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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998
[ ] For the transition period from __________ to __________
Commission file number: 000-22855
NEW DIRECTIONS MANUFACTURING, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 86-0671974
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2940 W. WILLETTA STREET, PHOENIX, ARIZONA 85009
(Address of principal executive offices) (Zip Code)
(602) 352-1165
(Issuer's telephone number, including area code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No [ ]
The issuer had 5,002,270 shares of common stock outstanding as of March
31, 1998.
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]
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NEW DIRECTIONS MANUFACTURING, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
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Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheet as of March 31, 1998 3
Comparative Consolidated Statements of Income for
The Three Months and Nine Months Ended March 31,
1998 and 1997 4
Comparative Consolidated Statements of Cash Flow for
The Three Months and Nine Months Ended March 31,
1998 and 1997 5-6
Notes to the Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 10
(b) Reports on Form 8-K 10
</TABLE>
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1
NEW DIRECTIONS MANUFACTURING, INC.
CONSOLIDATED BALANCE SHEET
ASSETS March 31, 1998
-----------------------
<S> <C>
Current Assets:
Cash and cash equivalents $285,566
Accounts receivable, less allowance of $30,938
for possible losses 691,508
Inventories 470,379
Other 25,098
-----------------------
Total Current Assets 1,472,551
Property, Plant and Equipment, Net 483,520
Other Assets:
Covenant not-to-compete, Net 600,005
Goodwill, net 615,284
Other 12,982
-----------------------
Total Assets $3,184,342
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $293,441
Commissions payable 15,679
Wages payable 10,888
Income taxes payable 101,600
Current portion long-term debt 195,299
Current portion capital lease obligations 25,905
Other accrued liabilities 63,800
-----------------------
Total Current Liabilities 706,612
-----------------------
Long-Term Liabilities:
Long-term debt, less current portion 381,243
Deferred income taxes 41,900
Capital lease obligations, less current portion 83,488
-----------------------
Total Long-Term Liabilities 506,631
-----------------------
Commitments and Contingencies (See Notes)
Stockholders' Equity:
Common stock, $.001 par value, 25,000,000 shares
authorized, 5,002,270 shares issued and outstanding 5,002
Additional paid in capital 1,915,509
Retained earnings 50,588
-----------------------
Total Stockholders' Equity 1,971,099
----------------------
Total Liabilities and Stockholders' Equity $3,184,342
=======================
</TABLE>
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NEW DIRECTIONS MANUFACTURING, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
March 31, 1998 March 31, 1997 March 31, 1998 March 31, 1997
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Net Sales $1,843,344 $1,537,004 $5,326,482 ***
Cost of Sales 1,541,607 1,263,743 4,472,288
------------------ ------------------ ------------------
Gross Profit 301,737 273,261 854,194
------------------ ------------------ ------------------
Operating Expenses:
Selling and marketing 28,640 55,250 82,546
Administrative and general 192,742 197,944 580,549
------------------ ------------------ ------------------
Total Operating Expenses 221,382 253,194 663,095
------------------ ------------------ ------------------
Operating Income 80,355 20,067 191,099
------------------ ------------------ ------------------
Interest Income (Expense):
Interest income 3,420 6,991 13,050
Interest expense 14,809 17,092 46,762
------------------ ------------------ ------------------
Net Interest Expense (11,389) (10,101) (33,712)
------------------ ------------------ ------------------
Income Before Taxes on Income 68,966 9,966 157,387
Taxes on Income 22,000 2,000 62,000
------------------ ------------------ ------------------
Net Income $46,966 $7,966 $95,387
================== ================== ==================
Earnings Per Share $0.01 $0.00 $0.02
================== ================== ==================
Weighted Average Number of
Common Shares Outstanding 4,989,675 4,987,770 4,989,675
================== ================== ==================
</TABLE>
** The Company was incorporated on January 9, 1997. As such, the operations
of the Company for the quarter and year-to-date ended March 31, 1997 are
identical.
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NEW DIRECTIONS MANUFACTURING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
YTD YTD
Nine Months Three Months
Ended Ended
March 31, 1998 March 31, 1997
------------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $95,387 $7,966
Adjustments to reconcile net income to
cash provided by operating activities:
Amortization of covenant-not-to-compete 119,997 39,999
Amortization of goodwill 26,950 7,000
Depreciation 47,181 12,000
Deferred income taxes (42,900) (8,800)
(Increase) in accounts receivable (123,756) (291,210)
(Increase) in inventory (233,511) (157,812)
(Increase) in other assets (9,894) (20,890)
Increase (decrease) in accounts payable (14,259) 347,057
Increase in accrued expenses 29,693 7,030
Increase (decrease) in commissions payable (13,258) 22,167
Increase in income taxes payable 99,600 10,800
------------------ -----------------
Net cash used for operating activities (18,770) (24,693)
------------------ -----------------
Cash flows from investing activities:
Purchase of property and equipment (104,657) (3,624)
Cash payment from stock of New Directions-Arizona 0 (1,280,000)
------------------ -----------------
Net cash used for investing activities (104,657) (1,283,624)
------------------ -----------------
Cash flows from financing activities:
Repayment of debt (136,841) (42,875)
Proceeds from short-term line of credit 0 240,000
Payment of capital lease obligations (32,925) (8,505)
Proceeds from issuance of stock 8,275 1,699,331
------------------ -----------------
Net cash provided (used) by financing activities (161,491) 1,887,951
------------------ -----------------
Net increase (decrease) in cash and cash equivalents (284,918) 579,634
Cash and cash equivalents, beginning of period 570,484 0
------------------ -----------------
Cash and cash equivalents, end of period $285,566 $579,634
================== =================
</TABLE>
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NEW DIRECTIONS MANUFACTURING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
YTD YTD
Nine Months Three Months
Ended Ended
March 31, 1998 March 31, 1997
------------------ -----------------
<S> <C> <C>
Supplementary Disclosure of Cash Flow Information
Cash paid during the period for interest $46,762 $17,092
================== =================
</TABLE>
<TABLE>
<CAPTION>
Summary of Non-cash Investing and Financing Activities
1) In January, 1997, the Company acquired new Directions-Manufacturers of Contemporary Furniture, Inc. The
Company paid cash of $1,280,000 and signed a note for $800,000. The values assigned to the assets
and liabilities acquired are as follows:
<S> <C>
Accounts receivable $300,000
Inventory 139,173
Property and equipment 325,250
Other 8,098
Covenant-not-to-compete 800,000
Goodwill 612,605
Capital lease obligations assumed (57,426)
Deferred tax liability (47,700)
-----------------
$2,080,000
=================
2) During 1998, the Company acquired various equipment. A portion of the equipment was financed by a capital
lease obligation of $98,400.
</TABLE>
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NEW DIRECTIONS MANUFACTURING, INC.
NOTES TO FINANCIAL STATEMENTS
1. PRESENTATION OF INTERIM INFORMATION
In the opinion of the management of New Directions Manufacturing, Inc. (the
"Company"), the accompanying unaudited financial statements include all normal
adjustments considered necessary to present fairly the financial position as of
March 31, 1998, the results of operations for the three months and nine months
ended March 31, 1998, and March 31, 1997, and cash flows for the nine months
ended March 31, 1998, and three months ended March 31, 1997. Interim results are
not necessarily indicative of results for a full year.
The financial statements and notes are presented as permitted by Form 10-QSB,
and do not contain certain information included in the Company's audited
financial statements and notes for the fiscal year ended June 30, 1997. Audited
financial statements for the fiscal year ended June 30, 1997 were filed with the
SEC as part of the Issuer's Registration Statement on Form SB-2 on January 2,
1998, and are incorporated herein by reference. Copies of the prospectus may be
obtained by faxing the Company at (602) 352-1505 or may be viewed on-line via
the SEC's EDGAR database at www.sec.gov.
2. CAPITAL LEASE OBLIGATION
The Company acquired equipment under a capital lease obligation. The lease is
for $98,400 and commenced August 1997. The terms of the lease require payments
of $2,077.18 monthly for 60 months.
3. RENEWAL OF LINE OF CREDIT
In May 1998, the Company renewed a $500,000 line of credit from a bank, which
expires on April 15, 1999. Terms were substantially unchanged.
4. EXERCISE OF HORWITZ & BEAM OPTIONS
On February 24, 1998, Company's legal counsel exercised an option to purchase
14,500 shares of common stock at $2.25 per share.
5. REPURCHASE AGREEMENT
On March 17, 1998, the Company entered into a Repurchase Agreement with
principal shareholders. A copy of the agreement is attached to this filing.
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PART I - FINANCIAL INFORMATION
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE COMPANY
New Directions Manufacturing Inc. ("Company") is a manufacturer of quality oak
furniture. The Company produces oak contemporary home furnishing items such as
television stands, stereo towers, entertainment centers, wall systems,
bookcases, and both adult and youth bedroom units. The Company sells its product
through retailers on both the East and West Coasts of the United States, and
Alaska, Hawaii, Puerto Rico, Canada, and the Bahamas. The Company includes New
Directions Manufacturing, Inc., a Nevada corporation, and its wholly owned
subsidiary, New Directions Manufacturing, Inc., an Arizona corporation, which
was founded in 1989.
RESULTS OF OPERATIONS
NET SALES
Net sales of $1,843,344 for the third quarter of fiscal 1998 ending March 31,
1998 exceeded the sales of the same quarter for the previous year of $1,537,004
by $306,340 or 19.9%. The gains can be attributed to strong retail sales, new
customers, and the placement of new products.
COST OF SALES AND GROSS PROFIT
The gross profit was $301,737 or 16.4% in the quarter ending March 31, 1998 in
comparison with $273,261 or 17.8% for the same quarter the previous year, which
ended March 31, 1997. As a percentage of sales, cost of sales was 83.6% compared
to 82.2% during the same aforementioned time periods. The decrease in gross
profit margin was primarily due to inventory adjustments and higher
manufacturing payroll costs.
OPERATING EXPENSES
Operating expenses were $221,382 or 12.0% of net sales during the quarter ending
March 31, 1998. This compares with $253,194 or 16.5% for the quarter ending
March 31, 1997. For the nine month period ending March 31, 1998, operating
expenses were $663,095 or 12.4% of net sales.
Operating expenses for the quarter ending March 31, 1998 decreased $31,812 or
12.6% compared to the same time period in 1997. The difference was primarily due
to adjustments for accrued commissions and showroom costs.
INTEREST AND TAXES
Net interest expense for the quarter ending March 31, 1998 increased $1,288 or
12.8% compared to the same time period in 1997. The increase was primarily due
to the pay-down of long-term debt that reduced interest expense being offset by
a reduction of interest income in 1998 compared to 1997.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for capital expenditures and
operating expenses, including labor costs, raw materials purchases, and funding
of accounts receivable. The Company's primary sources of cash have been from
operations since its private placement of stock in 1997.
Accounts receivable-net at March 31, 1998 increased $117,659 or 21.2% from June
30, 1997. This represents 21.7% of total assets at March 31, 1998 versus 18.2%
at June 30, 1997. The increase is due to the increase in sales volume and does
not represent a change in uncollectible accounts. The Company has not recognized
any significant bad debt expense in any of the periods represented.
The Company's current plans require additional capital expenditures for the
remainder of the year of approximately $10,000. Year to date, the Company has
expended approximately $200,000. As of March 31, 1998, the Company believes the
availability of credit under its $500,000 line of credit agreement and
internally generated cash will be adequate to finance its operations and
anticipated capital expenditures through fiscal 1998.
In May 1998, the Company renewed a $500,000 revolving line of credit from a
bank, which expires on April 15, 1999. The line bears interest at prime plus 1%
and is secured by the accounts receivable and inventory. Advances on the line
may not exceed 75% of the eligible accounts receivable. The line contains
various restrictive covenants, including minimum equity, working capital and
tangible net worth. As of March 31, 1998, no advances or repayments had been
made on this line of credit.
On February 24, 1998, Horwitz & Beam exercised 14,500 options to purchase shares
of common stock at $2.25 per share. Horwitz & Beam, as of the date hereof,
retains 35,500 options to purchase shares of common stock at $2.25 per share.
Horwitz & Beam is legal counsel to the Company.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 10, 1997, the Company was served with a complaint, which
alleges claims for strict liability and negligence in connection with
an accident with a piece of furniture. The litigation has been
forwarded to the Company's insurance carrier who is handling the
defense of this claim on behalf of the Company. Due to the early stage
of this litigation, the Company has not been able to determine the
estimated loss or range of loss. Management believes, however, that
this matter will be completely covered by its liability insurance and
that the Company will not suffer any out-of-pocket cash losses in
defending/settling this matter.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
(10) Material Contracts
Repurchase Agreement between New Directions Manufacturing,
Inc. and shareholders, Donald A. Metke, Sean F. Lee, and
Jack Horner, Jr., dated March 17, 1998.
(b) REPORTS ON FORM 8-K:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NEW DIRECTIONS MANUFACTURING, INC.
(Registrant)
Date: May 6, 1998 /s/ Donald A. Metke
-------------------
DONALD A. METKE
President, Chief Financial Officer,
Chief Operating Officer
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EXHIBIT 10
REPURCHASE AGREEMENT
THIS REPURCHASE AGREEMENT (this "Agreement") is made and entered into and
is effective as of March 17, 1998, by and between NEW DIRECTIONS MANUFACTURING,
INC., a Nevada corporation (the "Company") and the individuals listed in Exhibit
A hereto (collectively, the "Shareholders").
R E C I T A L S:
A. The Shareholders are the record and beneficial owner of the shares of
Stock (as such term is defined below) of the Company set forth adjacent to each
Shareholders name in Exhibit A hereto.
B. Simultaneous with the execution of this Agreement, the Company is
acquiring a life insurance policy on each shareholder in the amount set forth in
Exhibit A.
C. In consideration for issuing the Stock to the Shareholders, the Company
is retaining a right to repurchase the Stock upon the terms and conditions set
forth herein.
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. DEFINITIONS. Words or phrases used herein are defined as follows:
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "FREE TRADING SHARES" shall mean any and all shares which are
freely saleable on the public markets, even if subject to the quantity
limitations of Rule 144(e) of the Securities Act of 1933.
(c) "REPRESENTATIVE" shall include a trustee of a trust holding
Stock and the personal and/or legal representative of the Shareholder after such
Shareholder's demise.
(d) "REPURCHASE EVENT" shall mean termination of the Shareholder's
employment with the Company as a result of the death of the Shareholder.
(e) "REPURCHASE REQUIREMENT" shall refer to the obligation of the
Company, upon the death of the Shareholder, to repurchase as many of the
Shareholder's Shares as possible using the proceeds of the Shareholder's life
insurance policy purchased by the Company.
(f) "REPURCHASE RIGHT" shall refer to the right of the remaining
Shareholders or the Company, upon the death of another Shareholder, to
repurchase any and all shares of the Shareholder remaining after the Company
exercises its Repurchase Requirement upon the death of the Shareholder.
(g) "RESTRICTED SHARES" shall mean any and all Shares which are
not freely saleable on the public markets pursuant to a Rule 144 restriction or
otherwise. For example, a
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stock option for unregistered shares of common stock would be restricted; stock
subject to a lock-up agreement would be restricted; and stock which is subject
to the Rule 144 holding period would be restricted.
(h) "SHAREHOLDERS" shall mean those persons and entities set forth
in Exhibit A hereto.
(i) "STOCK" or "SHARES" shall mean all the issued and outstanding
shares of Common Stock of the Company and any Stock issued as the result of a
stock dividend, stock split or recapitulation, reorganization, option, warrant,
convertible security, merger, or consolidation of the Company.
2. SCOPE OF THIS AGREEMENT. All Shares, whether currently owned of record
by the Shareholder or subsequently acquired by them or any entity or person, are
subject at all times to the terms and conditions of this Agreement.
3. REPURCHASE REQUIREMENT.
3.1 REPURCHASE REQUIREMENT. The Company is hereby obligated (the
"Repurchase Requirement"), at any time during the sixty (60) day period
following the occurrence of a Repurchase Event, to repurchase as many of the
Shares as possible using the entire proceeds of the life insurance policy in the
amount set forth in Exhibit A. The Company shall repurchase all Free Trading
Shares of the Shareholder before it repurchases any Restricted Shares of the
Shareholder. Example: The Shareholder had 100,000 Free Trading Shares for which
the repurchase price equaled $400,000 and 100,000 Restricted Shares for which
the repurchase price equaled $240,000. The Company had the proceeds of the life
insurance policy on the Shareholder of $510,000. Obviously, the Company does not
have enough money to buy all of the Stock of the Shareholder. Therefore, the
Company must first use $400,000 of the life insurance proceeds to repurchase the
100,000 Free Trading Shares and, second, use the remaining $110,000 of the life
insurance proceeds to repurchase as many Restricted Shares as possible with that
amount of money (in this case, the Company would repurchase 45,833 of the
Restricted Shares, leaving the Shareholder's estate with 54,167 Restricted
Shares subject to the Repurchase Right set forth in Section 4 below).
3.2 REPURCHASE PRICE. The repurchase price of the Shares which the
Company must purchase pursuant to the Repurchase Requirement (the "Repurchase
Price") shall be (i) for Free Trading Shares, the average closing bid price for
the stock over the last sixty (60) trading days; or (ii) for Restricted Shares,
the average closing bid price for the stock over the last sixty (60) trading
days with a forty percent (40%) discount. As Restricted Shares are not freely
saleable on the public market, they are subject to a discount off of the public
market price. In any event, the total Repurchase Price cannot exceed the amount
of the proceeds of the life insurance policy as set forth in Exhibit A.
3.3 EXERCISE OF REPURCHASE REQUIREMENT. The Repurchase Requirement
shall be exercisable by written notice deliverable to the Representative (the
"Company Notice") prior to the expiration of the sixty (60) day period specified
in Section 3.1 above. The Company
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Notice shall indicate the number of Shares to be repurchased which must be the
maximum number subject to repurchase.
3.4 CLOSING OF THE PURCHASE. Following exercise of the Repurchase
Requirement, the Closing shall occur at the principal offices of the Company
within thirty (30) days following the determination of the Repurchase Price or
at such other time and place as the parties shall mutually agree. At that time,
the Representative shall deliver to the Company the certificate(s) representing
the Shares, duly endorsed in blank or accompanied by stock assignment(s)
separate from certificate duly executed in blank, and the Company shall deliver
to the Representative the Repurchase Price.
3.5 TERMS OF PAYMENT. The Repurchase Price shall be paid in
accordance with the provisions of Section 5 hereof.
4. REPURCHASE RIGHT.
4.1 REPURCHASE RIGHT. After exercise by the Company of its
Repurchase Requirement, if there are any Shares remaining which the Company did
not purchase due to the exhaustion of the proceeds of the life insurance policy,
the other Shareholders listed on Exhibit A and the Company, collectively are
hereby granted the right (the "Repurchase Right"), but not the obligation,
exercisable at any time during the sixty (60) day period following the exercise
of the Company's Repurchase Requirement, to repurchase all or any portion of the
remaining Shares.
4.2 REPURCHASE PRICE. The repurchase price of the Shares which the
Shareholders and/or the Company elect to purchase pursuant to the Repurchase
Right (the "Repurchase Price") shall be (i) for Free Trading Shares, the average
closing bid price for the stock over the last sixty (60) trading days; or (ii)
for Restricted Shares, the average closing bid price for the stock over the last
sixty (60) trading days with a forty percent (40%) discount. As Restricted
Shares are not freely saleable on the public market, they are subject to a
discount off of the public market price.
4.3 EXERCISE OF RIGHT. The Repurchase Right shall be exercisable
by written notice deliverable to the Representative (the "Shareholder Notice")
prior to the expiration of the sixty (60) day period specified in Section 5.1
above. The Shareholder Notice shall indicate the number of Shares to be
repurchased (which may be less than the maximum number subject to repurchase).
4.4 CLOSING OF THE PURCHASE. Following exercise of the Repurchase
Right, the Closing shall occur at the principal offices of the Company within
thirty (30) days following the determination of the Repurchase Price or at such
other time and place as the parties shall mutually agree. At that time, the
Representative shall deliver to the Company the certificate(s) representing the
Shares, duly endorsed in blank or accompanied by stock assignment(s) separate
from certificate duly executed in blank, and the Shareholders and/or the Company
shall deliver to the Representative the Repurchase Price.
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4.5 TERMS OF PAYMENT. The Repurchase Price shall be paid in
accordance with the provisions of Section 5 hereof.
5. PAYMENT OF THE REPURCHASE PRICE. The Repurchase Price for any Shares to
be repurchased under any provisions of this Agreement shall be in cash or a
cashier's check, or by cancellation of indebtedness owed by the Shareholder to
Company or another Shareholder (including purchase money indebtedness), or by
any combination of the foregoing.
6. TRADING RESTRICTION. After the exercise of the Company's Repurchase
Requirement and after the expiration of the sixty day period provided for the
Repurchase Right of the Shareholders and the Company, if any Shares remain in
the estate of the Shareholder, the Representative may transfer or sell their
shares in their discretion subject to the following trading limitation: The
Representative may sell every three months an amount of securities not to exceed
the greater of: (i) one percent of the shares outstanding as shown by the most
recent report or statement published by the Company; or (ii) the average weekly
reported volume of trading in such securities on all national exchanges and/or
reported through the automated quotation system of a registered securities
associate during the four calendar weeks preceding the date of the sale.
7. LEGEND ON CERTIFICATES. Any and all certificates evidencing ownership of
the Stock now or hereafter issued to the Shareholder shall have endorsed upon
them, in addition to such other legends as may be required by applicable federal
or state securities laws, a legend in the following form:
"Ownership of this certificate and the Shares evidenced hereby may be
sold, assigned, encumbered, hypothecated, pledged or otherwise
transferred or alienated only under and subject to a Repurchase
Agreement dated as of March 17, 1998, a copy of which is on file at
this corporation's principal office."
8. RECLASSIFICATION, REORGANIZATION, ETC. In the event of the
reclassification of the Shares, or any reorganization, recapitalization, stock
split, stock dividend, combination of Shares, consolidation or any change in the
capital structure of the Company, all shares of capital stock obtained as a
result thereof by a Shareholder in addition to, in exchange for or in respect of
the Shares subject to this Agreement, shall also be subject hereto as fully and
to the same extent as originally provided herein. Appropriate adjustments shall
be made to the number of Shares (including the number of Vested Shares and the
number of Unvested Shares) and to the Repurchase Price to reflect the effect of
any such transaction upon the Company's capital structure and upon the
Repurchase Right; provided, however, that the aggregate Repurchase Price in
effect immediately prior to such transaction shall not be affected by such
transaction.
9. TERMINATION. This Agreement shall terminate, and the certificates
representing the Shares subject to this Agreement shall be released from the
terms of this Agreement, on the occurrence of any of the following events:
(i) Authorization by the Board of a sale or assignment of all
or substantially all of the operating assets of the Company, which has the
effect of causing the Company to suspend the carrying on of its usual business;
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(ii) Adoption by the Board of a plan of liquidation or of
dissolution of the Company;
(iii) Consummation of a duly authorized and approved plan of
merger or consolidation with any other corporation;
(iv) The mutual agreement of Shareholder(s) and the Company; or
(v) The bankruptcy or receivership of the Company.
10. AMENDMENTS. This Agreement shall not be modified or amended except by a
writing signed by each of the parties hereto.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the respective heirs, successors, Legal Representatives and
assigns of the parties hereto.
12. GOVERNING LAW. This Agreement shall be construed and enforced under the
laws of the State of Nevada.
13. NOTICES. Any notice, request, instruction, or other document required
by the terms of this Agreement, or deemed by any of the Parties hereto to be
desirable, to be given to any other Party hereto shall be in writing and shall
be given by facsimile, personal delivery, overnight delivery, or mailed by
registered or certified mail, postage prepaid, with return receipt requested, to
the following addresses:
TO COMPANY: New Directions Manufacturing, Inc.
2940 W. Willetta
Phoenix, AZ 85009
Fax: (602) 352-1505
Attention: Donald A. Metke
WITH A COPY TO: Horwitz & Beam
Two Venture Plaza, Suite 350
Irvine, CA 92618
Attention: Lynne Bolduc, Esq.
Fax: (714) 453-0300
The persons and addresses set forth above may be changed from time to time
by a notice sent as aforesaid. If notice is given by facsimile, personal
delivery, or overnight delivery in accordance with the provisions of this
Section, said notice shall be conclusively deemed given at the time of such
delivery. If notice is given by mail in accordance with the provisions of this
Section, such notice shall be conclusively deemed given seven business days
after deposit thereof in the United States mail.
14. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which
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together shall constitute one and the same instrument. The Parties agree that
facsimile signatures of this Agreement shall be deemed a valid and binding
execution of this Agreement.
15. JURISDICTION. Any dispute, claim, or any other legal proceedings in
relation to this Agreement shall be heard in the County of Maricopa, State of
Arizona.
16. PROFESSIONAL FEES. In the event either party hereto shall commence
legal proceedings against the other to enforce the terms hereof, or to declare
rights hereunder, as the result of a breach of any covenant or condition of this
Agreement, the prevailing party in any such proceeding shall be entitled to
recover from the losing party its costs of suit, including reasonable attorneys'
fees, accountants' fees, and experts' fees.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof and is the
final, complete and exclusive expression of the terms and conditions hereof. All
prior or contemporaneous agreements, representations, negotiations and
understandings of the parties hereto, express or implied, are hereby superseded
and merged herein.
18. SECTION HEADINGS. Introductory headings at the beginning of each
numbered Section of this Agreement are solely for the convenience of the parties
and shall not be deemed to be a limitation upon or descriptive of the contents
of any such Section.
19. GENDER AND NUMBER. The use of the masculine, feminine and neuter
genders and the singular and plural number shall include the others whenever the
context so requires.
20. FILING OF AGREEMENT. A copy of this Agreement, as amended from time
to time, shall be filed with the Secretary and shall be available for inspection
by any prospective transferee of the Shares.
21. SEVERABILITY. If any provision of this Agreement shall be adjudged
by a court of competent jurisdiction to be void or unenforceable, the same shall
in no way affect (to the maximum extent permissible by law) any other provision
of this Agreement, or the validity or enforceability of this Agreement as a
whole.
22. ADVICE OF COUNSEL. Shareholder acknowledges that he has the right
to consult with his own counsel and represents and agreed that (i) to the extent
he desired he has consulted with such counsel, (ii) he has carefully read and
fully understands all the provisions of this Agreement, and (iii) he is
voluntarily executing this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
repurchase Agreement as of the date first above written.
THE COMPANY
NEW DIRECTIONS MANUFACTURING, INC.
a Nevada corporation
By: /s/ Donald A. Metke
____________________________
Donald A. Metke
President
THE SHAREHOLDERS
[as set forth in Exhibit A]
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EXHIBIT A
SHAREHOLDERS
<TABLE>
<CAPTION>
SHAREHOLDER NAME SHAREHOLDER SIGNATURE AMOUNT OF
LIFE INSURANCE POLICY
<S> <C> <C>
Donald A. Metke /s/ Donald A. Metke $10,000
SPOUSAL CONSENT:
Joanne B. Metke /s/ Joanne B. Metke
Jack Horner, Jr. /s/ Jack Horner, Jr. $10,000
SPOUSAL CONSENT:
Leslie Horner /s/ Leslie Horner
Sean F. Lee /s/ Sean F. Lee $10,000
SPOUSAL CONSENT:
Lee Family Limited Partnership /s/ Lee Family Limited Partnership
</TABLE>
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