
substantially all of our property and equipment is in good condition and that we
have sufficient capacity to meet our current and projected manufacturing and
distribution needs through the 2001 model year.
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The following table sets forth certain information concerning our principal
facilities:
SQUARE TYPE OF
LOCATION FOOTAGE INTEREST DESCRIPTION OF USE
- -------- ------- -------- ------------------
MICHIGAN
Masonic Facility 178,000 Leased(1) Molding, Mold Fabrication and
Repair
Malyn Complex 23,000 Leased(1) Molding
22,000 Leased(1) Molding
18,000 Owned Warehouse
Technical Center 56,000 Owned Headquarters, Laboratory,
Tryout, Mold Fabrication
Commerce Facility 24,000 Leased(1) Mold Fabrication and Repair
Doreka Center 6,000 Leased Design and Engineering
Service Center 6,000 Leased Administration
Grand Blanc Facility 365,000 Owned Molding, Painting, Assembly
Grand Rapids Complex 440,000 Leased Molding, Painting, Assembly
125,000 Leased Assembly Warehouse
85,000 Leased Warehouse, Shipping
Harper Facility 180,000 Leased(1) Molding, Painting, Assembly
Groesbeck Facility 128,000 Owned Molding
Design Center 20,000 Leased Design and Engineering
Almont Facility 10,000 Leased(1) Mold Fabrication and Repair
Almont Facility II 10,000 Leased(1) Mold Fabrication and Repair
Troy Center 10,000 Leased Mold Fabrication
Hillsdale Facility 119,000 Owned Molding, Painting, Assembly
25,000 Leased Warehouse
Redford Facility 22,000 Leased(1) Mold Fabrication
Allen Park Center 26,000 Leased Sales, Design, Engineering
KENTUCKY
Hopkinsville Complex 104,000 Owned Molding, Painting, Assembly
80,000 Leased Warehouse
NEW HAMPSHIRE
Seabrook Facility 390,000 Owned Molding, Painting, Assembly
WALLACEBURG, ONTARIO, CANADA
Venture Canada Facility 35,000 Owned Painting and Assembly
OHIO
Conneaut Facility 183,000 Leased Molding, Painting, Assembly
Lancaster Facility 156,000 Owned Molding, Painting, Assembly
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SQUARE TYPE OF
LOCATION FOOTAGE INTEREST DESCRIPTION OF USE
- -------- ------- -------- ------------------
INDIANA
Madison Facility 71,000 Owned Painting and Assembly (inactive)
Hartford City Facility 116,000 Owned Molding and Assembly
Portland Facility 120,000 Owned Molding and Painting (inactive)
GERMANY
Botzingen 167,000 Owned Molding, Painting and R&D Center
415,000 Leased Molding, Painting and R&D Center
Gottingen 274,000 Owned(2) Molding and Painting
Mosel 67,000 Leased Module Center
Munchen 52,000 Leased Module Center
Neckarsulm 25,000 Leased Module Center
Neustadt 506,000 Owned Molding and Painting
Oldenburg 312,000 Owned Molding and Painting
Rastatt 65,000 Leased Module Center
Regensburg 75,000 Leased Module Center
FRANCE
Burnhaupt 127,000 Leased Molding and Painting
Noeux-les Mines 312,000 Leased Molding and Painting
Pouance 248,000 Leased Molding and Painting
54,000 Owned Molding and Painting
Rueil 2,300 Leased Module Center
Vernon 194,000 Leased Molding and Painting
HUNGARY
Gyor 26,000 Leased Module Center
SPAIN
Palencia 244,000 Owned Molding and Painting
Polinya 269,000 Owned Molding and Painting
Sant Esteve Sesrovires 107,000 Leased Molding
Vigo 133,000 Owned Molding and Painting
Zaragoza 267,000 Owned(3) Molding
THE CZECH REPUBLIC
Liban 118,000 Owned Molding
Liberec 543,000 Owned Molding and Painting
Mlada Boleslav 16,000 Leased Module Center
BRAZIL
Curtiba 215,000 Leased(4) Molding and Painting
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SQUARE TYPE OF
LOCATION FOOTAGE INTEREST DESCRIPTION OF USE
- -------- ------- -------- ------------------
MEXICO
Puebla 66,000 Leased(5) Molding
NETHERLANDS
Sittard 95,000 Leased Module Center
- -------------------------
(1) Leased from an affiliate of Venture. See "Certain Transactions."
(2) A portion of this facility is used on the basis of hereditary building
rights which expire in 2012.
(3) Operated by a joint venture in which we hold a 50% interest.
(4) Production expected to begin in the third quarter of 1999.
(5) Operated by a joint venture in which we hold a 70% interest.
In addition to the above facilities, we rely upon certain affiliated
companies, which are owned or controlled by Mr. Winget, to provide facilities,
machinery and equipment, technology and services that are necessary for us to be
a full-service supplier. Deluxe Pattern Company, a company wholly owned by Mr.
Winget's living trust, makes available to us a 30,000 square foot advanced
design and model building facility under a usage agreement. In addition, Venture
Automotive Corp., a company wholly owned by Mr. Winget's living trust, operates
a 208,000 square foot facility in Flint, Michigan at which it performed services
for Venture which included sequencing and value-added assembly of parts. Some of
the services previously performed by Venture Automotive Corp. have now been
contracted to MAST Services, LLC, in which N. Matthew Winget, Mr. Winget's son,
formerly owned a minority interest. In addition, we have subcontracted certain
work to Nova Corporation, a business in which Mr. Winget has a significant
equity interest. See "Certain Transactions."
ENVIRONMENTAL MATTERS
Our operations are subject to numerous federal, state and local laws and
regulations in the United States and other countries pertaining to the
generation, storage, treatment and discharge of materials into the environment.
We have taken steps related to these matters in order to reduce the risks of
potentially harmful aspects of our operations on the environment. However, from
time to time we have been subject to claims asserted against us by regulatory
agencies for environmental matters relating to the generation, treatment,
storage and disposal of hazardous substances and wastes, as well as compliance
with environmental laws. Some of these claims relate to properties or business
lines we acquired after a release had occurred. In each known instance, however,
we believe that the claims asserted against us, or obligations incurred by us,
will not result in a material adverse effect upon our financial position or
results of operations. Nonetheless, there can be no assurance that activities at
these facilities or facilities acquired in the future, or changes in
environmental laws and regulations, will not result in additional environmental
claims being asserted against us or additional investigations, remedial actions,
compliance expenditures, fines or penalties being required.
We are currently involved in legal proceedings with the Michigan Department
of Environmental Quality concerning the emissions from our Grand Blanc paint
facility. See "Business -- Legal Proceedings."
In 1998 and 1999, the Michigan Department of Environmental Quality issued 3
letters of violation to our Grand Rapids, Michigan facility, alleging violations
of certain emission limitations and coating solvent content requirements of the
facility's state air use permit. We are presently
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reviewing and discussing the alleged violations with the Michigan Department of
Environmental Quality, and it is possible that some may be the result of
computation and reporting discrepancies. We are evaluating alternative coatings
that may address any unresolved violations. It is possible that the Michigan
Department of Environmental Quality may seek administrative penalties in
connection with the resolution of these matters. We do not believe that the
amount of those penalties, if any, will have a material adverse effect on our
operations, or that the resolution of these matters will require material
capital expenditures, although there can be no assurance that this will not be
the case.
The New Hampshire Department of Environmental Services is currently
undertaking an evaluation of certain modifications made in the early 1990's to
the paint lines at our Seabrook, New Hampshire facility to determine whether
those changes made that facility subject to new source review. The outcome of
that evaluation cannot reasonably be predicted or estimated at this time. If the
New Hampshire Department of Environmental Services concludes that the facility
is subject to new source review, it would likely require the installation of
emission control equipment and potentially other capital and operational
expenditures, and could possibly give rise to enforcement proceedings against
the facility. While we do not believe that any of the foregoing would have a
material adverse effect on our operations, there can be no assurance that this
will not be the case.
In connection with the Peguform acquisition, Venture conducted an
environmental due diligence assessment of the 16 primary Peguform manufacturing
facilities in Europe, Mexico and South America. That assessment identified
various potential environmental compliance and contamination issues that may
require expenditures to satisfy and ensure compliance with applicable regulatory
standards and requirements, defined as "Known Conditions" under the definitive
agreement with Klockner Mercator Maschinenbau GmbH. Under the terms of the
definitive agreement with Klockner Mercator Maschinenbau GmbH, they are
obligated to indemnify us, on a sliding, diminishing scale over a 7 year period,
for certain costs we incur in connection with the Known Conditions in excess of
DEM 7.5 million, and in excess of DEM 6.0 million for environmental conditions
other than the Known Conditions. We do not believe that any expenditures we may
be required to make in connection with the Known Conditions or other
environmental issues arising out of the Peguform acquisition will have a
material adverse effect on our operations, although there can be no assurance
that this will not be the case.
We have been notified of our status as a potentially responsible party,
commonly referred to as a "PRP" at the ReSolve Superfund site in North
Dartmouth, Massachusetts, the Solvents Recovery Services site in Southington,
Connecticut, the Old Southington Landfill Superfund site in Southington,
Connecticut, the Spectron, Inc. site in Elkton, Maryland, and the Hazardous
Waste Disposal Inc. site in Farmingdale, New York. At all 5 sites, Venture and
all other PRPs are jointly and severally liable for all remediation costs under
applicable hazardous waste laws. Therefore, our proportionate share is subject
to increase upon the insolvency of other PRPs.
Regarding the ReSolve site, we have been named, along with Bailey's
immediate predecessor, USM Corporation's Bailey division, in the name of Emhart
Corporation, as a PRP for wastes sent to the site during the 1970s. Recent
estimates provided by the PRP group responsible for the site's remediation
indicate that our potential liability for clean-up efforts at the site is
approximately $0.4 million for which we are fully reserved and have posted a
letter of credit in favor of the PRP group. The discovery of the presence of
contaminants in a form not currently susceptible of short-term remediation,
however, has created uncertainty about the future scope and cost of clean-up
efforts at this site, and a possibility that the ultimate cost of remediation
may be higher than previously estimated. We are unable to predict what, if any,
effect this recent discovery may have on us.
On June 18, 1992, we received notice from the EPA that we were a PRP under
the federal Superfund law for the Solvents Recovery Services of New England Site
in Southington, Connecticut.
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Based upon a volumetric ranking dated July 7, 1993, the waste allocated to us
represented 0.11593% of the total identified waste at the Southington site.
Under the terms of a settlement with Emhart, we agreed to assume liability for
wastes sent to the SRSNE Site by the Seabrook, New Hampshire facility and Emhart
agreed to assume liability for wastes sent by USM's Amesbury, Massachusetts
facility. The identified PRPs have organized a group to negotiate with the EPA,
and we have joined that group. The group has successfully negotiated with the
EPA to reduce the total estimated cost of the initial removal action at the
SRSNE Site from an original estimate of $14 million down to a current estimate
of approximately $4.0 million. The total estimated cost of long-term remediation
at the SRSNE Site is not yet known.
In January 1994, we received a Notice of Potential Liability for the Old
Southington Landfill Superfund Site located in Southington, Connecticut. We
received notice, along with USM/Emhart, of liability for the share of Old
Southington Landfill Superfund Site costs allocated to USM Corporation,
Amesbury, Massachusetts. We entered into a settlement agreement with Emhart
under which Emhart will assume sole responsibility for all cleanup costs,
imposed by the EPA, arising out of the alleged liabilities of USM Corporation's
Bailey division, Amesbury, Massachusetts, for the Old Southington Landfill
Superfund Site.
In June 1989, the EPA notified us that we were a PRP under the federal
Superfund law for the Spectron, Inc. site located in Elkton, Maryland. A group
of PRPs entered into agreements with the EPA to fund and conduct a $2.8 million
emergency response action to remove stored wastes at the site and pay the
government's past costs associated with the site, approximately $635,000. There
are several thousand PRPs at this site, with most being small generators with
low dollar exposure. In December 1989, nearly 800 entities, including Venture,
that sent small quantities of waste to the site participated on a cash-out basis
in the settlement for past costs and the removal action, and our allocated share
was approximately $8,100. Participation in the cash-out settlement gives us
protection against contribution claims from third parties for the first phase,
or Phase I of the site cleanup.
In August 1990, a separate PRP group was formed and negotiated an agreement
with the EPA to remediate contaminated seeps on the site and perform a limited
privately-funded remedial investigation/feasibility study for the site, the
so-called Phase II activities. We were not asked to join this Phase II PRP group
because that group determined that the companies that paid for Phase I of the
cleanup would not be asked to make any financial contributions toward Phase II
until the other customers have paid out an amount per gallon equal to that paid
by the Phase I parties. An additional investigation was conducted as part of the
Phase II activities to determine the nature and extent of a new form of
contamination discovered on the site; additional design work will be commenced
soon.
In October 1995, we received a notice from the EPA that we were PRP that
has liability for conducting a Remedial Investigation/Feasibility Study at the
Spectron site. In connection with this, we may have an opportunity to enter into
a de minimis party cash out settlement with the EPA and the other PRPs, the
terms of which currently are being negotiated. No estimate can be made at this
time as to the amount of Venture's liability at the Spectron site.
In 1995, the New York Department of Environmental Conservation notified us,
as well as a number of other parties, that we were named a responsible party
under the Environmental Conservation Law of the State of New York for the
Hazardous Waste Disposal, Inc. site located in Farmingdale, New York. Based on
available information, our involvement at the site appears to be related to the
shipment of 2 drums of waste materials to the site, and consequently minimal.
Additional investigations have been undertaken to determine: (1) whether there
are any other entities that shipped wastes to the site; and (2) whether any of
the named parties actually shipped more than was originally attributed to them.
The results to date do not suggest that our ranking at the site will change
significantly. We have demanded that Emhart Corporation assume the defense of
this claim.
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Emhart Corporation has taken our demand for a defense and indemnification under
advisement. In doing so, Emhart Corporation has taken the position that it did
not receive "prompt written notice" of the claim.
We also face the possibility of liability if we are deemed a successor to
TransPlastics for wastes generated and disposed of by TransPlastics when it
owned the Conneaut property. TransPlastics has been identified as a PRP at the
Millcreek site in Millcreek Township, Pennsylvania, and at the New Lyme Site
located in Dodgeville, Ashtabula County, Ohio, and at the Huth Oil Site in
Cleveland, Ohio, 3 sites currently undergoing remediation. We also received
notices from third parties regarding potential claims in connection with the
Huth Oil Site and the Millcreek site. We did not agree to assume any
environmental liabilities of TransPlastics and, as a result, submitted claims
for indemnification for these matters to TransPlastics, which liabilities
TransPlastics has accepted. Under the terms of the Conneaut Acquisition
agreement, TransPlastics and its parent companies must indemnify us for any
liability arising out of any such claim. Nevertheless, there can be no assurance
that TransPlastics and its parent companies will have sufficient assets to
satisfy our potential liability for the remediation and any associated damage or
cost caused by the contamination.
We also face potential liability at our Hillsdale, Michigan facility in
connection with the acquisition of The Boler Company by Bailey prior to our
acquisition of Bailey. An environmental site assessment completed by Boler
determined that the ground water at the Hillsdale facility was contaminated with
chlorinated solvents as a result of Boler's past site activities. The ground
water contamination plume has migrated onto adjacent properties. In addition,
the company from which Boler acquired the Hillsdale site is listed as a PRP for
a number of off-site disposal locations. The Boler Purchase and Sale Agreement
requires Boler to indemnify us for any environmental liabilities which arise in
connection with use of the property prior to closing. In addition, Boler has
executed a remediation agreement in which it agreed to remediate, at its own
expense, the identified ground water contamination at the Hillsdale facility.
Boler is currently conducting the remediation at that facility. If Boler has
insufficient resources to complete remediation of any contamination for which it
has indemnified us or otherwise becomes insolvent, we could incur successor
liability for the costs of remediation and any damages to third parties.
We also have potential liability in connection with contamination at
certain property in Cuba, Missouri, which had been leased by Bailey prior to our
acquisition of Bailey. The landlord has undertaken to remediate this property at
its own expense. We have negotiated the termination of all of our obligations
under the lease.
As a result of the environmental investigation conducted as part of its due
diligence during the acquisition of the three Premix/E.M.S. Inc. facilities
prior to our acquisition of Bailey, Bailey identified a number of environmental
concerns. Premix/E.M.S. Inc., as part of the acquisition agreement, agreed to
pursue and address these concerns, most of which it has completed. Pursuant to
the acquisition agreement, we performed certain post-acquisition investigations
which appeared to confirm the presence of subsurface contamination, of which we
have informed Premix/E.M.S. Inc. Under the acquisition agreement, Premix/E.M.S.
Inc. is obligated to undertake necessary remediation of this problem, if in fact
any is required. Premix/E.M.S. Inc. is currently conducting the remediation at
the Portland, Indiana facility. Premix/E.M.S. Inc. has entered into an
Environmental Indemnification Agreement for our benefit. There is a pending
dispute with Premix/E.M.S., Inc. as to whether there is a $3.0 million or $6.0
million limit on indemnification under this agreement. The shareholders of
Premix/E.M.S. Inc. have also severally undertaken to reimburse us in certain
limited circumstances, to the extent of distributions received by them from
Premix/E.M.S. Inc., and to the extent that Premix/E.M.S. Inc. does not directly
satisfy its indemnification obligations.
Estimates of the future cost of these environmental matters are necessarily
imprecise due to numerous uncertainties, including the enactment of new laws and
regulations, the development and
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application of new technologies, the identification of new sites for which we
may have remediation responsibility and the apportionment and collectibility of
remediation costs among responsible parties. We establish reserves for these
environmental matters when the loss is probable and reasonably estimable. At
December 31, 1998 and 1997, Venture had a reserve of approximately $1.3 million
and $1.3 million, respectively, to address the issues discussed above and for
compliance monitoring activities that may be incurred. We periodically evaluate
and revise estimates for environmental reserves based upon expenditures against
established reserves and the availability of additional information. It is
possible that final resolution of some of these matters may require us to make
expenditures in excess of established reserves, over an extended period of time
and in a range of amounts that cannot be reasonably estimated. Although the
ultimate cost of resolving these matters could not be precisely determined at
December 31, 1998, we believe, based on currently known facts and circumstances,
that the disposition of these matters will not have a material adverse effect on
our consolidated financial position and results of operations.
LEGAL PROCEEDINGS
On February 23, 1998, the Attorney General of the State of Michigan and the
Michigan Department of Environmental Quality instituted legal proceedings in
state court alleging that we have ongoing violations of air pollution control
laws, primarily related to the level of emissions and odors discharged from our
Grand Blanc paint facility. These proceedings seek and may result in the
imposition of civil penalties of up to $10,000 per violation. In the case of an
alleged continuous violation, a daily violation could run from on or about July
1, 1994. We have been advised by our legal counsel that the amount of any
penalty resulting from this legal proceeding is not capable of being ascertained
at this time. However, in a non-binding mediation process, a panel of three
independent mediators recommended a settlement in the amount of $2.3 million.
This mediation process does not represent a settlement offer by Venture. We plan
to make capital expenditures of approximately $5.5 million to the current Grand
Blanc systems to respond to the complaints and to make manufacturing
improvements. During the first quarter of 1999, the U.S. Environmental
Protection Agency issued a notice of violation and has taken an active role in
monitoring these legal proceedings and may take action separate and distinct
from the legal proceedings begun by the State of Michigan and the Michigan
Department of Environmental Quality. Currently, we intend on vigorously
contesting this legal proceeding, and are preparing for trial.
In addition to the environmental matters described above and under
"Business -- Environmental Matters," we are a party to several legal proceedings
incidental to the conduct of our business. We do not believe that any of these
actions, individually or in the aggregate, will have a material adverse effect
on our financial condition or results of operations.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act, and
in accordance therewith file periodic reports and other information with the
SEC. Reports and other information filed by us with the SEC can be inspected and
copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. Information on the operation of the Public Reference Room is
available from the SEC at 1-800-SEC-0330. In addition, the SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of this Web site is: http://www.sec.gov.
In the event we cease to be subject to the informational requirements of
the Exchange Act, we will be required under the indentures governing the Notes
to continue to file with the SEC the annual and quarterly reports, information,
documents or other reports, including, without limitation, reports on Forms
10-K, 10-Q and 8-K, which would be required pursuant to the informational
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requirements of the Exchange Act. We will also furnish such other reports as may
be required by law. In addition, for so long as any of the outstanding notes are
restricted securities within the meaning of Rule 144(a)(3) under the Securities
Act, we have agreed to make available to any prospective purchaser of the
outstanding notes or beneficial owner of the outstanding notes, in connection
with any sale thereof, the information required by Rule 144A(d)(4) under the
Securities Act.
We are not required to send annual reports to security holders under the
SEC's proxy rules or regulations. We will provide the Trustee with reports,
including reports on Forms 10-K (including audited financial statements), 10-Q
and 8-K, pursuant to the terms of the indentures governing the Notes.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following individuals are our Directors and Executive Officers, having
the operational titles set forth opposite their names. Venture does not have
directors. Mr. Winget, as Special Advisor to Venture, generally acts in that
capacity. Messrs. Winget, Schutz and Torakis serve as the directors of each
guarantor of the Notes. Mr. Winget and Stephen M. Cheifetz serve as the
directors of Venture Canada. Mr. Butler is a director of Venture Holdings
Corporation only.
NAME AGE POSITION
- ---- --- --------
Larry J. Winget......................... 56 Chairman of the Board and Chief
Executive Officer
Larry J. Winget, Jr. ................... 38 Chairman of Peguform GmbH and Executive
Vice President -- Manufacturing of
Venture Holdings Company LLC
A. James Schutz......................... 53 Vice Chairman
Michael G. Torakis...................... 42 President of Venture Holdings Company
LLC and Peguform GmbH
Robert Wedge............................ 61 President of Mold & Engineering
Operations
James E. Butler, Jr. ................... 46 Chief Financial Officer, Executive Vice
President and Secretary
Charles Hunter.......................... 46 Executive Vice President -- Engineering
Michael Juras........................... 57 Executive Vice President -- Advanced
Engineering and Marketing
Patricia A. Stephens.................... 52 Executive Vice President -- Purchasing
Joseph R. Tignanelli.................... 37 Executive Vice President -- Interior
Operations
David Voita............................. 58 Executive Vice
President -- Manufacturing
Warren Brown............................ 55 Vice President -- Exterior Operations
Gary Woodall............................ 56 Vice President -- Interior Operations
and General Motors Customer Executive
Werner Deggim........................... 48 Senior Vice President -- Peguform GmbH
Gerhard Ruf............................. 44 Vice President -- Operations, Logistics
and Process Engineering -- Peguform GmbH
Dieter Belle............................ 43 Vice President -- Finance, Controlling,
Purchasing and Human Resources --
Peguform GmbH
Larry J. Winget was one of the five original founders and shareholders of
Venture Industries Corporation and is the only one still involved with us. Since
1987 he has owned 100% of Venture and is currently the sole beneficiary of
Venture Holdings Trust, which is the sole member of Venture.
Larry J. Winget, Jr., Larry J. Winget's son, has been employed by us in
various positions since 1976, including Molding Plant Manager of Vemco, Inc.
from 1988 until 1990, Assistant Manager of Vemco, Inc. from 1990 until 1993, and
Vice President and General Manager of Vemco, Inc. until being named to the
position of Vice President -- Manufacturing in April of 1995. In December of
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1997 he assumed the additional role of leading all manufacturing operations and
on May 28, 1999 became Chairman of Peguform.
A. James Schutz assumed the position of Vice Chairman in October 1997 and
had been Executive Vice President since 1987. He has been in the injection
molding business for 25 years.
Michael G. Torakis joined us in 1985 and has been President since 1995. He
previously served as Treasurer and Chief Financial Officer and in various other
capacities with Venture, including Executive Vice President. On May 28, 1999,
Mr. Torakis became President of Peguform.
Robert Wedge joined us in November 1984 as Plant Manager, became Vice
President and General Manager of Venture Mold & Engineering in December 1993 and
assumed his present position in April of 1995. Mr. Wedge has 35 years of mold
building experience.
James E. Butler became Chief Financial Officer of Venture in 1999. He
joined us in 1994 and assumed the position of Executive Vice
President -- Finance and Secretary in April of 1995. From 1981 until joining
Venture, Mr. Butler was employed by Coopers & Lybrand L.L.P., a certified public
accounting firm.
Charles Hunter has been with us since 1989 and has held a number of
different positions with us involving mold building, design engineering and
prototype operations. He currently oversees worldwide design and advanced
engineering operations.
Michael Juras joined us in his current position in January 1997. Prior to
joining us, Mr. Juras had spent 30 years in various product and manufacturing
positions with General Motors, with his last position as Director of Engineering
Mid-Size Cars.
Patricia A. Stephens joined us in 1993 and has held positions involving
program management, contract administration and purchasing. She previously had
been employed for 23 years by General Motors, her last position being purchasing
agent.
Joseph R. Tignanelli, Larry J. Winget's son-in-law, has been employed by us
in several positions since 1980, including Molding Manager for Venture
Industries Corporation -- Groesbeck plant from 1985 until 1990, Assistant
Manager of Venture Industries Corporation from 1990 until 1993, Vice President
of Venture Industries until October of 1995, and Executive Vice
President -- Customer Services until December 1997, when he assumed his current
position.
David Voita has been employed by us in various manufacturing positions
since 1995, after a 33-year career with Ford Motor Company. Mr. Voita's last
position at Ford was that of Plant Manager for the Plastic and Trim Division,
where he managed a 1.2 million square foot, 1,300 employee facility.
Warren Brown joined us in 1993 as Vice President -- Mergers and
Acquisitions and assumed his current position in 1999. Prior to joining us, Mr.
Brown was employed for eight years as Chief Operating Officer of Autodie
Corporation. He has over 30 years experience in the automotive supplier
industry.
Gary Woodall joined us on April 1, 1999 as Vice President of Interior
Operations and General Motors Customer Executive. Mr. Woodall had previously
been employed by General Motors Corporation for over 35 years. Mr. Woodall's
last position with General Motors was as General Director of Products,
Manufacturing and Process Engineering. Prior to holding that position, Mr.
Woodall served as General Director of Operations, and was responsible for
General Motors' North American interior automotive component manufacturing.
Werner Deggim became a member of the Management Board of Peguform GmbH in
1994, in charge of Sales, Development and Research, until being named to his
present position in 1998. For
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5 years prior to joining Peguform Mr. Deggim was President of Kautex North
America, located in Windsor, Ontario Canada.
Gerhard Ruf served as plant manager of Peguform GmbH's plant in Neustadt,
Germany from 1994 to 1997. In 1997, Mr. Ruf assumed the position of Vice
President for Operations of Peguform GmbH. Mr. Ruf has been in his present
position since January 1998. Prior to joining Peguform, Mr. Ruf was employed for
8 years by Sommer Allibert as production and plant manager at their Sontra,
Germany facility.
Dieter Belle joined Peguform GmbH as Vice President -- Finance, Controlling
and Purchasing in 1995. In April 1998 he assumed responsibility for human
resources. Prior to joining Peguform, Mr. Belle served as Director of
Controlling for Felten & Guilleaume from 1990 to 1995.
Stephen M. Cheifetz, 43, is a partner of Corrent and Macri and has served
as partner of this firm for less than 1 year. Prior to joining his current firm,
he was a partner with Wilson, Walker, Hochberg, Slopen, a Windsor, Ontario law
firm, and served as a partner of that firm for over five years.
EXECUTIVE COMPENSATION
The following Summary Compensation Tables sets forth compensation paid for
the years ended December 31, 1998, 1997 and 1996, respectively, to those persons
who were, at such date, the chief executive officer of Venture and four other
executive officers who received more than $100,000 in compensation during each
year for services in all capacities to us.
SUMMARY COMPENSATION TABLE(1)
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(2) BONUS($) COMPENSATION(3) COMPENSATION(4)
- --------------------------- ---- ------------ -------- --------------- ---------------
Larry J. Winget........................ 1998 $526,503 -- $542,872 $366,063
Chairman of the Board and 1997 527,657 -- 478,945 277,347
Chief Executive Officer 1996 513,820 -- 675,799 250,807
A. James Schutz........................ 1998 $238,856 $41,760 -- $ 5,100
Vice Chairman 1997 237,150 41,760 -- 4,800
1996 231,491 41,760 -- 4,800
Michael G. Torakis..................... 1998 $268,834 -- -- $ 5,100
President 1997 263,819 -- -- 4,800
1996 257,615 250,000 -- 4,800
Larry J. Winget, Jr. .................. 1998 $219,224 -- -- $ 5,100
Executive Vice President 1997 220,938 -- -- 4,275
1996 216,034 -- -- 3,950
Joseph R. Tignanelli................... 1998 $198,039 -- -- $ 4,850
Executive Vice President 1997 192,428 -- -- 4,800
1996 189,084 -- -- 4,800
- -------------------------
(1) The compensation described in this table does not include benefits under
group plans which do not discriminate in scope, terms or operation in favor
of the officers listed and that are generally available to all salaried
employees, and certain perquisites and personal benefits received by the
officers listed, where these perquisites do not exceed the lesser of $50,000
or 10% of the officer's salary and bonus.
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(2) Includes salary reductions made under Venture's 401(k) Plan and Venture's
Cafeteria Benefit Plan.
(3) The amount indicated for Mr. Winget represents compensation in lieu of a
distribution of Trust principal equal to taxes incurred by the beneficiary
as a result of activities of Venture Holdings Trust's subsidiaries which
have elected "S" corporation status under the Internal Revenue Code or are
limited liability companies (taxed as partnerships). See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(4) "All Other Compensation" is comprised of: (1) a contribution made by Venture
to the accounts of each of the officers listed under Venture's 401(k) Plan;
(2) the incremental cost to Venture of additional premiums for term life
insurance benefits for the Named Officers which are not generally available
to the other salaried employees of Venture, and (3) for Mr. Winget, the
portion of the premium paid by Venture under a reverse split dollar life
insurance policy attributable to the build-up of the cash surrender value of
the policy, which aggregated $1,672,705, $1,311,742 and $1,039,195 at
December 31, 1998, 1997 and 1996, respectively, and is owned by Mr. Winget.
The beneficiary of the term insurance portion of the reverse split dollar
policy is Venture, which pays all premiums due under the policy and is
entitled to receive a $20.0 million benefit in the event of Mr. Winget's
death. Mr. Winget has the right to designate the distribution of the cash
surrender value and may, prior to his death, surrender the policy in
cancellation thereof and receive the benefit of the cash surrender value.
See the table below for complete details concerning all other compensation.
REVERSE
TERM LIFE SPLIT DOLLAR
NAME AND YEAR 401(K) INSURANCE POLICY TOTAL
- ------------- ------ --------- ------------ --------
Winget
1998 $4,800 $300 $360,963 $366,063
1997 4,500 300 272,547 277,347
1996 4,500 300 246,007 250,807
Schutz
1998 $4,800 $300 -- $ 5,100
1997 4,500 300 -- 4,800
1996 4,500 300 -- 4,800
Torakis
1998 $4,800 $300 -- $ 5,100
1997 4,500 300 -- 4,800
1996 4,500 300 -- 4,800
Winget, Jr.
1998 $4,800 $300 -- $ 5,100
1997 3,975 300 -- 4,275
1996 3,650 300 -- 3,950
Tignanelli
1998 $4,550 $300 -- $ 4,850
1997 4,500 300 -- 4,800
1996 4,500 300 -- 4,800
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COMPENSATION OF DIRECTORS
Mr. Winget serves as the Special Advisor to Venture, Messrs. Winget, Schutz
and Torakis serve as the directors of each guarantor of the Notes, and Mr.
Butler serves as director of Venture Holdings Corporation. None receive any
additional compensation or fees for their service to us in these capacities. Mr.
Cheifetz does not receive compensation for acting as a director of Venture
Canada; however, the law firm of which he is a partner acts as counsel to
Venture Canada.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All of the compensation for each of the officers listed in the Summary
Compensation Table above for the year ended December 31, 1998 was paid by
Experience Management LLC. Messrs. Winget and Torakis, in their capacities as
directors, participated in the deliberations concerning executive compensation.
In addition, some of the officers listed in the Summary Compensation Table above
have engaged in certain transactions with Venture. See "Certain Transactions."
OPTIONS
None of the officers listed in the Summary Compensation Table above hold
any options to acquire any interest in Venture or to acquire stock of the
subsidiaries of Venture or were granted any such options in the 1998 fiscal
year.
STOCK OWNERSHIP
Venture owns, directly or indirectly, all of the outstanding capital stock
of, or equity interests in, its subsidiaries, except for its 70%-owned Mexican
and 50%-owned Spanish joint ventures. Venture Holdings Trust is the sole member
of Venture, and Mr. Winget is the sole beneficiary of Venture Holdings Trust.
Mr. Winget's address is c/o Venture Holdings Company LLC, 33662 James J. Pompo
Drive, Fraser, Michigan 48026.
CERTAIN TRANSACTIONS
In addition to making distributions to Mr. Winget, either directly as sole
beneficiary of Venture Holdings Trust before the Trust Contribution, or
indirectly through distributions to Venture Holdings Trust as the sole member of
Venture after the Trust Contribution, and also compensating him in his capacity
as an Executive Manager of Venture, Venture has maintained business
relationships and engaged in certain transactions with Mr. Winget and certain
companies owned or controlled by him (each an "affiliate" and collectively, the
"affiliates") as described below. Since we operate for the benefit of Mr.
Winget, the terms of these transactions are not the result of arms'-length
bargaining; however, we believe that these transactions are on terms no less
favorable to us than would be obtained if these transactions or arrangements
were arms'-length transactions with non-affiliated persons.
Pursuant to the indentures governing the Notes and the indenture governing
the 1997 senior notes, Venture, each issuer of the 1997 senior notes and each
guarantor of each of the 1997 senior notes and the exchange notes is required to
maintain a Fairness Committee, at least one of whose members is independent,
which approves the terms and conditions of certain transactions between Venture
and our affiliates and participates in decisions concerning whether certain
corporate opportunities will be pursued by us. Venture has complied with this
requirement since the date of the issuance of the 1994 senior notes for
transactions initiated after that date. The indentures also contain
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restrictions on distributions to Mr. Winget and other restrictions on
transactions with affiliates, including the Corporate Opportunity Agreement. The
Corporate Opportunity Agreements, entered into in connection with the issuance
of the 1994 senior notes and the outstanding notes, require Mr. Winget to offer
to us certain corporate opportunities which relate to our business before he may
pursue these opportunities outside Venture. See "Description of Exchange Notes."
FACILITIES AND EQUIPMENT
We lease, or have arranged for the usage of, certain facilities, machinery
and equipment that are owned by affiliates, as set forth below. We believe that
the lease and usage agreements are based on the fair market value of the
facilities, machinery and equipment at the inception of the agreements. Venture
has made significant capital improvements to these properties. Venture has
accounted for these improvements as leasehold improvements. At the conclusion of
the applicable lease or usage agreement, the benefits of these improvements
inure to the benefit of the lessor.
Venture Real Estate, Inc., a corporation wholly owned by Mr. Winget's
living trust since 1988, leases two separate injection molding buildings to us
in our Malyn Complex, and our Commerce Mold Shop. Starting in 1996, the Redford
facility, and in 1998 the Almont II facility, were also leased to us by Venture
Real Estate, Inc. Amounts paid to Venture Real Estate, Inc. and a predecessor
affiliate were approximately $0.8 million, $1.0 million and $0.8 million for the
years ended December 31, 1996, 1997 and 1998, respectively.
Deluxe Pattern Corporation, a corporation wholly owned by Mr. Winget's
living trust since 1989, provides an advanced design, model and tool-building
facility, and is engaged in the business of providing design and model and
tool-building services to us and to customers unaffiliated with us. Since July,
1992, Venture has occupied and staffed the Deluxe facility pursuant to a usage
agreement. Venture paid Deluxe usage fees of $0.4 million for each of the years
ended December 31, 1996, 1997 and 1998. These fees are based upon the amount of
time the facility and advanced equipment housed there are made available to us.
In addition to the usage fees, Venture paid Deluxe $4.3 million, $9.2 million
and $6.6 million for the years ended December 31, 1996, 1997 and 1998,
respectively, for the purchase of goods and services and equipment at net book
value. Deluxe does not directly employ its own workforce, but rather, our
employees are made available to Deluxe on an as needed basis, for which Deluxe
pays us a fee. During the years ended December 31, 1996, 1997 and 1998, Venture
made sales to Deluxe of $1.1 million each year, and Deluxe paid Venture $9.6
million, $4.6 million and $17.3 million, respectively, for time spent by
Venture's employees on Deluxe business.
Harper Properties of Clinton Township Limited Partnership leases its Harper
facility to us on a month-to-month basis. Realven Corporation also leases the
machinery and equipment located at the Harper facility to us on a month-to-month
basis. Harper Properties is a limited partnership in which the living trusts of
Mr. Winget and his wife, Alicia, and an affiliated company are the general
partners and Mr. Winget, members of his family, A. James Schutz, an Executive
Manager of Venture, and Michael G. Torakis, an Executive Manager of Venture, are
the limited partners. Realven is a corporation wholly owned by Mr. Winget and
his wife, Alicia. The Harper lease provides for semi-annual lease payments.
Harper Properties and Realven have the right to require us to enter into
negotiations regarding an increase in the lease payments under the Harper lease
and the Realven lease, so that lease payments under these leases will reflect
all expenses to Harper Properties, Realven and their owners. Venture has made
several improvements to the Harper facility and the machinery and equipment
leased from Realven, and has accounted for them as leasehold improvements. At
the termination of the Harper and Realven leases, Harper Properties and Realven,
respectively, will retain the value, if any, of the leasehold improvements.
Venture paid Harper Properties $1.7 million in each of the years ended December
31, 1996, 1997 and 1998, respectively, under the Harper lease. Venture
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paid Realven $0.4 million in each of the years ended December 31, 1996, 1997 and
1998, respectively, under the Realven lease.
Mr. Winget has since 1991 allowed Venture to use approximately 12 molding
machines pursuant to the terms of usage agreements. In January of 1994, Mr.
Winget leased 28 additional injection molding machines to Venture as part of the
expansions of the Harper and Groesbeck facilities. Mr. Winget also leases
certain injection molding equipment to us. In February of 1995, Mr. Winget
contributed and assigned his interests in the leases to the various injection
molding machines and equipment to a new entity, Venture Heavy Machinery Limited
Liability Company. Venture paid Venture Heavy Machinery Limited Liability
Company $1.8 million in each of the years ended December 31, 1996, 1997 and
1998, respectively, under the usage agreements.
Venture Real Estate Acquisition Company and Venture Equipment Acquisition
Company, each wholly owned by Mr. Winget's living trust, acquired a 176,000
square foot injection molding facility and the machinery and equipment located
in the facility, including 35 molding machines, on February 4, 1994. Venture
entered into usage agreements for this facility, the Masonic facility, machinery
and equipment, the terms of which were reviewed and approved by the Fairness
Committee. During 1996, 1997 and 1998 Venture paid $1.3 million, $1.3 million
and $1.3 million, respectively, to Venture Real Estate Acquisition Company and
Venture Equipment Acquisition Company pursuant to these agreements.
BUSINESS RELATIONSHIPS
We maintain ongoing business relationships with affiliates, as set forth
below:
Nova Corporation is a corporation in which Windall Industries, a
corporation in which Mr. Winget owns a 49% equity interest and a former
Executive Manager of Venture owns the controlling 51% interest. Nova is a
successor to Windall Industries' business. Nova supplies us with certain small
parts or components of large assemblies that are sold to our customers. Venture
paid Nova $2.3 million, $1.0 million and $1.5 million for the years ended
December 31, 1996, 1997 and 1998, respectively. In connection with this
relationship, Venture has provided Nova with various raw materials at cost and
received commission income, for which Nova paid Venture $0.8 million, $0.3
million and $0.4 million in the years ended December 31, 1996, 1997 and 1998,
respectively. Nova sells products to other customers besides us, and has and
will compete with us for certain contracts. Nova paid Venture $0.2 million each
year pursuant to machinery and equipment operating leases for each of the years
ended December 31, 1996, 1997 and 1998. Venture paid Windall Industries usage
fees of $80,000 in each of the years ended December 31, 1996, 1997 and 1998.
Venture Sales and Engineering and Venture Foreign Sales Corporation,
corporations wholly owned by Mr. Winget, serve as our outside sales agencies for
sales of products manufactured at our Vemco, Inc., Venture Industries and
Venture Grand Rapids facilities. Currently, we pay Venture Sales and Venture
Foreign Sales, in the aggregate, a sales commission of 3% on all production
sales. Venture paid Venture Sales, $6.4 million, $7.3 million and $10.4 million
in the years ended December 31, 1996, 1997 and 1998, respectively. Venture made
no payments to Venture Foreign Sales in the years ended December 31, 1996, 1997
and 1998. Venture Sales has conducted sales and marketing activities around the
world for us and has been advanced certain funds in order to carry on that work
on our behalf.
Venture Automotive Corp. has, since 1991, performed sequencing and
value-added assembly of parts manufactured at our Grand Blanc facility. Venture
paid Venture Automotive Corp. $3.3 million in the year ended December 31, 1996
under this arrangement. During the years ended December 31, 1996 Venture made
sales to Venture Automotive Corp. of $69,000. Beginning October 1, 1996 the
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manufacturing services previously provided by Venture Automotive Corp. have been
contracted to MAST Services LLC, a company in which N. Matthew Winget, Mr.
Winget's son, owned a minority interest until the fourth quarter of 1998.
Services for the period ending December 31, 1996 were $0.3 million, and for the
years ended December 31, 1997 and 1998 were $2.7 million and $2.3 million,
respectively.
MANAGEMENT SERVICES
Venture Service Company provides administrative services and insurance to
Deluxe, Windall Industries, Venture Sales and Venture Automotive Corp. Deluxe,
Windall Industries, Venture Sales and Venture Automotive Corp. paid us $1.8
million and $0.2 million in the years ended December 31, 1996 and 1997,
respectively. No amounts were paid in 1998.
Venture provided Venture Asia Pacific Pty. Ltd. and its subsidiaries with
management and sales services, for which they paid Venture $5.1 million, $4.0
million and $4.5 million for 1996, 1997 and 1998, respectively. In addition,
Venture Asia Pacific also reimbursed Venture for certain other expenditures made
on its behalf and assigned certain tooling contracts to Venture.
Pompo Insurance & Indemnity Company Ltd., a Barbados corporation indirectly
wholly owned by Mr. Winget, was incorporated in 1992 under the Barbados Exempt
Insurance Act. We purchase insurance from Pompo Insurance to cover certain
medical claims by our employees and certain workers compensation claims. Venture
has accounted for this arrangement using the deposit method wherein the full
amount of the estimated liability for these claims is recorded in other
liabilities and the premiums paid to Pompo are recorded in other assets until
such time that the claims are settled. We remain primarily liable for any
amounts in excess of insurance coverage or any amounts not paid by Pompo
Insurance under these coverages. If a liability is settled for less than the
amount of the premium paid to Pompo, a portion of the excess is available as a
premium credit on future insurance. No amounts were paid in 1996 or 1997. In
1998 Venture paid Pompo Insurance $0.6 million in premiums. Venture received and
utilized premium credits of $0.2 million and $0.7 million, respectively for 1996
and 1998. No premium credits were utilized in 1997.
OTHER
From time to time, we pay certain expenses on behalf of Mr. Winget which he
is obligated to repay to us. These amounts payable by Mr. Winget do not bear
interest and are payable on demand. Mr. Winget was not indebted to Venture for
these expenses at December 31, 1996 or 1997. At December 31, 1998, Mr. Winget's
indebtedness to Venture for these expenses was $867,000. The highest amount of
this indebtedness outstanding at any one time during these periods was $867,000.
This indebtedness was repaid in its entirety in the first quarter of 1999.
Mr. Winget and his wife, Alicia, own the Acropolis Resort, which consists
of several separate units and a lodge near Gaylord, Michigan, a resort community
north of Detroit. We lease this facility from Mr. Winget primarily for use by
our employees, who are permitted to use the facility on an availability basis.
Cumulative leasehold improvements to this facility through December 31, 1998
aggregate $0.3 million. Our lease obligation to Mr. Winget is based upon the
actual use of the facility by our employees, provided that we are required to
pay for the use of 500 room nights per calendar year, approximately $25,000,
whether or not these rooms are rented. Venture paid Mr. Winget $80,000, $50,000
and $90,000 in the years ended December 31, 1996, 1997 and 1998, respectively,
under this arrangement.
Farm and Country Real Estate Company, a corporation wholly owned by Mr.
Winget, leases to us approximately 84 acres of undeveloped land adjacent to our
Grand Blanc facility on a month-to-
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month basis. This lease provides for monthly rental payments of $16,100. Rent
paid in 1996, 1997 and 1998 was $0.2 million in each year.
Mr. Winget and Patent Holdings, Inc., a corporation wholly owned by Mr.
Winget, have granted to us non-exclusive, royalty free licenses to certain
patents which have been issued under applications filed by Mr. Winget, as
assignee. Mr. Winget and the affiliated companies also generally permit us to
utilize proprietary technologies or processes, such as reverse engineering
automated process for rapid prototyping, which are developed by Deluxe and the
affiliated companies. The licenses are perpetual, but provide that the licensor
may negotiate a reasonable royalty in the event that Mr. Winget or an Excluded
Person, as defined in the indenture relating to the 1997 senior notes, no longer
owns at least 80% of the beneficial interest of Venture Holdings Trust.
On July 1, 1996, Venture Industries Corporation and its affiliated
companies, not including Venture Holdings Trust or Venture Canada, along with
VIC Management, L.L.C., a limited liability company wholly owned, directly or
indirectly, by Mr. Winget, entered into an agreement guaranteeing up to $3.5
million of the obligations of Atlantic Automotive Components, L.L.C. to RIC
Management Corp. This guarantee is one of a series of transactions whereby VIC
Management acquired RIC Management's minority interest in Atlantic Automotive.
Deluxe agreed to fully indemnify the Venture entities for all amounts paid under
the guarantee.
We recently agreed to a number of corporate and non-resident golf
memberships for certain of our employees in a golf club owned by companies Mr.
Winget controls. The aggregate initial fee for these memberships is
approximately $1.5 million, and the annual dues will be approximately $0.3
million. The initial fees are refundable upon termination, over various periods.
We will no longer pay dues for these employees in other clubs to which they may
belong.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of certain of our debt agreements does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
these agreements, including the definitions in these agreements of terms not
defined in this prospectus.
NEW CREDIT FACILITY
On May 27, 1999, we entered into a new credit facility and, as of June 4,
1999, we entered into the First Amendment to the new credit facility. Venture,
as successor to Venture Holdings Trust, assumed the obligations of Venture
Holdings Trust under the new credit facility and Venture Holdings Trust was
released from these obligations. Set forth below is a summary of the principal
terms of the new credit facility. The following summary is not complete and is
qualified by reference to all of the documents governing the new credit
facility.
Pursuant to the new credit facility, as amended, The First National Bank of
Chicago and certain other lenders provided, subject to certain terms and
conditions, credit facilities aggregating $575.0 million, including:
(1) a 5 year $175.0 million Revolving Credit Facility;
(2) a 5 year $75.0 million Term Loan A;
(3) a 6 year $200.0 million Term Loan B; and
(4) an 18 month $125.0 million Interim Term Loan.
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The new credit facility requires that $125.0 million principal amount
outstanding thereunder be refinanced within 18 months from the closing date,
utilizing the proceeds from the sale of securities that rank pari passu in right
of payment with, or are junior to, the 12% Senior Subordinated Notes due 2009.
See "Risk Factors -- Substantial Leverage."
The Revolving Credit Facility permits us to borrow up to the lesser of a
borrowing base computed as a percentage of accounts receivable and inventory, or
$175.0 million less the amount of any letter of credit issued against the new
credit facility. Pursuant to the borrowing base formula, as of December 31, 1998
we could have utilized the full amount available under the Revolving Credit
Facility.
The new credit facility provides for a multicurrency funding capability to
be made available to Venture. At present, loans may be made in U.S. dollars,
euros or, under certain circumstances, other available and freely tradeable
foreign currencies.
Neither the Revolving Credit Facility nor the Interim Term Loan requires
scheduled amortization payments or scheduled commitment reductions prior to
maturity. Each of Term Loan A and Term Loan B requires quarterly amortization
payments through maturity. The documents governing the new credit facility,
under certain circumstances, require mandatory prepayments and commitment
reductions. These circumstances include asset sales, issuances of equity and the
generation of cash flow in excess of certain amounts, and a change of control.
In addition, the borrowers have the right to make optional prepayments and
commitment reductions.
All indebtedness under the new credit facility is senior secured
indebtedness. Obligations under the new credit facility are jointly and
severally guaranteed by Venture's domestic subsidiaries and, under certain
circumstances, the agent bank may request guarantees of foreign subsidiaries,
however, no such guarantees are contemplated at this time. Obligations under the
new credit facility are secured by first priority security interests in
substantially all of the assets of Venture and its domestic subsidiaries. As a
result, payments may need to be made under the new credit facility even though
payments are then due under the exchange notes. See "Description of Exchange
Notes."
Interest on the Revolving Credit Facility, Term Loan A and the Interim Term
Loan accrues at an annual rate of interest equal to, at our option, either:
(a) the Alternate Base Rate, as announced by The First National Bank of
Chicago ("ABR"), plus an applicable margin, which applicable margin
will initially be 1.25% and thereafter may range from 0% to 1.25% (the
"ABR rate"), or
(b) at the London Interbank Offered Rate, adjusted, for a specified
interest period ("LIBOR"), for the applicable currency, plus an
applicable margin, which applicable margin will initially be 2.75% and
thereafter may range from 1.50% to 2.75%.
Interest on Term Loan B accrues at an annual rate of interest equal to
either:
(a) the ABR, plus an applicable margin, which applicable margin will
initially be 1.75% and thereafter may range from 1.25% to 1.75%
(together with the ABR rate the "floating rate"), or
(b) at LIBOR plus an applicable margin, which applicable margin will
initially be 3.25% and thereafter may range from 2.75% to 3.50%.
Interest on all borrowings under the new credit facility bearing interest
at a floating rate is payable quarterly and interest on all borrowings under the
new credit facility bearing interest based on LIBOR is payable at the end of the
interest period pertaining thereto unless the interest period is 6 months, in
which case it will also be payable 3 months after the interest period commences.
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We also pay an unused commitment fee on the Revolving Credit Facility which
commitment fee was initially 0.50% of the unused amount of the Revolving Credit
Facility and thereafter may range from 0.375% to 0.50%.
The documents governing the new credit facility contain a number of
covenants that, among other things, restrict our ability to dispose of assets,
incur additional indebtedness, incur guarantee obligations, pay dividends,
create liens, make investments, make acquisitions, engage in mergers or
consolidations, engage in certain transactions with affiliates and otherwise
restrict corporate activities. These covenants are more restrictive than those
related to the exchange notes. In addition, the documents governing the New
credit facility require compliance with financial tests and ratios.
THE 1997 SENIOR NOTES
Venture, as successor to Venture Holdings Trust, and certain of the
guarantors of the outstanding notes are jointly and severally liable as issuers
under an indenture relating to the 1997 senior notes. The 1997 senior notes bear
interest at a rate per annum of 9 1/2% and mature on July 1, 2005. As of
December 31, 1998, $205.0 million was outstanding under the 1997 senior notes.
Interest on the 1997 senior notes is payable semi-annually on January 1 and July
1 of each year. The 1997 senior notes are redeemable, in whole or in part, at
the option of the issuers of these notes at any time on or after July 1, 2001 at
104.750%, after July 1, 2002 at 102.375%, and after July 1, 2003 at 100%.
The indenture for the 1997 senior notes contains covenants that are
generally more restrictive than those related to the exchange notes. The
covenants contained in the indenture for the 1997 senior notes relate to the
following matters:
- limitations on additional indebtedness;
- limitations on restricted payments;
- limitations on transactions with affiliates;
- corporate opportunities;
- the application of proceeds of certain assets sales;
- limitations on liens;
- limitations on issuance of guarantees and pledges for indebtedness;
- limitation on equity interests of subsidiaries;
- limitations on dividends and other payment restrictions;
- limitations on other senior indebtedness;
- limitations on new lines of business; and
- restrictions on mergers, consolidations and transfers of all or
substantially all of the assets of Venture.
Each of Venture's domestic subsidiaries that are not issuers of the 1997
senior notes are guarantors of the 1997 senior notes.
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DESCRIPTION OF EXCHANGE NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the word
"Trust" refers only to Venture Holdings Company LLC, as successor to Venture
Holdings Trust following the Trust Contribution on May 27, 1999, and not to any
of its subsidiaries. Certain defined terms used in this description but not
defined below under "-- Certain Definitions" have the meanings assigned to them
in the Indentures.
The outstanding senior notes were, and the senior exchange notes will be,
issued under an Indenture (the "New Senior Indenture"), dated May 27, 1999,
among the Trust, the Guarantors and The Huntington National Bank, as trustee
(the "Trustee"). The outstanding senior subordinated notes were, and the senior
subordinated exchange notes will be, issued under an Indenture (the "New Senior
Subordinated Indenture" and, together with the New Senior Indenture, the
"Indentures"), dated May 27, 1999 among the Trust, the Guarantors and the
Trustee. The terms of the Exchange Notes are the same as the terms of the
Outstanding Notes, except that (1) the Trust registered the Exchange Notes under
the Securities Act of 1933, as amended, and their transfer is not restricted
like the Outstanding Notes and (2) holders of the Exchange Notes are not
entitled to certain rights under the Registration Rights Agreement.
Because this section of the prospectus merely summarizes the terms of the
Exchange Notes, the Indentures and the Registration Rights Agreement, you should
read the Indentures, the Registration Rights Agreement and the relevant portions
of the Trust Indenture Act of 1939 for more complete information regarding the
terms of the Outstanding Notes and the Exchange Notes. Copies of the Indentures
and Registration Rights Agreement can be obtained by following the instructions
contained in this prospectus under the headings "Where You Can Find More
Information." For the purposes of the remainder of this section entitled
"Description of Exchange Notes," the term the "Notes," refers to the Exchange
Notes, the term the "New Senior Notes" refers to the Senior Exchange Notes, and
the term the "New Senior Subordinated Notes" refers to the Senior Subordinated
Exchange Notes.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
THE NEW SENIOR SUBORDINATED NOTES
The New Senior Subordinated Notes:
- are general unsecured obligations of the Trust;
- are subordinated in right of payment to all existing and future Senior
Debt of the Trust, including the 1997 Senior Notes and the New Senior
Notes;
- are pari passu in right of payment with any future senior subordinated
Indebtedness of the Trust; and
- are unconditionally guaranteed by the Guarantors.
THE NEW SENIOR NOTES
The New Senior Notes:
- are general unsecured obligations of the Trust;
- are pari passu in right of payment with all existing and future unsecured
unsubordinated Indebtedness of the Trust, including the 1997 Senior
Notes;
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- are effectively subordinated to all secured debt of the Trust, including
that incurred under the Credit Agreement;
- are senior in right of payment to any current and future subordinated
Indebtedness of the Trust, including the New Senior Subordinated Notes;
and
- are unconditionally guaranteed by the Guarantors.
RESTRICTED SUBSIDIARIES
As of the Issue Date, all of our Subsidiaries were "Restricted
Subsidiaries." However, under the circumstances described below under the
subheading "-- Certain Covenants -- Designation of Restricted and Unrestricted
Subsidiaries," we will be permitted to designate certain of our subsidiaries as
"Unrestricted Subsidiaries." Our Subsidiaries which are designated as
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants in the Indentures and will not guarantee the Notes.
THE SUBSIDIARY GUARANTEES
The Notes are guaranteed by the Guarantors.
Each Subsidiary Guarantee of the New Senior Subordinated Notes:
- is a general unsecured obligation of the Guarantor;
- is subordinated in right of payment to all existing and future Senior
Debt of the Guarantors, including the Guarantors' Guarantee of the 1997
Senior Notes and the New Senior Notes; and
- is pari passu in right of payment with any future senior subordinated
Indebtedness of the Guarantor.
Each Subsidiary Guarantee of the New Senior Notes:
- is a general unsecured obligation of the Guarantor;
- is senior in right of payment to all existing and future subordinated
Indebtedness of the Guarantors, including the Guarantors' Guarantees of
the New Senior Subordinated Notes;
- is pari passu in right of payment with any current and future unsecured
unsubordinated Indebtedness of the Guarantors, including the 1997 Senior
Notes; and
- is effectively subordinated to all secured debt of the Guarantors,
including that incurred under the Credit Agreement.
Our foreign subsidiaries did not guarantee the Notes on the Issue Date. In
the event of a bankruptcy, liquidation or reorganization of any of these
non-guarantor subsidiaries, these non-guarantor subsidiaries will pay the
holders of their debts and their trade creditors before they will be able to
distribute any of their assets to us. The guarantor subsidiaries generated 33.1%
of our consolidated revenues in the twelve-month period ended December 31, 1998
and 31.4% of our consolidated revenues in the six-month period ended June 30,
1999, each on a pro forma basis. The guarantor subsidiaries held 43.0% of our
consolidated assets as of December 31, 1998, on a pro forma basis after giving
effect to the Peguform acquisition, and 44.0% of our consolidated assets as of
June 30, 1999. See "Risk Factors -- Company Structure; Not all Subsidiaries are
Guarantors."
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PRINCIPAL, MATURITY AND INTEREST
NEW SENIOR SUBORDINATED NOTES
The New Senior Subordinated Indenture provides for the issuance by the
Trust of New Senior Subordinated Notes with a maximum aggregate principal amount
of $250 million, of which $125 million of the Outstanding Senior Subordinated
Notes were issued on May 27, 1999. The Trust may issue additional senior
subordinated notes (the "Additional New Senior Subordinated Notes") from time to
time. Any offering of Additional New Senior Subordinated Notes is subject to the
covenant described below under the caption "-- Certain Covenants -- Incurrence
of Indebtedness and Issuance of Preferred Stock." The New Senior Subordinated
Notes and any Additional New Senior Subordinated Notes subsequently issued under
the New Senior Subordinated Indenture would be treated as a single class for all
purposes under the New Senior Subordinated Indenture, including, without
limitation, waivers, amendments, redemptions and offers to purchase. The Trust
will issue New Senior Subordinated Notes in denominations of $1,000 and integral
multiples of $1,000. The New Senior Subordinated Notes will mature on June 1,
2009.
Interest on the New Senior Subordinated Notes will accrue at the rate of
12% per annum and will be payable semi-annually in arrears on June 1 and
December 1, commencing on December 1, 1999. Venture will make each interest
payment to the Holders of record of New Senior Subordinated Notes on the
immediately preceding May 15 and November 15.
Interest on the New Senior Subordinated Notes will accrue from the date of
original issuance or, if interest has already been paid, from the date it was
most recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
NEW SENIOR NOTES
The New Senior Indenture provides for the issuance by the Trust of Notes
with a maximum aggregate principal amount of $175 million, of which $125 million
of the Outstanding Senior Notes were issued on May 27, 1999. The Trust may issue
additional senior notes (the "Additional New Senior Notes") from time to time.
Any offering of Additional New Senior Notes is subject to the covenant described
below under the caption "-- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock." The New Senior Notes and any Additional New Senior
Notes subsequently issued under the New Senior Indenture would be treated as a
single class for all purposes under the New Senior Indenture, including, without
limitation, waivers, amendments, redemptions and offers to purchase. The Trust
will issue New Senior Notes in denominations of $1,000 and integral multiples of
$1,000. The New Senior Notes will mature on June 1, 2007.
Interest on the New Senior Notes will accrue at the rate of 11% per annum
and will be payable semi-annually in arrears on June 1 and December 1,
commencing on December 1, 1999. The Trust will make each interest payment to the
Holders of record of New Senior Notes on the immediately preceding May 15 and
November 15.
Interest on the New Senior Notes will accrue from the date of original
issuance or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a Holder of $1,000,000 in aggregate principal amount of Notes or more
has given wire transfer instructions to the Company, the Company will pay all
principal, interest and premium and Liquidated Damages, if any, on that Holder's
Notes in accordance with those instructions. All other payments on Notes will be
made at the office or agency of the Paying Agent and Registrar within the
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City and State of New York unless the Trust elects to make interest payments by
check mailed to the Holders at their addresses set forth in the register of
Holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The Trustee will initially act as Paying Agent and Registrar. The Trust may
change the Paying Agent or Registrar without prior notice to the Holders, and
the Trust or any of its Subsidiaries may act as Paying Agent or Registrar.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the applicable
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the Trust
may require a Holder to pay any taxes and fees required by law or permitted by
the applicable Indenture. The Trust is not required to transfer or exchange any
Note selected for redemption. Also, the Trust is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes (including the determination of who is entitled to payments).
SUBSIDIARY GUARANTEES
The Guarantors will jointly and severally guarantee the Trust's obligations
under the Notes. Each Subsidiary Guarantee of the New Senior Subordinated Notes
will be subordinated to the payment in full of all unsubordinated Indebtedness
of that Guarantor. Each Subsidiary Guarantee of the New Senior Notes will be
pari passu to all unsecured unsubordinated Indebtedness of that Guarantor and
senior to all subordinated Indebtedness of that Guarantor. The obligations of
each Guarantor under its Subsidiary Guarantee will be limited as necessary to
prevent that Subsidiary Guarantee from constituting a fraudulent conveyance
under applicable law. See "Risk Factors -- Fraudulent Conveyance Matters."
SUBORDINATION OF THE NEW SENIOR SUBORDINATED NOTES
The payment of principal, interest, premium and Liquidated Damages, if any,
on the New Senior Subordinated Notes will be subordinated to the prior payment
in full of all Senior Debt of the Trust and Guarantors, including Senior Debt
incurred after the Issue Date.
The holders of Senior Debt will be entitled to receive payment in full in
cash or Cash Equivalents of all Obligations due in respect of Senior Debt
(including interest after the commencement of any bankruptcy proceeding at the
rate specified in the applicable Senior Debt) before the Holders of New Senior
Subordinated Notes will be entitled to receive any payment regarding the New
Senior Subordinated Notes, including, without limitation, any redemption,
defeasance or other acquisition of the New Senior Subordinated Notes. Until all
Obligations regarding Senior Debt are paid in full in cash or Cash Equivalents,
any payment or distribution to which the Holders of New Senior Subordinated
Notes would be entitled shall be made to the holders of Senior Debt (except that
Holders of New Senior Subordinated Notes may receive and retain Permitted Junior
Securities and payments made from the trust described under "-- Legal Defeasance
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and Covenant Defeasance") in the event of any distribution to creditors of the
Trust or the Guarantors:
(1) in a liquidation or dissolution;
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Trust or Guarantors or their property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of the Trust's or the Guarantors' assets and
liabilities.
The Trust and Guarantors of the New Senior Subordinated Notes also may not
make any payment in respect of the New Senior Subordinated Notes (except in
Permitted Junior Securities or from the trust described under "-- Legal
Defeasance and Covenant Defeasance") if:
(1) a default in the payment of the principal of, premium, if any, or
interest on Designated Senior Debt occurs and is continuing beyond any
applicable grace period (a "Payment Default"); or
(2) any other default occurs and is continuing on any series of
Designated Senior Debt that permits holders of that series of Designated
Senior Debt to accelerate its maturity and the Trustee receives a notice of
such default (a "Payment Blockage Notice") from the Trust or the holders of
any Designated Senior Debt.
Payments on the New Senior Subordinated Notes may and shall be resumed:
(1) in the case of a Payment Default, upon the date on which such
default is cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated or a Payment
Default has occurred.
No new Payment Blockage Notice may be delivered unless and until:
(1) 360 days have elapsed since the delivery of the immediately prior
Payment Blockage Notice; and
(2) all scheduled payments of principal, interest, premium and
Liquidated Damages, if any, on the New Senior Subordinated Notes that have
come due have been paid in full in cash.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 90 days.
If the Trustee or any Holder of the New Senior Subordinated Notes receives
a payment in respect of the Notes (except in Permitted Junior Securities or from
the trust described under "-- Legal Defeasance and Covenant Defeasance") when:
(1) the payment is prohibited by the subordination provisions of the
New Senior Subordinated Indenture; and
(2) the Trustee or the Holder has actual knowledge that the payment is
prohibited;
the Trustee or the Holder, as the case may be, shall hold the payment in trust
for the benefit of the holders of Senior Debt. Upon the proper written request
of the holders of Senior Debt, the Trustee or
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the Holder of New Senior Subordinated Notes, as the case may be, shall deliver
the amounts held in trust to the holders of Senior Debt or their proper
representative.
The Trust must promptly notify holders of Senior Debt if payment of the New
Senior Subordinated Notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of the Trust, Holders of New
Senior Subordinated Notes may recover less ratably than creditors of the Trust
or Guarantors who are holders of Senior Debt. As of June 30, 1999, the New
Senior Subordinated Notes would have been junior to $726.3 million of Senior
Debt, including the New Senior Notes and 1997 Senior Notes. See "Risk
Factors -- Subordination of Senior Subordinated Exchange Notes."
OPTIONAL REDEMPTION
At any time prior to June 1, 2002, the Trust may redeem up to 35% of the
aggregate principal amount of each of the New Senior Notes and the New Senior
Subordinated Notes issued under the Indentures at a redemption price of 111% of
the principal amount of New Senior Notes redeemed and 112% of the New Senior
Subordinated Notes redeemed, in each case plus accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date, with the net cash proceeds
of a Public Equity Offering; provided that:
(1) at least 65% of the aggregate principal amount of each of the New
Senior Notes and the New Senior Subordinated Notes issued under each
Indenture remains outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Trust and its Subsidiaries); and
(2) any such redemption must occur within 120 days of the date of the
closing of such Equity Offering.
Except pursuant to the preceding paragraph, the New Senior Notes will not
be redeemable at the Trust's option prior to June 1, 2003 and the New Senior
Subordinated Notes will not be redeemable at the Trust's option prior to June 1,
2004.
After June 1, 2004, the Trust may redeem all or a part of the New Senior
Subordinated Notes upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on June 1 of the years indicated below:
YEAR PERCENTAGE
- ---- ----------
2004................................................ 106.00%
2005................................................ 104.00%
2006................................................ 102.00%
2007 and thereafter................................. 100.00%
After June 1, 2003, the Trust may redeem all or a part of the New Senior
Notes upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any,
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thereon, to the applicable redemption date, if redeemed during the twelve-month
period beginning on June 1 of the years indicated below:
YEAR PERCENTAGE
- ---- ----------
2003................................................ 105.50%
2004................................................ 103.67%
2005................................................ 101.83%
2006 and thereafter................................. 100.00%
MANDATORY REDEMPTION
The Trust is not required to make mandatory redemption or sinking fund
payments for the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each Holder of Notes will have the right to
require the Trust to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of that Holder's Notes pursuant to a Change of Control Offer
on the terms set forth in the Indentures. In the Change of Control Offer, the
Trust will offer a Change of Control Payment in cash equal to 101% of the
aggregate principal amount of Notes repurchased plus accrued and unpaid interest
and Liquidated Damages, if any, thereon, to the date of purchase. Within 20 days
following any Change of Control, the Trust will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase Notes on the Change of Control Payment Date specified
in such notice, which date shall be no earlier than 20 Business Days and no
later than 55 Business Days from the date such notice is mailed, pursuant to the
procedures required by the Indentures and described in such notice. The Trust
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the Change of Control provisions of
the Indentures, the Trust will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
Change of Control provisions of the Indentures by virtue of such conflict.
On the Change of Control Payment Date, the Trust will, to the extent
lawful:
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered;
and
(3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the Trust.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof.
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Regarding the New Senior Subordinated Notes, prior to complying with any of
the provisions of this "Change of Control" covenant, but in any event within 90
days following a Change of Control, the Trust will either repay all outstanding
Senior Debt or obtain the requisite consents, if any, under all agreements
governing outstanding Senior Debt to permit the repurchase of the New Senior
Subordinated Notes required by this covenant. The failure to repay such Senior
Debt or obtain such consents within such time period shall constitute an Event
of Default under the New Senior Subordinated Indenture. The Trust will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The provisions described above that require the Trust to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether any other provisions of the Indentures are applicable. Except as
described above for a Change of Control, the Indentures do not contain
provisions that permit the Holders of the Notes to require that the Trust
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Trust will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes a Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indentures applicable to a Change of Control Offer made by the Trust, and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of the Trust and its
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of Notes to require the Trust to repurchase such Notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of the Trust and its Subsidiaries taken as a whole to another Person or
group may be uncertain.
ASSET SALES
The Trust will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) the Trust (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(2) for any single transaction or series of related transactions that
involves assets having a fair market value of more than $10.0 million, such
fair market value is determined by the Trust's Board of Directors and
evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee; and
(3) at least 85% of the consideration therefor received by the Trust
or such Restricted Subsidiary is in the form of cash or Cash Equivalents,
provided, however, that more than 15% of the total consideration may
consist of consideration other than cash or Cash Equivalents if:
(A) the portion of such consideration that does not consist of cash
or Cash Equivalents consists of assets of a type ordinarily used in the
operation of a Permitted Business to be used by the Trust or a
Restricted Subsidiary in the conduct of a Permitted Business or Capital
Stock of a Restricted Subsidiary engaged in a Permitted Business (or a
Person which becomes such a Restricted Subsidiary as a result of the
receipt of such consideration),
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(B) the terms of such Asset Sale have been approved by a majority
of the members of the Board of Directors of the Trust and
(C) if the value of the assets being disposed of by the Trust or
such Restricted Subsidiary in such transaction (as determined in good
faith by such members of the Board of Directors) is at least $10.0
million, the Board of Directors of the Trust has received a written
opinion of a nationally recognized investment banking firm (or other
nationally recognized valuation expert) to the effect that such Asset
Sale is fair, from a financial point of view, to the Trust and the Trust
has delivered a copy of such opinion to the Trustee.
For purposes of this provision (3), each of the following shall be deemed
to be cash:
(a) any liabilities (as shown on the Trust's or such Restricted
Subsidiary's most recent balance sheet), of the Trust or any Restricted
Subsidiary (other than contingent liabilities (except to the extent that a
reserve or other liability in respect thereof is reflected in accordance
with GAAP on the most recent balance sheet of the Trust or such Restricted
Subsidiary) and liabilities that are by their terms subordinated to the
Notes or any Subsidiary Guarantee) that are assumed by the transferee of
any such assets pursuant to a customary novation agreement that releases
the Trust or such Restricted Subsidiary from further liability; and
(b) any securities, notes or other obligations received by the Trust
or any such Restricted Subsidiary from such transferee that within 60 days
of such Asset Sale are converted by the Trust or such Restricted Subsidiary
into cash or Cash Equivalents (to the extent of the cash or Cash
Equivalents received in that conversion).
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Trust or Restricted Subsidiary may apply such Net Proceeds at its option:
(1) (a) regarding the New Senior Subordinated Indenture, to repay
Senior Debt and, if the Senior Debt repaid is revolving credit
Indebtedness, to correspondingly reduce commitments with respect thereto or
(b) regarding the New Senior Indenture, to repay Indebtedness under Credit
Facilities that are not expressly subordinated by their terms to any other
Indebtedness of the Trust or such Guarantors and, if the Indebtedness
repaid is revolving credit Indebtedness, to correspondingly reduce
commitments with respect thereto;
(2) to acquire all or substantially all of the assets of, or a
majority of the Voting Stock of, another Permitted Business;
(3) to make a capital expenditure;
(4) to acquire other long-term assets that are used or useful in a
Permitted Business; or
(5) to make and consummate an Asset Sale Offer (as described below).
Pending the final application of any such Net Proceeds, the Trust or such
Restricted Subsidiary may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indentures.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraphs will constitute "Excess Proceeds." Each
Indenture will provide that when (1) the aggregate amount of Excess Proceeds
exceeds $10.0 million or (2) the Trust or any Restricted Subsidiary is required
to make an offer to purchase or redeem any Indebtedness which is pari passu with
the applicable Notes and which contains provisions similar to those set forth in
such Indenture for offers to purchase or redeem with asset sale proceeds, then
in each such case, the Trust will make an Asset Sale Offer to all Holders of
Notes issued thereunder and all holders of other Indebtedness that is pari passu
with such Notes containing provisions similar to those set forth in the
applicable
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Indenture for offers to purchase or redeem with the proceeds of sales of assets
to purchase the maximum principal amount of such Notes and such other pari passu
Indebtedness that may be purchased out of the Excess Proceeds. The offer price
in any Asset Sale Offer will be equal to 100% of principal amount plus accrued
and unpaid interest and Liquidated Damages, if any, to the date of purchase, and
will be payable in cash. If any Excess Proceeds remain after consummation of an
Asset Sale Offer, the Trust or any Restricted Subsidiary may use such Excess
Proceeds for any purpose not otherwise prohibited by the Indentures. If the
aggregate principal amount of applicable Notes and such other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes and such other pari passu
Indebtedness to be purchased on a pro rata basis based on the principal amount
of Notes and such other pari passu Indebtedness tendered. Upon completion of
each Asset Sale Offer pursuant to an Indenture, the amount of Excess Proceeds
shall be reset at zero for purposes of such Indenture. The Trust shall commence
an Asset Sale Offer within ten (10) Business Days after the amount of Excess
Proceeds exceeds $10 million, such Asset Sale Offer shall remain open for at
least twenty (20) Business Days and the Trust shall complete such Asset Sale
Offer within thirty (30) Business Days after it is commenced.
All cash or Cash Equivalents received by the Trust or a Restricted
Subsidiary from an Event of Loss shall be used, invested, used for prepayment of
Indebtedness, or used to repurchase Notes, all of the foregoing within the
periods and as otherwise provided in the prior three paragraphs.
The Trust will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sales
provisions of the Indentures, the Trust will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under the Asset Sale provisions of the Indentures by virtue of such
compliance.
OTHER AGREEMENTS
Regarding the New Senior Notes, the agreements governing the Trust's other
Indebtedness contain requirements regarding repurchases of Notes or the
repayment of Indebtedness upon the occurrence of certain events, including
events that would constitute a Change of Control or an Asset Sale. In addition,
the exercise by the Holders of New Senior Notes of their right to require the
Trust to repurchase the New Senior Notes upon a Change of Control or an Asset
Sale could cause a default under these other agreements, even if the Change of
Control or Asset Sale itself does not, due to the financial effect of such
repurchases on the Trust. The Trust's ability to pay cash to the Holders of New
Senior Notes upon such a repurchase may be limited by the Trust's then existing
financial resources.
Regarding the New Senior Subordinated Notes, the agreements governing the
Trust's outstanding Senior Debt, including the New Senior Notes, the 1997 Senior
Notes and the Credit Agreement, currently prohibit the Trust from purchasing any
New Senior Subordinated Notes, and also provide that certain change of control
or asset sale events regarding the Trust would constitute a default under these
agreements. Any future credit agreements or other agreements relating to Senior
Debt to which the Trust becomes a party may contain similar restrictions and
provisions. In the event a Change of Control or Asset Sale occurs at a time when
the Trust is prohibited from purchasing New Senior Subordinated Notes, the Trust
could seek the consent of its senior lenders to the purchase of New Senior
Subordinated Notes or could attempt to refinance the borrowings that contain
such prohibition. If the Trust does not obtain such a consent or repay such
borrowings, the Trust will remain prohibited from purchasing New Senior
Subordinated Notes. In such case, the
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Trust's failure to purchase tendered New Senior Subordinated Notes would
constitute an Event of Default under the New Senior Subordinated Indenture which
would, in turn, constitute a default under such Senior Debt. In such
circumstances, the subordination provisions in the New Senior Subordinated
Indenture would likely restrict payments to the Holders of New Senior
Subordinated Notes. The Trust's ability to pay cash to the Holders of New Senior
Subordinated Notes upon a repurchase may be limited by the Trust's then existing
financial resources.
See "Risk Factors -- Financing Change of Control Offer."
SELECTION AND NOTICE
If less than all of the Notes issued under an Indenture are to be redeemed
at any time, the Trustee will select Notes for redemption as follows:
(1) if the Notes are listed, in compliance with the requirements of
the principal national securities exchange on which the Notes are listed;
or
(2) if the Notes are not so listed, on a pro rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate.
No Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of redemption that
relates to that Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion of
the original Note will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Trust will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of the Trust's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Trust or any
of its Restricted Subsidiaries), or to the direct or indirect holders of
the Trust's or any of its Restricted Subsidiaries' Equity Interests in
their capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Trust or to the
Trust or a Restricted Subsidiary of the Trust);
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving the Trust) any Equity Interests of the Trust or any
direct or indirect parent of the Trust;
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes or the Subsidiary Guarantees, except a payment of
interest or principal at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such payments and other
actions set forth in clauses (1) through (4) above being collectively
referred to as "Restricted Payments");
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unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(2) the Trust would, at the time of such Restricted Payment and after
giving Pro Forma Effect thereto as if such Restricted Payment had been made
at the beginning of the applicable Reference Period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock;" and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Trust and its Restricted Subsidiaries
after the Issue Date, excluding Restricted Payments permitted by clauses
(2), (3), (4), (5) and (6) of the next succeeding paragraph, is less than
the sum, without duplication, of:
(a) $20 million; plus
(b) 50% of the Consolidated Net Income of the Trust for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the Issue Date to the end of the Trust's most
recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit); plus
(c) 100% of the aggregate net cash proceeds received by the Trust
since the Issue Date as a contribution to its common equity capital or
from the issue or sale of Equity Interests of the Trust (other than
Disqualified Stock) or from the issue or sale of convertible or
exchangeable Disqualified Stock or convertible or exchangeable debt
securities of the Trust that have been converted into or exchanged for
such Equity Interests (other than Equity Interests (or Disqualified
Stock or debt securities) sold to a Subsidiary of the Trust); plus
(d) to the extent that any Restricted Investment that was made
after the Issue Date is sold for cash or otherwise liquidated or repaid
for cash, the lesser of:
- the cash return of capital relating to such Restricted
Investment (less the cost of disposition, if any) and
- the initial amount of such Restricted Investment; plus
(e) in the event that any Unrestricted Subsidiary is designated as
a Restricted Subsidiary in accordance with the provisions of the
applicable Indenture, the lesser of:
- the aggregate fair market value of all outstanding Investments
owned by the Trust and its Restricted Subsidiaries in such Subsidiary
at the time of such designation or
- the aggregate amount of Restricted Investments made in such
Unrestricted Subsidiary since the Issue Date.
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So long as no Default has occurred and is continuing or would be caused thereby,
the preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indentures;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Trust or any Guarantor
or of any Equity Interests of the Trust in exchange for, or out of the net
cash proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Trust) of, Equity Interests of the Trust (other than
Disqualified Stock); provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (3)(c) of the
preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
Indebtedness of the Trust or any Guarantor with the net cash proceeds from
an incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend or other distribution by a Subsidiary
of the Trust to the holders of its Equity Interests on a pro rata basis;
(5) (a) so long as the Trust is treated for federal, state or local
tax purposes as an entity described in Section 1361(c)(2), 1361(d) or
1361(e) of the Code, an S Corporation, a partnership or an entity that is
disregarded as an entity separate from its owner(s) (each a "Pass-Through
Entity"), the Trust shall be permitted to distribute to the
Beneficiary(ies) of the Trust (or pay compensation to the Beneficiary(ies)
of the Trust in lieu of such distributions) all amounts distributed to the
Trust by Subsidiaries or other Persons in which the Trust has a direct
investment (collectively, "Investee Companies") in cash as described below,
calculated before giving effect to such payments (such payments to be
referred to hereinafter as "Trust Tax Distributions"):
(1) on (or within 15 days prior to) each April 15, June 15,
September 15 and January 15 an amount not to exceed the minimum federal
and state estimated quarterly income and intangible tax payments
required to be made on such date by each Beneficiary of the Trust in
order to prevent underpayment of each such Beneficiary's estimated
income tax pursuant to the rules set forth in Section 6654(b) and
6654(d)(1) of the Code, or their successors or supplements, and any
similar provision of applicable state income and intangible tax law for
any state for which the Investee Companies qualify as Pass-Through
Entities for state law purposes, such amount to be calculated as though
each such Beneficiary's only income and loss in each such quarter
relating to a required estimated payment was an amount equal to the sum
of the taxable income and loss of the Investee Companies which are
Pass-Through Entities. The foregoing amounts may be paid so long as:
- each such Investee Company is and was a Pass-Through Entity
for such quarter, as provided in the Code or the Treasury Regulations
promulgated thereunder,
- no Default or Event of Default exists and is continuing or
would thereby occur,
- special tax counsel to the Trust delivers to the Trustee,
prior to the payment in respect of such quarter, an opinion
substantially in the form attached to the Indentures regarding the
classification of the Trust and each such Investee Company as a Pass-
Through Entity for federal income tax purposes (or, if Larry J.
Winget is disabled or unavailable as described in the Venture Trust
Instrument, such special tax counsel
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delivers to the Trustee, prior to the payment in respect of such
quarter, an opinion substantially in the form attached to the
Indentures),
- the Trust has not received a private ruling or a National
Office Technical Advice Memorandum from the Internal Revenue Service
or, in respect of distributions made for state income tax purposes, a
similar ruling from any applicable state or local taxing authority,
that the Trust is not a Pass-Through Entity, or there has been a
final "determination" (as used in Section 1313 of the Code) or
similar state determination to the same effect, and
- the Trust and its Investee Companies have complied with the
terms of clauses (b), (c) and (d) below.
The amount that is distributable pursuant to this clause (5)(a) by each
Investee Company which is a Pass-Through Entity in respect of each of the
quarters described above shall be that proportion of the amount of the Trust Tax
Distribution for each such quarter which such Investee Company's Tax Income for
such quarter bears to the aggregate Tax Income of all the Investee Companies
which are Pass-Through Entities in such quarter. For purposes of the foregoing,
"Tax Income" shall mean one-quarter of an Investee Company's actual taxable
income for the year prior to that for which the calculations described above are
being made. For purposes hereof, any references herein to the taxable income or
loss of a Pass-Through Entity that is disregarded as an entity separate from its
owner for tax purposes shall mean the taxable income or loss of such
Pass-Through Entity as if it was a pass-through corporation which was not
disregarded as a separate entity for tax purposes; and
(2) no later than September 15 of each year, the Trust shall cause
its tax advisors, which shall be a nationally recognized accounting
firm, to determine the actual amount of federal and state income tax
liability of each Beneficiary of the Trust for the previous calendar
year computed as if the only income and loss of each such Beneficiary in
such year was an amount equal to the sum of the taxable income and loss
of the Investee Companies which are Pass-Through Entities (the "Actual
Tax Amount"). If:
(A) the Actual Tax Amount, as determined by such tax advisor, is
less than the aggregate estimated amounts paid pursuant to clause (1)
above in respect of such year (the "Distributed Amounts") and/or
(B) if the Actual Tax Amount is at any time finally determined
by the Internal Revenue Service or a court of competent jurisdiction
to be less than that determined by such tax advisors, the Trust shall
cause the Beneficiary(ies) of the Trust, within 75 days after such
difference is determined, to reimburse to the Trust, with no
obligation on the part of the Trust to each such Beneficiary for such
reimbursement, the excess of the Distributed Amounts over the Actual
Tax Amount, as finally determined by the tax advisors, the Internal
Revenue Service or court of competent jurisdiction, as the case may
be, or the excess of the Actual Tax Amount, as determined by the tax
advisors, over the Actual Tax Amount as determined by the Internal
Revenue Service or court, as the case may be (in either case, which
excess amount may be offset by any amounts then or subsequently owed
to each such Beneficiary by reason of clause (1) above).
If the excess of the Distributed Amounts over the Actual Tax Amount, as
finally determined by the tax advisors, is reimbursed to the Trust after June 14
of such year, such excess shall bear interest from June 15 to the date preceding
the date it is paid to the Trust at an interest rate equal to the overpayment
rate established under Section 6621(a)(1) of the Code or its successor and
supplements. If the Actual Tax Amount, as determined by the tax advisors, the
Internal Revenue
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Service or court, as the case may be, is greater than the Distributed Amounts,
each of the Investee Companies which are Pass-Through Entities shall distribute
to the Trust (and the Trust shall then distribute to its Beneficiary(ies)) its
share of the excess of the Actual Amount over the Distributed Amounts, within 75
days after such difference is determined. If any payment is made (i) in
contravention of clause (1) above and paid to the Beneficiary(ies) of the Trust
pursuant to this clause(5)(a) or (ii) in contravention of the limitations
contained in the immediately preceding sentence and paid to the Beneficiary(ies)
of the Trust pursuant to the immediately preceding sentence, the Trust shall
cause the Beneficiary(ies) of the Trust to reimburse to each of the Investee
Companies making such prohibited payment the amount of such prohibited payment;
(b) in the event of the death, disability or unavailability of Larry
J. Winget as provided in the Venture Trust Instrument (such date, a
"Commencement Date"), the Trust shall notify the Trustee of the occurrence
of such Commencement Date no later than 10 days following such date and
shall apply for a private ruling from the Internal Revenue Service to the
effect that (1) each of the Investee Companies which was a Pass-Through
Entity immediately prior to such death, disability or unavailability, as
the case may be, qualifies, despite such death, disability or
unavailability, as a Pass-Through Entity and (2) the Trust qualifies as a
Pass-Through Entity;
(c) if at any time the Trust or an Investee Company receives
notification from the Internal Revenue Service that any Investee Company
does not qualify as a Pass-Through Entity:
(1) no further distributions shall be made pursuant to clause
(a)(1) above by such Investee Company, and
(2) the Trust shall cause the Beneficiary(ies) of the Trust either:
(A) to reimburse the Trust all amounts paid by that Investee
Company pursuant to clause (a)(1) and clause (a)(2) above for all
periods as to which that Investee Company did not qualify as a Pass-
Through Entity, with no obligation on the part of the Trust to any
such Beneficiary for such reimbursement, and the Trust shall then pay
such reimbursement to that Investee Company, or
(B) to reimburse such Investee Company such payments directly,
within 75 days after such requirement for reimbursement is
determined; provided that no such reimbursement shall be required to
the extent to which such distribution would otherwise have been
permitted, after taking into account interest, penalties and
additions to tax imposed on such Investee Company as a result of its
failure to qualify as a Pass-Through Entity.
If the Trust or any Investee Company at any time receives notification from
the Internal Revenue Service that the Trust is not a Pass-Through Entity or if
the Trust or the Investee Companies fail to receive a favorable response to a
ruling request described in clause (b) within 360 days after the Commencement
Date regarding the status of the Trust or any Investee Company as a Pass-Through
Entity (in either the case of a notification or a response to a ruling request,
the "Entity-in-Issue") the Trust shall, and shall cause its Beneficiaries to,
take the actions described in clauses (x) and (y) of the preceding sentence for
the Entity-in-Issue (unless such Internal Revenue Service response indicates
that the Internal Revenue Service is not ruling as to those issues and the Trust
has obtained a favorable opinion of independent tax counsel that the
Entity-in-Issue is a Pass-Through Entity); and
(d) no Trust Tax Distribution may be made to the extent such
distribution would cause the aggregate cumulative amount of Trust Tax
Distributions to exceed the aggregate cumulative Tax Distribution Amounts
for periods completed after the Issue Date; and
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(6) In the case of the New Senior Note Indenture, repurchases of
subordinated Indebtedness with the proceeds of Asset Sales to the extent
that (a) such proceeds have been offered to Holders of the New Senior
Notes pursuant to an Asset Sale Offer, (b) such Holders declined to
participate in such Asset Sale Offer and (c) the Trust is required to
offer to repurchase or redeem such subordinated Indebtedness with such
Asset Sale proceeds.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued to or by the Trust or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant shall be determined by the relevant Fairness Committee whose resolution
with respect thereto shall be delivered to the Trustee. The Fairness Committee's
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $10.0 million. Not later than the date of making any
Restricted Payment, the Trust shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this "Restricted Payments"
covenant were computed, together with a copy of any fairness opinion or
appraisal required by the Indentures.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Trust will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, for
(collectively, "incur") any Indebtedness (including Acquired Debt), and the
Trust will not issue any Disqualified Stock and will not permit any of its
Restricted Subsidiaries to issue any shares of Preferred Stock; provided,
however, that the Trust may incur Indebtedness (including Acquired Debt) and
issue Disqualified Stock, and the Trust and the Guarantors may incur
Indebtedness and issue Preferred Stock and any other Restricted Subsidiary may
incur Acquired Debt, if the Fixed Charge Coverage Ratio for the Trust's most
recently ended four full fiscal quarters for which financial statements are
publicly available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock or Preferred Stock is issued
would have been at least 2.0 to 1, determined on a Pro Forma Basis (including a
pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or the Preferred Stock or Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter period.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by the Trust and/or one or more Restricted
Subsidiaries of additional Indebtedness and letters of credit under Credit
Facilities in an aggregate principal amount at any one time outstanding
under this clause (1) (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Trust and
the Restricted Subsidiaries, without duplication, thereunder) not to exceed
$625.0 million less
(x) the aggregate principal amount of Receivables Debt outstanding
under clause (2) below and
(y) the aggregate amount of all Net Proceeds of Asset Sales applied
by the Trust or any of its Restricted Subsidiaries to repay any
Indebtedness under a Credit Facility or Receivables Debt under
Receivables Facilities and effect a corresponding commitment
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reduction thereunder pursuant to the covenant described under the
caption "-- Repurchase at the Option of Holders -- Asset Sales;"
provided, that Restricted Subsidiaries that are not Guarantors shall not
directly or indirectly incur Indebtedness and letters of credit in an aggregate
principal amount outstanding under this clause (1) in excess of $50.0 million;
provided, further, that the aggregate principal amount of Indebtedness, letters
of credit and Receivables Debt under Receivables Facilities which may be
incurred under this clause (1) and clause (2) below shall not be reduced below
$100.0 million in the aggregate at any one time outstanding by reason of
subclause (y) above and subclause (y) of clause (2) below;
(2) the incurrence by Receivables Subsidiaries of Receivables Debt
under Receivables Facilities in an aggregate principal amount at any time
outstanding pursuant to this clause (2) not to exceed $625 million less
(x) the aggregate principal amount of Indebtedness and letters of
credit (determined as described in clause (1) above) outstanding under
clause (1) above and
(y) the aggregate amount of all Net Proceeds of Asset Sales applied
to reduce commitments for Receivables Debt or Indebtedness under a
Credit Facility pursuant to the covenant described above under the
caption "-- Repurchase at the Option of Holders -- Asset Sales;"
provided, that the aggregate principal amount of Indebtedness, letters of credit
and Receivable Debt under Receivables Facilities which may be incurred pursuant
to this clause (2) and clause (1) above shall not be reduced below $100.0
million in the aggregate at any one time outstanding by reason of subclause (y)
above and subclause (y) of clause (1) above;
(3) the incurrence by the Trust and its Restricted Subsidiaries of the
Existing Indebtedness;
(4) the incurrence by the Trust and the Guarantors of Indebtedness
represented by the Notes to be issued on the Issue Date and the related
Subsidiary Guarantees and the New Notes (as defined in the Registration
Rights Agreement) to be issued pursuant to the Registration Rights
Agreement and the related Subsidiary Guarantees;
(5) the incurrence by the Trust or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case, incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Trust or such Subsidiary, in an aggregate principal amount,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause (5),
not to exceed $50.0 million at any time outstanding;
(6) (a) the incurrence by the Trust or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness) that was permitted by the applicable
Indenture to be incurred under the first paragraph of this covenant or
clauses (3), (4), (5), (6), or (14) of this paragraph and (b) the
incurrence by the Trust or any of its Restricted Subsidiaries of Permitted
Preferred Stock in exchange for, or the net proceeds of which are used to
refund, refinance or replace Preferred Stock (other than intercompany
Preferred Stock) that was permitted by the applicable Indenture to be
incurred under the first paragraph of this covenant;
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(7) the incurrence by the Trust or any of its Restricted Subsidiaries
of intercompany Indebtedness or Preferred Stock between or among the Trust
and any of its Restricted Subsidiaries; provided, however, that:
(a) if the Trust or any Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly subordinated to the
prior payment in full in cash of all Obligations regarding the Notes, in
the case of the Trust, or the Subsidiary Guarantee, in the case of a
Guarantor; and
(b)(i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness or Preferred Stock being held by a
Person other than the Trust or a Restricted Subsidiary thereof and (ii)
any sale or other transfer of any such Indebtedness or Preferred Stock
to a Person that is not either the Trust or a Restricted Subsidiary
thereof; shall be deemed, in each case, to constitute an incurrence of
such Indebtedness or Preferred Stock by the Trust or such Restricted
Subsidiary, as the case may be, that was not permitted by this clause
(7);
(8) the incurrence by the Trust or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred solely for the purpose of (a)
fixing or hedging interest rate risk for any Indebtedness that is permitted
by the terms of this Indenture to be outstanding or (b) hedging currency or
commodity risks of the Trust and its Restricted Subsidiaries incurred by
the Trust or such Restricted Subsidiaries in the ordinary course of their
business;
(9) the guarantee by the Trust or any of the Guarantors of
Indebtedness of the Trust or a Guarantor that was permitted to be incurred
by another provision of this covenant;
(10) the accrual of interest, the accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in the
form of additional Indebtedness with the same terms, and the payment of
dividends on Disqualified Stock in the form of additional shares of the
same class of Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this
covenant; provided, in each such case, that the amount thereof is included
in Fixed Charges of the Trust as accrued;
(11) Indebtedness of the Trust or any Restricted Subsidiary
represented by performance bonds and letters of credit for the account of
the Trust or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims and payment obligations
in connection with self-insurance, in each case, that are incurred in the
ordinary course of business in accordance with customary industry practice
in amounts, and for the purposes, customary in the Trust's industry;
(12) Indebtedness of the Trust or any Restricted Subsidiary arising
from agreements providing for indemnification, adjustment of purchase price
or similar obligations, in each case, incurred in connection with the
disposition of any business, assets or Subsidiary, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing such
acquisition; provided that the maximum aggregate liability in respect of
all such Indebtedness shall at no time exceed the gross proceeds actually
received or to be received by the Trust and the Restricted Subsidiary in
connection with such dispositions;
(13) Indebtedness of the Trust or any Restricted Subsidiary solely in
respect of bankers acceptances, and appeal bonds (to the extent that any
such incurrence does not result in the incurrence of any obligation to
repay any obligation relating to borrowed money of others), all in the
ordinary course of business in accordance with customary industry
practices, in amounts and for the purposes customary in the Trust's
industry; provided that the aggregate principal amount
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outstanding of such Indebtedness (including any Indebtedness issued to
refinance, refund or replace such Indebtedness) shall at no time exceed
$5.0 million;
(14) the incurrence by any Restricted Subsidiary that is not a
Guarantor of Indebtedness in accordance with the provisions described below
under the caption "-- Limitation on Foreign Indebtedness;"
(15) the guarantee by any Restricted Subsidiary that is not a
Guarantor of Indebtedness of a Restricted Subsidiary that is not a
Guarantor that was permitted to be incurred under the Indenture; and
(16) the incurrence by the Trust or any of the Guarantors of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (16), not to exceed $35.0
million.
Regarding the New Senior Notes, the Trust will not, and will not permit any
of its Restricted Subsidiaries to, incur any Indebtedness (including Permitted
Debt) that is contractually subordinated in right of payment to any other
Indebtedness of the Trust or such Restricted Subsidiaries unless such
Indebtedness is also contractually subordinated in right of payment to the New
Senior Notes on substantially identical terms; provided, however, that no
Indebtedness of the Trust or its Restricted Subsidiaries shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of the
Trust or its Restricted Subsidiaries solely by virtue of being unsecured.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (16) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Trust will be permitted to classify such item of Indebtedness on the date of its
incurrence in any manner that complies with this covenant. Indebtedness under
Credit Facilities outstanding on the date on which Notes are first issued and
authenticated under the Indentures shall be deemed to have been incurred on such
date in reliance on the exception provided by clause (1) of the definition of
Permitted Debt.
LIMITATION ON FOREIGN INDEBTEDNESS
The Trust will not permit any Restricted Subsidiary of the Trust that is
not a Guarantor to, directly or indirectly, incur any Indebtedness (including
Acquired Indebtedness) other than Permitted Debt unless:
(1) after giving effect to the incurrence of such Indebtedness and the
receipt of the application of the proceeds thereof:
(a) if, as a result of the incurrence of such Indebtedness such
Restricted Subsidiary will become subject to any restriction or
limitation on the payment of dividends or the making of other
distributions,
- the Fixed Charge Coverage Ratio of Restricted Subsidiaries
that are not Guarantors (determined on a Pro Forma Basis for
the last four fiscal quarters for which financial statements
are available at the date of determination) is greater than
2.75 to 1; and
- the Trust's Fixed Charge Coverage Ratio (determined on a pro
forma basis for the last four fiscal quarters of the Trust for
which financial statements are available at the date of
determination) is greater than 2.0 to 1; or
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(b) in any other case, the Trust's Fixed Charge Coverage Ratio
(determined on a Pro Forma Basis for the last four fiscal quarters of
the Trust for which financial statements are available at the date of
determination) is greater than 2.0 to 1; and
(2) no Default or Event of Default shall have occurred and be
continuing a the time or as a consequence of the incurrence of such
Indebtedness.
In the event that any Indebtedness incurred pursuant to clause (1)(b) of
the foregoing paragraph is proposed to be amended, modified or otherwise
supplemented such that the payment of dividends or the making of other
distributions becomes subject in any manner to any restriction or limitation,
the Trust will not permit the Restricted Subsidiary to so amend, modify or
supplement such Indebtedness unless such Indebtedness could be incurred pursuant
to the terms of clause (1)(a) of the foregoing paragraph.
In calculating the Fixed Charge Coverage Ratio of the Restricted
Subsidiaries that are not Guarantors, Fixed Charges for Indebtedness that is
solely owed to and held by the Trust or a Restricted Subsidiary shall be
excluded.
All calculations required under the prior two paragraphs hereof shall be
made in a manner consistent with the calculations required under the covenant
described under "-- Incurrence of Indebtedness and Issuance of Preferred Stock."
LIENS
New Senior Subordinated Notes
The Trust will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien of
any kind securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, except Permitted Liens, unless the Trust or the Guarantors
provide, and cause their Restricted Subsidiaries to provide, concurrently
therewith, that the New Senior Subordinated Notes are equally and ratably
secured.
New Senior Notes
The Trust will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien of
any kind securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, except Permitted Liens, unless the Trust or the Guarantors
provide, and cause their Restricted Subsidiaries to provide, concurrently
therewith, that the New Senior Notes are equally and ratably secured.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Trust will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
to the Trust or any of its Restricted Subsidiaries, or regarding any other
interest or participation in, or measured by, its profits, or pay any
indebtedness owed to the Trust or any of its Restricted Subsidiaries;
(2) make loans or advances to the Trust or any of its Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to the Trust or any of
its Restricted Subsidiaries.
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However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the Issue Date and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive, taken as
a whole, regarding such dividend and other payment restrictions than those
contained in such Existing Indebtedness, as in effect on the Issue Date;
(2) Credit Facilities, provided that such Credit Facilities are no
more restrictive, taken as a whole, regarding such dividend and other
payment restrictions than those contained in the Credit Agreement as in
effect on the Issue Date;
(3) the Indentures, the Notes and the Subsidiary Guarantees;
(4) applicable law;
(5) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Trust or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the
Indentures to be incurred;
(6) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(7) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (3) of the preceding paragraph;
(8) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition;
(9) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(10) Liens securing Indebtedness that limit the right of the debtor to
dispose of the assets subject to such Lien;
(11) provisions for the disposition or distribution of assets or
property in joint venture agreements, assets sale agreements, stock sale
agreements and other similar agreements entered into in the ordinary course
of business;
(12) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
and
(13) Indebtedness or other contractual requirements of a Receivables
Subsidiary in connection with a Qualified Receivables Transaction, provided
that such restrictions apply only to such Receivables Subsidiary; and
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(14) Indebtedness incurred by a Restricted Subsidiary that is not a
Guarantor in compliance with the provisions set forth under the caption
"-- Limitation on Foreign Indebtedness."
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Trust
The Trust may not, directly or indirectly: (1) consolidate or merge with or
into another Person (whether or not the Trust is the surviving entity); or (2)
sell, assign, transfer, convey or otherwise dispose of all or substantially all
of the properties or assets of the Trust (computed on a consolidated basis), in
one or more related transactions, to another Person; unless:
(1) either: (a) the Trust is the continuing entity; or (b) the Person
formed by or surviving any such consolidation or merger (if other than the
Trust) or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made is organized or existing under the laws of
the United States, any state thereof or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger
(if other than the Trust) or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes all
the obligations of the Trust under the Notes, the Indentures and the
Registration Rights Agreements pursuant to agreements reasonably
satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) the Trust or the Person formed by or surviving any such
consolidation or merger (if other than the Trust), or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made:
(a) will have a Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the
Trust immediately preceding the transaction; and
(b) will, on the date of such transaction after giving Pro Forma
Effect thereto and any related financing transactions as if the same had
occurred at the beginning of the applicable Reference Period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described above under the caption "-- Incurrence of
Indebtedness and Issuance of Preferred Stock."
The foregoing clause (4) will not apply to a sale, assignment, transfer,
conveyance or other disposition of assets between or among the Trust and any of
the Guarantors.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise) of all or substantially all of the properties and assets of one or
more Subsidiaries, the Trust's interest in which constitutes all or
substantially all of the properties and assets of the Trust shall be deemed to
be the transfer of all or substantially all of the properties and assets of the
Trust.
Notwithstanding anything contained in the Indentures to the contrary, the
Trust is permitted to contribute or otherwise transfer all of the Equity
Interests of the Subsidiaries then held by the Trust (other than the Equity
Interests of the Subsidiary which is to receive such contribution from the
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Trust) to Venture Holdings Corporation or other successor to the Trust (a "Trust
Contribution"), provided that:
(A) any successor or surviving entity is organized and existing under
the laws of the United States, any state thereof or the District of
Columbia,
(B) such contribution or reorganization is not materially adverse to
Holders of the Notes; it being understood, however, that such contribution
or reorganization shall not be considered materially adverse to Holders of
the Notes solely because the successor or surviving entity is subject to
income taxation as a corporate entity,
(C) immediately after giving effect to such transaction, no Default or
Event of Default exists,
(D) the actions comprising such contribution or reorganization (e.g.,
the contribution of Capital Stock of the Subsidiaries, or the issuance of
Capital Stock of the entity in exchange for assets of or Equity Interests
in the Trust or in exchange for stock of an entity holding such Equity
Interests, or the merger or consolidation of such entities) will not
themselves directly result in material income tax liability to the
successor or surviving entity,
(E) the successor or surviving entity has assumed all obligations of
the Trust, pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee, under the Notes and the Indentures and
(F) Holders of the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such contribution or
reorganization and will be subject to federal income tax regarding the
Notes on the same amounts, in the same manner, and at the same time as
would have been the case if such contribution or reorganization had not
occurred.
If the successor or surviving entity after a Trust Contribution is not a
Pass-Through Entity, the Trust's ability to make Trust Tax Distributions must
terminate prior to such contribution or reorganization (except for Trust Tax
Distributions in respect of taxable periods ending on or prior to the date such
contribution or reorganization is effective for relevant tax purposes), other
than Trust Tax Distributions in respect of Beneficiaries' income tax liability
that results from the actions comprising such contribution or reorganization.
The Trust shall deliver to the Trustee prior to such contribution or
reorganization an Officers' Certificate covering clauses (A) through (F) and the
preceding sentence of this paragraph, stating that such contribution or
reorganization and such supplemental indenture comply with the Indentures, and
an opinion of counsel covering clauses (A), (D), (E) and (F) above and the
preceding sentence of this paragraph.
Guarantors
A Guarantor may not consolidate with or merge with or into (whether or not
such Guarantor is the surviving Person), another Person, other than the Trust or
another Guarantor, unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) either:
(a) the Person formed by or surviving any such consolidation or
merger assumes all the obligations of that Guarantor under the
Indentures, its Subsidiary Guarantee and the Registration Rights
Agreement, pursuant to a supplemental indenture satisfactory to the
Trustee or
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(b) the Net Proceeds of such sale or other disposition are applied
in accordance with the "Asset Sale" provisions of the applicable
Indenture.
The Subsidiary Guarantee of a Guarantor will be released from its
obligations under the Subsidiary Guarantee:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (including by way of
merger or consolidation) to a Person that is not (either before or after
giving effect to such transaction) a Subsidiary of the Trust, if the
Guarantor applies the Net Proceeds of that sale or other disposition are
applied in accordance with the "Asset Sale" provisions of the Indentures;
or
(2) in connection with any sale of all of the Capital Stock of that
Guarantor to a Person that is not (either before or after giving effect to
such transaction) a Subsidiary of the Trust, if the Guarantor applies the
Net Proceeds of that sale in accordance with the "Asset Sale" provisions of
the Indentures; or
(3) if the Trust properly designates that Guarantor as an Unrestricted
Subsidiary;
provided, however, that any such termination shall occur only to the extent that
all obligations of such Guarantor under all of its guarantees of, and under all
of its pledges of assets or other security interests which secure, any
Indebtedness of the Trust, the Guarantors or any other Restricted Subsidiary
shall also terminate upon such sale, disposition or designation.
See "-- Repurchase at the Option of Holders -- Asset Sales."
TRANSACTIONS WITH AFFILIATES
The Trust will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter
into or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each, an
"Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to the Trust or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Trust or such
Restricted Subsidiary with an unrelated Person; and
(2) the Trust delivers to the Trustee:
(a) for any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0
million, a resolution of the Board of Directors of the Trust or such
Restricted Subsidiary, as the case may be (or a resolution of the Board
of Directors of the Trust in the case of Venture Canada) and a
resolution of the Independent members of the Fairness Committee of the
Trust or Restricted Subsidiary (or a resolution of the Independent
members of the Fairness Committee of the Trust in the case of Venture
Canada), set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with this covenant; and
(b) for any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $15.0
million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting,
appraisal, investment banking firm or other qualified independent
financial advisor of national standing.
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The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any transaction with officers or directors of the Trust or any
Restricted Subsidiary in the ordinary course of business and consistent
with the past practice of the Trust or such Restricted Subsidiary;
(2) transactions between or among the Trust and/or its Restricted
Subsidiaries;
(3) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Trust;
(4) sales of Equity Interests (other than Disqualified Stock) to
Affiliates of the Trust;
(5) Restricted Payments that are permitted by the provisions of the
Indentures described above under the caption "-- Restricted Payments";
(6) performance of all agreements in existence on the Issue Date and
any modification thereto or any transaction contemplated thereby (including
pursuant to any modification thereto) in any replacement agreement therefor
so long as such modification or replacement is not more disadvantageous to
the Holders in any material respect than the original agreement as in
effect on the Issue Date; and
(7) transactions between a Receivables Subsidiary and any Person in
which the Receivables Subsidiary has an Investment.
The Trust and each of its Restricted Subsidiaries (other than Venture
Canada) shall have or will establish and maintain a Fairness Committee, at
least one of whose members shall be Independent.
ADDITIONAL GUARANTORS
All future domestic Restricted Subsidiaries (other than Receivables
Subsidiaries) shall become Guarantors of the Notes. In addition, the Trust will
not permit any of its Restricted Subsidiaries, directly or indirectly, to
Guarantee or pledge any assets to secure the payment of any other Indebtedness
of the Trust or any Guarantor unless such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture providing for the Guarantee of
the payment of the Notes by such Restricted Subsidiary, which Guarantee shall be
senior to or pari passu with such Restricted Subsidiary's Guarantee of or pledge
to secure such other Indebtedness unless, with respect only to the New Senior
Subordinated Notes, such other Indebtedness is Senior Debt, in which case the
Guarantee of the New Senior Subordinated Notes may be subordinated to the
Guarantee of such Senior Debt to the same extent as the New Senior Subordinated
Notes are subordinated to such Senior Debt.
Notwithstanding the preceding paragraph, any Subsidiary Guarantee of the
Notes will provide by its terms that it will be automatically and
unconditionally released and discharged under the circumstances described above
under the caption "-- Merger, Consolidation or Sale of Assets -- Guarantors."
Forms of the Subsidiary Guarantees will be attached as exhibits to the
Indentures.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Board of Directors of the Trust may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if that designation would not cause a Default.
If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the
aggregate fair market value of all outstanding Investments (without duplication)
owned by the Trust and its Restricted Subsidiaries in the
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Subsidiary so designated will be deemed to be an Investment made as of the time
of such designation and will either reduce the amount available for Restricted
Payments under the first paragraph of the covenant described above under the
caption "-- Restricted Payments" or reduce the amount available for future
Investments under one or more clauses of the definition of Permitted
Investments, as the Trust shall determine. That designation will only be
permitted if such Investment would be permitted at that time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary
to be a Restricted Subsidiary if the redesignation would not cause a Default.
BUSINESS ACTIVITIES
The Trust will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Trust and its Restricted Subsidiaries taken as a
whole.
PAYMENTS FOR CONSENT
The Trust will not, and will not permit any of their Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indentures or the Notes
unless such consideration is offered to be paid and is paid to all Holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
LIMITATION ON AMENDMENTS TO AGREEMENTS
So long as the Trust is Venture Holdings Trust and is an obligor under the
Indentures,
(1) the Trust shall not engage in any business activity except for
agreements related to its outstanding indebtedness;
(2) the Trust shall not own any property other than:
(A) the stock or membership interest of its subsidiaries,
(B) insurance on the life of the Beneficiary, or
(C) amounts allowed to be distributed by it under the terms of its
outstanding indebtedness or required to be used by the Trust to service
such outstanding indebtedness and its other obligations incurred in the
ordinary course in accordance with past practice; and
(3) the Venture Trust Instrument shall not be amended, modified or
changed in any manner except that the Trust may make amendments,
modifications or changes which individually or in the aggregate are not
adverse to the interests of the Holders of the Notes. Without limiting the
foregoing, amendments to the Venture Trust Instrument reasonably necessary
to conform to the requirements of Section 1361(c)(2), 1361(d) or 1361(e) of
the Code, or their successors or supplements, shall not be deemed adverse
to the interests of the Holders of the Notes. The Trust will not amend,
modify or in any way alter the Corporate Opportunity Agreement in any
manner adverse to the Trust or any of its Restricted Subsidiaries.
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ANTI-LAYERING
With respect only to the New Senior Subordinated Notes, the Trust and the
Guarantors will not incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment to
any Senior Debt and senior in any respect in right of payment to the New Senior
Subordinated Notes, and no Guarantor will incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinate or
junior in right of payment to any Senior Debt and senior in any respect in right
of payment to its Subsidiary Guarantee of the New Senior Subordinated Notes;
provided, however, that no Indebtedness of the Trust or its Restricted
Subsidiaries shall be deemed to be subordinated or junior in right of payment to
any other Indebtedness of the Trust or its Restricted Subsidiaries solely by
virtue of being unsecured.
CORPORATE OPPORTUNITIES
Larry J. Winget will agree pursuant to the Corporate Opportunity Agreement
for the benefit of the Holders of the Notes that if any corporate opportunity,
business opportunity, proposed transaction, acquisition, disposition,
participation, interest, or other opportunity to acquire an interest in any
business or prospect in the same business or in any business reasonably related
to the business of the Trust or any of its Subsidiaries or in any machinery or
equipment useful in the business of the Trust or any of its Subsidiaries (a
"Business Opportunity") comes to his attention or shall be made available to him
or any of his Affiliates, a complete and accurate description of such Business
Opportunity, including all of the terms and conditions thereof and the identity
of all other Persons involved in the Business Opportunity, shall be promptly
presented in writing to the Board of Directors of each of the Trust and each
Guarantor and the Fairness Committee of the Trust and each Guarantor and the
Trust and each Guarantor shall be entitled to pursue and take advantage of such
Business Opportunity, either directly or through a wholly owned Restricted
Subsidiary, and Larry J. Winget shall not, nor shall any of his Affiliates
(other than the Trust or any wholly owned Restricted Subsidiary of the Trust),
pursue or take advantage of a Business Opportunity unless majorities of the
Board of Directors of the Trust and each Guarantor and the Fairness Committee of
the Trust and each Guarantor (including majorities of the Trust's and each
Guarantor's disinterested directors, if any, and Independent members of the
Fairness Committee) have determined that it is not in the interests of the Trust
or such Guarantor to pursue or take advantage of such Business Opportunity.
Notwithstanding the foregoing, Business Opportunities (1) relating to the
purchase of machinery and equipment or real estate and not constituting a
business within the meaning of Section 11.01 (d) of Regulation S-X of the
Commission or (2) relating to the sale of goods and services by an Affiliate in
the ordinary course of business as conducted as of the Issue Date shall not be
subject to the Corporate Opportunity Agreement.
REPORTS
Whether or not required by the Commission, so long as any Notes are
outstanding, the Trust will furnish to the Holders of Notes, within 15 days
after the time periods specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Trust were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, for the annual information only, a report on the annual
financial statements by the Trust's certified independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Trust were required to file such reports.
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In addition, whether or not required by the Commission, the Trust will file
a copy of all of the information and reports referred to in clauses (1) and (2)
above with the Commission for public availability within the time periods
specified in the Commission's rules and regulations (unless the Commission will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, the Trust and the
Subsidiary Guarantors have agreed that, for so long as any Notes remain
outstanding, they will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
If the Trust has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph shall include a reasonably detailed presentation, either
on the face of the financial statements or in the footnotes thereto, and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of the Trust
and its Restricted Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of the Trust.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default under an Indenture:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages regarding, the Notes issued under such Indenture, and
for the New Senior Subordinated Notes, whether or not such payment was
prohibited by the subordination provisions of the Indenture governing the
New Senior Subordinated Notes;
(2) default in payment when due of the principal of, or premium, if
any, on the Notes issued under such Indenture, when the same becomes due
and payable at maturity, redemption, by acceleration or otherwise, and for
the New Senior Subordinated Notes, whether or not such payment was
prohibited by the subordination provisions of the Indenture governing the
New Senior Subordinated Notes;
(3) failure by the Trust or any of its Restricted Subsidiaries to
comply with the provisions described under the captions "-- Repurchase at
the Option of Holders -- Change of Control" or "-- Repurchase at the Option
of Holders -- Asset Sales;"
(4) failure by the Trust or any of its Restricted Subsidiaries for 60
days after notice from the Trustee or Holders of 25% in aggregate principal
amount of the Notes issued under the applicable Indenture to comply with
any of the other agreements in the Indenture or by Larry J. Winget to
observe and perform any covenant or agreement contained in the Corporate
Opportunity Agreement;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness in an aggregate principal amount in excess of $15.0 million
for money borrowed by the Trust or any of its Restricted Subsidiaries (or
the payment of which is guaranteed by the Trust or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the Issue Date, if that default:
(a) is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default
(a "Payment Default"); or
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(b) results in the acceleration of such Indebtedness prior to its
express maturity, and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $15.0 million or
more;
(6) failure by the Trust or any of its Restricted Subsidiaries to pay
final judgments not covered by insurance aggregating in excess of $10.0
million, which judgments are not paid, bonded, discharged or stayed for a
period of 60 days; and
(7) except as permitted by the applicable Indenture, any Subsidiary
Guarantee issued thereunder shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force
and effect or any Guarantor, or any Person acting on behalf of any
Guarantor, shall deny or disaffirm its obligations under its Subsidiary
Guarantee; and
(8) certain events of bankruptcy or insolvency regarding the Trust,
Guarantors or any of their Significant Subsidiaries.
In the case of an Event of Default under an Indenture arising from certain
events of bankruptcy or insolvency regarding the Trust, any Subsidiary that is a
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Notes issued thereunder
will become due and payable immediately without further action or notice. If any
other Event of Default under an Indenture occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding Notes
issued thereunder may declare all the Notes to be due and payable immediately.
Holders of the Notes may not enforce the applicable Indenture or the Notes
except as provided in the applicable Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding New Senior
Subordinated Notes or New Senior Notes may direct the applicable Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the New
Senior Subordinated Notes or New Senior Notes notice of any continuing Default
or Event of Default (except a Default or Event of Default relating to the
payment of principal or interest or Liquidated Damages) if it determines that
withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the New Senior
Subordinated Notes or New Senior Notes then outstanding by notice to the
applicable Trustee may on behalf of the Holders of all of such Notes waive any
existing Default or Event of Default and its consequences under the applicable
Indenture except a continuing Default or Event of Default in the payment of
interest or Liquidated Damages on, or the principal of, such Notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of the Trust with the
intention of avoiding payment of the premium that the Trust would have had to
pay if the Trust then had elected to redeem the New Senior Subordinated Notes or
New Senior Notes pursuant to the optional redemption provisions of the
applicable Indenture, an equivalent premium shall also become and be immediately
due and payable to the extent permitted by law upon the acceleration of the
Notes. If an Event of Default occurs prior to June 1, 2004 for the New Senior
Subordinated Notes or prior to June 1, 2003 for the New Senior Notes, by reason
of any willful action (or inaction) taken (or not taken) by or on behalf of the
Trust with the intention of avoiding the prohibition on redemption of the New
Senior Subordinated Notes or New Senior Notes prior to such respective dates,
then the premium specified in the applicable Indenture shall also become
immediately due and payable to the extent permitted by law upon the acceleration
of such Notes.
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The Trust is required to deliver to the Trustee annually a statement
regarding compliance with the Indentures. Upon becoming aware of any Default or
Event of Default, the Trust is required to deliver to the Trustee a statement
specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator, stockholder, manager, member,
partner, trustee, beneficiary or special advisor or member of the successor
special advisor group of the Trust or any Guarantor, as such, shall have any
liability for any obligations of the Trust or the Guarantors under the Notes,
the Indentures, the Subsidiary Guarantees or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. The waiver may not be
effective to waive liabilities under the federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Trust may, at its option and at any time, elect to have all of its
obligations discharged regarding the outstanding Notes and all obligations of
the Guarantors discharged regarding their Subsidiary Guarantees ("Legal
Defeasance") except for:
(1) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, or interest or premium and Liquidated Damages,
if any, on such Notes when such payments are due from the trust referred to
below;
(2) the Trust's obligations regarding the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee,
and the Trust's and the Guarantor's obligations in connection therewith;
and
(4) the Legal Defeasance provisions of the Indentures.
In addition, the Trust may, at its option and at any time, elect to have
the obligations of the Trust and the Guarantors released regarding certain
covenants that are described in the Indentures ("Covenant Defeasance") and
thereafter any omission to comply with those covenants shall not constitute a
Default or Event of Default regarding the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default regarding the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance under
an Indenture:
(1) the Trust must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the applicable Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, or
interest and premium and Liquidated Damages, if any, on the outstanding
Notes issued under such Indenture on the stated maturity or on the
applicable redemption date, as the case may be, and the Trust must specify
whether such Notes are being defeased to maturity or to a particular
redemption date;
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(2) in the case of Legal Defeasance, the Trust shall have delivered to
the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that:
(a) the Trust has received from, or there has been published by,
the Internal Revenue Service a ruling or
(b) since the Issue Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes issued under such Indenture will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Trust shall have delivered
to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
to the effect that the Holders of the outstanding Notes issued under such
Indenture will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(4) no Default or Event of Default shall have occurred and be
continuing under such Indenture either:
(a) on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit); or
(b) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the relevant Indenture) to which the
Trust or any of its Subsidiaries is a party or by which the Trust or any of
its Subsidiaries is bound;
(6) the Trust must have delivered to the Trustee an Opinion of Counsel
(subject to customary exceptions) to the effect that, assuming no
intervening bankruptcy of the Trust or any Guarantor between the date of
deposit and the 91st day following the deposit and assuming that no Holder
is an "insider" of the Trust or a Guarantor under applicable bankruptcy
law, after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(7) the Trust must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Trust with the intent of
preferring the Holders of Notes over the other creditors of the Trust and
the Guarantors with the intent of defeating, hindering, delaying or
defrauding creditors of the Trust or Guarantors or others; and
(8) the Trust must deliver to the Trustee an Officers' Certificate and
an Opinion of Counsel (regarding legal conclusions only), each stating that
all conditions precedent relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs, an Indenture or
the Notes issued thereunder may be amended or supplemented with the consent of
the Holders of at least a majority
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in principal amount of such Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, such Notes), and any existing default or compliance with
any provision of an Indenture or the Notes issued thereunder may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes issued thereunder (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, such Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(for any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note
or alter the provisions regarding the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"-- Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on
any Note;
(4) waive a Default or Event of Default in the payment of principal
of, or interest or premium, or Liquidated Damages, if any, on the Notes
(except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the
Notes;
(6) make any change in the provisions of the relevant Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of, or interest or premium or Liquidated
Damages, if any, on the Notes;
(7) waive a redemption payment for any Note (other than a payment
required by one of the covenants described above under the caption
"-- Repurchase at the Option of Holders");
(8) release any domestic Guarantor from any of its obligations under
its Subsidiary Guarantee or the applicable Indenture, except in accordance
with the terms of the Indentures; or
(9) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the
Indentures relating to subordination that adversely affects the rights of the
Holders of the Notes will require the consent of the Holders of at least 75% in
aggregate principal amount of Senior Subordinated Notes then outstanding. The
release of any foreign Guarantor from any of its obligations under its
Subsidiary Guarantee regarding an issue of Notes or the applicable Indenture
will require the consent of Holders of at least two-thirds of such issue of
Notes then outstanding.
Notwithstanding the preceding, without the consent of any Holder of Notes,
the Trust, the Guarantors and the Trustee may amend or supplement the Indentures
or the Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to provide for the assumption of the Trust's obligations to
Holders of Notes in the case of a merger or consolidation or sale of all or
substantially all of the Trust's assets;
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(4) to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the
legal rights under the relevant Indenture of any such Holder;
(5) to add additional Guarantors; or
(6) to comply with requirements of the Commission in order to effect
or maintain the qualification of the relevant Indenture under the Trust
Indenture Act.
SATISFACTION AND DISCHARGE
Each Indenture will be discharged and will cease to be of further effect as
to all Notes issued thereunder, when:
(1) either:
(a) all Notes that have been authenticated thereunder (except lost,
stolen or destroyed Notes that have been replaced or paid) have been
delivered to the Trustee for cancellation; or
(b) all Notes authenticated under the relevant Indenture that have
not been delivered to the Trustee for cancellation have become due and
payable by reason of the making of a notice of redemption or otherwise
or will become due and payable within one year and the Trust or any
Guarantor has irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust solely for the benefit of the Holders,
cash in U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient without
consideration of any reinvestment of interest, to pay and discharge the
entire indebtedness on such Notes not delivered to the Trustee for
cancellation for principal, premium and Liquidated Damages, if any, and
accrued interest to the date of maturity or redemption;
(2) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or shall occur as a result of such
deposit and such deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which the Trust or any
Guarantor is a party or by which the Trust or any Guarantor is bound;
(3) the Trust or the Guarantors have paid or caused to be paid all
sums payable by them under the relevant Indenture; and
(4) the Trust has delivered irrevocable instructions to the Trustee
under the relevant Indenture to apply the deposited money toward the
payment of such Notes at maturity or the redemption date or upon delivery
for cancellation, as the case may be.
In addition, the Trust must deliver an Officers' Certificate and an Opinion of
Counsel to the Trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.
CONCERNING THE TRUSTEE
If the Trustee becomes a creditor of the Trust or any Guarantor, the
Indentures limit its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such conflict
within 90 days, or apply to the Commission for permission to continue or resign.
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The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur and be continuing and, subject to such direction, the Trustee will
be required, in the exercise of its power, to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indentures at the request of any Holder of Notes, unless such Holder
shall have offered to the Trustee security and indemnity satisfactory to it
against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the Indentures and
Registration Rights Agreements without charge by writing to Venture Holdings
Trust, 33662 James J. Pompo Drive, P.O. Box 278, Fraser, Michigan 48026,
Attention: James E. Butler.
BOOK-ENTRY, DELIVERY AND FORM
The Outstanding Notes are and the Exchange Notes will be issued in
registered, global form in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof (the "Global Notes").
The Global Notes will be deposited on the date of the acceptance for
exchange of the Outstanding Notes and the issuance of the Exchange Notes with
the Trustee as custodian for The Depository Trust Company ("DTC"), in New York,
New York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC as described
below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"-- Exchange of Global Notes for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the Global
Notes will not be entitled to receive physical delivery of Notes in certificated
form.
DEPOSITORY PROCEDURES
We are providing the following description of the operations and procedures
of DTC, the Euroclear System ("Euroclear") and Cedel, S.A. ("Cedel") solely as a
matter of convenience. These operations and procedures are solely within the
control of the respective settlement systems and are subject to changes by them.
We take no responsibility for these operations and procedures and urge you to
contact the system or their participants directly to discuss these matters.
DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers and
dealers (including the Initial Purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or the Indirect Participants. The
ownership interests in, and transfers of ownership
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interests in, each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
DTC has also advised us that, pursuant to procedures established by DTC:
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants represented by the Global Notes with portions of the principal
amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on,
and the transfer of ownership thereof will be effected only through,
records maintained by DTC, for the Participants, or by the Participants and
the Indirect Participants, regarding other owners of beneficial interest in
the Global Notes.
Investors in the Global Notes who are Participants in DTC's system may hold
their interests in the Global Notes directly through DTC. Investors in the
Global Notes who are not Participants may hold their interests in the Global
Notes indirectly through organizations (including Euroclear and Cedel) which are
Participants in such system. All interests in a Global Note, including those
held through Euroclear or Cedel, may be subject to the procedures and
requirements of DTC. Those interests held through Euroclear or Cedel may also be
subject to the procedures and requirements of such systems. The laws of some
states require that certain Persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Note to such Persons will be limited to that extent.
Because DTC can act only on behalf of Participants, which in turn act on behalf
of Indirect Participants, the ability of a Person having beneficial interests in
a Global Note to pledge such interests to Persons that do not participate in the
DTC system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTEREST IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
"HOLDERS" THEREOF UNDER THE INDENTURES FOR ANY PURPOSE.
We will make payments in respect of the principal of, and interest and
premium and Liquidated Damages, if any, on a Global Note registered in the name
of DTC or its nominee to DTC in its capacity as the registered Holder under the
Indentures. Under the terms of the Indentures, we, along with the Trustee, will
treat the Persons in whose names the Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving payments and for
all other purposes. Consequently, neither we, the Trustee nor any agent of the
Issuer or Guarantors or the Trustee has or will have any responsibility or
liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Notes or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Notes; or
(2) any other matter relating to the actions and practices of DTC or
any of its Participants or Indirect Participants.
DTC has advised us that its current practice, upon receipt of any payment
in respect of securities such as the Notes (including principal and interest),
is to credit the accounts of the relevant Participants with the payment on the
payment date unless DTC has reason to believe it will not receive payment on
such payment date. Each relevant Participant is credited with an amount
proportionate to its beneficial ownership of an interest in the principal amount
of the relevant security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility
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of DTC, the Trustee or the Issuer or Guarantors. Neither the Issuer, Guarantors
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Notes. We and the Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds, and transfers between
participants in Euroclear and Cedel will be effected in accordance with their
respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes described in this prospectus, cross-market transfers between the
Participants in DTC, on the one hand, and Euroclear or Cedel participants, on
the other hand, will be effected through DTC in accordance with DTC's rules on
behalf of Euroclear or Cedel, as the case may be, by its respective depositary;
however, such cross-market transactions will require delivery of instructions to
Euroclear or Cedel, as the case may be, by the counterparty in such system in
accordance with the rules and procedures and within the established deadlines
(Brussels time) of such system. Euroclear or Cedel, as the case may be, will, if
the transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Note in DTC, and making
or receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Cedel participants may
not deliver instructions directly to the depositories for Euroclear or Cedel.
DTC has advised us that it will take any action permitted to be taken by a
Holder of Notes only at the direction of one or more Participants to whose
account DTC has credited the interests in the Global Notes and only in respect
of such portion of the aggregate principal amount of the Notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Notes, DTC reserves the right to exchange the
Global Notes for legended Notes in certificated form, and to distribute such
Notes to its Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures
to facilitate transfers of interests in the Global Notes among participants in
DTC, Euroclear and Cedel, they are under no obligation to perform or to continue
to perform such procedures, and may discontinue such procedures at any time.
Neither the Issuer, Guarantors nor the Trustee nor any of their respective
agents will have any responsibility for the performance by DTC, Euroclear or
Cedel or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies us that it is unwilling or unable to continue as
depositary for the Global Notes and we fail to appoint a successor
depositary or (b) has ceased to be a clearing agency registered under the
Exchange Act;
(2) we, at our option, notify the Trustee in writing that we elect to
cause the issuance of the Certificated Notes; or
(3) there shall have occurred and be continuing a Default or Event of
Default regarding the Notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the Trustee by or on
behalf of DTC in accordance with the Indentures. In all
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cases, Certificated Notes delivered in exchange for any Global Note or
beneficial interests in Global Notes will be registered in the names, and issued
in any approved denominations, requested by or on behalf of the depositary, in
accordance with its customary procedures.
SAME DAY SETTLEMENT AND PAYMENT
We will make payments in respect of the Notes represented by the Global
Notes (including principal, premium, if any, interest and Liquidated Damages, if
any) by wire transfer of immediately available funds to the accounts specified
by the Global Note Holder. We will make all payments of principal, interest and
premium and Liquidated Damages, if any, for Certificated Notes held by Holders
of at least $1,000,000 in aggregate principal amount of Notes, by wire transfer
of immediately available funds to the accounts specified by the Holders thereof
or, if no such account is specified, by mailing a check to each such Holder's
registered address. The Notes represented by the Global Notes are expected to be
eligible to trade in the PORTAL market and to trade in DTC's Same-day Funds
Settlement System, and any permitted secondary market trading activity in such
Notes will, therefore, be required by DTC to be settled in immediately available
funds. We expect that secondary trading in any Certificated Notes will also be
settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following the
settlement date of DTC. DTC has advised the Trust that cash received in
Euroclear or Cedel as a result of sales of interests in a Global Note by or
through a Euroclear or Cedel participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The following description is a summary of the material provisions of the
Registration Rights Agreement. It does not restate that agreement in its
entirety. We urge you to read the Registration Rights Agreement in its entirety
because it, and not this description, defines your registration rights as
Holders of the Outstanding Notes. See "-- Additional Information."
The Trust, Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement on May 27, 1999 pursuant to which the Trust and
Guarantors agreed, for the benefit of the Holders of the Outstanding Notes, that
they would, at their cost,
(1) within 90 days after May 27, 1999 file a registration statement
under the Securities Act, of which this prospectus forms a part, (an
"Exchange Offer Registration Statement") with the Commission for a
registered offer to exchange the Outstanding Notes for the Exchange Notes
with terms substantially identical in all material respects to the
Outstanding Notes (except that such Exchange Notes will not contain terms
regarding transfer restrictions) and
(2) use their best efforts to cause such Exchange Offer Registration
Statement to be declared effective under the Securities Act within 150 days
after May 27, 1999.
Upon such Exchange Offer Registration Statement being declared effective, the
Trust will offer Exchange Notes in exchange for properly tendered Outstanding
Notes.
The Trust will keep the Exchange Offer open for not less than 20 Business
Days (or longer if required by applicable law) after the date notice of such
Exchange Offer is mailed to the Holders of the Outstanding Notes. For each
Outstanding Note surrendered pursuant to such Exchange Offer, the
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Holder of such Outstanding Note will receive the applicable Exchange Notes
having a principal amount equal to that of the surrendered Outstanding Note.
Under existing Commission interpretations, the Exchange Notes would in general
be freely transferable after the Exchange Offer without further registration
under the Securities Act; provided that in the case of broker-dealers a
prospectus meeting the requirements of the Securities Act must be delivered as
required. The Company has agreed for a period of at least 270 days after
consummation of the Exchange Offer to make available a prospectus meeting the
requirements of the Securities Act to any broker-dealer for use in connection
with any resale of any such Exchange Notes so acquired. A broker-dealer that
delivers such a prospectus to purchasers in connection with such resales will be
subject to certain of the civil liability provisions under the Securities Act
and will be bound by the provisions of the Registration Rights Agreement
(including, without limitation, certain indemnification and contribution rights
and obligations).
Each Holder of the Outstanding Notes who wishes to exchange such
Outstanding Notes for Exchange Notes in the Exchange Offer will be required to
make certain representations, including representations that:
(1) any Exchange Notes to be received by it will be acquired in the
ordinary course of its business,
(2) it has no arrangement with any Person to participate in the
distribution of the Exchange Notes and
(3) it is not an "affiliate," as defined in Rule 405 of the Securities
Act, of the Company or any of the Guarantors, or if it is an affiliate of
any of them, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
In addition, if the Holder is not a broker-dealer, it will be required to
represent that it is not engaged in, and does not intend to engage in, the
distribution of the Exchange Notes. If the Holder is a broker-dealer that will
receive Exchange Notes for its own account in exchange for the Outstanding Notes
that were acquired as a result of market-making activities or other trading
activities, it will be required to acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange Notes.
In the event that applicable interpretations of the staff of the Commission
do not permit the Trust to effect such an Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 180 days of May 27, 1999,
the Trust will, at its own expense,
(a) as promptly as practicable, file a shelf registration statement
covering resales of the Outstanding Notes (a "Shelf Registration
Statement"),
(b) use their best efforts to cause such Shelf Registration
Statement to be declared effective under the Securities Act as promptly
as practicable after the filing of such Shelf Registration Statement and
(c) use their best efforts to keep effective such Shelf
Registration Statement until the earlier of 24 months following May 27,
1999 and such time as all of the Outstanding Notes have been sold
thereunder, or otherwise cease to be a Transfer Restricted Security (as
defined in the Registration Rights Agreement).
The Trust will, in the event a Shelf Registration Statement is required to
be filed, provide to each Holder of the Outstanding Notes copies of the
prospectus which is a part of such Shelf Registration Statement, notify each
such Holder when such Shelf Registration Statement for the Outstanding Notes has
become effective and take certain other actions that are required to permit
unrestricted resales of the Outstanding Notes. A Holder of the Outstanding Notes
who sells such
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notes pursuant to the Shelf Registration Statement generally would be required
to be named as a selling security holder in the related prospectus and to
deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement which are
applicable to such a Holder, including certain indemnification and contribution
rights and obligations.
Each of the following events is a "Registration Default":
(a) if neither of the registration statements described above is
filed on or before the 90th day following May 27, 1999,
(b) if neither of such registration statements is declared
effective by the Commission on or prior to the 150th day after May 27,
1999 (the "Effectiveness Target Date"),
(c) if an Exchange Offer Registration Statement becomes effective,
and the Trust fails to consummate the Exchange Offer within 45 days of
the earlier of the effectiveness of such registration statement or the
Effectiveness Target Date, or
(d) if the Shelf Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with resales
of Outstanding Notes during the period specified in the Registration
Rights Agreement .
If there is a Registration Default, then the Trust will pay to each Holder of
the Outstanding Notes, accruing from the date of the first such Registration
Default (or if such Registration Default has been cured, from the date of the
next Registration Default), liquidated damages ("Liquidated Damages") in an
amount equal to one-half of one percent (0.5%) per annum of the principal amount
of the Outstanding Notes held by such Holder during the first 90-day period
immediately following the occurrence of such Registration Default, increasing by
an additional one-half of one percent (0.5%) per annum of the principal amount
of such Outstanding Notes during each subsequent 90-day period, up to a maximum
amount of Liquidated Damages equal to two percent (2.0%) per annum of the
principal amount of such Outstanding Notes, which provision for Liquidated
Damages will continue until such Registration Default has been cured. Liquidated
Damages accrued as of any interest payment date will be payable on such date.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indentures. Reference
is made to the Indentures for a full disclosure of all such terms, as well as
any other capitalized terms used in this prospectus for which no definition is
provided.
"1997 Senior Notes" means the 9 1/2% Senior Notes due 2005 issued under
that certain Indenture dated as of July 1, 1997 among the Trust and certain of
the Guarantors and the Huntington National Bank, as Trustee, as the same may be
amended from time-to-time.
"Acquisition" means the purchase or other acquisition of any Person or
substantially all the assets of any Person or line of business of such Person by
any other Person, whether by purchase, merger, consolidation, or other transfer,
and whether or not for consideration.
"Acquired Debt" means, for any specified Person:
(1) Indebtedness or Disqualified Stock of any other Person existing at
the time such other Person is merged with or into or became a Restricted
Subsidiary of such specified Person, whether or not such Indebtedness is
incurred in connection with, or in contemplation of, such other Person
merging with or into, or becoming a Restricted Subsidiary of, such
specified Person; provided, however, that Indebtedness of such Person that
is redeemed, defeased, retired or
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otherwise repaid at the time of or immediately upon consummation of the
transaction by which such Person becomes or merges with or into the Trust
or a Subsidiary of the Trust shall not be Acquired Debt; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person, provided, however, that any such Indebtedness that
is redeemed, defeased, retired or otherwise repaid at the time of or
immediately upon consummation of the transaction by which such asset is
acquired shall not be Acquired Debt.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used for any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that beneficial ownership of 10% or more of the Voting Stock
of a Person shall be deemed to be control. For purposes of this definition, the
terms "controlling," "controlled by" and "under common control with" shall have
correlative meanings. No Person in whom a Receivables Subsidiary makes an
Investment in connection with a Qualified Receivables Transaction will be deemed
to be an Affiliate of the Trust or any of its Subsidiaries solely by reason of
such Investment.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than sales of inventory in the ordinary course of business
consistent with either past practices or accepted business practices in the
industry; provided that the sale, conveyance or other disposition of all or
substantially all of the assets of the Trust and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of the
Indentures described above under the caption "-- Repurchase at the Option
of Holders -- Change of Control" and/or the provisions described above
under the caption "-- Certain Covenants -- Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests in any of the Trust's Restricted
Subsidiaries or the sale of Equity Interests in any of their Restricted
Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed to be
Asset Sales:
(1) any single transaction or series of related transactions that
involves assets having a fair market value of less than $1.0 million;
(2) a transfer of assets between or among the Trust and its Restricted
Subsidiaries;
(3) an issuance or transfer of Equity Interests by a Restricted
Subsidiary to the Trust or to another Restricted Subsidiary;
(4) the sale, lease, conveyance or other disposition of equipment,
inventory, accounts receivable or other assets (including, without
limitation, the sale, lease, conveyance or other disposition of damaged,
worn-out or other obsolete property if such property is no longer necessary
for the proper conduct of the business of the Trust or such Restricted
Subsidiary) in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents;
(6) a Restricted Payment or Permitted Investment that is permitted by
the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments;"
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(7) sales of Receivables to a Receivables Subsidiary for the fair
market value thereof, including cash in an amount at least equal to 80% of
the book value thereof as determined in accordance with GAAP, it being
understood that, for the purposes of this clause (7), notes received in
exchange for the transfer of Receivables will be deemed cash if the
Receivables Subsidiary or other payor is required to repay said notes as
soon as practicable from available cash collections less amounts required
to be established as reserves pursuant to contractual agreements with
entities that are not Affiliates of the Trust or any of the Guarantors
entered into as part of a Qualified Receivables Transaction; and
(8) transfers of Receivables (or a fractional undivided interest
therein) by a Receivables Subsidiary in connection with a Qualified
Receivables Transaction.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning.
"Beneficiary" means (i) any beneficiary of the Trust while it is a trust or
(ii) any holders of the Equity Interests of a successor entity to the Trust;
provided, that for any tax calculation or tax distribution herein, a Beneficiary
shall be any Person ultimately liable for the payment of taxes regarding the
Trust's income.
"Board of Directors" means:
(1) either the board of directors, general partners or managers of the
Trust's Subsidiaries, or any duly authorized committee thereof; or
(2) in the case of the Trust, the Special Advisor of the Trust;
provided that (a) in the event the Special Advisor's rights, duties and
powers are assumed by the Successor Special Advisor Group, "Board of
Directors" means the Successor Special Advisor Group of the Trust and (b)
in the case of a successor entity to Venture Holdings Trust, "Board of
Directors" means the board of directors, general partners or managers of
the successor entity.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation (other than non-voting
non-convertible Indebtedness) that confers on a Person the right to receive
a share of the profits and losses of, or distributions of assets of, the
issuing Person, including, without limitation, the beneficial interests of
a trust.
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"Cash Equivalents" means:
(1) cash;
(2) securities issued or directly and fully guaranteed or insured by
the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof);
(3) time deposits and certificates of deposit and commercial paper
issued by the parent corporation of any domestic commercial bank of
recognized standing having capital and surplus in excess of $250 million;
(4) commercial paper issued by others rated at least A-1 or the
equivalent thereof by Standard & Poor's Corporation or at least P-1 or the
equivalent thereof by Moody's Investors Service, Inc.;
(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (3)
above;
(6) any money market deposit accounts including those of the Trustee
issued or offered by a domestic commercial bank having capital and surplus
in excess of $250 million;
(7) investments in money market funds which invest substantially all
their assets in securities of the type described in clauses (1), (2), (3)
and (4) above and in the case of (1), (2) and (3) maturing within one year
after the date of acquisition.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the
properties or assets of the Trust and its Restricted Subsidiaries, taken as
a whole, to any "person" (as that term is used in Section 13(d)(3) of the
Exchange Act) other than a Principal or a Related Party of a Principal;
(2) the adoption of a plan relating to the liquidation or dissolution
of the Trust;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the Beneficial Owner, directly or indirectly, of more than
40% of the Capital Stock of the Trust or the total voting power in the
aggregate normally entitled to vote in the election of directors, managers,
or trustees, as applicable, of the transferee(s) or surviving entity or
entities, measured by voting power rather than number of shares, but only
if the Principals and their Related Parties are the Beneficial Owners,
directly or indirectly, of less than a majority of the total voting power
in the aggregate normally entitled to vote in the election of directors,
managers, or trustees, as applicable, of the Trust or the transferee(s) or
surviving entity or entities, measured by voting power rather than number
of shares; or
(4) during any period of 12 consecutive months after the Issue Date,
individuals who at the beginning of any such 12-month period constituted
the Board of Directors of the Trust (together with any new directors whose
election by such Board or whose nomination for election by the equity
holders of the Trust,
(A) regarding Venture Holdings Trust was made pursuant to the terms
of the Venture Trust Instrument, and
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(B) regarding Venture Holdings Corporation or another successor to
the Trust, or their respective successors, after the occurrence of a
Trust Contribution,
(x) was approved by the Beneficiary(ies) of Venture Holdings
Trust on or before the date of the Trust Contribution, or
(y) was approved by a majority of the directors of the Trust
whose appointment, election or nomination to the Board of Directors
was approved in accordance with the preceding clause (x) or by this
clause (y) cease for any reason to constitute a majority of the Board
of Directors of the Trust then in office.
Notwithstanding anything in this definition to the contrary, a "Change of
Control" shall not be deemed to have occurred solely as a result of a
transaction pursuant to which the Trust is reorganized or reconstituted as a
corporation or a Trust Contribution occurs in accordance with the provisions
described under "Merger, Consolidation or Sale of Assets" and no event which is
otherwise a "Change of Control" shall have occurred.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Cash Flow" means, for any specified Person for any period,
the Consolidated Net Income of such Person for such period plus, without
duplication:
(1) Michigan single business tax expense, to the extent deducted in
determining Consolidated Net Income; plus
(2) Trust Tax Distributions; plus
(3) provision for taxes based on income or profits of such Person and
their Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income;
plus
(4) consolidated interest expense of such Person and their Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations), to the extent
that any such expense was deducted in computing such Consolidated Net
Income; plus
(5) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period (calculated in accordance with GAAP)) and other
non-cash expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future
period or amortization of a prepaid cash expense that was paid in a prior
period (calculated in accordance with GAAP)) of such Person and their
Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income.
Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash charges
of, a Restricted Subsidiary of the Trust (collectively, the "Add-Backs") shall
be added (without duplication) to Consolidated Net Income to compute
Consolidated Cash Flow only:
(1) in the same proportion as the Net Income of such Restricted
Subsidiary was included in calculating the Consolidated Net Income of the
Trust and
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(2) only to the extent that such proportional amount of such Add-Backs
would be permitted at the date of determination to be dividended,
distributed or otherwise paid, directly or indirectly to the Trust by such
Restricted Subsidiary without prior approval (that has not been obtained)
and not in violation of the terms of its charter or any other agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its stockholders
and such dividend, distribution or other payment is not subject to the
right of any Person to the right of repayment, avoidance, set off or
similar right;
provided that, if such dividend, distribution or other payment does not meet
such requirements at such date, such Add-Backs shall be added to Consolidated
Net Income to compute Consolidated Cash Flow but only if such dividend,
distribution or other payment was actually made during the applicable period
without the required prior approval of any Person or governmental authority and
was not made in violation of such Restricted Subsidiary's charter or any other
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders and such
dividend, distribution or other payment is not subject to the right of any
Person to the right of repayment, avoidance, set-off or similar right.
"Consolidated Net Income" means, for any specified Person for any period,
the aggregate of the Net Income of such Person and their Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that:
(1) the Net Income of any Person that is not a Restricted Subsidiary
or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions
paid in cash to the specified Person or a Restricted Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders; provided, that if such
declaration or payment is not permitted at such date, such Net Income shall
nevertheless be included if such declaration and payment were made during
the applicable period without the prior required approval of any Person or
governmental authority and were not made in violation of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental resolution applicable to that Restricted Subsidiary or its
stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded;
(4) Trust Tax Distributions to the extent not already deducted shall
be excluded; and
(5) the cumulative effect of a change in accounting principles shall
be excluded.
In addition, solely for purposes of the covenant described under
"-- Certain Covenants -- Restricted Payments," Consolidated Net Income shall
include, without duplication of amounts included above,
(A) the amount of dividends or other distributions paid in cash to
the specified Person or a Restricted Subsidiary thereof by an
Unrestricted Subsidiary but only to the extent of the Consolidated Net
Income of such Unrestricted Subsidiary for the period beginning on the
first day of the fiscal quarter commencing immediately after such
Unrestricted Subsidiary became an Unrestricted Subsidiary and ending on
the last day of the fiscal quarter for which financial statements are
available immediately preceding the date of such dividend or other
distribution and
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(B) Net Income of a Restricted Subsidiary earned by such Restricted
Subsidiary during the period beginning on the first day of the first
fiscal quarter commencing after the Issue Date and ending on the last
day of the Trust's fiscal quarter for which financial statements are
available immediately preceding the date of determination to the extent
that:
(x) such Net Income was previously excluded from Consolidated
Net Income by reason of clause (2) of this definition and
(y) as of such date of determination, such Restricted Subsidiary
may declare and pay dividends or similar distributions without any
prior governmental approval (that has not been obtained) and not in
violation of its charter or any other agreement, covenant,
instrument, decree, order, statute, rule or governmental regulating
applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Net Worth" means, for any specified Person as of any date,
the sum of:
(1) the consolidated equity of the holders of Capital Stock or the
trust principal of such Person and its consolidated Restricted Subsidiaries
as of such date; plus
(2) the respective amounts reported on such Person's balance sheet as
of such date for any series of Preferred Stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of dividends unless
such dividends may be declared and paid only out of net earnings in respect
of the year of such declaration and payment, but only to the extent of any
cash received by such Person upon issuance of such Preferred Stock.
"Credit Agreement" means that certain Credit Agreement, dated as of May 27,
1999, by and among the Trust, the lenders referred to therein and The First
National Bank of Chicago, as agent, providing for up to $575 million of
borrowings, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith from time to time,
and in each case as amended, modified, renewed, refunded, replaced or refinanced
from time to time, including, without limitation, any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder in a manner not in
violation of the Indenture) or adding Restricted Subsidiaries as additional
borrowers or guarantors thereunder.
"Credit Facilities" means, one or more debt facilities (including, without
limitation, the Credit Agreement), commercial paper facilities or other issues
of debt securities, in each case with, or issued to, banks or other
institutional lenders (including qualified institutional buyers or accredited
investors) providing for revolving credit loans, term loans, receivables
financing (including through the sale of receivables to such lenders or to
special purpose entities formed to borrow from such lenders against such
receivables), letters of credit or other evidences of indebtedness, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means:
(1) any Senior Debt outstanding under the Credit Agreement and the
1997 Senior Notes; and
(2) after payment in full of all Obligations under the Credit
Agreement and the 1997 Senior Notes, any other Senior Debt permitted under
the New Senior Subordinated Indenture the principal amount of which is
$25.0 million or more and that has been designated by the Trust as
"Designated Senior Debt."
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"Disqualified Stock" means, under either Indenture, any Capital Stock that,
by its terms (or by the terms of any security into which it is convertible, or
for which it is exchangeable, in each case at the option of the holder thereof),
or upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the option
of the holder thereof, in whole or in part, on or prior to the date that is 91
days after the date on which the Notes issued under such Indenture mature.
Notwithstanding the preceding sentence, any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Trust to repurchase such Capital Stock upon the occurrence of a
change of control or an asset sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Trust may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an offering of Capital Stock of the Trust for cash.
"Event of Loss" means, for any property or asset, any (i) loss, destruction
or damage of such property or asset which exceeds $15 million or (ii) any
condemnation, seizure or taking, by exercise of the power of eminent domain or
otherwise, of such property or asset, or confiscation or requisition of use of
such property or asset, which impairs the value of such property or asset in an
amount exceeding $15 million as determined in good faith by the Fairness
Committee of the Trust.
"Existing Indebtedness" means Indebtedness of the Trust and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the Issue Date, until such amounts are repaid.
"Fairness Committee" means a committee duly established pursuant to the
Venture Trust Instrument and the bylaws of each other Guarantor, Restricted
Subsidiary and any successor to Venture Holdings Trust without whose approval
(and without the approval of a majority of its Independent members) the Trust, a
Guarantor or a Restricted Subsidiary shall not be authorized to enter into any
transaction or take any action which pursuant to the terms of the Indentures
requires approval of the Fairness Committee.
"Fixed Charges" means, for any specified Person and their Restricted
Subsidiaries, for any period, the sum, without duplication, of:
(1) the consolidated interest expense of such Person and their
Restricted Subsidiaries for such period, whether paid or accrued,
including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net of the effect of all payments made or
received pursuant to Hedging Obligations; plus
(2) the consolidated interest of such Person and their Restricted
Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of their Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of their Restricted
Subsidiaries, whether or not such Guarantee or Lien is called upon; plus
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(4) the product of (a) all dividends, whether paid or accrued and
whether or not in cash, on any series of Preferred Stock of such Person or
any of their Restricted Subsidiaries, other than dividends on Equity
Interests payable solely in Equity Interests of the Trust (other than
Disqualified Stock) or to the Trust or a Restricted Subsidiary of the
Trust, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state
and local statutory tax rate of such Person and its Restricted
Subsidiaries, expressed as a decimal, in each case, on a consolidated basis
and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means for any specified Person and its
Restricted Subsidiaries for any period, the ratio of the Consolidated Cash Flow
of such Person for such period to the Fixed Charges of such Person and its
Restricted Subsidiaries for such period, calculated on a Pro Forma Basis. In the
event that the specified Person or any of their Restricted Subsidiaries incurs,
assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than
ordinary working capital borrowings) or issues, repurchases or redeems Preferred
Stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated and on or prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving Pro Forma Effect to such incurrence, assumption, Guarantee, repayment,
repurchase or redemption of Indebtedness, or such issuance, repurchase or
redemption of Preferred Stock, and the use of the proceeds therefrom as if the
same had occurred at the beginning of the applicable Reference Period.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means each of:
(1) Vemco, Inc., Vemco Leasing, Inc., Venture Industries Corporation,
Venture Holdings Corporation, Venture Leasing Company, Venture Mold &
Engineering Corporation, Venture Service Company, Venture Europe, Inc.,
Venture EU Corporation, Venture Holdings Company LLC and Experience
Management, LLC; and
(2) any other subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the Indentures; and their respective
successors and assigns.
"Hedging Obligations" means, for any specified Person, the obligations of
such Person under:
(1) interest rate swap agreements, interest rate cap agreements,
interest rate collar agreements, interest rate exchange agreements and
currency exchange agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates or currency or commodity values,
including, without limitation, any arrangement whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a fixed or floating rate of interest
on a stated notional amount in exchange for periodic payments made by such
Person calculated by applying a fixed or floating rate of interest on the
same notional amount.
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"Indebtedness" means, without duplication, for any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or
trade payable; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
"Independent" means,for the Trust or any of its Restricted Subsidiaries, a
Person who would qualify as an "independent director" within the meaning of the
rules of the New York Stock Exchange and who:
(1) shall not receive any payment or other fees for services to the
Trust or any of its Affiliates (other than for serving as a member of the
Fairness Committee of the Trust or of a Subsidiary of the Trust) and
(2) shall not be an Affiliate, officer, member or employee of any
firm, company or other entity that has performed services for the Trust or
any of its Affiliates during the proceeding three fiscal years or that the
Trust or any of its Affiliates proposes to have perform services if the
amount of compensation for such services during any fiscal year exceeded or
would exceed 5% of such firm's gross revenues during any of its three
preceding fiscal years.
"Investments" means, without duplication, for any Person, all direct or
indirect investments by such Person in other Persons (including Affiliates) in
the forms of loans (including Guarantees or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers, employees, independent contractors or other third parties made in the
ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities, together with all items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP. If the Trust or any Restricted Subsidiary of the Trust
sells or otherwise disposes of any Equity Interests of any direct or indirect
Restricted Subsidiary of the Trust such that, after giving effect to any such
sale or disposition, such Person is no longer a Restricted Subsidiary of the
Trust, the Trust shall be deemed to have made an Investment on the
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date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Restricted Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "-- Certain Covenants -- Restricted Payments."
"Issue Date" means the date of the first issuance of the Notes under the
Indentures.
"Lien" means, for any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset, whether or not
filed, recorded or otherwise perfected under applicable law, including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
(except in connection with any Qualified Receivables Transaction) and any filing
of or agreement to give any financing statement under the Uniform Commercial
Code (or equivalent statutes) of any jurisdiction (except in connection with any
Qualified Receivables Transaction).
"Net Income" means, for any specified Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect
of Preferred Stock dividends, excluding, however:
(1) any gain or loss, together with any related provision for taxes on
such gain or loss, realized in connection with: (a) any Asset Sale; or (b)
the disposition of any securities by such Person or any of their Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or
any of their Restricted Subsidiaries; and
(2) any extraordinary gain or loss, together with any related
provision for taxes on such extraordinary gain or loss.
"Net Proceeds" means the aggregate cash or Cash Equivalent proceeds
received by the Trust or any of its Restricted Subsidiaries in respect of any
Asset Sale (including, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received in any Asset Sale), net
of the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof, taxes paid or payable
(including, without limitation, Trust Tax Distributions in respect thereof) as a
result thereof, in each case, after taking into account any available tax
credits or deductions and any tax sharing arrangements, and amounts required to
be applied to the repayment of Indebtedness, other than:
(1) in the case of the New Senior Subordinated Indenture, Senior Debt
and
(2) in the case of the New Senior Indenture, Indebtedness under a
Credit Facility that is not expressly subordinated by its terms to any
other Indebtedness of the Trust or such Restricted Subsidiary, secured by a
Lien on the asset or assets that were the subject of such Asset Sale and
any reserve for adjustment in respect of the sale price of such asset or
assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Trust nor any of its Restricted
Subsidiaries:
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable as a guarantor or otherwise,
or
(c) constitutes the lender, other than, in each case, pursuant to
an Investment in an Unrestricted Subsidiary not in violation of the
Indenture;
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(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of
any other Indebtedness of the Trust or any of its Restricted Subsidiaries
to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of the Trust or any of
its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness, in all cases whether now
outstanding or hereafter created, assumed or incurred in connection therewith
and including without limitation, interest accruing subsequent to the filing of
the petition in bankruptcy at the rate provided in the relevant document,
whether or not an allowed claim.
"Operating Expense or Cost Reduction" means, for the calculation of a Fixed
Charge Coverage ratio on a Pro Forma Basis, an operating expense or cost
reduction for an Acquisition, which, in the good faith estimate of management,
will be realized as a result of such Acquisition, provided that the forgoing
eliminations of operating expenses and realizations of cost reductions shall be
of the types permitted to be given effect to in accordance with Article 11 of
regulation S-X under the Exchange Act as in effect on the Issue Date and such
reduction is subject to negative comfort by the Trust's independent public
accountants.
"Permitted Business" means the business conducted (or proposed to be
conducted) by the Trust and its Restricted Subsidiaries as of the Issue Date and
any and all businesses that in the good faith judgment of the Board of Directors
of the Trust are reasonably related businesses.
"Permitted Investments" means:
(1) any Investment in the Trust or in a Restricted Subsidiary of the
Trust;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Trust or any Restricted Subsidiary of the
Trust in a Person (other than a Receivables Subsidiary), if as a result of
such Investment:
(a) such Person becomes a Restricted Subsidiary of the Trust; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Trust or a Restricted Subsidiary of the Trust;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales";
(5) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Trust;
(6) Hedging Obligations;
(7) loans or advances to employees, officers, independent contractors
and other third parties of the Trust and its Restricted Subsidiaries in the
ordinary course of business for bona fide business purposes;
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(8) Investments in securities of trade creditors or customers received
pursuant to any plan or reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers;
(9) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (9) not to exceed $25
million; and
(10) the acquisition by a Receivables Subsidiary in connection with a
Qualified Receivables Transaction of Equity Interests of a trust or other
Person established by such Receivables Subsidiary to effect such Qualified
Receivables Transaction; and any other Investment by the Trust or a
Subsidiary of the Trust in a Receivables Subsidiary or any Investment by a
Receivables Subsidiary in any other Person, in connection with a Qualified
Receivables Transaction, provided that each such other Investment is in the
form of a note or other instrument that the Receivables Subsidiary or other
Person is required to repay as soon as practicable from available cash
collections less amounts required to be established as reserves pursuant to
contractual agreements with entities that are not Affiliates of the Trust
entered into as part of a Qualified Receivables Transaction.
"Permitted Junior Securities" means:
(1) Equity Interests in the Trust or any Guarantor; or
(2) debt securities that are subordinated to all Senior Debt and any
debt securities issued in exchange for Senior Debt to substantially the
same extent as, or to a greater extent than, the New Senior Subordinated
Notes and the Subsidiary Guarantees thereof are subordinated to Senior Debt
under the New Senior Subordinated Indenture.
"Permitted Liens" means:
(1) for the New Senior Subordinated Notes, Liens of the Trust and any
Guarantor securing Indebtedness and other Obligations securing Senior Debt
that was permitted by the terms of the New Senior Subordinated Indenture to
be incurred;
(2) for the New Senior Notes, Liens of the Trust and any Guarantor
securing Indebtedness and other Obligations under Credit Facilities that
are not expressly subordinated by their terms to any other Indebtedness of
the Trust or such Guarantor that was permitted by the terms of the New
Senior Indenture to be incurred;
(3) Liens in favor of the Trust or the Guarantors;
(4) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Trust or any Restricted
Subsidiary of the Trust; provided that such Liens were not incurred in
contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Trust or the Restricted Subsidiary;
(5) Liens on property existing at the time of acquisition thereof by
the Trust or any Restricted Subsidiary of the Trust, provided that such
Liens were not incurred in contemplation of such acquisition;
(6) Liens to secure the performance of bids, trade contracts (other
than advanced money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
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(7) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (5) of the second paragraph of the covenant entitled
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock" covering only the assets acquired with such Indebtedness;
(8) Liens existing on the Issue Date;
(9) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(10) statutory liens of carriers, warehousemen, mechanics,
materialmen, landlords, repairmen or other like Liens arising by operation
of law in the ordinary course of business, provided that (i) the underlying
obligations are not overdue for a period of more than 60 days, or (ii) such
Liens are being contested in good faith and by appropriate proceedings and
adequate reserves with respect thereto are maintained on the books of the
Trust in accordance with GAAP;
(11) easements, rights-of-way, zoning, similar restrictions and other
similar encumbrances or title defects which, singly or in the aggregate, do
not in any case materially detract from the value of the property subject
thereto (as such property is used by the Trust or any of its Restricted
Subsidiaries) or interfere with the ordinary conduct of the business of the
Trust or any of its Restricted Subsidiaries;
(12) Liens arising by operation of law in connection with court orders
and judgments, only to the extent, for an amount and for a period not
resulting in an Event of Default with respect thereto;
(13) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security legislation;
(14) the New Senior Indenture will permit Liens securing the New
Senior Notes and the New Senior Subordinated Indenture will permit Liens
securing the New Senior Subordinated Notes;
(15) leases or subleases granted to other Persons in the ordinary
course of business not materially interfering with the conduct of the
business of the Trust or any of its Restricted Subsidiaries or materially
detracting from the value of the relative assets of the Trust or any
Restricted Subsidiary;
(16) Liens arising from precautionary Uniform Commercial Code
financing statement filings regarding operating leases entered into by the
Trust or any of its Subsidiaries in the ordinary course of business;
(17) Liens securing Refinancing Indebtedness incurred to refinance any
Indebtedness that was previously so secured in a manner no more adverse to
the Holders of the Notes than the terms of the Liens securing such
refinanced Indebtedness, provided that the Indebtedness secured is not
increased and the lien is not extended to any additional assets or property
unless the Notes are equally and ratably secured by such additional assets
or the additional assets were acquired after the Issue Date;
(18) additional Liens incurred in the ordinary course of business of
the Trust or any Subsidiary of the Trust for obligations that do not exceed
$5.0 million at any one time outstanding;
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(19) Liens on assets of a Restricted Subsidiary that is not a
Guarantor securing Indebtedness of such Restricted Subsidiary that was
permitted to be incurred under clause (14) of the second paragraph of the
covenant entitled "Incurrence of Indebtedness and Issuance of Preferred
Stock;" and
(20) Liens on assets of a Receivables Subsidiary incurred in
connection with a Qualified Receivables Transaction.
"Permitted Preferred Stock" means any Preferred Stock of the Trust or any
of its Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, amend, restate, refinance, renew, replace or refund
other Preferred Stock of the Trust or any of its Restricted Subsidiaries (other
than intercompany Preferred Stock); provided that:
(1) the liquidation preference of such Permitted Preferred Stock does
not exceed the liquidation preference of the Preferred Stock so extended,
refinanced, renewed, replaced or refunded (plus all accrued dividends
thereon and the amount of all expenses and premiums incurred in connection
therewith);
(2) such Permitted Preferred Stock has a final maturity date (or
redemption date, as applicable) later than the final maturity date (or
redemption date, as applicable) of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Preferred Stock being extended, refinanced, renewed, replaced, or
refunded;
(3) if the Preferred Stock being extended, refinanced, renewed,
replaced, defeased or refunded is Disqualified Stock, such Permitted
Preferred Stock has a redemption, maturity, repurchase or other required
payment (other than dividend payments) no earlier than the earliest
redemption, maturity, repurchase or other required payment (other than
dividend payments) of the Preferred Stock being extended, refinanced,
renewed, replaced, defeased or refunded;
(4) such Preferred Stock is issued either by the Trust or by the
Subsidiary who is the issuer on the Preferred Stock being extended,
refinanced, renewed, replaced, or refunded; and
(5) Permitted Preferred Stock constituting Disqualified Stock may only
be issued if the Preferred Stock being extended, refinanced, renewed,
replaced or refunded constitutes Disqualified Stock.
"Permitted Refinancing Indebtedness" means any Indebtedness or Preferred
Stock (other than Disqualified Stock) of the Trust or any of its Restricted
Subsidiaries issued in exchange for, or the net proceeds of which are used to
extend, amend, restate, refinance, renew, replace, defease or refund other
Indebtedness of the Trust or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value or liquidation preference,
if applicable) of such Permitted Refinancing Indebtedness does not exceed
the principal amount (or accreted value, if applicable) of the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus all
accrued interest thereon and the amount of all expenses and premiums
incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the applicable
Notes, such Permitted Refinancing
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Indebtedness has a final maturity date later than the final maturity date
of, and is subordinated in right of payment to, the applicable Notes on
terms at least as favorable to the Holders of the applicable Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred or such Preferred Stock is issued
either by the Trust or by the Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference for dividends, distributions
or liquidation proceeds or any other payments of such Person over the holders of
other Capital Stock issued by such Person.
"Principals" means Larry J. Winget.
"Pro Forma Basis" or "Pro Forma Effect" means, for purposes of calculating
the Fixed Charge Coverage Ratio, giving pro forma effect to certain transactions
such that:
(1) Acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the Calculation Date
shall be assumed to have occurred on the first day of the Reference Period
and any Operating Expense or Cost Reduction for such Acquisition shall be
deducted from such calculation;
(2) transactions giving rise to the need to calculate the Fixed Charge
Coverage Ratio shall be assumed to have occurred on the first day of the
Reference Period;
(3) the incurrence of any Indebtedness or issuance of any Disqualified
Stock during the Reference Period or subsequent to the Reference Period and
on or prior to the Calculation Date (and the application of the proceeds
therefrom, including to refinance or retire other Indebtedness) shall be
assumed to have occurred on the first day of such Reference Period (except
that, in making such computation, the amount of Indebtedness under any
revolving credit facility shall be computed based on the average daily
balance during the Reference Period);
(4) the Fixed Charges of such Person attributable to interest on any
Indebtedness or dividends on any Disqualified Stock bearing a floating
interest (or dividend) rate shall be computed on a Pro Forma Basis as if
the average rate in effect from the beginning of the Reference Period to
the Calculation Date had been the applicable rate for the entire period,
unless such Person or any of its Restricted Subsidiaries is a party to a
Hedging Obligation (which shall remain in effect for the 12-month period
immediately following the Calculation Date) that has the effect of fixing
the interest rate on the date of computation, in which case such rate
(whether higher or lower) shall be used;
(5) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be excluded;
and
(6) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Restricted Subsidiaries
following the Calculation Date.
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"Qualified Receivables Transaction" means any transaction or series of
transactions entered into by the Trust or any of its Subsidiaries pursuant to
which the Trust or any of its Subsidiaries sells, conveys or otherwise transfers
to (i) a Receivables Subsidiary (in the case of a transfer by the Trust or any
of its Subsidiaries) and (ii) any other Person (in the case of a transfer by a
Receivables Subsidiary), or grants a security interest in, any Receivables,
whether now existing or arising in the future, of the Trust or any of its
Subsidiaries.
"Receivables Debt" means Indebtedness:
(1) as to which neither the Trust nor any of its Subsidiaries (other
than the Receivables Subsidiary):
(a) provides any credit support that would constitute Indebtedness
or
(b) is directly or indirectly liable (as a guarantor or otherwise);
and
(2) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of any of the Trust or
any of its Subsidiaries (other than the Receivables Subsidiary);
provided that, notwithstanding the foregoing, the Trust and any of its
Subsidiaries that sell Receivables to the Receivables Subsidiary shall be
allowed to provide such representations, warranties, covenants and indemnities
as are customarily required in such transactions so long as no such
representations, warranties, covenants or indemnities constitute a Guarantee of
payment or recourse against credit losses.
"Receivables" means accounts receivable and all other assets related
thereto including, without limitation, all collateral securing such accounts
receivable, all contracts and all guarantees or other obligations in respect of
such accounts receivable, proceeds of such accounts receivable and all other
assets that are customarily transferred or in respect of which security
interests are customarily granted in connection with asset securitization
transactions involving accounts receivable.
"Receivables Facility" means one or more receivables financing facilities,
as amended from time to time, pursuant to which the Trust or any of its
Subsidiaries sells its accounts receivable to a Receivables Subsidiary.
"Receivables Subsidiary" means a Subsidiary of the Trust, created primarily
to purchase or finance the receivables of the Trust and/or its Subsidiaries
pursuant to a Receivables Facility, so long as it:
(a) has no Indebtedness other than Receivables Debt;
(b) is not party to any agreement, contract, arrangement or
understanding with any of the Trust or any other Subsidiary of the Trust
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Trust or such Subsidiary than
those that might be obtained at the time from Persons who are not
Affiliates of any of the Trust or a Guarantor;
(c) is a Person for which neither the Trust nor any of its
Subsidiaries has any direct obligation to maintain or preserve such
Person's financial condition or to cause such Person to achieve any
specified levels of operating results; and
(d) has not Guaranteed or otherwise directly provided credit support
for any Indebtedness of any of the Trust or any of its Subsidiaries.
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Notwithstanding the foregoing, the Trust and the Guarantors may make capital
contributions in the form of Receivables transferred to the Receivables
Subsidiary for non-cash consideration to the extent necessary or desirable to
prevent a disruption of purchases of Receivables or to avoid a default under the
Receivables Facility. If, at any time, such Receivables Subsidiary would fail to
meet the foregoing requirements as a Receivables Subsidiary, it shall thereafter
cease to be a Receivables Subsidiary for purposes of the Indentures and any
Indebtedness of such Receivables Subsidiary shall be deemed to be incurred by a
Subsidiary of the Trust as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under the
caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock," the Trust shall be in default of such covenant).
"Reference Period" with regard to any Person means the four full fiscal
quarters ended immediately preceding any date upon which any determination is to
be made pursuant to the terms of the Notes or the Indentures.
"Related Party" means Larry J. Winget's estate or legal representative,
members of his immediate family and all lineal descendants of Larry J. Winget
and all spouses of such lineal descendants (or any trust(s) or entity(ies) whose
sole beneficiaries or holders of Equity Interests, or the holders of a majority
of the outstanding Voting Stock are any one or more of the foregoing).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Debt" means, for the New Senior Subordinated Notes:
(1) all Indebtedness of the Trust or any Guarantor outstanding under
Credit Facilities that is not expressly subordinated by its terms to any
other Indebtedness of the Trust or such Guarantor, the New Senior Notes and
the 1997 Senior Notes and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of the Trust or any Guarantor permitted to
be incurred under the terms of the New Senior Subordinated Indenture,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right of payment to
the New Senior Subordinated Notes or any Subsidiary Guarantee thereof; and
(3) all Obligations for the items listed in the preceding clauses (1)
and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt will
not include:
(1) any liability for federal, state, local or other taxes owed or
owing by the Trust and the Guarantors;
(2) any Indebtedness of the Trust or Guarantors to any of their
Subsidiaries or other Affiliates;
(3) any trade payables; or
(4) the portion of any Indebtedness that is incurred in violation of
the New Senior Subordinated Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
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"Stated Maturity" means, for any installment of interest or principal on
any series of Indebtedness, the date on which such payment of interest or
principal was scheduled to be paid in the original documentation governing such
Indebtedness, and shall not include any contingent obligations to repay, redeem
or repurchase any such interest or principal prior to the date originally
scheduled for the payment thereof.
"Subsidiary" means, for any specified Person:
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means (1) for the New Senior Subordinated Notes, a
Guarantee by a Subsidiary on a senior subordinated basis of the Trust's payment
obligations under the New Senior Subordinated Notes and the New Senior
Subordinated Indenture in the form attached as an exhibit to the New Senior
Subordinated Indenture and (2) for the New Senior Notes, a Guarantee by a
Subsidiary on a senior basis of the Trust's payment obligations under the New
Senior Notes and the New Senior Indenture in the form attached as an exhibit to
the New Senior Indenture.
"Tax Distribution Amount" means, in respect of any period after the Issue
Date during which the Trust is a Pass-Through Entity for federal income tax
purposes, an amount, determined in good faith by the Trust's independent public
accountants, which shall be a nationally recognized accounting firm, equal to
the sum of (x) the amount of intangibles tax actually imposed on each
Beneficiary of the Trust in respect of Trust Tax Distributions for such period
and (y) (a) the sum of the highest marginal federal income tax rate and highest
state and local income tax rate applicable to a Beneficiary of the Trust on
income of the Investee Companies which are Pass-Through Entities for federal,
state or local income tax purposes for such period, expressed as a percentage,
multiplied by (b) such Investee Companies' taxable income for such period
computed taking into account, without limitation, the deduction for single
business and franchise tax actually imposed on such Investee Companies; provided
that (i) the foregoing shall be determined by giving effect to the deduction of
relevant state and local income and intangibles taxes for purposes of
determining federal income taxes, such deduction to be computed based on the
state and local income tax rates applicable in clause (y) (a) hereof and the
amount of intangibles tax determined under clause (x) hereof, and (ii) the
foregoing shall be appropriately reduced by the amount of cumulative tax losses
of such Investee Companies from any previous period (to the extent not
previously utilized in computing the Tax Distribution Amounts) since the Issue
Date and any investment tax credits and other tax credits of such Investee
Companies since the Issue Date.
"Trust" means (1) Venture Holdings Trust, a trust organized under the laws
of the State of Michigan, (2) Venture Holdings Corporation (after the occurrence
of a Trust Contribution) or (3) any successor Person to Venture Holdings Trust
or Venture Holdings Corporation (after the occurrence of a Trust Contribution)
in accordance with the provisions under "Merger, Consolidation or Sale of
Assets."
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"Unrestricted Subsidiary" means any Subsidiary of the Trust that is
designated by the Board of Directors of the Trust as an Unrestricted Subsidiary
pursuant to a Board Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Trust or any Restricted Subsidiary of the Trust
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Trust or such Restricted
Subsidiary than those that might be obtained at the time from Persons who
are not Affiliates of the Trust;
(3) is a Person for which neither the Trust nor any of its Restricted
Subsidiaries has any direct or indirect obligation (a) to subscribe for
additional Equity Interests or (b) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels
of operating results other than an Investment made in such Subsidiary not
in violation of the Indenture; and
(4) is not guaranteeing or otherwise directly or indirectly providing
credit support for any Indebtedness of the Trust or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary of the Trust as an Unrestricted Subsidiary
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indentures and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Trust as of such date
and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock," the Trust shall be in default of
such covenant. The Board of Directors of the Trust may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Trust of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (1) such Indebtedness
is permitted under the covenant described under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a Pro Forma Basis as if such designation had occurred at the
beginning of the Reference Period; and (2) no Default or Event of Default would
be in existence following such designation.
"Venture Trust Instrument" means the Agreement, dated December 28, 1987, as
amended and restated on February 16, 1994, as amended, among Larry J. Winget, as
Trustee, and Larry J. Winget, as Settlor, Beneficiary and Special Advisor, as
such agreement may be amended in accordance with the terms of the Indentures.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
or Preferred Stock at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, or liquidation preference, as applicable,
including payment at final maturity, in respect thereof, by (b) the number
of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment; by
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(2) the then outstanding principal amount, or liquidation preference,
as applicable, of such Indebtedness or Preferred Stock, as the case may be,
of such Indebtedness.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
This summary is not intended to be, nor should it be construed as being,
legal or tax advice. No representation regarding the consequences to any
particular holder is made. You should consult your own tax advisors for your
particular circumstances.
The following is a general discussion of material United States federal
income tax consequences associated with the exchange of the outstanding notes
for the exchange notes pursuant to the exchange offer and the ownership and
disposition of the exchange notes. This summary applies only to an initial
beneficial owner of an Exchange Note who acquired an Outstanding Note at the
initial offering for the original offering price thereof and who acquires the
Exchange Note pursuant to the exchange offer. This discussion is based on
provisions of the Internal Revenue Code of 1986, as amended, Treasury
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect on the date hereof and all of which
are subject to change, possibly with retroactive effect. This discussion does
not address the tax consequences to subsequent purchasers of the exchange notes
and is limited to investors who hold the exchange notes as capital assets.
Furthermore, this discussion does not address all aspects of United States
federal income taxation that may be applicable to investors in light of their
particular circumstances, or to investors subject to special treatment under
United States federal income tax law, including, without limitation, certain
financial institutions, insurance companies, tax-exempt entities, dealers in
securities, persons owning the exchange notes through partnerships or other
pass-through entities, former citizens or residents of the United States, or
persons who have acquired the exchange notes as part of a straddle, hedge,
conversion transaction or other integrated investment. This summary also does
not discuss the federal alternative minimum tax consequences to the holder, not
does it discuss consequences to a holder under state, local or foreign tax laws,
which may differ from corresponding federal income tax laws. Prospective
investors are advised to consult their own tax adviser regarding the particular
tax consideration pertaining to them regarding ownership and disposition of the
exchange notes, including the effects of applicable federal, state, local
foreign or other tax laws to which they may be subject, as well as possible
changes in the tax laws.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE EXCHANGE NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL
ESTATE OR GIFT TAX LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS, ANY CHANGES IN
APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS.
UNITED STATES TAXATION OF UNITED STATES HOLDERS
The term "United States Holder," as used in this prospectus, means a
beneficial owner of a note that is, for United States federal income tax
purposes:
- a citizen or resident, as determined for U.S. federal income tax
purposes, of the United States,
- a corporation or partnership created or organized in or under the laws of
the United States or of any political subdivision thereof,
- an estate the income of which is subject to United States federal income
taxation regardless of its source and
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- a trust if a United States court is able to exercise primary supervision
over the administration of such trust and one or more United States
persons have the authority to control all substantial decisions of such
trust.
The term "Non-U.S. Holder," as used in this prospectus means a beneficial owner
of a note that is not a United States Holder.
EXCHANGE OFFER
The exchange of an outstanding note for an exchange note pursuant to the
exchange offer should not constitute a "significant modification" of the
outstanding note for United States federal income tax purposes and, accordingly,
the exchange note received should be treated as a continuation of the
outstanding note in the hand of such holder. As a result, there should be no
United States federal income tax consequences to a United States Holder who
exchanges an outstanding note for an exchange note pursuant to the exchange
offer, and any such holder should have the same adjusted tax basis and holding
period in the exchange note as it had in the outstanding note immediately before
the exchange.
PAYMENTS OF INTEREST
Stated interest payable on an exchange note generally will be included in
the gross income of a United States Holder as ordinary interest income at the
time accrued or received, in accordance with such United States Holder's method
of accounting for United States federal income tax purposes.
DISPOSITION OF THE EXCHANGE NOTES
Upon the sale, exchange, retirement at maturity or other taxable
disposition, collectively a "disposition," of an exchange note, a United States
Holder generally will recognize capital gain or loss equal to the difference
between the amount realized on the disposition by such holder, except to the
extent such amount is attributable to accrued interest, which will be treated as
ordinary interest income, and such holder's adjusted tax basis in the exchange
note. Such capital gain or loss will be long-term capital gain or loss if such
United States Holder's holding period for the exchange note exceeds one year at
the time of the disposition. Recently enacted United States tax legislation
reduced the maximum federal income tax rate applicable to long-term capital
gains in certain instances. Prospective investors should consult their tax
advisors regarding the possible effect on such investors of such legislation.
UNITED STATES TAXATION OF NON-U.S. HOLDERS
PAYMENTS OF INTEREST
In general, payments of interest received by a Non-U.S. Holder will not be
subject to United States federal withholding tax, provided that:
(A) (1) the Non-U.S. Holder does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of
Venture entitled to vote,
(2) the Non-U.S. Holder is not a controlled foreign corporation
that is related to Venture actually or constructively through stock
ownership,
(3) the Non-U.S. Holder is not a bank that has purchased its
exchange notes pursuant to an extension of credit made in the ordinary
course of its trade or business, and
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(4) the beneficial owner of the exchange note, under penalties or
perjury, provides Venture or its agent with the beneficial owner's name and
address and certifies that it is not a United States Holder in compliance
with applicable requirements,
(B) the interest received on the exchange note is not effectively
connected with the conduct by the Non-U.S. Holder of a trade or business
within the United States and the Non-U.S. Holder complies with certain
reporting requirements, or
(C) the Non-U.S. Holder is entitled to the benefits of an income tax
treaty under which the interest is exempt from United States withholding
tax and the Non-U.S. Holder complies with certain reporting requirements.
Payments of interest not exempt from the United States federal withholding tax
as described above will be subject to such withholding tax at the rate of 30%,
subject to reduction under an applicable income tax treaty.
DISPOSITION OF THE EXCHANGE NOTES
A Non-U.S. Holder generally will not be subject to United States federal
income tax, and generally no tax will be withheld, for gain realized on the
disposition of an exchange note, unless:
- the gain is effectively connected with a United States trade or business
conducted by the Non-U.S. Holder,
- the Non-U.S. Holder is an individual who is present in the United States
for 183 or more days during the taxable year of the disposition and
certain other requirements are satisfied, or
- the Non-U.S. Holder is subject to certain provisions of United States
federal income tax law applicable to certain expatriates.
In addition, an exchange of an outstanding note for an exchange note pursuant to
the exchange offer will not constitute a taxable exchange of the outstanding
note for Non-U.S. Holders. See "United States Taxation of United States
Holders -- Exchange Offer."
EFFECTIVELY CONNECTED INCOME
If interest and other payments received by a Non-U.S. Holder for the
exchange notes, including proceeds from the disposition of the exchange notes,
are effectively connected with the conduct by the Non-U.S. Holder of a trade or
business within the United States, or the Non-U.S. Holders is otherwise subject
to United States federal income taxation on a net basis for such Holder's
ownership of the exchange notes, such Non-U.S. Holder will generally be subject
to the other rules described above under "United States Taxation of United
States Holders," subject to any modification provided under an applicable income
tax treaty. Such Non-U.S. Holder may also be subject to the "branch profits tax"
if such Holder is a corporation.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Certain non-corporate United States Holders may be subject to backup
withholding at a rate of 31% on payments of principal and interest on, and the
proceeds of the disposition of the exchange notes. In general, backup
withholding will be imposed only if the United States Holder:
- fails to furnish its taxpayer identification number, which, for an
individual, would be his or her Social Security number,
- furnishes an incorrect taxpayer identification number,
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- is notified by the IRS that it has failed to report payments of interest
or dividends, or
- under certain circumstances, fails to certify, under penalty of perjury,
that it has furnished a correct taxpayer identification number and has
been notified by the IRS that it is subject to backup withholding tax for
failure to report interest or dividend payments.
In addition, such payments of principal and interest to United States Holders
will generally be subject to information reporting. United States Holders should
consult their tax advisors regarding their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption, if
applicable.
Venture must report annually to the IRS and to each Non-U.S. Holder any
interest that is subject to U.S. withholding tax or that is exempt from
withholding pursuant to a tax treaty or the portfolio interest exception. Copies
of these information returns may also be made available under the provisions of
a specific treaty or agreement to the tax authorities of the country in which
the Non-U.S. Holder resides.
Backup withholding and information reporting on IRS Form 1099 generally
will not apply to interest payments made to a Non-U.S. Holder of an exchange
note who provides the certification described under "United States Taxation of
Non-U.S. Holders -- Payments of Interest" or otherwise establishes an exemption
from backup withholding. Payments of the proceeds of a disposition of the
exchange notes by or through a United States office of a broker generally will
be subject to backup withholding at a rate of 31% and information reporting
unless the Non-U.S. Holder certifies it is a Non-U.S. Holder under penalties of
perjury or otherwise establishes an exemption. Payments of the proceeds of a
disposition of the exchange notes by or through a foreign office of a United
States broker, a controlled foreign corporation for United States federal income
tax purposes or a foreign broker with certain relationships to the United States
generally will be subject to information reporting, but not backup withholding.
The amount of any backup withholding imposed on a payment to a Holder of an
exchange note will be allowed as a credit against such Holder's United States
federal income tax liability and may entitle such Holder to a refund, provided
that the required information is furnished to the IRS.
RECENTLY ISSUED TREASURY REGULATIONS
The U.S. Treasury Department recently issued final Treasury regulations
governing information reporting and the certification procedures regarding
withholding and backup withholding on certain amounts paid to Non-U.S. Holders.
The new Treasury regulations are generally effective for payments made after
December 31, 1999. In addition, the new Treasury regulations would alter the
procedures for claiming the benefits of an income tax treaty and may change the
certification procedures relating to the receipt by intermediaries of payments
on behalf of a beneficial owner of an Exchange Note. Prospective investors
should consult their tax advisors concerning the effect, if any, of such new
Treasury regulations on an investment in the exchange notes.
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PLAN OF DISTRIBUTION
Based on interpretations by the SEC set forth in no-action letters issued
to third parties in similar transactions, we believe that the exchange notes
issued in the exchange offer in exchange for the outstanding notes may be
offered for resale, resold and otherwise transferred by holders without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the exchange notes are acquired in the ordinary
course of such holders' business and the holders are not engaged in, and do not
intend to engage in, and have no arrangement or understanding with any person to
participate in, a distribution of exchange notes. This position does not apply
to any holder that is:
- an "affiliate" of ours within the meaning of Rule 405 under the
Securities Act,
- a broker-dealer who acquired Notes directly from us, or
- broker-dealers who acquired Notes as a result of market-making or other
trading activities.
Any broker-dealers receiving exchange notes in the exchange offer are subject to
a prospectus delivery requirement for resales of the exchange notes. To date,
the SEC has taken the position that these participating broker-dealers may
fulfill their prospectus delivery requirements for transactions involving an
exchange of securities such as the exchange pursuant to the exchange offer,
other than a resale of an unsold allotment from the sale of the outstanding
notes to the initial purchasers, with this prospectus.
Each broker-dealer receiving exchange notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in any resale
of the exchange notes. Participating broker-dealers may use this prospectus in
reselling exchange notes, if the outstanding notes were acquired for their own
accounts as a result of market-making activities or other trading activities. We
have agreed that a participating broker-dealer may use this prospectus in
reselling exchange notes for a period ending 270 days after the Expiration Date
or, if earlier, when a participating broker-dealer has disposed of all exchange
notes. A participating broker-dealer intending to use this prospectus in the
resale of exchange notes must notify us on or before the Expiration Date, that
it is a participating broker-dealer. This notice may be given in the space
provided for in the Letter of Transmittal or may be delivered to the Exchange
Agent. We have agreed that, for a period of 270 days after the Expiration Date,
we will make this prospectus, and any amendment or supplement to this
prospectus, available to any broker-dealer that requests these documents in the
Letter of Transmittal. See "The Exchange Offer -- Resales of Exchange Notes" for
more information.
We will not receive any cash proceeds from the exchange notes.
Broker-dealers acquiring exchange notes for their own accounts may sell the
notes in one or more transactions in the over-the-counter market, in negotiated
transactions, through writing options on the exchange notes or a combination of
such methods. Any 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 broker-dealer and/or the purchasers of exchange notes.
Any broker-dealer reselling exchange notes that it received in the exchange
offer and any broker or dealer that participates in a distribution of exchange
notes may be deemed to be an "underwriter" within the meaning of the Securities
Act. Any profit on any resale of exchange notes and any commissions or
concessions received by any 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 admit that it is an "underwriter" within the meaning of
the Securities Act.
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LEGAL MATTERS
Certain legal matters in connection with the exchange notes offered hereby
will be passed upon for us by Dykema Gossett PLLC, Detroit, Michigan.
EXPERTS
The consolidated financial statements of Venture Holdings Company LLC as of
December 31, 1998 and 1997 and for each of the years ended December 31, 1998,
1997 and 1996 included in this prospectus have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report appearing in this
prospectus, and are included in reliance upon the report of such firm given
their authority as experts in accounting and auditing.
The consolidated financial statements of Peguform GmbH as of September 30,
1998 and 1997, and for the years ended September 30, 1998 and 1997 included in
this prospectus have been audited by BDO International GmbH
Wirtschaftsprufungsgesellschaft, independent auditors, as stated in their report
appearing in this prospectus, and are included in reliance upon the report of
such firm given their authority as experts in accounting and auditing.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
VENTURE HOLDINGS COMPANY LLC
AS SUCCESSOR TO VENTURE HOLDINGS TRUST
Audited Financial Statements
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Income and Comprehensive
Income.................................................... F-4
Consolidated Statements of Changes in Trust Principal....... F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
Unaudited Financial Statements for Six Months Ended June 30,
1999 and 1998
Consolidated Balance Sheets................................. F-26
Consolidated Statements of Income and Comprehensive
Income.................................................... F-27
Consolidated Statements of Changes in Member's Equity....... F-28
Consolidated Statements of Cash Flows....................... F-29
Notes to Consolidated Financial Statements.................. F-30
PEGUFORM GMBH
Report of Independent Auditors.............................. F-40
Consolidated Balance Sheets................................. F-41
Consolidated Statements of Income........................... F-43
Consolidated Statements of Stockholders' Equity............. F-44
Consolidated Statements of Cash Flows....................... F-45
Notes to the Consolidated Financial Statements.............. F-47
F-1
163
INDEPENDENT AUDITORS' REPORT
Trustee of Venture Holdings Trust
Fraser, Michigan
We have audited the accompanying consolidated balance sheets of Venture
Holdings Trust as of December 31, 1998 and 1997, and the related consolidated
statements of income, comprehensive income, trust principal and cash flows for
each of the three years in the period ended December 31, 1998. Our audits also
included the financial statement schedule listed in the Index at Item 14. These
financial statements and the financial statement schedule are the responsibility
of Venture's management. Our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of Venture Holdings Trust as of
December 31, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
March 30, 1999
Detroit, Michigan
F-2
164
VENTURE HOLDINGS TRUST
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
-----------------------
1998 1997
---------- ----------
(DOLLARS IN THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 130 $ 1,477
Accounts receivable, net, includes related party
receivables of $56,648, $32,260 and $59,878 (unaudited)
at December 31, 1998 and 1997, and March 31, 1999
respectively (Notes 2, 6 & 7).......................... 190,135 161,157
Inventories (Notes 3, 6 & 7).............................. 51,139 52,616
Prepaid expenses and other (Note 11)...................... 8,870 8,994
-------- --------
Total current assets................................... 250,274 224,244
Property, Plant and Equipment, Net (Notes 4 & 7).......... 200,544 205,765
Intangible Assets (Note 5)................................ 52,022 53,900
Other Assets (Notes 1 & 7)................................ 26,636 25,771
Deferred Tax Assets (Note 11)............................. 11,839 14,442
-------- --------
Total Assets...................................... $541,315 $524,122
======== ========
LIABILITIES AND TRUST PRINCIPAL
Current Liabilities:
Accounts payable (Note 7)................................. $ 52,351 $ 70,047
Accrued payroll & taxes................................... 9,017 7,341
Accrued interest.......................................... 13,387 12,148
Other accrued expenses.................................... 5,299 6,485
Current portion of long-term debt (Note 6)................ 1,565 3,122
-------- --------
Total current liabilities.............................. 81,619 99,143
Other Liabilities (Note 10)............................... 7,254 14,281
Deferred Tax Liabilities (Note 11)........................ 11,955 13,350
Long-Term Debt (Note 6)................................... 363,374 333,066
-------- --------
Total liabilities...................................... 464,202 459,840
Commitments and Contingencies (Note 8)...................... -- --
Trust Principal:
Accumulated other comprehensive income -- minimum pension
liability in excess of unrecognized prior service cost,
net of tax (Note 10)................................... (737)
Trust principal........................................... 77,850 64,282
-------- --------
Total trust principal.................................. 77,113 64,282
-------- --------
Total Liabilities and Trust Principal............. $541,315 $524,122
======== ========
See notes to consolidated financial statements.
F-3
165
VENTURE HOLDINGS TRUST
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31,
------------------------------------
1998 1997 1996
-------- -------- --------
Net Sales (Notes 7 & 9)................................. $645,196 $624,113 $351,777
Cost of Products Sold (Note 7).......................... 532,809 521,361 302,940
-------- -------- --------
Gross Profit............................................ 112,387 102,752 48,837
Selling, General and Administrative Expense (Note 7).... 59,689 57,217 26,588
Payments to Beneficiary in Lieu of Taxes (Note 7)....... 535 472 666
-------- -------- --------
Income from Operations.................................. 52,163 45,063 21,583
Interest Expense........................................ 36,641 30,182 19,248
-------- -------- --------
Net Income Before Extraordinary Items and Taxes......... 15,522 14,881 2,335
Tax Provision (Note 11)................................. 1,954 3,358 336
-------- -------- --------
Net Income Before Extraordinary Items................... 13,568 11,523 1,999
Net Extraordinary Loss on Early Retirement of Debt (Note
12)................................................... 0 0 2,738
-------- -------- --------
Net Income (Loss)....................................... 13,568 11,523 (739)
Other Comprehensive Income -- minimum pension liability
in excess of unrecognized prior service cost, net of
tax (Note 10)......................................... (737) 0 0
-------- -------- --------
Comprehensive Income (Loss)............................. $ 12,831 $ 11,523 $ (739)
======== ======== ========
See notes to consolidated financial statements.
F-4
166
VENTURE HOLDINGS TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN TRUST PRINCIPAL
(DOLLARS IN THOUSANDS)
1998 1997 1996
------ ------ ------
Trust Principal, Beginning of Period........................ 64,282 52,759 53,498
Comprehensive Income (Loss)
Net Income (Loss)......................................... 13,568 11,523 (739)
Other Comprehensive Income -- minimum pension liability in
excess of unrecognized prior service cost, net of tax
(Note 10).............................................. (737)
------ ------ ------
Comprehensive Income (Loss)................................. 12,831 11,523 (739)
------ ------ ------
Trust Principal, End of Period.............................. 77,113 64,282 52,759
====== ====== ======
See notes to consolidated financial statements.
F-5
167
VENTURE HOLDINGS TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $13,568 $ 11,523 $ (739)
Adjustments to reconcile net income to net cash (used in)
provided by operating activities, net of acquisitions:
Depreciation and amortization............................. 39,320 32,147 22,628
Change in accounts receivable............................. (29,795) (31,489) (35,789)
Change in inventories..................................... 1,477 (1,517) (4,298)
Change in prepaid expenses................................ 2,147 2,329 (4,116)
Change in other assets.................................... (7,045) (7,178) (6,445)
Change in accounts payable................................ (17,696) (14,774) 32,400
Change in accrued expenses................................ (21) (5,588) 21,221
Change in other liabilities............................... (7,028) (1,630) 8,725
Change in deferred taxes.................................. (320) 3,119 (1,322)
Net extraordinary loss on early extinguishment of debt.... 0 0 2,738
------- --------- ---------
Net cash (used in) provided by operating activities.... (5,393) (13,058) 35,003
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (24,706) (33,012) (64,593)
Purchase of subsidiaries, net of cash acquired............ 0 (4,081) (56,954)
------- --------- ---------
Net cash used in investing activities.................. (24,706) (37,093) (121,547)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving credit
agreement.............................................. 32,000 (46,000) 91,000
Net proceeds from issuance of debt........................ 0 205,000 69,249
Principal payments on debt................................ (3,248) (122,808) (14,535)
Payment for early extinguishment of debt.................... 0 0 (62,738)
------- --------- ---------
Net cash (used in) provided by financing activities......... 28,752 36,192 82,976
------- --------- ---------
Net Increase (Decrease) in Cash............................. (1,347) (13,959) (3,568)
Cash and Cash Equivalents at Beginning of Period............ 1,477 15,436 19,004
------- --------- ---------
Cash and Cash Equivalents at End of Period.................. 130 1,477 15,436
======= ========= =========
Supplemental Cash Flow Information Cash paid during the
period for Interest....................................... $35,402 $ 22,628 $ 18,187
======= ========= =========
Income taxes paid (refunded).............................. $ 285 $ 140 $ (2,179)
======= ========= =========
See notes to consolidated financial statements.
F-6
168
VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES
Organization -- In 1987, the sole shareholder of the Venture Group of
companies contributed all of the common stock of the companies to Venture
Holdings Trust (the Trust). Simultaneously, certain property, plant, and
equipment was contributed by the sole shareholder to certain companies owned by
the Trust. In exchange, the shareholder was named the sole beneficiary of the
Trust.
The companies included in the Trust are Venture Industries Corporation,
Venture Mold and Engineering Corporation, Venture Industries Canada, Ltd.,
Vemco, Inc., Venture Leasing Company, Vemco Leasing, Inc., Venture Holdings
Corporation, Venture Service Company, Experience Management L.L.C. and any
predecessors to such organizations. Experience Management L.L.C. was formed late
in 1997 to assume the human resource obligations of the Trust. The companies
included in the Trust are involved in the design and manufacturing of molded
parts and systems integration for North American automotive original equipment
manufacturers. During 1996 the Trust acquired Bailey Corporation and its
subsidiaries ("Bailey") which were merged into Venture Holdings Corporation in
July of 1997. During 1996, the trust acquired the assets of AutoStyle Plastics,
Inc. ("AutoStyle") which was merged into Vemco, Inc. in July of 1997.
The Trust has been established as a grantor trust. The Trust received a
private letter ruling from the Internal Revenue Service confirming that the
Trust meets the requirements of a grantor trust under Section 1361(c)(2)(A)(i)
of the Internal Revenue Code.
Principles of Consolidation -- The consolidated financial statements
include the accounts of Venture Holdings Trust and its wholly owned subsidiaries
(collectively the "Company"). All intercompany accounts and transactions have
been eliminated.
The consolidated financial statements include only those assets and
liabilities which relate to the business of Venture Holdings Trust. These
statements do not include any assets or liabilities attributable to the
beneficiary's individual activities. However, the Company does enter into
various transactions with companies in which the sole beneficiary has an
interest. These transactions are summarized in Note 7 -- Related Party
Transactions.
Estimates -- The preparation of the Company's 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.
Cash and Cash Equivalents -- Highly liquid investments with an initial
maturity of three months or less are classified as cash equivalents.
Inventories -- Manufactured parts inventories are stated at the lower of
cost or market using the first-in, first-out method. Inventory also includes
costs associated with building molds under contract. Molds owned by the Company
and used in the Company's manufacturing operations are transferred to tooling,
in property, plant and equipment, when the molds are operational.
Property and Depreciation -- Property, plant, and equipment are recorded at
cost. Depreciation is computed by the straight-line method over the estimated
useful lives of the various classes of assets.
F-7
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VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Tooling is amortized on a piece price or straight line basis over the related
production contract, generally 3 to 7 years. The principal estimated useful
lives are as follows:
YEARS
-----
Building and improvements................................... 10-40
Machinery and equipment, and automobiles.................... 3-20
Leasehold improvements are amortized over the useful life or the term of
the lease, whichever is shorter. Expenditures for maintenance and repairs are
charged to expense as incurred.
Intangible Assets -- The purchase price of companies in excess of the fair
value of net identifiable assets acquired ("goodwill") is amortized over 30
years using the straight-line method. The amount reported at December 31, 1998
and 1997 was $52.0 million and $53.9 million, respectively, which is net of
accumulated amortization.
Long-Lived Assets and Long-Lived Assets to be Disposed of -- Effective
January 1, 1996, Statement of Financial Accounting Standards ("SFAS") No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" was adopted. This Statement establishes accounting standards for
the impairment of long-lived assets, and certain identifiable intangibles, and
goodwill related to those assets to be held and used and long-lived and certain
identifiable intangibles to be disposed of. The statement requires that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. In
addition, the Statement requires that certain long-lived assets and identifiable
intangibles to be disposed of be reported at the lower of carrying amount or
fair value less cost to sell. The Company periodically evaluates the carrying
value for impairment, such evaluations are based principally on the undiscounted
cash flows of the operations to which the asset is related.
Revenue Recognition -- Revenue from the sale of manufactured parts is
recognized when the parts are shipped. Revenue from mold sales is recognized
using the completed contract method due to the reasonably short build cycle.
Accounts receivable includes unbilled receivables for mold contracts that are
substantially complete. The amounts are billed when final approval has been
received from the customer or in accordance with contract terms. Provision for
estimated losses on uncompleted contracts, if any, is made in the period such
losses are identified.
Other Assets -- Deferred financing costs are included in other assets and
are amortized over the life of the related financing arrangement.
Program Costs -- Certain costs incurred for the design of components to be
built for customers are recorded as deferred program costs which are included in
other assets. These costs are recovered based on units produced in each year
over the term of production contracts.
Income Taxes -- Amounts in the financial statements relating to income
taxes relate to the subsidiaries that have not elected S corporation status and
are calculated using the Statement of Financial Accounting Standards Board No.
109, "Accounting for Income Taxes" (SFAS 109).
Other significant subsidiaries have elected to be taxed as S corporations
under the Internal Revenue Code. The beneficiary is required to report all
income, gains, losses, deductions, and credits of the S corporations included in
the Trust on his individual tax returns.
F-8
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VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Separate Financial Statements -- Separate financial statements for the
Trust and each Subsidiary are not included in this report because each entity
(other than Venture Canada and Experience Management L.L.C.) is jointly and
severally liable for the Company's senior credit facility and senior notes, and
each entity (including Venture Canada but excluding Experience Management
L.L.C.) is jointly and severally liable for the Company's senior subordinated
notes either as a co-issuer or as a guarantor. In addition, the aggregate total
assets, net earnings and net equity of the Subsidiaries of the Trust (with or
without Venture Canada and Experience Management L.L.C.) are substantially
equivalent to the total assets, net earnings and net equity of the Company on a
consolidated basis. Venture Canada and Experience Management L.L.C. represent
less than 1% of total assets, net earnings, net trust principal and operating
cash flow.
Derivative Financial Instruments -- Interest rate swaps are utilized to
reduce the sensitivity of earnings to various market risk and manage funding
costs. The primary market risk includes fluctuations in interest rates and
variability in spread relationships (i.e. Prime vs. LIBOR spreads). Interest
rate swaps are used to change the characteristics of its variable rate
exposures. Interest rate differentials resulting from interest rate swap
agreements used to change the interest rate characteristics are recorded on an
accrual basis as an adjustment to interest expense as part of operating
activities. In the event of early termination of an interest rate swap agreement
designated as a hedge, the gain or loss is deferred, and recognized as an
adjustment to interest expense over the remaining term of the underlying debt.
Reclassifications -- Certain reclassifications have been made to the 1997
financial statements in order to conform to the 1998 presentation.
Recent Accounting Pronouncements -- In June 1997, the Financial Accounting
Standards Board (FASB) approved SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 130 establishes accounting standards for reporting and
displaying comprehensive income and its components (revenues, expenses, gains
and losses). The Company has adopted this Standard in the financial statements
(Note 10). SFAS No. 131 establishes accounting standards for the way public
enterprises report information about operating segments in annual financial
statements. This statement also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The Company
has adopted this accounting standard; however, there was no impact on the
Company's financial statement presentation and disclosures because the chief
decision maker of the Company utilizes only the consolidated financial
statements to assess the Company's performance and to allocate the Company's
resources.
In February 1998, the FASB approved SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which standardizes the
disclosure requirements for pension and other postretirement benefits. In
particular, the Standard requires additional information on changes in the
benefit obligation and fair values of plan assets. The Company has adopted this
Standard in the presentation of its financial statements (Note 10).
In June 1998, the FASB approved SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
Standard is effective for the first
F-9
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VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
quarter of the Company's fiscal year beginning January 1, 2000. The Company has
not yet determined the impact of adopting this Standard on its financial
position or results of operations.
In March 1998, the Accounting Standards Executive committee published
accounting Statement of Position (SOP) 98-1, which provides guidance on
accounting for the costs of computer software developed or obtained for internal
use. The provisions of this SOP are applicable for the Company's fiscal year
beginning January 1, 1999. The Company does not anticipate that adoption of this
Standard will have a material impact on its financial position or results of
operations.
2. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
DECEMBER 31,
----------------------
1998 1997
-------- --------
(IN THOUSANDS)
Accounts receivable (including related parties)............. $172,759 $140,003
Unbilled mold contract receivables.......................... 21,894 24,726
-------- --------
194,653 164,729
Allowance for doubtful accounts............................. (4,518) (3,572)
-------- --------
Net accounts receivable..................................... $190,135 $161,157
======== ========
Excluding receivables from related parties, substantially all of the
receivables are from companies operating in the automobile industry.
3. INVENTORIES
Inventories consisted of the following:
DECEMBER 31,
--------------------
1998 1997
------- -------
(IN THOUSANDS)
Raw material................................................ $25,169 $26,036
Work-in-process -- manufactured parts....................... 2,965 2,863
Work-in-process -- molds.................................... 11,436 10,922
Finished goods.............................................. 11,569 12,795
------- -------
Total............................................. $51,139 $52,616
======= =======
F-10
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VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment consisted of the following:
DECEMBER 31
--------------------
1998 1997
-------- --------
(IN THOUSANDS)
Land...................................................... $ 2,418 $ 2,427
Building and improvements................................. 64,459 62,538
Leasehold Improvements.................................... 13,970 12,090
Machinery and equipment................................... 225,687 219,767
Tooling/Molds............................................. 12,026 8,659
Office and transportation equipment....................... 5,963 6,373
Construction in progress.................................. 4,009 7,421
-------- --------
328,532 319,275
Less accumulated depreciation and amortization............ 127,988 113,510
-------- --------
Total..................................................... $200,544 $205,765
======== ========
Included in property, plant and equipment is equipment and buildings held
under capitalized leases. These assets had a cost basis of $9.4 million and
accumulated depreciation relating to these assets of $2.6 million at December
31, 1998. As of December 31, 1997, these assets had a cost basis of $12.7
million and accumulated depreciation of $4.0 million.
5. BUSINESS ACQUISITIONS
Effective August 26, 1996, the Trust acquired Bailey, a manufacturer of
high quality molded plastic exterior components for sale to automobile
manufacturers for an aggregate purchase price of $57 million. This acquisition
price was the cost to acquire all of the outstanding shares of the company at
$8.75 per share including all of the outstanding options and warrants. The
acquisition was accounted for as a purchase with the purchase price allocated
over the estimated fair value of the assets and liabilities assumed, resulting
in goodwill of approximately $53.8 million. The goodwill is being amortized over
30 years using the straight-line method. Bailey was merged into Venture Holdings
Corporation in July of 1997.
Effective June 3, 1996, the Company acquired certain assets from AutoStyle
for a purchase price of $6.7 million and entered into a capital lease for all
property, plant and equipment. The acquisition was accounted for as a purchase
with the purchase price allocated over the estimated fair value of the assets
and liabilities assumed, resulting in goodwill of $2.6 million. The goodwill is
being amortized over 30 years using the straight-line method.
The consolidated earnings includes the operations of Bailey from August 26,
1996 and the operations for AutoStyle from June 3, 1996.
F-11
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VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Unaudited pro forma results of operations represent the consolidation of
historical results for the twelve months ended December 31, 1996, assuming the
acquisition of Bailey had occurred at January 1, are as follows (in thousands):
Net sales................................................... $471,118
Net (loss) before extraordinary item........................ (887)
Net (loss).................................................. (3,402)
The Bailey transaction had the following non-cash impact on the Company's
balance sheet at August 26, 1996 (in millions):
Current assets.............................................. $ 62
Non-current assets.......................................... 143
Current liabilities......................................... 159
Non-current liabilities..................................... 46
6. DEBT
Debt consisted of the following:
DECEMBER 31
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
Revolving credit agreement.................................. 77,000 45,000
Registered senior notes payable with interest at 9.5%....... 205,000 205,000
Registered senior subordinated notes payable with interest
at 9.75%.................................................. 78,940 78,940
Capital leases with interest at 8.25% to 11.5%.............. 2,196 5,023
Installment notes payable with interest at 5.85% to
11.75%.................................................... 1,803 2,225
-------- --------
Total.................................................. 364,939 336,188
Less current portion of debt.............................. 1,565 3,122
-------- --------
Total.................................................. $363,374 $333,066
======== ========
In the third quarter of 1997, the Trust, and each of its wholly owned
subsidiaries, other than Venture Industries Canada, Ltd. and Experience
Management L.L.C., which was not in existence at the time, (collectively, the
"Issuers") issued $205 million of Senior Notes. The net proceeds of $199 million
were used to repay Term loans and the amount outstanding under the revolving
credit portion of the Senior Credit Agreement. In connection with the issuance
of the Senior Notes, certain subsidiaries were merged and or liquidated into
other subsidiaries. On August 27, 1997, the Issuers filed a registration
statement on Form S-4 registering the Issuers' Series B 9 1/2% Senior Notes due
2005 (the "Registration Statement"), to be offered in exchange for the Senior
Notes. The
F-12
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VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Registration Statement was declared effective by the Securities and Exchange
Commission on October 29, 1997.
Simultaneously with the issuance of the Senior Notes, the Senior Credit
Agreement was amended and now provides for borrowings of up to the lesser of a
borrowing base or $200 million under a revolving credit facility. The annual
interest rate for borrowings under this agreement is a floating rate based upon
LIBOR or the banks prime rate which averaged 7.8% at December 31, 1998. The
Company must pay a fee of up to .5% of the unused portion of the commitment. The
Company has issued letters of credit of approximately $3.0 million at December
31, 1998 against this agreement, thereby reducing the maximum availability to
$197.0 million, and pursuant to the borrowing base formula could have borrowed
$120.4 million, of which $77.0 million was outstanding thereunder.
The Trust has agreed to guarantee up to $3.5 million of obligations of a
related party. In a separate transaction, a different related party agreed to
fully indemnify the Trust for all amounts paid under the guarantee.
The senior credit agreement, senior notes and the senior subordinated notes
contain certain restrictive covenants relating to cash flow, fixed charges,
debt, trust principal, trust distributions, leases, and liens on assets. The
Company's debt obligations contain various restrictive covenants that require
the Company to maintain stipulated financial ratios, including a minimum
consolidated net worth (adjusted yearly), fixed charge coverage ratio, interest
coverage ratio and total indebtedness ratio. As of December 31, 1998, the
Company was in compliance with all debt covenants.
See also Note 12 -- Extraordinary Items for information related to the
early retirement of debt.
Scheduled maturities of debt at December 31, 1998 were as follows (in
thousands):
1999........................................................ $ 1,565
2000........................................................ 976
2001........................................................ 887
2002........................................................ 558
2003........................................................ 77,013
Remaining years............................................. 283,940
--------
Total............................................. $364,939
========
To mitigate risk associated with changing interest rates on certain debt,
the Company entered into interest rate swap agreements. The notional amounts are
used to measure the volume of these agreements and do not represent exposure to
credit loss. The impact of interest rate swap agreements resulted in $0.6
million of additional interest expense in each of 1997 and 1998.
F-13
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VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTIONAL NOTIONAL
AMOUNTS AMOUNTS
OUTSTANDING OUTSTANDING
AND WEIGHTED AND WEIGHTED
VARIABLE AVERAGE RATES AVERAGE RATES
RATE MATURING DECEMBER 31, DECEMBER 31,
UNDERLYING FINANCIAL INSTRUMENT INDEX THROUGH 1998 1997
- ------------------------------- -------- -------- ------------- -------------
Pay Fixed Interest Rate Swaps Term
Loans................................... LIBOR 2001 $55,000,000 $55,000,000
Weighted average pay rate................. FIXED 2001 6.75% 6.75%
Weighted average receive rate............. LIBOR 2001 5.31% 5.70%
7. RELATED PARTY TRANSACTIONS
The Company has entered into various transactions with entities that the
sole beneficiary owns or controls. These transactions include leases of real
estate, usage of machinery, equipment, and facilities, purchases and sales of
inventory, performance of manufacturing related services, administrative
services, insurance activities and the receipt and payment of sales commissions.
In addition, employees of the Company are made available to certain of these
entities for services such as design, model and tool-building. Since the Company
operates for the benefit of the sole beneficiary, the terms of these
transactions are not the result of arms'-length bargaining; however, the Company
believes that such transactions are on terms no less favorable to the Company
than would be obtained if such transactions or arrangements were arms'-length
transactions with non-affiliated persons.
The Company provides or arranges for others to provide certain related
parties with various administrative and professional services, including
employee group insurance and benefit coverage, property and other insurance,
financial and cash management and administrative services such as data
processing. The related parties are charged fees and premiums for these
services. Administrative services were allocated to the entity for which they
were incurred and certain entities were charged a management fee.
In connection with the above mentioned cash management services, the
Company pays the administrative and operating expenses on behalf of certain
related parties and charges them for the amounts paid which results in
receivables from these related parties.
The Company purchased from Pompo Insurance & Indemnity Company Ltd.
("Pompo"), a corporation indirectly owned by the sole beneficiary, insurance to
cover certain medical claims by the Company's covered employees and certain
workers compensation claims. The Company remains an obligor for any amounts in
excess of insurance coverage or any amounts not paid by Pompo under these
coverages. If a liability is settled for less than the amount of the premium a
portion of the excess is available as a premium credit on future insurance. The
Company has accounted for this arrangement using the deposit method wherein the
full amount of the estimated liability for such claims is recorded in other
liabilities and the premiums paid to Pompo are recorded in other assets until
such time that the claims are settled. The Company made an additional payment of
$613 thousand to Pompo in 1998, and no payments in 1997. At December 31, 1998
and 1997, the Company had approximately $3.4 million and $2.8 million,
respectively, on deposit with Pompo. A portion of this amount was invested on a
short term basis with a related party.
F-14
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VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deluxe Pattern Corporation (Deluxe) provided design, model and prototyping
services to the Company of $6.6, $9.2, and $4.3 million in 1998, 1997 and 1996,
respectively. The Company charged approximately $1.1 million each year from
Deluxe in 1998, 1997 and 1996 for equipment rentals and services. Employees of
the Company made available to Deluxe on an as-needed basis, for which the
Company charged Deluxe $9.6, $4.6, and $17.3 million in 1996, 1997 and 1998,
respectively. These charges and the cash management services provided to Deluxe
by the Company result in a net receivable from Deluxe.
The Company leases buildings and machinery and equipment that have a book
value of approximately $460 thousand to an entity in which the sole beneficiary
owns a significant equity interest. During 1998, 1997 and 1996, the Company
received $162 thousand per year, in connection with this agreement.
Venture Sales and Engineering (VS&E) and Venture Foreign Sales Corporation,
corporations wholly owned by the sole beneficiary, serve as the Company's sales
representatives. The Company pays Venture Sales and Engineering and Venture
Foreign Sales Corporation, in the aggregate, a sales commission of 3% on all
production sales. VS&E has conducted sales and marketing activities around the
world for the Company and has been advanced certain funds in order to carry on
that work on behalf of the Company. These activities result in a net receivable
from VS&E.
The Company provided management services to Venture Asia Pacific Pty. Ltd.
(VAP) and its subsidiaries and corporations wholly owned by the sole
beneficiary. The Company billed management fees and commissions totaling $4.5,
$4.0 and $5.1 million to VAP in 1998, 1997 and 1996, respectively. In addition,
VAP is also liable to the Company for expenditures made on its behalf including
tooling costs associated with a long-term program to be launched in 1999. The
Company expects to receive payment on these receivables once final approval is
received from the end OEM customer.
F-15
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VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a summary of transactions with all related parties at
December 31, 1998, 1997 and 1996:
DECEMBER 31,
1998 1997 1996
------- ------------ -------
(IN THOUSANDS)
Revenue for:
Materials sold, tooling sales, sales commission and
rent
charged............................................ $18,974 $17,349 $ 2,123
Providing administrative services..................... 0 0 149
Insurance and benefit Premiums........................ 0 166 420
Management Fees....................................... 4,533 4,028 5,098
Subcontracted services.................................. 2,324 2,686 9,632
Manufacturing related services and inventory
purchased............................................. 8,084 10,213 11,683
Rent expense paid....................................... 2,180 3,195 2,950
Machine and facility usage fees paid.................... 4,158 3,748 3,397
Commission expense paid................................. 10,391 7,269 6,391
Litigation, workers compensation and medical insurance
premiums.............................................. 613 0 0
Property, Plant and Equipment purchased................. 40 0 49
The result of these related party transactions is a net receivable, which
is included in accounts receivable as follows:
DECEMBER 31,
1998 1997
------------ -------
(IN THOUSANDS)
Amounts Receivable.......................................... $65,755 $36,690
Amounts Payable............................................. 9,107 4,430
------- -------
Net Amounts Receivable...................................... $56,648 $32,260
======= =======
In accordance with the Company's debt agreements, payments are permitted to
be made to the Company's sole beneficiary for income tax payments and may be
made as a bonus payment or distribution of Trust Principal. The payments for the
years ended December 31, 1998, 1997 and 1996 were recorded as expense.
F-16
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VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
Operating Leases -- The Trust leases certain machinery and equipment under
operating leases which have initial or remaining terms of one year or more at
December 31, 1998. Future minimum lease commitments, including related party
leases, are as follows (in thousands):
RELATED
PARTY OTHER
OPERATING OPERATING
LEASES LEASES
--------- ---------
Years:
1999....................................................... 2,180 494
2000....................................................... 0 186
2001....................................................... 0 25
----- ---
Total................................................. 2,180 705
===== ===
Rent expense for operating leases and other agreements with a term of
greater than one month, including amounts paid to related parties, was $5.5
million, $6.3 and $5.0 million for the years ended December 31, 1998, 1997, and
1996, respectively. Usage fees paid based on monthly usage of certain machinery
and equipment and facilities, all of which were paid to related parties, were
$4.0 million, $3.6, and $3.4 million for the years ended December 31, 1998, 1997
and 1996, respectively.
Litigation -- In December of 1997, the Company settled litigation with the
contractor that built the paint line at Vemco, Inc. for $2.0 million. Of this
amount, $0.8 million was recorded as a reduction to the carrying value of the
paint line and $1.2 million was recorded as miscellaneous income.
Resolution of Commercial Issues -- During the fourth quarter of 1998, the
Company resolved several commercial issues which resulted in the recovery of
gross profit lost during current and prior years. The resolution of these issues
resulted in an addition $7.4 million of gross profit.
Environmental Costs -- The Company is subject to potential liability under
government regulations and various claims and legal actions which are pending or
may be asserted against the Company concerning environmental matters. Estimates
of future costs of such environmental matters are necessarily imprecise due to
numerous uncertainties, including the enactment of new laws and regulations, the
development and application of new technologies, the identification of new sites
for which the Company may have remediation responsibility and the apportionment
and collectibility of remediation costs among responsible parties. The Company
establishes reserves for these environmental matters when a loss is probable and
reasonably estimable. The Company's reserves for these environmental matters
totaled $1.3 million at December 31, 1998 and $1.3 million at December 31, 1997.
On February 23, 1998, the Attorney General of the State of Michigan and the
Michigan Department of Environmental Quality instituted legal proceedings in
state court alleging that we have ongoing violations of air pollution control
laws, primarily related to the level of emissions and odors discharged from our
Grand Blanc paint facility. These proceedings seek and may result in the
imposition of civil penalties of up to $10,000 per violation. In the case of an
alleged continuous violation, a daily violation could run from on or about July
1, 1994. The Company has been advised
F-17
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VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
by its legal counsel that the amount of any penalty resulting from this legal
proceeding is not capable of being ascertained at this time. However, in a
non-binding mediation process, a panel of three independent mediators
recommended a settlement in the amount of $2.3 million. This mediation process
does not represent a settlement offer by the Company. We plan to make capital
expenditures of approximately $5.5 million to the current Grand Blanc systems to
respond to the complaints and to make manufacturing improvements. During the
first quarter of 1999, the U.S. Environmental Protection Agency issued a notice
of violation and has taken an active role in monitoring these legal proceedings
and may take action separate and distinct from the legal proceedings begun by
the State of Michigan and the Michigan Department of Environmental Quality.
Currently, management of the Company intends on vigorously contesting this legal
proceeding and is preparing for trial.
The Company is party to various contractual, legal and environmental
proceedings, some which assert claims for large amounts. Although the ultimate
cost of resolving these matters could not be precisely determined at December
31, 1998, management believes, based on currently known facts and circumstances,
that the disposition of these matters will not have a material adverse effect on
the Company's consolidated financial position and results of operations. These
matters are subject to many uncertainties, and the outcome of individual matters
is not predictable with assurance. It is more than remote but less than likely
that the final resolution of these matters may require the Company to make
expenditures, in excess of established reserves, over an extended period of time
and in a range of amounts that cannot be reasonably estimated. The Company's
reserves have been set based upon a review of costs that may be incurred after
considering the creditworthiness of guarantors and/or indemnification from third
parties which the Company has received. The Company is not covered by insurance
for any unfavorable environmental outcomes, but relies on the established
reserves, guarantees and indemnifications it has received.
9. CONCENTRATIONS
The Company's sales to General Motors Corporation ("GM"), Ford Motor
Company ("Ford") and DaimlerChrysler Corporation ("DaimlerChrysler"), expressed
as a percentage of sales, were 41%, 16% and 12%, respectively, in 1996. For
1997, the percentages were 40% and 27% for GM and Ford, respectively, and less
than 10% for DaimlerChrysler. For 1998, the percentages were 38%, 23% and 15%
for GM, Ford and DaimlerChrysler, respectively. Many of the Company's automotive
industry customers are unionized and work stoppages, slow-downs experienced by
them, and their employee relations policies could have an adverse effect on the
Company's results of operations. Net sales during the second and third quarters
of 1998 were impacted negatively due to strikes at certain General Motors
plants. The Company believes that a portion of these lost sales were recouped in
the fourth quarter of 1998 as GM accelerated production to refill its
distribution channels. Approximately 11% of the Company's workforce is covered
by a collective bargaining agreement which will expire within one year.
10. PENSIONS, PROFIT-SHARING AND SALARY REDUCTION PLAN
The Company sponsors profit-sharing and salary reduction 401(k) plans which
cover substantially all employees. The plans provide for the Company to
contribute a discretionary amount each year. Contributions were $2.3, $2.2 and
$1.3 million for the years ended December 31, 1998, 1997 and 1996, respectively.
F-18
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VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Bailey has various retirement plans covering substantially all employees,
including five defined benefit pension plans covering full-time hourly and
salaried employees. The benefits payable under the plans are generally
determined based on the employees' length of service and earnings. For all these
plans the funding policy is to make at least the minimum annual contributions
required by Federal law and regulation.
The change in benefit obligation for the years ended December 31, 1998 and
1997 was as follows (in thousands):
1998 1997
------- -------
Benefit obligation at beginning of year..................... $15,980 $14,861
Service cost................................................ 543 321
Interest cost............................................... 1,120 1,069
Curtailment gain............................................ (648)
Amendments.................................................. 599
Actuarial loss (gain)....................................... 1,771 (365)
Benefits paid............................................... (536) (505)
------- -------
Benefit obligation at end of year........................... $18,230 $15,980
======= =======
The change in the market value of plan assets for the years ended December
31, 1998 and 1997 was as follows (in thousands):
1998 1997
------- -------
Market value of plan assets at beginning of year............ $14,026 $11,528
Actual return on plan assets................................ 105 2,531
Employer contribution....................................... 660 472
Benefits paid............................................... (536) (505)
------- -------
Market value of plan assets at end of year.................. $14,255 $14,026
======= =======
F-19
181
VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status of the defined benefit plans at December 31, 1998 was as
follows (in thousands):
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS
----------- -----------
Actuarial present value of benefit obligations:
Vested Benefits....................................... $3,017 $15,078
Nonvested benefits.................................... 33 102
------ -------
Accumulated benefit obligation.......................... $3,050 $15,180
====== =======
Projected benefit obligation............................ $3,050 $15,180
Market value of plan assets............................. 3,891 10,364
------ -------
Excess (deficiency) of assets over projected benefit
obligation............................................ 841 (4,816)
Unrecognized net (gain) loss............................ (928) 1,232
Unrecognized prior service cost......................... 519
Additional minimum liability............................ (1,751)
------ -------
Accrued pension cost.................................... $ (87) $(4,816)
====== =======
The funded status of the defined benefit plans at December 31, 1997 was as
follows (in thousands):
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS
----------- -----------
Actuarial present value of benefit obligations:
Vested Benefits....................................... $5,151 $10,003
Nonvested benefits.................................... 42 70
------ -------
Accumulated benefit obligation.......................... $5,193 $10,073
====== =======
Projected benefit obligation............................ $5,907 $10,073
Market value of plan assets............................. 6,996 7,030
------ -------
Excess (deficiency) of assets over projected benefit
obligation............................................ 1,089 (3,043)
Unrecognized net loss................................... (1,736) (892)
Unrecognized prior service cost......................... 0 559
------ -------
Accrued pension cost.................................... $ (647) $(3,376)
====== =======
F-20
182
VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic pension (benefit) expense for the years ended December 31,
1998 and 1997 included the following components (in thousands):
1998 1997
------- ------
Service cost benefit during the year........................ $ 543 $ 321
Interest cost on projected benefit obligation............... 1,120 1,069
Expected return on plan assets.............................. (1,174) (961)
Net amortization and deferral............................... (52) (22)
Curtailment gain............................................ (648)
------- ------
Net periodic pension (benefit) expense...................... $ (211) $ 407
======= ======
The date used to measure plan assets and liabilities is as of September 30
each year.
The weighted-average assumed discount rate was 6.5% and 7.25% for 1998 and
1997, respectively. The assumed rate of return on plan assets was 8.5% for 1998
and 1997. For salary based plans, the expected rate of increase in compensation
levels was 5.5% for 1998 and 1997.
At December 31, 1998, the Company recorded an intangible pension asset of
$519 thousand as an offset to recording the additional minimum pension
liability. An additional amount of $737 thousand was recorded (net of tax)
against equity at December 31, 1998, which represented the minimum pension
liability in excess of unrecognized prior service cost.
Plan assets consist principally of cash and cash equivalents, listed common
stocks, debentures, and fixed income securities.
A salaried pension plan has been frozen since 1992, and no further service
liability will accrue under the plan. During 1998, an additional salaried
pension plan and an hourly pension plan were frozen, and no further service
liability will accrue under these plans. The freezing of the salaried pension
plan resulted in a curtailment gain of approximately $648,000 and has been
included in the calculation of the net periodic pension benefit for the year
ended December 31, 1998. The freezing of the hourly plan did not result in a
curtailment gain or loss since the accumulated and projected benefit obligation
for this plan are equal.
Effective January 1, 1999, the three frozen plans were merged into one
plan. The merged plan will eventually be terminated.
11. INCOME TAXES
Amounts in the financial statements related to income taxes are for the
operations of Bailey. The other significant Subsidiaries have elected S
corporation status under the Internal Revenue Code. The beneficiary is required
to report all income, gains, losses, deductions, and credits of the S
corporations included in the Trust on his individual tax returns.
F-21
183
VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income tax expense for the period ended (in thousands):
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ ------------
Currently Payable
United States.......................... $ 80 $ 0 $ 0
State and Local........................ 0 239 0
Foreign................................ 16 0 0
------ ------ ----
Total............................... $ 96 $ 239 $ 0
====== ====== ====
Deferred
United States.......................... $1,618 $2,716 $293
State and Local........................ 240 403 43
------ ------ ----
Total............................... $1,858 $3,119 $336
====== ====== ====
The Company does not provide for U.S. income taxes or foreign withholding
taxes on cumulative undistributed earnings of foreign subsidiaries as these
earnings are all taxed currently to the beneficiary of the Trust.
The effective tax rate on pretax income was 70.4% for the year ended
December 31, 1998, of which 29.9% relates to permanent differences not
deductible for income taxes (primarily goodwill amortization)and 5.2% for state
and local income taxes, net of the federal tax benefit. The effective tax rate
on pretax income was 58.3% for the year ended December 31, 1997, of which 18.1%
relates to permanent differences not deductible for income taxes and 5.2% for
state and local income taxes, net of the federal tax benefit. The effective tax
rate on pretax income was 232.7% for the year ended December 31, 1996, of which
192.5% relates to permanent differences not deductible for income taxes and 5.2%
for state and local income taxes, net of the federal tax benefit.
F-22
184
VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax-effected temporary differences and carryforwards which comprised
deferred assets and liabilities were as follows (in thousands):
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
Deferred tax assets:
Accrued expenses and reserves....................... $ 7,372 $ 8,920
Net Operating Loss carryforward..................... 9,750 11,497
Minimum tax credit carryforward..................... 844 764
Other............................................... 750 293
------- -------
Total deferred tax assets........................ $18,716 $21,474
------- -------
Deferred tax liabilities:
Depreciation........................................ 11,931 12,505
Other............................................... 24 845
------- -------
Total deferred tax liabilities................... 11,955 13,350
------- -------
Net deferred tax asset........................... $ 6,761 $ 8,124
======= =======
The current portion of deferred tax assets, $6.9 and $7.0 million is
included in prepaid expense and other at December 31, 1998 and 1997,
respectively. Bailey's U.S. net operating loss carryforwards, which totaled
$26.4 and $29.9 million at December 31, 1998 and 1997, begin to expire in the
year 2011. Alternative minimum tax credit carryforwards totaled $0.8 million at
December 31, 1998 and have no expiration date. Management believes the net
operating loss carryforwards at December 31, 1998 are realizable based on
forecasted earnings and available tax planning strategies.
12. EXTRAORDINARY ITEMS
The senior secured notes payable to financial institutions required
semiannual interest payments at 9.89% and annual principal payments of $10
million each year commencing March 15, 1996. The outstanding balance of $40
million was refinanced on August 26, 1996 which resulted in an extraordinary
loss of $3.4 million ($2.5 million prepayment penalty plus unamortized deferred
financing costs of $0.9 million) in the quarter ended September 30, 1996.
On September 23, 1996 the Company redeemed approximately $21 million of the
senior subordinated bonds at 95% of par in conjunction with the refinancing
under the new credit agreement for acquisition of Bailey Corporation as required
by the First Supplement Indenture. The early extinguishment resulted in an
extraordinary gain of $688 thousand (net of unamortized deferred financing costs
of $365 thousand).
13. FINANCIAL INSTRUMENTS
The estimated fair values of the Company's debt instruments have been
determined using available market information. However, considerable judgment is
required in interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein may not be indicative of the amounts
that the Company could realize in a current market exchange. The use of
F-23
185
VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
different assumptions or valuation methodologies may have a material effect on
the estimated fair value amounts. The fair value of long-term debt was estimated
using quoted market prices (in thousands).
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
Debt.................................. $283,940 $282,126 $283,940 $287,626
The fair values of interest rate swaps were estimated by discounting
expected cash flows using quoted market interest rates. Interest rate swaps are
also discussed in Note 1.
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------ ------------------------
NOTIONAL UNREALIZED NOTIONAL UNREALIZED
AMOUNT GAIN/(LOSSES) AMOUNT GAIN/(LOSSES)
-------- ------------- -------- -------------
Interest Rate Swaps............... $55,000 $(2,020) $55,000 $(1,367)
The carrying values of cash and cash equivalents, accounts receivable,
accounts payable and the Senior Credit Facility approximate fair market value
due to the short-term maturities of these instruments.
14. ACQUISITION (UNAUDITED)
On March 8, 1999, the Company entered into an agreement to acquire Peguform
GmbH ("Peguform"), a leading European supplier of high performance interior and
exterior plastic modules, systems and components to European OEMs (the "Peguform
Acquisition"). Consummation of the Peguform Acquisition is subject to only
limited conditions, including approval of the shareholders of Klockner-Werke AG,
the parent of Peguform, and receipt of regulatory approvals. The purchase
agreement does not permit the Company to terminate the transaction, even if
there has been a material adverse change in the business of Peguform from the
date of signing the purchase agreement to closing, which is currently expected
to occur no later than May 31, 1999.
The Company has executed commitment letters with subsidiaries of Bank One
Corporation and Goldman Sachs Credit Partners, L.P., pursuant to which such
entities have committed, subject to certain conditions, to provide financing for
the Peguform Acquisition.
The aggregate purchase price of the Peguform Acquisition is approximately
DEM 850 million (approximately $459.1 million as of April 30, 1999), reduced by
the amount of certain indebtedness for borrowed money, and subject to
post-closing adjustments. In addition, the Company estimates an additional $28.2
million of fees, expenses and post-closing adjustments associated with the
Peguform Acquisition. The Company expects to complete the Peguform Acquisition
on or about May 31, 1999. The Peguform Acquisition will be accounted for as a
purchase.
In connection with the Peguform Acquisition, the Company expects to enter
into an amended and restated credit agreement (the "New Credit Agreement"). The
New Credit Agreement will provide for borrowings of (1) up to $200.0 million
under a Revolving Credit Facility, which, in addition to those matters described
below, will be used for working capital and general corporate purposes; (2)
$100.0 million under a five-year Term Loan A; and (3) $150.0 million under a
six-year Term Loan B. The Revolving Credit Facility will permit the Company to
borrow up to the lesser of a
F-24
186
VENTURE HOLDINGS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
borrowing base computed as a percentage of accounts receivable and inventory, or
$200.0 million less the amount of any letter of credit issued against the New
Credit Agreement. Pursuant to the borrowing base formula, as of December 31,
1998 the Company could have borrowed up to the maximum availability under the
Revolving Credit Facility.
Interest rates under the New Credit Agreement are based on the London
Interbank Offer Rate ("LIBOR"), Alternate Base Rate ("ABR"), which is the larger
of the bank's corporate base rate of interest announced from time-to-time or the
federal funds rate plus 1/2% per annum, and, in the case of non-dollar
denominated loans, a euro currency reference rate. Interest rates will be
determined by reference to the relevant interest rate option, plus an Applicable
Margin (as defined) based on the Company's Consolidated Ratio of Total Debt to
EBITDA. Obligations under the New Credit Agreement will be jointly and severally
guaranteed by the Trust's domestic subsidiaries and will be secured by first
priority security interests in substantially all of the assets of the Trust and
its domestic subsidiaries. The New Credit Agreement will contain certain
restrictive covenants, which we expect will be similar in nature to those in the
Company's current senior credit facility (the "Existing Credit Agreement"). The
New Credit Agreement will become effective contemporaneously with the completion
of the Peguform Acquisition.
In addition, the Company expects to offer an aggregate amount of up to
$375.0 million of unsecured senior subordinated notes and unsecured senior
notes. Proceeds from the offering of the notes, together with borrowings under
the New Credit Agreement will be used to (1) fund cash consideration paid in the
Acquisition; (2) redeem the Company's 9 3/4% Senior Subordinated Notes due 2004
at the redemption price of 104.875%, plus accrued interest; (3) refinance
amounts outstanding under the Existing Credit Agreement; (4) pay certain fees
and expenses related to the Peguform Acquisition and the offering of the notes;
and (5) fund working capital and other general corporate purposes.
After completing the Peguform Acquisition, the Company expects its budget
for capital expenditures during the remainder of 1999 to be approximately $70.0
million, which is expected to be financed either with cash generated from
operations or borrowings under the New Credit Agreement.
The Company expects, on or before the closing of the sale of the notes, to
enter into hedging obligations and interest rate swaps totalling approximately
$375.0 million which will have a maturity of 5 years. These hedging obligations
and interest rate swaps will effectively convert the Company's United States
dollar fixed rate coupon on the notes to a euro fixed rate coupon. These
instruments may not qualify for hedge accounting, which may result in non-cash
charges to earnings related to the mark to market on the swaps. The Company is
entering into this arrangement to take advantage of lower interest rates in
Europe and to hedge its exchange rate risk, however, no commitment is currently
in effect with respect to any such arrangements and no assurance can be given
that the Company will enter into such arrangements on the terms described or at
all.
F-25
187
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
JUNE 30, DEC. 31, JUNE 30,
1999 1998 1998
----------- -------- -----------
(UNAUDITED) (UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents........................... $ 40,295 $ 130 $ 12,603
Accounts receivable, net, includes related party
receivables of $65,690, $56,648 and $33,981 at
June 30, 1999, December 31, 1998 and June 30,
1998, respectively (Note 6)...................... 360,092 190,135 164,194
Inventories (Note 3)................................ 172,081 51,139 55,881
Investments (Note 5)................................ 25,875 -- --
Prepaid and other current assets.................... 49,310 8,870 8,573
---------- -------- --------
Total current assets........................... 647,653 250,274 241,251
Property, Plant and Equipment, Net (Note 2)........... 601,162 200,544 205,507
Intangible Assets, Net (Note 2)....................... 59,398 52,022 52,958
Other Assets.......................................... 54,756 26,636 25,153
Deferred Tax Assets................................... 16,146 11,839 13,952
---------- -------- --------
Total Assets................................... $1,379,115 $541,315 $538,821
========== ======== ========
LIABILITIES AND MEMBER'S EQUITY
Current Liabilities:
Accounts payable.................................... $ 203,123 $ 52,351 $ 58,412
Accrued interest.................................... 5,816 13,387 2,851
Accrued expenses.................................... 85,891 14,316 14,548
Current portion of long-term debt................... 10,502 1,565 1,835
---------- -------- --------
Total current liabilities...................... 305,332 81,619 77,646
Pension Liabilities & Other........................... 34,176 7,254 7,826
Deferred Tax Liabilities.............................. 19,859 11,955 14,175
Long Term Debt (Note 4)............................... 950,819 363,374 364,339
---------- -------- --------
Total liabilities.............................. 1,310,186 464,202 463,986
Commitments and Contingencies......................... -- -- --
Member's Equity:
Member's equity..................................... 92,457 77,850 74,835
Accumulated other comprehensive income -- minimum
pension liability in excess of unrecognized prior
service cost, net of tax......................... (737) (737) --
Accumulated other comprehensive income -- cumulative
translation adjustments.......................... (22,791) -- --
---------- -------- --------
Member's Equity....................................... 68,929 77,113 74,835
---------- -------- --------
Total Liabilities and Member's Equity.......... $1,379,115 $541,315 $538,821
========== ======== ========
See notes to consolidated financial statements.
F-26
188
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
Net Sales.................................... $273,803 $177,979 $439,795 $344,591
Cost of Product Sold......................... 246,686 151,069 379,756 284,685
-------- -------- -------- --------
Gross Profit................................. 27,117 26,910 60,039 59,906
Selling General and Administrative Expense... 19,954 15,244 34,224 30,099
Payments to Beneficiary in Lieu of Trust
Distributions.............................. 77 360 77 360
-------- -------- -------- --------
Income from Operations....................... 7,086 11,306 25,738 29,447
Interest Expense (Note 5).................... 15,549 10,697 25,028 17,842
Other Income (Note 5)........................ (19,900) -- (19,900) --
-------- -------- -------- --------
Income Before Taxes.......................... 11,437 609 20,610 11,605
Tax (Benefit) Provision...................... (662) (413) 405 1,052
Minority Interest............................ 29 -- 29 --
-------- -------- -------- --------
Net Income Before Extraordinary Loss......... 12,070 1,022 20,176 10,553
Extraordinary Loss on Early Extinguishment of
Debt (Note 7).............................. 5,569 -- 5,569 --
-------- -------- -------- --------
Net Income................................... 6,501 1,022 14,607 10,553
Other Comprehensive Loss -- Cumulative
translation adjustments.................... (22,791) -- (22,791) --
-------- -------- -------- --------
Comprehensive (Loss) Income.................. $(16,290) $ 1,022 $ (8,184) $ 10,553
======== ======== ======== ========
See notes to consolidated financial statements.
F-27
189
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY (UNAUDITED)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1999 1998 1999 1998
-------- ------- -------- -------
Member's Equity, Beginning of Period........... $ 85,219 $64,282 $ 77,113 $64,282
Comprehensive (Loss) Income:
Net Income................................... 6,501 1,022 14,607 10,553
Other Comprehensive Loss..................... (22,791) -- (22,791) --
-------- ------- -------- -------
Comprehensive (Loss) Income.................... (16,290) 1,022 (8,184) 10,553
-------- ------- -------- -------
Member's Equity, End of Period................. $ 68,929 $65,304 $ 68,929 $74,835
======== ======= ======== =======
See notes to consolidated financial statements.
F-28
190
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
SIX MONTHS ENDED
JUNE 30,
-----------------------
1999 1998
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 14,607 $ 10,553
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization.......................... 26,031 18,305
Unrealized gain on investments......................... (19,663) --
Net extraordinary loss on early extinguishment of
debt.................................................. 5,569 --
Change in accounts receivable.......................... 6,897 (2,985)
Change in inventories.................................. (4,224) (3,264)
Change in prepaid and other current assets............. (3,992) 2,878
Change in other assets................................. (15,240) (1,454)
Change in accounts payable............................. 20,333 (11,686)
Change in accrued expenses............................. 369 (8,576)
Change in other liabilities............................ 1,461 (6,455)
Change in deferred taxes............................... (386) (1,141)
--------- --------
Net cash provided by (used in) operating activities.... 31,762 (3,825)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of cash acquired......... (444,012) --
Capital expenditures................................... (13,177) (15,035)
--------- --------
Net cash used in investing activities.................. (457,189) (15,035)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving credit
agreement.............................................. (58,500) 32,500
Net borrowings on bank debt............................... 5,806 --
Net proceeds from issuance of debt........................ 650,000 --
Debt issuance fees........................................ (26,981) --
Payment for early extinguishment of debt.................. (82,788) --
Principal payments on debt................................ (19,949) (2,514)
--------- --------
Net cash provided by financing activities.............. 467,588 29,986
--------- --------
Effect of exchange rate changes on cash and cash
equivalents........................................... (1,996) --
Net Increase in Cash................................... 40,165 11,126
Cash at Beginning of Period................................. 130 1,477
========= ========
Cash at End of Period....................................... $ 40,295 $ 12,603
========= ========
Supplemental Cash Flow Information
Cash paid during the period for interest.................. $ 31,969 $ 27,139
========= ========
Cash paid during the period for taxes..................... $ 35 $ 225
========= ========
See notes to consolidated financial statements.
F-29
191
VENTURE HOLDINGS COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. The consolidated financial statements include the
accounts of Venture Holdings Company LLC (hereinafter referred to as "Venture")
and all of Venture's domestic and foreign subsidiaries that are wholly-owned or
majority-owned (collectively referred to as the "Company"). The Company's
investment in a less than majority-owned business is accounted for under the
equity method. In the opinion of management, all adjustments (consisting of only
normal recurring items), which are necessary for a fair presentation have been
included. The results for interim periods are not necessarily indicative of
results which may be expected for any other interim period or for the full year.
For further information, refer to the consolidated financial statements and
notes thereto included in the Company's 1998 Annual Report on Form 10-K filed
with the Securities and Exchange Commission.
2. ACQUISITION
On May 28, 1999, the Company purchased Peguform GmbH ("Peguform"), a
leading European supplier of high performance interior and exterior plastic
modules, systems and components to European OEMs (the "Peguform Acquisition"),
for approximately $463 million. The consideration paid for Peguform is subject
to adjustment based upon a final audit of the financial statements of Peguform
as of March 31, 1999.
The Peguform Acquisition was accounted for as a purchase, and accordingly,
the assets purchased and liabilities assumed in the acquisition have been
reflected in the accompanying consolidated balance sheet. The operating results
of Peguform have been included in the consolidated financial statements of the
Company since the date of acquisition. The preliminary purchase price and
related allocation were as follows (in millions):
Consideration paid to former owner, net of cash acquired of
$18.8 million............................................. $444.0
Debt assumed (including capital leases)..................... 107.3
------
Cost of acquisition......................................... $551.3
======
Property, plant and equipment............................... $417.0
Net working capital......................................... 101.8
Other assets purchased and liabilities assumed.............. 24.2
Goodwill.................................................... 8.3
------
Total cost allocation....................................... $551.3
======
The excess of the purchase price over the fair market value of the net
assets acquired (goodwill) was approximately $8 million and is being amortized
on a straight-line basis over 30 years. Adjustments to the purchase price and
related allocation may occur as a result of obtaining more information regarding
property valuations, liabilities assumed, the outcome of final negotiations with
the former owner and revisions of preliminary estimates of fair values made at
the date of purchase. The Company can provide no assurances as to whether any
revisions to the original purchase price allocation will be significant. These
uncertainties could result in an adjustment to goodwill of up to $60 million.
The net effect of the adjustments described above will be reported as an
adjustment to the purchase price and related allocation described above.
F-30
192
VENTURE HOLDINGS COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following pro forma financial data is presented to illustrate the
estimated effects of the Peguform Acquisition, as if the transaction had
occurred as of the beginning of the periods presented.
SIX MONTHS ENDED
JUNE 30,
-----------------------
1999 1998
-------- --------
Net sales................................................... $991,651 $926,013
Net income before extraordinary loss........................ 22,883 12,508
Net income.................................................. 17,314 18,077
3. INVENTORIES
Inventories included the following (in thousands):
JUNE 30, DECEMBER 31, JUNE 30,
1999 1998 1998
-------- ------------ --------
Raw materials............................................. $ 56,061 $25,169 $38,939
Work-in-process -- manufactured parts..................... 17,824 2,965 2,612
Work-in-process -- tools and molds........................ 75,212 11,436 10,319
Finished goods............................................ 22,984 11,569 4,011
-------- ------- -------
Total..................................................... $172,081 $51,139 $55,881
======== ======= =======
4. DEBT
Debt consisted of the following (in thousands):
JUNE 30, DEC. 31, JUNE 30,
1999 1998 1998
-------- -------- --------
Credit agreement
Term loan A............................................... $ 75,000 $ -- $ --
Term loan B............................................... 200,000 -- --
Interim term loan......................................... 125,000 -- --
Revolving credit outstanding.............................. 18,500 77,000 77,500
Bank debt payable........................................... 52,582 -- --
Senior notes payable, Due 2005 with interest at 9.5%........ 205,000 205,000 205,000
Senior notes payable, Due 2007 with interest at 11.0%....... 125,000 -- --
Senior subordinated notes payable, Due 2004 with interest at
9.75%..................................................... -- 78,940 78,940
Senior subordinated notes payable, Due 2009 with interest at
12.0%..................................................... 125,000 -- --
Capital leases with interest from 8.25% to 11.5%............ 33,695 2,196 2,731
Installment notes payable with interest from 5.85% to
11.75%.................................................... 1,544 1,803 2,003
-------- -------- --------
Total................................................ 961,321 364,939 366,174
Less current portion of debt................................ 10,502 1,565 1,835
-------- -------- --------
Total................................................ $950,819 $363,374 $364,339
======== ======== ========
On May 27, 1999, and in connection with the Peguform Acquisition, the
Company entered into a new credit agreement, which was amended on June 4, 1999
(the "credit agreement"). The credit
F-31
193
VENTURE HOLDINGS COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
agreement provides for borrowings of (1) up to $175 million under a revolving
credit facility, which, in addition to those matters described below, will be
used for working capital and general corporate purposes; (2) $75 million under a
five-year term loan A; (3) $200 million under a six-year term loan B; and (4)
$125 million under an 18-month interim term loan. The revolving credit facility
permits the Company to borrow up to the lesser of a borrowing base computed as a
percentage of accounts receivable and inventory, or $175 million less the amount
of any letters of credit issued against the credit agreement. Pursuant to the
borrowing base formula as of June 30, 1999, the Company could have borrowed up
to the maximum availability under the revolving credit facility.
Interest rates under the credit agreement are based on the London Interbank
Offer Rate ("LIBOR"), or the Alternate Base Rate ("ABR"), which is the larger of
the bank's corporate base rate of interest announced from time-to-time or the
federal funds rate plus 1/2% per annum, and, in the case of non-dollar
denominated loans, a euro currency reference rate. Interest rates are determined
by reference to the relevant interest rate option, plus an Applicable Margin (as
defined) based on the Company's Consolidated Ratio of Total Debt to EBITDA.
Obligations under the credit agreement are jointly and severally guaranteed by
Venture's domestic subsidiaries and are secured by first priority security
interests in substantially all of the assets of Venture and its domestic
subsidiaries.
On May 27, 1999, Venture issued $125 million of 11% unsecured senior notes
(the "1999 Senior Notes") and $125 million of 12% unsecured senior subordinated
notes (the "1999 Senior Subordinated Notes" and, together with the 1999 Senior
Notes, the "1999 Notes"). The net proceeds of the issuances of $243 million,
together with borrowings under the credit agreement were used to (1) fund the
cash consideration of $463 million paid in the Peguform Acquisition; (2) redeem
the Company's 9 3/4% senior subordinated notes due 2004 at the redemption price
of 104.875% plus accrued interest; (3) refinance amounts outstanding under
previous credit agreements; (4) pay certain fees and expenses related to the
Peguform Acquisition and the offering of the notes; and (5) fund working capital
and other corporate purposes.
The credit agreement, and documents governing the Company's 9 1/2% Senior
Notes due 2005 (the "1997 Senior Notes") and the 1999 Notes, contain restrictive
covenants relating to, among other things, cash flow, fixed charges, debt,
member's equity, distributions, leases, and liens on assets. The Company's debt
obligations contain various restrictive covenants that require the Company to
maintain stipulated financial ratios, including a minimum consolidated net worth
(adjusted yearly), fixed charge coverage ratio, interest coverage ratio and
total indebtedness ratio. As of June 30, 1999, the Company was in compliance
with all debt covenants.
Simultaneously with the issuance of the 1999 Notes, and to reduce the
Company's exposure to fluctuations in foreign exchange rates and reduce the
Company's overall cost of capital, the Company entered into various financial
instrument transactions. Refer to Note 5 -- Derivative Financial Instruments and
Risk Management.
5. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
In connection with the issuance of debt to finance the Peguform
Acquisition, Venture has entered into various currency and interest rate swaps.
Currency swaps are used to economically hedge foreign exchange exposure relating
to foreign denominated assets being financed by U.S. dollar denominated debt.
Currency swaps are legal agreements between Venture and a counterparty to
purchase and sell a foreign currency, for a price specified at the contract
date, with delivery and settlement at both the effective date and the maturity
date of the contract. Interest rate swaps are
F-32
194
VENTURE HOLDINGS COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
used to minimize interest expense while maintaining the desired level of
exposure to the risk of interest rate fluctuations. Venture has entered into
these financial instruments to take advantage of lower interest rates in Europe
and to hedge its foreign exchange risk.
On May 27, 1999, Venture, as part of the Peguform Acquisition, entered into
U.S. dollar versus Euro currency swaps with notional amounts of $205 million and
$250 million which mature in 2002 and 2004, respectively. At June 30, 1999,
these currency swaps had an estimated fair market value of $17.5 million. Since
these contracts do not meet all of the criteria for hedge accounting, the
estimated fair market value of these financial instruments is recorded as an
investment on the balance sheet and the $17.5 million non-cash change in
estimated fair market value for the quarter is recorded in other income on the
income statement.
Also on May 27, 1999, Venture, as part of the Peguform Acquisition, entered
into interest rate swaps with notional amounts of $410 million and $500 million
which mature in 2002 and 2004, respectively. Certain of the interest rate swaps
with an estimated fair market value of $2.0 million do not meet all of the
criteria for hedge accounting. Accordingly, the estimated fair market value of
these financial instruments is recorded as an investment on the balance sheet
and the $2.0 million non-cash change in estimated fair market value for the
quarter is recorded in other income on the income statement. Certain other
interest rate swaps do qualify for settlement accounting. The impact of these
interest rate swaps was to reduce interest expense by $142 thousand in the
second quarter of 1999.
6. RELATED PARTY TRANSACTIONS
The Company has entered into various transactions with entities that the
sole beneficiary owns or controls. These transactions include leases of real
estate, usage of machinery, equipment and facilities, purchases and sales of
inventory, performance of manufacturing related services, administrative
services, insurance activities, and payment and receipt of sales commissions. In
addition, employees of the Company are made available to certain of these
entities for services such as design, model and tool building. Since the Company
operates for the benefit of the sole beneficiary, the terms of these
transactions are not the result of arms'-length bargaining; however, the Company
believes that such transactions are on terms no less favorable to the Company
than would be obtained if such transactions or arrangements were arms'-length
transaction with non-affiliated persons.
The Company provides or arranges for others to provide certain related
parties with various administrative and professional services, including
employee group insurance and benefit coverage, property and other insurance,
financial and cash management and administrative services such as data
processing. The related parties are charged fees and premiums for these
services. Administrative services were allocated to the entity for which they
were incurred and certain entities were charged a management fee. In connection
with the above cash management services, the Company pays the administrative and
operating expenses on behalf of certain related parties and charges them for the
amounts paid which results in receivables from these related parties.
F-33
195
VENTURE HOLDINGS COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The result of these related party transactions was a net receivable, which
was included in accounts receivable as follows:
JUNE 30, DEC. 31, JUNE 30,
1999 1998 1998
-------- -------- --------
Amounts receivable......................................... $76,607 $65,755 $36,529
Amounts payable............................................ 10,917 9,107 2,548
------- ------- -------
Net amounts receivable................................ $65,690 $56,648 $33,981
======= ======= =======
7. EXTRAORDINARY ITEM
In connection with the issuance of the 1999 Notes, the Company redeemed its
9 3/4% senior subordinated notes due 2004 at the redemption price of 104.875%
plus accrued interest which resulted in an extraordinary loss of $5.6 million
($3.8 million prepayment penalty plus unamortized deferred financing costs of
$1.8 million).
8. GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS
Venture, as the successor to Venture Holdings Trust, and certain of its
wholly-owned, domestic subsidiaries are jointly and severally liable for the
1997 Notes issued on July 9, 1997. On May 27, 1999, certain wholly-owned,
domestic subsidiaries of Venture became guarantors of the 1997 Senior Notes.
These guarantees are full and unconditional, joint and several. Venture issued
the 1999 Notes on May 27, 1999 in connection with the Peguform Acquisition, as a
result of which Venture acquired certain additional foreign subsidiaries. The
1999 Notes are guaranteed by each of Venture's wholly-owned, domestic
subsidiaries. The guarantees of these wholly-owned, domestic subsidiaries are
full and unconditional, joint and several.
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of June 30, 1999
and for the three and six month periods ended June 30, 1999, of (a) Venture
(b) the guarantor subsidiaries, (c) the nonguarantor subsidiaries and (d)
the Company on a consolidated basis, and
(2) Elimination entries necessary to consolidate Venture and the
guarantor subsidiaries with the nonguarantor subsidiaries.
Condensed consolidating financial information for Venture and the guarantor
subsidiaries set forth below includes both the issuer subsidiaries and the
guarantor subsidiaries with respect to the 1997 Senior Notes and includes all of
the guarantor subsidiaries with respect to the 1999 Notes. Condensed
consolidating financial information for the periods prior to June 30, 1999 are
not presented because prior to May 27, 1999 the non-guarantors and the
non-issuers of the 1997 Senior Notes and the non-guarantors of the 1999 Notes
during those periods were inconsequential, individually and in aggregate, to the
consolidated financial statements.
The principal elimination entries eliminate investments in subsidiaries and
intercompany balances and transactions.
F-34
196
GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)
AS OF JUNE 30, 1999
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
---------- ------------ ------------ ------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents............. $ -- $ 5,929 $ 34,366 $ -- $ 40,295
Accounts receivable, net.............. -- 212,480 147,612 -- 360,092
Inventories........................... -- 52,101 119,980 -- 172,081
Investments........................... 19,522 -- 6,353 -- 25,875
Prepaid and other current assets...... -- 9,346 39,964 -- 49,310
---------- -------- -------- --------- ----------
Total current assets.............. 19,522 279,856 348,275 -- 647,653
Property, Plant and Equipment, Net...... -- 194,825 406,337 -- 601,162
Intangible Assets, Net.................. -- 51,082 8,316 -- 59,398
Other Assets............................ -- 50,243 4,513 -- 54,756
Deferred Tax Assets..................... -- 11,969 4,177 -- 16,146
Net investment in and advances to (from)
subsidiaries and affiliates........... 986,640 (424,613) (424,025) (138,002) --
---------- -------- -------- --------- ----------
Total Assets...................... $1,006,162 $163,362 $347,593 $(138,002) $1,379,115
========== ======== ======== ========= ==========
LIABILITIES AND MEMBER'S EQUITY
Current Liabilities:
Accounts payable...................... $ -- $ 68,005 $135,118 $ -- $ 203,123
Accrued interest...................... 5,816 -- -- -- 5,816
Accrued expenses...................... -- 17,126 68,765 -- 85,891
Current portion of long-term debt..... 4,100 1,002 5,400 -- 10,502
---------- -------- -------- --------- ----------
Total current
liabilities.................... 9,916 86,133 209,283 -- 305,332
Pension Liabilities & Other............. -- 5,647 28,529 -- 34,176
Deferred Tax Liabilities................ -- 11,784 8,075 -- 19,859
Long Term Debt.......................... 869,400 1,849 79,570 -- 950,819
---------- -------- -------- --------- ----------
Total liabilities................. 879,316 105,413 325,457 -- 1,310,186
Commitments and Contingencies........... -- -- -- -- --
Member's Equity:
Member's equity....................... 126,846 58,686 44,927 (138,002) 92,457
Accumulated other comprehensive
income -- minimum pension liability
in excess of unrecognized prior
service cost, net of tax............ -- (737) -- -- (737)
Accumulated other comprehensive
income -- cumulative translation
adjustments......................... -- -- (22,791) -- (22,791)
---------- -------- -------- --------- ----------
Member's Equity......................... 126,846 57,949 22,136 (138,002) 68,929
---------- -------- -------- --------- ----------
Total Liabilities and Member's Equity... $1,006,162 $163,362 $347,593 $(138,002) $1,379,115
========== ======== ======== ========= ==========
F-35
197
GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- ------------ ------------ ------------ ------------
Net Sales.................. $ -- $328,417 111,378 -- 439,795
Cost of Products Sold...... -- 276,861 102,895 -- 379,756
-------- -------- ------- ------- -------
Gross Profit............. -- 51,556 8,483 -- 60,039
Selling, General &
Administrative Expense... -- 26,848 7,376 -- 34,224
Payments to Beneficiary in
Lieu of Taxes............ 77 -- -- -- 77
-------- -------- ------- ------- -------
Income from Operations... (77) 24,708 1,107 -- 25,738
Interest Expense........... 24,109 97 822 -- 25,028
Intercompany Interest
Allocation............... (24,109) 24,109 1,105 (1,105) --
Other Expense (Income)..... (35,856) -- 244 15,712 (19,900)
-------- -------- ------- ------- -------
Income Before Taxes...... 35,779 502 (1,064) (14,607) 20,610
Tax Provision.............. -- 144 261 -- 405
Minority Interest.......... -- -- 29 -- 29
-------- -------- ------- ------- -------
Net Income Before
Extraordinary Loss.... 35,779 358 (1,354) (14,607) 20,176
Extraordinary Loss on Early
Extinguishment of Debt... 5,569 -- -- -- 5,569
-------- -------- ------- ------- -------
Net Income (Loss)........ $ 30,210 $ 358 (1,354) (14,607) 14,607
======== ======== ======= ======= =======
F-36
198
GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- ------------ ------------ ------------ ------------
Net Sales....................... $ -- $162,425 111,378 -- 273,803
Cost of Products Sold........... -- 143,791 102,895 -- 246,686
-------- -------- ------- ------ -------
Gross Profit.................. -- 18,634 8,483 -- 27,117
Selling, General &
Administrative Expense........ -- 12,578 7,376 -- 19,954
Payments to Beneficiary in Lieu
of Taxes...................... 77 -- -- -- 77
-------- -------- ------- ------ -------
Income from Operations........ (77) 6,056 1,107 -- 7,086
Interest Expense................ 14,649 78 822 -- 15,549
Intercompany Interest
Allocation.................... (14,649) 14,649 1,105 (1,105) --
Other Expense (Income).......... (27,750) -- 244 7,606 (19,900)
-------- -------- ------- ------ -------
Income Before Taxes........... 27,673 (8,671) (1,064) (6,501) 11,437
Tax (Benefit) Provision......... -- (923) 261 -- (662)
Minority Interest............... -- -- 29 -- 29
-------- -------- ------- ------ -------
Net Income Before
Extraordinary Loss......... 27,673 (7,748) (1,354) (6,501) 12,070
Extraordinary Loss on Early
Extinguishment of Debt........ 5,569 -- -- -- 5,569
-------- -------- ------- ------ -------
Net Income (Loss)............. $ 22,104 $ (7,748) (1,354) (6,501) 6,501
======== ======== ======= ====== =======
F-37
199
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
--------- ------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................... $ 30,210 $ 358 $ (1,354) $(14,607) $ 14,607
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization..... -- 21,540 4,491 -- 26,031
Unrealized gain on investments.... (19,522) -- (141) -- (19,663)
Net extraordinary loss on early
extinguishment of debt.......... 5,569 -- -- -- 5,569
Change in accounts receivable..... (14,607) (22,612) 29,509 14,607 6,897
Change in inventories............. -- (962) (3,262) -- (4,224)
Change in prepaid and other
current
assets.......................... -- (2,095) (1,897) -- (3,992)
Change in other assets............ -- (11,309) (3,931) -- (15,240)
Change in accounts payable........ -- 15,654 4,679 -- 20,333
Change in accrued expenses........ (7,572) 2,810 5,131 -- 369
Change in pension liabilities and
other........................... -- (1,606) 3,067 -- 1,461
Change in deferred taxes.......... -- 214 (600) -- (386)
--------- --------- -------- -------- ---------
Net cash provided by (used
in) operating activities... (5,922) 1,992 35,692 -- 31,762
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of
cash
acquired.......................... -- (462,814) 18,802 -- (444,012)
Net activity in investments in and
advances to (from) subsidiaries
and affiliates.................... (502,790) 502,790 -- -- --
Capital expenditures................ -- (8,040) (5,137) -- (13,177)
--------- --------- -------- -------- ---------
Net cash used in investing
activities................. (502,790) 31,936 13,665 -- (457,189)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under revolving
credit facility................... (58,500) -- -- -- (58,500)
Net borrowings on bank debt......... -- -- 5,806 -- 5,806
Net proceeds from issuance of
debt.............................. 650,000 -- -- -- 650,000
Debt issuance fees.................. -- (26,981) -- -- (26,981)
Payment for early extinguishment of
debt.............................. (82,788) -- -- -- (82,788)
Principal payments on debt.......... -- (1,148) (18,801) -- (19,949)
--------- --------- -------- -------- ---------
Net cash (used in) provided
by financing activities.... 508,712 (28,129) (12,995) -- 467,588
Effect of exchange rate changes on
cash and cash equivalents........... -- -- (1,996) -- (1,996)
Net Increase in Cash......... -- 5,799 34,366 -- 40,165
Cash at Beginning of Period........... -- 130 -- -- 130
--------- --------- -------- -------- ---------
Cash at End of Period................. $ -- $ 5,929 $ 34,366 -- 40,295
========= ========= ======== ======== =========
Supplemental Cash Flow Information
Cash paid during the period for
interest.......................... $ -- $ 31,969 $ -- -- $ 31,969
========= ========= ======== ======== =========
Cash paid during the period for
taxes............................. $ -- $ 35 $ -- $ -- $ 35
========= ========= ======== ======== =========
F-38
200
9. SEGMENT REPORTING
Prior to the Peguform Acquisition on May 28, 1999, the Company was
organized and operated in one reporting segment. As a result of the Peguform
Acquisition, the Company is organized and managed based primarily on geographic
markets served. Under this organizational structure, the Company's operating
segments have been segregated into two reportable segments: North America and
Europe. The following table presents net sales and other financial information
by business segment for the six months ended June 30, 1999 (in thousands):
INCOME (LOSS) NET TOTAL
NET SALES FROM OPERATIONS INCOME (LOSS) ASSETS
--------- --------------- ------------- ----------
North America (Venture)............ $328,417 $24,631 $15,961 $ 607,497
Europe (Peguform).................. 111,378 1,107 (1,354) 771,618
-------- ------- ------- ----------
Total......................... $439,795 $25,738 $14,607 $1,379,115
======== ======= ======= ==========
F-39
201
REPORT OF INDEPENDENT AUDITORS
To the Board of Management and
Shareholders of PEGUFORM GmbH
We have audited the accompanying consolidated balance sheets of PEGUFORM
GmbH and subsidiaries as of September 30, 1997 and 1998, and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements, based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in Germany, which are substantially the same as those followed in the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
PEGUFORM GmbH and subsidiaries as of September 30, 1997 and 1998 and the
consolidated results of their operations, changes in stockholders' equity and
cash flows for the years then ended in conformity with generally accepted
accounting principles in the United States.
Our audit also included the translation of Deutsche Mark amounts into U.S.
dollar amounts and, in our opinion, such translation has been made in conformity
with the basis stated in note 2. Such U.S. dollar amounts are presented solely
for the convenience of the readers.
Dusseldorf,
December 18, 1998, except for the adjustments according to U.S.
GAAP (see note 2), as to which the date is April 26, 1999
BDO International GmbH
Wirtschaftsprufungsgesellschaft
F-40
202
PEGUFORM GMBH, BOTZINGEN
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1997 AND 1998 AND MARCH 31, 1999
(DEM IN THOUSANDS)
THOUSANDS OF THOUSANDS OF
U.S. DOLLARS U.S. DOLLARS
(CONVENIENCE (CONVENIENCE
SEPTEMBER 30, TRANSLATION) TRANSLATION)
--------------------- SEPTEMBER 30, MARCH 31, MARCH 31,
1997 1998 1998 1999 1999
--------- --------- ------------- ----------- -------------
(UNAUDITED) (UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents................ 3,486 4,964 2,961 9,507 5,670
Accounts receivable (note 4)............. 276,685 277,891 165,737 357,001 212,919
Inventories (note 5)..................... 180,996 201,439 120,140 197,001 117,493
Deferred tax assets (note 13)............ 6,479 5,235 3,122 2,985 1,780
Prepaid expenses......................... 3,558 3,122 1,862 3,752 2,238
--------- --------- -------- --------- --------
Total current assets................ 471,204 492,651 293,822 570,246 340,100
Investment in associated company......... 6,431 7,665 4,571 8,834 5,269
Property, plant and equipment (note 6)... 488,218 535,199 319,198 539,398 321,702
Intangible assets........................ 74,894 65,206 38,889 62,794 37,451
Other assets............................. 3,866 5,244 3,128 8,654 5,161
Deferred tax assets (note 13)............ 4,073 6,063 3,616 6,806 4,059
--------- --------- -------- --------- --------
Total assets........................ 1,048,686 1,112,028 663,224 1,196,732 713,742
========= ========= ======== ========= ========
F-41
203
THOUSANDS OF THOUSANDS OF
U.S. DOLLARS U.S. DOLLARS
(CONVENIENCE (CONVENIENCE
SEPTEMBER 30, TRANSLATION) TRANSLATION)
--------------------- SEPTEMBER 30, MARCH 31, MARCH 31,
1997 1998 1998 1999 1999
--------- --------- ------------- ----------- -------------
(UNAUDITED) (UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of debt (note 9)......... 309,677 360,365 214,925 454,150 270,859
Accounts payable (note 8)................ 226,453 260,163 155,164 264,765 157,908
Accrued payroll.......................... 56,781 63,500 37,872 46,234 27,574
Other accrued expenses................... 37,267 25,105 14,973 21,648 12,911
Income taxes payable..................... 5,583 3,162 1,886 7,249 4,323
Deferred tax liabilities (note 13)....... 3,564 3,618 2,158 4,173 2,489
Other current liabilities and deferred
income................................. 20,278 12,979 7,741 24,499 14,611
--------- --------- -------- --------- --------
Total current liabilities........... 659,603 728,892 434,719 822,718 490,675
Long term debt (note 9).................. 101,893 97,855 58,362 95,785 57,127
Accrual for pension obligations (note
12).................................... 39,458 44,913 26,786 49,270 29,385
Deferred tax liabilities (note 13)....... 20,847 20,432 12,186 17,464 10,416
Minority interest........................ 6,248 1,450 865 1,218 726
Other non current liabilities and
deferred income........................ 2,266 3,850 2,295 1,578 943
--------- --------- -------- --------- --------
Total liabilities................... 830,315 897,392 535,213 988,033 589,272
--------- --------- -------- --------- --------
STOCKHOLDERS' EQUITY
Capital stock............................ 70,000 70,000 41,749 70,000 41,749
Additional paid in capital............... 358,397 373,234 222,600 373,234 222,600
Deficit.................................. (194,311) (209,995) (125,243) (213,966) (127,611)
Cumulative currency translation
adjustment............................. (14,628) (16,376) (9,767) (17,176) (10,244)
Accumulated other comprehensive income
(note 12).............................. (1,087) (2,227) (1,328) (3,393) (2,024)
--------- --------- -------- --------- --------
Total stockholders' equity.......... 218,371 214,636 128,011 208,699 124,470
--------- --------- -------- --------- --------
Total liabilities and stockholders'
equity............................ 1,048,686 1,112,028 663,224 1,196,732 713,742
========= ========= ======== ========= ========
F-42
204
PEGUFORM GMBH, BOTZINGEN
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1997 AND 1998
AND SIX MONTHS ENDED MARCH 31, 1998 AND 1999
(DEM IN THOUSANDS)
THOUSANDS OF
THOUSANDS OF U.S. DOLLARS
U.S. DOLLARS (CONVENIENCE
(CONVENIENCE TRANSLATION)
YEAR ENDED TRANSLATION) SIX MONTHS ENDED SIX MONTHS
SEPTEMBER 30, YEAR ENDED MARCH 31, ENDED
----------------------- SEPTEMBER 30, ------------------------- MARCH 31,
1997 1998 1998 1998 1999 1999
---------- ---------- ------------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
REVENUES
Net sales.................... 1,664,884 1,977,698 1,179,518 935,225 1,174,403 700,425
Other revenues............... 17,717 45,728 27,272 13,732 11,138 6,643
---------- ---------- ---------- -------- ---------- --------
Total revenues............ 1,682,601 2,023,426 1,206,790 948,957 1,185,541 707,068
Cost of products sold........ (1,482,448) (1,806,115) (1,077,184) (855,447) (1,056,225) (629,943)
---------- ---------- ---------- -------- ---------- --------
Gross profit.............. 200,153 217,311 129,606 93,510 129,316 77,125
Selling, general and
administrative expenses...... (154,427) (201,040) (119,902) (101,222) (104,744) (62,470)
Other expenses................. (7,524) (2,408) (1,436) (1,743) (8,668) (5,170)
Interest expense (net)......... (23,267) (23,992) (14,309) (13,444) (11,980) (7,145)
---------- ---------- ---------- -------- ---------- --------
Income (loss) before
income taxes.............. 14,935 (10,129) (6,041) (22,899) 3,924 2,340
Taxes on income................ (6,029) (6,060) (3,614) (3,210) (1,340) (799)
Minority interest.............. (618) 505 301 350 226 135
---------- ---------- ---------- -------- ---------- --------
Consolidated net income
(loss).................... 8,288 (15,684) (9,354) (25,759) 2,810 1,676
========== ========== ========== ======== ========== ========
Foreign currency translation
adjustments.................. (1,508) (1,748) (1,042) (1,442) (800) (477)
Other comprehensive income..... (1,087) (1,140) (680) (570) (1,166) (695)
---------- ---------- ---------- -------- ---------- --------
Total other comprehensive
income.................. (2,595) (2,888) (1,722) (2,012) (1,966) (1,172)
---------- ---------- ---------- -------- ---------- --------
Comprehensive income...... 5,693 (18,572) (11,076) (27,771) 844 504
========== ========== ========== ======== ========== ========
See notes to the consolidated financial statements.
F-43
205
PEGUFORM GMBH, BOTZINGEN
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1997 AND 1998
AND SIX MONTHS ENDED MARCH 31, 1999
(DEM IN THOUSANDS EXCEPT FOR SHARE DATA)
CUMULATIVE ACCUMULATED
ADDITIONAL CURRENCY OTHER
PAID IN TRANSLATION COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT INCOME TOTAL
------ ------ ---------- -------- ----------- ------------- -------
BALANCE AT OCTOBER 1, 1996......... 18 70,000 358,397 (198,050) (13,120) 217,227
Net income......................... 8,288 8,288
Dividend paid...................... (4,549) (4,549)
Currency translation............... (1,508) (1,508)
Additional minimum pension
liability........................ (1,087) (1,087)
-- ------ ------- -------- ------- ------ -------
BALANCE AT SEPTEMBER 30, 1997...... 18 70,000 358,397 (194,311) (14,628) (1,087) 218,371
Net loss........................... (15,684) (15,684)
Capital contribution............... 14,837 14,837
Currency translation............... (1,748) (1,748)
Additional minimum pension
liability........................ (1,140) (1,140)
-- ------ ------- -------- ------- ------ -------
BALANCE AT SEPTEMBER 30, 1998...... 18 70,000 373,234 (209,995) (16,376) (2,227) 214,636
== ====== ======= ======== ======= ====== =======
Thousands of U.S. Dollars
(Convenience translation)
September 30, 1998............... 41,749 222,600 (125,243) (9,767) (1,328) 128,011
====== ======= ======== ======= ====== =======
BALANCE AT SEPTEMBER 30, 1998...... 18 70,000 373,234 (209,995) (16,376) (2,227) 214,636
Net income......................... 2,810 2,810
Dividend paid...................... (6,781) (6,781)
Currency translation............... (800) (800)
Additional minimum pension
liability........................ (1,166) (1,166)
-- ------ ------- -------- ------- ------ -------
BALANCE AT MARCH 31, 1999
(Unaudited)...................... 18 70,000 373,234 (213,966) (17,176) (3,393) 208,699
== ====== ======= ======== ======= ====== =======
Thousands of U.S. Dollars
(Convenience translation)
March 31, 1999................... 41,749 222,600 (127,611) (10,244) (2,024) 124,470
====== ======= ======== ======= ====== =======
See notes to the consolidated financial statements.
F-44
206
PEGUFORM GMBH, BOTZINGEN
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1997 AND 1998 AND SIX MONTHS ENDED
MARCH 31, 1998 AND 1999
(DEM IN THOUSANDS)
THOUSANDS OF U.S. DOLLARS
U.S. DOLLARS (CONVENIENCE
(CONVENIENCE TRANSLATION)
YEAR ENDED TRANSLATION) SIX MONTHS ENDED SIX MONTHS
SEPTEMBER 30, YEAR ENDED MARCH 31, ENDED
------------------- SEPTEMBER 30, ------------------------- MARCH 31,
1997 1998 1998 1998 1999 1999
-------- -------- ------------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Cash Flows From Operating Activities
Net income (loss)............................ 8,288 (15,684) (9,354) (25,759) 2,810 1,676
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization.............. 87,828 88,734 52,922 46,722 48,759 29,080
(Gain) loss from the disposal of fixed
assets -- net............................ (1,621) (4,237) (2,527) (250) 459 274
Change in accounts receivable.............. (42,777) (1,206) (719) (24,013) (79,110) (47,182)
Change in inventories...................... (30,614) (20,443) (12,192) 17,501 4,438 2,647
Change in prepaid expenses................. 1,877 436 260 (4,429) (630) (376)
Change in investment in associated
company.................................. (1,373) (1,234) (736) (569) (1,169) (697)
Change in other assets..................... 582 (1,378) (822) 533 (5,290) (3,155)
Change in accounts payable................. 37,879 31,289 18,661 9,613 8,689 5,182
Change in accrued expenses................. 12,661 (2,378) (1,418) (18,904) (18,919) (11,283)
Change in other liabilities................ 5,760 (10,513) (6,270) (2,139) 11,047 6,586
Change in deferred taxes................... (3,483) 264 157 (442) 542 326
-------- -------- ------- -------- -------- -------
Net cash provided by (used in) operating
activities............................ 75,007 63,650 37,962 (2,136) (28,374) (16,922)
-------- -------- ------- -------- -------- -------
Cash Flows From Investing Activities
Proceeds from sale of fixed assets........... 10,524 19,381 11,559 6,783 713 425
Capital expenditures......................... (102,014) (143,552) (85,616) (74,109) (52,299) (31,192)
-------- -------- ------- -------- -------- -------
Net cash used for investing activities..... (91,490) (124,171) (74,057) (67,326) (51,586) (30,767)
-------- -------- ------- -------- -------- -------
Cash Flows From Financing Activities
Capital contribution......................... 0 14,837 8,849 0 0 0
Dividends paid............................... (4,549) 0 0 0 (6,781) (4,044)
Net borrowings............................... 38,734 60,141 35,869 91,720 115,171 68,689
Principal payments on debt................... (17,356) (12,967) (7,734) (6,450) (25,487) (15,201)
-------- -------- ------- -------- -------- -------
Net cash provided by (used for) financing
activities............................... 16,829 62,011 36,984 85,270 82,903 49,444
-------- -------- ------- -------- -------- -------
Effect of foreign exchange rate changes........ 838 (12) (7) 6,975 1,600 954
-------- -------- ------- -------- -------- -------
Net Increase in Cash........................... 1,184 1,478 882 22,783 4,543 2,709
Cash and Cash Equivalents at Beginning of
Period....................................... 2,302 3,486 2,079 3,486 4,964 2,961
-------- -------- ------- -------- -------- -------
Cash and Cash Equivalents at End of Period... 3,486 4,964 2,961 26,269 9,507 5,670
======== ======== ======= ======== ======== =======
F-45
207
THOUSANDS OF U.S. DOLLARS
U.S. DOLLARS (CONVENIENCE
(CONVENIENCE TRANSLATION)
YEAR ENDED TRANSLATION) SIX MONTHS ENDED SIX MONTHS
SEPTEMBER 30, YEAR ENDED MARCH 31, ENDED
------------------- SEPTEMBER 30, ------------------------- MARCH 31,
1997 1998 1998 1998 1999 1999
-------- -------- ------------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Supplemental Cash Flow Information
Cash paid during the period for interest..... 26,758 30,136 17,973 14,900 13,959 8,325
Income taxes paid (refunded)................... 3,026 7,372 4,391 893 0 0
Non-cash changes relating to additional minimum
liability
Change in minimum liability.................. 3,301 2,390 1,425 598 2,553 1,523
Change in intangible asset................... (819) 121 72 30 61 36
Change in deferred asset..................... (1,395) (1,371) (817) (353) (1,448) (864)
Other comprehensive income................... (1,087) (1,140) (680) (275) (1,166) (695)
See notes to consolidated financial statements.
F-46
208
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(DEM IN THOUSANDS)
(1) DESCRIPTION OF BUSINESS
The Company is a supplier to the automotive industry and mainly provides
plastic system components.
(2) BASIS OF PRESENTATION
Solely for the convenience of the readers, the consolidated financial
statements as of September 30, 1998 and for the year then ended and as of March
31, 1999 and for the six months then ended have been translated to U.S. dollars
at the rate of DEM 1,6767 per U.S. dollar, the noon buying rate in New York City
for cable transfers in DEM as certified for customs purposes published by the
Federal Reserve Bank of New York as of December 31, 1998. The translation should
not be construed as a representation that the amounts shown could be converted
into U.S. dollars at such rate or any other rate.
The accompanying financial statements have been prepared in accordance with
United States generally accepted accounting principles ("U.S. GAAP"). The
company maintains its financial records in accordance with the German Commercial
Code, which represents generally accepted accounting principles in Germany
("German GAAP"). Generally, accepted accounting principles in Germany vary in
certain respects from U.S. GAAP. Accordingly, the Company has recorded certain
adjustments in order that these financial statements are in accordance with U.S.
GAAP.
(3) SUMMARY OF ACCOUNTING POLICIES
Fiscal year -- The Company's fiscal year runs from October 1 to September
30.
Principles of consolidation -- The consolidated financial statements
include the accounts of PEGUFORM GmbH and its wholly or majority owned
subsidiaries (collectively the "Group").
The Group accounts include the following companies:
PERCENTAGE HOLDING
%
----------
PEGUFORM GmbH, Botzingen............................... 100
PEGUFORM France S.A., Vernon/France.................... 100
PEGUFORM Iberica S.A., Polinya/Spain................... 100
PEGUFORM Bohemia a.s., Liberec/Czech
Republic............................................. 100
PEGUFORM Hella Mexico, S.A. de C.V., Puebla/Mexico..... 70
INERGA Components S.A., Rubi/Spain..................... 100
INERGA Logistics S.L., Polinya/Spain................... 100
INERGA Argentina S.A., Buenos Aires/Argentina.......... 100
INERGA do Brasil Ltda., Guaranema/Brasil............... 100
PEGUFORM Slovakia s.r.o. Poprad/Slowacian Republic..... 100
All intercompany accounts and transactions have been eliminated.
The group holds a 50% interest in Celulosa Fabril (Cefa) S.A.,
Zaragoza/Spain. This investment is stated at equity.
F-47
209
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Application of a new basis of accounting after a change in control of the
Company ("push-down accounting") -- In 1990 there was a change in the control of
the Company. 99% of the shares of Eurotec Systemteile GmbH, the then parent
company of PEGUFORM GmbH (which was merged downstream into PEGUFORM GmbH with
economic effect as of October 1, 1996), were acquired by Klockner Mercator
Maschinenbau GmbH, a subsidiary of Klockner-Werke AG. The paid purchase price
for the shares transferred was retroactively allocated to the net identifiable
assets. The remaining goodwill is amortized over 15 years using the
straight-line method.
Foreign Currencies -- Currency translation is based upon the Statement of
Financial Accounting Standards (SFAS) 52 "Foreign Currency Translation," whereby
the assets and liabilities of foreign subsidiaries where the functional currency
is the local currency are generally translated using period end exchange rates
while the income statements are translated using average exchange rates during
the period. Differences arising from the translation of assets and liabilities
in comparison with the translation of the previous periods are included as a
separate component of stockholders' equity.
Estimates -- The preparation of the Company's 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.
Cash and Cash Equivalents -- Highly liquid investments with an initial
maturity of three months or less are classified as cash equivalents.
Inventories -- Manufactured parts inventories are stated at the lower of
cost or market using the average cost method. Inventory also includes costs
associated with building molds under contract.
There are generally no molds used in the Company's manufacturing operations
which are owned by the Company.
Property and Depreciation -- Property, plant, and equipment are recorded at
cost. Depreciation is computed by the straight-line method over the estimated
useful lives of the various classes of assets. Tooling is amortized on a piece
price or straight line basis over the related production contract, generally 3
to 7 years. The principal estimated useful lives are as follows:
YEARS
-----
Building and improvements................................... 10-50
Machinery and equipment..................................... 3-20
Other equipment, office and transportation equipment........ 3-10
Leasehold improvements are amortized over the useful life or the term of
the lease. Expenditures for maintenance and repairs are charged to expense as
incurred.
Leases -- The group leases property, plant and equipment as a lessee. All
leases that meet certain specified criteria intended to represent situations
where the substantive risks and rewards of ownership have been transferred to
the lessee are accounted for as capital lease. All other leases are accounted
for as operating lease.
Intangible Assets -- Purchased intangible assets are recorded at
acquisition cost. Amortization is computed by the straight-line method over the
estimated useful lives, generally 3 to 10 years.
F-48
210
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The purchase price of companies in excess of the fair value of net
identifiable assets acquired ("goodwill") is capitalized and generally amortized
over 15 years using the straight-line method. The same applies to goodwill
resulting from push-down accounting for the change in control in the Company in
1990. In the case of Inerga Components S.A., which was acquired as of October 1,
1995, goodwill is amortized over 5 years.
Intangible assets include an amount relating to an additional minimum
pension liability. This amount is determined by the unrecognized transitional
amount considered to calculate accrued pension cost (see note 12).
Long-lived assets and long-lived assets to be disposed of -- Effective
October 1, 1996, the Statement of Financial Accounting Standards ("SFAS") No.
121 "Accounting for the Impairment of Long-lived Assets and for Long-Lived
Assets to be Disposed of" was adopted. This Statement establishes accounting
standards for the impairment of long-lived assets, and certain identifiable
intangibles, and goodwill related to those assets to be held and used and
long-lived and certain identifiable intangibles to be disposed of. The statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. In addition, the Statement requires that certain long-lived assets
and identifiable intangibles to be disposed of be reported at the lower of
carrying amount or fair value less cost to sell. The Company periodically
evaluates the carrying value for impairment.
Revenue recognition -- Revenue from the sale of manufactured parts is
recognized when the parts are shipped. Revenue from mold sales is recognized
using the completed contract method due to the reasonably short build cycle. The
revenues are recognized when final approval has been received from the customer
or in accordance with contract terms. Provision for estimated losses on
uncompleted contracts, if any, is made in the period such losses are identified.
Other revenue is comprised of foreign exchange gains, gains on disposal of fixed
assets, insurance reimbursements and recoveries, and other miscellaneous income.
Related party transactions -- The Company is a 99% owned subsidiary of
Klockner Mercator Maschinenbau GmbH, a subsidiary of Klockner-Werke AG,
Duisburg, Germany. Besides immaterial transactions with sister companies the
Company has entered into various transactions with its parent company. These
transactions do not include operational activities but mostly administrative and
financing services. Since the Company operates for the sole benefit of the
parent company, the terms of these transactions are not the result of
arms'-length bargaining.
Since 1990 exist a so called "control and profit distribution agreement"
between Klockner Mercator Maschinenbau GmbH and PEGUFORM GmbH and its former
parent Eurotec Systemteile GmbH respectively. Under this agreement the company
has to distribute all its net income to the parent. On the other side the parent
company has to absorb any net losses incurred at the company. In these financial
statements the payments of the parent to absorb the losses are stated as
additional paid in capital. Any profit distributions are treated as dividends.
The control and profit distribution agreement also has an effect for tax
purposes. PEGUFORM GmbH is no longer a separate taxable individual, with the
effect that all corporation taxes, if any, are recorded and paid by the parent
company. In years with profit the parent company however charges PEGUFORM GmbH
for income taxes. These tax charges are deemed to be based on actual corporate
and trade income tax rates. On the other hand no tax credits are given for net
losses.
F-49
211
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes -- Deferred income taxes are provided using the liability
method in accordance with SFAS No. 109. "Accounting for income taxes".
Deferred taxes for German income taxes are recorded as if PEGUFORM GmbH
were a "stand alone" taxable unit for corporate and trade income taxes. Being
currently integrated for income tax purposes as a subsidiary of a German parent
company PEGUFORM GmbH may be charged for tax liabilities or credited for tax
receivables for future net profits or losses if there were no change in
ownership. With the sale of all the shares in the Company to a foreign company
there will be no future integration for tax purposes anymore thus resulting in
an income tax consideration of all temporary differences.
(4) ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
AT SEPTEMBER 30,
------------------ AT MARCH 31,
1997 1998 1999
------- ------- ------------
(UNAUDITED)
Accounts receivable trade............................. 243,151 247,248 338,364
Other accounts receivable............................. 38,024 34,924 28,711
------- ------- -------
281,175 282,172 367,075
Allowance for doubtful accounts....................... (4,490) (4,281) (10,074)
------- ------- -------
Net accounts receivable............................... 276,685 277,891 357,001
======= ======= =======
Substantially all of the receivables are from companies operating in the
automobile industry.
(5) INVENTORIES
Inventories consist of the following:
AT SEPTEMBER 30,
------------------ AT MARCH 31,
1997 1998 1999
------- ------- ------------
(UNAUDITED)
Raw material.......................................... 48,437 57,376 60,412
Work-in-process....................................... 116,488 102,411 100,340
Finished goods........................................ 20,892 22,544 21,289
Payments on account................................... 33,230 51,960 39,397
Advance payments...................................... (38,051) (32,852) (24,437)
------- ------- -------
Total................................................. 180,996 201,439 197,001
======= ======= =======
Payments on account and advance payments (received) mostly relate to molds.
The Company has no mold production, the manufacturing of the molds is
subcontracted to specialized suppliers usually receiving payments in advance.
There are usually also advance payments by the customer, not necessarily
identical to the ones to be paid to the subcontractor.
In case of probable losses on the purchase and sale of the molds provisions
for threatening losses are recorded.
F-50
212
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment consist of the following:
AT SEPTEMBER 30,
--------------------- AT MARCH 31,
1997 1998 1999
--------- --------- ------------
(UNAUDITED)
Land and buildings................................... 365,126 377,659 381,221
Machinery and equipment.............................. 689,912 751,878 790,011
Office and transportation equipment.................. 99,747 101,152 103,896
Construction in progress............................. 42,406 64,500 54,054
--------- --------- ---------
1,197,191 1,295,189 1,329,182
Less accumulated depreciation and amortization....... (708,973) (759,990) (789,784)
--------- --------- ---------
Total................................................ 488,218 535,199 539,398
========= ========= =========
Included in property, plant and equipment is equipment and buildings held
under capitalized leases. These assets have a cost basis of DEM 94,494 and DEM
94,636 and accumulated depreciation relating to these assets of DEM 32,740 and
DEM 38,769 at September 30, 1997 and 1998 respectively.
(7) BUSINESS ACQUISITIONS
Effective July 1, 1990 shares in Eurotec Systemteile GmbH, the then parent
company of PEGUFORM GmbH, were acquired by Klockner Mercator Maschinenbau GmbH,
a subsidiary of Klockner-Werke AG. This transaction was accounted for as a
purchase and the purchase price was allocated applying "push-down" accounting to
the estimated fair value of assets and liabilities assumed, resulting in a
goodwill of approximately DEM 127.5 million.
Effective January 2, 1992 the Company acquired 51% of the shares of
PEGUFORM Bohemia a.s. This acquisition was accounted for as a purchase resulting
in a goodwill of approximately DEM 2.7 million. The goodwill is amortized over
15 years. At October 8, 1993 additional 25% of the shares in this company were
acquired increasing the goodwill already by DEM 1.0 million.
Effective January 26/February 12, 1998 the Company acquired the remaining
24% of outstanding shares in PEGUFORM Bohemia for a purchase price of DEM 4.67
million. This acquisition was accounted for as a purchase with the purchase
price allocated to the relating minority interest in equity. The net amount paid
included an adjustment for costs absorbed by the majority shareholder. As a
result of this adjustment, DEM 1.9 million was recorded in revenue in the year
ending September 30, 1998.
With a contract signed on October 2/October 14, 1998 the Company and Grupo
Hermez, S.A. de C.V., Mexico City/Mexico, established PEGUFORM Hella Mexico,
S.A. de C.V., Puebla/ Mexico, as a joint company. The Company holds 70% of the
shares, Grupo Hermez 30%.
The consolidated earnings include the operations of PEGUFORM Hella Mexico
from October 14, 1997, the operations of PEGUFORM Bohemia were already fully
consolidated in the prior two years.
F-51
213
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Had the acquisition of the minority interest in PEGUFORM Bohemia occurred
before October 1, 1996 the pro forma effect on prior year financial statements
would have been the following increase of net profits resulting from a decrease
of minority interests:
YEAR ENDED
SEPTEMBER 30,
--------------
1997 1998
----- -----
Minority interests portion of the results of PEGUFORM
Bohemia................................................... 618 338
=== ===
(8) ACCOUNTS PAYABLE
Accounts payable consist of the following:
AT SEPTEMBER 30,
------------------ AT MARCH 31,
1997 1998 1999
------- ------- ------------
(UNAUDITED)
Accounts payable trade................................ 225,395 259,672 264,765
Liabilities to affiliated companies................... 1,058 491 0
------- ------- -------
Total................................................. 226,453 260,163 264,765
======= ======= =======
(9) DEBT
Debt consist of the following:
AT SEPTEMBER 30,
INTEREST RATES ----------------- AT MARCH 31,
% MATURITIES 1997 1998 1999
-------------- ---------- ------- ------- ------------
(UNAUDITED)
Liabilities to financial institutions............ 3.25 - 15.5 1999 36,415 44,490 51,461
Liabilities to affiliated companies.............. variable 1999 264,972 308,440 391,575
Liabilities from capital leases.................. 4.16 - 11.76 1999 8,290 7,435 11,114
------- ------- -------
Short-term financial liabilities................. 309,677 360,365 454,150
------- ------- -------
Liabilities to financial institutions............ 3.25 - 8.24 2000-2003 49,848 53,165 42,558
Liabilities from capital leases.................. 4.16 - 11.76 2000-2011 52,045 44,690 53,227
------- ------- -------
Long-term financial liabilities.................. 101,893 97,855 95,785
------- ------- -------
Total debt................................... 411,570 458,220 549,935
======= ======= =======
The liabilities to financial institutions include various loans received
from banks in different countries. In 1997/98 PEGUFORM GmbH has received two new
loans by Sudwest LB, Stuttgart, Germany, in the aggregate amount of DEM 21,535.
These loans are to be repaid in four installments on December 30, starting
December 30, 1998. In a separate agreement with Klockner Mercator Maschinenbau
GmbH PEGUFORM receives the difference between the average monthly internal group
interest rate and the loan interest rate.
F-52
214
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Group has entered into various capital lease agreements for property,
plant and equipment. The leases require monthly, quarterly and half-yearly
payments of principal and interest. The Group usually intends to exercise the
options to buy the respective assets.
Bonds and liabilities to financial institutions are partially secured by a
comfort letter from Klockner-Werke AG as the ultimate parent of PEGUFORM GmbH.
Klockner-Werke AG has given to the banks the commitment not to cancel the
"profit distribution agreement" (see note 3: "related party transactions")
before the loans given to PEGUFORM GmbH have been repaid.
The Company had available unused unsecured short-term lines of credit of
DEM 59,715 at September 30, 1998 and unsecured long-term lines of credit of DEM
26,589 at September 30, 1998.
Aggregate amounts of debt maturing during the next five years and
thereafter as of September 30, 1998 are as follows:
DEM
-------
1999........................................................ 360,365
2000........................................................ 21,567
2001........................................................ 23,169
2002........................................................ 17,278
2003........................................................ 10,219
Remaining years............................................. 25,622
-------
Total....................................................... 458,220
=======
(10) RELATED PARTY TRANSACTIONS
The transactions of the Company with its parent company Klockner Mercator
Maschinenbau GmbH include mostly financing and the distribution/absorption of
profit/losses. Additionally there were minor purchases of machinery from sister
companies. The Company believes that its operating results on a stand-alone
basis would not have been different from the results of operations as presented
in these financial statements.
The financing of the Company is done exclusively via short-term credits
without fixed repayment dates.
According to the profit distribution agreement (see note 3: related party
transactions) final net profits (before taxes) are to be distributed to the
parent company while net losses are to be absorbed.
In 1997/98 the parent company granted operating subsidies to the Company.
The current accounts with the parent company are to be charged with
variable interest rates.
F-53
215
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a summary of transactions with the parent company at
September 30, 1997 and 1998:
AT SEPTEMBER 30,
---------------- AT MARCH 31,
1997 1998 1999
------ ------ ------------
(UNAUDITED)
Revenue received for:
Operating subsidies granted by the parent company..... 0 13,335 0
------ ------ -----
0 13,335 0
====== ====== =====
Expenses charged for:
Interest on current intercompany accounts............. 9,962 14,320 6,488
Tax charge by parent company.......................... 4,252 0 0
------ ------ -----
14,214 14,320 6,488
====== ====== =====
Based on the control and profit distribution agreement with the parent
company, in the year ended September 30, 1997 the company distributed its net
income for the year in the amount of DEM 4,549. In the year ended September 30,
1998 the parent company absorbed the company's loss of DEM 14,837.
The result of the related party transactions is the following net payable.
The amounts are shown on a gross basis in accounts receivable and in accounts
payable and short-term debt:
AT SEPTEMBER 30,
------------------ AT MARCH 31,
1997 1998 1999
------- ------- ---------------
(UNAUDITED)
Amounts Receivable.................................. 0 0 0
Amounts Payable..................................... 266,030 308,931 389,544
------- ------- -------
Net Amounts Payable................................. 266,030 308,931 389,544
======= ======= =======
(11) COMMITMENTS AND CONTINGENCIES
Operating Leases -- The Company leases certain of its manufacturing
facilities, sales offices, transportation and other equipment under operating
leases. Total rental expense was approximately DEM 14,946 and DEM 19,994 for the
years ended September 30, 1997 and 1998 respectively.
F-54
216
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease commitments under non-cancellable operating leases
with initial or remaining terms in excess of one year are as follows:
DEM
------
1999........................................................ 6,726
2000........................................................ 5,738
2001........................................................ 4,346
2002........................................................ 3,243
2003........................................................ 1,382
Remaining years............................................. 785
------
Total....................................................... 22,220
======
Other Commitments and contingencies -- The Company has in 1995 entered into
an agreement with a company regarding the use of EDP hardware components and
software as well as technical support. This agreement is not cancellable and
runs until September 30, 2003. Total expense was DEM 16,240 and DEM 22,841 for
the years ended September 30, 1997 and 1998 respectively.
Future EDP cost commitments under this non-cancellable agreement are as
follows:
DEM
------
1999........................................................ 15,683
2000........................................................ 13,209
2001........................................................ 11,972
2002........................................................ 11,512
2003........................................................ 11,117
Remaining years............................................. 0
------
Total....................................................... 63,493
======
(12) PENSION PLANS
PEGUFORM GmbH maintains one defined benefit pension plan covering all its
full-time hourly and salaried employees plus some individual defined benefit
pension agreements for managers and members of the board. The benefits payable
under the plans are generally determined based on the employees' length of
service and earnings. There are no external fundings of these schemes.
F-55
217
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status of the defined benefit plans was as follows:
ACCUMULATED
BENEFITS
EXCEED ASSETS
AT SEPTEMBER 30,
----------------
1997 1998
------ ------
Actuarial present value of benefit obligations
Vested Benefits........................................... 33,086 37,841
Nonvested benefits........................................ 6,372 7,073
------ ------
Accumulated benefit obligation.............................. 39,458 44,914
====== ======
Projected benefit obligation................................ 40,529 45,871
Market value of plan assets................................. 0 0
------ ------
Excess of projected benefit obligation over assets.......... 40,529 45,871
Unrecognized transitional amount............................ 1,331 1,210
Unrecognized net loss....................................... 3,553 5,951
Unrecognized prior service cost............................. 0 0
------ ------
Accrued pension cost........................................ 35,645 38,710
====== ======
ACCUMULATED
BENEFITS
EXCEED ASSETS
AT SEPTEMBER 30,
----------------
1997 1998
------ ------
Amounts recognized in the balance sheet consist of
Accrued pension liability................................. 39,458 44,913
Intangible asset.......................................... 1,331 1,210
Unrecognized prior service cost........................... 2,482 4,993
------ ------
Net amount recognized....................................... 35,645 38,710
====== ======
The date used to measure plan liabilities is as of September 30 each year.
The weighted-average assumed discount rate was 6.0% for the years ended
September 30, 1997 and 1998 respectively. The expected rate of increase in
compensation levels was 2.0% and 1.6% respectively for the years ended September
30, 1997 and 1998 respectively. The same rates as for the compensation were used
for inflation and increase in social security contribution ceiling in the
actuarial calculation.
F-56
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PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic pension expense for the years ended September 30, 1997 and
1998 included the following components:
AT
SEPTEMBER 30,
--------------
1997 1998
----- -----
Service cost benefits during the year....................... 1,692 1,910
Interest cost on projected benefit obligation............... 2,183 2,393
Actual return on plan assets................................ 0 0
Net amortization and deferral............................... 121 121
----- -----
Net periodic pension expense................................ 3,996 4,424
===== =====
(13) INCOME TAXES
Amounts in the financial statements related to income taxes are for the
operations of the consolidated subsidiaries as listed under note 3 and for
PEGUFORM GmbH as charged by its parent company.
As explained under note 3 deferred taxes for PEGUFORM GmbH are recorded
considering a full taxation of future profits and losses although this company
is currently not subject to German corporate and trade income taxes.
The provision for income tax expense for the period ended:
AT
SEPTEMBER 30,
--------------
1997 1998
------ -----
Currently Payable
Germany................................................... 4,252 38
Foreign................................................... 1,367 4,728
------ -----
Total....................................................... 5,619 4,766
------ -----
Deferred
Germany................................................... 6,480 (624)
Foreign................................................... (6,070) 1,918
------ -----
Total....................................................... 410 1,294
------ -----
Total....................................................... 6,029 6,060
====== =====
German corporate tax law applies a split-rate computation with regard to
the taxation of the income of a corporation and its shareholders. Current German
taxes are recorded as being charged by the parent company based on the tax law
in effect for the respective fiscal period. Corporate income is initially
subject to a federal corporation tax of 45% plus a solidarity surcharge of 7.5%
until 1997 and 5.5% effective January 1, 1998 on the federal corporate tax
payable. Including the impact of the surcharge, the federal corporate tax rate
amounted to 48.375% until 1997 and to 47.475% effective January 1, 1998. Upon
distribution of retained earnings to stockholders, the corporate income tax rate
F-57
219
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
on the earnings is adjusted to 30%, plus the solidarity surcharge on the
distribution corporate tax by means of a refund for taxes previously paid. Upon
distribution of retained earnings in the form of a dividend, stockholders who
are taxpayers in Germany are entitled to a tax credit in the amount of federal
income taxes previously paid by the corporation.
Current taxes are calculated on the basis of the respective tax rates in
effect for the periods presented. This may presumably also apply to the tax
charges by the parent company of PEGUFORM GmbH for the German operations. The
calculation of the deferred taxes is based on future tax rates. As a result, the
deferred taxes for PEGUFORM GmbH are calculated with an effective corporate
income tax rate of 48.375% as of September 30, 1997 and 47.475% as of September
30, 1998 plus the after federal tax benefit rate for trade tax of 7.8% and 7.9%
as of September 30, 1997 and 1998 respectively.
A reconciliation of income taxes determined using the German corporate tax
rate of 48.375% plus the after federal tax benefit rate for trade taxes of 7.8%
for a combined statutory rate of 55.4% for the year ended September 30, 1997 and
of 47.475% plus the after federal tax benefit rate for trade taxes of 7.9% for a
combined statutory rate of 56.2% for the year ended September 30, 1998 is as
follows:
YEAR ENDED
SEPTEMBER 30,
---------------
1997 1998
------ ------
Expected provision (benefit) for income taxes............... 8,392 (5,613)
Non-deductible items........................................ 2,566 1,092
Tax free income............................................. (1,363) (1,631)
Write off of goodwill not tax-deductible.................... 5,237 5,159
Badwill credited to income not taxable...................... 0 (1,058)
Consolidation items not taxable............................. (907) (71)
Foreign tax rate differential............................... (6,893) (3,409)
Changes in valuation allowances on deferred tax assets...... (990) 2,090
Parent company's tax allocation differential................ 2,078 10,970
Investment and export tax credits (Spain)................... (1,966) (1,891)
Other....................................................... (125) 422
------ ------
Actual income tax expense................................... 6,029 6,060
====== ======
The amounts shown under Parent company's tax allocation differential relate
to the tax charges by Klockner Werke AG. There were no credits given for the
losses the year ending September 1998, while the charge for the year ending
September 1997 was not based on the taxable income of PEGUFORM GmbH.
The amount of the Group's deferred tax valuation allowances is based upon
management's belief that it is more likely than not that not all of the deferred
tax assets will be realized. In future periods, depending upon the Group's
financial results, management's estimate of the amount of the deferred tax
assets considered realizable may change, and hence the valuation allowance may
increase or decrease.
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220
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax-effected temporary differences and carryforwards which comprised
deferred assets and liabilities were as follows:
YEAR ENDED
SEPTEMBER 30,
------------------
1997 1998
------- -------
Deferred tax assets:
Accounts receivable....................................... 127 235
Inventories............................................... 1,557 776
Property, plant and equipment............................. 368 0
Other accrued expenses.................................... 5,191 5,596
Net operating loss carryforwards.......................... 19,207 20,923
Additional minimum pension liability...................... 1,395 2,766
Other..................................................... 0 415
------- -------
27,845 30,711
Valuation allowances................................... (17,293) (19,413)
------- -------
Total deferred tax assets.............................. 10,552 11,298
------- -------
Deferred tax liabilities:
Accounts receivable....................................... 1,179 1,890
Inventories............................................... 0 603
Property, plant and equipment (including capital
leases)................................................ 17,998 17,483
Other accrued expenses.................................... 3,915 2,845
Other..................................................... 1,319 1,229
------- -------
Total deferred tax liabilities......................... 24,411 24,050
------- -------
Net deferred tax liabilities........................... (13,859) (12,752)
======= =======
At September 30, 1998, the Group had net operating losses ("NOLs")
amounting to DEM 53,883. The NOLs relate to losses of foreign companies and are
partly limited in their use to the Group.
Management believes the net operating loss carryforwards at September 30,
1998 are only to a limited extent realizable based on forecasted earnings and
available tax planning strategies.
With regard to the additional minimum pension liability we refer to Note
12. Changes in these deferred tax assets have no impact on the provision for
income tax expenses.
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221
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net deferred income tax assets and liabilities in the consolidated balance
sheets are as follows:
YEAR ENDED
SEPTEMBER 30,
------------------
1997 1998
------- -------
Current
Deferred income tax assets................................ 6,479 5,235
Deferred income tax liabilities........................... (3,564) (3,618)
------- -------
Total....................................................... 2,915 1,617
------- -------
Non-current
Deferred income tax assets................................ 4,073 6,063
Deferred income tax liabilities........................... (20,847) (20,432)
------- -------
Total....................................................... (16,774) (14,369)
------- -------
Total....................................................... (13,859) (12,752)
======= =======
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222
VENTURE LOGO
223
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
2.1** Share Purchase and Transfer Agreement between Klockner
Mercator Maschinenbau GmbH, on the one hand, and Venture
Beteiligungs GmbH and Venture Holdings Trust, on the other
hand, dated March 8, 1999, filed as Exhibit 2.1 to the
Issuer's Annual Report on Form 10-K for the year ended
December 31, 1998 (File No. 333-34475) and incorporated
herein by reference. Schedules to the Agreement, listed on
the last two pages of the Agreement, were not filed, but
will be provided to the Commission supplementally upon
request.
2.2** Share Purchase and Transfer Agreement among Neptuno
Verwaltungs-und-Treuhand-Gesellschaft mbH, and Venture
Verwaltungs GmbH and Venture Holdings Trust, dated March 8,
1999, filed as Exhibit 2.2 to Venture's Current Report on
Form 8-K on June 11, 1999 (File No. 333-34475) and
incorporated herein by reference.
2.3** Trust Contribution Agreement, made as of the 27th day of
May, 1999, by and between Venture Holdings Trust and Venture
Holdings Company LLC, filed as Exhibit 2.3 to Venture's
Current Report on Form 8-K on June 11, 1999 (File No.
333-34475) and incorporated herein by reference.
3.1** Restated Articles of Organization of Venture Holdings
Company LLC.
3.2** Restated Articles of Incorporation of Vemco, Inc., filed as
Exhibit 3.1 to Venture's Registration Statement on Form S-4,
effective October 27, 1997 (Registration No. 333-34475), and
incorporated herein by reference.
3.3** Restated Articles of Incorporation of Venture Industries
Corporation, filed as Exhibit 3.2 to Venture's Registration
Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
3.4** Restated Articles of Incorporation of Venture Mold &
Engineering Corporation, filed as Exhibit 3.3 to Venture's
Registration Statement on Form S-4, effective October 27,
1997 (Registration No. 333-34475), and incorporated herein
by reference.
3.5** Restated Articles of Incorporation of Venture Leasing
Company, filed as Exhibit 3.4 to Venture's Registration
Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
3.6** Restated Articles of Incorporation of Vemco, Leasing, Inc.,
filed as Exhibit 3.5 to Venture's Registration Statement on
Form S-4, effective October 27, 1997 (Registration No.
333-34475), and incorporated herein by reference.
3.7** Restated Articles of Incorporation of Venture Holdings
Corporation, filed as Exhibit 3.6 to Venture's Registration
Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
3.8** Restated Articles of Incorporation of Venture Service
Company, filed as Exhibit 3.7 to Venture's Registration
Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
3.9** Articles of Organization of Experience Management LLC.
3.10** Articles of Incorporation of Venture Europe, Inc.
3.11** Articles of Incorporation of Venture EU Corporation.
3.12** Amended and Restated Operating Agreement of Venture Holdings
Company LLC.
3.13** Bylaws of Vemco, Inc., filed as Exhibit 3.9 to Venture's
Registration Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and incorporated herein by
reference.
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224
3.14** Bylaws of Venture Industries Corporation, filed as Exhibit
3.10 to Venture's Registration Statement on Form S-1,
effective February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
3.15** Bylaws of Venture Mold & Engineering Corporation, filed as
Exhibit 3.11 to Venture's Registration Statement on Form
S-1, effective February 8, 1994 (Registration No. 33-72826)
and incorporated herein by reference.
3.16** Bylaws of Venture Leasing Company, filed as Exhibit 3.12 to
Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
3.17** Bylaws of Vemco Leasing, Inc., filed as Exhibit 3.13 to
Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
3.18** Bylaws of Venture Holdings Corporation, filed as Exhibit
3.14 to Venture's Registration Statement on Form S-1,
effective February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
3.19** Bylaws of Venture Service Company, filed as Exhibit 3.15 to
Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
3.20** Operating Agreement of Experience Management LLC.
3.21** Bylaws of Venture Europe, Inc.
3.22** Bylaws of Venture EU Corporation.
4.1** Indenture, dated as of May 27, 1999, between Venture
Holdings Trust and The Huntington National Bank, as Trustee,
regarding 11% Senior Notes due 2007 (including form of
Notes).
4.1.1** First Supplemental Indenture to the Indenture filed as
Exhibit 4.1, made as of the 27th day of May, 1999, by and
among Venture Holdings Trust and The Huntington National
Bank, as Trustee.
4.2** Indenture, dated as of May 27, 1999, between Venture
Holdings Trust and The Huntington National Bank, as Trustee,
regarding 12% Senior Subordinated Notes due 2009 (including
form of Notes).
4.2.1** First Supplemental Indenture to the Indenture filed as
Exhibit 4.2, made as of the 27th day of May, 1999, by and
among Venture Holdings Trust and The Huntington National
Bank, as Trustee.
4.3** Indenture for 9 1/2% Senior Notes due 2005 (including form
of Notes) filed as Exhibit 4.1 to Venture's Registration
Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
4.3.1** First Amendment to the Indenture incorporated by reference
as Exhibit 4.3, by and among Venture Holdings Trust, Vemco,
Inc. Vemco Leasing, Inc., Venture Industries Corporation,
Venture Holdings Corporation, Venture Leasing Company,
Venture Mold & Engineering Corporation and Venture Service
Company, as Issuers, and The Huntington National Bank, as
Trustee, made as of the 27th day of May, 1999.
4.3.2** First Supplemental Indenture to the Indenture incorporated
by reference as Exhibit 4.3, by and among Venture Holdings
Trust, Vemco, Inc. Vemco Leasing, Inc., Venture Industries
Corporation, Venture Holdings Corporation, Venture Leasing
Company, Venture Mold & Engineering Corporation and Venture
Service Company, as Issuers, Venture Holdings Company LLC,
Experience Management LLC, Venture Europe, Inc. and Venture
EU Corporation, as Guarantors, and The Huntington National
Bank, as Trustee, made as of May 27, 1999.
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225
4.3.3** Second Amendment to the Indenture incorporated by reference
as Exhibit 4.3, by and among Venture Holdings Trust, Vemco,
Inc. Vemco Leasing, Inc., Venture Industries Corporation,
Venture Holdings Corporation, Venture Leasing Company,
Venture Mold & Engineering Corporation and Venture Service
Company, as Issuers, and The Huntington National Bank, as
Trustee, made as of May 27, 1999.
4.3.4** Second Supplemental Indenture to the Indenture incorporated
by reference as Exhibit 4.3, by and among Venture Holdings
Trust, Vemco, Inc. Vemco Leasing, Inc., Venture Industries
Corporation, Venture Holdings Corporation, Venture Leasing
Company, Venture Mold & Engineering Corporation and Venture
Service Company, as Issuers, Venture Holdings Company LLC,
and The Huntington National Bank, as Trustee, made as of May
27, 1999.
4.3.5** Guarantee executed by Venture Holdings Company LLC on the
27th day of May, 1999, pursuant to the terms of the
Indenture incorporated by reference as Exhibit 4.3,
including Trustee's Certificate of Authorization.
4.3.6** Guarantee executed by Experience Management LLC on the 27th
day of May, 1999, pursuant to the terms of the Indenture
incorporated by reference as Exhibit 4.3, including
Trustee's Certificate of Authorization.
4.3.7** Guarantee executed by Venture Europe, Inc. on the 27th day
of May, 1999, pursuant to the terms of the Indenture
incorporated by reference as Exhibit 4.3, including
Trustee's Certificate of Authorization.
4.3.8** Guarantee executed by Venture EU Corporation on the 27th day
of May, 1999, pursuant to the terms of the Indenture
incorporated by reference as Exhibit 4.3, including
Trustee's Certificate of Authorization.
4.4** Registrant Rights Agreement, made and entered into as of May
27, 1999, among Venture Holdings Trust, Vemco, Inc., Vemco
Leasing, Inc., Venture Industries Corporation, Venture
Holdings Corporation, Venture Leasing Company, Venture Mold
& Engineering Corporation, Venture Service Company, Venture
Europe, Inc., Venture EU Corporation, Experience Management
LLC and Venture Holdings Company LLC, as Issuers, and Banc
One Capital Markets, Inc. and Goldman Sachs & Co., as
Initial Purchasers.
5.1** Opinion of Dykema Gossett PLLC.
10.1** Credit Agreement, dated as of May 27, 1999, among Venture
Holdings Trust, the Lenders (as defined therein) and The
First National Bank of Chicago, as Administrative Agent.
10.1.1** First Amendment, dated June 4, 1999, to the Credit Agreement
filed as Exhibit 10.1.
10.2** ISDA Master Agreement, dated May 27, 1999, between Venture
Holdings Company LLC and The First National Bank of Chicago.
10.2.1** Schedules to the Agreement filed as Exhibit 10.2.
10.3** Corporate Opportunity Agreement, made and entered into on
the 27th day of May, 1999, by and between Larry J. Winget
and The Huntington National Bank, as Indenture Trustee.
10.4** Corporate Opportunity Agreement, dated February 16, 1994, by
and between Larry J. Winget and Comerica Bank, as Indenture
Trustee, filed as Exhibit 10.3 to Venture's Registration
Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
10.4.1** Agreement, dated July 9, 1997, by Larry J. Winget to be
bound by the terms of the Corporate Opportunity Agreement,
filed as Exhibit 10.3, for the benefit of the holders of the
Issuers' 91/2% Senior Notes due 2005 filed as Exhibit 10.3.1
to Venture's Registration Statement on Form S-4, effective
October 27, 1997 (Registration No. 333-34475), and
incorporated herein by reference.
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226
10.5** Service Agreement, dated as of January 1, 1992, by and
between Venture Industries Corporation, Vemco, Inc., Venture
Mold & Engineering Corporation, Venture Leasing Company,
Vemco Leasing, Inc., Deluxe Pattern Corporation, Venture
Automotive Corp., Venture Sales & Engineering Corp. and
Venture Service Company, filed as Exhibit 10.11 to Venture's
Registration Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and incorporated herein by
reference.
10.6** Lease, dated as of November 1, 1990, by and among Venture
Industries Corporation, Venture Technical Development
Company, Venture Mold & Engineering Corporation, Vemco,
Inc., Deluxe Pattern Company, Venture Automotive Corp.,
Larry J. Winget and Alicia Winget (Acropolis Resort), filed
as Exhibit 10.14 to Venture's Registration Statement on Form
S-1, effective February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
10.7** Real Estate Lease Agreement, dated December 7, 1988, by and
between Harper Properties of Clinton Township Limited
Partnership and Venture Industries Corporation (Harper
Lease), filed as Exhibit 10.15 to Venture's Registration
Statement on Form S-1, effective February 8, 1994
(Registration No. 33-72826), and incorporated herein by
reference.
10.7.1** First amendment to Real Estate Lease Agreement, dated
December 30, 1993, by and between Harper Properties of
Clinton Township Limited Partnership and Venture Industries
Corporation (Harper Lease), filed as Exhibit 10.15.1 to
Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.8** Machinery and Equipment Lease Agreement, dated as of
December 7, 1988, by and between Realven Corporation and
Venture Industries Corporation (Realven Lease), filed as
Exhibit 10.16 to Venture's Registration Statement on Form
S-1, effective February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
10.8.1** First Amendment to Machinery and Equipment Lease Agreement,
dated December 30, 1993, by and between Realven Corporation
and Venture Industries Corporation (Realven Lease), filed as
Exhibit 10.16.1 to Venture's Registration Statement on Form
S-1, effective February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
10.9** Real Estate Lease Agreement, dated as of January 27, 1989,
by and between Venture Real Estate, Inc. and Venture Mold &
Engineering Corporation (Commerce Road facility), filed as
Exhibit 10.17 to Venture's Registration Statement on Form
S-1, effective February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
10.10** Real Estate Lease Agreement, dated as of August 1, 1992, by
and between Venture Real Estate, Inc. and Venture Industries
Corporation (17400 Malyn), filed as Exhibit 10.18 to
Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.11** Real Estate Lease Agreement, dated as of August 1, 1992, by
and between Venture Real Estate, Inc. and Venture Industries
Corporation (17350 Malyn), filed as Exhibit 10.19 to
Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.12** Farm and Country Real Estate Company and Vemco, Inc. Real
Estate Availability and Usage Agreement, dated April 24,
1992, filed as Exhibit 10.20 to Venture's Registration
Statement on Form S-1, effective February 8, 1994
(Registration No. 33-72826), and incorporated herein by
reference.
10.13** Sales Representation Agreement by and between Vemco, Inc.
and Venture Sales & Engineering Corporation, filed as
Exhibit 10.21 to Venture's Registration Statement on Form
S-1, effective February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
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227
10.13.1** Sales Representation Agreement by and between Venture
Industries Corporation and Venture Sales & Engineering
Corporation, filed as Exhibit 10.21.1 to Venture's
Registration Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and incorporated herein by
reference.
10.14** Manufacturing Agreement by and between Venture Automotive
Corp. and Vemco, Inc., filed as Exhibit 10.22 to Venture's
Registration Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and incorporated herein by
reference.
10.15** Machinery Usage Agreements between Larry J. Winget Living
Trust and Venture Industries Corporation, filed as Exhibit
10.23 to Venture's Registration Statement on Form S-1,
effective February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.15.1** Machinery Usage Agreement between Larry J. Winget Living
Trust and Vemco, Inc., filed as Exhibit 10.23.1 to Venture's
Registration Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and incorporated herein by
reference.
10.16** Machinery Usage Agreement between Deluxe Pattern Corporation
and Venture Mold & Engineering, filed as Exhibit 10.24 to
Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.17** Form of Machinery and Equipment Lease Agreement between
Venture Industries Corporation and Nova Industries, Inc.,
filed as Exhibit 10.25 to Venture's Registration Statement
on Form S-1, effective February 8, 1994 (Registration No.
33-72826), and incorporated herein by reference.
10.18** Form of Machinery and Equipment Lease Agreement between
Venture Industries Corporation and Nova Industries, Inc.,
filed as Exhibit 10.26 to Venture's Registration Statement
on Form S-1, effective February 8, 1994 (Registration No.
33-72826), and incorporated herein by reference.
10.19** Indemnification Agreement between the Company and Larry J.
Winget.
10.20** Indemnification Agreement between the Company and Michael G.
Torakis.
10.21** Indemnification Agreement between the Company and A. James
Schutz.
10.22** Insurance Policies issued by Pompo Insurance & Indemnity
Company Ltd. to the Registrants and affiliated companies,
filed as Exhibit 10.32 to Venture's Registration Statement
on Form S-1, effective February 8, 1994 (Registration No.
33-72826), and incorporated herein by reference.
10.23** Real Estate Usage Agreement between Venture Real Estate
Acquisition Company and Venture Industries Corporation,
dated February 15, 1995, filed as Exhibit 10.23 to Venture's
Registration Statement on Form S-4, effective October 27,
1997 (Registration No. 333-34475), and incorporated herein
by reference.
10.24** Machinery Usage Agreement between Venture Equipment
Acquisition Company and Venture Industries Corporation,
dated February 15, 1995, filed as Exhibit 10.24 to Venture's
Registration Statement on Form S-4, effective October 27,
1997 (Registration No. 333-34475), and incorporated herein
by reference.
10.25** Venture Industries Group Participation Agreement between
Venture Industries Corporation and Venture Asia Pacific Pty
Ltd. filed as Exhibit 10.29 to Venture's Registration
Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
10.26** License Agreement as to Proprietary Technologies and
Processes, dated July 2, 1997, between Larry J. Winget and
Venture Industries Corporation, Vemco, Inc., Venture Mold &
Engineering Corporation, Venture Industries Canada Ltd.,
Vemco Leasing, Inc., Venture Leasing Company, Venture
Service Company, Venture Holdings Corporation and Venture
Holdings Trust filed as Exhibit 10.30 to Venture's
Registration Statement on Form S-4, effective October 27,
1997 (Registration No. 333-34475), and incorporated herein
by reference.
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228
10.27** License Agreement as to Patents, dated July 2, 1997, between Larry
J. Winget and Venture Industries Corporation, Vemco, Inc., Venture
Mold & Engineering Corporation, Venture Industries Canada Ltd.,
Vemco Leasing, Inc., Venture Leasing Company, Venture Service
Company, Venture Holdings Corporation and Venture Holdings Trust
filed as Exhibit 10.31 to Venture's Registration Statement on Form
S-4, effective October 27, 1997 (Registration No. 333-34475), and
incorporated herein by reference.
10.28** Purchase Agreement, dated May 25, 1999, relating to $125,000,000
11% Senior Notes due 2007 and $125,000,000 12% Senior Subordinated
Notes due 2009, filed as Exhibit 10.4 to Venture's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1999 (File No.
333-34475), and incorporated herein by reference.
12.1** Statement Regarding Computation of Ratio of Earnings to Fixed
Charges.
21.1** Subsidiaries of the Registrants.
23.1* Consent of Deloitte & Touche LLP.
23.2* Consent of BDO International GmbH Wirtschaftsprufungsgesellschaft.
23.3** Consent of Dykema Gossett PLLC (contained in their opinion filed as
Exhibit 5.1).
24.1** Power of Attorney (included on signature page to this Registration
Statement).
25.1** Statement of Eligibility of Trustee related to 11% Senior Notes due
2007.
25.2** Statement of Eligibility of Trustee related to 12% Senior
Subordinated Notes due 2009.
99.1** Form of Letter of Transmittal related to exchange for the Senior
Exchange Notes.
99.2** Form of Notice of Guaranteed Delivery related to exchange for the
Senior Exchange Notes.
99.3** Form of Letter of Transmittal related to exchange for the Senior
Subordinated Exchange Notes.
99.4** Form of Notice of Guaranteed Delivery related to exchange for the
Senior Subordinated Exchange Notes.
- -------------------------
* Filed herewith.
** Previously filed.
(b) Financial Statement Schedules
Valuation and Qualifying Accounts.
II-6
229
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Detroit, State of Michigan, on October 20, 1999.
VENTURE HOLDINGS COMPANY LLC, VEMCO, INC.,
VENTURE INDUSTRIES CORPORATION, VENTURE
MOLD & ENGINEERING CORPORATION, VENTURE
LEASING COMPANY, VEMCO LEASING,
INC.,VENTURE SERVICE COMPANY, VENTURE
HOLDINGS CORPORATION, EXPERIENCE
MANAGEMENT LLC, VENTURE EUROPE, INC.,
VENTURE EU CORPORATION
By: /s/ JAMES E. BUTLER, JR.
---------------------------------------
James E. Butler, Jr.
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons in
the capacities indicated on October 20, 1999.
SIGNATURES TITLE
---------- -----
* Principal Executive Officer and Special
- --------------------------------------------------- Advisor to Venture, and director of each
Larry J. Winget guarantor
* Principal Executive Officer and director of
- --------------------------------------------------- each guarantor
Michael G. Torakis
Director of each guarantor
- ---------------------------------------------------
A. James Schutz
/s/ JAMES E. BUTLER, JR. Principal Financial Officer and Principal
- --------------------------------------------------- Accounting Officer of each registrant and
James E. Butler, Jr. director of Venture Holdings Corporation
* By James E. Butler, Jr.
Attorney-in-fact
II-7
230
VENTURE HOLDINGS TRUST
VALUATION AND QUALIFYING ACCOUNTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(THOUSANDS OF DOLLARS)
COLUMN A COLUMN B COLUMN C ADDITIONS COLUMN D COLUMN E
-------- ---------- ---------- ---------- ---------- ----------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS END OF
ALLOWANCE FOR DOUBTFUL ACCOUNTS OF PERIOD EXPENSES DESCRIBED DESCRIBED PERIOD
------------------------------- ---------- ---------- ---------- ---------- ----------
For the six months ended June 30,
1999............................... $4,518 $1,642 $10,074 $(1,564) $14,670
For the year ended December 31,
1998............................... 3,572 3,226 0 (2,280) 4,518
For the year ended December 31,
1997............................... 2,781 1,635 0 (844) 3,572
For the year ended December 31,
1996............................... 1,679 3,175 0 (2,073) 2,781
II-8
231
INDEX TO EXHIBITS
2.1** Share Purchase and Transfer Agreement between Klockner
Mercator Maschinenbau GmbH, on the one hand, and Venture
Beteiligungs GmbH and Venture Holdings Trust, on the other
hand, dated March 8, 1999, filed as Exhibit 2.1 to the
Issuer's Annual Report on Form 10-K for the year ended
December 31, 1998 (File No. 333-34475) and incorporated
herein by reference. Schedules to the Agreement, listed on
the last two pages of the Agreement, were not filed, but
will be provided to the Commission supplementally upon
request.
2.2** Share Purchase and Transfer Agreement among Neptuno
Verwaltungs-und-Treuhand-Gesellschaft mbH, and Venture
Verwaltungs GmbH and Venture Holdings Trust, dated March 8,
1999, filed as Exhibit 2.2 to Venture's Current Report on
Form 8-K on June 11, 1999 (File No. 333-34475) and
incorporated herein by reference.
2.3** Trust Contribution Agreement, made as of the 27th day of
May, 1999, by and between Venture Holdings Trust and Venture
Holdings Company LLC, filed as Exhibit 2.3 to Venture's
Current Report on Form 8-K on June 11, 1999 (File No.
333-34475) and incorporated herein by reference.
3.1** Restated Articles of Organization of Venture Holdings
Company LLC.
3.2** Restated Articles of Incorporation of Vemco, Inc., filed as
Exhibit 3.1 to Venture's Registration Statement on Form S-4,
effective October 27, 1997 (Registration No. 333-34475), and
incorporated herein by reference.
3.3** Restated Articles of Incorporation of Venture Industries
Corporation, filed as Exhibit 3.2 to Venture's Registration
Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
3.4** Restated Articles of Incorporation of Venture Mold &
Engineering Corporation, filed as Exhibit 3.3 to Venture's
Registration Statement on Form S-4, effective October 27,
1997 (Registration No. 333-34475), and incorporated herein
by reference.
3.5** Restated Articles of Incorporation of Venture Leasing
Company, filed as Exhibit 3.4 to Venture's Registration
Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
3.6** Restated Articles of Incorporation of Vemco, Leasing, Inc.,
filed as Exhibit 3.5 to Venture's Registration Statement on
Form S-4, effective October 27, 1997 (Registration No.
333-34475), and incorporated herein by reference.
3.7** Restated Articles of Incorporation of Venture Holdings
Corporation, filed as Exhibit 3.6 to Venture's Registration
Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
3.8** Restated Articles of Incorporation of Venture Service
Company, filed as Exhibit 3.7 to Venture's Registration
Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
3.9** Articles of Organization of Experience Management LLC.
3.10** Articles of Incorporation of Venture Europe, Inc.
3.11** Articles of Incorporation of Venture EU Corporation.
3.12** Amended and Restated Operating Agreement of Venture Holdings
Company LLC.
3.13** Bylaws of Vemco, Inc., filed as Exhibit 3.9 to Venture's
Registration Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and incorporated herein by
reference.
3.14** Bylaws of Venture Industries Corporation, filed as Exhibit
3.10 to Venture's Registration Statement on Form S-1,
effective February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
232
3.15** Bylaws of Venture Mold & Engineering Corporation, filed as
Exhibit 3.11 to Venture's Registration Statement on Form
S-1, effective February 8, 1994 (Registration No. 33-72826)
and incorporated herein by reference.
3.16** Bylaws of Venture Leasing Company, filed as Exhibit 3.12 to
Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
3.17** Bylaws of Vemco Leasing, Inc., filed as Exhibit 3.13 to
Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
3.18** Bylaws of Venture Holdings Corporation, filed as Exhibit
3.14 to Venture's Registration Statement on Form S-1,
effective February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
3.19** Bylaws of Venture Service Company, filed as Exhibit 3.15 to
Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
3.20** Operating Agreement of Experience Management LLC.
3.21** Bylaws of Venture Europe, Inc.
3.22** Bylaws of Venture EU Corporation.
4.1** Indenture, dated as of May 27, 1999, between Venture
Holdings Trust and The Huntington National Bank, as Trustee,
regarding 11% Senior Notes due 2007 (including form of
Notes).
4.1.1** First Supplemental Indenture to the Indenture filed as
Exhibit 4.1, made as of the 27th day of May, 1999, by and
among Venture Holdings Trust and The Huntington National
Bank, as Trustee.
4.2** Indenture, dated as of May 27, 1999, between Venture
Holdings Trust and The Huntington National Bank, as Trustee,
regarding 12% Senior Subordinated Notes due 2009 (including
form of Notes).
4.2.1** First Supplemental Indenture to the Indenture filed as
Exhibit 4.2, made as of the 27th day of May, 1999, by and
among Venture Holdings Trust and The Huntington National
Bank, as Trustee.
4.3** Indenture for 9 1/2% Senior Notes due 2005 (including form
of Notes) filed as Exhibit 4.1 to Venture's Registration
Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
4.3.1** First Amendment to the Indenture incorporated by reference
as Exhibit 4.3, by and among Venture Holdings Trust, Vemco,
Inc. Vemco Leasing, Inc., Venture Industries Corporation,
Venture Holdings Corporation, Venture Leasing Company,
Venture Mold & Engineering Corporation and Venture Service
Company, as Issuers, and The Huntington National Bank, as
Trustee, made as of the 27th day of May, 1999.
4.3.2** First Supplemental Indenture to the Indenture incorporated
by reference as Exhibit 4.3, by and among Venture Holdings
Trust, Vemco, Inc. Vemco Leasing, Inc., Venture Industries
Corporation, Venture Holdings Corporation, Venture Leasing
Company, Venture Mold & Engineering Corporation and Venture
Service Company, as Issuers, Venture Holdings Company LLC,
Experience Management LLC, Venture Europe, Inc. and Venture
EU Corporation, as Guarantors, and The Huntington National
Bank, as Trustee, made as of May 27, 1999.
4.3.3** Second Amendment to the Indenture incorporated by reference
as Exhibit 4.3, by and among Venture Holdings Trust, Vemco,
Inc. Vemco Leasing, Inc., Venture Industries Corporation,
Venture Holdings Corporation, Venture Leasing Company,
Venture Mold & Engineering Corporation and Venture Service
Company, as Issuers, and The Huntington National Bank, as
Trustee, made as of May 27, 1999.
233
4.3.4** Second Supplemental Indenture to the Indenture incorporated
by reference as Exhibit 4.3, by and among Venture Holdings
Trust, Vemco, Inc. Vemco Leasing, Inc., Venture Industries
Corporation, Venture Holdings Corporation, Venture Leasing
Company, Venture Mold & Engineering Corporation and Venture
Service Company, as Issuers, Venture Holdings Company LLC,
and The Huntington National Bank, as Trustee, made as of May
27, 1999.
4.3.5** Guarantee executed by Venture Holdings Company LLC on the
27th day of May, 1999, pursuant to the terms of the
Indenture incorporated by reference as Exhibit 4.3,
including Trustee's Certificate of Authorization.
4.3.6** Guarantee executed by Experience Management LLC on the 27th
day of May, 1999, pursuant to the terms of the Indenture
incorporated by reference as Exhibit 4.3, including
Trustee's Certificate of Authorization.
4.3.7** Guarantee executed by Venture Europe, Inc. on the 27th day
of May, 1999, pursuant to the terms of the Indenture
incorporated by reference as Exhibit 4.3, including
Trustee's Certificate of Authorization.
4.3.8** Guarantee executed by Venture EU Corporation on the 27th day
of May, 1999, pursuant to the terms of the Indenture
incorporated by reference as Exhibit 4.3, including
Trustee's Certificate of Authorization.
4.4** Registrant Rights Agreement, made and entered into as of May
27, 1999, among Venture Holdings Trust, Vemco, Inc., Vemco
Leasing, Inc., Venture Industries Corporation, Venture
Holdings Corporation, Venture Leasing Company, Venture Mold
& Engineering Corporation, Venture Service Company, Venture
Europe, Inc., Venture EU Corporation, Experience Management
LLC and Venture Holdings Company LLC, as Issuers, and Banc
One Capital Markets, Inc. and Goldman Sachs & Co., as
Initial Purchasers.
5.1** Opinion of Dykema Gossett PLLC.
10.1** Credit Agreement, dated as of May 27, 1999, among Venture
Holdings Trust, the Lenders (as defined therein) and The
First National Bank of Chicago, as Administrative Agent.
10.1.1** First Amendment, dated June 4, 1999, to the Credit Agreement
filed as Exhibit 10.1.
10.2** ISDA Master Agreement, dated May 27, 1999, between Venture
Holdings Company LLC and The First National Bank of Chicago.
10.2.1** Schedules to the Agreement filed as Exhibit 10.2.
10.3** Corporate Opportunity Agreement, made and entered into on
the 27th day of May, 1999, by and between Larry J. Winget
and The Huntington National Bank, as Indenture Trustee.
10.4** Corporate Opportunity Agreement, dated February 16, 1994, by
and between Larry J. Winget and Comerica Bank, as Indenture
Trustee, filed as Exhibit 10.3 to Venture's Registration
Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
10.4.1** Agreement, dated July 9, 1997, by Larry J. Winget to be
bound by the terms of the Corporate Opportunity Agreement,
filed as Exhibit 10.3, for the benefit of the holders of the
Issuers' 91/2% Senior Notes due 2005 filed as Exhibit 10.3.1
to Venture's Registration Statement on Form S-4, effective
October 27, 1997 (Registration No. 333-34475), and
incorporated herein by reference.
10.5** Service Agreement, dated as of January 1, 1992, by and
between Venture Industries Corporation, Vemco, Inc., Venture
Mold & Engineering Corporation, Venture Leasing Company,
Vemco Leasing, Inc., Deluxe Pattern Corporation, Venture
Automotive Corp., Venture Sales & Engineering Corp. and
Venture Service Company, filed as Exhibit 10.11 to Venture's
Registration Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and incorporated herein by
reference.
234
10.6** Lease, dated as of November 1, 1990, by and among Venture
Industries Corporation, Venture Technical Development
Company, Venture Mold & Engineering Corporation, Vemco,
Inc., Deluxe Pattern Company, Venture Automotive Corp.,
Larry J. Winget and Alicia Winget (Acropolis Resort), filed
as Exhibit 10.14 to Venture's Registration Statement on Form
S-1, effective February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
10.7** Real Estate Lease Agreement, dated December 7, 1988, by and
between Harper Properties of Clinton Township Limited
Partnership and Venture Industries Corporation (Harper
Lease), filed as Exhibit 10.15 to Venture's Registration
Statement on Form S-1, effective February 8, 1994
(Registration No. 33-72826), and incorporated herein by
reference.
10.7.1** First amendment to Real Estate Lease Agreement, dated
December 30, 1993, by and between Harper Properties of
Clinton Township Limited Partnership and Venture Industries
Corporation (Harper Lease), filed as Exhibit 10.15.1 to
Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.8** Machinery and Equipment Lease Agreement, dated as of
December 7, 1988, by and between Realven Corporation and
Venture Industries Corporation (Realven Lease), filed as
Exhibit 10.16 to Venture's Registration Statement on Form
S-1, effective February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
10.8.1** First Amendment to Machinery and Equipment Lease Agreement,
dated December 30, 1993, by and between Realven Corporation
and Venture Industries Corporation (Realven Lease), filed as
Exhibit 10.16.1 to Venture's Registration Statement on Form
S-1, effective February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
10.9** Real Estate Lease Agreement, dated as of January 27, 1989,
by and between Venture Real Estate, Inc. and Venture Mold &
Engineering Corporation (Commerce Road facility), filed as
Exhibit 10.17 to Venture's Registration Statement on Form
S-1, effective February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
10.10** Real Estate Lease Agreement, dated as of August 1, 1992, by
and between Venture Real Estate, Inc. and Venture Industries
Corporation (17400 Malyn), filed as Exhibit 10.18 to
Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.11** Real Estate Lease Agreement, dated as of August 1, 1992, by
and between Venture Real Estate, Inc. and Venture Industries
Corporation (17350 Malyn), filed as Exhibit 10.19 to
Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.12** Farm and Country Real Estate Company and Vemco, Inc. Real
Estate Availability and Usage Agreement, dated April 24,
1992, filed as Exhibit 10.20 to Venture's Registration
Statement on Form S-1, effective February 8, 1994
(Registration No. 33-72826), and incorporated herein by
reference.
10.13** Sales Representation Agreement by and between Vemco, Inc.
and Venture Sales & Engineering Corporation, filed as
Exhibit 10.21 to Venture's Registration Statement on Form
S-1, effective February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
10.13.1** Sales Representation Agreement by and between Venture
Industries Corporation and Venture Sales & Engineering
Corporation, filed as Exhibit 10.21.1 to Venture's
Registration Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and incorporated herein by
reference.
10.14** Manufacturing Agreement by and between Venture Automotive
Corp. and Vemco, Inc., filed as Exhibit 10.22 to Venture's
Registration Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and incorporated herein by
reference.
235
10.15** Machinery Usage Agreements between Larry J. Winget Living
Trust and Venture Industries Corporation, filed as Exhibit
10.23 to Venture's Registration Statement on Form S-1,
effective February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.15.1** Machinery Usage Agreement between Larry J. Winget Living
Trust and Vemco, Inc., filed as Exhibit 10.23.1 to Venture's
Registration Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and incorporated herein by
reference.
10.16** Machinery Usage Agreement between Deluxe Pattern Corporation
and Venture Mold & Engineering, filed as Exhibit 10.24 to
Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.17** Form of Machinery and Equipment Lease Agreement between
Venture Industries Corporation and Nova Industries, Inc.,
filed as Exhibit 10.25 to Venture's Registration Statement
on Form S-1, effective February 8, 1994 (Registration No.
33-72826), and incorporated herein by reference.
10.18** Form of Machinery and Equipment Lease Agreement between
Venture Industries Corporation and Nova Industries, Inc.,
filed as Exhibit 10.26 to Venture's Registration Statement
on Form S-1, effective February 8, 1994 (Registration No.
33-72826), and incorporated herein by reference.
10.19** Indemnification Agreement between the Company and Larry J.
Winget.
10.20** Indemnification Agreement between the Company and Michael G.
Torakis.
10.21** Indemnification Agreement between the Company and A. James
Schutz.
10.22** Insurance Policies issued by Pompo Insurance & Indemnity
Company Ltd. to the Registrants and affiliated companies,
filed as Exhibit 10.32 to Venture's Registration Statement
on Form S-1, effective February 8, 1994 (Registration No.
33-72826), and incorporated herein by reference.
10.23** Real Estate Usage Agreement between Venture Real Estate
Acquisition Company and Venture Industries Corporation,
dated February 15, 1995, filed as Exhibit 10.23 to Venture's
Registration Statement on Form S-4, effective October 27,
1997 (Registration No. 333-34475), and incorporated herein
by reference.
10.24** Machinery Usage Agreement between Venture Equipment
Acquisition Company and Venture Industries Corporation,
dated February 15, 1995, filed as Exhibit 10.24 to Venture's
Registration Statement on Form S-4, effective October 27,
1997 (Registration No. 333-34475), and incorporated herein
by reference.
10.25** Venture Industries Group Participation Agreement between
Venture Industries Corporation and Venture Asia Pacific Pty
Ltd. filed as Exhibit 10.29 to Venture's Registration
Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
10.26** License Agreement as to Proprietary Technologies and
Processes, dated July 2, 1997, between Larry J. Winget and
Venture Industries Corporation, Vemco, Inc., Venture Mold &
Engineering Corporation, Venture Industries Canada Ltd.,
Vemco Leasing, Inc., Venture Leasing Company, Venture
Service Company, Venture Holdings Corporation and Venture
Holdings Trust filed as Exhibit 10.30 to Venture's
Registration Statement on Form S-4, effective October 27,
1997 (Registration No. 333-34475), and incorporated herein
by reference.
10.27** License Agreement as to Patents, dated July 2, 1997, between
Larry J. Winget and Venture Industries Corporation, Vemco,
Inc., Venture Mold & Engineering Corporation, Venture
Industries Canada Ltd., Vemco Leasing, Inc., Venture Leasing
Company, Venture Service Company, Venture Holdings
Corporation and Venture Holdings Trust filed as Exhibit
10.31 to Venture's Registration Statement on Form S-4,
effective October 27, 1997 (Registration No. 333-34475), and
incorporated herein by reference.
236
10.28** Purchase Agreement, dated May 25, 1999, relating to $125,000,000
11% Senior Notes due 2007 and $125,000,000 12% Senior Subordinated
Notes due 2009, filed as Exhibit 10.4 to Venture's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1999 (File No.
333-34475), and incorporated herein by reference.
12.1** Statement Regarding Computation of Ratio of Earnings to Fixed
Charges.
21.1** Subsidiaries of the Registrants.
23.1* Consent of Deloitte & Touche LLP.
23.2* Consent of BDO International GmbH Wirtschaftsprufungsgesellschaft.
23.3** Consent of Dykema Gossett PLLC (contained in their opinion filed as
Exhibit 5.1).
24.1** Power of Attorney (included on signature page to this Registration
Statement).
25.1** Statement of Eligibility of Trustee related to 11% Senior Notes due
2007.
25.2** Statement of Eligibility of Trustee related to 12% Senior
Subordinated Notes due 2009.
99.1** Form of Letter of Transmittal related to exchange for the Senior
Exchange Notes.
99.2** Form of Notice of Guaranteed Delivery related to exchange for the
Senior Exchange Notes.
99.3** Form of Letter of Transmittal related to exchange for the Senior
Subordinated Exchange Notes.
99.4** Form of Notice of Guaranteed Delivery related to exchange for the
Senior Subordinated Exchange Notes.
- -------------------------
* Filed herewith.
** Previously filed.