Note 19 - Subsequent Events

6 Months Ended

Jul. 05, 2015

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Subsequent Events

On July 9, 2015, the Company entered an asset purchase agreement (the “Agreement”) to sell certain assets used in the Company’s manufacturing facility in Morganton, North Carolina, to Meritor. The Company retained the Morganton plant’s axle shaft manufacturing lines and certain related assets, intellectual property and inventories, which will be transitioned to the Company’s Louisville, Kentucky plant later this year. All other Morganton equipment, related assets and intellectual property were sold to Meritor (the “Morganton Sale”) for $10,500,000 in cash paid at the closing and other consideration. Meritor purchased related inventories and accounts receivable and assumed or released certain accounts payable and other accrued liabilities, for $2,000,000 (subject to customary post-closing adjustments to actual). Meritor also agreed to lease the Morganton facility for an initial five-year term for $2,000,000 in rent, pre-paid at the closing, and an additional $1,200,000 to be paid within 30 days of closing either to purchase the facility or to extend the lease for an additional 15 years at Meritor’s option. The proceeds of $14,500,000 at closing, and $1,200,000 received within 30 days of closing, approximated $15,700,000 in total consideration for the Morganton Sale.

At closing, the parties also entered into a Meritor Note Amendment, whereby the Company has issued an additional secured obligation to Meritor of $412,000 on July 9, 2015 and further agreed to increase the Meritor Note by up to an additional $335,000 in the near future as needed to reflect certain potential roof repairs required at the Morganton facility. (See Note 12 “Debt”.)