<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 8, 1997
REGISTRATION NO. 333-14187
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
RIVIERA TOOL COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MICHIGAN 3544
(State or other jurisdiction of (Primary Standard Industrial 38-2828870
incorporation or organization) Classification Code Number) (I.R.S. Employer Identification No.)
</TABLE>
------------------------
5460 EXECUTIVE PARKWAY SE
GRAND RAPIDS, MICHIGAN 49512
(616) 698-2100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
KENNETH K. RIETH, PRESIDENT
5460 EXECUTIVE PARKWAY SE
GRAND RAPIDS, MICHIGAN 49512
(616) 698-2100
(Address, including zip code, and telephone number, including area code, of
agent for service)
------------------------
Copies to:
<TABLE>
<S> <C>
STUART F. CHENEY, ESQ. ALAN I. ANNEX, ESQ.
Dickinson, Wright, Moon, Van Dusen & Freeman Camhy Karlinsky & Stein LLP
200 Ottawa Avenue, N.W., Suite 900 1740 Broadway, Sixteenth Floor
Grand Rapids, MI 49503 New York, NY 10019
(616) 458-1300 (212) 977-6600
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
------------------------
If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
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. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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 DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
RIVIERA TOOL COMPANY
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION
-------------------------------------------------- -------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus.................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Inside Front Cover Page; Outside Back
Cover
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges......................... Prospectus Summary; Risk Factors: The
Company
4. Use of Proceeds................................... Use of Proceeds
5. Determination of Offering Price................... Underwriting
6. Dilution.......................................... Dilution
7. Selling Security Holders.......................... Not Applicable
8. Plan of Distribution.............................. Outside Front Cover Page;
Underwriting
9. Description of Securities to be Registered........ Description of Capital Stock
10. Interests of Named Experts and Counsel............ Legal Matters; Experts
11. Information with Respect to the Registrant
(a) Description of Business....................... Prospectus Summary -- The Company;
Business
(b) Description of Property....................... Business -- Properties
(c) Legal Proceedings............................. Business -- Legal Proceedings
(d) Market Price and Dividends on the Registrant's
Common Equity and Related Stockholder
Matter........................................ Cover Page; Dividend Policy; Selected
Financial Data; Principal
Shareholders; Description of Capital
Stock; Underwriting
(e) Financial Statements.......................... Financial Statements
(f) Selected Financial Data....................... Selected Financial Data
(g) Supplementary Financial Information........... Not Applicable
(h) Management's Discussion and Analysis of
Financial Condition and Results of Operations..... Management's Discussion and Analysis
of Financial Condition and Results of
Operations
(i) Disagreements with Accountants on Accounting
and Financial Disclosure.......................... Not Applicable
(j) Directors and Executive Directors............. Management -- Executive Officers,
Directors and Key Employees
(k) Executive Compensation........................ Management -- Compensation of
Executive Officers and Directors
(l) Security Ownership of Certain Beneficial
Owners and Management............................. Principal Shareholders
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.... Management -- Limitations of
Liability and Indemnification Matters
</TABLE>
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This Prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED JANUARY 8, 1997
PROSPECTUS
RIVIERA LOGO
RIVIERA TOOL COMPANY
1,100,000 SHARES
COMMON STOCK
------------------------
Prior to this offering (this "Offering"), there has been no market for the
common stock (the "Common Stock") of Riviera Tool Company ("Riviera" or the
"Company") and there can be no assurance that such a market will develop or, if
developed, that it will be sustained. It is estimated that the initial public
offering price of the Common Stock will be between $7.00 and $8.00 per share.
See "Underwriting" with respect to the method to be used in determining the
initial public offering price. The Common Stock has been approved for quotation
subject to notice of issuance on the American Stock Exchange under the symbol
"RTC."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share....................................... $ $ $
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Total(3)........................................ $ $ $
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</TABLE>
(1) Excludes a non-accountable expense allowance payable to National Securities
Corporation as representative (the "Representative") of the several
underwriters (the "Underwriters") equal to 3% of the total Price to Public.
The Company will sell five-year warrants to the Representative (the
"Representative's Warrants") entitling the Representative to purchase up to
110,000 shares of Common Stock. The Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting the expenses of this Offering which are payable by the
Company estimated at $ , which includes the nonaccountable expense
allowance payable to the Representative.
(3) The Company has granted the Underwriters a 45-day option to purchase up to
165,000 additional shares of Common Stock to cover over-allotments. If this
option is exercised in full, the total Price to Public, Underwriters'
Discounts and Commissions, and Net Proceeds to the Company will be
$ , $ , and $ , respectively. See
"Underwriting."
------------------------
The shares of Common Stock are being offered by the Underwriters subject to
prior sales when, as, and if
delivered to and accepted by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of the shares will be made
against payment at the offices of National Securities Corporation, 1001 Fourth
Avenue, Seattle, Washington 98154, on or about , 1996.
NATIONAL SECURITIES CORPORATION
The date of this Prospectus is , 1997.
<PAGE> 4
From the simplest
die to the most
complicated parts
assembly, Riviera's
single-source
capability covers
every aspect of
die production
from concept
to completion.
[PHOTO]
[PHOTO]
[PHOTO]
Process development and
engineering are critical stages in
every project. Riviera's
computer-integrated design and
manufacturing systems ensure the
accurate and efficient completion
of these important phases.
Located minutes away from I-96 and Kent
County International Airport in Grand
Rapids, Michigan, the Company's 180,000
square foot facility features a unique
layout that facilitates the seamless
flow of ideas, data, and die production.
[RIVIERA LOGO]
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL
MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements included elsewhere in this Prospectus.
Unless the context indicates otherwise, Riviera Tool Company, dba Riviera Die &
Tool, Inc, is referred to as the "Company" or "Riviera." Except as otherwise
noted, all information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option. Investors should carefully consider the
information set forth under the heading, "Risk Factors."
THE COMPANY
The Company designs, develops and manufactures custom large scale metal
stamping die systems used in the high speed production of sheet metal stamped
parts and assemblies for the automobile industry. The Company incorporates its
knowledge of integrated computer technologies with the design and manufacture of
metal stamping die systems resulting in solutions that address the specific
manufacturing requirements of its main customers, Chrysler Corporation
("Chrysler"), Ford Motor Company ("Ford") and General Motors Corporation
("General Motors"), the three largest domestic automobile manufacturers (the
"OEMs"), and their tier one suppliers of sheet metal stamped parts and
assemblies.
Management has strategically positioned the Company as one of North
America's most technologically advanced independent suppliers of metal stamping
die systems utilizing a totally computer integrated process for the design,
manufacture and validation of its products. The Company should continue to
benefit from current trends in the global automotive industry which require
continuous quality improvement, simultaneous engineering and development, and
increasing reliance on a select number of suppliers capable of utilizing
computer integrated technology to develop new automobile models. Examples of
parts made from die systems recently developed and manufactured by the Company
include the bumper system for the Ford Explorer and F-Series trucks, door panels
and wheels for the Jeep Wrangler, structural body components for the Chrysler
Neon and mini-vans, as well as body panels for semi-tractor vehicles.
The Company maintains "Preferred Supplier" status with Chrysler and Ford.
The Company has been awarded Chrysler's PentaStar quality award, the highest
quality award for a single plant supplier and Ford's Q-1 supplier award, an
award that has historically been given to suppliers who manufacture parts and
assemblies, rather than suppliers of tooling and equipment. The Company was the
first tool and die supplier to be awarded the Q-1 status by Ford.
By transferring design information electronically ("EDI"), the Company
communicates directly with the OEMs' design and development centers regarding
specific product and manufacturing information necessary to develop a custom
manufacturing system for each respective part. This digital data base is
incorporated in each phase of the design, manufacture and inspection process for
both the prototype and production tooling systems, ensuring high quality
repeatable processes. Electronically linking the Company to the OEM's design and
development centers enables significant reductions in product development lead
time and cost. The Company intends to use a portion of the proceeds of this
Offering to enhance its technical capabilities and competitive position by
acquiring advanced 3-dimensional design software known generally as "relational
data based software" and integrating it with high-speed precision machining
centers. Relational data base software systems can significantly reduce design
lead time and the high-speed precision machining centers are designed to nearly
double the through-put capacity of each machine on a semi-automated basis at
approximately half the cost of traditional computerized machining centers.
The Company has adopted a strategy that includes (i) single source program
management from concept to completion which involves the coordination of design,
manufacture of prototype and final dies, tryout and final inspection, all at a
single location; (ii) accomplishing each of the foregoing using the same
electronic data; (iii) simultaneous engineering of product and process, see
"Business -- Products and Services;" and (iv) maintaining ongoing continuous
improvement programs enabling it to improve its products and services in
response to technological advances and the changing requirements of its
customers.
The Company was originally acquired by the purchase of the assets of an
existing tool and die business on December 19, 1967 and was incorporated in its
present form in 1988 under the laws of the State of Michigan
3
<PAGE> 6
to provide an investment vehicle for Motor Wheel Corporation, an Ohio
corporation, which currently owns 50% of the Company's common stock. Since that
time the business has been operating as the wholly-owned and only subsidiary of
the Company. Prior to this Offering the operating subsidiary was merged into the
Company, which now operates the business. Since the financial statements for the
business have been audited and reported on a consolidated basis since 1988, this
merger had no effect on the substance of the financial statements of the
business. See Note 1 of Notes to Financial Statements -- Nature of Business and
Significant Accounting Policies -- Reporting Entity. Its executive offices and
manufacturing facility are located at 5460 Executive Parkway, Grand Rapids,
Michigan 49512, and its telephone number is (616) 698-2100.
4
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 1,100,000 shares(1)
Common Stock to be outstanding after the
Offering................................... 2,560,000 shares(1)
Use of Proceeds.............................. Reduction of financial institution debt, to
acquire fixed assets, retirement of all
outstanding 8% Cumulative Preferred Stock,
and for general working capital purposes. See
"Use of Proceeds."
AMEX Proposed Symbol......................... "RTC"
</TABLE>
- -------------------------
(1) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED AUGUST 31, NOVEMBER 30,
----------------------------------------------- ---------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------ ------
(IN 000'S EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATION DATA:
Sales................................ $13,207 $18,946 $22,425 $22,225 $18,334 $4,934 $5,480
Gross Profit......................... 1,160 1,788 2,749 4,108 3,398 884 1,085
Income (loss) from Operations........ (311) 318 1,635 2,206 2,043 463 654
Interest Expense..................... 780 856 1,415 1,749 1,670 367 403
Other Income......................... 265 244 139 106 227 37 15
Other Expense(1)..................... 0 2,247 532 0 0 0 0
Income (loss) before income taxes.... (826) (2,541) (173) 563 600 133 267
Income Taxes (Benefits).............. (312) (252) (134) 77 204 45 91
------- ------- ------- ------- ------- ------ ------
Net Income (loss) available for
common shares...................... $ (536) $(2,314) $ (69) $ 450 $ 367 $ 80 $ 172
======= ======= ======= ======= ======= ====== ======
Net Income (loss) per common share,
as adjusted(2)..................... $(.21) $(.90) $(.03) $.18 $.14 $.03 $.07
======= ======= ======= ======= ======= ====== ======
Supplementary Net Income (loss) per
common share, as adjusted(3)....... $.37 $.11
======= ======
OTHER DATA :
Depreciation & amortization.......... 991 993 1,214 1,438 1,272 313 322
======= ======= ======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
AS OF AUGUST 31, AS OF NOVEMBER 30, 1996
----------------------------------------------- ---------------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(3)(4)
------- ------- ------- ------- ------- ------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital
(Deficiency)............... $ 421 $(2,727) $(4,273) $(3,966) $(3,669) $(3,463) $ 6,885
Total Assets................. 20,824 22,927 26,439 21,706 22,928 22,154 22,449
Current Portion of Long-Term
Debt & Capital Leases...... 796 2,935 3,129 2,256 1,336 1,258 1,000
Revolving Line of Credit..... 5,110 8,127 9,461 6,866 10,242 9,796 --
Long-term Capital Leases &
Term Debt, less current
portion.................... 3,173 1,178 2,715 1,830 1,002 738 4,000
Redeemable Preferred Stock... 54 80 109 111 139 91 --
Common Stockholder's
Equity..................... 7,153 4,839 4,770 5,220 5,588 5,760 12,936
</TABLE>
- -------------------------
(1) Other Expense includes the following: For 1993, amount represents loss from
related company as a write-off of $1,687,000 of preferred stock in related
company and write-off of receivable from such entity of $560,000. For 1994,
amount represents $532,000 in costs associated with vacant facility space
formerly leased to the related company. See "Business -- Legal Proceedings."
(2) Adjusted to give effect to the sale by the Company of 1,100,000 shares of
Common Stock offered hereby.
(3) See Note 18 of Notes to Financial Statements.
(4) Adjusted to give effect to the sale by the Company of 1,100,000 shares of
Common Stock offered hereby at an estimated initial public offering price of
$7.50 per share, less applicable underwriting discounts and commissions and
estimated offering expenses payable by the Company and the effect of
restructuring its bank debt. See "Risk Factors -- Debt Covenant Violations."
5
<PAGE> 8
RISK FACTORS
A prospective investor should consider, together with the other information
set forth in this Prospectus, the following:
RELIANCE UPON MAJOR CUSTOMERS
Approximately 25% of the Company's sales during fiscal 1996 and 24% in
fiscal 1995 were made directly to Chrysler Corporation. In addition,
approximately 11% of the Company's sales during fiscal 1996 and 7% during fiscal
1995 were made directly to Ford Motor Company. Ford suppliers represented
approximately 17% and 55% of the Company's sales during fiscal 1996 and 1995,
respectively. General Motors represented approximately 13% of the Company's
sales during fiscal 1996 and 1% during fiscal 1995. For the three months ended
November 30, 1996, Chrysler, Ford, General Motors and their tier one suppliers
accounted for approximately 50%, 35% and 8% of the Company's revenues,
respectively. See "Business -- General."
The loss of the Company's relationship with these customers, or a
significant reduction of their minimum tooling purchases, or a reduction in new
product development due to economic conditions, could have a material adverse
effect upon the Company.
The Company is directly dependent on its customers who directly produce the
end use product. As a result, if the end use producers (Chrysler, Ford and
General Motors) experience difficulties in such critical areas as style, quality
or global competition, the demand for such end use producer's product may be
adversely affected, which may in turn adversely affect the Company.
GENERAL FACTORS: ECONOMIC CLIMATE, INTERNATIONAL MONETARY CYCLES, CHANGING
FACILITIES,
INTER-INDUSTRY DEPENDENCE, AVAILABLE FINANCING
The revenue and value of manufacturing concerns, such as the Company, in
general, may be adversely affected by a number of factors, including: (a) the
international, national, regional and local economic climate -- in particular,
manufacturing intended for large ticket durable consumer goods, which directly
contributes to or adversely affects the work loads of manufacturing concerns
supplying product that will contribute to or be incorporated into end use
consumer products. (b) international monetary cycles -- manufacturing concerns
produce products that contribute to or are otherwise incorporated into retail
consumer end use products will directly or indirectly be competing on a global
basis. Where price becomes an issue, monetary cycles may contribute to or
detract from competitive positioning. (c) the need to periodically repair,
replace, upgrade and expand existing production capabilities may not prove to be
a profitable endeavor. (d) the dependence on other industries -- manufacturing
concerns that do not produce an end product but contribute to an end product
produced by another manufacturing concern are subject to both the trends of the
end user and the buying practices of the manufacturer that assembles into a
merchantable product. (e) manufacturing concern values are affected by factors
such as changes in interest rates and the availability of financing in capital
- -- intensive industries, an in addition, manufacturing concerns do not typically
receive progress payments from their customers.
VOTING CONTROL
Following completion of this Offering, Riviera Holding Company (owned 100%
by Kenneth K. Rieth), a Michigan corporation and Motor Wheel Corporation, an
Ohio corporation located in Lansing, Michigan, will each have approximately
28.5% of the voting power and ownership of the Company (assuming no exercise of
the Underwriters' over-allotment option). Together they will have effective
voting control of the Company, and will be able to elect or remove all of the
Company's Directors, will exercise significant control over the other affairs of
the Company and will be able to block any proposal put to a vote of the
shareholders including proposals which require a supermajority. These two
shareholders have entered into a formal voting agreement. See "Principal
Shareholders."
6
<PAGE> 9
DEPENDENCE ON EXISTING MANAGEMENT
Kenneth K. Rieth and a few key employees have been primarily responsible
for the development of most of the Company's products, processes and business
methods. The loss or interruption of the continued full-time services of any of
them could have a material adverse effect on the Company. The Company maintains
"Key-man" life insurance policies on Kenneth K. Rieth, President, C.E.O. and
Director, and Leonard H. Wood, Vice President, General Manager and Director, for
$2,500,000 and $500,000, respectively. See "Management."
COMPETITION AND MARKET CONSOLIDATION
The tooling systems industry is highly competitive, and there can be no
assurance that the Company will be able to compete successfully in the future.
The Company's largest customers, Chrysler and Ford, both have internal die
construction capability; however, the Company believes that such capacity is
insufficient in relationship to their total requirements. The Company believes
that the automobile industry has been going through a tooling systems supplier
consolidation and that there are now fewer quality oriented, full service die
systems suppliers. There is no assurance that the Company will continue to
qualify as a supplier to any of the automobile manufacturers. The loss of any
such qualification would have a material adverse effect on the Company. In
addition, the Company faces competition from foreign manufacturers, particularly
from Japan.
IMMEDIATE AND SUBSTANTIAL DILUTION
After giving effect to the sale by the Company of the 1,100,000 shares of
Common Stock being offered hereby at an estimated public offering price of $7.50
per share (assuming no exercise of the Underwriters' over-allotment option and
application of the net proceeds therefrom), there will be an immediate increase
in the Company's net tangible book value of $1.11 per share and an immediate
dilution of $2.45 per share to investors who purchase Common Stock pursuant to
this Offering. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
The 1,460,000 shares of Common Stock held by Riviera Holding Company, owned
100% by Kenneth K. Rieth, and Motor Wheel Corporation after the date of this
Prospectus will be eligible for sale in accordance with Rule 144 under the
Securities Act of 1933, as amended, 90 days following the date of this
Prospectus. Under Rule 144, shareholders who have held fully-paid shares for at
least two years may sell them without registration under certain conditions. The
sale of a significant portion of these shares in the open market could have a
material adverse effect on the market price of the Common Stock. However,
Riviera Holding Company and Motor Wheel Corporation have agreed with the
Representative that they will not sell or otherwise dispose of any Common Stock
for two years from the date of this Prospectus without the consent of the
Representative. See "Shares Eligible for Future Sale" and "Underwriting."
Riviera Holding Company and Motor Wheel have executed a written
Shareholders Agreement (the "Shareholders Agreement") dated October 31, 1996.
Pursuant to the Shareholders Agreement, Motor Wheel has granted Riviera Holding
Company an option to purchase all shares of stock of the Company held by Motor
Wheel. The purchase price under this option is $3.0 million or $4.11 per share.
This option will lapse on October 31, 1997. See "Principal Shareholders --
Shareholders Agreement" and "Shares Eligible for Future Sale."
PREFERRED STOCK
The Board of Directors of the Company is authorized to issue, without any
further action on the part of the Company's shareholders, up to 200,000 shares
of preferred stock (the "Preferred Stock") in one or more series with such
designations, preferences, limitations and other rights, including voting
rights, as are determined by the Board of Directors from time to time. The
issuance of such shares of preferred stock could result in the dilution of the
voting power of the shares on Common Stock purchased in this Offering and could
have a dilutive effect on earnings per share. See "Description of Capital
Stock."
7
<PAGE> 10
ABSENCE OF PRIOR MARKET FOR COMMON STOCK
There has been no public market for the Common Stock of the Company prior
to this Offering. There can be no assurance than an active public market for the
shares will develop or be sustained after this Offering or that the market price
of the Common Stock will not decline below the initial public offering price.
The initial public offering price of the Common Stock offered hereby was
determined by negotiations between the Company and the Representative and may
not be indicative of the market price of the Common Stock in the future. See
"Underwriting." The trading price of the Company's Common Stock in the future
could be subject to wide fluctuations in response to quarterly variations in
operating results of the Company or its competitors, changes in analysts'
estimates of the Company's financial performance, regulatory developments,
general industry conditions, worldwide economic and financial conditions, and
other factors. During certain periods, the stock markets have experienced
extreme price and volume fluctuations. In addition, securities sold in initial
public offerings have been especially susceptible to price volatility. These
broad market fluctuations and other factors may adversely affect the market
price of the Company's Common Stock.
DEBT COVENANT VIOLATIONS
In connection with the Company's revolving line of credit and notes payable
to bank the Company has agreed to certain covenants. The agreements require the
Company to maintain working capital and net worth at specified levels, do not
permit the debt-to-equity ratio to exceed a specified amount, and prohibit the
payment of cash dividends. The Company presently is not in compliance with
certain of these covenants. As a consequence the bank could (but to date has
chosen not to) pursue collection of all amounts due which could result in the
liquidation of the Company. After application of the proceeds of this Offering,
the Company expects to be in compliance with all such covenants then applicable.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
1,100,000 shares of Common Stock offered hereby at an estimated public offering
price of $7.50 per share are estimated to be $7,177,500 ($8,254,126 if the
Underwriters' over-allotment option is exercised in full). The Company intends
to apply the net proceeds to reduce financial institution debt which was
incurred for fixed asset acquisition (approximately $1,557,119) and repay
working capital borrowed for its sales growth (approximately $5,620,381). The
unused credit on the Company's revolving line of credit available to the Company
may be used to acquire additional fixed assets, retire all outstanding 8%
cumulative preferred stock and for working capital and other general corporate
purposes, including accommodating growth and future production through the
addition of plant and equipment acquisitions and payment of a preferential
dividend previously declared (see "Dividend Policy"). As of the date of this
Prospectus, there are no agreements or understandings with respect to specific
acquisitions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources." The fixed asset
acquisition debt bears interest at the annual interest rate of 12.25% ($256,962
due February 28, 1997), 9.9% ($995,019 due March 1, 1999) and 7.0% ($305,138 due
September 1, 1998). The working capital borrowing ($9,795,585) bears annual
interest at the rate of prime plus 4% and is due November 30, 1996. Upon
completion of this Offering and application of the proceeds therefrom, the
Company will restructure its bank debt into a $10.0 million revolving line of
credit, of which $0 will be drawn upon closing, and a $5.0 million, 5 year term
loan bearing annual interest at the rate of prime. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." The Company believes that this line of credit, the lower
cost of such funds and internally generated cash flow will be sufficient to
cover anticipated cash needs through 1997.
8
<PAGE> 11
DILUTION
As of November 30, 1996, the net tangible book value per share of Common
Stock of the Company was $3.94. "Net tangible book value per share" represents
the book value of the Company's tangible assets less the amount of its
liabilities, divided by the number of shares of Common Stock outstanding. Upon
completion of this Offering, 2,560,000 shares of Common Stock will be
outstanding with a pro forma net tangible book value per share of $5.05. As a
result of this Offering, there will be an immediate dilution to new investors of
approximately $2.45 per share. "Dilution" represents the difference between the
price per share paid by new investors in this Offering and the pro forma net
tangible book value per share as of November 30, 1996, after giving effect to
this Offering. The following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share........................ $7.50
Net tangible book value per share before this Offering....... $3.94
Increase in net tangible book value per share attributable to
new investors............................................. 1.11
Pro forma net tangible book value per share after this
Offering..................................................... 5.05
-----
Dilution per share to new investors............................ $2.45
=====
</TABLE>
The following table summarizes, as of the completion of this Offering, the
differences between the effective cash contributions paid by the existing
shareholders of the Company and the new investors with respect to the number of
shares purchased from the Company, the total consideration paid, and the average
price per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- -----------------------------------
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders....................... 1,460,000 57.0% $ 4,693,150 36.2% $3.21
New investors(1)............................ 1,100,000 43.0% 8,250,000 63.8% 7.50
--------- ----- ------------ ------ ------
Total................................ 2,560,000 100.0% $12,943,150 100.0%
========= ===== ============ ======
</TABLE>
- -------------------------
(1) Assumes the sale of 1,100,000 shares of Common Stock at an initial public
offering price of $7.50 per share.
DIVIDEND POLICY
The Company has never paid dividends on its common stock and currently
intends to retain future earnings in order to provide funds for the operation
and expansion of its business and, accordingly, does not anticipate paying cash
dividends in the foreseeable future. Furthermore, the Company's current lending
arrangement with its principal commercial lender prohibit the payment of common
stock dividends without the consent of the lender and the Company anticipates
that any future lending facilities will include similar restrictions. Such
restrictions could limit the Company's ability to pay common stock dividends in
the future.
Pursuant to the Shareholder Agreement dated October 31, 1996 between Motor
Wheel and Riviera Holding Company, the Company has declared a preferential
dividend of approximately $170,000 on the shares of Common Stock of the Company
owned by Riviera Holding to pay the income tax payable by Riviera Holding
Company as a result of the lapse of options by Motor Wheel to purchase common
stock owned by Riviera Holding Company and as a result of the dividend itself.
This dividend has been consented to by all directors and both existing
shareholders of the Company. The dividend cannot be paid until consented to by
the Company's primary commercial lender. The Company expects to receive such
consent upon completion of this Offering.
9
<PAGE> 12
CAPITALIZATION
The following table sets forth the actual short-term debt and
capitalization of the Company at November 30, 1996. Also set forth is such data,
pro forma, to give effect to the sale by the Company of the 1,100,000 shares of
Common Stock offered hereby and the application of the estimated net proceeds
therefrom.
<TABLE>
<CAPTION>
NOVEMBER 30, 1996
-------------------------
ACTUAL AS ADJUSTED(1)
------- --------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Notes Payable and Capital Leases -- Current(2)........................ $11,053 $ 1,000
======= ========
Long-term Debt Obligations, less current portions(2).................. $ 738 $ 4,000
Long-term Capital Leases, less current portions(2).................... -- --
Preferred Stock, no par value, 200,000 shares authorized and none
outstanding......................................................... -- --
8% Cumulative Preferred Stock, $5 par value, $100 redemption value
-- 1,425 shares authorized and outstanding.......................... 91 --
Common Stockholder's Equity:
Common Stock, no par value --
9,798,575 shares authorized, 1,460,000 shares outstanding, 2,560,000
as adjusted......................................................... 4,393 11,569
Retained Earnings..................................................... 1,367 1,367
------- --------
Total Stockholder's Equity..................................... 5,760 12,936
------- --------
Total Capitalization.................................................. $ 6,589 $ 16,936
======= ========
</TABLE>
- -------------------------
(1) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."
(2) See Notes 5 and 10 of Notes to Financial Statements.
10
<PAGE> 13
SELECTED FINANCIAL DATA
The following selected financial data for each of the five fiscal years in
the period ended August 31, 1996 is derived from financial statements which have
been audited by Plante & Moran LLP, independent public accountants, and should
be read in conjunction with the Financial Statements and Notes thereto included
elsewhere herein. The Statement of Operation Data for the three months ended
November 30, 1996 and 1995, and the Balance Sheet Data at November 30, 1996, are
derived from unaudited financial statements of the Company that include all
adjustments, consisting of only normal recurring adjustments, that the Company
considers necessary for a fair presentation of its results of operations for
such periods. The results of operations for the three months ended November 30,
1996 are not necessarily indicative of results to be expected for the entire
year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED AUGUST 31, NOVEMBER 30,
--------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------ ------
(IN 000'S EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATION DATA:
Sales.................................. $13,207 $18,946 $22,425 $22,225 $18,334 $4,934 $5,480
Gross Profit........................... 1,160 1,788 2,749 4,108 3,398 884 1,085
Income (loss) from Operations.......... (311) 318 1,635 2,206 2,043 463 654
Interest Expense....................... 780 856 1,415 1,749 1,670 367 403
Other Income........................... 265 244 139 106 227 37 15
Other Expense(1)....................... 0 2,247 532 0 0 0 0
Income (loss) before income taxes...... (826) (2,541) (173) 563 600 133 267
Income Taxes (Benefits)................ (312) (252) (134) 77 204 45 91
------- ------- ------- ------- ------- ------- -------
Net Income (Loss) available for common
shares............................... $ (536) $(2,314) $ (69) $ 450 $ 367 $ 80 $ 172
======= ======= ======= ======= ======= ======= =======
Income (loss) from Operations per
share,
as adjusted(2)....................... $(.12) $.12 $.64 $.86 $.80 $.18 $.26
======= ======= ======= ======= ======= ======= =======
Net Income (loss) per common share,
as adjusted(2)....................... $(.21) $(.90) $(.03) $.18 $.14 $.03 $.07
======= ======= ======= ======= ======= ======= =======
Supplementary Net Income (loss) per
common share, as adjusted(3)......... $.37 $.11
======= =======
OTHER DATA:
Depreciation & amortization............ 991 993 1,214 1,438 1,272 313 322
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF AUGUST 31, AS OF NOVEMBER 30, 1996
--------------------------------------------------- ----------------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(3)(4)
------- ------- ------- ------- ------- ------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (Deficiency)..... $ 421 $(2,727) $(4,273) $(3,966) $(3,669) $(3,463) $ 6,885
Total Assets..................... 20,824 22,927 26,439 21,706 22,928 22,154 22,449
Current Portion of Long-term Debt
& Capital Leases............... 796 2,935 3,129 2,256 1,336 1,258 1,000
Revolving Line of Credit......... 5,110 8,127 9,461 6,866 10,242 9,796 --
Long-term Capital Leases & Term
Debt, less current portion..... 3,173 1,178 2,715 1,830 1,002 738 4,000
Redeemable Preferred Stock....... 54 80 109 111 139 91 --
Common Stockholder's Equity...... 7,153 4,839 4,770 5,220 5,588 5,760 12,936
</TABLE>
- -------------------------
(1) Other Expense includes the following: For 1993, amount represents loss from
related company as a write-off of $1,687,000 of preferred stock in related
company and write-off of receivable from such entity of $560,000. For 1994,
amount represents $532,000 in costs associated with vacant facility space
formerly leased to a related company. See "Business -- Legal Proceedings."
(2) Adjusted to give effect to the sale by the Company of 1,100,000 shares of
Common Stock offered hereby.
(3) See Note 18 of Notes to Financial Statements.
(4) Adjusted to give effect to the sale by the Company of 1,100,000 shares of
Common Stock offered hereby at an initial price of $7.50 per share per
share, less applicable underwriting discounts and commissions and estimated
offering expenses payable by the Company and the effect of restructuring its
bank debt. See "Risk Factors -- Debt Covenant Violations."
11
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the components of
the Company's statements of operations as a percentage of sales.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED AUGUST 31, NOVEMBER 30,
-------------------------------------------- --------------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATION DATA:
Net Sales............................. 100% 100% 100% 100% 100% 100% 100%
Gross Margin.......................... 9 9 12 18 18 18 20
Income from Continuing Operations..... (2) 2 7 10 11 9 12
Interest Expense...................... 6 5 6 8 9 7 7
Other Income.......................... 2 1 1 1 1 1 --
Other Expense......................... -- 12 2 -- -- -- --
Income (loss) before income taxes..... (6) (13) -- 3 3 3 5
Federal Income Tax (Benefit).......... (2) (1) -- 1 1 1 2
--- --- --- --- --- --- ---
Net Income (Loss)..................... (4)% (12)% --% 2% 2% 2% 3%
=== === === === === === ===
OTHER DATA:
Depreciation and Amortization......... 8% 5% 5% 6% 7% 6% 6%
</TABLE>
COMPARISON OF THREE MONTHS ENDED NOVEMBER 30, 1996 AND NOVEMBER 30, 1995
Revenue. Total Revenue increased by 11% from approximately $4.9 million for
the quarter ended November 30, 1995, to approximately $5.5 million for the
quarter ended November 30, 1996. This increase was due to the timing of
contracts in process in the comparative periods. As of November 30, 1995 the
Company's contracts in process was $5.2 million as compared to $4.9 million as
of November 30, 1996 which resulted in the increase in revenue during the
quarter ended November 30, 1996.
Cost of Goods Sold. Cost of goods sold decreased from 82% of total revenue
for the quarter ended November 30, 1995 to 80% for the quarter ended November
30, 1996. This decrease was largely due to lower direct labor expense (28% of
total revenue for the quarter ended November 30, 1995 as compared to 23% of
total revenue for the quarter ended November 30, 1996).
Selling, General and Administrative. Selling, general and administrative
expense was approximately $422,000 for the quarter ended November 30, 1995 as
compared to $430,000 for the quarter ended November 30, 1996. As a percentage of
total revenue, selling, general and administrative expense decreased to 7% for
the quarter ended November 30, 1996 as compared to 8% for the quarter ended
November 30, 1995.
Interest Expense. Interest expense was approximately $367,000 for the
quarter ended November 30, 1995 as compared to $403,000 for the quarter ended
November 30, 1996. This increase was due to the higher revolving line of credit
balance during these comparative periods ($9.8 million as of November 30, 1996
as compared to $9.2 million as of November 30, 1995).
COMPARISON OF FISCAL YEARS ENDED AUGUST 31, 1996 AND AUGUST 31, 1995
Revenue. Total revenue decreased by 17% from approximately $22.2 million
for the year ended August 31, 1995 ("Fiscal 1995"), to approximately $18.4
million for the year ended August 31, 1996 ("Fiscal 1996"). This decrease was
due to the timing of contracts in process and the Company's contract backlog.
Contracts in process as of August 31, 1996 was approximately $2.2 million higher
than as of August 31, 1995
12
<PAGE> 15
(an increase of 69%) and the Company's backlog as of August 31, 1996 was $6.4
million higher than as of August 31, 1995. This backlog will reasonably be
reflected in revenue during 1997.
Cost of Goods Sold. Cost of goods sold decreased from $18.1 million in
Fiscal 1995 to $14.9 million in Fiscal 1996. This was due to the decrease in
revenue when comparing the same periods. As a percentage of total revenue, cost
of goods sold remained consistent at 81.5% for Fiscal 1996 from Fiscal 1995.
Selling, General and Administrative. Selling, general and administrative
expense was approximately $1.3 million for Fiscal 1996, a decrease of 32% from
approximately $1.9 million for Fiscal 1995. As a percentage of total revenue,
selling, general and administrative expense decreased from 8.8% in 1995 to 7.0%
for Fiscal 1996. This decrease was largely due to legal and professional (a
decrease of $134,000), amortization (a decrease of $47,000), and administrative
salaries (a decrease of $128,000).
Interest Expense. Interest expense was approximately $1.7 million for
Fiscal 1996, a decrease of 5% from approximately $1.8 million for Fiscal 1995.
As a percentage of total revenue, interest expense increased from 8% for Fiscal
1995 to 9% for Fiscal 1996. This was primarily due to the increase in average
short-term outstanding debt of $11.1 million in Fiscal 1996 as compared to $10.7
in Fiscal 1995.
COMPARISON OF FISCAL YEARS ENDED AUGUST 31, 1995 AND AUGUST 31, 1994
Revenue. Total revenue decreased by 1% from approximately $22.4 million for
the year ended August 31, 1994 ("Fiscal 1994"), to approximately $22.2 million
for the year ended August 31, 1995 ("Fiscal 1995"). The Company must finance its
construction-in-process and accounts receivable. Due to the nature of this
process, each dollar of annual sales volume requires approximately $.50 of
working capital financing. The inability of the Company to obtain additional
working capital has therefore restricted its ability to increase sales.
Cost of Goods Sold. Cost of goods sold decreased from $19.7 million for
Fiscal 1994 to $18.1 million for the year ended August 31, 1995. As a percentage
of total revenue, cost of goods sold decreased from 88% for the year ended
August 31, 1994 to 82% for the year ended August 31, 1995. This decrease was
largely due to the Company subcontracting less of its machining requirements
(decrease of $124,000), outside pattern services (decrease of $327,000) and
outside engineering services (decrease of $290,000).
Selling, General and Administrative. Selling, general and administrative
expense was approximately $1.9 million for Fiscal 1995, an increase of 73% from
approximately $1.1 million for Fiscal 1994. As a percentage of total revenue,
selling, general and administrative expense increased to 9% for Fiscal 1995 as
compared to 5% for Fiscal 1994, primarily due to an increase in legal expense
($81,000), State of Michigan Single Business Tax ($158,000) and during Fiscal
1994, the Company received final information on dividends from its workers
compensation and health insurance carrier which resulted in refunds of $102,000
and $159,000, respectively, which were recorded in Fiscal 1994 as a reduction to
the appropriate expense. For 1995, no dividends were received from the workers
compensation insurance carrier and a $65,000 refund was received from the
Company's health insurance carrier.
Interest Expense. Interest expense was approximately $1.7 million for
Fiscal 1995, a increase of 24% from approximately $1.4 million for Fiscal 1994.
As a percentage of total revenue, interest expense increased from 6% for Fiscal
1994 to 8% for Fiscal 1995, primarily due to increased short-term borrowing
levels (the average short-term borrowings outstanding during Fiscal 1995 was
$1.6 million higher than Fiscal 1994), increase in the interest rate charged by
the Company's primary lender on outstanding debt (an increase of 2.55%) bank
fees of $173,000 paid to its primary lender in extending its revolving line of
credit and term debt, and the Company incurred additional long-term debt of $2.5
million in the fourth quarter of 1994 for the acquisition of capital assets
which resulted in an additional $208,000 of interest expense in Fiscal 1995.
13
<PAGE> 16
COMPARISON OF FISCAL YEARS ENDED AUGUST 31, 1994 AND AUGUST 31, 1993
Revenue. Total revenue increased by 18% from approximately $18.9 million
for the year ended August 31, 1993, to approximately $22.4 million for the year
ended August 31, 1994 primarily due to increase in amount of contracts with
Chrysler Corporation and Ford Motor Company.
Cost of Goods Sold. Cost of goods sold increased from $17.2 million for the
year ended August 31, 1993 to $19.7 million for the year ended August 31, 1994.
As a percentage of total revenue, cost of goods sold decreased from 91% for the
year ended August 31, 1993 to 88% for the year ended August 31, 1994. The
increase in cost of sales (an increase in labor of $1.6 million and $1.0 million
in direct materials) was largely due to an increase of 18% in revenue for the
year ended August 31, 1994 over the prior year.
Selling, General and Administrative. Selling, general and administrative
expense was approximately $1.1 million for the year ended August 31, 1994, a
decrease of 23% from approximately $1.5 million for the year ended August 31,
1993. As a percentage of total revenue, selling, general and administrative
expense decreased to 5% in 1994 as compared to 8% for 1993. This decrease was
largely due to dividends received from the Company's workers compensation and
health insurance carriers in 1994 (a total of $261,000 as compared to $0 in
1993) and a decrease in the State of Michigan Single Business Tax (a decrease of
$173,000 as compared to 1993).
Interest Expense. Interest expense was approximately $1.4 million for the
year ended August 31, 1994, a increase of 65% from approximately $856,000 for
the year ended August 31, 1993. As a percentage of total revenue, interest
expense increased from 5% for the year ended August 31, 1993 as compared to 6%
for the year ended August 31, 1994, primarily due to increased borrowing levels
necessary to finance growth in revenue (average outstanding short-term debt
increased from $6.3 million in 1993 to $9.1 million in 1994) and an increase in
the interest rate (3% per annum) the Company's primary lender charged on
outstanding debt.
Other Expense. In July of 1992, the Company contributed machinery,
equipment, inventory, work-in-process and receivables related to the business of
building plastic injection molds to a joint venture that then became known as
Leap Technologies, Inc. The Company contributed assets valued at $5.4 million
and Leap Technologies, Inc. assumed debts in the amount of $3.7 million, and the
Company received $1.7 million of preferred stock. In Fiscal 1993, Leap
Technologies, Inc. was liquidated and the Company wrote-off its preferred stock
in Leap Technologies, Inc. ($1,687,000) and accounts receivable from the related
company ($560,000). During the year ended August 31, 1994, the Company absorbed
the cost of the unleased Leap Technologies, Inc. facility space ($532,000) and
then leased such space to an unrelated company.
FEDERAL INCOME TAX.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109. A current tax liability or asset
is recognized for the estimated taxes payable or refundable on tax returns for
the year. Deferred tax liabilities or assets are recognized for the estimated
future tax effects of temporary differences between book and tax accounting and
operating loss and tax credit carryforwards. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
As of November 30, 1996, the Company had approximately $3.8 million of net
operating loss carryforwards that expire 2006 through 2009, investment tax
credit carryforwards of approximately $246,700 that expire 1998 through 2003 and
alternative minimum tax credits of approximately $40,000, the use of which does
not expire.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's needs for capital have been extensive over the period
presented. Bank borrowings have increased primarily to acquire fixed assets and
to finance the increase in trade accounts receivable and contracts in process,
as the OEMs typically do not make progress payments on tooling contracts. The
Company has financed these needs through internally generated funds, bank
financing, and various capital and operating leases. Cash provided from (used
by) operating activities was $183,926 in 1994, $4,991,021 in 1995,
14
<PAGE> 17
($977,133) in 1996 and $942,680 for the quarter ended November 30, 1996. The
capital used by operations in 1996 was primarily due to changes in the Company's
Accounts Receivable, Contracts in Process, and current liabilities accounts and
for the quarter ended November 30, 1996 the primary change was the decrease in
Contracts in Process.
The Company utilized $3,005,247, $575,401, $319,308 and $50,808 of Cash
Flows from Investing Activities in 1994, 1995, 1996 and the quarter ended
November 30, 1996, respectively. In 1994 and 1995 the most significant items
were the acquisition of $2,849,684 and $585,248 of capital assets, respectively.
From Financing Activities in 1994 the Company incurred additional long-term
debt for the acquisition of capital assets. In 1995, the reduction of short-term
debt was a result of the decrease in accounts receivable and application of such
proceeds to the revolving line of credit. For 1996, the increase in the
short-term debt resulted from the increase in Contracts in Process and decrease
in Accounts Payable accounts, and the Company incurred $333,325 of costs in
connection with this Offering which have been capitalized. These capitalized
costs will be expensed or charged to paid in capital upon completion of this
Offering. For the quarter ended November 30, 1996 the Company decreased
short-term debt which resulted from the decrease in Contracts in Process and
increase in Accounts Payable.
In connection with the Company's line of credit and note payable to bank as
of November 30, 1996, the Company has agreed to certain covenants. The agreement
requires the Company to maintain minimum working capital and net worth of
$200,000 and $6,000,000, respectively, to keep its combined debt-to-equity ratio
at less than 3 to 1, and prohibits the payment of cash dividends. As of November
30, 1996 the Company had working capital deficit of ($3,463,183), net worth of
$5,759,602, and a debt-to-equity ratio of 2.85 to 1. As a result, the Company
has classified those debt obligations as current liabilities. Although the bank
has extended the terms of the obligations to February 28, 1997, it has not
waived their rights under the agreement. See "Risk Factors -- Debt Covenant
Violations."
After application of the proceeds from this Offering, the Company's
adjusted total bank debt as of November 30, 1996 would be $5,000,000, of which
$1,000,000 will be short-term and the balance long-term. See "Use of Proceeds."
The Company has received a non-binding proposal from LaSalle National Bank,
which anticipates that the bank will issue a binding commitment letter upon
completion of this Offering, to restructure its bank debt into a $10,000,000
line of credit and a $5,000,000, 5 year term loan, with amortization commencing
the first quarter after closing. The Company is also exploring the possibility
of issuing up to $10.0 million of publicly traded debt securities in place of
the term loan portion of the bank debt. The Company believes that the unused
portion of this credit line and the lower cost of such funds, together with
funds generated from operations, will be sufficient to cover anticipated cash
needs through 1997. However, depending on the level of future sales, an expanded
credit line may be necessary to finance increases in trade accounts receivable
and contracts in process. The Company believes it will be able to obtain such
expanded credit line, if required, on generally the same terms as the proposed
new credit line.
The LaSalle proposal to restructure the Company's bank debt calls for an
interest rate equal to the bank's floating prime rate on the credit line term
loan. This compares to rates of 4% in excess of prime rate on the Company's
present bank debt. The $5,000,000 long-term portion of the restructured debt
would be repayable in equal quarterly installments over five years. The credit
line utilization is based on a formula of 80% of eligible accounts receivable,
and 50% of contracts in process. Under this formula, substantially all of the
credit line would be available to the Company. The entire restructured bank debt
would be secured by substantially all of the Company's assets, as is the case
with the existing bank debt.
INFLATION.
The Company has no long-term, fixed price contracts. Historically, the
Company has been able to reflect increases in the prices of labor and material
in its selling prices. The Company expects that this will continue to be the
case.
15
<PAGE> 18
BUSINESS
GENERAL
The Company is a leading manufacturer of large scale, complex stamping die
systems used to form sheet metal parts. Most of the stamping die systems sold by
the company are used in the production of automobile and truck body parts such
as doors, door frames, structural components and bumpers. The following table
indicates the Company's sales (in thousands) and percentage of total sales by
customer for each of the last five fiscal years for the period ended August 31
and the three months ended November 30, 1995 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED AUGUST 31, NOVEMBER 30,
--------------------------------------------------------------------------------- ----------------------------
1992 1993 1994 1995 1996 1995 1996
------------- ------------- ------------- ------------- ------------- ------------ ------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %
------- --- ------- --- ------- --- ------- --- ------- --- ------ --- ------ ---
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chrysler
Corporation... $ 2,912 22% $ 8,949 47% $ 6,885 31% $ 5,291 24% $ 4,622 25% $ 493 10% $2,605 48%
Suppliers of
Chrysler
Corporation... 2,129 16 0 * 0 * 0 * 0 * 0 * 124 2
Ford Motor
Company...... 1,342 10 231 1 1,852 8 1,511 7 2,061 11 298 6 794 14
Suppliers of
Ford Motor
Company...... 4,120 31 7,610 40 6,951 31 12,172 55 3,042 17 1,288 26 1,131 21
General Motors
Corp. ....... 2,449 18 0 * 0 * 225 1 2,297 13 1,214 25 461 8
Suppliers of
General
Motors
Corp. ....... 0 * 0 * 0 * 140 * 1,560 9 488 10 0 *
Other auto and
truck
manufacturers
and
their
suppliers.... 255 3 2,156 12 6,737 30 2,886 13 4,752 25 1,153 23 365 7
------- --- ------- --- ------- --- ------- --- ------- --- ------ --- ------ ---
Total
Sales(1)(2) $13,207 100% $18,946 100% $22,425 100% $22,225 100% $18,334 100% $4,934 100% $5,480 100%
======= === ======= === ======= === ======= === ======= === ====== === ====== ===
</TABLE>
- -------------------------
* Less than 1.0% of the Company's total sales.
(1) Sales to Motor Wheel Corporation were $6.9, $2.7, $2.5, $2.8, $2.0, $.7 and
$.2 million for fiscal years 1992 through 1996 and the three months ended
November 30, 1995 and 1996, respectively, and are all included above.
Included in sales to Motor Wheel Corporation sales are die construction
contract underutilization charges (see "Certain Transactions") of $62,472,
$462,543, $110,744, $246,011, $72,245, $72,245 and $0 for fiscal years 1992
through 1996 and the three months ended November 30, 1995 and 1996,
respectively.
(2) In conjunction with the Shareholders Agreement between Riviera Holding
Company and Motor Wheel Corporation dated October 31, 1996, a die
construction contract was terminated retroactive to December 31, 1995 and no
underutilization charges are included in sales thereafter. See "Certain
Transactions" and "Principal Shareholders -- Shareholders Agreement."
INDUSTRY TRENDS
Several significant trends within the North American automotive industry
have had, and are likely to continue to have, an impact on the Company's
business. Over the past several years, the industry has required that its tool
suppliers utilize advanced computer integrated technology. This has required
significant capital investment. In some cases, being unable or unwilling to make
this investment, many independent tooling suppliers have exited the business.
This has decreased the available domestic tooling capacity and has resulted in
fewer qualified suppliers.
The automotive industry's trend towards shorter product life cycles and
introduction of a greater number of vehicle models will create growing demand
for the Company's complex tooling systems. In accordance with this trend, the
OEMs are forming alliances with select suppliers which have the technological
capability to successfully perform simultaneous engineering of product and
manufacturing processes from concept to completion at the supplier level and
utilizing computer data based design, manufacturing and validation processes.
The OEMs have formed "Platform" teams which provide the organizational structure
for this simultaneous engineering process, and have included their critical or
key suppliers in these teams. This simultaneous engineering concept allows model
changes to be implemented more quickly and cost-effectively. By involving the
ultimate tool and die manufacturer early in the design process, the OEMs are
better able to design-in more cost-effective manufacturing processes, improve
product quality, and avoid costly changes downstream. Chrysler and Ford are
currently operating Platform teams and management believes that General Motors
will implement this concept within the near future.
16
<PAGE> 19
The emphasis on designing and manufacturing more fuel efficient vehicles as
the result of federal Corporate Average Fuel Economy ("C.A.F.E.") regulation has
produced many new vehicle designs. In addition, automobile manufacturers are
utilizing light-weight, high strength steels and aluminum in new model designs
in order to decrease the weight of the vehicle and increase fuel efficiency.
Therefore, suppliers will be required to have the ability to work with these
types of materials in order to remain competitive. The Company has established
an expertise in manufacturing dies used in the production of structural
components made of light-weight, high strength steels and aluminum.
Chrysler, Ford and General Motors have developed "cash accumulation
policies." These policies entail the establishing and maintaining of cash
reserves to fund new model development during industry downturns. These policies
should create increased and more stable demand for the Company's products and
services in the future. As of September 30, 1996, Chrysler had accumulated $7.5
billion and Ford $13.0 billion for such development during future industry
downturns.(1) General Motors reported cash accumulation reaching $13.0 billion
- -- or $18.4 billion on a consolidated basis, and stated that "This will enable
us to weather the next industry down cycle without sacrificing any of our
product programs, which is critical for long-term success".(2)
Efforts by OEMs and their suppliers to reduce labor and other manufacturing
costs have resulted in their tending to combine common parts into a single
stamping press and reduce the number of "hits" required to manufacture a part.
In addition, utilization of transfer presses has increased demand for transfer
dies to reduce labor cost at the OEMs and their suppliers. The Company believes
that it is one of only a few North American independent suppliers that have the
capability to both design and produce large complex transfer dies.
Management believes these industry trends will continue with emphasis on
simultaneous engineering and manufacturing processes centered around the
utilization of fully computer integrated technologies. This should increase the
Company's customer relationships with and importance to the OEMs and their tier
one suppliers of sheet metal stamped parts and assemblies.
PRODUCTS AND SERVICES
Dies. The Company's dies are used in the high speed production of sheet
metal stamped parts and assemblies. Production of such parts is a multiple step
process involving a series of dies. Typically, the first die is used to cut the
appropriate size metal blank from a sheet or coil of steel. The next die draws
the metal blank into its primary shape and subsequent dies are used to bend
edges or corners, create flanges, trim off excess metal and pierce assembly
holes. A customer usually orders only one series of dies for each separate part.
Normally, the dies do not require replacement due to usage because the life of
well maintained dies is sufficient to carry production to the point when styling
changes dictate production of new dies. The dies manufactured by the Company
generally include automation features, adding to the complexity of design and
construction. These automation features facilitate rapid introduction and
removal of the work piece or raw material into and out of the die, thereby
increasing production speeds and reducing labor cost. A set of stamping dies
manufactured by the Company generally sells for between $250,000 and $2,000,000
depending upon size and complexity.
Simultaneous Engineering of Product and Process. The OEMs are developing
organizational structures involving internal design and engineering personnel as
well as supplier representatives which they are using to develop new car models.
These organizations are called "Platform" teams. This allows full implementation
of simultaneous engineering -- the application of the product engineering and
process engineering functions simultaneously and early in the process. The
Company utilizes advanced Computer Aided Design/Computer Aided Manufacturing
("CAD/CAM") technology to design and manufacture its complex stamping dies. Due
to this advanced computer capability, the Company is able to work very closely
with its customers and is often assigned to these Platform teams early. Its
process engineering input facilitates the teams' goals of introducing new models
rapidly and efficiently. The Company has invested significantly to ensure that
it remains one of the
- -------------------------
(1) Source: Ward's Autoworld, December, 1996.
(2) Source: General Motors Corporation, 1996 Midyear Report to Shareholders,
dated September 10, 1996.
17
<PAGE> 20
few domestic tool and die firms with advanced technology capabilities and is one
of only a few independent suppliers capable of receiving and working directly
from complex mathematical data received from its OEM customers. Although several
of its competitors also utilize CAD/CAM technology, Management believes the
Company is one of only a few suppliers who have successfully integrated
mathematical data into their on-site design, manufacturing and validation
processes across their product line. Management's investment in, and commitment
to, advanced technology has solidified its quality reputation with its customers
and helped the Company advance to tier one status.
Prototype Tooling and Parts. With the advent of Platform team and
simultaneous engineering methods, the Company has become responsible for the
design and manufacture of both the prototype tooling, the final production
tooling and specifies the final production process. Prototype tooling and parts
are utilized during the design phase of new models which the automobile
manufacturers use to validate the fit and function of the respective components
and assemblies and the repeatability of the respective production processes. The
parts manufactured from prototype tools are also often used in crash testing.
Typically, prototype tools associated with the primary metal forming
operations are manufactured from an alloy casting or mild steel and subsequently
machined using the mathematical data base and related Computer Numerically
Controlled ("CNC") programs. After machining, the prototype tools are assembled
and tested to validate the integrity and repeatability of the final
manufacturing process. The results of the validation process are incorporated
into the mathematical data base which will then be used to manufacture the final
production tools. After testing the primary forming operations, prototype parts
are manufactured using special means such as computerized laser cutting machines
to trim off excess scrap and to incorporate various slots and holes. These parts
are then sent to the automobile manufacturers for further testing and
evaluation. The results of this testing and evaluation may require the
incorporation of additional design and manufacturing process modifications.
MANUFACTURING
Traditionally, the die manufacturing process was comprised of various
manual steps performed by craftsmen. After being awarded a contract, the Company
would be presented with a wooden model of the part to be produced. From the
model, plaster tooling aids were constructed. The plaster tooling aids were then
traced and cut into steel. The steel was then ground, usually quite extensively,
by hand to fit. Validation was also done by hand by measuring specific points on
the die face and comparing these to the original design blueprints. Today, with
the Company's technology, the design and most of the manufacturing process is
computer-driven, which increases accuracy and reduces the time required to
produce a set of stamping dies. The process starts when the Company is assigned
to a new Platform team and simultaneous engineering begins. An electronic
"model" of the part to be produced is transmitted directly to the Company via
EDI or sent on computer disk represented as a mathematical database. Company
engineers use the mathematical database to generate computer-aided die designs
and die face cutter path programs. These cutter path programs are used by the
tool makers and machinists to manufacture the inner workings of the tool. Most
material is removed and the cutting is done by CNC machine tools which utilize
the computer-generated cutter path programs. Depending on the complexity of the
tool, a prototype may be manufactured to prove-out the manufacturing process or
to provide actual parts for crash testing and to test fit and function. Finally,
after the die is constructed, it is evaluated statistically for process
repeatability and dimensional validation on the Company's Coordinate Measuring
Machine, or CMM. The Company believes, based upon experience and customer
discussions, that it is one of a very few North American die suppliers and
manufacturers that are able to routinely, and across their product line,
completely computer integrate the mathematical database throughout the entire
die design, manufacture and validation process at their own facilities. During
this automated validation process, the tool is statistically compared to the
mathematical database. Having the optimum size and quantity of tryout presses is
an important aspect of the construction and validation process, and the Company
has therefore invested heavily to ensure its capability in this area.
On average, 10 months elapse from the time the Company is awarded a
contract until the final set of dies is shipped to the customer. The OEMs are
facing growing pressure to reduce the time required to introduce a new car
model. For example, Chrysler has historically needed three years, on average, to
introduce a new
18
<PAGE> 21
model. However, the last small car introduced by Chrysler was introduced in only
31 months. To meet shorter timeframes, OEMs are relying more heavily on
simultaneous engineering and integrating suppliers more closely into the design
process. This trend helps the Company by requiring more direct relationships
between the OEMs and its suppliers such as the Company.
The steel, castings and other components utilized by the Company in the
manufacturing process are available from many different sources and the Company
is not dependent on any single source.
MARKETING AND SALES
The Company's marketing emphasis is on Chrysler, Ford and General Motors
and their tier one suppliers. The Company maintains excellent relationships with
Chrysler and Ford which accounted for about 49% of the Company's revenues in
1996. For the year ended August 31, 1996, Chrysler, Ford, General Motors and
their tier one suppliers accounted for approximately 75% of the Company's
revenues. For the three months ended November 30, 1995 and 1996, Chrysler, Ford,
General Motors and their tier one suppliers accounted for approximately 77% and
93% of the Company's revenues, respectively.
With the growing use of simultaneous engineering, the Company's marketing
goal is to be assigned early to the new model Platforms. As one of only a few
technically proficient suppliers assigned to a Platform, the Company's
opportunity to win business for a new model is greatly enhanced. The Company
works to achieve preferred supplier status with its customers to further
increase its chances of being assigned to new model Platforms. The Company
currently maintains Preferred Supplier status with Chrysler Corporation and Ford
Motor Company. The Company was recently awarded Chrysler's PentaStar quality
award, the highest quality award for a single plant supplier, and Ford Motor
Company's Q-1 supplier award, an award that has been historically given to
suppliers who manufacture parts and assemblies, not to suppliers of tooling. The
Company is the first tool and die firm to be awarded the Q-1 status by Ford
Motor Company.
Sales efforts are conducted primarily by Company's President, senior
management and project management personnel. Frequent contact is made with the
domestic automobile manufacturers and their purchasing agents, Platform managers
and tier one suppliers. When the Company has been assigned to a new model
Platform Team, the Platform Team manager is contacted to determine those parts
and assemblies that will be assigned to various required suppliers. During the
design phase, the Company recommends process and design changes to improve the
cost and quality of the product. Generally, when the Company is assigned to the
Platform Team, orders are obtained directly and without a formal bid process.
The Company maintains a comprehensive computer database with historical
information regarding dies it has previously manufactured. This assists the
Company in quoting prices for dies and enables it to respond to most quotation
requests quickly. If the customer decides to accept the Company's quotation, a
purchase order is issued subject to price adjustments for engineering changes
requested by the customer. Where no Platform Team is assembled, the Company bids
on specific tooling assignments, and bids are awarded on a competitive basis
among a small group of qualified suppliers.
For business done with tier one suppliers, the Company's sales process
follows a more traditional process. The Company typically receives a package or
request for quotation from the tier one supplier and is less involved in the
design process of the part to be manufactured. Bids are generally awarded based
on technological capability, price, quality and past performance.
BACKLOG AND SEASONALITY
The Company's backlog of awarded contracts, of which all are believed to be
firm, was approximately $13.5 million and $8.8 million as of December 31, 1996
and December 31, 1995, respectively. Of the December 31, 1996 contract backlog,
the Company expects all backlog contracts will be reflected in sales during
fiscal year ended August 31, 1997. The Company's sales of stamping dies do not
follow a seasonal pattern: however, the timing of new model introductions and
existing model restyling ("facelifts" and "redos") tooling programs are
dependent on Chrysler, Ford and General Motors and their strategy of
accelerating the introduction of new models.
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<PAGE> 22
COMPETITION
Large, complex automotive stamping dies are manufactured primarily by three
supplier groups: a) domestic independent tool and die manufacturers, b) foreign
independent tool and die manufacturers, and c) captive or in-house tool and die
shops owned and operated by the OEMs.
The independent (both domestic and foreign) tool and die manufacturers have
experienced a significant reorganization over the past five years as the
industry has consolidated. Management believes that during this period, the
independent domestic supplier base (those with sales of at least $15 million)
was reduced significantly and that fewer than 6 such independent domestic
suppliers remain today. Management believes that these 6 competitors have begun
to utilize portions of the technology utilized by the Company. Further,
significant barriers to entry reduce competition in the large-scale die market.
The industry is highly capital intensive and technically complex. Attracting and
retaining employees skilled in the use of advanced design and manufacturing
technology is a multi-year process. Finally, a new competitor would most likely
lack much of the credibility and historical customer relationships that can take
years to develop.
Based upon the responses of 94 sheet metal die manufacturing companies to a
1995 survey by the National Tooling and Machining Association, the annual
domestic independent production of tools and dies exceeds $528,000,000. Of those
respondents only 12 reported average annual sales in excess of $10.0 million.
Based upon the study and the Company's independent knowledge of its direct
competitors, the Company believes it is among the 6 largest independent
suppliers and that no one supplier is dominant.
Finally, the OEMs maintain in-house, captive tool and die capacity to meet
a portion of their needs. General Motors maintains the largest captive capacity
and, based on estimates from various trade publications, supplies an estimated
75-80% of its own die construction needs. Ford produces approximately 50% and
Chrysler 25% of their own respective needs. Independent suppliers like the
Company tend to have a competitive advantage over the OEMs' in-house die shops
due to the OEMs' higher cost structure.
EMPLOYEES
The Company's work force consists of approximately 165 full-time employees,
of which approximately 25 are salaried managerial and engineering personnel. The
balance are hourly employees engaged in manufacturing and indirect labor
support. Included among these hourly workers are approximately 120 skilled
tradesmen who are either journeymen tool and die makers or machinists. None of
the Company's employees are covered by a collective bargaining agreement. The
Company has not experienced any work stoppages and considers its relations with
its employees to be good. The Company has a discretionary contribution 401K
plan. The Company has no contingent pension liabilities arising from any defined
benefit plan. See "Retirement Savings Plan."
PROPERTIES
The Company's facilities are located in Grand Rapids, Michigan and consist
of approximately 178,000 square feet of space of which 28,000 square feet is
utilized for office, engineering and employee service functions, 98,000 square
feet is dedicated to the Company's tooling production and 52,000 square feet is
under a four-year sublease to an unaffiliated tenant. Constructed in 1989, the
facility is leased with a lease term of 20 years. The facility lease provides
for annual payments of $934,500 plus an escalation of base rent of 1% for each
of the first ten years and 2% for each of the second ten years. The Company has
a purchase option on the building at the fair market value beginning in November
1996. The sublease requires annual lease payments of $216,000 commencing August
1, 1994 through July 1, 1996 with annual lease payments of $224,724 commencing
August 1, 1996 through July 1, 1998. The sublease has two options for two years
each with annual lease payments of $231,468 and $238,412, respectively. The
sublease also requires the subtenant to pay 33.7% of common operating expenses
of the facility. The facilities were designed and constructed specifically to
the Company's manufacturing requirements. The Company believes that its
facilities are modern, well maintained, adequately insured and will be adequate
and suitable for their present and intended uses.
20
<PAGE> 23
LEGAL PROCEEDINGS
The Company is a plaintiff in an action against Fred Borsini, Herbert
Keeler and Durametallic Corporation, a Delaware corporation, with Kenneth K.
Rieth, Arlene Morris and Riviera Holding Company, a Michigan corporation wholly
owned by Kenneth K. Rieth, as co-plaintiffs, filed July 22, 1994, in the Kent
County Circuit Court, Grand Rapids, Michigan, Case No. 94-2809-CZ. In July of
1992, the Company contributed machinery, equipment, inventory, work-in-process
and receivables related to the business of building plastic injection molds to a
joint venture that then became known as Leap Technologies, Inc. Defendants in
this action contributed all of the stock of a mold builder then known as Leap
Technologies, Inc. The Company contributed assets valued at $5.4 million, the
new entity assumed debts in the amount of $3.7 million, and the Company received
$1.7 million of preferred stock in the new entity. The Company alleges that the
status of the business contributed by the defendants was fraudulently
represented to it and the defendants are therefore liable to the Company for all
losses sustained as a result of the failure of the venture. The Company is
asking for return of its investment plus the additional damages it incurred in
the process of liquidating the venture. Management believes that approximately
$3,000,000 of damages has been identified, however, the complete damage
evaluation is incomplete. One defendant has counterclaimed for breach of
representations by the Company without specifying any amount of damages. The
Company is not currently involved in other legal proceedings other than ordinary
or routine proceedings incidental to its operations. In the opinion of
management, no existing proceedings, including the matter involving Leap
Technologies, Inc., would have a significant effect on the financial condition,
results of operations and cash flows of the Company if determined against the
Company.
21
<PAGE> 24
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth the names of and certain other information
concerning the executive officers, directors and key employees of the Company.
The Company currently has five directors, Messrs. Rieth, Wood, Collins, Kinstler
and Kennedy. Mr. Highley has been selected and has agreed to become a director
of the Company subject to the completion of this Offering made hereby, at which
time the Company's Board of Directors will be increased in number from five to
six directors.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION CLASS SINCE
- ------------------------------ --- ----------------------------------------- ----- --------
<S> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND
DIRECTORS
Kenneth K. Rieth(1)........... 37 President, Chief Executive Officer and III 1980
Director
Leonard H. Wood(1)............ 54 Vice President -- General Manager and II 1988
Director
Peter C. Canepa............... 37 Chief Financial Officer, Secretary and -- --
Treasurer
John C. Kennedy(1)............ 37 Director I 1991
Thomas R. Collins(2).......... 53 Director II 1995
John H. Kinstler(2)........... 47 Director III 1988
Thomas H. Highley(3).......... 55 Director Nominee I --
</TABLE>
- -------------------------
(1) Designated by Kenneth K. Rieth pursuant to Voting Agreement. See "Principal
Shareholders -- Shareholders Agreement."
(2) Designated by Motor Wheel Corporation pursuant to Voting Agreement. See
"Principal Shareholders -- Shareholders Agreement."
(3) Nominated by Agreement of Motor Wheel Corporation and Riviera Holding
Company. See "Principal Shareholders -- Shareholders Agreement."
The Board of Directors is divided into three classes: Class I, Class II and
Class III. The initial terms of office of directors in Class I, Class II and
Class III end following the annual meetings in 1997, 1998, and 1999
respectively. Thereafter directors in each class will serve for three year
terms. Executive officers serve at the discretion of the Company's Board of
Directors. The Company pays each director who is not a Company employee or an
employee of a 10% or more shareholder a fee of $5,000 per year.
Kenneth K. Rieth -- Mr. Rieth has been a principal owner and President of
Riviera Die & Tool since 1980. Mr. Rieth serves as a Director of Autocam
Corporation, a designer and manufacturer of close tolerance, specialty metal
alloy components for the automotive, electronic and computer industries since
1991.
Leonard H. Wood -- Mr. Wood has been a Vice President of the Company since
1985 and a Director since 1988. Prior to that time, he was Project Manager with
American Motors Corporation.
Peter C. Canepa -- Mr. Canepa has been with the Company since March of 1994
as the Chief Financial Officer, Secretary and Treasurer. Prior to that time, he
was Chief Financial Officer, Treasurer and Director of Frost, Incorporated, a
Michigan corporation, a manufacturer of material handling systems components,
more than three years. Mr. Canepa graduated in 1980 with a Bachelor of Science
in Accounting and Finance degree from Ohio Wesleyan University.
John C. Kennedy -- Mr. Kennedy has been a principal owner, Director and
President of Autocam Corporation, a designer and manufacturer of close
tolerance, specialty metal alloy components for the automotive, electronic and
computer industries since 1988.
Thomas R. Collins -- Mr. Collins has been Controller of the Automotive
Brake Division of Hayes Wheels International, Inc., the Parent Company of Motor
Wheel Corporation (see "Principal Shareholders"), since July, 1996. Prior to
that time, he was Vice President, Treasurer and Chief Financial Officer of Motor
22
<PAGE> 25
Wheel Corporation, a designer and producer of wheels and brakes for the
automotive and commercial highway markets, since 1991. Prior to 1991, he was
Comptroller and held other various positions at Motor Wheel Corporation.
John H. Kinstler -- Mr. Kinstler has been Vice President of Engineering of
the Fabricated Wheel Division of Hayes Wheels International, Inc., the Parent
Company of Motor Wheel Corporation (see "Principal Shareholders"), since May,
1996. Prior to that time, he was Vice President of Manufacturing of Motor Wheel
Corporation since 1992. He was Executive Vice President of Engineering and
Quality from 1989 through 1992 and Vice President of Engineering from 1985
through 1989 of Motor Wheel Corporation.
Thomas H. Highley -- Mr. Highley has been President and C.E.O. of the
Empire Company, a distributor of residential and commercial millwork products,
since 1991.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the total compensation earned by each
executive officer during the fiscal years ended August 31, 1996, 1995, and 1994
for services rendered to the Company in all capacities during such years.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1)
NAME AND PRINCIPAL ------------------
POSITION AT AUGUST 31, 1996 YEAR SALARY BONUS OTHER(2)
- --------------------------------------------------------- ---- -------- ----- -------
<S> <C> <C> <C> <C>
Kenneth K. Rieth......................................... 1996 $150,800 $-0- $ -0-
President, CEO and Director 1995 150,800 -0- -0-
1994 150,800 -0- -0-
Leonard H. Wood.......................................... 1996 $124,800 $-0- $ 7,291
Vice President, General Manager and Director 1995 124,800 -0- 7,291
1994 124,000 -0- 7,291
Peter C. Canepa.......................................... 1996 $110,500 $-0- $ -0-
Secretary, Treasurer and CFO 1995 110,500 -0- -0-
1994 51,150(3) -0- -0-
</TABLE>
- -------------------------
(1) Does not include any value that might be attributable to job-related
personal benefits, the annual value of which has not exceeded the lesser of
10% of annual salary plus bonus or $50,000 for each executive officer.
(2) Represents the dollar value of the premiums paid by the Company for life
insurance policy maintained in respect of a deferred compensation plan
discussed below in "Other Benefits."
(3) Mr. Canepa joined the Company on March 21, 1994.
The Company's Board of Directors has given Mr. Rieth the authority to set
the compensation for Senior Management. Mr. Rieth's salary has been set by the
Board of Directors since 1991.
1996 STOCK OPTION PLAN
The Company's 1996 Stock Option Plan (the "Option Plan") was adopted by the
Board of Directors and approved by the shareholders on October 31, 1996. The
purpose of the Option Plan is to make options available to employees of the
Company to give them a greater personal interest in the success of the Company
and an added incentive to continue their employment. Riviera Holding Company,
Kenneth K. Rieth and Motor Wheel Corporation are not eligible to participate in
the Option Plan. 250,000 shares of Common Stock are reserved for issuance under
the Option Plan and the options are intended to qualify as incentive stock
options under the Internal Revenue Code of 1986, as amended.
The Option Plan is administered by members of the Board of Directors who
are not eligible to participate in the Option Plan, or if designated, a
committee comprised of such directors. Options granted under the Option Plan are
not transferable by the optionee other than by will or the laws of descent and
distribution and
23
<PAGE> 26
each option is exercisable during the lifetime of the optionee, and so long as
the employee does not engage in activity in competition with or contrary to the
interests of the Company. No options may be granted under the Option Plan after
August 31, 2006.
The exercise price of options granted under the Plan cannot be less than
the fair market value of the underlying shares on the option date grant. The
terms of each option and the manner in which it may be exercised will be
determined by the administrator subject to the requirement that no option may be
exercisable more than ten years after the option grant date. With respect to any
option granted to a participant who owns, or is deemed to own, stock possessing
more than 10% of the voting rights of the Company's outstanding capital stock at
the option grant date, the exercise price of the option must be at least equal
to 110% of the fair market value on the date of grant and the option may not be
exercisable more than five years after option grant date. Under the terms of the
Option Plan, the aggregate fair market value of the Common Stock (determined at
the date of the option grant) underlying options granted to any employee and
exercisable in any single year may not exceed $100,000.
RETIREMENT SAVINGS PLAN
The Company has a profit-sharing plan that covers substantially all
employees (the "Plan"). The Plan includes a 401(k) deferred compensation option.
It is the Company's policy to fund profit-sharing costs accrued on an annual
basis. The Plan, as established, allows for discretionary contribution as
determined annually by the Company's Board of Directors. No discretionary
contribution has been made for 1993, 1994 or 1995.
Part of the Plan includes a retirement savings plan qualified under
Internal Revenue Code Section 401(k) in which all full-time employees may
participate. Contributions are made to the plan by participants electing to
defer portions of their regular compensation. Amounts elected to be deferred
within certain statutory limits (currently $9,240 per year) are not taxable to
the participant. The Company matches and contributes up to 15% of the employee's
contribution to the 401(k) Plan, up to 2% of the employee's annual wage.
The Company's 8% Cumulative Preferred Stock is all owned by the Plan. A
dividend of $8.00 per share is payable on each July 31 to the holder of each
share of such stock and no other dividends can be paid until all such dividends
have been paid for all periods the 8% Cumulative Preferred Stock is outstanding.
No other dividends are payable in respect of the 8% Cumulative Preferred Stock.
The outstanding 8% Cumulative Preferred Stock may be redeemed at any time by the
Board of Directors for the price of $100 per share and all must be redeemed in
installments of 475 shares on July 1, 1996 and 1997, respectively. The Company
is in default of such redemption for the July 1, 1996 installment. Upon
redemption, all unpaid dividends must also be paid on a pro rata basis through
date of redemption. The Company has not paid dividends for 1996. In the event of
liquidation of the Company, the holders of shares of 8% Cumulative Preferred
Stock are entitled to receive, prior to the holders of shares of all other stock
of the Company, ratably an amount up to $100 per share plus all unpaid and
accrued dividends to the date of payment. The shares of 8% Cumulative Preferred
Stock currently outstanding are duly authorized, validly issued, fully paid, and
nonassessable. Holders of 8% Cumulative Preferred Stock have no conversion
rights and are not entitled to any preemptive or subscription rights.
Under the Plan, benefits are payable in a lump sum upon termination of
employment with the Company for any reason.
OTHER BENEFITS
The Company has an Executive Deferred Compensation Plan agreement with Mr.
Wood. This Agreement provides that upon death, disability or retirement from
service after reaching age 65, the employee or his heir and assigns will receive
$50,000 per year for five consecutive years. For each year that employment with
the Company is terminated, for any reason, prior to September 1, 1999, the
benefit will be reduced by 10% or $5,000 per year. Mr. Wood is age 54.
24
<PAGE> 27
The Company has an Employment Agreement with Kenneth K. Rieth. Pursuant to
which Mr. Rieth will continue to serve as the Chief Executive Officer and
President of the Company. The term of the agreement is for a period of three
years beginning September 1, 1996. Pursuant to the agreement with Mr. Rieth, the
Company will pay Mr. Rieth a base salary of $150,800 and a bonus of not less
than 3.5% of the Company's income before taxes.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During fiscal 1996 the Board of Directors, then consisting of Directors
Kennedy, Wood, Kinstler, Collins and Rieth, had the responsibility of setting
executive compensation. Mr. Rieth serves as President and Chief Executive
Officer of the Company and serves on the Board of Directors of Autocam
Corporation, where Mr. Kennedy is President, Chief Executive Officer and also a
member of the Board of Directors. Mr. Rieth also served on the Compensation
Committee of Autocam Corporation until August 1995.
CERTAIN TRANSACTIONS
The Company previously had a contract with Motor Wheel Corporation ("Motor
Wheel"), an Ohio corporation, located in Okemos, Michigan, relating to the
performance of engineering for and construction of dies to be purchased by Motor
Wheel. This contract was terminated October 14, 1996 effective December 31,
1995. Mr. Kinstler, a director of the Company, is Vice President of the
Fabricated Wheel Division of Hayes Wheels International, Inc., the Parent
Company of Motor Wheel. Mr. Collins, a director of the Company, is Controller of
the Automotive Brake Division of Hayes Wheels International, Inc., the Parent
Company of Motor Wheel. Motor Wheel owns 50% of the outstanding common stock of
the Company and, assuming no exercise of the Underwriters' overallotment option,
will own 28.5% of the Company's Common Stock after the sale of the shares
described by this Prospectus. This contract provided that the Company would
quote such services to Motor Wheel at hourly rates not greater than it had on
file with or was actually quoting to any automobile manufacturer. Motor Wheel
was required to purchase not less than 155,000 hours of such work, as defined by
the contract, or, if less, 85% of its entire domestic consumption of such
services if domestic consumption was less than 182,500 hours in any year. In
that event, Motor Wheel was required to purchase its foreign consumption of such
services from the Company if the Company was competitive in price, quality and
delivery. Motor Wheel paid to the Company $72,245 and $246,011 during fiscal
1996 and 1995, respectively, resulting from its having used less than the
155,000 hours minimum. The contract was to terminate on December 31, 1998 and
could have been extended for two additional five year terms by Motor Wheel.
Pursuant to the Shareholders Agreement between Motor Wheel and Riviera Holding
Company dated October 31, 1996, such die construction supply contract was
terminated effective December 31, 1995. As a result, no under utilization
charges will be received by the Company for any period after December 31, 1995.
See "Principal Shareholders -- Shareholders Agreement."
In connection with the Shareholders Agreement dated October 31, 1996
between Motor Wheel and Riviera Holding Company, the Company has declared a
preferential dividend on the shares of common stock of the Company owned by
Riviera Holding to pay the income tax payable by Riviera Holding Company as a
result of the lapse of options by Motor Wheel to purchase common stock owned by
Riviera Holding Company and as a result of the dividend itself. The Company has
estimated this dividend to be approximately $170,000.
Mr. Rieth has pledged all of his Riviera Holding Company common stock to
the Company's principal commercial lender under its loan documents, which pledge
Mr. Rieth expects to terminate on the date of this Prospectus.
The Company believes that the transactions described above were at prices
and terms which were no less favorable to the Company than would have been
available in similar transactions with unaffiliated third parties. The policy of
the Company is that, in the future, proposed transactions with affiliates of the
Company must have the prior approval of a majority of the disinterested members
of the Board of Directors and be made on terms no less favorable to the Company
than could be obtained from unaffiliated parties.
25
<PAGE> 28
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's articles of incorporation and bylaws provide for
indemnification of directors and officers. The Company believes that such
indemnification will assist the Company in continuing to attract and retain
talented directors and officers in light of the growing risk of litigation
directed against directors and officers of publicly held corporations. The
Company's articles of incorporation and bylaws provide that the Company shall
indemnify each person who may serve or who has served at any time as director or
officer, or who at the request of the Board of Directors of the Company may
serve or at any time have served as director or officer of another corporation
or enterprise, and his or her respective heirs, administrators, successors and
assigns, against any and all expenses, including amounts paid upon judgments,
counsel fees, and amounts paid in settlement (before and after suit is
commenced), actually and necessarily incurred by such person in connection with
the defense or settlement of any claim, action, suit, or proceeding in which he
or she are made parties, or are a party, or which may be asserted against them
or any event, by reason of being or having been director or officer or a
director or officer of the Company or any such other corporation or enterprise,
if he or she acted in good faith and in a manner which such person reasonably
believed to be in or not opposed to the best interests of the Company, or its
shareholders, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was not unlawful. Such
indemnification shall be in addition to any other rights to which those
indemnified may be entitled under any law, by-law, agreement, vote of
Shareholders or otherwise.
The Michigan Business Corporation Act permits Michigan corporations to
limit the personal liability of directors for a breach of their fiduciary duty.
The Company's articles of incorporation limit liability to the maximum extent
permitted by law. The Company's articles of incorporation provide that a
director of the Company shall not be personally liable to the Company or its
shareholders for monetary damages for breach of the director's fiduciary duty.
However, it does not eliminate or limit the liability of a director for any of
the following: (1) a breach of the director's duty of loyalty to the Company or
its shareholders; (2) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (3) a transaction from
which the director derives an improper personal benefit; (4) making an unlawful
loan to a director, officer or employee of the Company; and (5) declaring an
unlawful dividend or distribution to shareholders. As a result of this
provision, shareholders of the Company may be unable to recover monetary damages
against directors for actions taken by them which constitute negligence or gross
negligence or which are in violation of their fiduciary duties, although it may
be possible to obtain injunctive or other equitable relief with respect to such
actions. If equitable remedies are found not to be available to shareholders in
any particular case, shareholders may not have any effective remedy against the
challenged conduct.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act") may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is therefore unenforceable.
26
<PAGE> 29
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock and 8% Cumulative Preferred Stock as of
November 30, 1996 by (i) persons known by the Company to own more than 5% of the
Company's Common Stock; (ii) directors and officers of the Company; and (iii)
all officers and directors of the Company as a group. Beneficial ownership
includes both voting and investment power.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL AMOUNT OF BENEFICIAL
OWNERSHIP PRIOR TO OFFERING OWNERSHIP AFTER OFFERING
----------------------------------------- -----------------------------------------
NAME OF BENEFICIAL OWNER COMMON STOCK 8% PREFERRED STOCK COMMON STOCK 8% PREFERRED STOCK
OFFICER, DIRECTORS & 5% ------------------- ------------------- ------------------- -------------------
SHAREHOLDERS: SHARES % TOTAL SHARES % TOTAL(1) SHARES % TOTAL SHARES % TOTAL(1)
- ------------------------------- --------- ------- ------ ---------- --------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kenneth K. Rieth(2)(3)(4)...... 1,460,000 100% * * 1,460,000 57% * *
Motor Wheel Corporation(5)..... 730,000 50% -- -- 730,000 28.5% -- --
Leonard H. Wood(2)............. -- -- -- -- -- -- -- --
Peter C. Canepa(2)............. -- -- -- -- -- -- -- --
-- --
--------- ------- ------ --------- ------- ------
All officers and directors as a
group (3 persons)(1)......... 1,460,000 100% * * % 1,460,000 57% * * %
========= ======= ====== ========== ========= ======= ====== ==========
</TABLE>
- -------------------------
* Beneficial ownership of less than 1% of the class.
(1) Beneficial ownership determined on the basis of the ratio of account balance
to total plan assets in Riviera Tool Company Cash or Deferred Compensation
Plan, owner of all the outstanding 8% Cumulative Preferred Stock of the
Company.
(2) The business address for Messrs. Rieth, Canepa and Wood is 5460 Executive
Parkway SE, Grand Rapids, MI 49512.
(3) Riviera Holding Company, 100% owned by Kenneth K. Rieth, owns the Common
Stock of Riviera Tool Company.
(4) Includes beneficial ownership of 730,000 shares of common stock owned by
Motor Wheel Corporation and subject to purchase by Riviera Holding Company
under the Shareholders Agreement and related Stock Option Agreement dated
October 31, 1996. See "Principal Shareholders -- Shareholders Agreement" and
"Shares Eligible for Future Sale."
(5) John R. Kinstler and Thomas R. Collins are directors of the Company and are
Vice President of the Fabricated Wheel Division and Controller of Automotive
Brake Division, respectively, of Hayes Wheels International, Inc. Mr.
Kinstler owns less than 1% of the common stock of such company. The business
address for Mr. Collins and Mr. Kinstler is 38481 Huron River Drive,
Romulus, Michigan 48174.
SHAREHOLDERS AGREEMENT
Riviera Holding Company and Motor Wheel have executed a written
Shareholders Agreement (the "Shareholders Agreement") which provides that they
will unconditionally and irrevocably vote their respective shares of common
stock jointly in structuring the Company's Board of Directors into a board
consisting of seven members divided into three classes, two classes consisting
of two members and one class consisting of three members. Under such agreement
Riviera Holding Company will be entitled to designate three directors and Motor
Wheel to designate two directors. Both parties agree unconditionally and
irrevocably to vote all of their respective shares of common stock in favor of
the persons so designated by each party as directors. The remaining members of
the Board of Directors (two directors) may be nominated by any person however,
Motor Wheel and Riviera Holding Company have agreed to vote together on nominees
for these positions. Voting on all other matters is in the sole discretion of
the shareholder.
Pursuant to the Shareholders Agreement, Motor Wheel has granted Riviera
Holding Company an option to purchase all the shares of the Company owned by
Motor Wheel. The option is exercisable at a purchase price of $3.0 million, or
$4.11 per share, payable within 30 days after notice of exercise. This stock
option will lapse on October 31, 1997.
Under the Shareholders Agreement Motor Wheel has certain registration
rights. Motor Wheel, Riviera Holding Company and the Company have agreed not to
register, sell, contract to sell or otherwise dispose of any shares of Common
Stock for a period of two years after the date of this Prospectus (the "Lock-Up
Period") without the prior written consent of the Representative. Motor Wheel
has a demand registration right which is exercisable at any time after the
expiration of the "Lock-Up" period. In connection with any
27
<PAGE> 30
Company registration after the expiration of the "Lock-Up" period Motor Wheel
has "piggyback registration rights" for all of their shares. However, if in the
reasonable opinion of the lead underwriter who is expected to market the
securities covered by such registration statement, to the extent the inclusion
of such Motor Wheel shares shall be impractical and inadvisable. Motor Wheel
shares will be included in such registration shall be reduced pro rata (pro-rata
reduction of all shares of selling shareholders included in such registration
statement), but only as to such registration statement.
Under the Shareholders Agreement both Motor Wheel and Riviera Holding
Company have specific rights under a proposed sale of the shares of the Company
held by either one. Under such provision if either Motor Wheel or Riviera
Holding Company proposes to directly or indirectly transfer its shares in the
Company, it shall give the other party the right to purchase such shares at the
same price, terms and conditions as the proposed transfer. Alternatively, at the
election of the other party, the seller must arrange for the purchaser or
purchasers to purchase at least identical percentages of the Company shares
owned by each of Motor Wheel and Riviera Holding Company immediately prior to
such proposed transfer. If such proposed purchaser is purchasing only a given
number of shares, then the total number of shares to be sold in such transfer by
each of Motor Wheel and Riviera Holding Company shall be reduced pro rata so as
to total such given amount.
This Shareholders Agreement will terminate when one of the parties no
longer holds shares of Common Stock.
28
<PAGE> 31
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 200,000 shares of
Preferred Stock, none of which have been issued, and 1,425 shares of 8%
Cumulative Preferred Stock which are outstanding and owned by the Riviera Tool
Company Cash or Deferred Compensation Plan, a qualified retirement plan
maintained by the Company for its employees, and 9,798,575 shares of Common
Stock, of which 1,460,000 shares are currently issued and outstanding. See
"Principal Shareholders." Pursuant to Michigan corporate law, the capital stock
of the Company has no par value.
PREFERRED STOCK
The terms of the Preferred Stock, or any series thereof, may be determined
from time to time by the Board of Directors. Such shares may be convertible into
Common Stock and may be superior to the Common Stock in the payment of
dividends, liquidation, voting and other rights, preferences and privileges.
Shares of Preferred Stock may be issued from time to time by authorization of
the Board of Directors of the Company without the vote of holders of the Common
Stock. The issuance of such Preferred Stock could be used, for example, in
certain circumstances to render more difficult or to discourage a merger, tender
offer or proxy contest or a removal of incumbent management. The Company has no
present plans to issue any shares of Preferred Stock.
8% CUMULATIVE PREFERRED STOCK
Holders of the 8% Cumulative Preferred Stock vote only on such matters
where voting as a class is required by law to authorize an action. All
outstanding shares of this stock are all owned by the Company's qualified
retirement plan. A dividend of $8.00 per share is payable on each July 31 to the
holder of each share of such stock and no other dividends can be paid until all
such dividends have been paid for all periods during which the 8% Cumulative
Preferred Stock is outstanding. No other dividends are payable in respect of the
8% Cumulative Preferred Stock. The outstanding 8% Cumulative Preferred Stock may
be redeemed at any time by the Board of Directors for the price of $100 per
share and must be redeemed in installments of 475 shares each on July 1, 1996
and 1997, respectively. The Company is in default of such redemption for the
July 1, 1996 installment. Upon redemption, all unpaid dividends must also be
paid on a pro rata basis through date of redemption. The Company has not paid
dividends for 1996. In the event of liquidation of the Company, the holders of
shares of 8% Cumulative Preferred Stock are entitled to receive, prior to the
holders of shares of all other stock of the Company, ratably an amount up to
$100 per share plus all unpaid and accrued dividends to the date of payment. The
shares of 8% Cumulative Preferred Stock currently outstanding are duly
authorized, validly issued, fully paid, and nonassessable. Holders of 8%
Cumulative Preferred Stock have no conversion rights and are not entitled to any
preemption or subscription rights.
COMMON STOCK
Holders of Common Stock have one vote per share and a ratable right to the
net assets of the Company in liquidation after payment of all amounts due to
creditors and any holders of preferred stock. After payment of dividends or
distributions to the holders of preferred stock, if any, holders of Common Stock
participate ratably in dividends and distributions as may be declared by the
Board of Directors from funds legally available therefor. See "Dividend Policy."
Holders of Common Stock have no conversion rights and are not entitled to any
preemptive or subscription rights. The shares of Common Stock currently
outstanding are, and the shares to be issued pursuant to this Offering will be,
duly authorized, validly issued, fully paid and nonassessable.
VOTING ON DIRECTORS
The Company's by-laws provide that the Board of Directors is divided into
three classes with each class elected for a three year term. The Board currently
consists of five members and will be expanded to six members upon completion of
the Offering made hereby. Shareholders do not have cumulative voting rights in
the election of directors. Riviera Holding Company and Motor Wheel have an
agreement with respect to the
29
<PAGE> 32
voting of their shares on Directors which provides that they will vote in
concert to elect three members designated by Riviera Holding Company, two
members designated by Motor Wheel and two additional members as they agree upon.
Only one member has been agreed upon. A seventh member has not been proposed by
either of them, but may be added in the future.
OTHER PROVISIONS
Chapter 7A of the Michigan Business Corporation Act. Under Chapter 7A of
the Michigan Business Corporation Act (the "MBCA"), "business combinations"
(defined to include, among other transactions, mergers, consolidations, certain
dispositions of assets or shares, and certain recapitalizations) between certain
corporations or their domestic subsidiaries and an "interested Shareholder"
(defined as the direct or indirect beneficial owner of at least 10% of the
voting power of a covered corporation's outstanding shares or an affiliate of
the corporation which had such 10% ownership within the preceding two years) can
only be consummated if approved by at least 90% of the votes of each class of
the corporation's shares entitled to vote thereon and by at least two-thirds of
such votes not held by the interested Shareholder or its affiliates, unless
certain price and other conditions imposed by Chapter 7A are satisfied. The
Board of Directors may elect to exempt business combinations with a particular
interested shareholder from the requirements of Chapter 7A at any time before
the interested shareholder attains that status.
Chapter 7B of the Michigan Business Corporation Act. Under Chapter 7B of
the MBCA, "control shares" (defined to mean shares, which when added to all
other shares of the corporation owned by a person or with respect to which that
person may exercise or direct the exercise of voting power, would entitle that
person, immediately after the acquisition of the shares, to exercise or direct
the exercise of voting power in the election of directors in excess of threshold
levels of 20%, 33 1/2% or a majority of all voting power) acquired in a "control
share acquisition" (defined to include the acquisition, directly or indirectly,
by any person of ownership of or the power to exercise the voting power with
respect to, issued and outstanding control shares) have the same voting rights
as were accorded the shares before the control share acquisition only to the
extent granted by resolution approved by the Shareholders of the corporation. To
have such a resolution considered by the shareholders of the corporation, the
acquiring person must deliver an "acquiring person statement" to the corporation
and the Michigan Department of Commerce, Corporation and Securities Bureau. To
be approved by the shareholders, the resolution must be approved by a majority
of the votes cast by the holders of the common stock and a majority of the votes
cast by the holders of shares of each class or series entitled to vote thereon,
excluding "interested shares" (defined to include shares held by the acquiring
person or member of his group, an officer of the corporation and any director
who is also an employee of the corporation). The practical effect of Chapter 7B
of the MBCA is to require that a person making a tender offer for shares of a
corporation condition the offer on shareholder approval of the person's right to
vote the shares to be acquired.
If authorized by the corporation's articles of incorporation or bylaws,
control shares acquired in a control share acquisition with respect to which no
acquiring person statement has been filed may be redeemed by the corporation at
any time more than 60 days after the end of the control share acquisition at
"fair value." If authorized by the corporation's articles of incorporation or
bylaws, control shares acquired in a control share acquisition which are not
accorded full voting rights may be redeemed by the corporation at "fair value."
Unless otherwise provided in the corporation's articles of incorporation or
bylaws, in the event that control shares acquired in a control share acquisition
are accorded full voting rights and the acquiring person has acquired a majority
of all voting power of the corporation, the Shareholders of the corporation,
other than the acquiring person, have dissenters' rights. "Fair value" means a
value not less than the highest price paid per share by the acquiring person in
the control share acquisition.
The provisions of Chapter 7B automatically apply to the Company, although
the Board of Directors or the Shareholders may elect to remove the Company from
the application of Chapter 7B. The Board has no plans to elect to remove such
application and is not aware of any plans or proposals to do so. Further, none
of the provisions discussed above has been included in the Company's Articles of
Incorporation or Bylaws.
The foregoing discussion concerning the provisions of the MBCA is qualified
in its entirety by reference to such MBCA provisions.
30
<PAGE> 33
SHAREHOLDER PROPOSALS
Any proposal intended to be presented by a shareholder at a meeting of the
Company's shareholders must be presented in writing to the Secretary of the
Company at least 60 days prior to the date of the meeting for consideration by
the shareholders at such meeting.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the shares of Common Stock of the
Company is Boston EquiServe Limited Partnership, Canton, Massachusetts 020201.
Its telephone number is (617) 575-2000.
SHARES ELIGIBLE FOR FUTURE SALE
Immediately following the completion of this Offering, approximately
1,460,000 shares of Common Stock will be held by two existing shareholders,
Riviera Holding Company and Motor Wheel. Such shares of Common Stock (herein
referred to as "Restricted Shares") may not be sold unless they are registered
under the Securities Act of 1933, are sold pursuant to an applicable exemption
from registration, or sold within the volume limitations established by Rule 144
promulgated under the Act. Rule 144 restricts Riviera Holding Company and Motor
Wheel to sales via brokers' transactions or to market-makers in an amount in any
three months not in excess of the greater of 1% of the number of shares of
Common Stock then outstanding or the average weekly trading volume for a
four-week period prior to each such sale. In connection with this Offering,
Riviera Holding Company and Motor Wheel have agreed not to sell any of their
Restricted Shares for a period of two years after the date of this Prospectus
without the consent of the Representative.
Motor Wheel and Riviera Holding Company have entered into a Shareholders
Agreement which provides for certain "demand" and "piggyback registration
rights" for Motor Wheel, an option for Riviera Holding Company to purchase Motor
Wheel shares in the Company for a period ending October 31, 1997, coordination
of voting for directors and certain other rights should either one of them
propose a sale of shares in the Company to a third party without registration.
See "Principal Shareholders -- Shareholder Agreement."
No predictions can be made as to the effect, if any, that market sales of
Common Stock or the availability of Common Stock for sale will have on the
market price prevailing from time to time. Nevertheless, sales of substantial
amounts of Common Stock in the public market could adversely affect prevailing
market prices.
31
<PAGE> 34
UNDERWRITING
In the Underwriting Agreement, the Underwriters, represented by the
Representative, have agreed, severally, subject to the terms and conditions
therein set forth to purchase from the Company, and the Company has agreed to
sell them, the number of shares of Common Stock, totaling 1,100,000 shares, set
forth opposite their respective names below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
------------------------------------------------------------------- ---------
<S> <C>
National Securities Corporation....................................
----------
Total......................................................... 1,100,000
==========
</TABLE>
The Underwriters propose to initially offer the shares to the public at the
public offering price set forth on the cover page of this Prospectus. The
Underwriters may allow to select dealers who are members of the National
Association of Securities Dealers, Inc. a concession not exceeding $
per share and any Underwriter may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After
this Offering, the public offering price and concession and discounts may be
changed by the Representative.
The Company has granted an option to the Underwriters, exercisable during
the 45-day period after the date of this Prospectus, to purchase up to an
additional 165,000 shares of Common Stock at the same price per share as the
initial shares purchased from the Company. The Underwriters may exercise such
option only to cover over-allotments in the sale of shares that the Underwriters
have agreed to purchase. To the extent that the Underwriters exercise such
option, each of the Underwriters will have a firm commitment, subject to certain
conditions, to purchase the same percentage of the total option shares as the
number of shares to be purchased and offered by that Underwriter in the table
above bears to the total.
The Company has agreed to indemnify, or to contribute to payments made by,
the Underwriters and certain of their controlling persons with respect to
certain civil liabilities, including certain civil liabilities under the
Securities Act of 1933.
The Company and each existing common stockholder have agreed not to
register, sell, contract to sell or otherwise dispose of any shares of Common
Stock for a period of two years after the date of this Prospectus without the
prior written consent of the Representative.
Prior to this Offering, there has been no public market for the Company's
Common Stock. Consequently, the offering price has been determined through
negotiation between the Company and the Representative. Such price has been
based upon on a number of factors, including estimates of the business potential
of the Company, its earning history and prospects, the present state of the
Company's development, an assessment of the Company's management, the
consideration of the above factors in relation to market valuations of
comparable companies and the current condition of the industry and the economy
as a whole.
The Company has agreed to pay the Representative a non-accountable expense
allowance of 3% of the gross proceeds from the sale of the Common Stock offered
hereby, $25,000 of which has been paid as of the date of this Prospectus. In
addition, upon completion of this Offering, the Company will issue the
Representative's Warrant to the Representative entitling the Representative to
purchase up to 110,000 shares of Common Stock. The Representative's Warrant is
exercisable beginning one year from the effective date of this Prospectus,
expires five years from the date of this Prospectus, and may not be transferred,
assigned or hypothecated for a period of one year following the effective date
of this Prospectus, but may thereafter be assigned into any successor, officer
or partner of the Representative. The Representative's Warrant will be
32
<PAGE> 35
exercisable in whole or in part for a period of four years thereafter at a price
per share equal to 120% of the initial public offering price set forth on the
cover page of this Prospectus. The Representative's Warrant provides for
adjustment in the exercise price of the Representative's Warrant in the event of
certain mergers, acquisitions, stock dividends and capital changes. The
Representative's Warrant grants to the holders thereof certain rights with
respect to the registration under the Act of the securities issuable upon
exercise of the Representative's Warrant. In the event of the exercise of the
Representative's Warrants, the Company has the right to redeem such warrants.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Dickinson, Wright, Moon, Van Dusen & Freeman, Grand Rapids, Michigan.
Certain legal matters will be passed on for the Underwriters by Camhy Karlinsky
& Stein LLP, New York City, New York.
EXPERTS
The financial statements as of August 31, 1996, and for each of the three
years in the period ended August 31, 1996 included in this Prospectus and the
related financial statement schedules included elsewhere in the Registration
Statement containing this Prospectus (the "Registration Statement") have been
audited by Plante & Moran, LLP, independent auditors, as stated in their reports
appearing herein and elsewhere in the Registration Statement and are included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration
Statement on Form S-1 under the Act, as amended, with respect to the shares of
Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits thereto.
For further information with respect to the Company and the shares of Common
Stock offered by this Prospectus reference is made to such Registration
Statement and exhibits. Statements made in this Prospectus referring to a
document filed as an exhibit to the Registration Statement are qualified by
reference to the exhibit for a complete statement of its terms and conditions.
Copies of the Registration Statement together with exhibits thereto may be
obtained from the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549 upon payment of the charges prescribed by the Commission
or may be examined without charge at the public reference facilities maintained
at the principal office of the Commission. The Company is an electronic filer,
and the Commission maintains a web site that contains reports, proxy and
information statements and other information regarding the Company at
www.sec.gov/edgarhp.htm.
33
<PAGE> 36
RIVIERA TOOL COMPANY
TABLE OF CONTENTS
<TABLE>
<S> <C>
REPORT LETTER........................................................................ F-2
FINANCIAL STATEMENTS
Balance Sheet...................................................................... F-3
Statement of Operations............................................................ F-4
Statement of Common Stockholders' Equity........................................... F-5
Statement of Cash Flows............................................................ F-6
Notes to Financial Statements...................................................... F-7
</TABLE>
F-1
<PAGE> 37
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Riviera Tool Company
We have audited the accompanying balance sheet of Riviera Tool Company, as
of August 31, 1994, 1995 and 1996, and the related statements of operations,
common stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Riviera Tool Company at
August 31, 1994, 1995 and 1996, and the results of its operations and cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
PLANTE & MORAN, LLP
Grand Rapids, Michigan
November 22, 1996
F-2
<PAGE> 38
RIVIERA TOOL COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
NOVEMBER
AUGUST 31 30,
--------------------------------------- -----------
NOTE 1994 1995 1996 1996
------ ----------- ----------- ----------- -----------
(UNAUDITED)
ASSETS
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash.................................. $ -- $ 3,188 $ -- $ --
Accounts receivable:
Trade............................... 7,377,345 4,433,129 4,924,305 5,000,094
Related party....................... 12 930,967 1,111,282 344,892 319,953
Costs and estimated gross profit in
excess of billings on contracts in
process............................. 2 4,293,596 3,279,489 5,549,823 4,942,372
Inventories........................... 3 727,102 561,710 445,473 445,473
Prepaid expenses and other current
assets.............................. 329,124 284,678 250,210 291,584
------------ ------------ ------------ ------------
Total current assets........... 13,658,134 9,673,476 11,514,703 10,999,476
PROPERTY, PLANT AND EQUIPMENT, NET...... 4 11,664,882 10,906,099 9,785,639 9,547,695
PERISHABLE TOOLING...................... 704,613 836,360 759,258 720,068
OTHER ASSETS............................ 1 411,551 290,197 868,832 886,827
------------ ------------ ------------ ------------
Total assets................... $26,439,180 $21,706,132 $22,928,432 $22,154,066
============ ============ ============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable......................... 5 9,460,669 6,866,170 10,241,503 9,795,585
Current portion of long-term debt..... 5 2,395,545 1,631,629 926,861 819,391
Current portion of capitalized lease
obligations......................... 10 733,400 624,561 409,225 438,250
Accounts payable...................... 4,718,369 3,953,522 2,913,878 2,605,972
Accrued liabilities................... 623,209 563,931 692,271 803,461
------------ ------------ ------------ ------------
Total current liabilities...... 17,931,192 13,639,813 15,183,738 14,462,659
CAPITALIZED LEASE OBLIGATIONS........... 10 699,946 397,412 118,805 --
LONG-TERM DEBT.......................... 5 2,015,442 1,433,033 882,989 737,728
DEFERRED GAINS.......................... 7 359,144 210,342 61,540 46,153
ACCRUED LEASE EXPENSE................... 9 437,457 502,870 558,935 570,617
DEFERRED TAX LIABILITY.................. 6 116,700 191,700 395,700 486,300
PREFERRED STOCK -- no par value,
$100 mandatory redemption value:
Authorized -- 5,000 shares
Issued and outstanding -- 950
shares........................... 11, 13 109,249 110,537 139,072 91,007
PREFERRED STOCK -- no par value,
Authorized -- 200,000
Issued and outstanding -- no
shares........................... -- -- -- --
COMMON STOCKHOLDERS' EQUITY.............
Common stock -- No par value:
Authorized -- 9,798,575 shares
Issued and outstanding -- 1,460,000
shares........................... 4,392,752 4,392,752 4,392,752 4,392,752
Retained earnings..................... 377,298 827,673 1,194,901 1,366,850
------------ ------------ ------------ ------------
Total common stockholders'
equity...................... 4,770,050 5,220,425 5,587,653 5,759,602
------------ ------------ ------------ ------------
Total liabilities and stockholders'
equity................................ $26,439,180 $21,706,132 $22,928,432 $22,154,066
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 39
RIVIERA TOOL COMPANY
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED AUGUST 31 NOVEMBER 30
--------------------------------------- -----------------------
NOTE 1994 1995 1996 1995 1996
---- ----------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
SALES
Trade....................... $19,885,808 $19,429,894 $16,379,909 $4,201,240 $5,310,295
Related party............... 12 2,538,919 2,794,829 1,954,184 733,180 169,918
----------- ----------- ----------- ---------- ----------
TOTAL SALES................... 22,424,727 22,224,723 18,334,093 4,934,420 5,480,213
COST OF SALES................. 19,675,967 18,116,301 14,936,514 4,050,170 4,395,263
----------- ----------- ----------- ---------- ----------
GROSS PROFIT.................. 2,748,760 4,108,422 3,397,579 884,250 1,084,950
SELLING AND ADMINISTRATIVE
EXPENSES.................... 1,113,185 1,902,044 1,354,112 421,683 430,531
----------- ----------- ----------- ---------- ----------
INCOME FROM OPERATIONS........ 1,635,575 2,206,378 2,043,467 462,567 654,419
OTHER INCOME (EXPENSE)
Interest expense............ (1,415,290) (1,749,447) (1,670,414) (367,221) (402,645)
Gain on asset sales......... 7 138,695 105,632 226,710 37,202 15,387
Loss from related company... 15 (532,242) -- -- -- --
----------- ----------- ----------- ---------- ----------
TOTAL OTHER EXPENSE -- NET.... (1,808,837) (1,643,815) (1,443,704) (330,019) (387,258)
----------- ----------- ----------- ---------- ----------
INCOME (LOSS) -- BEFORE TAXES
ON INCOME................... (173,262) 562,563 599,763 132,548 267,161
INCOME TAX EXPENSE (CREDIT)... 6 (133,500) 76,700 204,000 45,066 90,600
----------- ----------- ----------- ---------- ----------
NET INCOME (LOSS)............. (39,762) 485,863 395,763 87,482 176,561
DIVIDENDS AND ACCRETION ON
PREFERRED STOCK............. 13 29,636 35,488 28,535 7,134 4,612
----------- ----------- ----------- ---------- ----------
NET INCOME (LOSS) AVAILABLE
FOR COMMON SHARES........... $ (69,398) $ 450,375 $ 367,228 $ 80,348 $ 171,949
=========== =========== =========== ========== ==========
NET INCOME (LOSS) PER COMMON
SHARE....................... 1 $(.05) $.31 $.25 $.06 $.12
=========== =========== =========== ========== ==========
COMMON SHARES OUTSTANDING..... 1 1,460,000 1,460,000 1,460,000 1,460,000 1,460,000
=========== =========== =========== ========== ==========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 40
RIVIERA TOOL COMPANY
STATEMENT OF COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
----------------------- RETAINED STOCKHOLDERS'
SHARES(1) AMOUNT EARNINGS EQUITY
--------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
BALANCE -- AUGUST 31, 1993..................... 1,460,000 $4,392,752 $ 446,696 $ 4,839,448
Increase to redeemable preferred stock (Note
13).......................................... -- -- (29,636) (29,636)
Net loss....................................... -- -- (39,762) (39,762)
--------- ---------- ---------- ----------
BALANCE -- AUGUST 31, 1994..................... 1,460,000 4,392,752 377,298 4,770,050
Increase to redeemable preferred stock (Note
13).......................................... -- -- (35,488) (35,488)
Net income..................................... -- -- 485,863 485,863
--------- ---------- ---------- ----------
BALANCE -- AUGUST 31, 1995..................... 1,460,000 4,392,752 827,673 5,220,425
Increase to redeemable preferred stock (Note
13).......................................... -- -- (28,535) (28,535)
Net income..................................... -- -- 395,763 395,763
--------- ---------- ---------- ----------
BALANCE -- AUGUST 31, 1996..................... 1,460,000 4,392,752 1,194,901 5,587,653
========= ========== ========== ==========
Increase to redeemable preferred stock (Note
13).......................................... -- -- (4,612) (4,612)
Net Income (Unaudited)......................... -- -- 176,561 176,561
--------- ---------- ---------- ----------
BALANCE -- NOVEMBER 30, 1996 (UNAUDITED)....... 1,460,000 $4,392,752 $1,366,850 $ 5,759,602
========= ========== ========== ==========
</TABLE>
- -------------------------
(1) See Notes to Financial Statement, Note 1 -- Nature of Business and
Significant Accounting Policies, Reporting Entity
See Notes to Financial Statements.
F-5
<PAGE> 41
RIVIERA TOOL COMPANY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED AUGUST 31 NOVEMBER 30
----------------------------------------- ------------------------
1994 1995 1996 1995 1996
----------- ----------- ----------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ (39,762) $ 485,863 $ 395,763 $ 87,482 $ 176,561
Adjustments to reconcile net income
(loss) to net cash from operating
activities:
Depreciation and amortization..... 1,213,516 1,438,403 1,272,366 313,295 321,523
Loss (gain) on sale of machinery
and equipment.................. 10,107 43,170 (77,908) -- --
Amortization of deferred gain..... (148,802) (148,802) (148,802) (37,202) (15,387)
Deferred taxes.................... (130,000) 75,000 204,000 45,066 90,600
Bad debt expense.................. -- -- 175,000 -- --
(Increase) decrease in assets:
Accounts receivable............ (2,602,273) 2,763,901 100,214 (179,572) (50,850)
Costs and estimated gross
profit in excess of billings
on contracts in process...... 1,134,689 1,014,107 (2,270,334) (1,833,012) 607,451
Inventories.................... 579,924 165,392 116,237 -- --
Perishable Tooling............. (704,613) (131,747) 77,102 -- 39,190
Prepaid expenses and other
current assets............... 105,788 44,446 34,468 59,685 (41,374)
Increase (decrease) in
liabilities:
Accounts payable............... 614,845 (764,847) (1,039,644) (266,242) (307,906)
Accrued lease expense.......... 74,761 65,413 56,065 14,016 11,682
Accrued liabilities............ 75,746 (59,278) 128,340 259,363 111,190
----------- ----------- ----------- ----------- ---------
Net cash provided by (used
in) operating activities... 183,926 4,991,021 (977,133) (1,537,121) 942,680
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of machinery and
equipment........................... 36,000 80,000 205,800 -- --
Increase in other assets.............. (191,563) (70,153) (342,448) -- --
Additions to property, plant and
equipment........................... (2,849,684) (585,248) (182,660) (72,892) (50,808)
----------- ----------- ----------- ----------- ---------
Net cash used in investing
activities................. (3,005,247) (575,401) (319,308) (72,892) (50,808)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (repayments of)
short-term debt..................... 1,334,149 (2,594,499) 3,375,333 2,319,027 (445,918)
Principal payments under capital lease
obligations......................... (501,113) (437,408) (493,943) (101,145) (89,780)
Proceeds from issuance of long-term
debt................................ 2,584,294 -- -- -- --
Principal payments on long-term
debt................................ (704,909) (1,346,325) (1,254,812) (386,926) (252,731)
Redemption of Preferred stock......... -- -- -- -- (47,500)
Capitalized refinancing costs......... -- -- (333,325) -- (50,766)
Dividends paid........................ -- (34,200) -- -- (5,177)
----------- ----------- ----------- ----------- ---------
Net cash provided by (used
in) financing activities... 2,712,421 (4,412,432) 1,293,253 1,830,956 (891,872)
----------- ----------- ----------- ----------- ---------
NET INCREASE (DECREASE) IN CASH......... (108,900) 3,188 (3,188) 220,943 --
CASH -- Beginning of Period............. 108,900 -- 3,188 3,188 --
----------- ----------- ----------- ----------- ---------
CASH -- End of Period................... $ -- $ 3,188 $ -- $ 224,131 $ --
=========== =========== =========== =========== =========
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE> 42
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business -- The Company is a manufacturer of medium- to
large-scale, complex stamping dies that are sold to automobile manufacturers and
their suppliers for the production of automobile and truck parts. The nature of
the Company's business is such that a limited number of customers comprise a
majority of its business in any given year, even though the specific customers
will differ from year to year. The following table summarizes the Company's
sales to those customers which represent more than 10% of the annual sales of
the Company:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31, NOVEMBER 30,
-------------------------------------------------- ------------------------------
CUSTOMER: 1994 % 1995 % 1996 % 1995 % 1996 %
- ---------------------- ------- --- ------- --- ------- --- ------ --- ------ ---
(IN 000'S) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chrysler
Corporation......... $ 6,885 31% $ 5,291 24% $ 4,622 25% $ 493 10% $2,605 48%
Ford Motor Company.... 1,852 8 1,511 7 2,061 11 298 6 794 14
General Motors........ -- -- 225 1 2,297 13 1,214 25 461 8
Mayflower Vehicle
Systems............. 2,617 12 6,211 28 2,678 15 294 6 -- --
American Bumper &
Manufacturing
Co. ................ 3,949 18 3,170 14 -- -- -- -- -- --
Motor Wheel
Corporation......... 2,539 11 2,795 13 1,954 11 733 15 170 3
Dana-Parish........... -- -- 2,684 12 984 5 393 8 521 10
Others................ 4,583 20 338 1 3,738 20 1,509 30 929 17
------- --- ------- --- ------- --- ------ --- ------ ---
Total Sales...... $22,425 100% $22,225 100% $18,334 100% $4,934 100% $5,480 100%
======= === ======= === ======= === ====== === ====== ===
</TABLE>
Reporting Entity -- In October 1996, the Company executed an agreement and
plan of merger. Under the provisions of the agreement, Riviera Die & Tool, Inc.,
merged with and into Riviera Tool Company, owner of 100% of its common stock, as
the survivor corporation. Concurrently with such merger, the By-Laws and
Articles of Incorporation have been amended to provide updated language on
officer and director indemnification and the authorized capital stock of the
Company was amended to increase the availability of unissued shares of common
and preferred stock. The following two classes of preferred stock exists after
the merger:
- Redeemable Preferred Stock -- no par value, authorized 1,425 shares,
1,425 shares issued and outstanding.
- Non-Redeemable Preferred Stock -- no par value, authorized 200,000
shares, no shares issued and outstanding.
These two entities have been reported on a consolidated basis for more than
five years prior to the merger. Therefore the merger has no effect on the
balance sheet, statement of operations, statement of common stockholders' equity
or cash flows. The stockholders' equity section of this report reflects the
impact of this merger on authorized, issued and outstanding shares of stock.
Cash -- In connection with its cash management efforts, the Company
periodically issues checks in excess of cash balances. These checks issued in
excess of cash balances, which amounted to $378,853, $232,777, $590,075 and
$42,745 in 1994, 1995, 1996 and November 30, 1996, respectively, are included in
accounts payable.
Net Income (Loss) per Common Share -- Net Income (Loss) per common share is
based on net income available for common stockholders divided by the weighted
average number of common shares outstanding
F-7
<PAGE> 43
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
during the period. The number of common shares outstanding has been adjusted to
reflect the impact of the merger and recapitalization as referred to in
Reporting Entity above.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Significant Estimates -- The most significant estimates made by the Company
are in the determination and recognition of revenue on contracts in process at
year end. Management's best estimate of costs to complete is based on costs
incurred subsequent to year end, engineers' cost projections and other analyses.
Although management's estimates are not expected to materially change in the
near term, the costs the Company will ultimately incur could differ from the
amounts estimated based on the various factors.
Revenue Recognition -- The Company recognizes revenue on time and material
contracts, utilizing the completed-contract method. Revenue is recognized on all
other contracts, utilizing the percentage-of-completion method. Under the
completed-contract method, the contract is considered complete when all costs
except for insignificant items have been incurred and the project has been
approved by the customer. Under the percentage-of-completion method estimated
contract earnings are based on total estimated contract profits multiplied by
the ratio of labor hours incurred to total estimated labor hours on the
contract. Provisions for estimated losses on contracts in process are recognized
in the period such losses are determined. Changes in job performance, conditions
and estimated profitability may result in revisions to costs and income and are
recognized in the period such revisions are determined.
Accounts Receivable -- The Company established a reserve for uncollectible
accounts receivable of $175,000 as of August 31, 1996 and November 30, 1996. For
the years ended August 31, 1994 and 1995 all accounts receivable were considered
to be fully collectible; accordingly, no allowance for doubtful accounts was
provided.
Inventories -- Inventories are recorded at the lower-of-cost (first-in,
first-out) method, or market.
Property, Plant and Equipment -- Property, plant and equipment are recorded
at cost. Depreciation is computed principally using the straight-line method
over the useful life of the asset for financial reporting purposes and
accelerated methods for tax purposes.
Perishable Tooling -- Certain perishable tools are gradually used up over
extended periods of time. These inventory items, which are reported as
non-current assets in the balance sheet, are recorded at cost less a valuation
allowance to reflect the loss in value resulting from gradual use.
Other Assets -- Included in other assets are deferred debt issuance costs
that are being amortized over the related debt term. Amortization expense for
the years ended August 31, 1994, 1995 and 1996, was $60,991, $191,507 and
$97,138, respectively and $0 for the three months ended November 30, 1996. As of
August 31, 1996 costs incurred totaling $333,325 in connection with the planned
public offering of common stock have been deferred and classified as other
assets. The Company has incurred additional costs of $50,766 in connection with
the planned public offering of common stock since August 31, 1996. These costs
have also been deferred and classified as other assets. As of November 30, 1996,
total costs incurred with the planned public offering of common stock total
$384,091. Such costs will be expensed or charged to paid-in capital depending
upon whether the public offering of common stock is consummated.
F-8
<PAGE> 44
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
Income Taxes -- The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109. A current tax
liability or asset is recognized for the estimated taxes payable or refundable
on tax returns for the year. Deferred tax liabilities or assets are recognized
for the estimated future tax effects of temporary differences between book and
tax accounting and operating loss and tax credit carryforwards. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Reclassifications -- Certain reclassifications have been made in the 1994
and 1995 financial statements to conform to the classifications used in 1996.
NOTE 2 -- COSTS AND BILLINGS ON CONTRACTS IN PROCESS
Costs and billings on contracts in process are as follows:
<TABLE>
<CAPTION>
AUGUST 31 NOVEMBER 30
--------------------------------------- ------------
1994 1995 1996 1996
---------- ---------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Costs incurred on contracts in process under
the percentage-of-completion method....... $8,168,619 $8,217,497 $10,844,647 $ 12,364,776
Estimated gross profit...................... 527,445 98,355 900,375 375,125
---------- ---------- ----------- -----------
Total.................................. 8,696,064 8,315,852 11,745,022 12,739,901
Less progress payments received and progress
billings to date.......................... 4,809,173 5,438,504 6,353,779 7,890,476
Plus costs incurred on contracts in process
under the completed contract method....... 406,705 402,141 158,580 92,947
---------- ---------- ----------- -----------
Costs and estimated gross profit in
excess of billings on contracts in
process........................... $4,293,596 $3,279,489 $ 5,549,823 $ 4,942,372
========== ========== =========== ===========
</TABLE>
Included in estimated gross profit for 1994, 1995, 1996 and November 30,
1996 are jobs with losses accrued of $95,471, $266,860, $441,301 and $264,890,
respectively.
NOTE 3 -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
AUGUST 31 NOVEMBER 30
-------------------------------- -----------
1994 1995 1996 1996
-------- -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Raw material stock $216,866 $143,454 $149,006 $ 149,006
Small tools and supplies........................... 510,236 418,256 296,467 296,467
-------- -------- -------- ---------
Total......................................... $727,102 $561,710 $445,473 $ 445,473
======== ======== ======== =========
</TABLE>
F-9
<PAGE> 45
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
AUGUST 31 NOVEMBER 30
----------------------------------------- -----------
1994 1995 1996 1996
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land and leasehold improvements........... $ 1,441,401 $ 1,501,624 $ 1,553,206 $ 1,553,206
Office furniture and fixtures............. 536,373 289,142 186,909 186,909
Machinery and equipment................... 16,234,857 15,722,397 14,704,396 14,755,204
Transportation equipment.................. 86,148 78,881 99,935 99,935
----------- ----------- ----------- -----------
Total cost........................... 18,298,779 17,592,044 16,544,446 16,595,254
Accumulated depreciation and
amortization............................ 6,633,897 6,685,945 6,758,807 7,047,559
----------- ----------- ----------- -----------
Net carrying amount.................. $11,664,882 $10,906,099 $ 9,785,639 $ 9,547,695
=========== =========== =========== ===========
Annual depreciation expense............... 981,496 951,848 1,081,680 241,023
Annual amortization expense............... 171,029 295,048 93,548 47,729
----------- ----------- ----------- -----------
Annual depreciation and amortization
expense................................. $ 1,152,525 $ 1,246,896 $ 1,175,228 $ 288,752
=========== =========== =========== ===========
</TABLE>
NOTE 5 -- NOTES PAYABLE AND LONG-TERM DEBT
The Company's notes payable and long-term debt consist of the following:
<TABLE>
<CAPTION>
AUGUST 31
--------------------------------------- NOVEMBER 30
1994 1995 1996 1996
---------- ---------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
NOTES PAYABLE
Revolving bank credit line, collateralized by
substantially all assets of the Company. The
agreement provides for borrowings, subject to
certain collateral requirements of up to
$10,000,000, and bears interest at 4% above
the bank's prime rate at November 30, 1996
and August 31, 1996 and 3% above the bank's
prime rate at August 31, 1995 and 1994 (an
effective rate of 12.25%, 12.25%, 11.75% and
10.25%, respectively). The agreement is
subject to certain loan covenants (discussed
below) and requires a commitment fee of .375%
per annum on the average daily unused portion
of the revolving credit line, and a facility
fee of .125% per annum on the revolving
credit line. Subsequent to August 31, 1996,
the bank extended the line-of-credit
agreement to February 28, 1997, and increased
the borrowing limit to $10,500,000 until
February 28, 1997. .......................... $9,460,669 $6,866,170 $10,241,503 $9,795,585
=========== ========== ========== ==========
</TABLE>
F-10
<PAGE> 46
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 5 -- NOTES PAYABLE AND LONG-TERM DEBT -- CONTINUED
<TABLE>
<CAPTION>
AUGUST 31
-------------------------------------- NOVEMBER 30,
1994 1995 1996 1996
---------- ---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
LONG-TERM DEBT
Note payable to bank, payable in monthly
installments of $40,000 plus interest of 4%
over the bank's prime rate at November 30,
1996 and August 31, 1996 and 3% above the
bank's prime rate at August 31, 1995 and 1994,
(effective rates of 12.25%, 12.25%, 11.75% and
10.25%, respectively), collateralized by
substantially all assets of the Company. This
agreement is subject to certain covenants
discussed below. Subsequent to August 31,
1996, the bank extended the note's maturity
date to February 28, 1997. ................... 1,336,962 856,962 376,962 256,962
Note payable to financial institution, payable
in monthly installments of $39,945 including
interest at 9.9%, collateralized by specific
assets of the Company with a carrying value of
$2,050,304 at August 31, 1996, due March 1,
1999.......................................... 1,858,170 1,441,051 1,088,532 995,019
Note payable to bank, payable in monthly
installments of $15,000 including interest at
7%, collateralized by specific assets of the
Company with a carrying value of $2,050,304 at
August 31, 1996, due September 1, 1998........ 595,341 494,432 344,356 305,138
Other......................................... 620,514 272,217 -- --
---------- ---------- ---------- ----------
Total long-term debt........................ 4,410,987 3,064,662 1,809,850 1,557,119
Less current portion........................ 2,395,545 1,631,629 926,861 819,391
---------- ---------- ---------- ----------
Long-term debt -- Net....................... $2,015,442 $1,433,033 $ 882,989 $ 737,728
========== ========== ========== ==========
</TABLE>
Minimum scheduled principal payments on long-term debt to maturity as of
August 31, 1996, are as follows:
<TABLE>
<S> <C>
1997............................................................................ $ 926,861
1998............................................................................ 601,834
1999............................................................................ 281,155
2000............................................................................ --
2001............................................................................ --
----------
Total......................................................................... $1,809,850
----------
</TABLE>
In connection with the line of credit and notes payable to certain banks as of
November 30, 1996, August 31, 1996, 1995 and 1994, the Company has agreed to
certain covenants. The agreements require the Company to maintain minimum
working capital and net worth of $200,000 and $6,000,000, respectively, to not
let its combined debt-to-equity ratio exceed 3 to 1, and prohibit the payment of
cash dividends. The Company presently is not in compliance and was not in
compliance at November 30, 1996, August 31, 1996, 1995 and 1994, with certain
covenants and, therefore, has reclassified those debt obligations to banks as
current liabilities. Although the banks have extended the terms of the
obligations to February 28, 1997, they have not waived their rights under the
agreements.
F-11
<PAGE> 47
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 6 -- FEDERAL INCOME TAXES
The provision for federal income taxes (benefit) is as follows:
<TABLE>
<CAPTION>
AUGUST 31
---------------------------------- NOVEMBER 30,
1994 1995 1996 1996
--------- ------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current expense (benefit)...................... $ (3,500) $ 1,700 $ -- $ --
Deferred expense (benefit)..................... (130,000) 75,000 204,000 90,600
--------- ------- -------- --------
Total tax expense (benefit)............... $(133,500) $76,700 $204,000 $ 90,600
========= ======= ======== ========
</TABLE>
The difference between the federal statutory tax rate and the Company's
effective rate was:
<TABLE>
<CAPTION>
AUGUST 31
------------------------ NOVEMBER 30,
1994 1995 1996 1996
----- ----- ---- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Federal statutory tax rate..................... (34.0)% 34.0% 34.0% 34.0%
Increase (reduction) in income taxes relating
to:
Effect of recording and changing valuation
allowance............................... (59.9) (23.3) -- --
Effect of providing for deferred taxes at
rates less than statutory rates and
other items............................. 16.8 2.9
----- ---- ---- ----
Effective tax rate................... (77.1)% 13.6% 34.0% 34.0%
===== ==== ==== ====
</TABLE>
The details of the net deferred tax liability are as follows:
<TABLE>
<CAPTION>
AUGUST 31 NOVEMBER 30,
----------------------------------------- -------------
1994 1995 1996 1996
----------- ----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Deferred tax liabilities:
Depreciation........................... $(1,821,000) $(2,158,000) $(2,137,000) $(2,120,400)
------------ ------------ ------------ -----------
Deferred tax assets:
Net operating loss carryforward........ 1,517,000 1,637,200 1,438,000 1,306,700
Investment tax credit carryforward..... 246,700 246,700 246,700 246,700
Alternative minimum tax credit
carryforward........................ 40,000 40,000 40,000 40,000
Accrued lease expense.................. 131,000 170,900 190,000 194,000
Deferred gains and other items......... 147,300 118,200 73,300 93,400
------------ ------------ ------------ ----------
Total deferred tax assets........... 2,082,000 2,213,000 1,988,000 1,880,800
Valuation allowance recognized for
deferred tax assets.................... (377,700) (246,700) (246,700) (246,700)
------------ ------------ ------------ -----------
Net deferred tax liability.......... $ (116,700) $ (191,700) $ (395,700) $ (486,300)
============ ============ ============ ===========
</TABLE>
F-12
<PAGE> 48
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 6 -- FEDERAL INCOME TAXES -- CONTINUED
The details of the deferred tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
AUGUST 31 NOVEMBER 30,
---------------------------------- ------------
1994 1995 1996 1996
--------- --------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net operating loss carryforward.................. $(129,600) $(120,200) $199,200 $130,500
Accrued lease.................................... (22,200) (39,900) (19,100) (4,000)
Depreciation..................................... 97,000 337,000 (21,000) (17,000)
Deferred compensation............................ (7,200) (9,400) (5,000) (1,500)
Deferred revenue................................. 44,600 36,200 51,000 5,000
Other items...................................... (2,900) 3,900 (1,100) (22,400)
Change in valuation allowance.................... (103,800) (131,000) -- --
Investment tax credit............................ (6,700) -- -- --
Alternative minimum tax credit................... 800 (1,600) -- --
--------- --------- -------- --------
Deferred tax expense (reduction)............ $(130,000) $ 75,000 $204,000 $ 90,600
========= ========= ======== ========
</TABLE>
As of November 30, 1996, the Company had the following applicable
carryforwards to be applied against future taxable income:
<TABLE>
<CAPTION>
NET OPERATING
LOSS INVESTMENT
EXPIRATION CARRYFORWARD TAX CREDITS
- --------------------------------------------------------------------- ------------- -----------
<S> <C> <C>
1998................................................................. $ -- $ 32,800
1999................................................................. -- 46,400
2000................................................................. -- 19,600
2001................................................................. -- 22,400
2002................................................................. -- 28,000
2003................................................................. -- 97,500
2004................................................................. -- --
2005................................................................. -- --
2006................................................................. 937,000 --
2007................................................................. 2,199,900 --
2008................................................................. 486,000 --
2009................................................................. 220,100 --
----------- ---------
Total........................................................... $ 3,843,000 $ 246,700
=========== =========
</TABLE>
The Company also has approximately $40,000 of alternative minimum tax
credits that do not expire.
NOTE 7 -- DEFERRED GAINS
In prior years, the Company sold and subsequently leased back machinery and
equipment. The gain on these assets is being recognized over five years and
seven years, the respective lives of the leases. Gains recognized for each of
the years ended August 31, 1994, 1995 and 1996, amounted to $84,515. Gains
recognized for the three months ended November 30, 1995 and 1996, amounted to
$21,815 and $4,822, respectively.
During the year ended August 31, 1994, the Company restructured three
operating leases. The transaction involved machinery and equipment operating
leases. Machinery and equipment were purchased at
F-13
<PAGE> 49
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 7 -- DEFERRED GAINS -- CONTINUED
$2,611,000 with proceeds from long-term debt totaling $2,584,294. The gain that
had been previously deferred on these assets as a result of a prior
sale/leaseback will continue to be recognized over the remaining lives of the
original lease terms. Gains for each of the years ended August 31, 1996, 1995
and 1994, related to these assets, amounted to $64,287. Gains recognized for the
three months ended November 30, 1995 and 1996 amounted to $10,565.
NOTE 8 -- CASH FLOWS
Cash paid or refunded during the years ended August 31, 1994, 1995, 1996
and the three months ended November 30, 1995 and 1996, for interest and income
taxes is summarized as follows:
<TABLE>
<CAPTION>
AUGUST 31 NOVEMBER 30
-------------------------------------- --------------------
1994 1995 1996 1995 1996
---------- ---------- ---------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest paid......................... $1,361,879 $1,701,065 $1,572,292 $357,406 $309,113
Income taxes refunded................. 20,974 -- -- -- --
</TABLE>
Noncash investing activities for the years ended August 31, 1994, 1995,
1996 and the three months ended November 30, 1996 consisted of the acquisition
of machinery and equipment and leasehold improvements of $352,884, $26,030, $0
and $0, respectively, through capital leases.
NOTE 9 -- OPERATING LEASES
The Company has entered into a noncancellable operating lease agreement for
manufacturing and office facilities with a lease term that expires in October
2009. The agreement provides for annual lease payments plus an escalation of the
base rent of 1 percent in each of the first 10 years and 2 percent in each of
the second 10 years. The Company has an option to renew this lease for two
additional 10-year terms at a rate to be negotiated and has an option to acquire
the facility at fair market value, commencing November 1996. The current annual
rent is $988,239. Generally accepted accounting principles require that rent
expense related to this type of lease be recognized ratably over the term of the
lease. The difference between the rent payments made and the amount of expense
recognized has been recorded as accrued lease expense (a liability). For the
years ended August 31, 1994, 1995 and 1996, accrued lease expense exceeded cash
payments made by $74,761, $65,413 and $56,065, respectively and $14,016 and
$11,682 for the three months ended November 30, 1995 and 1996, respectively.
On May 25, 1994, the Company entered into a sublease agreement with an
unrelated company. The agreement commenced August 1, 1994, and terminates on
July 31, 1998. The agreement provides for annual lease payments ranging from
$216,000 to $224,724. The agreement also contains two options to renew the lease
for up to five years, with annual lease payments ranging from $231,468 to
$268,332. In addition, the agreement requires the tenant to pay a pro-rata share
(33.7 percent) of the facility's operating costs.
The Company has various operating leases, including the noncancellable
operating lease noted above, for facilities and equipment that expire during the
next 15 years. Rent expense under these leases for the year ended August 31,
1994, 1995 and 1996 amounted to $1,349,400, $1,117,023 and $1,164,855,
respectively and $289,383 and $286,613 for the three months ended November 30,
1995 and 1996, respectively.
F-14
<PAGE> 50
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 9 -- OPERATING LEASES -- CONTINUED
The following is a schedule of future minimum rent payments and
noncancellable sublease income required under operating leases that have initial
or remaining noncancellable lease terms in excess of one year as of August 31,
1996:
<TABLE>
<CAPTION>
LEASE SUB-LEASE NET LEASE
PAYMENTS RECEIVABLE PAYMENT
----------- ---------- -----------
<S> <C> <C> <C>
1997..................................................... $ 1,169,931 $ 220,320 $ 949,611
1998..................................................... 1,067,330 224,724 842,606
1999..................................................... 1,031,486 -- 1,031,486
2000..................................................... 1,034,180 -- 1,034,180
2001..................................................... 1,052,870 -- 1,052,870
2002 and after........................................... 9,296,718 -- 9,296,718
----------- -------- -----------
Total minimum payments required..................... $14,652,515 $ 445,044 $14,207,471
=========== ======== ===========
</TABLE>
NOTE 10 -- CAPITAL LEASES
The Company has entered into a number of capital leases. At August 31,
1994, 1995, 1996 and November 30, 1996, included in machinery and equipment and
accumulated depreciation and amortization are assets with a total cost of
$3,039,735, $3,065,770, $3,065,770, $3,065,770 and accumulated amortization of
$680,184, $975,232 and $1,068,780, $1,116,509, respectively, acquired through
capital lease transactions. The following is a schedule of future minimum lease
payments under capital leases together with the present value of the net minimum
lease payments as of August 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- --------
<S> <C> <C> <C>
1995....................................................... $ 851,807 $ -- $ --
1996....................................................... 374,611 705,210 --
1997....................................................... 294,152 302,666 439,614
1998....................................................... 104,723 119,723 119,723
---------- ---------- --------
Total minimum lease payments............................. 1,625,293 1,127,599 559,337
Less amount representing interest.......................... 191,947 105,626 31,307
---------- ---------- --------
Present value of net minimum lease payments.............. 1,433,346 1,021,973 528,030
Less amount representing current portion................... 733,400 624,561 409,225
---------- ---------- --------
Noncurrent portion....................................... $ 699,946 $ 397,412 $118,805
========== ========== ========
</TABLE>
NOTE 11 -- RETIREMENT PLANS
The Company has a profit-sharing plan that covers substantially all
employees. The plan includes a 401(k) deferred-compensation option. The
Company's policy is to fund profit-sharing costs accrued on an annual basis. The
plan, as established, allows for discretionary contributions as determined
annually by the Company's Board of Directors. No discretionary contribution was
made for the years ended August 31, 1994, 1995 and 1996.
The Company also matches and contributes up to 15 percent of the employees'
contributions, up to 2% of the employee's annual wage, to the 401(k)
deferred-compensation plan. The Company's contributions to the plan for the
years ended August 31, 1994, 1995 and 1996, amounted to $84,887, $92,575 and
$80,438, respectively, and $17,514 and $18,990 for the three months ended
November 30, 1995 and 1996, respectively.
F-15
<PAGE> 51
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 11 -- RETIREMENT PLANS -- CONTINUED
The plan owns 100 percent of the Company's redeemable preferred stock.
NOTE 12 -- RELATED-PARTY TRANSACTIONS
The Company had a contract with a corporation that owns 50 percent of the
Company's common stock. The contract related to the performance of engineering
services and construction of dies to be purchased by the stockholder
corporation. The contract provided that the stockholder corporation was required
to purchase not less than 155,000 hours of work, as defined by the contract, or,
if less, 85 percent of its entire domestic consumption. In the event the total
hours of work were less than the required amount, the stockholder corporation
paid an underutilization fee, based on a formula, to the Company. Under the plan
of merger between Riviera Die and Tool, Inc and Riviera Tool Company dated
October 31, 1996, and related shareholders agreement, such contract was
terminated retroactive to December 31, 1995 and no such underutilization fees
were received or recorded for periods thereafter. Sales to the stockholder
corporation (including underutilization fees for periods prior to December 31,
1995) for the fiscal years ended August 31, 1994, 1995 and 1996, amounted to
$2,538,919, $2,794,829, and $1,954,184, respectively, and $733,180 and $169,918
for the three months ended November 30, 1995 and 1996, respectively.
NOTE 13 -- REDEEMABLE PREFERRED STOCK
The Company has issued and outstanding 950 shares of mandatory redeemable
preferred stock. The stock bears an $8 per year cumulative dividend preference
over common stock of the Company. All outstanding shares of this stock are owned
by the Company's retirement plan. According to the terms of the redemption
agreement, 475 shares of the stock was to be redeemed at $100 per share, plus
unpaid dividends on July 31, 1995, 1996, and 1997. The July 1995 redemption
however, did not occur until after August 31, 1996 but prior to quarter ended
November 30, 1996.
The carrying amount of the preferred stock is being increased by periodic
accretions, using the interest method, so that the carrying amount will equal
the mandatory redemption amount on the redemption date. The carrying amount is
also being increased by unpaid dividends. Increases in the preferred stock are
being effected by charges against retained earnings. The following schedule
summarizes activity in the preferred stock:
<TABLE>
<CAPTION>
AUGUST 31 NOVEMBER 30
-------------------------------- -----------
1994 1995 1996 1996
-------- -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Beginning balance.................................. $ 79,613 $109,249 $110,537 $ 139,072
Accretion.......................................... 18,236 24,088 17,135 1,762
Cumulative dividend preference..................... 11,400 11,400 11,400 2,850
Preferred stock redeemed........................... -- -- -- (47,500)
Dividends paid..................................... -- (34,200) -- (5,177)
-------- -------- -------- --------
Ending balance................................ $109,249 $110,537 $139,072 $ 91,007
======== ======== ======== ========
</TABLE>
NOTE 14 -- LEGAL PROCEEDINGS AND CLAIMS
The Company is a plaintiff and counter-defendant in an action against two
individuals and a corporation, with the owners of the Company and a related
corporation affiliated through common ownership as co-plaintiffs, filed July 22,
1994. In July 1992, the Company contributed machinery, equipment, inventory,
work in process and receivables that were related to the business of building
plastic injection molds to a joint venture that then operated as a mold builder
and injection molder. The Company contributed assets valued at
F-16
<PAGE> 52
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 14 -- LEGAL PROCEEDINGS AND CLAIMS -- CONTINUED
$5.4 million, assigned debts in the amount of $3.7 million, and received $1.7
million of preferred stock in the new entity. Defendants in this action
contributed all of the stock of a mold builder then known as Leap Technologies,
Inc. In November 1993, the joint venture was liquidated, and the Company's
preferred stock in the entity was written off as were receivables from Leap
Technologies, Inc., of $559,653. These write-offs were reflected in the
financial statements for the year ended August 31, 1993. The Company alleges
that the status of the business contributed by the defendants was fraudulently
represented, and the defendants are, therefore, liable to the Company for all
losses sustained as a result of the failure of the venture. The Company is
asking for the return of its investment plus additional damages it incurred in
the process of liquidating the venture. One defendant has counterclaimed for
breach of representations by the Company without specifying any amount of
damages. The Company is not currently involved in other legal proceedings other
than ordinary and routine proceedings incidental to its operations. In the
opinion of management, no existing proceedings, including the matter involving
Leap Technologies, Inc., would have a significant effect on the financial
condition, results of operations and cash flows of the Company if determined
against the Company.
NOTE 15 -- OTHER NONOPERATING EXPENSE
YEAR ENDED AUGUST 31, 1994:
The Company formally subleased a portion of the facility, charging annual
rent payments of $462,012 in accordance with a month-to-month lease agreement
with a related company having some shareholders in common. During the year ended
August 31, 1994, the sublease was discontinued and no sublease revenue was
received. As a result of the discontinuance of the sublease, the Company was
unable to recover $532,242 of rent and related expenses, which has been charged
to other expense in 1994.
NOTE 16 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at August 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------------------------ --------------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash...................................... $ 3,188 $ 3,188 $ -- $ --
Accounts receivable -- Trade and related
party.................................. 5,544,411 5,544,411 5,269,167 5,269,167
Costs and estimated gross profit in excess
of billings on contracts in process.... 3,279,489 3,279,489 5,549,823 5,549,823
FINANCIAL LIABILITIES
Accounts payable.......................... 3,953,522 3,953,522 2,913,878 2,913,878
Notes payable............................. 6,866,170 6,866,170 10,241,503 10,241,503
Long-term debt............................ 3,064,662 2,967,775 1,809,850 1,763,716
</TABLE>
Short-Term Financial Instruments -- The fair value of short-term financial
instruments, including cash, trade accounts receivable and payable, and costs
and earnings in excess of billings on uncompleted contracts, approximates their
carrying amounts in the financial statements due to the short maturity of such
instruments.
Notes Payable -- The estimated fair value of the Company's notes payable
approximates its carrying amount because the interest rate fluctuates with
market rates.
F-17
<PAGE> 53
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 16 -- FAIR VALUE OF FINANCIAL INSTRUMENTS -- CONTINUED
Long-Term Debt -- The estimated fair value of the Company's long-term debt
is calculated based on expected cash flows discounted using interest rates
currently available for debt with similar terms and remaining maturities.
NOTE 17 -- MANAGEMENT'S PLAN
As discussed in Note 5, the Company is presently not in compliance with
certain loan covenants, and the current bank agreements expire on February 28,
1997. As a result of the covenant violations, the bank could pursue collection
of all amounts due. Management is in the process of finalizing an initial public
offering, the proceeds of which are to be used principally to retire bank debt.
Management believes that it is more likely than not that the public
offering will be successful, and that as a result the Company will be in
compliance with all covenants then applicable. If the offering is not
successful, and the bank pursues collection, there will be a significant near
term effect on the Company's ongoing operations.
NOTE 18 -- SUPPLEMENTARY NET INCOME PER SHARE
Supplementary net income per share is based on the number of shares
outstanding assuming the sale by the Company of 1,100,000 shares of common stock
in Note 1 and the Company's outstanding debt at the then stated interest rate of
such debt (12.25%) as if it had occurred at the beginning of the period. The net
income available for common shares for the year ended August 31, 1996 would
increase by $580,381, and net income per share would increase by .12 cents per
share to .37 cents per share, and as of November 30, 1996 net income available
for common shares would increase by $96,033, and net income per share would
increase by .04 cents per share to .11 cents per share, as a result of such
calculations.
F-18
<PAGE> 54
[RIVIERA LOGO]
- --------------------------------------------------------------------------------
Riviera's tryout
presses offer the
capacity for final
adjustment on any
customer project. [PHOTO]
The Company's
comprehensive
evaluation and
inspection process
ensures maximum
die performance.
Precision machining
is performed by
our highly-skilled
operators. Riviera's
computer numerically
controlled machining
capabilities offer the
exact metal removal
process necessary
to meet customer
quality specifications.
[PHOTO]
<PAGE> 55
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE NOTES BY ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING
THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
------------------
TABLE ON CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 6
Use of Proceeds........................ 8
Dilution............................... 9
Dividend Policy........................ 9
Capitalization......................... 10
Selected Financial Data................ 11
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 12
Business............................... 16
Management............................. 22
Principal Shareholders................. 27
Description of Capital Stock........... 29
Shares Eligible for Future Sale........ 31
Underwriting........................... 32
Legal Matters.......................... 33
Experts................................ 33
Additional Information................. 33
Index to Financial Statements.......... F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
RIVIERA LOGO
RIVIERA TOOL COMPANY
1,100,000 SHARES
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
NATIONAL SECURITIES CORPORATION
JANUARY , 1997
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 56
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a list of the estimated expenses to be incurred by the
Registrant in connection with the issuance and distribution of the shares of
Common Stock being registered hereby, other than underwriting discounts and
commissions.
<TABLE>
<CAPTION>
ITEM
-------------------------------------------------------------------
<S> <C>
Securities and Exchange Commission Registration Fee................ $ 3,387
National Association of Securities Dealers, Inc. Filing Fee........ 11,325
Printing Expenses*................................................. 100,000
Transfer Agent and Registrar Fees*................................. 3,500
Accounting Fees and Expenses*...................................... 90,000
Legal Fees and Expenses* (not including Blue Sky).................. 125,000
Blue Sky Fees and Expenses......................................... 14,125
Miscellaneous Expenses*............................................ 50,000
--------
Total*........................................................ $397,337
========
</TABLE>
--------------------------------
* To be supplied by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 561 through 571 of Michigan Business Corporation Act ("MBCA") set
forth the conditions and limitations governing the indemnification of officers,
directors and other persons. In this regard, the MBCA provides for
indemnification of directors and officers acting in good faith and in a manner
they reasonably believe to be in, or not opposed to, the best interest of the
Company or its shareholders (and, with respect to a criminal proceeding, if they
have no reasonable cause to believe their conduct to be unlawful). Such
indemnification may be made against (a) expenses (including attorney's fees),
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit or proceeding (other than an action by, or in the right of, the
Company) arising by reason of the fact that they were serving as a director,
officer, employee or agent of the Company (or some other entity at the Company's
request), and (b) expenses (including attorney's fees) and amounts paid in
settlement actually and reasonably incurred in connection with a threatened,
pending or completed action or suit by, or in the right of, the Company, unless
the director or officer is found liable to the Company and an appropriate court
does not determine that he or she is nevertheless fairly and reasonably entitled
to indemnification. The MBCA requires indemnification for expenses to the extent
that a director or officer is successful in defending against any such action,
suit or proceeding, and otherwise requires in general that the indemnification
provided for in (a) and (b) above be made only on a determination by a majority
vote of a quorum of the Board of Directors comprised of members who were not
parties to or threatened to be made parties to such action. In certain
circumstances, the MBCA further permits advances to cover such expenses before a
final determination that indemnification is permissible, upon receipt of (i) a
written affirmation by the director or officer of his or her good faith belief
that he or she has met the applicable standard of conduct set forth in the MBCA,
and (ii) a written undertaking by or on behalf of the director or officer to
repay such amounts unless it shall ultimately be determined that he or she is
entitled to indemnification and a determination that the facts then known to
those making the advance would not preclude indemnification.
References made to Article IX of the Registrant's Articles of
Incorporation, a copy of which is filed as Exhibit 3(a), and to Article VI of
the Registrant's Bylaws, a copy of which is filed as Exhibit 3(b), which provide
for indemnification of directors and officers of the Registrant and authorize
the Board to extend such indemnity to others to the full extent permitted by the
aforesaid Sections of the Michigan Business Corporation Act.
II-1
<PAGE> 57
Section 9 of Article VI of the Bylaws also authorizes the Registrant to
purchase and maintain insurance on behalf of any officer, director, employee or
agent of the Company against any liability asserted against or incurred by them
in such capacity or arising out of their status as such whether or not
Registrant would have the power to indemnify such officer, director, employee or
agent of the Company against any liability under the provisions of such Article
or Michigan law.
Reference is made to Section of the Underwriting Agreement, a copy of which
is filed as part of Exhibit 1 to the Registration Statement, for information
concerning indemnification arrangements among the Registrant and the
Underwriters.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
No securities of the Registrant have been issued or sold by the Registrant
within the past three years.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following exhibits are files herewith and made a part hereof:
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION OF DOCUMENT
- ---- ----------------------------------------------------------------------------------
<C> <S>
*1 Proposed form of Underwriting Agreement.
3(a) Amended and Restated Articles of Incorporation of the Registrant.
3(b) Bylaws of the Registrant.
*4(a) Specimen Common Stock of Registrant.
**4(b) Form of Representative's Warrant Agreement, including form of Warrant (to be
supplied by Amendment).
**5 Opinion and consent of Dickinson, Wright, Moon, Van Dusen & Freeman as to the
legality of the Common Stock being Registered (to be filed by amendment).
9 Shareholder Agreement and related Stock Option Agreement between Riviera Holding
Company and Motor Wheel Corporation (to be supplied by Amendment).
*10(a) 1996 Incentive Stock Option Plan of Registrant.
10(b) Employment Agreement of Kenneth K. Rieth.
*10(c) Promissory Note dated March 31, 1994 between Registrant and Heller Financial, Inc.
covering various manufacturing machinery and equipment.
*10(d) Promissory Note dated April 1, 1994 between Registrant and Banc One Equipment
Finance, Inc. covering various manufacturing machinery and equipment.
*10(e) Lease Agreement dated November 1, 1988 between Registrant and Greenbrook Limited
Partners/Riviera regarding industrial facilities at 5460 Executive Parkway SE,
Grand Rapids, Michigan.
*10(f) Proposal from LaSalle National Bank.
**10(g) (NBD Bank Credit Agreement -- to be supplied by Amendment)
23(a) Consent of Plante & Moran LLP (contained at page S-1 of this Registration
Statement).
23(b) Consent of Dickinson, Wright, Moon, Van Dusen & Freeman (contained in the opinion
of such firm filed as Exhibit 5 hereto).
*24(a) Power of Attorney (contained on Page II-5, the signature page)
24(b) Consent of Director Nominees
*27 Financial Data Schedule
- -------------------------
* Previously filed.
** To be filed by Amendment.
</TABLE>
II-2
<PAGE> 58
(b) Financial Statement Schedules
V -- Property, Plant and Equipment.
VI -- Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment.
IX -- Short-term Borrowings.
X -- Supplementary Income Statement Information.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act") may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the Michigan Business
Corporation Act and the documents referred to in Item 14 or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or together,
represent a fundamental change in the information set forth in the
Registration Statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) That, for determining liability under the Securities Act, treat
each as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide
offering.
(3) To file a post-effective amendment to remove from registration any
of the securities being registered which remain unsold at the end of the
offering.
(4) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(5) That for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
(6) That for purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE> 59
(7) That insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling
persons of the Registrant, pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(8) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.
II-4
<PAGE> 60
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement or Amendment thereto to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Grand
Rapids, Michigan and State of Michigan on the 8th day of January, 1997.
RIVIERA TOOL COMPANY
By: /s/ KENNETH K. RIETH
------------------------------------
Kenneth K. Rieth, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the 8th day of January, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ---------------------------------------------
<S> <C>
/s/ KENNETH K. RIETH President (Principal Executive Officer)
- --------------------------------------------- Shareholder and Director
Kenneth K. Rieth
/s/ PETER C. CANEPA Secretary, Treasurer, and Chief Financial
- --------------------------------------------- Officer (Principal Financial Officer and
Peter C. Canepa Principal Accounting Officer)
/s/ LEONARD H. WOOD* Vice President-General Manager and Director
- ---------------------------------------------
Leonard H. Wood
/s/ JOHN C. KENNEDY* Director
- ---------------------------------------------
John C. Kennedy
Director
- ---------------------------------------------
John H. Kinstler
Director
- ---------------------------------------------
Thomas R. Collins
*By /s/ PETER C.
CANEPA
----------------------------------------
Peter C. Canepa, Attorney-in-Fact
</TABLE>
II-5
<PAGE> 61
INDEPENDENT AUDITORS' CONSENT AND REPORT OF SCHEDULES
Riviera Tool Company:
We consent to the use in this Registration Statement on Form S-1 of Riviera
Tool Company of our report dated November 22, 1996, appearing in the Prospectus,
which is a part of this Registration Statement, and to the references to us
under the headings "Selected Financial Data" and "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedules of Riviera Tool Company.
These financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based upon our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
PLANTE & MORAN, LLP
Grand Rapids, Michigan
January 8, 1997
S-1
<PAGE> 62
SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ----------------------------------- ----------- ---------- --------- -------------- -----------
BALANCE OTHER CHANGES- BALANCES AT
BEGINNING ADDITIONS ADD (DEDUCT)- END OF
DESCRIPTION OF PERIOD AT COST RETIREMENT DESCRIBE PERIOD
- ----------------------------------- ----------- ---------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C>
1994
Land and leasehold
improvements.................. $ 1,435,958 $ 5,443 $ -- $ -- $ 1,441,401
Office furniture and fixtures.... 431,161 105,212 -- -- 536,373
Machinery and equipment.......... 13,203,152 3,084,905 53,200 -- 16,234,857
Transportation................... 69,880 16,268 -- -- 86,148
----------- ---------- ---------- --- -----------
Totals........................ $15,140,151 $3,211,828 $ 53,200 $ -- $18,298,779
=========== ========== ========== === ===========
1995
Land and leasehold
improvements.................. $ 1,441,401 $ 65,201 $ 4,978 $ -- $ 1,501,624
Office furniture and fixtures.... 536,373 16,349 263,580 -- 289,142
Machinery and equipment.......... 16,234,857 483,314 995,774 -- 15,722,397
Transportation................... 86,148 30,469 37,736 -- 78,881
----------- ---------- ---------- --- -----------
Totals........................ $18,298,779 $ 595,333 $1,302,068 $ -- $17,592,044
=========== ========== ========== === ===========
1996
Land and leasehold
improvements.................. $ 1,501,624 $ 51,582 $ -- $ -- $ 1,553,206
Office furniture and fixtures.... 289,142 -- 102,233 -- 186,909
Machinery and equipment.......... 15,722,397 313,652 1,331,653 -- 14,704,396
Transportation................... 78,881 51,838 30,784 -- 99,935
----------- ---------- ---------- --- -----------
Totals........................ $17,592,044 $ 417,072 $1,464,670 $ -- $16,544,446
=========== ========== ========== === ===========
NOVEMBER 30, 1996 (UNAUDITED)
Land and leasehold
improvements.................. $ 1,553,206 $ -- $ -- $ -- $ 1,553,206
Office furniture and fixtures.... 186,909 -- -- -- 186,909
Machinery and equipment.......... 14,704,396 50,808 -- -- 14,755,204
Transportation................... 99,935 -- -- -- 99,935
----------- ---------- ---------- --- -----------
Totals........................ $16,544,446 $ 50,808 $ -- $ -- $16,595,254
=========== ========== ========== === ===========
</TABLE>
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Land and leasehold improvements......................... 15 years
Office furniture and fixtures........................... 7 years
Machinery and equipment................................. 10-20 years
Transportation.......................................... 5 years
</TABLE>
S-2
<PAGE> 63
SCHEDULE VI
ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION OF PROPERTY, PLANT AND
EQUIPMENT
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ---------------------------------- ---------- ---------------- ---------- -------------- ----------
BALANCE
BEGINNING ADDITIONS OTHER CHANGES- BALANCES
OF CHARGED TO COSTS ADD (DEDUCT) AT END OF
DESCRIPTION PERIOD AND EXPENSES RETIREMENT DESCRIBE PERIOD
- ---------------------------------- ---------- ---------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C>
1994
Land and leasehold
improvements................. $ 280,514 $ 157,832 $ -- $ -- $ 438,346
Office furniture and fixtures... 389,448 25,130 -- -- 414,578
Machinery and equipment......... 4,744,978 975,163 7,093 -- 5,713,048
Transportation.................. 64,265 3,660 -- -- 67,925
---------- ---------- ---------- --- ----------
Totals....................... $5,479,205 $1,161,785 $ 7,093 $ -- $6,633,897
========== ========== ========== === ==========
1995
Land and leasehold
improvements................. $ 438,346 $ 125,688 $ 4,977 $ -- $ 559,057
Office furniture and fixtures... 414,578 27,519 263,580 -- 178,517
Machinery and equipment......... 5,713,048 1,087,276 888,555 -- 5,911,769
Transportation.................. 67,925 6,413 37,736 -- 36,602
---------- ---------- ---------- --- ----------
Totals....................... $6,633,897 $1,246,896 $1,194,848 $ -- $6,685,945
========== ========== ========== === ==========
1996
Land and leasehold
improvements................. $ 559,057 $ 131,621 $ -- $ -- $ 690,678
Office furniture and fixtures... 178,517 25,175 102,233 -- 101,459
Machinery and equipment......... 5,911,769 1,005,643 969,527 -- 5,947,885
Transportation.................. 36,602 12,788 30,605 -- 18,785
---------- ---------- ---------- --- ----------
Totals....................... $6,685,945 $1,175,227 $1,102,365 $ -- $6,758,807
========== ========== ========== === ==========
NOVEMBER 30, 1996 (UNAUDITED)
Land and leasehold
improvements................. $ 690,678 $ 29,405 $ -- $ -- $ 720,083
Office furniture and fixtures... 101,459 4,616 -- -- 106,075
Machinery and equipment......... 5,947,885 250,609 -- -- 6,198,494
Transportation.................. 18,785 4,122 -- -- 22,907
---------- ---------- ---------- --- ----------
Totals....................... $6,758,807 $ 288,752 $ -- $ -- $7,047,559
========== ========== ========== === ==========
</TABLE>
S-3
<PAGE> 64
SCHEDULE IX
SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ------------------------ ----------- ------------- -------------- -------------------- -------------------
MAXIMUM AMOUNT WEIGHTED AVERAGE
BALANCE WEIGHTED OUTSTANDING AVERAGE AMOUNT INTEREST RATE
CATEGORY OF AGGREGATE AT END OF AVERAGE DURING THE OUTSTANDING DURING DURING THE
SHORT-TERM BORROWINGS PERIOD INTEREST RATE PERIOD THE PERIOD(1) PERIOD(1)
- ------------------------ ----------- ------------- -------------- -------------------- -------------------
<S> <C> <C> <C> <C> <C>
Amounts payable to banks
for borrowings
1994............... $11,856,214 9.71% $ 13,467,407 $ 9,142,077 9.92%
1995............... 8,497,799 10.84 12,010,593 10,707,897 10.95
1996............... 11,168,364 10.92 11,924,641 11,131,436 10.69
November 30,
1996............. 10,614,976 10.48 11,788,501 11,172,342 10.35
</TABLE>
- -------------------------
(1) Based on the average amount outstanding during the year and the interest
rate each month end.
S-4
<PAGE> 65
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS
COL. E ENDED
COL. A -------------------------------------- NOVEMBER 30,
- -------------------------------------- --------------------
ITEM 1994 1995 1996 1995 1996
- -------------------------------------- ---------- ---------- ---------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Maintenance and repairs............... $ 212,412 $ 220,984 $ 145,420 $ 22,292 $ 51,229
Depreciation and amortization......... 1,213,516 1,438,403 1,272,366 313,295 321,523
Property tax.......................... 221,832 266,689 96,835 42,789 23,627
Advertising........................... 2,807 3,231 720 224 1,947
</TABLE>
S-5
<PAGE> 66
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION OF DOCUMENT
- -------- -----------------------------------------------------------------------------------
<S> <C>
*1 Proposed form of Underwriting Agreement.
3(a) Amended and Restated Articles of Incorporation of the Registrant.
3(b) Bylaws of the Registrant.
*4(a) Specimen Common Stock of Registrant.
**4(b) Form of Representative's Warrant Agreement, including form of Warrant (to be
supplied by Amendment).
**5 Opinion and consent of Dickinson, Wright, Moon, Van Dusen & Freeman as to the
legality of the Common Stock being Registered (to be filed by amendment).
9 Shareholder Agreement and related Stock Option Agreement between Riviera Holding
Company and Motor Wheel Corporation (to be supplied by Amendment).
*10(a) 1996 Incentive Stock Option Plan of Registrant.
10(b) Employment Agreement of Kenneth K. Rieth.
*10(c) Promissory Note dated March 31, 1994 between Registrant and Heller Financial, Inc.
covering various manufacturing machinery and equipment.
*10(d) Promissory Note dated April 1, 1994 between Registrant and Banc One Equipment
Finance, Inc. covering various manufacturing machinery and equipment.
*10(e) Lease Agreement dated November 1, 1988 between Registrant and Greenbrook Limited
Partners/Riviera regarding industrial facilities at 5460 Executive Parkway SE,
Grand Rapids, Michigan.
*10(f) Proposal from LaSalle National Bank.
**10(g) (NBD Bank Credit Agreement -- to be supplied by Amendment)
23(a) Consent of Plante & Moran LLP (contained at page S-1 of this Registration
Statement).
23(b) Consent of Dickinson, Wright, Moon, Van Dusen & Freeman (contained in the opinion
of such firm filed as Exhibit 5 hereto).
*24(a) Power of Attorney (contained on Page II-5, the signature page)
24(b) Consent of Director Nominees
*27 Financial Data Schedule
</TABLE>
- -------------------------
* Previously filed.
** To be filed by Amendment.
<PAGE> 1
EXHIBIT 3(a)
RESTATED ARTICLES OF INCORPORATION
OF
RIVIERA TOOL COMPANY
1. These Restated Articles of Incorporation are executed pursuant
to the provisions of Section 641-651, Act 284, Public Acts of 1972, as amended.
2. The present name of the corporation is Riviera Tool Company.
3. The date of filing the original Articles of Incorporation was
February 26, 1988.
4. The following Restated Articles of Incorporation supersede the
original Articles of Incorporation, as amended, and shall be the Articles of
Incorporation of the corporation:
ARTICLE I
The name of the corporation is Riviera Tool Company.
ARTICLE II
The purpose or purposes for which the corporation is organized is to
engage in any activity within the purposes for which corporations may be
organized under the Business Corporation Act of Michigan.
ARTICLE III
The total authorized capital stock is 6,000,000 shares of Common stock
without par value and 1,425 shares of 8% Cumulative Preferred stock and 200,000
shares of Preferred Stock other than the 8% Cumulative Preferred stock.
The Board of Directors of the corporation is authorized at any time
and from time to time, to provide for the issuance of shares of Preferred Stock
in one or more series, each with such voting powers, full or limited, or
without voting powers, and with such stated values, designations, preferences
and relative participating conversion, option or other rights, and such
qualifications, limitations or restrictions thereon, as shall be stated in the
resolution or resolutions providing for the issuance thereof adopted by the
Board of Directors; provided that all rights to dividends, liquidation
distributions or other mandatory distributions of any kind shall be junior in
right and time of payment to all shares then outstanding of the 8% Cumulative
Preferred stock.
<PAGE> 2
ARTICLE IV
The preferences, limitations, designations and relative rights of each
class of stock which the corporation is authorized to issue under Article III,
above, are as follows:
4.1. 8% Cumulative Preferred.
4.1.1. Voting. The holders of the 8% Cumulative Preferred
stock shall only possess voting rights with respect to such stock where voting
as a class is required by law to authorize an action.
4.1.2. Dividends. The holders of the 8% Cumulative
Preferred stock shall be entitled to receive, when and as declared by the Board
of Directors, out of the surplus of the corporation, dividends to the extent of
Eight Dollars ($8.00) per share per annum, except as provided below upon
redemption or liquidation. Such dividend shall be cumulative and payable on
the last day of July each year and shall be with respect to the fiscal year
then in process. Such dividend shall be the entire dividend entitlement of the
8% Cumulative Preferred stock.
4.1.3. Redemption. The 8% Cumulative Preferred stock shall
be subject to redemption as set out below. The price of a redemption hereunder
shall be One Hundred Dollars ($100.00) per share plus any cumulative dividends
on the 8% Cumulative Preferred stock remaining unpaid, to which the holders of
the 8% Cumulative Preferred stock are entitled by reason of the provisions of
Paragraph 4.1.2, above. In the event of a redemption on a date other than July
31, a pro rata portion of the specified dividend shall be paid based upon a 365
day year commencing August 1. The redemption price shall be paid in cash.
4.1.3.1. Call. Notice of a call for redemption
shall be given in writing by first-class United States mail,
postage prepaid, to all the holders of record of the 8%
Cumulative Preferred stock addressed to the address appearing
in the stock records of the corporation. Immediately upon
mailing such notice, the corporation shall deposit the
aggregate of the dividends due pursuant to the provisions
above, plus the redemption price in cash, with any bank or
trust company in the City of Grand Rapids, State of Michigan,
as specified in the notice of redemption, payable to the
respective recordholders of the shares to be redeemed upon
endorsement and surrender of their certificates. Immediately
upon the making of such deposit, said holders shall cease to
be stockholders of the corporation with respect to such shares
and shall have no further interest in or claim against the
corporation with respect to such shares except for the right
to receive such deposit from the specified bank or trust
company. The specified deposit shall not bear interest and
any interest earned thereon shall be returned to the
corporation. Any of such deposit unclaimed at the expiration
of one year from the date of the deposit shall be repaid to
the corporation to be held until claimed.
2
<PAGE> 3
4.1.3.2. Mandatory. The eight percent (8%)
Cumulative Preferred stock shall be issued with mandatory
redemption dates noted thereon as follows:
July 31, 1995 475 Shares
July 31, 1996 475 Shares
July 31, 1997 475 Shares
Upon presentation to the corporation of the shares so
redeemable endorsed in blank, the corporation shall pay to the
holder the redemption price plus the dividend payable to the
date of redemption. The redemption price and the dividend
payable shall not bear interest beyond the date of the
specific redemption date unless otherwise declared by the
Board of Directors of the corporation.
4.1.4. Liquidation. In the event of the voluntary or
involuntary liquidation of the corporation, before any distribution is made to
the holders of the Common stock, the net assets of the corporation shall be
distributed pro rata to the holders of the 8% Cumulative Preferred stock in an
amount up to One Hundred Dollars ($100.00) per share plus Eight Dollars ($8.00)
per share per year from August 1, 1986 to the date of final distribution less
the amount of all dividends previously paid on such shares. A pro rata portion
of the dividend shall be paid in respect of a short year. Such pro rata
portion shall be based upon the ratio that the number of days in such year
prior to such distribution bears to three hundred sixty-five (365). The
preference distribution specified herein shall be the maximum liquidation
distribution entitlement of the 8% Cumulative Preferred stock.
4.2. Common Stock.
4.2.1. Voting. Except as provided in Paragraph 4.1.1.,
above, the holders of the Common stock shall possess the full voting rights of
the capital stock of the corporation and shall be entitled to one vote for each
share of Common stock held.
4.2.2. Dividends.
4.2.2.1. In any calendar year if the preference
dividends have been declared and paid in the full amount per
share as provided in Paragraph 4.1.2., above, the holders of
the Common stock shall be entitled to receive on a per share
basis, the aggregate amount of any additional dividends that
may be declared and paid by the Board of Directors of the
corporation during said calendar year.
4.2.3. Liquidation. In the event of the voluntary or
involuntary liquidation of the corporation, and after the preference
distributions as provided in Paragraph 4.1.4., above, have been
3
<PAGE> 4
made in full, the remaining net assets of the corporation, if any, shall be
distributed pro rata among the holders of the Common stock according to the
number of shares held by each.
ARTICLE V
The street and mailing address of the registered office is 5460
Executive Parkway, S.E., Grand Rapids, Michigan, 49512.
The name of the resident agent at the registered office is Kenneth K.
Rieth.
ARTICLE VI
The name and address of the incorporator are as follows:
Name Business Address
Stuart F. Cheney 650 Frey Bldg.
Grand Rapids, MI 49503
ARTICLE VII
When a compromise or arrangement or a plan of reorganization of this
corporation is proposed between this corporation and its creditors or any class
of them or between this corporation and its shareholders or any class of them,
a court of equity jurisdiction within the state, on application of this
corporation or of a creditor or shareholder thereof, or on application of a
receiver appointed for the corporation, may order a meeting of the creditors or
class of creditors or of the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement or reorganization, to be
summoned in such manner as the court directs. If a majority in number
representing 3/4 in value of the creditors or class of creditors, or of the
shareholders or class of shareholders to be affected by the proposed compromise
or arrangement or a reorganization, agree to a compromise or arrangement or a
reorganization of this corporation as a consequence of the compromise or
arrangement, the compromise or arrangement and the reorganization, if
sanctioned by the court to which the application has been made, shall be
binding on all the creditors or class of creditors, or on all the shareholders
or class of shareholders and also on this corporation.
ARTICLE VIII
No director of the corporation shall be personally liable to the
corporation or to its shareholders for monetary damages for breach of the
director's fiduciary duty, except for liability (i) for a breach of the
director's duty of loyalty to the corporation or its shareholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
knowing violation of law,
4
<PAGE> 5
(iii) for a violation of Section 551(1) of the Michigan Business Corporation
Act, (iv) for a transaction from which the director derived an improper
personal benefit, or (v) for an act or omission occurring before the effective
date of this Article VIII. Any repeal or modification of this Article VIII by
the shareholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE IX
The corporation shall indemnify its directors and officers in the
manner and to the fullest extent as now or hereafter permitted by law. The
corporation shall indemnify any person who was or is a party, or is threatened
to be made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she is or was a director or officer of the corporation,
or is or was serving another organization or entity (whether for profit or not)
at the corporation's request. Such indemnification shall be to the fullest
extent, and shall be determined in such manner, as now or hereafter permitted
by law.
Notwithstanding the foregoing, the indemnification and advancement of
expenses provided by or granted under the Michigan Business Corporation Act
shall not be considered exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under the Articles
of Incorporation, Bylaws, insurance or a contractual agreement.
ARTICLE X
(1) Any action required or permitted by the Michigan Business
Corporation Act to be taken at an annual or special meeting of shareholders may
be taken without a meeting, without prior notice and without a vote, if
consents in writing, setting forth the action so taken, are signed by the
holders of outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take action at a meeting at which all
shares entitled to vote on the action were present and voted. The written
consents shall bear the date of signature of each shareholder who signs the
consent. No written consents shall be effective to take the corporate action
referred to unless within 60 days after the record date for determining
shareholders entitled to express consent to or to dissent from a proposal
without a meeting, written consents signed by a sufficient number of
shareholders to take the action are delivered to the corporation. Delivery
shall be to the corporation's registered office, its principal place of
business, or an officer or agent of the corporation having custody of the
minutes of the proceedings of its shareholders. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to shareholders who have not consented in writing.
(2) Any action required or permitted by this act to be taken at an
annual meeting or special meeting of shareholders may be taken without a
meeting, without prior notice, and without a vote, if before or after the
action all the shareholders entitled to vote consent in writing. If the action
consented to would have required filing of a certificate under any other
section of this act if
5
<PAGE> 6
the action had been voted upon by shareholders at the meeting, the certificate
filed under a different section shall state, in lieu of any statement required
by the section concerning a vote of shareholders, that written consent has been
given as provided by this section.
(3) The necessary number of shares as required by statute were
voted in favor of the restated articles.
IN WITNESS WHEREOF, the undersigned has hereunto signed these Articles
of Incorporation on this ____ day of ______________, 1996.
RIVIERA TOOL COMPANY
By:
-----------------------------------
Kenneth K. Rieth, President
PREPARED BY:
Stuart F. Cheney
Dickinson Wright Moon et al
200 Ottawa Avenue NW Suite 900
Grand Rapids, MI 49503
(616) 458-1300
6
<PAGE> 1
EXHIBIT 3(b)
BYLAWS
OF
RIVIERA TOOL COMPANY
ARTICLE I
OFFICES
SECTION 1. BUSINESS OFFICES. The principal office of the corporation
in the State of Michigan shall be located at 5460 Executive Parkway, S.E., in
the City of Grand Rapids, County of Kent. The corporation may have such other
offices, either within or without the State of Michigan as the Board of
Directors may designate or as the business of the corporation may require from
time to time.
SECTION 2. REGISTERED OFFICE. The registered office of the
corporation (required by the Michigan Business Corporation Act to be maintained
in the State of Michigan) may be, but need not be, identical with the principal
office in the State of Michigan, and the address of the registered office may
be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS' MEETINGS
SECTION 1. ANNUAL MEETINGS. The annual meeting of the shareholders
shall be held on such day in such month and at such place as the directors
shall determine, for the purpose of electing directors and for the transaction
of such other business as may come before the meeting. If the election of
directors shall not be held at the time designated for the annual meeting of
the shareholders or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of the shareholders as soon
thereafter as convenient.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by statute, may be
called by the President or the Board of Directors, and shall be called by the
President at the request of the holders of not less than 10% of all the
outstanding shares of the corporation entitled to vote at the meeting.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate
any place, either within or without the State of Michigan, as the place of
meeting for any annual meeting, or for any special meeting called by the Board
of Directors. A waiver of notice signed by all shareholders entitled to vote
at a meeting may designate any place, either within or without the State of
Michigan, as the place of the holding of such meeting. If no designation is
made, or if a special meeting be otherwise called, the place of meeting shall
be the principal office of the corporation in the State of Michigan, but any
meeting may be adjourned to reconvene at any place designated by vote of a
majority of the shares represented thereat.
<PAGE> 2
SECTION 4. NOTICE OF MEETING. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
days, unless a longer minimum notice period is required by law, nor more than
sixty days before the date of the meeting either personally or by mail to each
shareholder of record entitled to vote at the meeting. If mailed, such notice
shall be deemed to be delivered when deposited in a post office or official
depository under the exclusive care and custody of the United States Postal
Service, addressed to the shareholder at his address as it appears on the stock
record books of the corporation, with postage thereon prepaid.
SECTION 5. WAIVER OF NOTICE BY SHAREHOLDERS. Whenever any notice
whatever is required to be given to any shareholder of the corporation under
the provisions of these bylaws or under the provisions of the articles of
incorporation or under the provisions of any statute, a waiver thereof in
writing, signed at any time, whether before or after the time of meeting, by
the shareholder entitled to such notice, shall be deemed equivalent to the
giving of such notice. Attendance of a person at a meeting of shareholders, in
person or by proxy constitutes a waiver of notice of the meeting, except when
the shareholder attends the meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 6. ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action
required or permitted to be taken at an annual or special meeting of
shareholders may be taken without a meeting, without prior notice and without a
vote, if all the shareholders entitled to vote thereon consent thereto in
writing.
SECTION 7. FIXING OF RECORD DATE.
(a) For the purpose of determining shareholders entitled to notice
of and to vote at a meeting of shareholders or an adjournment of a meeting, the
board may fix a record date, which shall not precede the date on which the
resolution fixing the record date is adopted by the board. The date shall not
be more than 60 nor less than 10 days before the date of the meeting. If a
record date is not fixed, the record date for determination of shareholders
entitled to notice of or to vote at a meeting of shareholders shall be the
close of business on the day next preceding the day on which notice is given,
or if no notice is given, the day next preceding the day on which the meeting
is held. When a determination of shareholders of record entitled to notice of
or to vote at a meeting of shareholders has been made as provided in this
section, the determination applies to any adjournment of the meeting, unless
the board fixes a new record date under this section for the adjourned meeting.
(b) For the purpose of determining shareholders entitled to
express consent to or to dissent from a proposal without a meeting, the bylaws
may provide for fixing a record date, which shall not be more than 60 days
before effectuation of the action proposed to be taken. In the absence of a
provision, the board may fix a record date, which shall not precede the date on
which the resolution fixing the record date is adopted by the board and shall
not be more than 10 days
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<PAGE> 3
after the board resolution. If a record date is not fixed and prior action by
the board is required with respect to the corporate action to be taken without
a meeting, the record date shall be the close of business on the day on which
the resolution of the board is adopted. If a record date is not fixed and
prior action by the board is not required, the record date shall be the first
date on which a signed written consent is delivered to the corporation as
provided in section 407.
(c) For the purpose of determining shareholders entitled to
receive payment of a share dividend or distribution, or allotment of a right,
or for the purpose of any other action, the bylaws may provide for fixing, or
in the absence of a provision the board may fix a record date, which shall not
precede the date on which the resolution fixing the record date is adopted by
the board. The date shall not be more than 60 days before the payment of the
share dividend or distribution or allotment of a right or other action. If a
record date is not fixed, the record date shall be the close of business on the
day on which the resolution of the board relating to the corporate action is
adopted.
SECTION 8. QUORUM. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. The shareholders present in
person or by proxy at such meeting may continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum. Though less than a quorum of the outstanding shares are
represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
called.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder
entitled to vote may vote by proxy appointed in writing by the shareholder or
by his authorized agent or representative. Such proxy shall be filed with the
Secretary of the corporation before or at the time of the meeting. No proxy
shall be valid after three years from the date of its execution, unless
otherwise provided in the proxy.
SECTION 10. VOTING OF SHARES. Each outstanding share entitled to
vote shall be entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders.
SECTION 11. LIST OF SHAREHOLDERS. A complete list of the
shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged in alphabetical order, and showing the address of
each shareholder and the number of shares registered in the name of each
shareholder shall be prepared by the officer or agent of the corporation having
charge of the stock transfer books. Such list shall be produced at the time
and place of the meeting during the whole time thereof, and be subject to the
inspection of any shareholder. Such list shall be prima facie evidence as to
who are the shareholders entitled to examine the list and to vote at the
meeting.
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<PAGE> 4
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the
corporation shall be managed by its Board of Directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of
directors of the corporation shall be seven, or such other number as may be
fixed from time to time by action of the shareholders or by resolution of the
Board of Directors. The members of the Board of Directors shall be divided
into three classes in respect of term of office, each class to contain as near
as may be one-third of the whole number of directors. Of the first classified
Board of Directors, the members of one designated class shall serve until the
annual meeting of shareholders next following their elections, the members of a
second designated class shall serve until the annual meeting of shareholders in
the second year following their election, and the members of the third
designated class shall serve until the annual meeting of shareholders in the
third year following their election; thereafter, each class of directors shall
be elected to serve until the annual meeting of shareholders held three years
next following their election. In all instances, a director shall continue to
serve until his or her successor is elected and qualified, or until his or her
death, resignation or removal.
SECTION 3. INDEPENDENT DIRECTORS. The shareholders or board may
designate 1 or more directors as an independent director. Any director so
designated shall be entitled to reasonable compensation in addition to
compensation paid to directors generally, as determined by the board or
shareholders, and reimbursement for expenses reasonably related to performance
of duties as an independent director. An independent director may communicate
with shareholders at the corporation's expense, as part of a communication or
report sent by the corporation to shareholders.
SECTION 4. REGULAR MEETINGS. The Board of Directors may from time to
time provide by resolution the time and place, either within or without the
State of Michigan, for the holding of regular meetings of the Board of
Directors. Such regular meetings may be held without other notice than such
resolution.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the President or of the
Secretary or any one of the directors. The person or persons calling such
meeting may fix any time or place for holding any special meeting of the Board
of Directors called by them.
SECTION 6. NOTICE OF MEETING. Notice of any special meeting shall
be given at least forty-eight (48) hours prior thereto by written notice
delivered personally or mailed to each director at the address designated by
him for that purpose or, if none is designated, at his last known address or by
telegram. If mailed, such notice shall be deemed to be delivered when
deposited so addressed in a post office or official depository under the
exclusive care and custody of the United States Postal Service, with postage
thereon prepaid. If notice is given by telegram, such notice shall be deemed
to be delivered when given to the telegraph company.
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<PAGE> 5
SECTION 7. WAIVER OF NOTICE BY DIRECTORS. Whenever any notice
whatever is required to be given to any director of the corporation under the
provisions of these bylaws or under the provisions of the articles of
incorporation or under the provisions of any statute, a waiver thereof in
writing, signed at any time, whether before or after the time of meeting, by
the director entitled to such notice, shall be deemed equivalent to the giving
of such notice. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
SECTION 8. QUORUM. A majority of the directors then in office shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors; but though less than such quorum is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice.
SECTION 9. PRESENCE BY MEANS OF TELEPHONE. A director shall be
deemed to be present in person at a meeting of the directors if he participates
in the meeting by means of conference telephone or similar communications
equipment through which all persons participating in the meeting can
communicate with the other participants.
SECTION 10. MANNER OF ACTING. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, unless the act of a greater number is required by
statute.
SECTION 11. ACTION BY DIRECTORS WITHOUT A MEETING. Any action
required or permitted to be taken at any meeting of the Board of Directors or
any committee thereof may be taken without a meeting if, before or after the
action, all members of the Board or of the committee, as the case may be, shall
have signed a written consent. Any such written consents shall be filed with
the minutes of the proceedings of the Board or the committee.
SECTION 12. REMOVAL. A director or the entire Board may be removed,
with or without cause, by vote of the holders of a majority of the shares
entitled to vote at an election of directors.
SECTION 13. VACANCIES. (1) Unless otherwise limited by
the articles of incorporation, if a vacancy, including a vacancy resulting from
an increase in the number of directors, occurs in a board, the vacancy may be
filled as follows:
(a) The shareholders may fill the vacancy.
(b) The board may fill the vacancy.
(c) If the directors remaining in office constitute fewer
than a quorum of the
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<PAGE> 6
board, they may fill the vacancy by the affirmative vote of a majority
of all the directors remaining in office.
(2) A vacancy that will occur at a specific date, by reason of a
resignation effective at a later date as provided by statute or otherwise, may
be filled before the vacancy occurs but the newly elected or appointed director
may not take office until the vacancy occurs.
SECTION 14. COMPENSATION. The Board of Directors by affirmative vote
of a majority of the directors then in office, and irrespective of any personal
interest of any of its members, may establish reasonable compensation of all
directors for services to the corporation as directors, officers or otherwise,
or may delegate such authority to an appropriate committee.
SECTION 15. PRESUMPTION OF ASSENT. A director of the corporation who
is present at a meeting of the Board of Directors or a committee thereof at
which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the person acting as the Secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the Secretary of
the corporation immediately after the adjournment of the meeting. Such right
to dissent shall not apply to a director who voted in favor of such action.
SECTION 16. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. The Board of Directors shall have the power at any time to fill
vacancies in, to change the membership of, or to discharge any such committee,
or to designate additional committees. The Board of Directors shall have the
power to appoint employees of the corporation who are not members of the Board
of Directors to serve as advisory, non-voting consultants to any such
committees. Any committee, to the extent provided in the resolutions of the
Board creating such committee and subject to the limitations provided by
statute, shall have and may exercise the powers of the whole Board of Directors
in the management of the business and affairs of the corporation.
SECTION 17. DIVIDENDS. Subject always to the provisions of law and
the articles of incorporation, the Board of Directors shall have full power to
determine whether any, and if any, what part of any, funds legally available
for the payment of dividends shall be declared in dividends and paid to
shareholders; the division of the whole or any part of such funds of the
corporation shall rest wholly within the lawful discretion of the Board of
Directors, and it shall not be required at any time, against such discretion,
to divide or pay any part of such funds along or to the shareholders as
dividends or otherwise; and the Board of Directors may fix a sum which may be
set aside or reserved as working capital for the corporation or as a reserve
for any proper purpose, and from time to time may increase, diminish and vary
the same in its absolute judgment and discretion.
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<PAGE> 7
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The Board of Directors, as soon as practicable
after the election thereof held in each year, shall elect a President, one or
more Vice Presidents, a Secretary and a Treasurer, and from time to time may
elect such Assistant Secretaries, Assistant Treasurers and such other officers,
agents and employees as it may deem proper. Any two offices other than the
offices of President and Secretary may be held by the same person. Prior to
the election or appointment of the first Board of Directors, the
incorporator(s) of the corporation may appoint such officers as he deems
necessary or appropriate to conduct the affairs of the corporation.
SECTION 2. ELECTION AND TERM OF OFFICE. Each officer shall hold
office for the term for which he was elected and until his successor shall have
qualified or until his death or until he shall resign or shall have been
removed in the manner hereinafter provided.
SECTION 3. REMOVAL. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors, whenever in its
judgment the best interests of the corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment shall not of itself create contract
rights.
SECTION 4. VACANCIES. A vacancy in any principal office because of
death, resignation, removal, disqualification or otherwise shall be filled by
the Board of Directors for the unexpired portion of the term.
SECTION 5. PRESIDENT. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall, in general, supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders and Board of Directors. He may sign certificates for shares
of the corporation, any deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated
by the Board of Directors or by these bylaws or some other law to be otherwise
signed or executed, and in general shall perform all duties incident to the
office of President and such other duties as may be prescribed by the Board of
Directors from time to time.
SECTION 6. VICE PRESIDENT. In the absence of the President, or in
the event of his death or inability to act, the Vice President, if any, or if
more than one, then in the order designated by the Board of Directors, shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President.
SECTION 7. SECRETARY. The Secretary shall: (a) keep the minutes of
the shareholders' and the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these bylaws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the
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<PAGE> 8
corporation is affixed to all documents the execution of which on behalf of the
corporation under its seal is duly authorized; (d) keep a register of the post
office address of each shareholder; (e) have general charge of the stock
transfer books of the corporation; and (f) in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the President or by the Board of Directors.
SECTION 8. TREASURER. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such
sum and with such surety or sureties as the Board of Directors shall determine.
He shall: (a) have charge and custody of and be responsible for all funds and
securities of the corporation; receive and give receipts for monies due and
payable to the corporation from any source whatsoever and deposit all such
monies in the name of the corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of these
bylaws; and (b) in general perform all of the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
SECTION 9. SALARIES. The salaries of the officers shall be fixed
from time to time by the Board of Directors and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a director of
the corporation.
SECTION 10. OFFICER REIMBURSEMENT. Each officer by accepting his
office agrees that any payments made to him by the corporation such as a
salary, commission, bonus, interest, or rent, or entertainment expense incurred
by him, which shall be disallowed in whole or in part as a deductible expense
by the Internal Revenue Service, shall be reimbursed by such officer to the
corporation to the full extent of such disallowance. It shall be the duty of
the directors, as a Board, to enforce payment of each such amount disallowed.
In lieu of payment by the officer, subject to the determination of the
directors, proportionate amounts may be withheld from his future compensation
payments until the amount owed to the corporation has been recovered.
ARTICLE V
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Subject to the requirements of
law, certificates representing shares of the corporation shall be in such form
as shall be determined by the Board of Directors. Such certificates shall be
signed by the President or a Vice President or by the Secretary. All
certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the corporation. All certificates
surrendered to the corporation for transfer shall be canceled and no new
certificates shall be issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except that in case of a
lost, destroyed or mutilated certificate, a new one may be issued therefor upon
such terms and indemnity to the corporation as the Board of Directors may
prescribe.
SECTION 2. FACSIMILE SIGNATURES. If a transfer agent or registrar is
appointed and
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<PAGE> 9
countersigns certificates representing shares of the corporation, the
signatures of the officers of the corporation on such certificates may be
facsimiles.
SECTION 3. NO PREEMPTIVE RIGHTS. No holders of shares of the capital
stock of any class of the corporation shall have any preemptive right of
subscription to any shares of any class of stock of the corporation, whether
now or hereafter authorized.
ARTICLE VI
INDEMNIFICATION
SECTION 1. ACTIONS AGAINST DIRECTORS AND OFFICERS. The corporation
shall indemnify its directors and officers in the manner and to the fullest
extent as now or hereafter permitted by law. The corporation shall indemnify
any person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director or officer of the corporation, or is or was serving
another organization or entity (whether for profit or not) at the corporation's
request. Such indemnification shall be to the fullest extent, and shall be
determined in such manner, as now or hereafter permitted by law.
Notwithstanding the foregoing, the indemnification and advancement of
expenses provided by or granted under the Michigan Business Corporation Act
shall not be considered exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under the Articles
of Incorporation, Bylaws, insurance or a contractual agreement.
SECTION 2. PREPAYMENT. Expenses incurred in defending a civil or
criminal action, suit or proceeding described in Section 1 of this Article VI
shall be paid by the corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
the person for whom such expenses are being paid to repay such amount unless it
shall ultimately be determined that he is entitled to be indemnified by the
corporation.
SECTION 3. PERSONS NOT DIRECTORS OR OFFICERS. Persons for whom
indemnification is not provided in Sections 1 of this Article VI but who are
employees or agents of the corporation or are serving at the request of the
corporation as employees or agents of another corporation, partnership, joint
venture, trust or enterprise may be indemnified to the extent authorized at any
time or from time to time by the Board of Directors of the corporation subject,
however, to the limitations set forth in this Article VI.
SECTION 4. PERSONS WHO HAVE CEASED TO HOLD OFFICE. The
indemnification provided in this Article VI shall continue as to a person who
has ceased to be a director or officer and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 5. IMPLIED CONTRACT. The assumption by a person of a term of
office as a director or officer of the corporation or, at the request of the
corporation, as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, shall constitute a contract,
entitling
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<PAGE> 10
such person, during such term of office, to all of the rights and privileges of
indemnification afforded by this Article VI as in effect as of the date of his
assumption of such term of office, but such contract shall not prevent the
amendment of this Article VI in respect of any future term of office of such
persons or in respect of any other person.
SECTION 6. INSURANCE. The corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity or
arising out of his status as such, whether or not the corporation would have
the power to indemnify him against such liability under the provisions of this
Article VI or of the Michigan Business Corporation Act.
SECTION 7. INVALIDITY OF PART. The invalidity or enforceability of
any provision of this Article VI shall not affect the validity or
enforceability of any other provision hereof.
ARTICLE VII
AMENDMENTS
The shareholders or Board of Directors may amend, alter or repeal any
of these bylaws except to the extent that any such bylaw has hereinafter been
enacted by the shareholders of the corporation with specific limitations upon
the power of the Board of Directors to amend, alter or repeal such bylaw.
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<PAGE> 1
EXHIBIT 9
SHAREHOLDERS AGREEMENT
THIS AGREEMENT made as of this 31st day of October, 1996 by and
between Riviera Holding Company ("Holding"), a Michigan corporation, with its
principal office at 5460 Executive Parkway, S.E., Grand Rapids, Michigan,
49512, Motor Wheel Corporation ("Motor Wheel"), an Ohio corporation, with its
principal office at 38481 Huron River Drive, Romulus, Michigan 48174, and
Riviera Tool Company ("Tool") f/k/a New 3, Inc., a Michigan corporation, with
its principal office at 5460 Executive Parkway, S.E., Grand Rapids, Michigan
49512.
RECITALS
WHEREAS, Holding and Motor Wheel executed a Shareholders Agreement
dated April 15, 1988 as the record and beneficial shareholders of all of the
capital stock of Tool; and
WHEREAS, Tool has been merged or is in the process of merging with its
wholly-owned subsidiary, Riviera Die & Tool, Inc. with Tool as the survivor;
and
WHEREAS, Holding and Motor Wheel, subsequent to such merger, will each
own 50% of the common stock of Tool; and
WHEREAS, Tool may file a Registration Statement with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, (the
"Registration Statement); and
WHEREAS, the parties desire to provide for certain voting of their
shares of Tool stock in concert and certain other rights and restrictions.
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein, the parties agree as follows:
1. Voting on Board of Directors. The parties agree
unconditionally and irrevocably as a right coupled with their ownership
interest in the Common Stock of Tool to at all times hereafter vote all of
their respective shares of the Tool in favor of structuring a board of
directors as follows:
1.1 To provide a board of directors of seven (7) persons
consisting of three (3) persons designated by Holding and two (2)
persons designated by Motor Wheel and two (2) persons as mutually
agreed upon. The parties agree unconditionally and irrevocably to
vote all of their respective shares of Tool stock in favor of persons
designated by each respective party or together, as the case may be,
as directors pursuant to this Agreement. The persons designated by
the parties to be voted upon by the other party pursuant to this
Agreement shall be specified in writing by each party to the other
party prior to the date set for the vote on directors. Failure to so
specify any designee not requiring agreement hereunder in writing
shall permit a party who has specified its designees hereunder to vote
on directors for the undesignated position as such party chooses. In
the event of a failure to agree on designees for the two directors as
required above, neither party shall be permitted to vote on directors
for such position. Failure to designate any person for a director
position which
<PAGE> 2
requires agreement hereunder prior to a vote properly scheduled on
such position is irrevocably presumed to be consent and agreement to
any person properly designated by the other party hereunder and the
other party may then vote for the properly designated person whether
or not the party whose consent is presumed votes on such person.
Notwithstanding the foregoing, the parties agree that until Tool or
its successor in interest is a public company the board of directors
shall remain at five (5), three (3) persons designated by Holding and
two (2) designated by Motor Wheel.
1.2 The seven-man board of directors shall be divided
into three classes, two classes of two directors, and one class of
three directors. Directors designated by a party may be assigned to
any class of directors; provided, however, that only the specified
number of designees for either party may be in office at any one time
hereafter. The initial classification of directors shall be as
follows:
Class 1 whose terms shall expire at the annual
meeting following the close of Tool's fiscal year in 1997,
John C. Kennedy (or successor designated by Holding) and
director to be agreed upon by the parties;
Class 2 whose terms shall expire at the annual
meeting following the close of Tool's fiscal year in 1998,
Leonard C. Wood, (or successor designated by Holding), Thomas
R. Collins (or successor designated by Motor Wheel) and
director to be agreed upon by the parties;
Class 3 whose terms shall expire at the annual
meeting following the close of Tool's fiscal year in 1999,
Kenneth K. Rieth (or successor to be designated by Holding)
and John R. Kinstler (or successor to be designated by Motor
Wheel).
1.3 When a vacancy occurs for any reason, including
death, removal, resignation or at the expiration of the term of the
director, in the office of a director of Tool who has been designated
by a party hereunder, the parties shall attempt to provide that the
vacancy shall be filled by the board of directors with a new director
designated by the party who has designated the director who has
vacated office. In the event that the parties are unable to
accomplish such action by the board of directors, a special meeting of
the shareholders of Tool shall be held without delay upon the request
of either party hereto for the purposes of electing a replacement with
voting at such election to be pursuant to this Agreement.
1.4 The parties shall vote from time to time to amend the
Articles of Incorporation and the Bylaws of Tool so as to be
consistent with and accomplish the intent of this Agreement.
1.5 Voting on all matters other than specified above
shall be in the sole unfettered discretion of the shareholders of
record.
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<PAGE> 3
2. Option. Motor Wheel hereby grants to Holding an option to
purchase all the shares of Tool owned by Motor Wheel from time to time on the
terms and conditions of a Stock Option Agreement attached hereto as Exhibit A,
and Motor Wheel and Holding agree to execute such Option Agreement
simultaneously herewith.
3. Registration Rights.
3.1 Motor Wheel's Demand Registration Rights. At any
time after the expiration of the "lock up" period given to the
underwriter in connection with the first registration statement for
Tool under the Securities Act of 1933, if any, Tool shall promptly
prepare, file and use its best efforts to process to effectiveness one
new registration statement to cover a public offering of the shares of
common stock of Tool now and then still owned by Motor Wheel (the "MW
Shares"), if a written request for registration under the Securities
Act of 1933 by Motor Wheel is made. If subsequent to Tool's receipt
of Motor Wheel's written request or the receipt of Motor Wheel's
written request after passing of the Investigation Period (as defined
below) with no action by Tool, (i) the Board of Directors of Tool have
instructed management, or (ii) a director has formally requested, as
evidenced in the minutes of the Board, that Tool investigate the
issuance of additional securities through an offering under the
Securities Act of 1933 (collectively (i) and (ii) are a "Registration
Investigation"), and if such additional securities are so issued and
an offering commenced prior to the completion of Motor Wheel's Demand
Registration and the sale of all of the Motor Wheel Shares, then Motor
Wheel's Demand shall be treated as a request under Section 3.2 below.
In that case, however, all of the Motor Wheel Shares must be included
in the registration and subsequent offering and no reduction shall
occur by reason of the inclusion of any other securities in such
registration. If Motor Wheel's written request is made within six
(6) months of a Registration Investigation (the "Investigation
Period"), and if new shares of Tool are issued within the
Investigation Period, Motor Wheel's request shall be treated as a
request under Section 3.2, and shall, to the extent required, be
subject to the pro rata adjustment set forth therein.
3.2 Motor Wheel's Piggyback Registration Rights. Tool
shall include the MW Shares in any new registration statement filed by
Tool relating to the public sale of securities for cash, provided that
requests therefor shall have been received from Motor Wheel to be
included therein after the expiration of the "lock up" period given to
the underwriter in connection with the first registration statement
for Tool under the Securities Act of 1933. Anything herein to the
contrary notwithstanding, if in the reasonable opinion of the lead
underwriter who is expected to market the securities covered by such
new registration statement, the inclusion of all or part of the MW
Shares shall be impractical or inadvisable, to the extent the
inclusion of such MW Shares shall be so impractical and inadvisable,
the rights of Motor Wheel under this Section 3.2 to have the MW Shares
included in such registration statement shall be reduced pro-rata, but
only as to such registration statement. Tool agrees to give written
notice of any registration statement to
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<PAGE> 4
Motor Wheel at least thirty (30) days prior to the filing of any such
registration statement. In connection with the reduction described
above, the term "pro-rata" shall mean a pro-rata reduction of all
shares of selling shareholders included in such registration
statement. Motor Wheel's pro-rata portion of such reduction shall be
the number of MW Shares requested to be included divided by the total
number of shares to be included (including the MW Shares) times the
aggregate number of shares to be reduced. Each other selling
shareholder's pro-rata reduction shall be calculated in the same
fashion using as the numerator that shareholder's number of shares
originally requested or planned to be included.
3.3 The following provisions shall be applicable to any
registration statement prepared pursuant to this Section:
3.3.1 All expenses incident to Tool's performance of
or compliance with its obligations with respect to the demand
registration or piggyback registration rights provided above,
including, without limitation, all registration and filing
fees, all fees and expenses of compliance with securities and
"Blue Sky" laws (including, without limitation, the fees and
expenses of counsel for the underwriters or placement of sales
agent in connection therewith), all printing and copying
expenses, all messenger and delivery expenses, all fees and
expenses of underwriters and sales of placement agents in
connection therewith, all fees and expenses of Tool's
independent certified public accountants and counsel,
including, without limitation, with respect to "comfort"
letters and opinions (collectively the "Registration
Expenses") shall be borne by Tool; provided, however, that
Tool shall not be responsible for fees and expenses of any
independent legal counsel engaged by Motor Wheel in connection
with such registration, and in the event of a demand
registration right, not including any other shares of Tool,
Tool shall be responsible only for the first $50,000 of such
Registration Expenses, the balance of which shall be borne by
Motor Wheel. In the event of inclusion of shares of Tool
other than MW Shares in connection with the demand
registration rights above, the Registration Expenses shall be
borne pro-rata among the holders of the shares to be sold
pursuant to such registration according to the number of
shares held by each, or in the event shares are to be issued
in connection therewith by Tool, for this purpose Tool shall
be treated as the holder of such shares to be issued.
3.3.2 Motor Wheel shall furnish Tool with such
appropriate information as Tool shall reasonably request in
writing concerning Motor Wheel as is necessary for Tool to
comply with the disclosure requirements of the Securities Act
of 1933, as amended (the "Act"), and the rules and regulations
promulgated thereunder. Following the effective date of such
registration statement, Tool shall, upon the reasonable
request of Motor Wheel, forthwith supply such number of
prospectuses meeting the requirements of the Act, as shall be
requested by Motor Wheel to permit Motor Wheel to make a
public offering of all MW Shares included therein.
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<PAGE> 5
Tool shall exercise good faith efforts to qualify the MW
Shares for sale in such states as Motor Wheel shall reasonably
designate.
3.3.3 Tool shall indemnify, defend and hold harmless
Motor Wheel and each underwriter (within the meaning of the
Act) who may purchase from or sell for Motor Wheel any MW
Shares from and against all liabilities under the Securities
Act of 1933 or otherwise arising from such registration
statement, or contribute to payments of Motor Wheel or such
underwriter (except as provided by Paragraph 3.3.4 below )
from and against all liabilities under the Securities Act of
1933 or otherwise arising from such registration statement or,
to the extent such indemnification is prohibited by law,
contribute to payments of Motor Wheel.
3.3.4 Motor Wheel shall indemnify, defend and hold
harmless Tool from and against all liabilities under the
Securities Act of 1933 or otherwise arising from such
registration statement, or, to the extent such indemnification
is prohibited by law, contribute to payments of Tool, to the
extent such liability arises out of or is based on statements
or omissions made in reliance upon or in conformity with
written information furnished to Tool by Motor Wheel.
4. Proposed Sales. Subject to the restrictions on transfers by
Motor Wheel pursuant to Exhibit A, and other than as provided in Paragraphs 2
and 3 above, if at any time during this Agreement either of Motor Wheel or
Holding proposes to directly or indirectly transfer its shares in Tool to any
person (the "Sending Party"), it shall give the other party (the "Receiving
Party") notice of such proposed transfer, including all of the terms and
conditions of such proposed transfer and shall identify the proposed transferee
(the "Sale Notice"). Upon receipt of the Sale Notice the receiving party shall
have ten (10) business days to notify the sending party that it is exercising
its rights hereunder to participate in such transfer (the "Exercise Notice").
4.1 Right of Purchase. The Exercise Notice may specify
that the receiving party has elected to purchase the Tool shares
identified by the Sale Notice upon the prices, terms and conditions
identified in the Sale Notice.
4.2 Tag Along Sale. The Exercise Notice may specify that
the Receiving Party is electing to participate with the Sending Party
in the sale to the proposed purchaser and such notice shall specify
the number of shares of Tool held by the Receiving Party which the
Receiving Party wishes to sell. Upon receipt of the Exercise Notice,
the Sending Party shall arrange for the proposed purchaser to purchase
the shares that the Receiving Party wishes to sell upon the same terms
and conditions (including all direct and indirect compensation) as
that identified in the Sale Notice; provided, however, that the
Sending Party shall only be required to arrange for the sale of the
same percentage of shares of Tool held by the Receiving Party as the
percentage of shares in Tool held by the Sending party which are to be
sold to the proposed purchaser; further provided, however, that if the
proposed purchaser elects only to purchase a given amount of shares,
then the total number
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<PAGE> 6
of shares to be sold in such transfer by each of Motor Wheel and
Holding shall be reduced pro rata (based upon the total shares that
each party wishes to sell as compared to the given number of shares
that the proposed purchaser wishes to purchase) so as to total such
given amount.
4.3 In the event that the sender of a Sale Notice does
not receive an Exercise Notice in a timely fashion, such sender shall
have 120 days from the expiration of the ten-day period to consummate
the proposed transfer. To the extent that such transfer is not made
within such period, all shares of stock in Tool shall again be subject
to the restrictions of this Agreement, including those with respect to
any proposed transfer or the same proposed transfer, for which a Sale
Notice, Exercise Notice and other compliance hereunder shall again be
required.
4.4 Each party agrees to execute a "lock-up" agreement as
may be reasonably requested by the underwriters in connection with the
Registration Statement filed within six (6) months of the date hereof
which will restrict sales of stock by the parties for a period of two
(2) years from the effective date of the Registration Statement, and,
with respect to any registration statement filed beyond such six (6)
month period, such lock-up agreement as may be reasonably requested by
the managing underwriter in connection with such registration
statement. Notwithstanding the foregoing, Motor Wheel shall be
permitted to transfer its shares in Tool to Hayes Wheels
International, Inc. and any subsidiary of Hayes Wheels International,
Inc. including a subsidiary of a subsidiary so long as one hundred
percent (100%) ownership of such subsidiary is maintained directly or
indirectly through intermediate subsidiaries at the time of transfer
and at all times thereafter during which the subsidiary owns such Tool
stock, and further provided that it is specifically understood that
neither Motor Wheel, Hayes Wheels International, Inc. nor any
subsidiary shall have the right to nor shall it encumber or pledge
such shares in any manner in connection with any financing or
otherwise.
4.5 Holding's Shares in Tool are now pledged to NBD Bank
to secure all existing and future obligations of Holding to NBD Bank.
It is specifically understood that Holding shall not have the right to
nor shall it otherwise encumber or pledge such Shares in any manner in
connection with any financing or otherwise in the future.
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<PAGE> 7
5. Effective Date; Term of Agreement. This Agreement shall
become effective immediately and shall continue until one of the parties hereto
no longer holds Common Stock of Tool.
6. No Shareholder Guarantee Is Required. Neither the parties nor
any beneficial owner thereof shall be required to provide any guarantees for
the benefit of Tool, including guarantees of indebtedness incurred thereby.
7. Indemnifications of Directors. The parties agree to vote
their shares and direct their designated directors to vote so as to provide an
indemnification and hold harmless provision for directors of Tool to the
fullest extent permitted by law, holding such directors harmless from and
against any claim asserted against them by third parties for action taken by
them in good faith in their capacity as director of Tool. At such times as
Tool may be a company with stock having been issued pursuant to a registration
under the Securities Act of 1933, the parties agree to have Tool execute an
agreement with each director of Tool in the form attached hereto as Exhibit B,
or such other agreement as may unanimously be agreed upon between Holding and
Motor Wheel from time to time and Tool agrees to make a good faith effort to
purchase directors' and officers' liability insurance with limits of at least
ten million dollars to the extent such purchase is not unreasonably costly in
light of the benefits provided thereby.
8. Stock Covered by Agreement. This Agreement shall be
applicable to all shares of Tool's capital stock held by either party hereto,
whether now owned or hereafter acquired by whatever means.
9. Miscellaneous.
9.1 Specific Performance. The parties hereby recognize
and agree that the shares of Common Stock of Tool are unique and that
the benefits of this Agreement cannot be achieved by the payment of
money damages only and that the covenants and agreements herein set
forth are therefore specifically enforceable.
9.2 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Michigan,
including the conflicts of law provisions thereof.
9.3 Notices. All notices, requests, demands or other
communications required or permitted to be given hereunder shall be in
writing and shall be deemed to be duly given if personally delivered
or delivered by an independent contract courier, or mailed postage
prepaid, registered or certified to a party of this Agreement at its
or his address as set forth in the first paragraph of this Agreement
or at a changed address if proper notice has been given of such
change.
9.4 Entire Agreement. This Agreement sets forth the
entire agreement and
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<PAGE> 8
understanding of the parties with respect to the transactions
contemplated hereby. No modification of this Agreement shall be
binding upon a party unless in writing and signed by the party to be
charged.
9.5 Assignments. The terms, covenants and agreements of
this Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors,
heirs, and assigns.
9.6 Headings. Titles and headings are inserted for the
convenience of reference only and are not intended to be part of or to
effect the meaning or interpretation of this Agreement.
9.7 Restrictive Legend. Upon the execution of this
Agreement, Holding and Motor Wheel shall surrender to Tool all
certificates evidencing ownership of stock in Tool. Tool shall return
said certificates, after placing upon them the following endorsement:
The shares of Riviera Tool Company represented hereby and the
disposition, assignment or encumbrance thereof are restricted
and subject to the terms of the Agreement dated October, 1996
entered into among the Company, Riviera Holding Company and
Motor Wheel Corporation. A copy of such Agreement is on file
at the principal office of the Company in Grand Rapids,
Michigan. The securities evidenced hereby have not been
issued pursuant to registration under the Securities Act of
1933 or any state securities laws.
WHEREFORE, this Shareholders Agreement is executed as of the day,
month and year first above written.
MOTOR WHEEL CORPORATION
By
--------------------------------
Daniel M. Sandberg
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<PAGE> 9
RIVIERA HOLDING COMPANY
By
--------------------------------
Kenneth K. Rieth, President
RIVIERA TOOL COMPANY
By
--------------------------------
Kenneth K. Rieth, President
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<PAGE> 1
EXHIBIT 10(b)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of
September, 1996, by and between Riviera Tool Company a Michigan
corporation, hereinafter referred to as "Corporation," and Kenneth K.
Rieth, hereinafter referred to as "Employee."
W I T N E S S E T H:
WHEREAS, Corporation will be engaging in the business of design
and construction of tools for the metal stamping business; and
NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth, the parties hereto do promise and agree as follows:
1. EMPLOYMENT. Corporation shall employ Employee and Employee
shall serve Corporation as President and Chief Executive Officer performing
such reasonable duties as are customary to such position and as may from
time to time be directed by the Corporation's Board of Directors. The
Employee's place of employment shall be the present offices of the
Corporation in Grand Rapids, Michigan, or at another location as shall be
mutually agreed upon between the parties. Employee shall devote his full
working time and efforts to the affairs of Corporation.
2. TERM. The term of employment of Employee under this
Agreement shall commence on the closing of S-1 and shall continue for
one fixed term of three (3) years.
3. COMPENSATION. In consideration of the services to be
performed for Corporation by Employee pursuant to Paragraph 1, above,
Corporation shall provide to Employee the following:
A. A base salary of One Hundred Fifty Thousand Eight Hundred and
No/100 Dollars ($150,800.00) per year, subject to being increased in
the discretion of the Board of Directors of Corporation, payable in
installments according to Corporation's regular salaried payroll
policy payment procedures in effect from time to time.
B. Such bonuses as from time to time are determined by the
Corporation but not less than three and one-half percent (3 1/2%) of
the annual consolidated profits of the Corporation, before payment of
or provision for any taxes on
<PAGE> 2
income or officers' bonuses based upon such income of the Corporation,
and as determined by the regular certified public accountants for the
Corporation according to generally accepted accounting principles
consistently applied.
The amounts to be paid pursuant to this paragraph are prior to
any deductions for withholding, social security taxes or similar payroll
deductions. Corporation's obligation to make such payments and provide
such benefits to Employee shall terminate in the event of termination of
Employee's employment with Corporation for any reason.
4. OFFICE; EXPENSES. Corporation shall provide to Employee such
office space, furniture, materials, supplies and secretarial help as are
necessary or appropriate hereunder. Employee shall be entitled to
reimbursement for all out-of-pocket expenses incurred on behalf of the
Corporation in the conduct of his employment and which are accounted for in
such fashion as may reasonably be required by the Corporation.
5. MEDICAL INSURANCE; FRINGE BENEFITS. Employee shall be
entitled to participate in such medical and health benefit protection, life
insurance coverage, or other fringe benefits as are provided by the
Corporation to its employees generally or its management employees
generally and such other fringe benefits as the Board of Directors may
establish from time to time for the benefit of Employee.
6. TRADE SECRETS. Employee agrees not to divulge (other than in
the normal pursuit of Corporation's business) to any unauthorized person or
to use for other than Corporation's sole benefit at any time while he is
employed and after he is employed by Corporation, the names and addresses
of any past, present or prospective customers of Corporation, or any of
Corporation's procedures, processes, systems, methods, forms and records or
other information of whatever nature acquired by him as an employee, it
being understood that the foregoing are trade secrets of Corporation and
are disclosed to Employee in confidence. For the purposes of this
Paragraph 6, the term "Corporation" shall include Corporation and any
affiliated company.
2
<PAGE> 3
7. TERMINATION. The term of employment of Employee hereunder
shall be considered to terminate upon the occurrence of any of the following
(with the provisions in this Paragraph 7 not to be construed as limiting
Corporation's ability to otherwise terminate Employee's employment following the
term hereof).
7.1. DEATH OF EMPLOYEE. The death of Employee.
7.2. DISABILITY OF EMPLOYEE. For purposes of this
Agreement, Employee shall be considered to be disabled if he is
unable to perform his services hereunder for a continuous period
of ninety (90) consecutive calendar days by reason of physical or
mental illness or incapacity. If there is any dispute as to
whether Employee is or was physically or mentally unable to
perform his duties hereunder, such question shall be submitted to
a licensed physician for determination. If the parties cannot
agree upon a licensed physician for purposes of making such
determination within five (5) days after written notice by one
party to the other, then both parties shall each select a
licensed physician who together shall appoint a third licensed
physician who will then make such determination. The
determination of such physician as to such mental or physical
condition of Employee shall be binding and conclusive upon the
parties. A disability shall be considered as a continuing
disability unless Employee returns to full-time employment
rendering all of the duties of his position pursuant to Paragraph
1, above, for a period of sixty (60) consecutive calendar days.
7.3. THE COMMISSION OF A PROHIBITED ACT BY EMPLOYEE. A
prohibited act shall be any of the following if committed by
Employee directly or indirectly without the prior written
approval of an officer of Corporation:
(a) Commission of an act of dishonesty or gross
negligence involving Corporation;
(b) Disclosure to an unauthorized person of the
information described in Paragraph 6, above, or of any
3
<PAGE> 4
other information which would be beneficial to a business
competitive with Corporation or which could be materially
disadvantageous to Corporation;
(c) Rendering advice or assistance to a business
competitive with Corporation;
(d) Becoming a proprietor who or a shareholder,
officer or director of a corporation, or a member of a
partnership or trustee of a trust which conducts a business
competitive with Corporation, or an employee or agent
thereof;
(e) For purposes of subparagraphs (b), (C) and (d),
above, a business competitive with Corporation is any
business, firm or entity engaged directly or indirectly in
any business now or hereafter engaged in by Corporation, or
any company affiliated therewith.
7.4. AGREEMENT. By mutual agreement of the parties.
7.5. DISMISSAL. Dismissal of employee by Corporation or
termination of services by Employee after the expiration of the
original term hereof.
8. INSURANCE. Corporation shall have the right to insure its
obligation hereunder and to obtain such key man life insurance on the Employee
as it deems necessary or appropriate and Employee agrees to cooperate as may be
necessary or appropriate in order to obtain such insurance.
9. ARBITRATION. All claims, disputes and other matters in
question between the parties to this Agreement arising out of or relating to
this Agreement or the breach thereof, other than under Paragraph 7 hereof, shall
be decided by arbitration in accordance with the Commercial Disputes Arbitration
Rules of the American Arbitration Association then obtaining. Notice of the
demand for arbitration shall be filed in writing with the other party to this
Agreement and with the American Arbitration Association. The award rendered by
the arbitrator shall be final and judgment may be entered upon it in accordance
with
4
<PAGE> 5
applicable law in any court having jurisdiction thereof. Arbitration
hereunder shall take place in Grand Rapids, Michigan.
10. WAIVER OF BREACH. The waiver by Corporation of the breach
of any of the provisions of this Agreement by Employee shall not be deemed
a waiver by Corporation of any subsequent breach.
11. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors and assigns.
12. GOVERNING LAW. This Agreement is made in the State of
Michigan and shall be interpreted in accordance with the laws thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day, month and year first above written.
RIVIERA TOOL COMPANY
By:
--------------------------------
-----------------------------------
Kenneth K. Rieth
5
<PAGE> 1
EXHIBIT 24(b)
TO WHOM IT MAY CONCERN:
The undersigned does hereby consent to being named in the form S-1
Registration Statement of Riviera Tool Company, and the prospectus forming a
part thereof, as a person selected to become a director of Riviera Tool
Company upon completion of said offering.
Very truly yours,
/s/ Thomas H. Highley
Dated: December, 23, 1996 Thomas H. Highley
