As filed with the Securities and Exchange Commission on September 18, 1997.
Registration No. 333-27149
SECURITIES AND EXCHANGE COMMISSION
AMENDMENT NO.1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NOBLE INTERNATIONAL, LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Michigan 3714 38-3139487
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
(248) 433-3093
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Michael C. Azar, Esq.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
(248) 433-3093
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
<TABLE>
<S> <C>
Teresa Tormey Fineman, Esq. Robert J. Mittman, Esq.
Bruck & Perry, A Professional Corporation Tenzer Greenblatt LLP
500 Newport Center Drive, Suite 700 405 Lexington Avenue
Newport Beach, California 92660 New York, New York 10174
Telephone No.: (714) 719-6000 Telephone No.: (212) 885-5000
Facsimile No.: (714) 719-6020 Facsimile No.: (212) 885-5001
</TABLE>
Approximate date of commencement of proposed sale to
the public: As soon as practicable after this 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, as amended, check the following box. [ X ]
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. [ ]
Calculation of Registration Fee
<TABLE>
<CAPTION>
===================================================================================================================================
Proposed maximum
Title of each class of Amount to aggregate offering Proposed maximum Amount of
securities to be registered be registered price par security(1) aggregate offering price registration fee(2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value.............. 3,795,000(3) $10.00 $ 37,950,000 $ 11,500
- -----------------------------------------------------------------------------------------------------------------------------------
Representatives' Warrants............... 330,000 $ .001 $ 330 -- (4)
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, no par value(5)(6)........ 330,000 $12.00 $ 3,960,000 $ 1,200
- -----------------------------------------------------------------------------------------------------------------------------------
Total...................................................................................................... $ 12,700(7)
===================================================================================================================================
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(2) Calculated pursuant to Rule 457(a) of the Securities Act of 1933 based
upon an estimate of the maximum offering price.
(3) Includes up to 495,000 shares issuable pursuant to the Representatives'
over-allotment option
(4) None, pursuant to Rule 457(g) under the Securities Act of 1933.
(5) Issuable upon exercise of the Representatives' Warrants.
(6) Pursuant to Rule 416 under the Securities Act of 1933, there are also
being registered such additional indeterminate number of shares of
common stock, no par value, as may become issuable pursuant to the
anti-dilution provisions of the Representatives' Warrants.
(7) Includes $8,891 which was previously paid in connection with the
Registrant's inital filing on May 14, 1997 and the balance of $3,809
which is being paid herewith.
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.
<PAGE>
================================================================================
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.
PRELIMINARY PROSPECTUS DATED SEPTEMBER 18, 1997
SUBJECT TO COMPLETION
3,300,000 Shares
[LOGO] NOBLE
INTERNATIONAL, LTD.
Common Stock
All of the shares of Common Stock, no par value (the "Common Stock"),
offered hereby (the "Offering") are being issued and sold by Noble
International, Ltd. ("Noble" or the "Company"). A portion of the net proceeds
from the Offering will be used to finance the acquisition by Noble of all of the
outstanding capital stock of Utilase, Inc. (the "Utilase Acquisition") and the
balance of the outstanding capital stock of the Company's minority-owned
subsidiary, DCT Component Systems, Inc. (the "Final DCT Acquisition").
Consummation of the Offering is conditioned upon the concurrent consumation of
each of the Utilase Acquisition and the Final DCT Acquisition (together, the
"Closing Acquisitions"). See "Use of Proceeds" and "Certain Transactions."
Prior to the Offering, there has been no public market for the Common
Stock and there can be no assurance that any such market will develop. It is
anticipated that the Common Stock will be listed on the American Stock Exchange
("AMEX") under the symbol ["______"] and it is currently estimated that the
initial public offering price of the Common Stock will be between $8.00 and
$10.00 per share. For a discussion of the factors considered in determining the
initial public offering price, see "Underwriting."
Following the consummation of the Offering and the Closing
Acquisitions, the Company's principal shareholder will continue to own and/or
control approximately 43.8% of the outstanding Common Stock. As a result, after
the Offering, the Company's principal shareholder will continue to be able to
exert significant influence over the outcome of all matters subject to a
shareholder vote. See "Principal Shareholders" and "Certain Transactions."
---------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON PAGE 9 AND
"DILUTION" ON PAGE 16 OF THIS PROSPECTUS FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREBY.
---------------
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.
================================================================================
Price to Underwriting Proceeds to
Public Discount (1) Company (2)
- --------------------------------------------------------------------------------
Per Share.................... $ $ $
- --------------------------------------------------------------------------------
Total (3).................... $ $ $
- --------------------------------------------------------------------------------
(1) Does not include additional compensation to be received by BlueStone
Capital Partners, L.P. and Rodman & Renshaw, Inc., as representatives (the
"Representatives") of the several underwriters (the "Underwriters"), in the
form of (i) a nonaccountable expense allowance of $250,000 and (ii)
warrants to purchase up to 330,000 shares of Common Stock (the
"Representatives' Warrants"). The Company has also agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $900,000, including the Representatives' nonaccountable expense
allowance.
(3) The Company has granted the Representatives an option, exercisable within
45 days after the date of this Prospectus, to purchase up to 495,000
additional shares of Common Stock, on the same terms set forth above,
solely for the purpose of covering over-allotments, if any. If the
Representatives' over-allotment option is exercised in full, the total
Price to Public, Underwriting Discount and Proceeds to Company will be
$____, $____, and $____, respectively. See "Underwriting."
The shares of Common Stock are being offered, subject to prior sale,
when, as and if delivered to and accepted by the Underwriters, and subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters reserve the right to withdraw, cancel or modify the Offering
and to reject any order in whole or in part. It is expected that delivery of the
certificates representing the shares will be made against payment therefor at
the offices of BlueStone Capital Partners, L.P., 575 Fifth Avenue, New York, New
York 10017, on or about __________, 1997.
BlueStone Capital Partners, L.P. Rodman & Renshaw, Inc.
The date of this Prospectus is ____________, 1997.
================================================================================
<PAGE>
[PHOTOS]
AVAILABLE INFORMATION
As of the date of this Prospectus, the Company will become subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and, in accordance therewith, will file reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). The Company intends to furnish its shareholders with annual
reports containing audited consolidated financial statements and an opinion
thereon expressed by independent certified public accountants and will make
available quarterly reports for the first three quarters of each fiscal year
containing unaudited financial information.
------------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF
THE COMMON STOCK, INLCUDING PLACING STABILIZING BIDS OR EFFECTING PURCHASES OF
THE COMMON STOCK IN THE MARKET, THROUGH SYNDICATE SHORT COVERING TRANSACTIONS
AND THROUGH THE IMPOSITION OF PENALTY BIDS BY THE REPRESENTATIVES AND/OR THE
UNDERWRITERS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
Each prospective investor is urged to read this Prospectus in its entirety. As
used in this Prospectus, unless the context otherwise requires, the "Company" or
"Noble" refers to Noble International, Ltd. and its subsidiaries, after giving
effect to the Utilase Acquisition and the Final DCT Acquisition, each of which
Closing Acquisitions will be consummated concurrently with, and as a condition
to, the consummation of the Offering. Except with respect to historical
financial statements and unless the context indicates otherwise, the description
of the Company as set forth in this Prospectus includes the operations of
Prestolock International, Ltd.("Prestolock"), Monroe Engineering Products,
Inc.("Monroe"), Cass River Coatings, Inc., dba Vassar Industries ("Vassar"),
Skandy Corp.("Skandy"), and Utilase Production Process, Inc.("UPP"), each a
wholly-owned subsidiary of the Company, as well as the operations of DCT
Component Systems, Inc. ("DCT") and Utilase, Inc., dba Utilase Blank Welding
Technologies ("Utilase"), each of which will become a wholly-owned subsidiary of
the Company in connection with the Closing Acquisitions.
Except as otherwise indicated herein, the information contained in this
Prospectus, including per share data and information relating to the number of
shares of Common Stock outstanding, gives retroactive effect to a 334.213- for-
1 split of the Common Stock effected on September 11, 1997 and assumes no
exercise of the Representatives' over-allotment option to purchase up to 495,000
additional shares of Common Stock. See "Underwriting" and Note M of Notes to
Consolidated Financial Statements.
The Company
Noble is a full service, independent supplier of automotive component
assemblies and value-added services to the automotive industry. The Company's
customers include original equipment manufacturers ("OEMs"), such as
General Motors ("GM"), Chrysler Corporation ("Chrysler"), Ford Motor Company
("Ford") and Mitsubishi Motors Manufacturing of America ("Mitsubishi") and
direct suppliers of OEMs ("Tier I" suppliers), such as Textron Automotive
Company, GM/Delphi and United Technologies, Inc. The Company believes that it is
one of the few suppliers to Tier I companies (a "Tier II" supplier) to provide
integrated manufacturing, design, planning, engineering and other value-added
services. While the Company is predominately a Tier II supplier to the
automotive industry, through its Utilase operations, the Company also operates
as a Tier I supplier. The Company's objective is to become one of the premier
full service Tier II suppliers to the automotive industry.
The Company has experienced substantial growth as a result of both
internal growth and acquisitions. For the year ended December 31, 1996, the
Company had pro forma combined net sales of $48.5 million and pro forma combined
net income of $1.1 million. For the six months ended June 30, 1996 and 1997, the
Company had pro forma combined net sales of approximately $23.0 million and
$29.7 million, respectively, representing an increase of 29%, and pro forma
combined net income of approximately $771,000 and $1.4 million, respectively,
representing an increase of 87%.
As a result of the mature and competitive nature of the automotive
industry, the world's automakers are under intense pressure to cut costs and
development times for their new products. In order to accomplish this feat,
automakers are increasingly relying on those Tier I and Tier II suppliers that
have the in-house capability to design, engineer and deliver entire vehicle
modules, systems and solutions. Pricing pressure in the automotive supplier
industry is intense because most automakers wield an extraordinary amount of
leverage over their suppliers. However, management believes that
systems-oriented suppliers will have a greater ability to reduce the cost of
components, while maintaining or increasing margins, as they take control of
the design and engineering function.
The Company views the acquisition of automotive suppliers that
operate in high growth niche markets, or that are strategic to the further
integration of its operations, as a fundamental part of its growth strategy.
This strategy is fueled by the consolidation presently occuring among the
approximately 30,000 companies in the Tier II supplier base segment. Since its
inception in 1993, the Company has successfully completed five acquisitions and,
concurrently with the consummation of the Offering, will complete the two
Closing Acquisitions. Thereafter, the Company intends to continue to seek
acquisition opportunities that will strategically expand or enhance its current
businesses.
In addition to the pursuit of strategic acquisitions, the Company's
business strategy includes delivering integrated component systems, providing
technological leadership and product production innovations, cross-selling to
existing customers, and developing strategic alliances and joint ventures. The
Company believes that by focusing on this strategy it can continue to
capitalize on the increasing opportunities for growth within the automotive
component supply industry.
The Company's operations include: (i) laser welding of tailored blanks,
laser production welding and laser cutting; (ii) automotive manufacturing
utilizing progressive die stampings; (iii) design, engineering and assembly of
automotive glovebox latches and other automotive component systems; (iv)
painting and coating of automotive components; (v) other value-added services,
such as prototyping of automotive components and die design and construction;
and (vi) assembly, machining and distribution of components used in machine
tooling. As OEMs and Tier I suppliers continue to reduce their supplier base
and demand improved quality and enhanced technology, management believes that
Noble's ability to offer a number of diverse yet highly complementary services
will provide it with a competitive advantage.
The Closing Acquisitions illustrate the benefits associated with the
Company's successful implementation of its business strategy. The Utilase
Acquisition will significantly impact the Company's operations, as Utilase is
one of the dominant suppliers of laser welded tailored blanks to the automotive
industry. The Company believes that Utilase's proprietary technology and
production processes permit it to produce laser welded blanks more quickly and
with higher quality and tolerance levels than its competitors. Laser blank
welding offers several significant advantages over other current welding
technologies, including cost, weight and safety benefits. According to a 1995
study commissioned by the UltraLight Steel Auto Body Consortium, a worldwide
industry
3
<PAGE>
association of steel producers, laser welded tailored blanks will play a
significant role in car manufacturing in the next decade as the automotive
industry is further challenged to produce cars that are lighter for better fuel
economy, with enhanced safety features and lower manufacturing costs. The Final
DCT Acquisition will provide the Company with additional value-added service
operations as a result of DCT's progressive die stamping and stamped extrusion
facilities and services. Progressive die stamping is a process in which steel is
passed through a series of dies in a stamping press in order to form the steel
into three-dimensional parts. Stamped extrusion is a process that involves the
forcing of steel through progressive die openings in order to produce a product
of uniform cross-sectional shape. In adddition, the Utilase and Final DCT
Acquisitions will, among other things, allow the Company to integrate the
production laser welding operations of UPP, one of the Company's current
subsidiaries, and the laser blank welding operations of Utilase, with the
progressive die stamping applications of DCT, to provide additional value-added
products and integrated systems.
The Company is a Michigan corporation and was incorporated on October
3, 1993. The Company maintains its principal executive office at 33 Bloomfield
Hills Parkway, Suite 155, Bloomfield Hills, Michigan 48304, and its telephone
number is (248) 433-3093.
Acquisition Background
Pursuant to its strategic acquisition program, the Company has, since
its formation in 1993, completed five acquisitions and the partial
acquisition of DCT (such acquisitions, together with the Final DCT Acquisition
and the Utilase Acquisition, collectively referred to herein as the
"Acquisitions"). These Acquisitions include:
Prestolock International, Ltd.
The Company completed its first acquisition in February 1994 by
acquiring, through its predecessor and now its wholly-owned subsidiary,
Prestolock, the assets of Presto Lock, Inc. for a cash purchase price of
$750,000 (the "Prestolock Acquisition"). In July 1994, a portion of the assets
acquired, which were not strategic to the Company's business plan, were resold
by Prestolock for $500,000 in cash, plus a royalty receivable by Prestolock
through December 31, 2000. The Prestolock Acquisition was financed through
shareholder loans, all of which have subsequently been repaid.
Prestolock designs and engineers automobile glovebox latches.
Prestolock's engineers are included in the planning and design phase by both
GM and Chrysler and remain included in the design of new body platforms
under consideration by the OEMs and Tier I instrument panel suppliers.
Prestolock had net sales of approximately $5.5 million and $3.4 million for
the twelve months ended December 31, 1996 and the six months ended June 30,
1997, respectively, representing 11.4% of the Company's pro forma combined net
sales for such periods.
Vassar Industries
In January 1996, the Company completed the acquisition of all of the
outstanding capital stock of Vassar (the "Vassar Acquisition). The Vassar
Acquisition purchase price consisted of a $200,000 stock purchase price, paid in
cash, and consulting and non-compete fees aggregating $1.8 million, payable over
seven years. Payments with respect to the Vassar Acquisition have been financed
with a combination of bank debt and cash flow from operations. An aggregate of
approximately $120,000 of the net proceeds from the Offering will be used to
make final payments with respect to two of the six Vassar consulting and
non-competition agreements.
Vassar provides just-in-time painting, coating and assembly services to
OEMs and Tier I suppliers on automotive components consigned to the Company. In
addition, as defined by GM/Delphi, Vassar is a dedicated supplier providing
painting services to GM/Delphi's Saginaw Steering Division. Vassar had net
sales of approximately $5.5 million and $3.1 million for the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively,
representing 11.3% and 10.3%, respectively, of the Company's pro forma combined
net sales for such periods.
<PAGE>
Monroe Engineering Products, Inc.
In January 1996, the Company also completed the acquisition of all of
the outstanding capital stock of Monroe and certain real estate owned by an
affiliate of Monroe (the "Monroe Acquisition"). The Monroe Acquisition purchase
price consisted of $6.4 million for the capital stock, payable in installments
over 16 months, and $500,000 for the real estate, payable interest-only, on a
monthly basis, until April 30, 1998 when the entire principal amount becomes
due. Payments with respect to the Monroe Acquisition purchase price have been
financed with a combination of bank debt and cash flow from operations. A total
of $500,000 of the net proceeds of the Offering will be used to pay the final
installment on the Monroe Acquisition stock purchase price.
Monroe distributes tooling components, including adjustable handles,
hand wheels, plastic knobs, levers, handles, and hydraulic clamps used in
automotive and other manufacturing equipment. Monroe's
products have international reputations for quality in the engineering
community. Monroe had net sales of approximately $5.1 million and $2.6 million
for the year ended December 31, 1996 and the six months ended June 30, 1997,
respectively, representing 10.5% and 8.9%, respectively, of the Company's pro
forma combined net sales for such periods.
4
<PAGE>
Skandy Corp.
In January 1997, the Company acquired all of the outstanding capital
stock of Skandy in exchange for 133,686 shares of the Company's Common Stock
(the "Skandy Acquisition"). Skandy is the sales and marketing arm of Noble.
Skandy's sales force consists of five full-time sales representatives each of
whom has at least 20 years of industry experience. For the six months ended
June 30, 1997, Skandy had net sales of $327,007, representing 1.1% of the
Company's pro forma combined net sales for such period.
Utilase Production Process, Inc.
In March 1997, the Company, through its wholly-owned subsidiary UPP,
acquired certain assets of Utilase (the "UPP Acquisition"). The UPP Acquisition
purchase price was $850,000, evidenced by a promissory note, of which $750,000
was originally payable upon the earlier of the consummation of the Offering or
July 31, 1997, and the balance was payable at the rate of $50,000 on each of
February 28, 1998 and 1999. Subsequently, in August 1997, such terms were
amended and the entire $850,000 will be paid upon the consummation, and out of
the proceeds, of the Offering.
UPP provides the Company with both laser production welding and laser
cutting capabilities, which the Company provides to customers such as GM and
Chrysler, as well as to general non-automotive customers. For the period from
March 1, 1997 through June 30, 1997, UPP had net sales of $430,495, representing
1.5% of the Company's pro forma combined net sales for the six months ended
June 30, 1997.
DCT Component Systems, Inc.
In July 1996, the Company acquired newly issued shares representing a
37.5% minority interest in DCT (the "Initial DCT Acquisition") and, effective
April 7, 1997, it acquired an additional 7.5% interest in DCT from the former
president of DCT for an aggregate price of $1.00. The Company intends to
exercise its right to purchase the balance of DCT's outstanding capital stock
from DCT's other shareholders in connection with the Closing Acquisitions for
$1 million in cash, payable out of the net proceeds of the Offering.
DCT provides progressive die stamping and operates one of only six
stamping facilities approved by Chrysler to provide extrusion stampings.
DCT had net sales of approximately $23.0 million and $13.2 million
for the year ended December 31, 1996 and the six months ended June 30, 1997,
respectively. On a pro forma basis, DCT's net sales represent 47.4% and 44.6%,
respectively, of the Company's pro forma combined net sales for such periods.
Utilase, Inc.
The Company will also acquire all of the outstanding shares of Utilase
in connection with the Closing Acquisitions. The Utilase Acquisition purchase
price is $8.2 million in cash, which will be paid from the proceeds of the
Offering, and an aggregate of approximately $10.1 million in principal amount of
promissory notes (the "Utilase Notes"). In addition, as part of the Utilase
Acquisition, the Company will pay $1.4 million out of the proceeds of the
Offering to certain of Utilase's officers in exchange for their agreements not
to compete with Utilase.
Utilase was founded in 1986 to provide production and prototype laser
processing services and produced its first prototype of a laser welded tailored
blank in 1987. To date, Utilase has produced over eight million laser welded
blanks, making it one of the leaders in its field. Utilase had net sales of
approximately $9.3 million, including net sales attributable to the operations
acquired by UPP as discussed above, for the year ended December 31, 1996 and net
sales of approximately $6.7 million, including net sales attributable to the
operations acquired by UPP until their purchase by UPP in March 1997, for the
six months ended June 30, 1997. On a pro forma basis, Utilase's net sales
represent 19.2% and 22.6% of the Company's pro forma combined net sales for the
year ended December 31, 1996 and the six months ended June 30, 1997,
respectively.
5
<PAGE>
The Offering
Common Stock offered ................. 3,300,000 shares
Common Stock to be outstanding after
the Offering (1)...................... 7,225,006 shares
Use of Proceeds....................... The Company intends to use the net
proceeds of the Offering for the
reduction of financial institution
debt, payments relating to the
Utilase Acquisition, payments
relating to the Final DCT
Acquisition, repayment of related
party debt, payments relating to
prior Acquisitions and equipment
purchases. See "Use of Proceeds."
Proposed AMEX symbol.................. ["_____"]
Risk Factors.......................... The securities offered hereby
involve a high degree of risk and
immediate substantial dilution. See
"Risk Factors" and "Dilution."
(1) Includes 64,838 shares of Common Stock issued effective July 1997 in
connection with the Company's $3.8 million preferred stock financing. Does
not include 700,000 shares reserved for issuance upon the exercise of
options available for future grant under Noble's 1997 Stock Option Plan
(the "Option Plan") and 330,000 shares of Common Stock reserved for
issuance upon the exercise of the Representatives' Warrants. Also does not
include an aggregate of 58,485 shares reserved for issuance in future
periods in exchange for a covenant not to compete in connection with the
Utilase Acquisition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources," "Management - Stock Option Plan," "Certain Transactions -
Other Matters" and "Underwriting."
6
<PAGE>
Summary Pro Forma Combined Financial Data
(Dollars in thousands, except per share data)
The following sets forth summary pro forma financial data for the
Company as of June 30, 1997 and for the year ended December 31, 1996 and the
six months ended June 30, 1996 and 1997 and has been prepared to illustrate the
effects of the Acquisitions and the Offering as if all of such transactions had
occurred as of January 1, 1996 with respect to the statement of operations
information and as of June 30, 1997 with respect to the balance sheet
information. The Acquisitions are reflected using the purchase method of
accounting for business combinations. The pro forma financial data is provided
for comparative purposes only and does not purport to be indicative of the
results that actually would have been obtained if these transactions had been
effected on the dates indicated. The information presented below is qualified
in its entirety by, and should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Pro Forma Financial Data," "Selected Financial Data" and the financial
statements and notes thereto included elsewhere in this Prospectus.
Pro Forma Combined
Statement of Operations:
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
For the Year Ended -------------------------
December 31, 1996 1996 1997
----------------- ---- ----
<S> <C> <C> <C>
Net sales............................ $ 48,480 $23,016 $ 29,678
Cost of sales........................ 36,837 16,965 21,739
--------- ---------- ----------
Gross profit......................... 11,643 6,051 7,939
Selling, general, and administrative
expense............................ 8,471 4,218 4,843
--------- ---------- ----------
Operating profit..................... 3,172 1,833 3,096
Interest expense..................... 1,806 768 1,083
Sundry, net........................... 369 103 206
-------- ---------- ---------
Earnings before income taxes.......... 1,735 1,168 2,219
Income tax expense................... 617 397 780
--------- ---------- ---------
Net earnings......................... $ 1,118 $ 771 $ 1,439
========= ========== ==========
Net earnings per share............... $ .16 $ .12 $ .19
Weighted average common shares
outstanding........................ 7,120,390 6,577,293 7,160,160
Other Financial
Information
- ---------------
EBITDA(1)............................ $ 6,726 $ 3,568 $ 4,944
Ratio of EBITDA to interest expense.. 3.7x 4.7x 4.6x
Pro Forma Combined
Balance Sheet Data:
</TABLE>
<PAGE>
June 30, 1997
--------------
Total assets......................... $ 63,999
Working capital...................... $ 2,682
Total debt(2)........................ $ 24,832
Shareholders' equity................. $ 27,895
- -------------
(1) EBITDA represents income before income taxes, plus interest expense and
depreciation and amortization expense. EBITDA is not presented as, and
should not be considered, an alternative measure of operating results or
cash flows from operations (as determined in accordance with generally
accepted accounting principles), but is presented because it is a widely
accepted financial indicator of a company's ability to incur and service
debt.
(2) Includes $925,000 of redeemable preferred stock.
7
<PAGE>
Summary Historical Financial Data
(Dollars in thousands, except per share data)
The following sets forth summary historical financial data for the
Company and its consolidated subsidiaries (Prestolock, Monroe and Vassar) as of
December 31, 1996 and for each of the three fiscal years ended December 31, 1996
and is derived from the audited financial statements. The summary financial data
as of June 30, 1997 and for the six months ended June 30, 1996 and 1997 sets
forth summary historical financial data for the Company and its consolidated
subsidiaries (which at June 30, 1997 also included Skandy and UPP) and is
derived from the unaudited financial statements included elsewhere herein. The
comparability of the historical consolidated financial data reflected in this
financial data has been significantly impacted by the Company's acquisitions of
Monroe and Vassar in 1996 and its acquisitions of Skandy and UPP in January and
March, 1997, respectively. The information presented below is qualified in its
entirety by, and should be read in conjunction with, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Pro Forma
Financial Data," "Selected Financial Data" and the financial statements and
notes thereto included elsewhere in this Prospectus.
Consolidated Statement of Operations:
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
------------------------------------- -----------------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales........................................... $3,305 $4,442 $16,187 $8,155 $ 9,733
Cost of goods sold.................................. 2,261 2,911 10,587 5,153 6,445
------ ------ ------- ------ ------
Gross profit........................................ 1,044 1,531 5,600 3,002 3,288
Selling, general and administrative expenses........ 915 1,030 5,088 1,956 2,232
------ ------ ------- ------ ------
Operating profit.................................... 129 501 512 1,046 1,056
Equity in loss of unconsolidated subsidiary......... 95 65
Interest income..................................... (5)
Interest expense.................................... 24 24 555 215 439
Sundry, net......................................... (1) (29) (64) (55)
------ ------ ------- ------ ---------
Earnings (loss) before income taxes and minority
interest.......................................... 106 506 (69) 831 607
Minority interest................................... 38 67
Income tax expense.................................. 8 30 7 283 212
------ ------ ------- ------ ----------
Net earnings (loss)................................ $ 60 $ 409 $ (76) $ 548 $ 395
====== ====== ======= ====== ==========
Net earnings (loss) per share(1)................... $ .03 $ .10 $ (.02) $ .17 $ .10
Weighted average common shares outstanding......... 1,535,170 2,807,390 3,820,390 3,277,293 3,860,160
Other Financial
Information
- ---------------
EBITDA(2).......................................... $ 121 $ 566 $ 999 $1,286 $ 1,387
Ratio of EBITDA to interest expense................ 5.0x 23.6x 1.8x 6.0x 3.2x
Consolidated Balance Sheet Data:
<CAPTION>
December 31, June 30,
1996 1997
---- ----
<S> <C> <C>
Total assets........................................ $11,533 $14,851
Working capital (deficiency)........................ (817) (1,719)
Total debt.......................................... 8,675 10,746
Shareholders' equity................................ 729 1,174
</TABLE>
- -------------
(1) Net earnings (loss) per share data for 1994 and 1995 include the pro forma
tax effects attributable to Prestolock being taxed under Subchapter S of
the Internal Revenue Code through December 31, 1995.
(2) EBITDA represents income before income taxes, plus interest expense and
depreciation and amortization expense. EBITDA is not presented as, and
should not be considered, an alternative measure of operating results or
cash flows from operations (as determined in accordance with generally
accepted accounting principles), but is presented because it is a widely
accepted financial indicator of a company's ability to incur and service
debt.
8
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks
and uncertainties. Actual results could differ materially from those discussed
in this Prospectus as a result of the risk factors set forth below and the
matters set forth in this Prospectus generally. The Company cautions each
prospective purchaser, however, that this list of factors may not be exhaustive.
In analyzing an investment in the Common Stock, prospective purchasers should
carefully consider, together with the other matters referred to herein, the risk
factors described below.
Reliance on Major Customers
The Company's sales to the automotive industry accounted for
approximately 68.5% and 72.8% of consolidated net sales for the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively (pro
forma combined net sales after giving effect to all of the Acquisitions
represented 89.5% and 89.0%, respectively, for such period). Sales to GM,
Chrysler, Ford, and their respective Tier I suppliers, accounted for
approximately 24%, 28% and 5%, respectively, of the Company's consolidated net
sales for the year ended December 31, 1996 (pro forma combined net sales after
giving effect to all of the Acquisitions represented 38%, 39% and 8%,
respectively, for such period). For the six months ended June 30, 1997, sales to
GM, Chrysler, Ford, and their respective Tier I suppliers, accounted for
approximately 27%, 30% and 6%, respectively, of the Company's consolidated net
sales (pro forma combined net sales after giving effect to all of the
Acquisitions represented 39%, 40% and 8%, respectively, for such period). Thus,
the loss of GM, Chrysler or Ford or of any of the Company's other significant
customers could have a material adverse effect on the Company. The Company, as
is typical in the automotive supply industry, has no long-term contracts with
any of its customers. There is substantial and continuing pressure from the
major OEMs and Tier I suppliers to reduce costs, including the cost of products
purchased from outside suppliers such as the Company. If in the future the
Company were unable to generate sufficient production cost savings to offset
price reductions, the Company's gross margins could be adversely affected. See
"Business."
Limited Consolidated Operating History
The Company has a limited consolidated operating history with regard to
a significant portion of its operations. Prior to the Vassar and Monroe
Acquisitions in January 1996, Prestolock represented the substantial majority of
the Company's operations. In addition, the Company's historical results of
operations for 1996 do not include the results of operations of Skandy or UPP,
which were acquired in January and March 1997, respectively, and neither the
1996 results of operations nor the results of operations for the six months
ended June 30, 1997 include the operations of DCT or Utilase. Moreover, while
the pro forma combined financial data of the Company included elsewhere herein
has been prepared to illustrate the effects of the Acquisitions as if all such
transactions, including the Closing Acquisitions, had occurred as of January 1,
1996 with respect to the statement of operations information, such pro forma
combined financial data has been prepared for comparative purposes only and does
not purport to be indicative of the results that actually would have been
obtained if these Acquisitions had been effected on such earlier date. As a
result, such data is not necessarily indicative of the results that would have
been achieved if all of the businesses acquired had been operated on an
integrated basis or of the results that may be realized by the Company on a
consolidated basis in the future. See "Pro Forma Financial Data" and
Consolidated Financial Statements.
Substantial Outstanding Indebtedness; Significant Leverage
In order to finance its operations, including costs relating to the
consummation of the Acquisitions, the Company has incurred substantial
indebtedness. The Company intends to use a substantial portion of the proceeds
of the Offering to repay a significant amount of its pro forma combined
indebtedness; however, the Company will, following the consummation of the
Closing Acquisitions and the Offering, continue to have an aggregate of
approximately $20.9 million of long-term debt, including current maturities, and
$925,000 of redeemable preferred stock oustanding, representing a .41-to-1
ratio of indebtedness to capitalization (including, in capitalization, the $3.8
million of callable preferred stock issued effective July 1997). The Company
does not expect such debt to capitalization ratio to decrease in the foreseeable
future as it will acquire an additional line of credit facility with a borrowing
base of up to at least $15 million following the consummation of the Offering
and the Closing Acquisitions (the Company has a commitment letter from NBD Bank
for a $15 million revolving line of credit facility subject to the Company's
prior completion of the Offering, and will either enter into an aggrement with
NBD Bank pursuant to the terms of such committment or obtain a revolver from
another lender on the same or better terms) and anticipates that it will, in
connection with its expansion strategy, consummate additional acquisitions in
the future, some or all of which may be financed with additional debt. In
addition, the Company has, on a pro forma combined basis, from time to time been
in violation of certain of its financial ratio covenants and covenants relating
to the issuance of preferred stock and the payment of preferred stock dividends,
requiring it to obtain waivers of default from its lenders. In addition, the
Company has from time to time, had to negotiate extensions relating to the
payment of several of its debt obligations. Although, as of the date of this
Prospectus, the Company is, on a pro forma combined basis, in compliance with
all of its debt covenants and/or has obtained waivers of default relating
thereto, there can be no assurance that, in the event the Company were to
default upon any of its loan obligations or require additional time to repay
and/or refinance certain of its indebtedness in the future, the Company will be
succcessful in negotiating waivers and/or extensions relating thereto. In the
event of a violation by the Company of any of its loan covenants or other
default by the Company on its obligations, the lenders could declare the
Company's indebtedness to be immediately due and payable and, in certain cases,
such as in the case of the $15 million line of credit facility to be obtained by
the Company following the consummation of the Offering, the lenders could
foreclose on some or all of the Company's assets. Moreover, to the extent that
all of the Company's assets continue to be pledged to secure outstanding
borrowings under its credit facility agreement, such assets will not be
available to secure additional indebtedness which may adversely affect the
Company's ability to borrow in the future. See "Capitalization", "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" and "Use of Proceeds."
Risks Relating to Future Acquisitions
The automotive component supply industry has undergone, and is likely
to continue to experience, consolidation as OEMs and Tier I suppliers seek to
reduce both their costs and their supplier base. The Acquisitions were pursued
by the Company, and future acquisitions may be made, in order to enable the
Company to expand into new geographic markets, add new customers, provide new
products, manufacturing and service capabilities and increase automotive model
penetration with existing customers. Integration of the Closing Acquisitions,
and any future acquisitions, will place a strain upon the Company's financial
and managerial resources. The full benefits of the Closing Acquisitions, or any
future acquisitions, will require the integration of administrative, finance,
purchasing, engineering, sales and marketing organizations; the coordination of
production efforts; and the implementation of appropriate operational, financial
and management systems and controls. There can be no assurance that the Company
will be able to integrate these operations successfully. If the Company fails to
successfully integrate the Closing Acquisitions, or any future acquisitions, the
Company's business could be adversely affected. Moreover, while the Company will
continue to explore acquisitions of businesses and assets that it believes are
compatible with its business strategy and regularly evaluates possible
acquisition opportunities in search of candidates whose operations it believes
will complement the Company's operations and that may be purchased at a price
and on terms which the Company believes are fair and reasonable, as of the date
of this Prospectus, the Company has no agreements, commitments, understandings
or arrangements with respect to any potential acquisition other than the Closing
Acquisitions. Consequently, there is no basis for investors in the Offering to
evaluate the specific merits or risks of any potential acquisitions that the
Company may undertake following the consummation of the Offering. Moreover,
under Michigan law, various forms of business combinations can be effected
without shareholder approval and, accordingly, investors in the Offering will,
in all likelihood, neither receive nor otherwise have the opportunity to
evaluate any financial or other information which may be made available to the
Company in the future in connection with any acquisition and must rely entirely
upon the ability of management in selecting, structuring and consummating
acquisitions that are consistent with the Company's business objectives.
Although the Company will endeavor to evaluate the risks inherent in a
particular acquisition, there can be no assurance the the Company will properly
ascertain or assess all significant risk factors prior to consummating any
acquisition. See "Business - Strategy."
9
<PAGE>
Failure to Obtain Business on New and Redesigned Model Introductions
Certain of the Company's product lines are subject to change as the
Company's customers, including both OEMs and Tier I suppliers, introduce new or
redesigned products. The Company principally competes for new business both at
the beginning of the development phase of new vehicle models and upon the
redesign of existing models. New model development generally begins two to five
years prior to the marketing of such models to the public. Failure of the
Company to obtain new business on new models or to retain or increase business
on redesigned existing models would adversely affect the Company's business.
Dependence on Continuous Improvement of Production Technologies
The ability of the Company to continue to meet customer specifications
with respect to performance, cost, quality and service will depend, in part,
upon the Company's ability to remain technologically competitive with its
production processes. The Company's business may therefore require from time to
time significant additional capital or other resources to meet this continuing
challenge. The inability of the Company to continuously improve its production
technologies in order to remain competitive could have a material adverse effect
on the Company's business. See "Business - Strategy."
Design and Engineering Resources
OEMs and Tier I suppliers are increasingly requiring their suppliers to
provide more design and engineering input at earlier stages in the product
development process. While the direct costs of design and engineering are
generally borne by the customer, the supplier bears the indirect cost associated
with the allocation of its limited design and engineering resources to such
product development projects, including the inability to allocate such resources
to other projects. Despite the Company's up-front dedication of design and
engineering resources, the OEMs and Tier I suppliers are under no obligation to
order the subject components or systems from the Company following their
development. In addition, in the future, the Company may in some cases, when it
deems it strategically advisable, bear the direct up-front design and
engineering costs as well. There can be no assurance that the Company's
dedication of design and engineering resources, or up-front design and
engineering expenditures, will not have a material adverse effect on the
financial condition or results of operations of the Company.
Historical Working Capital Deficit; Potential Need for Additional Financing
Although as of June 30, 1997, the Company had pro forma combined
working capital of approximately $2.7 million, on a historical basis it had a
working capital deficit of $817,006 and approximately $1.7 million for the year
ended December 31, 1996 and the six months ended June 30, 1997, respectively.
The Company believes, based on its currently proposed plans and assumptions
relating to its operations, that the Company's anticipated revenues from
operations, cash and cash equivalent balances and borrowing availabilities
under its line of credit facilities (including the new $15 million revolving
line of credit facility, which will be available to the Company following the
consummation of the Offering) will be sufficient to fund its operating
requirements for at least the next 12 months, there can be no assurance that
such funds will not be expended prior thereto due to changes in economic
conditions or other unforeseen circumstances, requiring the Company to obtain
additional financing prior to the end of such period. Moreover, the Company
intends to pursue, as part of its business strategy, future growth through
opportunistic acquisitions of assets or companies involved in the automotive
component supply industry, which acquisitions may involve the expenditure of
significant funds and managment time. Depending upon the nature, size and timing
of future acquisitions, the Company may be required to obtain additional debt or
equity financing in connection with such potential future acquisitions. There
can be no assurance that additional financing will be available to the Company,
when and if needed, on acceptable terms or at all. Any inability to obtain
addititional financing when needed could have a material adverse effect on the
Company's results of operations and/or expansion plans. See "Use of Proceeds,"
"Pro forma Financial Data," "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."
Option of Others to Purchase an Interest in Vassar
The former shareholders of Vassar retained an option to repurchase from
the Company, for $1.00, 25% of the stock of Vassar, which option expires when
the Company's obligations under consulting agreements with such former
shareholders terminate in 2003. In the event such former shareholders exercise
this option, they will be entitled to receive 25% of any dividends issued by
Vassar and, if and when Vassar is liquidated, 25% of the liquidating proceeds
distributable to holders of Vassar common stock. To date, none of the former
Vassar shareholders have stated an interest in exercising the option. See
"Certain Transactions - Vassar Acquisition."
Industry Cyclicality and Seasonality
The Company's business is largely dependent upon the automotive
industry, which is highly cyclical and dependent on consumer spending. Economic
factors adversely affecting automotive production and consumer spending could
adversely impact the Company. In addition, the automotive component supply
industry is somewhat seasonal. Increased revenues and operating income are
generally experienced during the second calendar quarter of each year as a
result of the automotive industry's spring selling season, the peak sales and
production period of the year. Decreased revenues and operating income are
generally experienced during July and December of each year as a result of
scheduled OEM plant shut downs for vacations and holidays, as well as
changeovers in production lines for new model years. The Company's historical
results of operations do not reflect cyclical or seasonal fluctuations in
revenues and operating income because the Acquisitions have resulted in a growth
trend through successive periods which has masked the effect of any such
fluctuations. There can be no assurance that the Company will not be affected by
such cyclical or seasonal fluctuations in the future.
Risk of Labor Interruptions
Substantially all of the hourly employees of North American OEMs are
represented by the United Automobile, Aerospace and Agricultural Implement
Workers of America (the "UAW") or the Canadian Automobile Workers Union ("CAWU")
under similar collective bargaining agreements. The UAW and CAWU collective
bargaining agreements applicable to GM and Chrysler are scheduled to expire in
September 1999. The failure of GM, Chrysler or any other significant customer of
the Company to reach agreement with the UAW or CAWU relating to the terms of a
new agreement on a timely basis resulting in either a work stoppage or strike at
any of their production facilities could have a material adverse effect on the
Company. GM Truck and Bus had a strike from April 7, 1997 to May 29, 1997, which
impacted the Company as follows: (i) lost sales at DCT, Prestolock and Vassar
are estimated at $200,000, $126,000 and $430,000, respectively; and (ii) the
decrease in gross profit at DCT, Prestolock and Vassar is estimated at $50,000,
$50,000 and $157,000, respectively. Chrysler's Mound Road Plant had a strike
from April 7, 1997 to May 7, 1997 which impacted the Company as follows: (i)
lost sales at DCT, Prestolock, UPP and Utilase are estimated at $250,000,
$124,000, $30,000 and $100,000, respectively; and (ii) the decrease in gross
profit at DCT, Prestolock, UPP and Utilase is estimated at $62,000, $50,000,
$12,000 and $40,000, respectively. Bertrand Faure Components Ltd. ("Bertrand"),
a customer of DCT, had a strike from May 30, 1997 to June 11, 1997, which
affected DCT's sales to Bertrand through August 30, 1997 by an estimated
$223,000 and gross profit by an estimated $56,000. All of the Company's
operations are non-union, except for Vassar, whose production workers are
represented by the International Paper Workers Union ("AFL-CIO"). On August 1,
1997, these AFL-CIO workers went out on strike. The Company's operations have
been impacted by the strike. Management estimates the cost through August 31,
1997 to be approximately $177,000 on a pre-tax basis due to increased overtime,
labor variances, containment by the customer and security measures.
10
<PAGE>
Competition
Both the automotive component supply and the tooling component
industries are highly competitive. Competition in the sale of the Company's
products is primarily based on engineering, product design, process capability,
quality, cost, delivery and responsiveness. Many of the Company's competitors
are companies, or divisions or subsidiaries of companies, that are larger and
have greater financial and other resources than the Company. In addition, with
respect to certain of its products, some of the Company's competitors, including
GM/Delphi, are divisions of its OEM customers. There can be no assurance that
the Company's products will be able to compete successfully with the products of
these other companies. See "Business--Competition."
Product Liability Exposure
The Company faces an inherent business risk of exposure to product
liability claims if the failure of one of its products results in personal
injury or death, and there can be no assurance that the Company will not
experience material product liability losses in the future. In addition, if any
of the Company's products prove to be defective, the Company may be required to
participate in a recall involving such products. The Company maintains insurance
against product liability claims, but there can be no assurance that such
coverage will be adequate for liabilities ultimately incurred or that such
insurance will continue to be available to the Company on acceptable terms or at
all. A successful claim brought against the Company in excess of available
insurance coverage or a requirement to participate in any product recall may
have a material adverse effect on the Company's business.
Impact of Environmental Regulation
The Company is subject to the requirements of federal, state and local
environmental and occupational health and safety laws and regulations. There can
be no assurance that the Company will always be in complete compliance with all
such requirements. The Company has made and will continue to make capital and
other expenditures to comply with environmental requirements. If a release of
hazardous substances occurs on or from the Company's properties or from any of
its disposals at offsite disposal locations, or if contamination is discovered
at any of the Company's current or former properties, the Company may be held
liable, and the amount of such liability could be material. See
"Business--Environmental Matters."
Dependence on Key Personnel
The future success of the Company will largely depend on the efforts
and abilities of Robert J. Skandalaris, the Company's President and Chief
Executive Officer, Christopher L. Morin, the Company's Chief Operating Officer,
its other executive officers and John K. Baysore, the President of Utilase. The
Company has an employment agreement with Mr. Skandalaris and Utilase has an
employment agreement with Mr. Baysore. The Company does not, however, have
employment agreements with Mr. Morin or its other executive officers. The
Company maintains no key-person life insurance on the lives of any of its
executives. The loss of the services of Mr. Skandalaris could have a material
adverse effect on the Company. See "Management."
Control by Existing Shareholders
Upon consummation of the Offering, Robert J. Skandalaris will continue
to own and/or control approximately 43.8% of the outstanding Common Stock. As a
result, Mr. Skandalaris will continue to be able to exert significant influence
over the outcome of all matters submitted to a vote of the holders of Common
Stock, including the election of directors, amendments to the Company's Articles
of Incorporation and approval of significant corporate transactions. Such
consolidation of voting power could also have the effect of delaying, deterring
or preventing a change in control of the Company that might be otherwise
beneficial to shareholders. See "Principal Shareholders" and "Description of
Capital Stock.
"
Anti-Takeover Effect of Certain Charter, Bylaw and Statutory Provisions
Certain provisions of the Company's Articles of Incorporation and
Bylaws may inhibit changes in control of the Company not approved by the
Company's Board of Directors (the "Board"). These provisions include (i) a
prohibition on shareholder action through written consents, (ii) a requirement
that special meetings of shareholders be called only by the Board, (iii) advance
notice requirements for shareholder proposals and nominations, (iv) limitations
on the ability of shareholders to amend, alter or repeal the Bylaws and (v) the
authority of the Board to issue without shareholder approval preferred stock
with such terms as the Board may determine. The Company will also be afforded
the protections of Sections 1790 through 1799 of the Michigan Business
Corporation Act, which could have similar effects. See "Description of Capital
Stock."
<PAGE>
Dividend Policy; Restrictions on Payment of Dividends
The Company currently intends to retain any earnings to support its
growth strategy and does not anticipate paying dividends in the foreseeable
future. As a holding company, the ability of the Company to pay dividends in the
future will be dependent upon the receipt of dividends or other payments from
its operating subsidiaries. The payment of dividends by such subsidiaries, other
than in stock of such subsidiaries, is restricted by the Company's current bank
loan agreements, as is the Company's ability to pay cash dividends on any class
of stock. Moreover, the Company expects that its NBD Bank revolver and any other
future lending facilities will include similar restrictions. The Company's
ability to pay dividends, other than in stock, will also be subject to
limitations imposed by the Utilase Notes which will be issued by the Company in
connection with the Utilase Acquisition. See "Dividend Policy" and "Certain
Transactions."
11
<PAGE>
Shares Eligible for Future Sale
No prediction can be made as to the effect, if any, that future sales
of shares of Common Stock or the availability of such shares for future sale
will have on the market price of the Common Stock prevailing from time to time.
Sales of substantial amounts of Common Stock, or the perception that such sales
could occur, could adversely affect prevailing market prices for the Common
Stock. Upon consummation of the Offering, the Company will have 7,225,006 shares
of Common Stock issued and outstanding (7,720,006 if the Representatives'
over-allotment option is exercised in full), of which the 3,300,000 shares of
Common Stock sold in the Offering will be freely tradable without restriction or
further registration under the Securities Act of 1933, as amended (the
"Securities Act"), unless such shares are acquired by an "affiliate" of the
Company as that term is defined under Rule 144 under the Securities Act ("Rule
144"). The shares of Common Stock outstanding prior to the consummation of the
Offering have not been registered under the Securities Act and may not be sold
unless they are registered or unless an exemption from registration, such as the
exemption provided by Rule 144, is available. A total of 3,523,949 of such
unregistered shares of Common Stock will become eligible for sale, pursuant to
Rule 144, subject to the volume and manner of sale limitations prescribed by
Rule 144 and to the contractual restrictions of certain 360-day "lock up"
agreements with BlueStone described herein, beginning 90 days from the date of
this Prospectus. See "Shares Eligible for Future Sale" and "Underwriting."
Absence of Public Market; Possible Volatility of Stock Price
Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained in the future or that the market price of the Common Stock will
not decline below its initial public offering price. If an active public market
for the Common Stock does not develop, the market price and liquidity of the
Common Stock will likely be materially adversely affected. The initial public
offering price of the Common Stock will be determined by negotiations between
the Company and the Representatives, will not necessarily be related to the
Company's asset value, net worth or other established criteria of value and may
not be indicative of the market price for the Common Stock after the Offering.
The trading price of the Common Stock could be subject to wide fluctuations in
response to variations in the Company's quarterly operating results, changes in
earnings estimates by analysts, conditions in the Company's businesses or
general market or economic conditions. In addition, in recent years, the stock
market has experienced extreme price and volume fluctuations. These fluctuations
have had a substantial effect on the market prices for many emerging growth
companies often unrelated to the operating performance of the specific
companies. Such market fluctuations could have a material adverse effect on the
market price for the Common Stock. See "Underwriting."
Immediate and Substantial Dilution to New Investors
Purchasers of Common Stock in the Offering will acquire 45.7% of the
then outstanding Common Stock for 95.5% of the total consideration paid for the
then outstanding Common Stock (based on an assumed offering price of $10.00 per
share, the high point of the anticipated range of the initial public offering
price per share) and will experience immediate and substantial dilution in net
tangible book value per share. As of June 30, 1997, the Company had a deficiency
in net tangible book value of approximately $.96 per share. After giving effect
to the sale of Common Stock offered by this Prospectus, the deduction of
underwriting discounts and the estimated expenses of the Offering and giving
effect to the Closing Acquisitions and the anticipated use of proceeds of the
Offering (based on an assumed offering price of $10.00 per share), the
adjusted net tangible book value of the Company at June 30, 1997 would have been
$.19 per share, representing an immediate dilution of $9.81 per share to
purchasers in the Offering. See "Dilution."
Benefits of the Offering to Current Shareholders
Upon the consummation of the Offering, the current shareholders of the
Company will receive substantial benefits, including the creation of a public
trading market for their securities and the corresponding facilitation of sales
by such shareholders of their shares of Common Stock in the secondary market
(although, most of such shares are subject to a 360-day lock-up agreement with
BlueStone and to certain limitations on resale imposed upon officers, directors
and affiliates of the Company under the Federal securities laws), as well as an
immediate increase in net tangible book value of $1.15 per share to such
shareholders based upon the adjusted net tangible book value per share after the
consummation of the Offering and the Closing Acquisitions and the application of
the estimated net proceeds of the Offering (based upon an assumed offering price
of $10.00 per share, the high point of the currently anticipated range of the
initial public offering price per share). If, at the time the existing
shareholders are able to sell their shares of Common Stock in the public market,
the market price per share remains at the initial public offering price, of
which there can be no assurance, such shareholders would realize an average gain
of $9.60 per share on the sale of their existing shares (again, based upon an
assumed offering price of $10.00 per share). See "Dilution," "Principal
Shareholders," "Shares Eligible for Future Sale" and "Underwriting."
12
<PAGE>
Limited Lead Underwriting Experience
Although BlueStone has engaged in the investment banking business since
its formation as a broker-dealer in March 1996 and its principals have had
extensive experience in the underwriting of securities in their capacities with
other broker-dealers, this Offering constitutes one of the first public
offerings for which BlueStone has acted as lead underwriter. See "Underwriting."
Recent Publicity
Following the execution of the definitive agreement for the Utilase
Acquisition, and after the filing of the Company's registration statement for
the Offering with the Commission, press reports of the pending Utilase
Acquisition appeared in certain publications. These reports included statements
attributed to current Utilase management, and not to the Company, with respect
to anticipated revenues and employment levels at Utilase over the next two
years. Neither the Company nor the Representatives have confirmed, endorsed or
adopted these statements. The Company does not believe that these statements are
inconsistent with, or conflict with, the information contained in this
Prospectus.
Forward-Looking Information May Prove Inaccurate
This Prospectus contains various forward-looking statements that are
based on the Company's beliefs as well as assumptions made by and information
currently available to the Company. When used in this Prospectus, the words
"believe," "expect," "anticipate," "estimate" and similar expressions are
intended to identify forward-looking statements. The accuracy of such
forward-looking statements are subject to certain risks, uncertainties and
assumptions, including those identified above under "Risk Factors." Should one
or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, estimated, or projected. The Company cautions potential purchasers
not to place undue reliance on any such forward-looking statements.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
3,300,000 shares of Common Stock offered hereby, are estimated to be
approximately $26,721,000 ($30,864,150 if the Representatives' over-allotment
option is exercised in full), assuming an initial public offering price of $9.00
per share (the midpoint of the currently anticipated range of the initial public
offering price) and after deducting underwriting discounts and estimated
offering expenses. The Company expects to use the net proceeds as follows:
Approximate
Approximate Percentage of
Anticipated Use of Net Proceeds Dollar Amount Net Proceeds
- ------------------------------- -------------- ------------
Reduction of financial institution debt(1)(2)...... $11,290,000 42.3%
Payments relating to Utilase Acquisition(3)........ 10,450,000 39.1
Payments relating to Final DCT Acquisition(4)...... 1,960,000 7.3
Repayment of related party debt(5)................. 1,901,000 7.1
Payments relating to prior Acquisitions(6)......... 620,000 2.3
Equipment purchases................................ 500,000 1.9
----------- -----
Total........................................ $26,721,000 100.0%
=========== =====
- -------------
(1) Although the Company intends to use a significant portion of the proceeds to
repay a substantial amount of its financial institution debt, it will,
immediately following the Offering, acquire a revolving line of credit
facility with a borrowing base of up to at least $15 million (the Company
has a commitment letter from NBD Bank for a $15 million revolving line of
credit facility, subject to the consummation of the Offering, and will
either enter into an agreement with NBD Bank based on such commitment or
with another financial institution on the same or better terms) and intends
to utilize the resulting increased borrowing availability under such new
line of credit as necessary in the ordinary course of its business,
including for increased inventories and receivables and continued growth of
the Company and its subsidiaries. In addition, the Company may use a portion
of such increased borrowing availability to acquire businesses which the
Company believes are compatible with its business strategy; however, while
the Company regularly evaluates possible acquisition opportunities, as of
the date of this Prospectus, the Company has no agreements, commitments,
understandings or arrangements with respect to any acquisition other than
the Closing Acquisitions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
(2) Includes (i) approximately $4.23 million for the repayment in full of
amounts outstanding under DCT's revolving line of credit facility with CIT
Group/Credit Finance, Inc. ("CIT"), which permits borrowings of up to $7.5
million (the actual borrowing base at any given time depending upon advance
formulas based on outstanding accounts receivable and inventory), bears
interest at 2.625% over CIT's prime lending rate (a total of 10.875% as of
August 31, 1997) and matures on June 1, 1998 (the "DCT/CIT Line"); (ii) an
anticipated $3.0 million for the repayment in full of the Company's term
loan with Comerica Bank ("Comerica"), which had an outstanding principal
balance of $3.44 million as of June 30, 1997, bears interest at 1.5% above
Comerica's prime lending rate (a total of 9.75% as of August 31, 1997), is
payable in monthly principal installments of $78,125 plus accrued interest
and matures on December 31, 2000 (the "Noble/Comerica Term Loan"); (iii) an
anticipated $2.1 million for the repayment in full of DCT's term loan with
CIT, which bears interest at 2.625% above CIT's prime lending rate (a total
of 10.875% as of August 31, 1997), is payable in monthly principal
installments of $46,992 plus interest and matures on June 1, 1998 (the
"DCT/CIT Term Loan"); (iv) an anticipated $1.1 million for the repayment in
full of Utilase's term loan with Comerica, which had an outstanding
principal balance of $1.209 million as of June 30, 1997, bears interest at
2.0% above Comerica's prime lending rate (a total of 10.25% as of August 31,
1997), is payable in monthly principal installments of $30,000 plus interest
and matures on October 31, 2000 (the "Utilase/Comerica Term Loan"); and (v)
approximately $842,000 for the repayment in full of amounts outstanding
under Utilase's revolving line of credit facility with Comerica, which
permits borrowings of up to $4.0 million (the actual borrowing base at any
given time depending upon advance formulas based on outstanding accounts
receivable and inventory), bears interest at 2% above Comerica's prime
lending rate and matures on December 31, 1997 (the "Utilase/Comerica Line").
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
(3) Includes (i) the $8.2 million cash portion of the Utilase stock purchase
price, (ii) $1.4 million payable to various employees and shareholders of
Utilase and its parent company, DCTI, in consideration of their covenants
not to compete, and (iii) $850,000 to make the final payment due to the
former shareholders of Utilase in connection with the UPP Acquisition, each
of which payments is a condition precedent to the Utliase Acquisition. See
"Certain Transactions--UPP Acquisition" and "--Utilase Acquisition."
(4) Includes (i) $1.0 million for the purchase of the remaining 55% interest in
DCT and (ii) $960,000 to repay DCT's loan from DCTI assumed by the Company
in connection with the Final DCT Acquisition, which loan bears interest at
the rate of 10% per annum and matures on the earlier of June 30, 1998 and
the consummation of the Final DCT Acquisition. See "Certain
Transactions--Final DCT Acquisition."
(5) Represents the repayment of a portion of Utilase's approximately $2.83
million aggregate amount of intercompany debt owed to DCTI and its
affiliated entities. See "Certain Transactions--Other Matters."
(6) Includes $500,000 payable in connection with the Monroe Acquisition and
$120,000 payable in connection with the Vassar Acquisition. See "Certain
Transactions--Vassar Acquisition" and "--Monroe Acquisition."
Pending their use as set forth above, the Company intends to use the
net proceeds of the Offering either to make short-term reductions in the
Company's working capital lines of credit or to invest in short-term, investment
grade, interest-bearing securities. The described use of proceeds is based upon
management's assumptions concerning certain acquisition, development, financial
and other matters which may affect the Company in the future. If the development
of the Company's business varies materially from these assumptions, the Company
may reallocate some of the proceeds in the best interests of the Company.
If the Representatives exercise their over-allotment option in full, the Company
will realize additional net proceeds of approximately $4.1 million. Such
proceeds, if received, are expected to be used for working capital and general
corporate purposes.
14
<PAGE>
DIVIDEND POLICY
The Company has not declared or paid any dividends on its Common Stock
since its incorporation. The Company currently intends to retain any earnings to
support its growth strategy and operations and does not anticipate paying cash
dividends in the foreseeable future. Payment of future dividends, if any, will
be at the discretion of the Company's Board of Directors after taking into
account various factors, including the Company's financial condition, operating
results, current and anticipated cash needs and plans for expansion. In
addition, the payment of dividends by the Company on the Common Stock is
restricted by the Company's current bank loan agreements and it is anticipated
that the NBD Bank revolver and any other future lending facilities which
the Company obtains will include similar restrictions. Such restrictions would
limit the Company's ability to pay dividends on the Common Stock in the future.
Further, the Utilase Notes, which will be delivered in connection with the
Utilase Acquisition, will require the consent of the holders of 67% of the
aggregate outstanding principal amount thereof for the Company to declare or pay
any dividends on the Common Stock, other than in shares of capital stock. See
"Certain Transactions."
15
<PAGE>
DILUTION
The difference between the initial public offering price per share of
Common Stock and the net tangible book value per share of Common Stock after the
Offering constitutes the dilution to investors in the Offering. Net tangible
book value per share on any given date is determined by dividing the net
tangible book value of the Company (total tangible assets less total
liabilities) on such date by the number of then outstanding shares of Common
Stock.
At June 30, 1997, net tangible book value (deficit) of the Company was
$(3,717,417), or $(.96) per share. After giving retroactive effect to the sale
of the 3,300,000 shares of Common Stock offered hereby at an assumed price of
$10.00 per share (the high point of the currently anticipated range of the
initial public offering price) and the receipt and anticipated application of
the estimated net proceeds therefrom and to the concurrent consummation of the
Closing Acquisitions, the as adjusted net tangible book value of the Company at
June 30, 1997 would have been $1,358,583, or $.19 per share, representing an
immediate increase in net tangible book value of $1.15 per share to existing
shareholders and an immediate dilution of $9.81 (98.1%) per share to investors
in the Offering.
The following table illustrates the foregoing information with respect
to dilution to new investors on a per share basis:
Assumed initial public offering price...................... $10.00
Net tangible book value (deficit) before the Offering.... $(.96)
Increase attributable to investors in the Offering....... 1.15
-------
Adjusted net tangible book value after this Offering....... .19
------
Dilution to investors in the Offering...................... $ 9.81
======
The following table sets forth, with respect to existing shareholders
and the investors in the Offering, a comparison of the number of shares of
Common Stock purchased from the Company, the percentage ownership of such
shares, the aggregate consideration paid, the percentage of total consideration
paid, and the average price paid per share.
<TABLE>
<CAPTION>
Shares Acquired Total Consideration
--------------- ------------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Shareholders......... 3,925,006 54.33% $ 1,552,962 4.50% $0.40
Purchasers in the Offering.... 3,300,000 45.67% $33,000,000 95.50% $10.00(1)
--------- ------- ----------- -------
7,225,006 100.00% $34,552,962 100.00%
========= ====== =========== ======
</TABLE>
- ----------------
(1) Based on the high point of the currently anticipated range of the initial
public offering price.
The foregoing table assumes no exercise of the Representatives'
over-allotment option. If such option is exercised in full, the new investors
will have paid $37,950,000 (based on an assumed price of $10.00 per share, the
high point of the currently anticipated range of the initial public offering
price) for 3,795,000 shares of Common Stock, representing approximately 96.1% of
the total consideration for 49.2% of the total number of shares outstanding. In
addition, computations set forth in the above table exclude an aggregate of
700,000 shares of Common Stock reserved for issuance upon the exercise of
options available for future grant under the Option Plan and 330,000 shares of
Common Stock reserved for issuance upon the exercise of the Representatives'
Warrants. See "Management - Stock Option Plan" and "Underwriting."
16
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company, as of
June 30, 1997, on: (i) a historical basis; (ii) a pro forma basis to reflect the
consummation of the Closing Acquisitions (including the utilization of a portion
of the net proceeds from the Offering in connection therewith, as well as the
sale of a corresponding number of the shares offered hereby); and (iii) a pro
forma basis, as adjusted to reflect the sale of the balance of the 3,300,000
shares of Common Stock offered hereby at an assumed price of $9.00 per share
(the midpoint of the currently anticipated range of the initial public offering
price) and the anticipated application of the estimated net proceeds therefrom.
This table should be read in conjunction with "Pro Forma Financial Data" and the
consolidated financial statements, including the notes thereto, included
elsewhere in this Prospectus.
June 30, 1997
------------------------------------
Pro Forma as
Historical Pro Forma Adjusted
---------- --------- ---------
(In thousands)
Current maturities of long-term debt:
Current maturities of long-term
institutional debt...................... $1,052 $ 4,197 $ 2,336
Current maturities of related
party debt.............................. 1,336 500 --
------ ------ -------
Total current maturities................ 2,388(1) 4,697 2,336
------ ------ -------
Long-Term debt:
Long-term institutional debt, less
current maturities..................... 3,464 10,173 4,714
Related party debt, less current
maturities.............................. 1,890 14,852 13,854
----- ------ ------
Total long-term debt.................... 5,354 25,025 18,568
----- ------ ------
Redeemable Preferred Stock, $100 par
value: none authorized or outstanding
historical; 150,000 shares authorized
pro forma and pro forma as adjusted
and 9,250 shares outstanding pro
forma as adjusted(2)..................... -- -- 925
Shareholders' Equity(3):
Common Stock, no par value:
20,000,000 shares authorized; 3,860,168
shares issued and outstanding historical,
5,237,501 shares issued and outstanding
pro forma and 7,160,168 shares issued
and outstanding pro forma as adjusted(4). 1,086 13,482 27,807
Retained earnings......................... 88 88 88
------ ------ ------
Total shareholders' equity.............. 1,174 13,570 27,895
------ ------ ------
Total capitalization................. $8,916 $43,292 $49,724
====== ======= =======
- ---------------
(1) Does not include short-term debt of $3.0 million outstanding at June 30,
1997 which was repaid in July 1997 from the proceeds of the Company's
$3.8 million preferred stock financing effective July 1997. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources."
(2) Assumes conversion of the outstanding shares of DCT redeemable preferred
stock into redeemable preferred stock of the Company concurrently with the
closing of the Offering. See "Certain Transactions" and "Description of
Capital Stock -- Preferred Stock."
(3) Does not include 38,000 shares of callable preferred stock issued in
connection with the Company's $3.8 million preferred stock financing
effective July 1997. See "Management's Discussion and Analysis of Financial
Condition and the Company's Results of Operations -- Liquidity and Capital
Resources."
(4) Does not include (i) 64,838 shares of Common Stock issued effective July
1997 in connection with the Company's $3.8 million preferred stock
financing; (ii) 700,000 shares reserved for issuance upon exercise of
options available for future grant under the Option Plan; (iii) 330,000
shares of Common Stock reserved for issuance upon exercise of the
Representatives' Warrants; and (iv) 58,485 shares reserved for issuance in
future periods in exchange for a covenant not to compete in connection with
the Utilase Acquisition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources," "Management -- Stock Option Plan," "Certain Transactions" and
"Underwriting."
17
<PAGE>
PRO FORMA FINANCIAL DATA
Introduction
The following pro forma financial data is based upon the historical
financial statements of the Company and has been prepared to illustrate the
effects of the Acquisitions and the Offering. The effects of the Offering
proceeds have been isolated from the effects of the Acquisitions, except to the
extent that the Offering proceeds will be used to finance the Acquisitions. The
unaudited pro forma combined statement of operations for the year ended December
31, 1996 and for the six months ended June 30, 1996 and 1997 give effect to the
Acquisitions and the Offering as if they had been completed as of January 1,
1996. The unaudited pro forma combined balance sheet as of June 30, 1997 gives
effect to the Acquisitions and the Offering as if such transactions had been
completed on June 30, 1997. The Acquisitions are reflected using the purchase
method of accounting for business combinations.
The pro forma financial data is provided for comparative purposes only
and does not purport to represent the actual financial position or results of
operations of the Company that actually would have been obtained if the
Acquisitions had been consummated on the dates specified, nor is it necessarily
indicative of the results of operations that may be achieved in the future.
Adjustments to the pro forma combined operating results for the
Acquisitions include changes in depreciation and amortization to reflect the new
cost basis of assets acquired; changes to selling, general and administrative
expenses to remove non-recurring expenses and salaries to officers and
shareholders; changes in interest expense to reflect debt incurred in financing
the Acquisitions; and changes to the provision for income taxes to reflect
reductions resulting from the pro forma income adjustments. The pro forma
financial data is based on certain assumptions and adjustments described in the
notes thereto and should be read in conjunction therewith. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included elsewhere herein.
18
<PAGE>
Noble International, Ltd. And Acquired Businesses
Unaudited Pro Forma Combined Statement of Operations
<TABLE>
<CAPTION>
For the Year ended December 31, 1996
(Dollars in thousands, except per share data)
--------------------------------------------------------------------------------------------------------
Acquisition Other
and Related Adjusted Offering
Noble Offering Proceeds Pro Forma Proceeds Pro Forma
Int'l DCT Utilase Adjustments(AA) Combined Adjustments Combined
------------- ----------- ------------- -------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $ 16,187 $22,988 $ 9,305 $ 48,480 $ 48,480
Cost of sales............ 10,587 20,446 5,804 36,837 36,837
--------- ------- --------- -------- --------
Gross profit 5,600 2,542 3,501 11,643 11,643
Selling, general, and
administrative
expense................ 5,088 1,961 2,060 (841)(BB) 8,497 (26)(LL) 8,471
133 (CC)
1,286 (DD)
(626)(EE)
(564)(FF)
-------- ------- --------- ----- ------ ----- ---------
Operating profit........ 512 581 1,441 612 3,146 26 3,172
Interest expense........ 555 938 631 1,049 (GG) 3,077 (1,271)(MM) 1,806
(96)(HH)
Sundry, net............. (26) 104 171 95 (II) 369 369
25 (JJ)
-------- ------- --------- ----- ------ ----- ---------
Earnings (loss) before
income taxes........... (69) (253) 981 (221) 438 1,297 1,735
Income tax expense...... 7 135 330 (296)(KK) 176 441 (NN) 617
-------- ------- --------- ----- ------ ----- ---------
Net earnings (loss)..... $ (76) $ (388) $ 651 $ 75 $ 262 $ 856 $ 1,118
======== ======= ========= ===== ====== ===== =========
Earnings per share...... $ .05 $ .16(OO)
Weighted average common
shares outstanding..... 5,329,405 1,790,985(PP) 7,120,390
Other Financial
Information
- ---------------
EBITDA (QQ)............. $ 999 $ 1,405 $ 2,171 $2,152 $ 6,726 $ 0 $ 6,726
Cash Flow From:
Operating............... $ 913 $ (302) $ 1,775
Investing............... 270 (193) 1,441
Financing............... (713) 1,100 (2,811)
-------- -------- ---------
Net Cash Flow........... $ 470 $ 605 $ 405
======== ======== =========
- ---------------------
</TABLE>
(AA) Includes adjustments directly attributable to the Acquisitions, including
the Offering proceeds adjustments relating to the Closing Acquisitions.
(BB) Reflects bonus paid to Company's Chief Executive Officer. Pursuant to his
employment agreement with the Company, entered into April 1997, as amended,
he is precluded from the receipt of any bonus in 1997.
(CC) Reflects the addition of the depreciation of $133,000 due to the purchase
of Competitive Technologies Investment Company ("CTIC") in connection with
the Final DCT Acquisition. See "Certain Transactions - DCT Acquisition and
Related Matters."
(DD) Reflects the amortization of goodwill over 20 years relating to the
purchase of CTIC totaling $14,000, the amortization of goodwill over 20
years relating to the Utilase Acquisition totaling $857,703, the
amortization of goodwill over 20 years relating to the Final DCT
Acquisition totaling $214,951, and the amortization of the covenant not to
compete obtained in connection with the Utilase Acquisition over 7 years
totaling $200,000.
(EE) Reflects the corporate allocation expense incurred by Utilase that will
cease upon its acquisition by Noble.
(FF) Reflects the elimination of rent expense in the amount of $564,000 that
will cease upon the purchase of CTIC.
(GG) Reflects imputed interest at a rate of 9.25% on the acquisition cost of
$850,000 for UPP totaling $78,625 (this interest expense adjustment is
eliminated with the payment of the $850,000 with proceeds from the
Offering), the additional interest expense of $425,000 relating to the
purchase of CTIC, and the imputed interest expense of $623,621 on the
Utilase Notes issued in connection with the Utilase Acquisition. The
Utilase Notes mature over a four-year period from the date of the Utilase
Acquisition. The Series A, B, and C Utilase Notes have a negotiated
interest rate of 6.0%, and the Series D Utilase Notes have a negotiated
interest rate of 6.5%.
(HH) Reflects the interest expense savings totaling $96,000 resulting from the
repayment of DCT's 10% note payable to DCTI in the principal amount of
$960,000.
(II) Reflects the elimination of the Company's minority interest in DCT's
loss totaling $95,239.
(JJ) Reflects the addition of rent income of $25,000 due to the purchase of
CTIC.
(KK) Reflects the tax effects of the pro forma adjustments amounting to $74,980
and the presumed utilization of DCT's loss for the year ended December 31,
1996 providing a tax benefit of $220,858.
(LL) Reflects the amortization over 7 years of the Vassar consulting agreements
settled with proceeds from the Offering. The basis of these consulting
agreements, as settled, totals $205,000, of which payments totaling $85,000
have been made through June 30, 1997. The adjustment reflects the
difference between the $55,000 of consulting agreements which were actually
expensed in 1996 and the $29,286 amortization expense allocable to 1996.
(MM) Reflects the interest expense savings totaling approximately $1.270
million resulting from the reduction of debt through application of the
Offering proceeds. These savings include the repayment of debt totaling
approximately $13.205 million at an interest rate of 9.3% that reflects
the weighted average interest rate at January 1, 1996. The savings also
include the repayment of the $500,000 principal amount remaining
outstanding under the note issued in connection with the Monroe
Acquisition at an imputed interest rate of 8.5%.
(NN) Reflects the tax effects, at 34%, of the other Offering proceeds
adjustments.
(OO) Earnings per share on a pro forma combined basis adjusted for the Offering
and Acquisitions.
(PP) Represents the shares of Common Stock offered hereby to the extent not
utilized to finance the Acquisitions.
(QQ) EBITDA consists of income before income taxes plus interest, depreciation
and amortization expense. EBITDA is not presented as, and should not be
considered, an alternative measure of operating results or cash flows from
operations (as determined in accordance with generally accepted accounting
principles) but is presented because it is a widely accepted financial
indicator of a company's ability to incur and service debt.
19
<PAGE>
Noble International, Ltd. And Acquired Businesses
Unaudited Pro Forma Combined Statement of Operations
<TABLE>
<CAPTION>
For the Six Months ended June 30, 1996
(Dollars in Thousands, except per share data)
---------------------------------------------------------------------------------------------------------
Acquisition Other
and Related Adjusted Offering
Noble Offering Proceeds Acquisition Proceeds Pro Forma
Int'l DCT Utilase Adjustments(AA) Combined Adjustments Combined
------------ ----------- ------------- ----------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $ 8,155 $10,656 $ 4,205 $ 23,016 $ 23,016
Cost of sales............ 5 153 9,439 2,373 16,965 16,965
-------- ------- --------- -------- ---------
Gross profit 3,002 1,217 1,832 6,051 6,051
Selling, general, and
administrative
expense................ 1,956 1,026 1,132 (282)(BB) 4,233 (15)(KK) 4,218
66 (CC)
(308)(DD)
643 (EE)
-------- ------- --------- ----- --------- ----- --------
Operating profit (loss). 1,046 191 700 (119) 1,818 15 1,833
Interest expense........ 215 418 294 524 (FF) 1,403 (635)(LL) 768
(48)(GG)
93 (2) 12 (HH) 103 103
Sundry, net............. 0 (II)
-------- ------- --------- ------ --------- ------ --------
Earnings (loss) before
income taxes........... 831 (134) 404 (583) 518 650 1,168
Income tax expense...... 283 0 138 (245)(JJ) 176 221(NN) 397
-------- ------- --------- ------ --------- ------ --------
Net earnings (loss)..... $ 548 $ (134) $ 266 $(338) $ 342 $ 429 $ 771
======== ======= ========= ====== ========= ====== ========
Earnings per share...... $ .07 $ .12(OO)
Weighted average common
shares outstanding..... 4,786,308 1,790,985(PP) 6,577,293
Other Financial
Information
- ---------------
EBITDA (MM)............. $ 1,286 $ 644 $ 986 $ 651 $ 3,568 $ 0 $ 3,568
Cash Flow From:
Operating............... $ 987 $ (361) $ 1,092
Investing............... 597 (85) (1,287)
Financing............... (1,202) 495 345
-------- ------- ---------
Net Cash Flow........... $ 382 $ 49 $ 150
======== ======= =========
</TABLE>
- ------------
(AA) Includes adjustments directly attributable to the Acquisitions, including
the Offering proceeds adjustments relating to the Closing Acquisitions.
(BB) Reflects the elimination of rent expense in the amount of $282,000 that
will cease upon the purchase of CTIC.
(CC) Reflects the addition of the depreciation of $66,500 resulting from the
purchase of CTIC.
(DD) Reflects the corporate allocation expenses incurred by Utilase that will
cease upon its acquisition by Noble.
(EE) Reflects the amortization of goodwill over 20 years relating to the
purchase of CTIC. totaling $7,000, the amortization of goodwill over 20
years relating to the Utilase Acquisition totaling $428,852, the
amortization of goodwill over 20 years relating to the Final DCT
Acquisition totaling $107,476, and the amortization of the covenants not
to compete obtained in connection with the Utilase Acquisition over 7
years totaling $100,000.
(FF) Reflects imputed interest at a rate of 9.25% on the acquisition cost of
$850,000 for UPP totaling $39,312 (this interest expense adjustment is
eliminated with the payment of the $850,000 with proceeds from the
Offering), the additional interest expense of $212,500 relating to the
purchase of CTIC, and the imputed interest expense of $311,810 on the
Utilase Notes issued in connection with the Utilase Acquisition.
The Utilase Notes mature over a four-year period from the date of the
Utilase Acquisition. The Series A, B, and C Utilase Notes have a
negotiated interest rate of 6.0%, and the Series D Utilase Notes have a
negotiated interest rate of 6.5%.
(GG) Reflects the interest expense savings totaling $48,000 resulting from the
repayment of DCT's 10% note payable to DCTI in the principal amount of
$960,000.
(HH) Reflects the addition of rent income of $12,500 due to the purchase of
CTIC.
(II) Equity adjustments to earnings related to DCT did not begin until July
1996.
(JJ) Reflects the tax effect of the pro forma adjustments amounting to $198,277
and the presumed utilization of DCT's loss for the six months ended June
30, 1996 providing a total benefit of $45,408.
(KK) Reflects the amortization over 7 years of the Vassar consulting agreements
settled with proceeds from the Offering. The basis of these consulting
agreements, as settled, totals $205,000, of which payments totaling $85,000
have been made through June 30, 1997. The adjustment reflects the
difference between the $30,000 expensed by the Company relating to the
consulting agreements during the six months ended June 30, 1996 and the
$14,643 amortization expense allocable to such six-month period.
(LL) Reflects the interest expense savings totaling $635,267 resulting from the
reduction of debt through application of the Offering proceeds. These
savings include the repayment of debt totaling approximately $13.205
million at an interest rate of 9.3% that reflects the weighted average
interest rate of such debt at January 1, 1996. The savings also include the
repayment of the $500,000 principal amount remaining outstanding under the
note issued in connection with the Monroe Acquisition at an imputed
interest rate of 8.5%.
(MM) EBITDA consists of income before income taxes plus interest, depreciation
and amortization expense. EBITDA is not presented as, and should not be
considered, an alternative measure of operating results or cash flows from
operations (as determined in accordance with generally accepted accounting
principles) but is presented because it is a widely accepted financial
indicator of a company's ability to incur and service debt.
(NN) Reflects the tax effects, at 34%, of the other Offering proceeds
adjustments.
(OO) Earnings per share on a pro forma combined basis adjusted for the
Offering and Acquisitions.
(PP) Represents the shares of Common Stock offered hereby to the extent not
utilized to finance the Acquisitions.
20
<PAGE>
Noble International, Ltd. And Acquired Businesses
Unaudited Pro Forma Combined Statement of Operations
<TABLE>
<CAPTION>
For the Six Months ended June 30, 1997
(Dollars in thousands, except per share data)
------------------------------------------------------------------------------------------------------
Acquisition
and Related Adjusted Other
Noble Offering Proceeds Pro Forma Proceeds Pro Forma
Int'l DCT Utilase Adjustments(AA) Combined Adjustments Combined
----- --- -------- ----------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $ 9,733 $13,240 $ 6,705 $29,678 $29,678
Cost of sales............... 6,445 11,841 3,453 21,739 21,739
------- ------ ----- ------ -------
Gross profit................ 3,288 1,399 3,252 7,939 7,939
Selling, general, and
administrative expense..... 2,232 1,007 1,496 (282)(BB) 4,858 (15)(KK) 4,843
67 (CC)
(305)(DD)
643 (EE)
------- ------ ----- ----- ------- ----- ------
Operating profit............ $ 1,056 $ 392 $ 1,756 $(123) $3,081 $ 15 $ 3,096
Interest expense............ 439 513 290 524 (FF) 1,718 (635)(LL) 1,083
(48)(GG)
Sundry, net................. (10) 2 137 12 (HH) 206 206
65 (II)
------- ----- ----- ----- ------- ------- ---------
Earnings (loss) before
income taxes............... $ 607 $ (119) $ 1,603 $(522) $1,569 $ 650 $ 2,219
Income tax expense.......... 212 27 565 (245)(JJ) 559 221(NN) 780
------- ------ ------- ----- -------- -------- ---------
Net earnings (loss)......... $ 395 $ (146) $ 1,038 $(277) $1,010 $ 429 $ 1,439
======= ====== ======= ===== ====== ====== ========
Earnings per share.......... $ .19 $ .19(OO)
Weighted average common
shares outstanding......... 5,369,175 1,790,985(PP) 7,160,160
Other Financial
Information
- ---------------
EBITDA (MM)................. $ 1,387 $ 765 $ 2,128 $ 664 $4,944 $ 0 $ 4,944
Cash Flow From:
Operating................... $(1,017) $ (651) $ 2,366
Investing................... $ (506) (17) $(3,074)
Financing................... $ 1,258 577 1,430
------- ------ -------
Net Cash Flow............... $ (265) $ (91) $ 722
======= ====== =======
</TABLE>
- -----------
(AA) Includes adjustments directly attributable to the Acquisitions including
the Offering proceeds adjustments relating to the Closing Acquisitions.
(BB) Reflects the elimination of the rent of $282,000 due to the purchase of
CTIC.
(CC) Reflects the addition of the depreciation of $66,500 due to the purchase of
CTIC.
(DD) Reflects the corporate allocation expenses incurred by Utilase that will
cease upon its acquisition by Noble.
(EE) Reflects the amortization of goodwill over 20 years relating to the
purchase of CTIC totaling $7,000, the amortization of goodwill over 20
years relating to the Utilase Acquisition totaling $428,852, the
amortization of goodwill over 20 years relating to the Final DCT
Acquisition totaling $107,476, and the amortization of the covenants
not to compete obtained in connection with the Utilase Acquisition
over 7 years totaling $100,000.
(FF) Reflects imputed interest at a rate of 9.25% on the acquisition cost of
$850,000 for UPP totaling $39,312 (this interest expense adjustment is
eliminated with the payment of the $850,000 with proceeds from the
Offering), the additional interest expense of $212,500 relating to the
purchase of CTIC and the imputed interest expense on the Utilase Notes
issued in connection with the Utilase Acquisition totaling $311,810. The
Utilase Notes mature over a four-year period from the date of the Utilase
Acquisition. The Series A, B, and C Utilase Notes have a negotiated
interest rate of 6.0%, and the Series D Utilase Note has a negotiated
interest rate of 6.5%.
(GG) Reflects the interest expense savings totaling $48,000 resulting from the
repayment of the 10.00%, $960,000 payable to DCT.
(HH) Reflects the addition of rent income of $12,500 due to the purchase of
CTIC.
(II) Reflects the elimination of the equity in loss of unconsolidated affiliate,
DCT, totaling $64,700.
(JJ) Reflects the tax effect of the pro forma adjustment amounting to $177,400
and the presumed utilization of DCT's loss for the six months ended June
30, 1997 providing a total benefit of $67,304.
(KK) Reflects the amortization over 7 years of the Vassar consulting agreements
settled with proceeds from the Offering. The basis of these consulting
agreements, as settled, totaled $205,000, of which payments totaling
$85,000 have been made through June 30, 1997. The adjustment reflects the
difference between the $30,000 expensed by the Company relating to the
consulting agreements during the six months ended June 30, 1997 and the
$14,643 amortization expense allocable to such six-month period.
(LL) Reflects the interest expense savings totaling $635,267 resulting from the
reduction of debt through application of the Offering proceeds. These
savings include the repayment of debt totaling approximately $13.205
million at an interest rate of 9.3% that reflects the weighted average
interest rate of such debt at January 1, 1996. The savings also include the
repayment of the $500,000 balance remaining outstanding under the note
issued in connection with the Monroe Acquisition at an imputed interest
rate of 8.5%.
(MM) EBITDA consists of income before income taxes plus interest, depreciation
and amortization expense. EBITDA is not presented as, and should not be
considered, an alternative measure of operating results or cash flows from
operations (as determined in accordance with generally accepted accounting
principles) but is presented because it is a widely accepted financial
indicator of a company's ability to incur and service debt.
(NN) Reflects the tax effects, at 34%, of the other Offering proceeds
adjustments.
(OO) Earnings per share on a pro forma combined basis adjusted for the Offering
and Acquisitions include a deduction to earnings related to preferred
dividends paid during the six months ended June 30, 1997 in the amount of
$47,808.
(PP) Represents the shares of Common Stock offered hereby to the extent not
utilized to finance the Acquisitions.
21
<PAGE>
Noble International, Ltd. And Acquired Businesses
Unaudited Pro Forma Combined Balance Sheet
<TABLE>
<CAPTION>
As of June 30, 1997
(In thousands)
------------------------------------------------------------------------------------------------------
Acquisition Other
and Related Adjusted Offering
Noble Offering Proceeds Pro Forma Proceeds Pro Forma
Int'l DCT Utilase Adjustments Combined Adjustments Combined
----- --- ------- ----------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents... $ 206 $ 517 $ 1,128 $ $ 1,851 $ $ 1,851
Accounts receivable, net.... 2,855 3,852 2,229 8,936 8,936
Inventory................... 2,653 2,988 161 5,802 5,802
Other....................... 730 243 922 1,895 1,895
------- ------- ------- -------- -------- -------- -------
Total current assets........ 6,444 7,600 4,440 18,484 18,484
PP&E, net................... 3,012 3,881 6,959 4,347 18,199 500 18,699
Goodwill.................... 4,892 20,125 25,017 -- 25,017
Other....................... 503 27 111 1,038 1,679 120 1,799
------- ------- ------- -------- -------- -------- -------
Total Assets................ $14,851 $11,508 $11,510 $ 25,510 $ 63,379 $ 620 $63,999
======= ======= ======= ======== ======== ======== =======
LIABILITIES AND SHAREHOLDERS'
EQUITY
Accounts payable............ $ 1,679 $ 4,273 $ 2,952 $ (362) $ 8,542 $ 8,542
Accrued liabilities......... 1,093 439 389 1,921 1,921
Notes payable............... 3,003 4,045 842 7,890 (4,887) 3,003
Current maturities
of long-term debt......... 1,052 2,764 381 4,197 (1,861) 2,336
Current maturities-related
parties................... 1,336 (836) 500 (500)
------- -------- ------- ------ ------- -------- --------
Total current liabilities... 8,163 11,521 4,564 (1,198) 23,050 (7,248) 15,802
Long term debt.............. 5,354 1,350 3,784 14,537 25,025 (6,457) 18,568
Other....................... 160 1,592 177 (1,120) 809 809
Preferred stock-redeemable.. 925 925 925
Common stock................ 1,086 4 1 12,391 13,482 14,325 27,807
Paid in capital............. 17,345 1,704 (19,049)
Retained earnings(deficit).. 88 (21,229) 1,280 19,949 88 88
------ ------- ------- ------ ------ -------- -------
Total liabilities and
shareholders' equity...... $14,851 $11,508 $11,510 $25,510 $63,379 $ 620 $63,999
======= ======= ======= ======= ======= ======== =======
</TABLE>
Notes: Please see following page
22
<PAGE>
Noble International, Ltd. And Acquired Businesses
Unaudited Pro Forma Combined Balance Sheet
Note 1: Pro Forma Balance Sheet Adjustments
NOBLE INTERNATIONAL, LTD. AND ACQUIRED BUSINESSES
NOTES TO PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
The accompanying pro forma combined balance sheet as of June 30, 1997 gives
effect to the purchase of the acquired businesses and the Offering as if such
transactions occurred on June 30, 1997.
<TABLE>
<CAPTION>
Assets Liabilities and Shareholders' Equity
------------------------------------------ ----------------------------------------------------
Current Current Accounts Current Mat
Cash PP&E Goodwill Other Bank Debt Maturities Payable Related Parties
---- ---- -------- ----- --------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Acquisition/Offering
Proceeds Adjustments
- ----------------------
Utilase Acquisition(A) $(8,200) $15,350
Utilase non-compete
payments(B)(F) (1,400) 1,400
Payment of note related
to UPP Acquisition (836) (836)
DCT debt repayment (960)
DCT purchase(C) (1,000) 4,880
Elimination of equity in
loss of unconsolidated
affiliate (160)
Elimination of receivable
from unconsolidated
affiliate (362) (362)
Competitive Technologies
Investment Company
acquisition(D) 4,347 55
Offering proceeds(G) 12,396
-------- ------ ------- ------ ------ --------- ----- -----
$ 0 $4,347 $20,125 $1,038 $ 0 $ 0 $(362) $(836)
======== ====== ======= ====== ====== ========= ===== =====
<CAPTION>
Assets Liabilities and Shareholders' Equity
------------------------------------------ ----------------------------------------------------
Current Current Accounts Current Mat
Cash PP&E Goodwill Other Bank Debt Maturities Payable Related Parties
---- ---- -------- ----- --------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other Offering Proceeds
Adjustments
- --------------------
Payment of Offering
expenses $ (388)
Purchase of capital
equipment at Vassar (500) 500
Payment of note related
to Monroe Acquisition (500) (500)
Repayment of bank debt(E) (13,205) (4,887) (1,861)
Prepayment of Vassar
covenants-not-to-
compete (120) 120
Offering Proceeds(H) 14,713
-------- ------ ----------- ------ ------- ------- -------- -----
$ 0 $ 500 $ 0 $ 120 $(4,887) $(1,861) $ 0 $(500)
======== ====== =========== ====== ======= ======= ======== =====
<PAGE>
<CAPTION>
Liabilities and Shareholders' Equity
--------------------------------------------------------------------------------------
Long-term Retained
Debt Other Common Stock Paid in Capital Earnings (deficit)
---- ----- ------------ --------------- ------------------
<S> <C> <C> <C> <C> <C>
Acquisition/Offering
Proceeds Adjustments
- ---------------------
Utilase Acquisition(A) $10,135 $ (1) $ (1,704) $ (1,280)
Utilase non-compete
payments(B)
Payment of note related
to UPP Acquisition
DCT debt repayment (960)
DCT purchase(C) (4) (17,345) 21,229
Elimination of equity in
loss of unconsolidated
affiliate (160)
Elimination of receivable
from unconsolidated
affiliate
CTIC(D) 4,402
Offering proceeds(G) 12,396
------- ------- ------- --------- -------
$14,537 $(1,120) $12,391 $(19,049) $19,949
======= ======= ======= ========= =======
<CAPTION>
Liabilities and Shareholders' Equity
--------------------------------------------------------------------------------------
Long-term Retained
Debt Other Common Stock Paid in Capital Earnings (deficit)
---- ----- ------------ --------------- ------------------
<S> <C> <C> <C> <C> <C>
Other Offering Proceeds
Adjustments
- -----------------------
Payment of Offering
expenses $ (388)
Purchase of capital
equipment at Vassar
Payment of note related
to Monroe Acquisition
Repayment of bank debt (6,457)
Prepayment of Vassar
covenants-not-to-compete
Offering Proceeds(H) 14,713
------- ----------- -------- -------- -----------
$(6,457) $ 0 $ 14,325 $ $ 0
======= =========== ======== ======== ===========
</TABLE>
- ------------
(A) The adjustment reflects the acquisition of Utilase under the purchase
method of accounting. The excess of the purchase price over the net book
value of the assets acquired has been recorded as goodwill as management
believes net book value approximates fair value. No specifically
identifiable intangible assets will be acquired.
(B) The covenants not to compete are being amortized over the seven-year period
of the agreement.
(C) Reflects the acquisition of DCT under the purchase method of accounting.
The excess of the purchase price over the net book value of the assets
acquired has been recorded as goodwill as management believes net book
value approximates fair value. No specifically identifiable intangible
assets will be acquired.
(D) Reflects the acquisition of CTIC under the purchase method of accounting.
This transaction was part of the DCT acquisition accordingly, the excess
of the debt assumed over the fair market value of the real estate acquired
was recorded as goodwill.
(E) The bank debt will be reduced from the proceeds of the Offering, including
repayment of credit lines of $4.887 million, current maturities of long
term debt of $1.861, and long-term debt of $6.457 million. The total use of
proceeds to repay debt reflected on this table is $13.205 million which
amount will differ from the actual use of proceeds to be used for the
repayment of debt as a result of events occurring after June 30, 1997 and
before the consummation of the Closing Acquisitions and the Offering.
(F) In consideration for his covenant not to compete, Jeffrey Moss, a director
of Utilase and President of DCTI will, subject to continuing compliance
with the covenant, receive 11,698 shares of Common Stock on each
anniversary of the Utilase Acquisition closing date commencing in 1999
and continuing through 2003. The issuance of the shares will be recorded as
earned pursuant to the terms of the agreement.
(G) Reflects the proceeds from the Offering that were used to finance the
Acquisitions.
(H) Reflects the proceeds from the Offering, except to the extent proceeds were
used to finance the Acquisitions.
23
<PAGE>
SELECTED FINANCIAL DATA
The following selected historical financial data as of and for each of the three
fiscal years in the period ended December 31, 1996 is derived from the audited
financial statements of Noble International, Ltd. and should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere herein. The selected financial data as of and for the six
months ended June 30, 1996 and 1997 is derived from the unaudited financial
statements included elsewhere herein. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
----------------------------------------- -----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales................. $ 3,305 $ 4,442 $ 16,187 $ 8,155 $ 9,733
Cost of goods sold........ 2,261 2,911 10,587 5,153 6,445
---------- ---------- ---------- ---------- ----------
Gross profit.............. 1,044 1,531 5,600 3,002 3,288
Selling, general and
administrative expense... 915 1,030 5,088 1,956 2,232
---------- ---------- ---------- ---------- ----------
Operating profit.......... 129 501 512 1,046 1,056
Equity in loss of
unconsolidated
subsidiary.............. 95 65
Interest income........... (5)
Interest expense.......... 24 24 555 215 439
Sundry, net............... (1) (29) (64) (55)
---------- ---------- ---------- ---------- ----------
Earnings (loss) before inome
taxes and minority
interest.................. 106 506 (69) 831 607
Minority interest.......... 38 67
Income tax expense......... 8 30 7 283 212
---------- ---------- ---------- ----------- ----------
Net earnings (loss)........ $ 60 $ 409 $ (76) $ 548 $ 395
========== ========== ========== =========== ==========
Net earnings (loss) per
share(1).................. .03 .10 (.02) .17 .10
Weighted average common
shares outstanding........ 1,535,170 2,807,390 3,820,390 3,277,293 3,860,160
Other Financial
Information
- ---------------
EBITDA(2).................. $ 121 $ 566 $ 999 $ 1,286 $ 1,387
Ratio of EBITDA to interest
expense.................. 5.0x 23.6x 1.8x 6.0x 3.2x
</TABLE>
Consolidated Balance Sheet Data:
December 31,
---------------------------------- June 30,
1994 1995 1996 1997
--------- ---------- ----------- -----------
Total assets............... $1,189 $1,785 $11,533 $14,851
Working capital
(deficiency)............. 295 349 (817) (1,719)
Total debt................. 152 218 8,675 10,746
Shareholders' equity....... 355 624 729 1,174
- --------------
(1) Net earnings (loss) per share data for 1994 and 1995 have been presented to
reflect the pro forma tax effects attributable to Prestolock being taxed
under Subchapter S of the Internal Revenue Code through December 31, 1995.
(2) EBITDA represents income before income taxes, plus interest expense and
depreciation and amortization expense. EBITDA is not presented as, and
should not be considered, an alternative measure of operating results or
cash flows from operations (as determined in accordance with generally
accepted accounting principles), but is presented because it is a widely
accepted financial indicator of a company's ability to incur and service
debt.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The Company is a full service, independent supplier of automotive
component assemblies and value-added services to the automotive industry.
Pursuant to its strategic acquisition program, the Company has, since its
formation in 1993, completed five acquisitions, and will complete two more in
connection with the Offering. The Company completed its first acquisition in
February 1994 by acquiring the assets of Prestolock. In January 1996, the
Company completed the acquisition of all of the outstanding shares of Vassar and
Monroe. In July 1996, the Company acquired a minority interest in DCT. In
January 1997, the Company acquired all of the outstanding capital stock of
Skandy. In March 1997, the Company, through UPP, acquired certain assets of
Utilase. Concurrently with the consummation of the Offering, the Company will
also acquire all of the outstanding shares of Utilase and the balance of the
shares of DCT.
Prestolock commenced operations in February 1994 and subsequently
incurred significant engineering and other start-up costs to improve its market
position as a provider of glovebox latches to the automotive industry. The
historical operating results which include these costs are not necessarily
indicative of future operating results. As a result of the acquisition of
Vassar, in January 1996, the Company enhanced its relationship with GM/Delphi as
a customer which the Company regards as a first step in realizing its strategy
of providing multiple services to its automotive customers. DCT has experienced
continued improvement in its operating results over the past three years. As a
result of changes in DCT and the affiliation with Skandy, UPP and Utilase, it is
anticipated that DCT's operating results in the future will vary from historical
operating results due to strengthened sales efforts and the ability to provide
assembled products using production laser welding processes. The results of UPP
and Utilase are also expected to be impacted by the addition of a dedicated
sales force. Management believes Utilase's growth has been limited by the funds
available for both working capital requirements and capital expenditures for
expanding capacity. The proceeds of the Offering, the increased availability
created under existing bank lines as a result of the use of proceeds of the
Offering to reduce bank debt, and the cash generated from operations are
expected to cause Utilase's future operating results to differ from its
historical operating results.
The following analysis of the financial condition and results of
operations of the Company should be read in conjunction with "Pro Forma
Financial Data," "Selected Financial Data," and the financial statements,
including the notes thereto, of the Company, Monroe, DCT and Utilase, included
elsewhere in this Prospectus. Except for the historical information contained
herein, the discussion in this Prospectus contains or may contain
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from those discussed herein. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed herein, as well as those factors discussed under "Risk Factors"
and elsewhere in this Prospectus. Historical results are not necessarily
indicative of trends in operating results for any future periods. For example,
labor interruptions at customers' plants during 1997 have resulted in lost sales
and earnings before income taxes for the Company estimated at $1.5 million and
$0.5 million, respectively. In addition, a recent strike at Vassar has resulted
in approximately $0.2 million in increased costs bringing the total strike
related reduction in earnings before income taxes to approximately $700,000 over
the second and third quarters of fiscal 1997.
<PAGE>
Results of Operations
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30,
1996 (Pro Forma and Historical)
The following table sets forth certain financial data for the Company
both on a pro forma basis (giving effect to the Acquisitions as reflected in
"Pro Forma Financial Data") and on a historical basis. The pro forma information
may not be indicative of actual results that would have been achieved if the
Acquisitions had occurred at the beginning of the periods. See "Pro Forma
Financial Data" and the financial statements and notes thereto appearing
elsewhere in this Prospectus.
Results of Operations
(in thousands)
Pro Forma Combined Historical
Six Months Ended Six Months Ended
June 30, June 30,
---------------- ----------------
1996 1997 1996 1997
---- ---- ---- ----
Net sales $23,016 $29,678 $8,155 $ 9,733
Cost of goods sold 16,965 21,739 5,153 6,445
Gross profit 6,051 7,939 3,002 3,288
Selling, general, and
administrative expenses 4,218 4,843 1,956 2,232
Operating profit 1,833 3,096 1,046 1,056
Interest expense 768 1,083 215 439
Sundry, net 103 206 -- (10)
Earnings (loss) before income
taxes and minority interest 1,168 2,219 831 607
Minority interest -- -- -- --
Income tax expense 397 780 283 212
------- -------- ------- -------
Net earnings $ 771 $ 1,439 $ 548 $ 395
======= ======== ======= =======
<PAGE>
Net Sales. The Company's pro forma combined net sales increased by $6.7
million, or 28.9%, to $29.7 million for the six months ended June 30, 1997 from
$23.0 million for the six months ended June 30, 1996. The increase in sales is
comprised of: (i) an increase in Utilase sales of $2.5 million, or 59.5%, to
$6.7 million from $4.2 million, due to new orders for Utilase's tailored blanks
resulting from GM's addition of several new car and truck models and a new Honda
door application; (ii) an increase in DCT sales of $2.6 million, or 24.2%, to
$13.2 million from $10.6 million, as a result of DCT receiving outsource
stamping business for Chrysler products; and (iii) an increase in Noble sales of
$1.6 million, or 19.5%, to $9.7 million from $8.1 million.
The increase in consolidated net sales for Noble for the six months
ended June 30, 1997 as compared to the six months ended June 30, 1996 is
comprised of: (i) Prestolock's increase in sales of $0.7 million, or 22.8%, to
$3.4 million from $2.7 million, which was primarily attributable to new
business for the Chrysler and GM glovebox latches; and (ii) Vassar's increase in
sales of $0.3 million, or 11.6%, to $3.0 million from $2.7 million, which was
primarily attributable to new assembly and painting business awarded from
GM/Delphi on steering column shrouds for several passenger car vehicle lines. In
addition, the acquisition of UPP increased the consolidated sales of Noble by
$0.4 million for the six months ended June 1997 as compared to the prior year
period.
Cost of Goods Sold. The Company's pro forma combined cost of goods sold
increased $4.7 million, or 28.1%, to $21.7 million for the six months ended June
30, 1997 from $17.0 million for the comparable 1996 period. As a percent of net
sales, pro forma combined cost of goods sold remained stable at 73% for each of
such periods, despite fluctuations at Utilase and DCT. The cost of goods sold at
Utilase decreased to 51.5% for the six months ended June 30, 1997 from 56.4% for
the six months ended June 30, 1996, as a result of the manufacturing overhead
cost being absorbed over a larger sales base. The cost of goods sold at DCT
increased to 89.4% of net sales for the six months ended June 30, 1997 from
88.6% of net sales for the six months ended June 30, 1996, due to obtaining
Chrysler and Mitsubishi stamping business that had higher raw material cost as
compared to other business.
The cost of goods sold for Noble increased to 66.2% of its consolidated
net sales for the period ended June 30, 1997 from 63.2% of its consolidated net
sales for the period ended June 30, 1996, primarily due to increased
engineering, prototyping, and other expenses related to the Company's investment
in developing future glovebox latches. These expenses have resulted in the
awarding of new business for future periods.
Gross Profit. As a result of the foregoing factors, the Company's pro
forma combined gross profit increased $1.8 million, or 31.2%, to $7.9 million
for the six months ended June 30,1997 from $6.1 million for the six months ended
June 30, 1996.
Noble's gross profit increased by $0.3 million, or 9.6%, to $3.3
million for the six months ended June 30, 1997 from $3.0 million for the prior
year period.
Selling, General and Administrative Expenses. Pro forma combined
selling, general and administrative expenses increased $0.6 million, or 14.8%,
to $4.8 million for the six months ended June 30, 1997 from $4.2 million for the
six months ended June 30, 1996. For the period ended June 30, 1997, selling,
general and administrative expenses as a percent of net sales was 22.3%, as
compared to 26.9% for the six-month period ended June 30, 1996. Selling, general
and administrative expenses at Utilase increased by $0.4 million primarily due
to an increase in personnel incurred in anticipation of new business.
Selling, general and administrative expenses at Noble increased by $0.2
million, or 14%, for the six months ended June 30, 1997 as compared to the six
months ended June 30, 1996, due to expenses incurred to establish the necessary
infrastructure to support the continued growth of the Company.
Operating Profit. As a result of the foregoing factors, the Company's
pro forma combined operating profit increased by $1.3 million, or 68.9%, to
$3.1 million for the six months ended June 30, 1997 from $1.8 million for the
comparable 1996 period.
Noble's operating profit increased by $11,022, or 1.0%, to $1.1 million
for the six months ended June 30, 1997 from $1.0 million for the six months
ended June 30, 1996.
Interest Expense. Pro forma combined interest expense increased $0.3
million, or 40.3%, to $1.1 million for the six-month period ended June 30, 1997
from $0.8 million for the six-month period ending June 30, 1996. The increase
was primarily due to an increase in DCT's weighted average interest rate to
10.75% from 9.1% as a result of debt restructuring.
Noble's interest expense increased $0.2 million, or 104.8%, to $0.4
million for the six-month period ended June 30, 1997 from $0.2 million for the
prior year period, primarily due to the financing obtained to support increased
sales as well as the financing of the Acquisitions.
Net Earnings. As a result of the foregoing factors, the Company's pro
forma combined net earnings increased by $0.6 million, or 91.2%, to $1.4 million
for the period ended June 30, 1997 from $0.8 million for the period ended June
30, 1996, after providing for income tax.
Noble's consolidated net earnings decreased by $0.1 million, or 27.9%,
to $0.4 million for the six-month period ended June 30, 1997 from $0.5 million
for the six-month period ended June 30, 1996, primarily due to increased
interest expense.
26
<PAGE>
Fiscal Year Ended December 31, 1996 Compared to Fiscal Year Ended
December 31, 1995 (Historical)
Net Sales. Net sales increased $11.8 million, or 264%, to $16.2 million
for the year ended December 31, 1996 from $4.4 million for the year ended
December 31, 1995. The increase was primarily attributable to the acquisitions
of Monroe and Vassar and new business at Prestolock relating to glovebox
latches for GM. The Monroe Acquisition increased sales by $5.1 million, or
114.8%, for the year ended December 31,1996. The Vassar Acquisition increased
sales by $5.5 million, or 122.9%, for the year ended December 31, 1996. The
Prestolock sales increased the Company's net sales by $1.1 million, or 24.67%,
to $5.5 million for the year ended December 31, 1996.
Cost of Goods Sold. Cost of goods sold increased $7.7 million, or
263.7%, to $10.6 million for the year ended December 31, 1996 from $2.9 million
for the year ended December 31, 1995. As a percentage of net sales, cost of
goods sold decreased to 65.4% for the year ended December 31, 1996 from 65.9%
for the year ended December 31, 1995. The increase in cost of goods sold was
primarily attributable to the Monroe and Vassar Acquisitions which increased the
Company's cost of goods sold by $2.0 million and $4.4 million, respectively,
for the year ended December 31, 1996, and the increased expenses at Prestolock
related to the Company's investment in developing future glovebox latches.
Gross Profit. As a result of the foregoing factors, gross profit
increased $4.1 million, or 26.6%, to $5.6 million for the year ended December
31, 1996 from $1.5 million for the year ended December 31, 1995.
Selling General and Administrative Expenses. Selling, general and
administrative expenses increased $4.1 million, or 393.8%, to $5.1 million for
the year ended December 31, 1996 from $1.0 million for the year ended December
31, 1995. The increase in selling, general and administrative expenses was
primarily attributable to: (i) the Monroe and Vassar Acquisitions, which
increased such expenses by $1.6 million and $1.0 million, respectively, for the
year ended December 31, 1996, (ii) an increase of $1.1 million, or 110.0%, for
the year ended December 31, 1996, due to the establishment of Noble as a holding
company and a bonus to Robert J. Skandalaris, and (iii) an increase of $0.3
million, or 29.2%, at Prestolock due to increased commissions on net sales,
increased personnel and expenses incurred to move administration and engineering
to Michigan.
Operating Profit. As a result of the foregoing factors, operating
profit increased $10,849, or 2.2%, to $0.5 million for the year ended December
31, 1996.
Interest Expense. Interest expense increased $0.5 million, to $0.6
million for the year ended December 31, 1996 from $23,836 for the year ended
December 31, 1995. This increase was primarily attributable to the financing of
the acquisitions of Monroe and Vassar.
Net earnings (Loss). As a result of the foregoing factors, net earnings
decreased $0.5 million to a net loss of $76,363 for the year ended December 31,
1996 from net earnings of $0.4 million for the prior year after providing for
the income tax effect.
Fiscal Year Ended December 31, 1995 Compared to Fiscal Year Ended
December 31, 1994 (Historical)
Net Sales. Net sales increased $1.1 million, or 34.4%, to $4.4 million
for the year ended December 31, 1995 from $3.3 million for the year ended
December 31, 1994, primarily due to the addition of new car programs and an
increase in tooling sales.
Cost of Goods Sold. Cost of goods sold increased $0.6 million, or
26.1%, to $2.9 million for the year ended December 31, 1995 from $2.3 million
for the year ended December 31, 1994. As a percentage of net sales, cost of
goods sold decreased to 65.5% for the year ended December 31, 1995 from 68.4%
for the year ended December 31, 1994. This decrease was primarily due to
manufacturing costs being allocated over a larger sales base.
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Gross Profit. Gross profit increased $0.5 million, or 46.7%, to $1.5
million for the year ended December 31, 1995 from $1.0 million for the year
ended December 31, 1994. As a percent of net sales, the gross profit margin
increased to 34.5% for the year ended December 31, 1995 from 31.6% for the year
ended December 31, 1994.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.1, or 12.6%, to $1.0 million for the year
ended December 31, 1995 from $0.9 million for the year ended December
31, 1994. This increase was primarily due to additional compensation, partially
offset by a decrease in bad debt expense.
Net Earnings. Net earnings increased $0.3 million, or 581.7%, to $0.4
million for the year ended December 31, 1995 from $60,000 for the year ended
December 31, 1994.
Liquidity and Capital Resources
The Company's cash requirements have historically been met through a
combination of cash flow from operations, equipment financing, bank financing
and loans from shareholders. The Company's working capital needs and capital
equipment requirements have grown as a result of the growth of the Company and
are expected to continue to increase as a result of anticipated growth in laser
blank welding, glovebox latch, and assembly operations. The anticipated
increase in required working capital and capital equipment requirements, and
the cash requirements for the purchase of Utilase and DCT, are expected to be
met from the net proceeds from the Offering, cash flow from operations,
equipment financing, and revolving credit borrowings. As of June 30, 1997, the
Company had working capital of approximately $2.7 million on a pro forma
combined basis and a working capital deficit of $1.7 million on a historical
basis.
Noble, DCT and Utilase generated pro forma combined cash flow from
operations of $2.4 million for the year ended December 31, 1996 and $0.7
million for the six months ended June 30, 1997. In addition, cash was
generated through financing activities.
The Company currently has a $3.5 million secured revolving line of
credit facility, subject to qualifying accounts receivable and inventory, with
Comerica which expires on November 30, 1997 (the "Noble/Comerica Line"). The
outstanding balance on the Noble/Comerica Line was $3.0 million at June 30,
1997. In July 1997, the Company paid off its outstanding borrowings under the
Noble/Comerica Line with proceeds from a $3.8 million preferred stock
financing, in order to create availablity under the line as required by
Comerica in connection with Noble's guarantee of an $8 million equipment
financing line for Utilase. (See discussion below.) Interest on the
Noble/Comerica Line is payable monthly at 1% over Comerica's prime lending rate
(a total of 9.25% at August 31, 1997). The Company also has a term loan wih
Comerica, which had an outstanding principal balance of $3.4 million at June
30, 1997, is payable in monthly principal installments of $78,125, plus accrued
interest at 1.5% over Comerica's prime lending rate (at total of 9.75% at
August 31, 1997), and matures December 31, 2000 (the "Noble/Comerica Term
Loan"). See "Certain Transactions--Other Matters."
DCT currently has a credit facility with CIT which allows it to borrow
up to $7.5 million based upon a percentage of certain balance sheet accounts
(the "DCT/CIT Line"). At June 30 1996 there was approximately $4.1 million
outstanding under the DCT/CIT Line, which bears interest, payable monthly, at
2.625% over CIT's prime lending rate (a total of 10.875% at August 31, 1997) and
expires June 1, 1998. DCT also has a term loan with CIT which had a balance
outstanding of $2.3 million at June 30, 1997, bears interest at 2.625% above
CIT's prime lending rate (a total of 10.875% as of August 31, 1997), is payable
in monthly installments of $46,992 plus interest and matures June 1, 1998 (the
"DCT/CIT Term Loan").
Utilase has a revolving line of credit with Comerica under which there
was $0.8 million outstanding at June 30, 1997 (the "Utilase/Comerica Line").
Interest on the Utilase/Comerica Line is payable monthly at 2% over Comerica's
prime lending rate (a total of 10.25% at August 31, 1997) and it matures on
December 31, 1997. Utilase also has a term loan with Comerica which had an
outstanding principal balance of $1.2 million at June 30, 1997, bears interest
at 2.0% above Comerica's prime rate and matures October 31, 2000 (the
"Utilase/Comerica Term Loan"). The Utilase/Comerica Term Loan is payable in
monthly principal installments of $30,000 plus accrued interest. In addition,
on March 26, 1997, Utilase obtained a commitment letter from Comerica pursuant
to which Comerica committed, subject to the conditions set forth therein, to
provide Utilase with an $8 million credit facility to be used for the purchase
of equipment. The Company will be a guarantor of this credit facility.
The Company intends that its various credit facilities will be
restructured or refinanced upon the consummation of the Offering. On May 6, 1997
the Company received a letter of intent from Comerica confirming the bank's
interest in restructuring the Company's various credit facilities by providing a
$15.0 million secured revolving credit facility with a two year term. This
letter of intent also includes confirmation of Comerica's interest in
refinancing the Company's term debt with a $10.0 million secured term loan with
a five year term. On September 5, 1997, the Company obtained a commitment letter
from NBD Bank for a $15.0 million secured revolving credit facility with a
two-year term. The NBD Bank commitment letter, which provides the Company with
an alternative refinancing choice, provides for interest at a base rate equal to
either prime or LIBOR (at the option of the Company) plus a margin rate based
upon the rate of the Company's funded senior debt EBITDA ranging from 0% to
2.25%. The Company intends to restructure or refinance its existing credit
facilities on terms no less favorable than those provided in the NBD Bank
commitment letter immediately following the consummation of the Offering.
The Company has, on a pro forma combined basis, from time to time been
in violation of certain of its financial debt ratio covenants and covenants
relating to the issuance of preferred stock and the payment of preferred stock
dividends, requiring it to obtain waivers of default from its lenders. In
addition, the Company has from time to time had to negotiate extensions relating
to the payment of several of its debt obligations. As of the date of this
Prospectus, however, the Company is in compliance with all of its debt covenants
and/or has obtained waivers of default relating thereto.
The Company intends to utilize a portion of the net proceeds from the
Offering to reduce its outstanding obligations to financial institutions by
$11.3 million. See "Use of Proceeds." The additional liquidity provided by the
reduction of the Company's existing revolving debt, and the anticipated
increase in available credit facilities, combined with the proceeds from the
Offering and cash flow from operations is expected to be sufficient to meet the
Company's currently anticipated working capital and capital expenditure needs
for existing debt service and operations, including all of the Acquisitions,
for at least 12 months. There can be no assurance, however, that such funds
will not be expended prior thereto due to changes in economic conditions or
other unforeseen circumstances, requiring the Company to obtain additional
financing prior to the end of such 12-month period. In addition, the Company
intends to pursue, as part of its business strategy, future growth through
opportunistic acquisitions of assets or companies involved in the automotive
component supply industry, which acquisitions may involve the expenditure of
significant funds and managment time. Depending upon the nature, size and
timing of future acquisitions, the Company may be required to obtain additional
debt or equity financing in connection with such future acquisitions. There
can be no assurance however, that additional financing will be available to the
Company, when and if needed, on acceptable terms or at all.
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Inflation
Inflation generally affects the Company by increasing the interest
expense of floating rate indebtedness and by increasing the cost of labor,
equipment and raw materials. The Company does not believe that inflation has had
any material effect on its business over the past three years.
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BUSINESS
General
Noble is a full service, independent supplier of automotive component
assemblies and value-added services to the automotive industry. The Company's
customers include OEMs, such as GM, Chrysler, Ford (collectively, the "Big
Three") and Mitsubishi, and Tier I suppliers, such as Textron Automotive
Company, GM/Delphi and United Technologies, Inc. The Company believes that it is
one of the few Tier II suppliers to provide integrated manufacturing, design,
planning, engineering and other value-added services to the automotive market.
In addition, the Company also operates as a Tier I supplier with respect to its
Utilase operations.
The Company's operations include, among other things: (i) laser welding
of tailored blanks, laser production welding and laser cutting; (ii) automotive
component manufacturing utilizing progressive die stamping; (iii) design,
engineering and assembly of automotive glovebox latches and other automotive
component systems; (iv) painting and coating of automotive components; (v) other
value-added services such as prototyping of automotive components and die
design and construction; and (vi) assembly, machining and distribution of
components used in machine tooling.
Industry Overview
As a result of the mature and competitive nature of the automotive
industry, the world's automakers are under intense pressure to cut costs and
development times for their new products. In order to accomplish this feat,
automakers are increasingly relying on those Tier I suppliers that have the
in-house capability to design, engineer and deliver entire vehicle modules,
systems and solutions. Pricing pressure in the automotive supplier industry is
intense because most automakers wield an extraodinary amount of leverage over
their suppliers. However, management believes that systems-oriented suppliers
will have a greater ability to reduce the cost of components as they take
control of the design and engineering function. The Tier I suppliers have made
similar demands on Tier II suppliers to provide integrated systems and
sub-systems, as well as to accept more responsibility. These changing industry
relationships have resulted in a consolidation of the Tier I and Tier II
suppliers, since many of them do not have the financial resources or operational
capability to accept these increased responsibilities. Such companies are either
going out of business or selling their businesses to other Tier I and Tier II
suppliers. In addition, those Tier I and Tier II suppliers that choose to remain
in the industry are increasingly consolidating in order to achieve operating
efficiencies that will allow them to respond to these increasing demands.
Strategy
The Company's objective is to become one of the premier full service
Tier II suppliers to the automotive industry, through both internal growth and
acquisitions. The key element of the Company's strategic plan is the
identification of alternative methods to assist OEMs and Tier I suppliers in
meeting their cost reduction needs. The Company intends to implement its
strategy through the pursuit of strategic acquisitions, the delivery of
integrated component systems, technological leadership and product production
innovations, cross-selling to existing customers, and the development of
strategic alliances and joint ventures. The Company believes that by focusing on
this strategy it can continue to capitalize on the increasing opportunities for
growth within the automotive component supply industry and increase both its
sales volumes and model penetration with existing customers and its creation of
new business.
Strategic Acquisitions
The Company views the strategic acquisition of automotive suppliers
that operate in high growth niche markets, or that are strategic to the further
integration of its operations, as a fundamental part of its growth strategy. The
Company continually seeks strategic acquisition opportunities within the highly
fragmented automotive component supply business. Specifically, the Company seeks
to acquire businesses that will enable the Company to broaden its product
offerings, access new niche markets and new geographic regions, obtain
additional manufacturing capabilities and develop new customer relationships.
Since its inception in 1993, the Company has successfully integrated five
acquisitions, which have contributed to broadening its product mix. Concurrently
with the Offering, it intends to complete the two Closing Acquisitions, which
it believes will further contribute to the Company's growth by providing it with
a dominant position in a niche market and additional integration opportunities
for its existing operations. The Company believes that its extensive knowledge
of the automotive component supply industry provides it with an important
competitive advantage in identifying domestic acquisition opportunities and that
its considerable experience in integrating acquired businesses will continue to
provide it with significant growth opportunities.
Delivery of Integrated Component Systems
Management has positioned the Company to meet the demands of OEMs and
Tier I suppliers for additional product responsibility and the delivery of
integrated component systems ("Systems Approach"). The Company has identified
numerous individual components it currently produces that are suitable for
additional processing and assembly by the Company in order to produce an
integrated system for delivery to OEMs and Tier I suppliers. The Company
believes that the adoption of and focus on a Systems Approach is crucial to
achieving significant growth and increasing profitability. As an example, by
enlarging upon the Company's engineering and design capabilities, the Company
expects to promote further vertical integration of its manufacturing and
assembly operations and to increase the scope and complexity of the projects it
undertakes, thereby expanding the Company's product offerings.
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For example, the Company believes that current design, engineering and
assembly responsibilities in connection with its glovebox latch business can be
expanded to include in-house manufacturing of latch components, as well as
expansion of design, engineering, manufacturing and assembly responsibilities to
include the entire glovebox as an integrated system for insertion into an
instrument panel. In addition, a significant portion of the Company's painting
business involves the painting of steering columns and related shrouds for
GM/Delphi, which can now be expanded to include the assembly of steering columns
after painting. Further, as a result of its stamping and laser welding
capabilities, the Company has recently been able to combine the stamping of door
latch components with laser welding of such components to produce a value-added
product. With the Utilase and Final DCT Acquisitions, the Company will be able
to integrate its current production laser welding services with the laser blank
welding of Utilase and the progressive die stamping applications of DCT, to
provide additional value-added products and integrated systems.
Providing Technological Leadership and Product Innovation.
The Company takes a proactive approach to product line introduction and
expansion. The Company's team of highly talented and experienced engineers work
closely with the advance engineering teams of the OEMs and Tier I suppliers to
provide solutions and enhancements to the passenger vehicle production process
by incorporating the Company's technologies. By providing this level of service,
Management believes the Company is in a more competitive position.
Cross-Selling to Existing Customer
The Company focuses on leveraging its unique relationships with its
customers to obtain additional business by cross-selling the services of each of
its business units. For example, because Vassar's painting and coating facility
serves as a dedicated facility to GM/Delphi, Vassar has been able to leverage
its relationship with GM/Delphi to obtain additional component assembly
business. Management strongly believes that the ability to provide customers
with a full line of products and services designed to meet their increasing
demands distinguishes the Company from its competitors and provides it with a
competitive advantage.
Building Strategic Alliances/Joint Ventures
In an effort to maximize profitability and support future growth, the
Company will evaluate strategic alliances and joint ventures on an ongoing basis
and seek opportunities that allow it to expand the scope of its operations,
add sales and marketing capabilities and share capital expenditures, while
continuing to control the production quality. The Company is currently
evaluating several opportunities, which, if successful, could increase
distribution of several products. For example, the Company intends to pursue
participation in OEM sponsored minority-owned business mentoring programs.
Operations
Laser Production Welding and Cutting
The Company provides laser production welding and cutting for a variety
of automotive components. The process of laser welding involves the
concentration of a beam of light, producing energy densities of from 16 to 20
million watts per square inch, at the point where two metal pieces are to be
joined. Laser welding allows rapid weld speeds with low heat input, thus
minimizing topical distortion of the metal and resulting in ductile and formable
welds that have mechanical properties comparable to, or in some cases superior
to, the metal being welded. Laser welds provide improved visual aesthetics as
well as less likelihood of the rattling associated with multi-piece, spot-welded
assemblies. The process of laser cutting involves the same concentrated
light-beam production of energy, but uses a different wavelength and mode. A
coherent beam of single wavelength light is focused on a small area of the
metal piece to be cut, where the optical energy is converted into thermal
energy intense enough to melt and vaporize the affected area.
Some of the laser production processes performed by UPP for the Company
include the laser welding of latch strike plates for Chrysler's B-van mini-van
doors and the welding of covers onto fuel chargers as an aftermarket part. In
addition, UPP also provides laser cutting services for the reverse transmission
bands on certain Chrysler trucks and the hydroform rails for GM's Chevrolet
Corvettes.
Laser Welding of Tailored Blanks
Utilase is one of the dominant suppliers of laser welded
tailored blanks to the automotive industries. Laser welding of blanks
offers significant advantages over other blank welding technologies,
including cost, weight and safety benefits. The Company believes that
Utilase has developed a prorietary technology and production process
that permits it to produce laser welded blanks more quickly and with
higher quality and tolerance levels than its competitors. In 1995, the
UltraLight Steel Auto Body Consortium, a worldwide industry association
of steel producers, commissioned a study which concluded that laser
welded tailored blanks will play a significant role in car manufacturing
in the next decade as the automotive industry is further challenged to
produce lighter cars for better fuel economy, with enhanced safety
features and lower manufacturing costs. In addition, the study
identified 18 potential applications for laser welding of tailored
blanks per vehicle. An additional 13 potential applications have been
identified by Utilase. These 31 potential applications, if adopted by
OEMs, could provide significant levels of growth in the tailored
blanking segment of the industry. The following diagram identifies such
applications.
[Diagram of automotive components identified by the Company for
potential application of laser welded tailored blanking depicted as skeletal
vehicle structure.]
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The manufacture of conventional (non-tailored) blanks begins with the
cutting of part-specific pieces from larger coils, or rolls, of sheet metal.
These blanks are then stamped or formed into a part for ultimate spot-weld
assembly into an end product at the OEM. Conventional blanks are cut from a
single steel coil and possess a uniform thickness, strength, coating and alloy.
In many cases, a particular product requires a part to possess different
characteristics in certain areas. When conventional blanks are used, achieving
these differences requires reinforcements and additional processing or the use
of material with the required characteristic throughout the entire part. In
addition, when conventional blanks are used, blanks must be stamped separately
prior to being welded together. This results in increased design, assembly and
tooling costs, as well as increased waste associated with cutting irregularly
shaped parts for reinforcement from single sheets of steel.
Tailored blanks are combinations of flat sheet metal of varying
thickness, strength, coating and/or alloy which, when welded together prior to
stampings result in a product that possesses the desired characteristics in the
appropriate areas of the finished stampings. The use of tailored blanks in
automotive applications results in cost, weight and safety benefits. Use of
tailored blanks frequently decreases the number of dies required to produce the
finished product and eliminates the spot welds required to fasten reinforcements
to conventional blanks. As a result, tooling costs are decreased due to the
elimination of dies and manufacturing costs are decreased due to elimination of
stamping and spot-welding operations. Steel utilization is also improved as a
result of the ability to assemble smaller, irregular parts into a single
tailored blank. The Company estimates that use of tailored blanks can decrease
manufacturing scrap by as much as 30% in certain applications. In addition, by
permitting the use of varying weights of steel and eliminating the need for
reinforcements, tailored blanks can result in decreased vehicle weight and
improved gas mileage. For example, many automotive applications require the use
of zinc-coated steel, which is more expensive than uncoated steel, in order to
improve corrosion resistance. When conventional blanks are used in such
applications, coated steel must be used for an entire sub-assembly even when
only a portion of the sub-assembly requires corrosion resistance. On the other
hand, the use of tailored blanks in such applications permits the manufacturer
to limit its use of coated steel to those areas where it is specifically needed.
For each reinforcement included in a sub-assembly produced using conventional
blanks, costs are incurred for design, development, engineering, prototyping and
die tryout. The use of tailored blanks eliminates these costs and shortens the
product development cycle.
The dimensional accuracy of an automobile is a function of the fit and
finish of individual components and the associated assembly operations. Tailored
blanks improve dimensional accuracy by decreasing the number of separate
components, eliminating the need for reinforcements and decreasing required
assembly operations. This results in improved fit and finish, reduced wind noise
and a quieter ride. Because tailored blanks are stamped after welding, the welds
have higher reliability than spot welds made on conventional blanks after
stamping. Weld defects on tailored blanks, if any, are likely to become apparent
upon stamping, resulting in improved quality control. Tailored blanks can also
improve the crashworthiness ratings of automobiles since their welds are stiffer
and provide continuous load-carrying ability.
Design and Engineering
The development of new automobile models generally begins two to five
years prior to the marketing of such models to the public. The Company's
engineering staff typically works with OEM and Tier I engineers early in the
development phase to design components to meet OEM or Tier I specifications on
new or redesigned models. The Company presently offers engineering services for
all its products.
The Company designs and engineers automobile glovebox latches under the
brand name Prestolock(R). The design and engineering of a new Prestolock(R)
latch begins two to three years prior to actual production. After a new latch is
designed, the Company produces prototype latches and builds the required tooling
for production parts. The Company then contracts with manufacturers for the
various component parts of the latch and begins the assembly planning process.
Prestolock's engineers are included in the planning and design phase by
both GM and Chrysler, and remain up to date with the new body platforms under
consideration by the OEMs and Tier I instrument panel suppliers. Automotive
glovebox latches are required to comply with certain safety standards and to be
engineered to fit securely into the glovebox. Historically, the Company's
primary customer for Prestolock(R) latches has been GM, with the Company
currently supplying approximately 58% of GM's glovebox latch requirements.
Beginning in 1997, the Company also began supplying glovebox latches to Chrysler
and Management anticipates, based upon Chrysler's current production estimates,
that the Company will supply approximately 42% of Chrysler's 1998 model year
requirements.
Stamping, Painting and Assembly
The Company, through DCT, manufactures a variety of automotive
components utilizing progressive die stampings. Progressive die stamping is a
process in which steel is passed through a series of dies in a stamping press in
order to form the steel into three-dimensional parts. DCT's stamping presses
range in size from 75 tons to 800 tons, providing the flexibility to stamp
flat-rolled steel and steel blanks ranging in thickness from .028 inches to .25
inches. DCT's products are sold primarily to both OEMs and Tier I suppliers,
DCT's stamping operations also include the production of parts through extrusion
stamping, a process that involves the forcing of steel through a die opening,
by restricting movement in other directions, in order to produce a product of
uniform cross-sectional shape. DCT operates one of only six stamping facilities
approved by Chrysler to provide extrusion stampings.
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Through Vassar, the Company also provides painting and coating services
to OEMs and Tier I suppliers on automotive components consigned to the Company
for processing and re-delivery to the customer on a just-in-time basis. Since
1986, Vassar has operated as a dedicated GM/Delphi supplier, painting steering
column component parts for GM/Delphi's Saginaw Steering Division. As an
extension of its relationship with GM/Delphi, the Company also provides steering
column sequencing and shoe release and air pump assembly services.
While the Company is actively pursuing and developing additional
assembly business as part of its overall integration strategy, historically the
Company's assembly business primarily consisted of the production of glovebox
latches at Prestolock. Following Prestolock's design and engineering of a latch,
the approximately eight to 12 component parts are contract manufactured on a
competitive bid basis. These components are then delivered to Prestlock for
assembly into a completed glovebox latch assembly.
The Company also provides other value-added services such as
prototyping and mold design and construction. The Company also designs,
engineers and produces precision tools and dies for use in its own stamping
operations.
Distribution of Tooling Components
The Company, through Monroe, distributes tooling components, including
adjustable handles, hand wheels, plastic knobs, levers, handles, hydraulic
clamps, drills, jigs and permanent magnets to non-automotive customers. The
Company's primary tooling component product line is Kipp(R) brand standard and
heavy duty adjustable handles, representing approximately one-half of its
tooling component sales. The Company also distributes Elesa(R) brand high
tensile plastic hand wheels, knobs, handles and levers, representing
approximately one-quarter of tooling component sales. The other products
distributed through Monroe are purchased from a variety of suppliers, none of
which represents more than 10% of the Company's tooling component sales.
Although most tooling component products are sold off the shelf, the Company
does perform some light machining of parts for custom orders.
The Company is the primary North American distributor for Kipp(R)
products and holds the U.S. patent rights to Kipp(R) adjustable handles. The
Company also holds non-exclusive rights to distribute Elesa(R) products
throughout North America. Kipp(R) is based in Germany and Elesa(R) is based in
Italy. Both product lines have international reputations for quality in the
engineering community. The Company has recently been successful in challenging a
patent infringement, reestablishing its position as the sole United States
source for certain Kipp(R) adjustable handles. The defendant has filed an
appeal. See "Legal Proceedings" below.
Marketing and Sales
Automotive Supply
Historically, a number of independent sales representatives were
engaged in connection with the Company's operations. As a result of the
Acquisitions, the Company is in the process of consolidating sales
representation in-house (i.e., within Skandy) in order to provide a more focused
sales effort with lower costs. The Company's sales representatives and project
managers have experience in representing both Tier I and Tier II automotive
suppliers. The Company's in-house sales force (excluding Utilase) currently
consists of five full-time sales representatives, although expansion to
approximately eight full-time salespersons is anticipated within the next 12
months. Management believes that the Company's in-house sales team provides it
with significant marketing advantages. The Company's salesmen and project
managers are involved in product planning and spend a significant amount of time
consulting with OEM engineers in order to facilitate the integration of the
Company's products into future automotive models. Prior to its acquisition by
the Company, Skandy acted as an independent sales representative for a number of
automotive suppliers other than the Company and its affiliates, and it continues
to do so. Additional non-affiliate sale representation relationships may be
pursued in the future for product lines that are not competitive with those of
the Company.
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Due to the product specific nature of Utilase's sales presentations,
marketing efforts for Utilase are currently handled by a separate, dedicated
in-house sales force. Orders for tailored blanks are typically placed by OEMs
directly with producers of coiled steel. Further processing steps, such as
blanking, are done either by the steel producer or by an independent processor
sub-contracted by the steel producer. As part of its product line expansion
strategy, the Company plans on offering blanking and other services currently
provided by independent processers. Project managers at Utilase work closely
with OEMs during the design phase to promote the specification of Utilase as the
processor prior to the placing of orders by OEMs with steel producers.
Relationships with domestic steel producers are also maintained in order to
obtain sub-contracting work for which no processor has been specified by an OEM.
Working with OEM product development teams from the early stages of new body
platform concepts, the Company intends to increase efforts to encourage the
design of laser-welded tailored blanks into new platforms and vehicles.
33
<PAGE>
Tooling Components
The Company's tooling component products are sold through catalogs as
well as through a network of regional distributors of Kipp(R) and Elesa(R)
products. There are approximately 78 wholesale distributors located throughout
the United States offering the Company's products. These distributors sell to
industrial manufacturing companies such as GM, Chrysler, Caterpillar Inc. and
Deere & Company. In addition, there are three distributors of the Company's
products in Canada and one in Mexico.
Customers
Sales to the automotive industry constitute a substantial portion of
the Company's net sales. The Company's remaining sales are primarily to the
tooling component industry. In 1996, sales to the automotive industry accounted
for approximately 68.5% of the consolidated net sales of the Company (89.5% of
its pro forma combined net sales giving effect to all of the Acquisitions) with
GM, Chrysler and Ford, including their respective Tier I suppliers, accounting
for substantially all of the Company's historical and pro forma net sales to the
automotive industry.
The Company works closely with its major customers during the design
and development stages of their products. The Company believes that its
commitment to quality, service and just-in-time delivery has enabled it to build
and maintain strong and stable customer relationships.
Suppliers and Raw Materials
The raw materials required for the Company's operations include steel,
paint, plastic and gases such as carbon dioxide and argon. The Company obtains
its raw materials from a variety of suppliers. With the exception of Monroe's
purchase of tooling components from Kipp(R) and Elesa(R), the Company does not
believe that it is dependent upon any of its suppliers despite concentration of
purchasing of certain materials from a few sources. For example, approximately
65% of the paint used at Vassar is purchased from a single supplier, although
other suppliers of the same or similar materials are readily available.
Management believes that volume purchasing from a single source can provide
pricing advantages. The Company typically purchases its raw materials on a
purchase order basis as needed and has generally been able to obtain adequate
supplies of raw materials for its operations.
Competition
Both the automotive component supply and tooling component industries
are highly competitive. Competition in the sale of all of the Company's products
is primarily based on engineering, product design, process capability, quality,
cost, delivery and responsiveness. The Company believes that its performance
record in these respects places it in a strong competitive position. Many of the
Company's competitors are larger and have greater financial and other resources
than the Company. In addition, with respect to certain of its products, some of
the Company's competitors, such as GM/Delphi, are divisions of its OEM
customers. There can be no assurance that the Company's products will be able to
compete successfully with the products of these other companies.
Environmental Matters
The Company is subject to environmental laws and regulations concerning
emissions to the air, discharges to waterways, and generation, handling,
storage, transportation, treatment and disposal of waste materials. The Company
is also subject to other Federal and state laws and regulations regarding health
and safety matters. Each of the Company's production facilities has permits and
licenses allowing and regulating air emissions and water discharges. The Company
believes that it is currently in compliance with applicable environmental and
health and safety laws and regulations, however, these laws and regulations are
constantly evolving and it is impossible to predict whether compliance with
these laws and regulations may have a material adverse effect on the Company in
the future.
34
<PAGE>
Patents and Trademarks
The Company holds the registered U.S. trademarks "Presto" and
"Prestolock" used in connection with its glovebox latch business. The Company
also holds U.S. Patent No. 4,598,614 entitled "Hand Lever Turning Mechanism"
which provides the Company with the exclusive right to distribute certain
Kipp(R) brand adjustable handles, which incorporate such technology, in the
United States. The Company's rights under this patent were recently upheld in
United States District Court in an action commenced by the Company against an
entity which was found by the Court to be infringing upon the patent through the
sale of similar hand levers. The defendant has filed an appeal. See "Legal
Proceedings." Utilase has proprietary technology and equipment that constitute
trade secrets which it has chosen not to register in order to avoid public
disclosure thereof.
Seasonality
The Company's business is largely dependent upon the automotive
industry, which is highly cyclical and is dependent on consumer spending.
Economic factors adversely affecting automotive production and consumer spending
could adversely impact the Company. In addition, the automotive component supply
industry is somewhat seasonal. Increased revenues and operating income are
generally experienced during the second calendar quarter as a result of the
automotive industry's spring selling season, the peak sales and production
period of the year. Decreased revenues and operating income are generally
experienced during July and December of each year as a result of scheduled OEM
plant shut downs for vacations and holidays, as well as changeovers in
production lines for the new model year. The Company's historical results of
operations do not reflect cyclical or seasonal fluctuations in revenues and
operating income because the Acquisitions have resulted in a growth trend
through successive periods which has masked the effect of any such fluctuations.
Employees
As of August 31, 1997, the Company, including DCT and Utilase, had
approximately 484 employees, including 398 production employees, 45 sales and
clerical employees and 41 management and administrative employees. The foregoing
does not include the approximately 68 production workers at Prestolock and 50
production workers at Utilase, all of whom are leased workers. Upon consummation
of the Utilase Acquisition, the Company intends to discontinue this leasing
arrangement for the 50 production workers at Utilase. It is anticipated that the
subject workers will be hired as employees of the Company on similar terms. All
of the Company's operations are non-union except for Vassar, whose production
workers are represented by the (AFL-CIO). On August 1, 1997, the AFL-CIO workers
went out on strike. Management estimates that increased costs relating to the
strike were approximately $177,000 through August 31, 1997 on a pre-tax basis
due to increased overtime, labor variances, containment by the customer and
security measures. There has been no other recent history of labor strikes or
unrest at any of the Company's facilities. The Company believes that its
relations with its employees are satisfactory. In addition, management believes
that the available labor force in the geographic areas where its facilities are
located is sufficient to provide the workers required for the Company's
anticipated expansion over the next 12 months.
Legal Proceedings
The Company faces an inherent business risk of exposure to product
liability claims in the event that the failure of one of its products results in
personal injury or death, and there can be no assurance that the Company will
not experience any material product liability losses in the future. In addition,
if any of the Company's products prove to be defective, the Company may be
required to participate in a recall involving such products. The Company
maintains insurance against product liability claims, but there can be no
assurance that such coverage will be adequate for liabilities ultimately
incurred or that such insurance will continue to be available to the Company on
acceptable terms or at all. A successful claim brought against the Company in
excess of available insurance coverage or a requirement to participate in any
product recall may have a material adverse effect on the Company.
On December 4, 1994, Monroe filed an action in United States District
Court, Eastern District of Michigan, against J.W. Winco, Inc. for infringement
of Monroe's U.S. Patent for a hand lever turning mechanism, which patent
protects Monroe's exclusive right to distribute certain Kipp(R) brand adjustable
handles in the United States. On June 17, 1996, a judgment was entered in favor
of Monroe on the issue of infringement. On August 13, 1997, the United States
Court of Appeals for the Federal Circuit affirmed the trial court's finding of
infringement with respect to one of the litigated parts but overturned the
finding of infringement with respect to the second part. Monroe has appealed the
Court's decision. The Company does not believe that an adverse decision on the
appeal would have a material adverse effect on the Company.
On December 10, 1995, Utilase filed an action in Wayne County Circuit
Court in the State of Michigan against Mark Williamson, a former employee of
Utilase, for misappropriation of trade secrets, breach of confidentiality and
non-compete agreements and related claims. The action was subsequently removed
to federal court. On May 6, 1997, Utilase obtained an injunction in United
States District Court, Eastern District of Michigan, prohibiting Mr. Williamson
from becoming employed in any capacity without establishing to the satisfaction
of the court that the proposed employment does not involve laser blank welding.
On May 6, 1997, Utilase filed a related action in United States District Court,
Eastern District of Michigan, against Olympic Steel, Inc. for breach of
contract, misappropriation of trade secrets, and tortuous interference with
contract. Following the Utilase Acquisition, the former principal shareholder of
Utilase, which is controlled by Messrs. Henderson and Stone, two nominees for
director of the Company, will continue to have the right to control the actions
of Utilase with respect to the litigation, including decisions with respect to
whether to bring actions against additional parties, subject to the requirement
of the Company's reasonable consent for any settlement. Any cash or property
recovered in connection with the litigation will be divided equally with such
former principal shareholder of Utilase and the Company's portion will be
deposited into a sinking fund to be applied against payment of the Utilase Notes
delivered by the Company in connection with the Utilase Acquisition. See
"Certain Transactions."
35
<PAGE>
From time to time, the Company is involved in lawsuits arising in the
ordinary course of its business. In addition, the Company is a party to certain
lawsuits arising in connection with the Acquisitions. In management's opinion,
the outcome of such pending matters will not have a material adverse effect on
the Company's business, financial condition or results of operations. See
"Certain Transactions."
36
<PAGE>
Properties
All of the Company's current operations, with the exception of one
assembly plant, are conducted at facilities located in the greater Detroit area
of Michigan. The Company's existing facilities are adequate for current
operations. Management currently anticipates that additional facilities will be
leased as needed and that sufficient facilities for the Company's needs are
readily available. See "Management Discussion and Analysis of Financial
Condition and Results of Operation - Liquidity and Capital Resources." The
following is a summary of the location, ownership status, size and function of
each of the Company's facilities:
<TABLE>
<CAPTION>
Approximate
Owned or Size
Facility Location Leased (sq.ft.) Primary Use
- ----------------- ------------ ------------- --------------
<S> <C> <C> <C>
Bloomfield Hills Pkwy, Leased 10,145 Executive Offices, Sales and Engineering
Bloomfield Hills, Michigan
Enterprise Drive, Vassar, Michigan Owned(1) 30,000 Painting and Assembly
Sherman Street, Vassar, Michigan Leased 14,600 Painting and Assembly
El Paso, Texas Leased 13,700 Prestolock(R)Assembly
34683 Centaur, Clinton Township, Michigan Leased(2) 9,250 Warehouse
34660 Centaur, Clinton Township, Michigan Leased(2) 54,470 Stamping
34706 Centaur, Clinton Township, Michigan Leased(2) 12,692 Warehouse and Engineering
34728 Centaur, Clinton Township, Michigan Leased(2) 13,675 Warehouse
34635 Nova, Mt. Clemens, Michigan Leased(2) 12,200 Die Maintenance
Woodward Avenue, Bloomfield Hills, Michigan Leased 1,417 Tooling Component Sales
Harbor Springs, Michigan Owned(3) 9,600 Tooling Component Warehouse Distribution Facility
20530 Hoover Road, Detroit, Michigan Leased(4) 50,937 Laser Welding and Tailored Blanks
20201 Hoover Road, Detroit, Michigan Leased(4) 11,110 Utilase Production Process
20101 Hoover Road, Detroit, Michigan Leased(4) 210,000 Laser Welding and Tailored Blanks
Brantford, Ontario, Canada Leased 89,330 Laser Welding and Tailored Blanks
</TABLE>
- ------------
(1) Purchased pursuant to a Land Contract dated October 26, 1994 from Cass
River Investment Company, an entity affiliated with a former controlling
shareholder of Vassar. See "Certain Transactions."
(2) Each of these facilities is leased by DCT from Competitive Technologies
Investment Company which is controlled by affiliates of the Company. The
Company will acquire ownership of this landlord entity concurrently with
the consummation of its purchase of the balance of the outstanding capital
stock of DCT. See "Certain Transactions." A portion of the 34683 Centaur
facility is sublet to a local law enforcement agency for storage purposes.
(3) Purchased pursuant to a Land Contract dated April 30, 1996 from the former
controlling shareholder of Monroe who is currently an affiliate of the
Company, for an aggregate purchase price of $500,000 payable in monthly
installments of interest only at the rate of 12% per annum with all
outstanding principal and accrued interest due April 30, 1998. See "Certain
Transactions."
(4) The Hoover Road facilities are leased from entities controlled by an
affiliate of the Company. See "Certain Transactions."
37
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information concerning each
director, nominee for director and executive officer of the Company. Upon
consummation of the Offering, James Bronce Henderson, III, Peter Sugar, David C.
Stone and Anthony R. Tersigni have agreed to become directors of the Company.
Messrs. Richard V. Balgenorth and Michael C. Azar will resign as directors, but
remain as executive officers.
<TABLE>
<CAPTION>
Director
Name Age Position Since
- ------------------ ------- ---------------------------------- ----------
<S> <C> <C> <C>
Robert J. Skandalaris 44 President, Chief Executive Officer and Director 1993
Christopher L. Morin 38 Chief Operating Officer 1997
Richard V. Balgenorth 49 Treasurer, Chief Financial Officer and Director 1996
Michael C. Azar 33 General Counsel, Secretary and Director 1996
James Bronce Henderson, III 46 Director Nominee (Chairman) --
Peter Sugar 51 Director Nominee --
David C. Stone 49 Director Nominee --
Anthony R. Tersigni 47 Director Nominee --
</TABLE>
Robert J. Skandalaris the Company's founder, currently serves as
President, Chief Executive Officer and Director. Prior to founding the Company
in 1993, Mr. Skandalaris was Vice Chairman and a shareholder of The Oxford
Investment Group, Inc., a Michigan-based merchant banking firm. From 1987 until
its sale in 1993, Mr. Skandalaris served as Chairman and Chief Executive Officer
of Acorn Asset Management, a privately held investment advisory firm. Mr.
Skandalaris began his career as a Certified Public Accountant with the national
accounting firm of Touche Ross & Co. Mr. Skandalaris also serves as a Manager
of Twenty-First Century Advisors, LLC, an investment fund general partner, which
acts as the general partner of two funds, one of which, Twenty-First Century
Advisor Offshore Fund, LP, is publicly traded on the Irish Stock Exchange. In
addition, since 1995 Mr. Skandalaris has served as a Manager of Invest L'Inc.
Partners, LLC, a consulting firm, and from 1994 to March, 1997, Mr. Skandalaris
served as the Chairman of River Capital, Inc., an investment banking firm.
Christopher L. Morin joined the Company on June 1, 1997 as its Chief
Operating Officer. From July 1994 to June 1997, Mr. Morin was the Chief
Operating Officer of Talon Automotive LLC, a privately held automotive supplier
with over $200 million in annual revenues. Prior to joining Talon Automotive,
LLC in 1994, Mr. Morin was the Vice President of operations for Irvin
Automotive, an operating division of Takata North America. Mr. Morin began his
career as a production supervisor and has held management positions in
materials, quality, sales and marketing and operations.
Richard V. Balgenorth joined the Company on May 1, 1996 as its Chief
Financial Officer and was elected to the Board of Directors in December 1996.
From 1990 to 1996, Mr. Balgenorth was a member of the Mergers and Acquisitions
Group in NBD Bank's Capital Markets Division. Mr. Balgenorth began his career as
a Certified Public Accountant with the national accounting firm of Arthur
Andersen, LLP.
Michael C. Azar joined the Company in November 1996 as its General
Counsel and Secretary and was elected to the Board of Directors in December
1996. Prior to joining the Company, Mr. Azar was employed as General Counsel to
River Capital, Inc., an investment banking firm, from January through November
1996. From 1988 to 1995, Mr. Azar practiced law with the firm of Mason,
Steinhardt, Jacobs and Perlman in Southfield, Michigan.
James Bronce Henderson III will be appointed as Chairman of the
Company's Board of Directors upon consummation of the Offering. Since 1989, Mr.
Henderson has served as the Chairman and Chief Executive Officer of DCT, Inc.,
the privately held parent company of Utilase and the majority owner of DCT prior
to their acquisitions by the Company in connection with the Closing
Acquisitions. Mr. Henderson has served on the Chrysler CEO Round Table since
July 1995 and is a past chairman of the Michigan/Japan Foundation. Mr. Henderson
will serve as a member of the Board of Directors pursuant to an agreement
entered into in connection with the DCT Acquisition. See "Certain Transactions."
Peter Sugar will be appointed to the Board of Directors upon
consummation of the Offering. Mr. Sugar is an attorney specializing in corporate
law and mergers and acquisitions. From 1995 to the present, and from 1970 to
1987, Mr. Sugar has practiced with the law firm of Jaffe, Raitt, Heuer & Weiss,
P.C. in Detroit, Michigan. From 1992 to 1997, Mr. Sugar was employed as
Executive Vice President of International Voyager Media, L.P., a publishing and
media company. From 1987 to 1992, Mr. Sugar was employed as President of Emptor
Equities, Inc., a private investment and consulting company.
David C. Stone will be appointed to the Board of Directors upon
consummation of the Offering. Mr. Stone is an attorney specializing in
commercial transactions. From 1989 to the present, Mr. Stone has practiced with
the law firm of Stone, Biber & O'Toole, P.C. in Troy, Michigan. Since 1990, Mr.
Stone has served in various management positions with DCT, Inc. and currently
serves as Vice Chairman, Secretary and a member of the Board of Directors of
DCT, Inc.
38
<PAGE>
Anthony R. Tersigni will be appointed to the Board of Directors upon
consummation of the Offering. Dr. Tersigni is the President and Chief Executive
Officer of St. John Health System, an integrated health delivery system
headquartered in Detroit, Michigan. Prior to joining St. John Health System in
1995, Dr. Tersigni was President and Chief Executive Officer of Oakland General
Health Systems, Inc., in Madison Heights, Michigan from 1987 through 1995. Dr.
Tersigni received his doctorate in Organizational Development from Western
Michigan University in 1992.
Directors are elected to serve until the next annual meeting of
shareholders or until a successor is duly elected and qualified. Executive
officers are duly elected by the Board of Directors to serve until their
respective successors are elected and qualified.
Each of the Company's subsidiaries maintains its own board of directors
which oversees operational issues at each respective subsidiary. These boards of
directors consist of from five to seven members, with the president of one of
the Company's other subsidiaries serving as the chairman. Outside directors are
included as deemed appropriate by the management and chairman of each
subsidiary.
Committees of the Board of Directors
Audit Committee
Promptly following the consummation of the Offering, the Board of
Directors will establish an Audit Committee comprised of Messrs. Peter Sugar,
David C. Stone, and Anthony R. Tersigni, all of whom will be independent
directors. The Audit Committee will make recommendations concerning the
engagement of independent public accountants, review with the independent public
accountants the plans of the audit engagement, approve professional services
provided by the independent accountants, review the independence of the
independent accountants and review the adequacy of the Company's internal
accounting controls.
Compensation Committee
Promptly following the consummation of the Offering, the Board of
Directors will establish a Compensation Committee which will be comprised solely
of independent directors. The Compensation Committee will establish compensation
policies and determine compensation for the Company's and each of its
subsidiaries' executive officers in addition to administering the Company's 1997
Stock Option Plan, described elsewhere herein.
Compensation of Executive Officers and Directors
The following table sets forth the total compensation earned by the Chief
Executive Officer and the only other executive officer who received compensation
in excess of $100,000 during the fiscal year ended December 31, 1996, for
services rendered to the Company in all capacities during such year.
Summary Compensation Table(1)
--------------------------------------------
Restricted
Name and Principal Position at Stock
December 31, 1996 Year Salary Bonus Awards
- ------------------------------ ------- ------- --------- -----------
Robert J. Skandalaris......... 1996 $ 94,000 $960,000(2) --
President, Chief Executive
Officer and Director......... --
Mark A. Davis................. 1996 $112,400 -- $32,000(4)
Former President, General
Counsel and Director(3)
- ------------------
(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) Mr. Skandalaris has agreed to forego any bonus for the year ended December
31, 1997. See " - Employment Agreements."
(3) Mr. Davis served as an officer and director of Noble from July 1996 to
October 1996. Prior thereto, Mr. Davis was employed as an officer of
Prestolock from January 1996 to July 1996. Compensation set forth in the
table includes Mr. Davis' salaries at Prestolock and Noble.
(4) Represents the book value of shares of Common Stock issued to Mr. Davis on
January 1, 1996. These shares were subsequently repurchased from Mr. Davis
when he left the Company in October 1996 by Robert J. Skandalaris, as
assignee of the Company's right to repurchase pursuant to Mr. Davis'
Shareholder's Agreement with the Company. See "Certain Transactions."
39
<PAGE>
Employment Agreements
The Company entered into an Employment Agreement (the "Employment
Agreement") with Robert J. Skandalaris, its President and Chief Executive
Officer, dated April 2, 1997. The Employment Agreement provides for an initial
term of three years, with an unlimited number of successive three-year renewals
subject to the election by either party not to renew the Employment Agreement.
The Employment Agreement provides for a base salary of $225,000 per annum
commencing May 1, 1997 and continuing for the remainder of the term of
employment. Mr. Skandalaris is also entitled to an incentive bonus for each
fiscal year in an amount to be determined by the Compensation Committee of the
Board (other than for 1997, for which year Mr. Skandalaris has agreed to forgo
any bonus) as well as to participate in any executive bonus or other incentive
compensation program adopted by the Company. In the event that Mr. Skandalaris'
employment is terminated by the Company, without cause, or by reason of his
death or disability, or in the event that the Employment Agreement is not
renewed, the Company is obligated to pay to Mr. Skandalaris, as severance and/or
liquidated damages, an amount equal to three times his annual base salary at the
time of termination plus any incentive bonus due under the Employment Agreement.
Prior to April 1, 1997, the Company did not have an employment agreement with
Robert J. Skandalaris. In fiscal 1996, Mr. Skandalaris received a base salary of
$94,000 and bonus compensation of $960,000.
Utilase has an employment agreement with its President, John K. Baysore
which was entered into on April 7, 1997 in contemplation of the Utilase
Acquisition. Mr. Baysore's employment agreement has a term of three years and
provides for an initial base salary of $175,000 per annum, with increases to be
determined by Utilase's board of directors. Mr. Baysore is eligible to receive
annual bonus awards as follows: (i) from April 7, 1997 to December 31, 1997, 8%
of the excess of Utilase's net income over $1.0 million, (ii) for calendar year
1998, 4.5% of the excess of Utilase's net income over $2.5 million; and (iii)
for calendar 1999, 2.25% of the excess of Utilase's net income over $6.0
million. If Mr. Baysore's employment is terminated by Utilase without cause, he
is entitled to a lump sum severance payment equal to one time his annual base
salary. Mr. Baysore's employment agreement also contains a covenant not to
compete for the term of his employment agreement and for a period of three years
thereafter, for which Mr. Baysore shall receive $200,000 upon closing of the
Utilase Acquisition out of the proceeds of the Offering. See "Certain
Transactions."
Board of Directors
Directors who are employees of the Company receive no compensation, as
such, for their service as members of the Board. Directors who are not employees
of the Company receive an attendance fee of $1,000 for each Board meeting or
committee meeting attended in person by that director and $250 for each
telephonic Board meeting or committee meeting in which such director
participated; however, fees for in-person meetings of the Board and committees
may not exceed $1,000 per day. All Directors are reimbursed for expenses
incurred in connection with attendance at meetings.
Stock Option Plan
The Company intends to adopt the 1997 Stock Option Plan (the "Option
Plan") effective upon consummation of the Offering. The Option Plan provides for
the grant to employees, officers, directors, consultants and independent
contractors of non-qualified stock options as well as for the grant to employees
of stock options that qualify as incentive stock options under Section 422 of
the Internal Revenue Code of 1986 (the "Code"). The Option Plan has a 10 year
term. The purpose of the Option Plan is to enable the Company to attract and
retain qualified persons as employees, officers and directors and others whose
services are required by the Company, and to motivate such persons by providing
them with an equity participation in the Company. Under the Option Plan, 700,000
shares of the Company's Common Stock are reserved for issuance, subject to
adjustment upon occurrence of certain events affecting the capitalization of the
Company.
The Option Plan will be administered by the Compensation Committee of
the Board of Directors which has, subject to specified limitations, the full
authority to grant options and establish the terms and conditions for vesting
and exercise thereof. The exercise price of incentive stock options granted
under the Option Plan is required to be no less than the fair market value of
the Common Stock on the date of grant (110% in the case of a greater than 10%
shareholder). The exercise price of non-qualified stock options is required to
be no less than 85% of the fair market value of the Common Stock on the date of
grant. Options may be granted for terms of up to 10 years (5 years in the case
of incentive stock options granted to greater than 10% shareholders). No
optionee may be granted incentive stock options such that the fair market value
of the options which first become exercisable in any one calendar year exceeds
$100,000. If an optionee ceases to be employed by, or ceases to have a
relationship with the Company, such optionee's options expire six months after
termination of the employment or consulting relationship by reason of death, one
year after termination by reason of permanent disability, immediately upon
termination for cause and three months after termination for any other reason.
In order to exercise an option granted under the Option Plan, the
optionee must pay the full exercise price of the option with respect to the
shares being purchased. Payment may be made either (i) in cash, (ii) at the
discretion of the Committee, by delivering shares of Common Stock already owned
by the optionee that have a fair market value equal to the applicable exercise
price or (iii) in the form of such other consideration as may be determined by
the Committee and permitted by applicable law.
40
<PAGE>
Subject to the foregoing, the Committee has broad discretion to
describe the terms and conditions applicable to options granted under the Option
Plan. The Committee may at any time discontinue granting options under the
Option Plan or otherwise suspend, amend or terminate the Option Plan and may,
with the consent of an optionee, make such modification of the terms and
conditions of such optionee's option as the Committee shall deem advisable.
However, the Committee has no authority to make any amendment or modifications
to the Option Plan or any outstanding option which would (i) increase the
maximum number of shares which may be purchased pursuant to options granted
under the Option Plan, either in the aggregate or by any optionee, except in
connection with certain antidilution adjustments, (ii) change the designation of
the class of employees eligible to receive qualified options, (iii) extend the
term of the Option Plan or the maximum option period thereunder, (iv) decrease
the minimum qualified option price or permit reductions of the price at which
shares may be purchased for qualified options granted under the 1997 Plan,
except in connection with certain antidilution adjustments, or (v) cause
qualified stock options issued under the Option Plan to fail to meet the
requirements of incentive stock options under Section 422 of the Code. Any such
amendment or modification shall be effective immediately, subject to shareholder
approval thereof within 12 months before or after the effective date. No option
may be granted during any suspension or after termination of the Option Plan.
The Option Plan is designed to meet the requirements of an incentive
stock option plan as defined in Code Section 422. As a result, an optionee will
realize no taxable income, for federal income tax purposes, upon either the
grant of an incentive stock option under the Option Plan or its exercise. If no
disposition of the shares acquired upon exercise is made by the optionee within
two years from the date of grant or within one year from the date the shares are
transferred to the optionee, any gain realized upon the subsequent sale of the
shares will be taxable as a capital gain. In such case, the Company will be
entitled to no deduction for federal income tax purposes in connection with
either the grant or the exercise of the option. If, however, the optionee
disposes of the shares within either of the periods mentioned above, the
optionee will realize earned income in an amount equal to the excess of the fair
market value of the shares on the date of exercise (or the amount realized on
disposition if less) over the exercise price, and the Company will be allowed a
deduction for a corresponding amount.
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 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 a director or
officer, or who at the request of the Board of Directors of the Company may
serve or at any time has served as director or officer of another corporation or
enterprise, and such person's respective heirs, administrators, successors and
assigns, against any and all expenses, including judgments, attorneys' 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 such person is made a party,
or are a party, or which may be asserted against them by reason of being or
having been a director or officer of the Company or any such other corporation
or enterprise, if such person 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 such person's conduct was not
unlawful. Such indemnification shall be in addition to any other rights to which
those indemnified may be entitled under any law, bylaw, 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, the Articles of Incorporation do not eliminate or limit the liability
of a director for any of the following: (i) breach of the director's duty of
loyalty to the Company or its shareholders; (ii) acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law;
(iii) a transaction from which the director derives an improper personal
benefit; (iv) making an unlawful loan to a director, officer or employee of the
Company; and (v) 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.
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Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company 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.
PRINCIPAL SHAREHOLDERS
The following table sets forth as of the date of this Prospectus and as
adjusted to reflect the sale of the 3,300,000 shares offered hereby, certain
information known to the Company concerning the beneficial ownership of the
Common Stock by (i) each person known by the Company to own more than 5% of the
Common Stock; (ii) each director of the Company and each person who will become
a director of the Company immediately following the consummation of the
Offering; (iii) each officer of the Company named in the Summary Compensation
Table; and (iv) all officers and directors of the Company as a group. Except as
otherwise indicated, each shareholder listed below has sole voting and
investment power with respect to the shares beneficially owned by such person.
Percentage of Outstanding
Shares Beneficially Owned
Name and Address of Number of Shares -------------------------
Beneficial Owner Beneficially Owned Shares % Total
- ------------------- ------------------- ---------- ---------
Robert J. Skandalaris(1)..... 3,162,994(2) 80.59% 43.78%
Daniel J. Brunell(1)......... 200,528 5.11% 2.78%
Richard G. Skandalaris(1).... 233,950 5.96% 3.24%
Richard V. Balgenorth........ 83,554(3) 2.13% 1.16%
Michael C. Azar.............. 40,106(3) 1.02% 0.56%
James Bronce Henderson, III.. 133,686(3) 3.41% 1.85%
Peter Sugar.................. -- 0.00% 0.00%
David C. Stone............... 167,107 4.26% 2.31%
James D. Skandalaris(1)...... 200,528(3) 5.11% 2.78%
All officers and directors as
a group (six persons after
the Offering)............... 3,587,447 91.40% 49.65%
- -----------------
(1) The addresses of these individuals are as follows: Robert J. Skandalaris,
James D. Skandalaris, Daniel J. Brunell and Richard G. Skandalaris - 33
Bloomfield Hills Parkway, Suite 155, Bloomfield Hills, Michigan 48304;
David C. Stone - 2701 Troy Center Drive, Suite 400, Troy, Michigan 48084.
(2) Includes 150,396 shares of Common Stock held by Robert J. Skandalaris as
custodian for his three minor children; 534,742 shares of Common Stock over
which Mr. Skandalaris exercises voting power pursuant to certain Voting
Agreements and Powers of Attorney; and 64,838 shares of Common Stock owned
by Twenty-First Century Off-Shore Fund, Ltd., a Bahamian open-ended
corporation, an investment fund the majority shareholder of which is a
limited liability company in which Mr. Skandalaris holds a 31% membership
interest. See "Certain Transactions."
(3) Represents shares of Common Stock which, although owned by the holder
indicated, are also included in those beneficially owned by Mr. Robert
Skandalaris, as he has sole voting power with respect to these shares
pursuant to a Voting Agreement and Power of Attorney.
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CERTAIN TRANSACTIONS
Prestolock Acquisition
On February 25, 1994, Prestolock acquired the assets of Presto Lock,
Inc. ("PLI") for $750,000 in cash. The assets were purchased from Midlantic
National Bank, which had acquired the PLI assets as the result of a foreclosure.
At the time of the Prestolock Acquisition, Prestolock was owned by: Robert J.
Skandalaris, the President, Chief Executive Officer, principal shareholder and a
director of the Company; Daniel J. Brunell, the President of Vassar and a
shareholder of the Company; and Richard G. Skandalaris, the President of
Prestolock, a shareholder of the Company and the brother of Robert J.
Skandalaris. PLI was not an affiliate of Prestolock. In July 1994, Prestolock
sold a portion of the acquired assets (the padlock division assets) to The
Eastern Company ("Eastern") resulting in cash proceeds to Prestolock of
$500,000. Prestolock sold these non-automotive assets because they were, in
management's opinion, not strategic to its business plan. Prestolock also
entered into a Sales Service Consulting Agreement with Eastern which provides
that Prestolock will provide up to 20 hours per month of consulting services in
exchange for an annual royalty equal to 3% of Eastern's gross sales of certain
non-automotive padlock products. The Sales Service Consulting Agreement expires
on December 31, 2000. Prestolock received $42,501 and $47,022 in fees from
Eastern for services rendered in 1995 and 1996, respectively. On January 1,
1996, the Company entered into an agreement with the Prestolock shareholders
whereby the Company acquired all of the outstanding shares of Prestolock in
exchange for 2,673,704 shares of Common Stock.
Vassar Acquisition
Effective January 1, 1996, the Company completed the acquisition of all
of the outstanding shares of Vassar for aggregate consideration of $2.0 million,
including a stock purchase price of $200,000 paid in cash and consulting and
non-competition fees aggregating $1.8 million payable to six former Vassar
shareholders, including Christan Frampton, the current Treasurer of Vassar and
James Lamb, a current director of Vassar. These consulting agreements provide
for 24 monthly payments to such former shareholders in the aggregate monthly
amount of $25,000 beginning in January 1996, followed by 60 monthly payments in
the aggregate monthly amount of $20,000. The Company's obligations pursuant to
the consulting agreements are secured by the equipment and fixtures of Vassar.
The selling shareholders of Vassar retained an option to repurchase 25% of the
Common Stock of Vassar for $1, which option expires when the Company's
obligations under the consulting agreements are discharged. In July 1996, Ms.
Frampton surrendered her consulting agreement in exchange for 7,687 shares of
Common Stock. In January 1997, the consulting agreements with two of the former
Vassar shareholders, including James Lamb, which together represented 20% of the
aggregate consulting fee commitment, were amended to provide for the Company's
payment of an aggregate of $120,000 to such persons within 30 days of the
consummation of the Offering in full satisfaction of its obligations thereunder.
The Company intends to utilize $120,000 of the net proceeds of the Offering to
satisfy such arrangements. In March 1997, two former Vassar shareholders,
including Eugene Oldford, the former controlling shareholder of Vassar, filed a
lawsuit against the Company for payments allegedly owed pursuant to their
consulting agreements. The Company's position is that it is entitled to cease
payments under these consulting agreements due to the breach by these former
shareholders of their covenants not to compete. This litigation is not expected
to have a material impact on the business of the Company. In connection with the
Vassar Acquisition, the Company also acquired an approximately 30,000 square
foot painting and assembly facility subject to an October 26, 1994 land contract
with Cass River Investment Company, an entity affiliated with Mr. Oldford,
providing for an aggregate purchase price of $600,000, payable in monthly
installments of $7,280 over a term of 10 years and bearing interest at a rate of
8% per annum.
Monroe Acquisition
Effective January 1, 1996, the Company completed the Monroe
Acquisition, pursuant to which it acquired all of the outstanding shares of
Monroe from Richard J. Reason, individually and as trustee of a revocable trust,
and from an irrevocable trust for the benefit of Mr. Reason's children, of which
David C. Stone is the trustee. The aggregate consideration was $6.85 million,
including (i) a stock purchase price of $6.35 million, payable in installments
over 16 months, and (ii) a real estate purchase price of $500,000, payable
pursuant to a land contract dated April 30, 1996, which provides for monthly
interest payments at the rate of 12% per annum, and a principal balloon payment
on April 30, 1998. The obligations of the Company under the land contract are
guaranteed by Robert J. Skandalaris. Mr. Reason currently serves as the
President and a director of Monroe. Concurrently with the Monroe Acquisition,
Monroe entered into a 28-month employment agreement with Mr. Reason, which
provides for an annual salary of $200,004, as well as deferred compensation
payments of $2,000 per month, for a three-year period commencing May 1, 1998.
The Company intends to use $500,000 of the net proceeds of the Offering to pay
the final installment of the stock purchase price due in connection with the
Monroe Acquisition.
DCT Acquisition and Related Matters
On July 1, 1996, the Company acquired newly issued shares representing
37.5% of the outstanding shares of DCT for $1 and the option to acquire, subject
to certain limitations, an additional 14.1% of DCT's outstanding shares from
James Bronce Henderson, III and David C. Stone, the principal shareholders of
DCT, for $1.00 through July 31, 2001. On June 9, 1997, DCT assigned to the
Company its rights under a Stock Redemption Agreement between DCT and Peter
Raab, a former officer and employee of DCT, pursuant to which, effective April
7, 1997, the Company exercised its rights to acquire Mr. Raab's 7.5% interest in
DCT for $1.00. In connection with the Initial DCT Acquisition, the shareholders
of DCT agreed to write-off and forgive all existing debt to affiliates and
shareholders, except for an unsecured term note payable to DCT, Inc. ("DCTI"), a
company controlled by Messrs. Henderson and Stone, in the principal amount of
$960,000, which bore interest at the rate of 10% per annum and had an original
maturity date of June 30, 1998 (the "DCTI Loan"). As a result, during the year
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ended December 31, 1996, an aggregate of $15,325,865 of indebtedness to DCTI and
$1,515,579 of indebtedness to shareholders and former shareholders of DCT was
forgiven and written off. The Company also received irrevocable proxies from
Messrs. Stone, Henderson and Raab providing the Company with the authority to
direct the vote of these shareholders on all matters except with respect to the
merger, liquidation or sale of substantially all of DCT, or other extraordinary
items. In addition, the Company and such other shareholders of DCT agreed to
certain put and call provisions with respect to the purchase by the Company of
the balance of the outstanding shares of DCT.
Pursuant to a March 15, 1997 Letter Agreement and an Agreement of
Amendment dated August 26, 1997 (the "August 26 Amendment), the Company's rights
to purchase the balance of the DCT shares owned by Messrs. Henderson and Stone,
representing a 55% interest in DCT, were modified. These agreements provide
that: (i) on the earlier of the consummation of the Offering or December 31,
1997, the Company will repay the $960,000 DCTI Loan; (ii) on the earlier of the
consummation of the Offering or December 31, 1997, the Company shall acquire the
remaining shares of DCT (currently owned by Messrs. Henderson and Stone) for $1
million (the "Final DCT Purchase Price"); and (iii) as of the consummation of
the Offering, Mr. Henderson will serve as a member of the Company's Board and
its chairman until December 31, 1999. The Company intends to complete the Final
DCT Acquisition upon the consummation, and using $1.96 million of the net
proceeds, of the Offering.
DCT leases five separate facilities aggregating approximately 102,287
square feet located in Clinton Township and Mt. Clemens, Michigan, pursuant to
leases expiring September 30, 1998, from Competitive Technologies Investment
Company ("CTIC"), an entity controlled by Messrs. Henderson and Stone, at an
aggregate rent of $47,000 per month. CTIC will be purchased by the Company
concurrently with the consummation of the Final DCT Acquisition for no
additional consideration other than assumption of the debt encumbering such
properties aggregating approximately $4.402 million at June 30, 1997. One of
the facilities owned by CTIC, and leased by DCT, is encumbered by a mortgage
securing a promissory note in the original principal amount of $238,000 in
favor of The Bank of Bloomfield Hills. Robert J. Skandalaris is a 25%
shareholder of The Bank of Bloomfield Hills. The mortgage originated in
1992, prior to the existence of any affiliate relationship between
Mr. Skandalaris and DCT or CTIC.
Concurrently with the closing of the Initial DCT Acquisition, the
Company and DCT entered into a Management Agreement pursuant to which the
Company provides executive and general supervision over the business activities
of DCT for an annual fee of $100,000, payable in monthly installments of $8,333.
Upon consummation of the Offering and the Final DCT Acquisition, the Company
will terminate the Management Agreement.
During 1996, Monroe paid an aggregate of $59,322 and DCT paid an
aggregate of $6,000 to the law firm of Stone, Biber & O'Toole for legal
services. David C. Stone, who will become a director of the Company upon the
consummation of the Offering, is a principal of such law firm.
Skandy Acquisition
Effective January 1, 1997, the Company acquired all of the outstanding
capital stock of Skandy from Richard G. Skandalaris, the sole shareholder of
Skandy, in exchange for 133,686 shares of the Company's Common Stock. For the
years ended December 31, 1995 and 1996, Skandy received commissions for sales
representation services provided to Prestolock of $20,460 and $106,387,
respectively.
UPP Acquisition
On March 1, 1997, the Company, through its wholly-owned subsidiary UPP,
acquired certain assets of Utilase, a majority owned subsidiary of DCTI. The UPP
Acquisition purchase price was $850,000, payable by delivery of the Company's
promissory note (secured by the assets acquired), providing for payment of
$750,000 upon the earlier of July 31, 1997 or the consummation of the Offering
and $50,000 on each of February 1, 1998 and 1999 (the "UPP Note"). The UPP Note
bears no stated rate of interest but provides for a default rate of interest of
10% per annum. Pursuant to the August 26 Amendment referred to above, the entire
$850,000 principal amount under the UPP Note now becomes due and payable upon
the earlier to occur of the consummation of the Offering or December 31, 1997.
The Company intends to use $850,000 of the net proceeds of the Offering to make
the required payment.
UPP leases an approximately 11,110 square foot facility in Detroit,
Michigan from an entity controlled by Mr. Henderson, pursuant to a three-year
lease expiring February 28, 2000, at an annual rent of $38,885, plus its pro
rata share of taxes, utilities and other common charges. The Company believes
that such lease is at least as favorable to the Company as could be obtained
from an unaffiliated third party.
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Utilase Acquisition
On April 7, 1997, the Company entered into a Stock Purchase Agreement
with Utilase and its shareholders (DCTI and John K. Baysore), providing for the
acquisition by the Company of all of the outstanding capital stock of Utilase on
the earlier of the consummation of the Offering and December 31, 1997. Mr.
Baysore is the President of Utilase and will remain the President of Utilase
following the Utilase Acquisition. The Stock Purchase Agreement provides for a
purchase price of $8.2 million in cash and the Company's delivery of the
Utilase Notes (Series A, B, C and D) in the aggregate original principal amount
of $10,134,544.
A summary of the principal terms of the Utilase Notes is as follows:
(i) the Series A notes in the aggregate principal amount of $1,886,792 will bear
interest at the rate of 6% per annum until the first anniversary of the closing
of the Utilase Acquisition (the "Utilase Closing Date") after which they bear
interest at the rate of 10% per annum and become due and payable at the option
of the holder if the note is not paid within 180 days of such first anniversary
date; (ii) the Series B notes in the aggregate principal amount of $1,779,993
will bear interest at the rate of 6% per annum until the second anniversary of
the Utilase Closing Date, increasing to 10% per annum thereafter, and become due
and payable at the option of the holder if the notes are not paid within 90 days
of such second anniversary date; (iii) the Series C notes in the aggregate
principal amount of $3,358,477 will bear interest at the rate of 6% per annum
until the third anniversary of the Utilase Closing Date, increasing to 10% per
annum thereafter, and become due and payable at the option of the holder if the
notes are not paid within 90 days of such third anniversary date; and (iv) the
Series D notes in the aggregate principal amount of $3,109,292 will bear
interest at the rate of 6.5% per annum until the fourth anniversary of the
Utilase Closing Date, increasing to 10% per annum thereafter. For so long as any
amount is outstanding under the Utilase Notes, the written consent of the
holders of at least 67% of the aggregate outstanding principal amount thereof is
required for the Company to (a) declare or pay any dividend or other
distribution on its shares (other than in shares of capital stock) or (b) redeem
or set apart funds for the purchase or redemption of any shares of its capital
stock through a sinking fund or otherwise, except, subject to certain
limitations, pursuant to the Shareholders Agreements discussed below. If the
Company is in default under the Utilase Notes, the written consent of the
holders of at least 67% of the aggregate outstanding principal of the Utilase
Notes is required for the Company to (1) effect any sale, lease or other
conveyance, other than as security for a loan from a senior lender, of all or
substantially all of the assets of the Company, (2) effect any consolidation or
merger involving the Company (except solely to, with or among Noble and its
subsidiaries), (3) effect any reclassification or other change of any stock or
any recapitalization of Noble, or (4) permit any subsidiary to issue or sell
stock of such subsidiary, except to Noble or any wholly owned subsidiary of
Noble.
The Company's right to acquire Utilase, and the remaining shares of
DCT, is expressly contingent upon: (i) the Company's completion of the Utilase
Acquisition; (ii) UPP's prior payment of the $850,000 UPP Note issued in
connection with the UPP Acquisition; (iii) the Company's prior payment of the
Final DCT Purchase Price; (iv) the Company's purchase of CTIC, and (v) the
Company's payment of the DCTI Loan. The Utilase Stock Purchase Agreement also
provides that certain employees and shareholders of Utilase and DCTI, including
Messrs. Henderson and Baysore, will receive payments aggregating $1.4 million on
the Utilase Closing Date in exchange for covenants not to compete with Utilase.
Mr. Henderson will receive $200,000 in exchange for his covenant not to compete
with Utilase for the longer of seven years from the Utilase Closing Date or two
years from the date he ceases to be a director of the Company. Mr. Baysore will
receive $200,000 in exchange for his covenant not to compete with Utilase for a
period of three years from the date of termination of his employment with
Utilase pursuant to his employment agreement. Jeffrey A. Moss, a director of
Utilase and the President of DCTI, will receive $1 million on the Utilase
Closing Date and 11,697 shares of the Company's Common Stock on each anniversary
of the Utilase Closing Date, commencing in 1999 and continuing through 2003, in
exchange for his covenant not to compete with Utilase for the longer of seven
years from the Utilase Closing Date or two years after he ceases to be a
director of Utilase. The Company also obtained a covenant not to compete from
DCTI with a term of seven years for no additional consideration. The covenants
not to compete of Messrs. Henderson and Moss and of DCTI terminate in the event
of a default under the Utilase Notes which is not cured within 60 days.
Utilase leases an approximately 50,937 square foot facility located in
Detroit, Michigan from an entity controlled by Mr. Henderson pursuant to a
three-year lease expiring February 14, 1999, at an annual rent of $148,167, and
an approximately 210,000 square foot facility in Detroit, Michigan from an
entity controlled by Mr. Henderson pursuant to a five-year lease expiring April
30, 2002. Pursuant to the terms of the latter lease, Utilase is acquiring
occupancy of the larger building in stages, with one-half having been acquired
in August, 1997 and the balance to be acquired in April 1998. Upon full
occupancy, Utilase will vacate its smaller facility and DCTI will assume the
lease obligations relating thereto.
<PAGE>
Effective May 1, 1994, Utilase began leasing employees from DCTI. Lease
expenses for these employees for the years ended December 31, 1994, 1995 and
1996 were $328,392, $2.4 million and $2.8 million, respectively. Upon
consummation of the Utilase Acquisition, the Company intends to discontinue this
leasing arrangement. It is anticipated that the subject workers will be hired as
employees of the Company on similar terms.
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Other Matters
Certain shareholders of the Company have entered into voting agreements
and powers of attorney with the Company granting to Robert J. Skandalaris an
irrevocable proxy to vote their shares of Common Stock on all matters. These
voting agreements also bind after-acquired shares and shares transferred to
third parties. An aggregate of 534,742 shares, representing 7.4% of the
outstanding shares after giving effect to the Offering, are subject to such
voting agreements. These shares are owned by James D. Skandalaris, Richard G.
Skandalaris, George J. Skandalaris, Joseph J. Skandalaris and Robert J.
Skandalaris as trustee for his minor children. These same shareholders, in
addition to Daniel Brunell, the President of Vassar, are also parties to
Shareholders Agreements, which terminate upon the consummation of the Offering,
prohibiting the transfer of their Common Stock without the consent of the
Company and providing for the repurchase of their shares by the Company at net
book value at any time at the election of the Company or upon the death or
termination as an employee or director of the Company. The Company had a similar
Shareholder's Agreement with Mark A. Davis, its former President. When Mr. Davis
left the Company in October 1996, the Company assigned its right to repurchase
Mr. Davis' shares of Common Stock to Robert J. Skandalaris. Mr. Skandalaris
purchased 267,370 shares of Common Stock owned by Mr. Davis for $60,000 on
November 27, 1996. In July, 1997, new Shareholders Agreements were entered into
between the Company and certain employee-shareholders, including Richard V.
Balgenorth and Michael C. Azar, the Chief Financial Officer and General Counsel,
respectively, which provide the Company with the option to repurchase their
shares of Common Stock upon death or termination of employment, based upon a
book value formula.
On January 15, 1996, the Company received a loan of $300,000 from James
D. Skandalaris, the father of Robert J. Skandalaris, evidenced by an unsecured
promissory note with interest at 10% per annum, payable monthly, with the
principal balance due upon demand. In addition, on March 1, 1994, James D.
Skandalaris made a loan of $90,000 to Prestolock, evidenced by an unsecured
demand note with interest only payments due monthly at a rate of 10% per annum.
Effective June 30, 1997, James D. Skandalaris entered into a letter agreement
with the Company and Prestolock providing that no demand for repayment of the
principal balance of either the January 15, 1996 or March 1, 1994 notes will be
made until after December 30, 1998.
On April 30, 1996, Robert J. Skandalaris made a loan of $1 million to
the Company evidenced by an unsecured promissory note due on April 30, 2000,
bearing interest at the rate of 7% per annum with interest only payable monthly.
Effective July 30, 1997, the Company issued 38,000 shares of its
Series A Preferred Stock, and 64,838 shares of Common Stock, to Twenty-First
Century Off-Shore Fund, Ltd., a Bahamian open-ended liability company
("Twenty-First Century"), for $3.8 million. The majority shareholder of Twenty-
First Century is a limited liability company in which Robert J. Skandalaris
holds a 31% membership interest. The proceeds of Twenty-First Century's $3.8
million investment were utilized to reduce the Noble/Comerica Line in order to
satisfy Comerica's requirement that the Company have at least $2.3 million in
available credit facilities prior to the funding of Utilase's $8 million
equipment financing line, of which the Company will be a guarantor. See
" - Utilase Acquisition" and "Capital Stock - Preferred Stock."
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 150,000 shares
of Preferred Stock, $100 par value, of which 38,000 shares are currently
outstanding and 20,000,000 shares of Common Stock, no par value, of which
3,925,006 shares are currently issued and outstanding.
Preferred Stock
The Board of Directors is authorized, subject to any limitations
prescribed by the laws of the State of Michigan, but without further action by
the Company's shareholders, to provide for the issuance of Preferred Stock in
one or more series, to establish from time to time the number of shares to be
included in such series, to fix the designations, powers, preferences, and
rights of the shares of each such series and any qualifications, limitations, or
restrictions thereof, and to increase or decrease the number of shares of any
such series (but not below the number of shares of such series then outstanding)
without any further vote or action by the shareholders. The Board may authorize
and issue Preferred Stock with voting or conversion rights that could adversely
affect the voting power or other rights of the holders of Common Stock. In
addition, the issuance of Preferred Stock may have the effect of delaying,
deterring or preventing a change in control of the Company.
The Company issued 38,000 shares of its Series A Preferred Stock in
connection with a $3.8 million financing in July 1997. The Series A Preferred
Stock has a stated value of $100 per share, accrues 10% annual cumulative
dividends, payable quarterly, has no voting rights and is redeemable at any
time, at the option of the Company, in whole or in part, at a per share price
equal to the stated value per share, plus accumulated and unpaid dividends.
Concurrently with the consummation of the Offering, the holder of
10,000 shares of the preferred stock of DCT will convert such shares into 10,000
shares of Preferred Stock of the Company pursuant to a Debt Conversion Agreement
entered into between such holder, DCT and Noble in December 1996. Upon
conversion, the shares of Preferred Stock issued by the Company will have a
stated value of $100 per share, a liquidation preference of $100 per share, no
voting rights and be entitled to a 10% annual cumulative dividend payable
quarterly. In addition, such shares of Preferred Stock will be subject to
mandatory redemption by the Company at the option of the holder, at a price of
$100 per share, in increments of 375 shares each during the first 10 days of the
first month of each calendar quarter beginning January 1, 1997 and ending
October 10, 2001 and the remaining 2,500 shares during the period from December
21 through December 31, 2001. See "Certain Transactions."
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Common Stock
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of shareholders and do not have cumulative voting
rights. Accordingly, the holders of a majority of the shares entitled to vote in
any election of directors may elect all of the directors standing for election.
Subject to the preferences that may be applicable to any then outstanding
Preferred Stock, the holders of Common Stock will be entitled to receive such
dividends, when, as and if declared by the Board from time to time out of
legally available funds. Upon the liquidation, dissolution or winding up of the
Company, the holders of Common Stock will be entitled to share ratably in all
assets of the Company that are legally available for distribution, after payment
of all debts and other liabilities and subject to the prior rights of holders of
any Preferred Stock then outstanding. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights.
Michigan Business Corporation Act and Certain Charter Provisions
The provisions of the Company's Articles of Incorporation and Bylaws
and the Michigan Business Corporation Act (the "MBCA") summarized below may have
the effect of discouraging, delaying, or preventing hostile takeovers, including
those that might result in a premium over the market price, or discouraging,
delaying, or preventing changes in control or management of the Company.
Chapter 7A of the Michigan Business Corporation Act. Under Chapter 7A
of the MBCA, "business combinations" (defined to include, among other
transactions, mergers, consolidations, certain dispositions of assets or shares
and certain recapitalizations) between a Michigan corporation and an "Interested
Shareholder" (defined generally as the direct or indirect beneficial owner of at
least 10% of the voting power of the 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 it is 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 as shares, which when added to all other
shares of a Michigan 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 any 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 their "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 with
respect to their shares. "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 the Company from the application of Chapter 7B and is not aware of any
plans or proposals to do so. Further, none of the provisions discussed above
have been included in the Company's Articles of Incorporation or Bylaws.
47
<PAGE>
Articles of Incorporation and Bylaws. The Company's Articles of
Incorporation and Bylaws contain a number of other provisions relating to
corporate governance and to the rights of shareholders. These provisions include
(i) a prohibition on shareholder action through written consents, (ii) a
requirement that special meetings of shareholders be called only by the Board,
(iii) advance notice requirements for shareholder proposals and nominations,
(iv) limitations on the ability of shareholders to amend, alter or repeal the
Bylaws, and (v) the authority of the Board to issue without shareholder approval
preferred stock with such terms as the Board may determine.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the shares of Common Stock of the
Company is ___________. Its telephone number is _______________.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have 7,225,006
shares of Common Stock outstanding. All 3,300,000 of the shares to be sold in
the Offering will be freely tradable without restriction or further registration
under the Securities Act unless held by "affiliates" of the Company as that term
is defined under the Securities Act. The remaining 3,925,006 shares of Common
Stock outstanding will be deemed "restricted" stock, as that term is defined
under Rule 144, and may only be sold pursuant to an effective registration
statement under the Securities Act, in compliance with the exemption provisions
of Rule 144 or pursuant to another exemption under the Securities Act. Such
restricted shares of Common Stock will become eligible for sale, under Rule 144,
subject to the volume and manner of sale limitations prescribed by Rule 144 and
to the contractual restrictions described below, at various times commencing 90
days following the date of this Prospectus.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person (or persons whose shares are
aggregated), including an affiliate of the Company, who has owned restricted
shares of Common Stock beneficially for at least one year, is entitled to sell,
in brokerage transactions within any three-month period, a number of shares
(including non-restricted shares of the same class) equal to the greater of one
percent of the total number of outstanding shares of the same class or the
average weekly trading volume during the four calendar weeks preceding the sale.
A person who has not been an affiliate of the Company for at least the three
months immediately preceding the sale and who has beneficially owned shares of
Common Stock for at least two years is entitled to sell such shares under Rule
144 without regard to any of the limitations described above.
The officers, directors and 1% or greater beneficial shareholders of
the Company and their affiliates have entered into lock-up agreements with
BlueStone wherein they have agreed not to sell any of their shares for a period
of 12 months after the date of this Prospectus without the prior written consent
of BlueStone. See "Underwriting."
Prior to the Offering, there has not been any public market for the
Common Stock. No prediction can be made as to the effect, if any, that market
sales of shares or the availability of shares for sale will have on the market
price of the Common Stock prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public market could adversely affect
the prevailing market price and the ability of the Company to raise equity
capital in the future.
48
<PAGE>
UNDERWRITING
The underwriters named below (collectively, the "Underwriters") for
which BlueStone Capital Partners L.P. ("BlueStone") and Rodman & Renshaw, Inc.
are acting as representatives (the "Representatives"), have agreed severally,
not jointly, subject to the terms and conditions contained in the underwriting
agreement between the Company and the Underwriters (the "Underwriting
Agreement"), to purchase from the Company, and the Company has agreed to sell to
the several Underwriters, the 3,300,000 shares of Common Stock offered hereby.
The number of shares of Common Stock that each Underwriter has agreed to
purchase is set forth opposite its name below:
Underwriter Number of Shares
----------- ----------------
BlueStone Capital Partners, L.P......................
Rodman & Renshaw, Inc. ..............................
---------
Total ...................................... 3,300,000
=========
The Underwriters are committed on a "firm commitment" basis to purchase
and pay for all of the shares of Common Stock offered hereby (other than shares
offered pursuant to the over-allotment option) if any shares are purchased. The
shares of Common Stock are being offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters and subject
to approval of certain legal matters by counsel and to certain other conditions.
Through the Representatives, the several Underwriters have advised the
Company that they propose to offer the shares of Common Stock to the public at
the public offering price set forth on the cover page of this Prospectus. The
Underwriters may allow to certain dealers who are members of the National
Association of Securities Dealers, Inc. ("NASD") concessions, not in excess of
$_____ per share, of which not in excess of $___ per share may be reallowed to
other dealers who are members of the NASD. After the commencement of the
Offering, the public offering price, concessions and reallowance may be changed.
The Company has granted the Representatives an option, exercisable for
45 days following the date of this Prospectus, to purchase up to 495,000
additional shares of Common Stock at the public offering price set forth on the
cover page of this Prospectus, less the underwriting discounts and commissions.
The Representatives may exercise this option in whole or, from time to time, in
part, solely for the purpose of covering over-allotments, if any, made in
connection with the sale of the shares of Common Stock offered hereby.
The Company has agreed to pay to the Representatives individually, and
not as representatives of the Underwriters, an aggregate non accountable
expense allowance of $250,000, $50,000 of which has been paid as of the date of
this Prospectus. The Company has also agreed to pay all expenses in connection
with qualifying the shares of Common Stock offered hereby for sale under the
laws of such states as the Representatives may designate, including expenses of
counsel retained for such purpose by the Representatives.
The Company has agreed to issue to the Representatives and their
designees, for an aggregate of $330, the Representatives' Warrants to purchase
up to 330,000 shares of Common Stock, at an exercise price of $___ per share
(120% of the initial public offering price per share). The Representatives'
Warrants may not be transferred for one year following the date of this
Prospectus, except to the officers and partners of the Representatives or the
Underwriters or members of the selling group, and are exercisable at any time,
and from time to time, during the four-year period commencing one year following
the date of this Prospectus (the "Warrant Exercise Term"). During the Warrant
Exercise Term, the holders of the Representatives' Warrants are given, at
nominal cost, the opportunity to profit from a rise in the market price of the
Common Stock. To the extent that the Representatives' Warrants are exercised or
exchanged, dilution to the interests of the Company's shareholders will occur.
Further, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected since the holders of the
Representatives' Warrants can be expected to exercise them at a time when the
Company would, in all likelihood, be able to obtain any needed capital on terms
more favorable to the Company than those provided in the Representatives'
Warrants. Any profit realized by the Representatives on the sale of the
Representatives' Warrants or the underlying shares of Common Stock may be deemed
additional underwriting compensation. Subject to certain limitations and
exclusions, the Company has agreed to register, at the request of the holders of
a majority of the Representatives' Warrants and at the Company's expense, the
Representatives' Warrants and the shares of Common Stock underlying the
Representatives' Warrants under the Securities Act on one occasion during the
Warrant Exercise Term and to include such Representatives' Warrants and such
underlying shares in any appropriate registration statement that is filed by the
Company during the seven years following the date of this Prospectus.
49
<PAGE>
All of the Company's officers, directors and shareholders owing 1% or
more of the outstanding Common Stock have agreed that, for the 360-day period
following the date of this Prospectus, they will not, without the prior written
consent of BlueStone, directly or indirectly sell, offer for sale, transfer,
pledge or otherwise dispose of any securities of the Company or exercise any
registration right relating to any securities of the Company.
The Representatives have informed the Company that the Underwriters do
not intend to confirm sales in excess of 3% of the number of shares of common
Stock offered hereby to discretionary accounts.
The Company has agreed to indemnify the Underwriters against certain
civil liabilities in connection with the Registration Statement of which this
Prospectus forms a part, including liabilities under the Securities Act.
Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price of the shares of Common
Stock has been determined by negotiation between the Company and the
Representatives and is not necessarily related to the Company's asset value, net
worth or other established criteria of value. Among the factors considered in
determining the offering price are the Company's financial condition and
prospects, management, market prices of similar securities of comparable
publicly-traded companies, certain financial and operating information of
companies engaged in activities similar to those of the Company and the general
condition of the securities market.
In connection with the Offering, the Underwriters may purchase and sell
the Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created by the Underwriters in connection with the Offering.
Stabilizing transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the Common Stock; and
syndicate short positions created by the Underwriters involve the sale by the
Underwriters of a greater number of securities than they are required to
purchase from the Company in the Offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the securities sold in the Offering for their
account may be reclaimed by the syndicate Underwriters if such shares of Common
Stock are repurchased by the syndicate Underwriters in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Common Stock, which may be higher than the price that might
otherwise prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be affected on the AMEX, the
over-the-counter market or otherwise.
The Underwriters may also place bids or purchase shares to reduce a
short position created in connection with the Offering. Short positions are
created by persons who sell shares which they do not own in anticipation of
purchasing shares at a lower price in the market to deliver in connection with
the earlier sale. Short positions tend to place downward pressure on the market
price of a stock.
The Representatives and/or the Underwriters may impose a penalty bid by
reclaiming the selling concession to be paid to an Underwriter or selected
dealer when the securities sold by the Underwriter or selected dealer are
purchased to reduce a short position created in connection with the Offering.
BlueStone was organized and registered as a broker-dealer with the
Commission and the National Association of Securities Dealers, Inc. in March
1996. Although, since its organization, BlueStone has engaged in the investment
banking business and its principals have had significant experience in the
underwriting of securities in their capacities with other borker-dealers, the
Offering will constitute one of the first public offerings for which BlueStone
has acted as lead manager.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Bruck & Perry, A Professional Corporation,
Newport Beach, California. Certain legal matters will be passed on for the
Underwriters by Tenzer Greenblatt LLP, New York, New York.
EXPERTS
The consolidated financial statements of Noble International, Ltd., the
financial statements of DCT Components System, Inc. and the financial statements
of Utilase, Inc. as of December 31, 1996 and 1995, and for each of the three
years in the period ended December 31, 1996, and the financial statements of
Monroe Engineering Products, Inc. as of December 31, 1995 and for each of the
two years in the period ended December 31, 1995, included in this Prospectus
have been audited by Grant Thornton LLP, independent certified public
accountants, as stated in their reports appearing herein and elsewhere in the
Registration Statement and have been so included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
50
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-l under the Securities Act, 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.
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.,
Room 1024, 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 Commission also
maintains a Web site that contains reports, proxy and information statements and
other materials that are filed through the Commission's Electronic Data
Gathering, Analysis, and Retrieval System ("EDGAR"). Information filed via EDGAR
may be obtained at this Web site at http:\\www.sec.gov. Following consummation
of the Offering, it is anticipated that the Company's Common Stock will be
traded on the AMEX.
51
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Noble International, Ltd. Consolidated Financial Statements
Report of Independent Certified Public Accountants..............................................................F-2
Consolidated Balance Sheets - December 31, 1996 and 1995 and June 30, 1997 (unaudited)..........................F-3
Consolidated Statements of Operations - For the years ended December 31, 1996, 1995 and 1994
and the six months ended June 30, 1996 and 1997 (unaudited).....................................................F-5
Consolidated Statement of Shareholders' Equity - For the years ended
December 31, 1996, 1995 and 1994 and the six months ended June 30, 1996 and 1997 (unaudited).................F-6
Consolidated Statements of Cash Flows - For the years ended December 31, 1996, 1995 and 1994 and the six
months ended June 30, 1996 and 1997 (unaudited).............................................................F-7
Notes to Consolidated Financial Statements......................................................................F-9
Monroe Engineering Products, Inc.
Report of Independent Certified Public Accountants..............................................................F-25
Balance Sheet - December 31, 1995...............................................................................F-26
Statements of Earnings and Retained Earnings - For the years ended December 31, 1995 and 1994...................F-27
Statements of Cash Flows - For the years ended December 31, 1995 and 1994.......................................F-28
Notes to Financial Statements...................................................................................F-29
DCT Component Systems, Inc.
Report of Independent Certified Public Accountants..............................................................F-31
Balance Sheets - December 31, 1996 and 1995 and June 30, 1997 (unaudited).......................................F-32
Statements of Operations - For the years ended December 31, 1996, 1995 and 1994 and the six months ended
June 30, 1996 and 1997 (unaudited)............................................................................F-33
Statement of Shareholders' Deficit - For the years ended December 31, 1996, 1995 and 1994 and the six months
ended June 30, 1996 and 1997 (unaudited)......................................................................F-34
Statements of Cash Flows - For the years ended December 31, 1996, 1995 and 1994 and the six months ended
June 30, 1996 and 1997 (unaudited)............................................................................F-35
Notes to Financial Statements...................................................................................F-37
Utilase, Inc.
Report of Independent Certified Public Accountants..............................................................F-47
Balance Sheets - December 31, 1996 and 1995 and June 30, 1997 (unaudited).......................................F-48
Statements of Operations - For the years ended December 31, 1996, 1995 and 1994 and the six months ended
June 30, 1996 and 1997 (unaudited)............................................................................F-49
Statement of Shareholder's Equity - For the years ended December 31, 1996, 1995 and 1994 and the six
months ended June 30, 1996 and 1997 (unaudited) ..............................................................F-50
Statements of Cash Flows - For the years ended December 31, 1996, 1995 and 1994 and the six months ended
June 30, 1996 and 1997 (unaudited)............................................................................F-51
Notes to Financial Statements...................................................................................F-53
</TABLE>
F-1
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Noble International, Ltd.
We have audited the accompanying consolidated balance sheets of Noble
International, Ltd. (a Michigan corporation) and Subsidiaries as of December 31,
1995 and 1996 and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above, present
fairly, in all material respects, the consolidated financial position of Noble
International, Ltd. and Subsidiaries as of December 31, 1995 and 1996, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
Detroit, Michigan
May 9, 1997 (except for Note M
as to which the date is September 15, 1997)
F-2
<PAGE>
Noble International, Inc. and Subsidiaries
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30,
December 31, 1997
1995 1996 (Unaudited)
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,297 $ 471,412 $ 206,241
Accounts receivable, trade, net of
allowance for doubtful accounts of
$21,481, $10,148 and $0 at
December 31, 1995 and 1996 and
June 30, 1997, respectively 740,700 1,566,551 2,854,920
Due from affiliate - - 361,906
Due from shareholder - 60,000 -
Inventories 578,743 2,285,361 2,652,784
Prepaid expenses and other assets 5,332 177,012 368,554
---------- ---------- ----------
Total Current Assets 1,326,072 4,560,336 6,444,405
Property, Plant and Equipment, net 445,089 1,848,759 3,011,971
Other Assets
Goodwill, net of accumulated amortization
of $272,007 at December 31, 1996 and
$407,137 at June 30, 1997 - 5,026,254 4,891,124
Sundry 13,504 97,164 503,532
---------- ---------- ----------
13,504 5,123,418 5,394,656
---------- ---------- ----------
$ 1,784,665 $11,532,513 $14,851,032
============ ============ ============
F-3
<PAGE>
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
June 30,
December 31, 1997
1995 1996 (Unaudited)
---------- ---------- -----------
<S> <C> <C> <C>
LIABILITIES AND EQUITY
Current Liabilities
Note payable to bank $ 45,000 $ 1,402,708 $ 3,003,395
Current maturities of long-term debt - 1,059,021 1,052,550
Current maturities of notes payable -
related parties 111,500 882,613 1,336,333
Accounts payable 473,567 1,359,127 1,679,083
Accrued liabilities 188,364 666,673 893,578
Income taxes payable - 7,200 198,849
Dividends payable 158,759 - -
--------- ---------- ----------
Total Current Liabilities 977,190 5,377,342 8,163,788
Long-Term Debt, excluding current
maturities - 3,830,477 3,463,598
Notes payable - related parties,
excluding current maturities 61,042 1,500,000 1,890,000
Other Long-Term Liabilities 33,655 - -
Investment in Unconsolidated Subsidiary - 95,239 159,939
Commitments and Contingencies (Note I) - - -
Minority Interest 88,410 - -
Shareholders' Equity
Common stock, no par value, authorized
20,000,000 shares, issued and
outstanding 2,673,704 and 3,726,482
shares in 1995 and 1996, respectively and
3,860,168 shares at June 30, 1997 341,909 1,036,634 1,086,134
Retained earnings (deficit) 282,459 (307,179) 87,573
--------- ---------- ----------
624,368 729,455 1,173,707
--------- ---------- ----------
$1,784,665 $11,532,513 $14,851,032
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
Noble International Ltd., and Subsidiaries
Consolidated Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31, Six Months Ended June 30,
1996 1997
1994 1995 1996 (Unaudited)
--------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales $3,305,787 $4,442,225 $16,186,811 $8,155,378 $9,733,787
Cost of goods sold 2,261,460 2,910,696 10,587,175 5,153,845 6,445,298
--------- --------- ---------- --------- ----------
Gross profit 1,044,327 1,531,529 5,599,636 3,001,533 3,288,489
Selling, general and
administrative expenses 915,420 1,030,263 5,087,521 1,956,291 2,232,225
--------- --------- ---------- --------- ----------
Operating profit 128,907 501,266 512,115 1,045,242 1,056,264
Other income (expense)
Equity in loss of unconsolidated
subsidiary - - (95,239) - (64,700)
Interest income - - 4,632 - -
Interest expense (23,579) (23,836) (555,058) (214,286) (438,834)
Sundry, net 652 29,036 64,387 - 54,233
--------- --------- ---------- --------- ---------
(22,927) 5,200 (581,278) (214,286) (449,301)
--------- --------- ---------- --------- ---------
Earnings (loss) before
income taxes
and minority
interest 105,980 506,466 (69,163) 830,956 606,963
Minority Interest 38,585 67,195 - - -
--------- --------- ---------- --------- ---------
Earnings (loss) before income taxes 67,395 439,271 (69,163) 830,956 606,963
Income tax expense 7,600 30,562 7,200 283,000 212,211
--------- --------- ---------- --------- ---------
Net earnings (loss) $ 59,795 $ 408,709 $ (76,363) $ 547,956 $ 394,752
=========== =========== ============ =========== ===========
Earnings (loss) per share $ (.02) $ .17 $ .10
============ =========== ===========
Pro forma earnings data
Earnings before income taxes,
as reported $ 67,395 $439,271
Pro forma income tax expense 17,200 169,000
--------- ---------
Pro forma net earnings $ 50,195 $270,271
=========== ===========
Pro forma net earnings per
share $ .03 $ .10
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
Noble International Ltd., and Subsidiaries
Consolidated Statement of Shareholders' Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Retained
Earnings
Common (Accumulated
Stock Deficit) Total
--------- ----------- ---------
<S> <C> <C> <C>
Balance at January 1, 1994, (334,213 shares) $ 1,000 $ - $ 1,000
Issuance of 2,339,491 shares of common stock 340,909 - 340,909
Dividend payable to Prestolock shareholders - (46,978) (46,978)
Net earnings - 59,795 59,795
-------- -------- ---------
Balance at December 31, 1994 341,909 12,817 354,726
Dividend payable to Prestolock shareholders - (139,067) (139,067)
Net earnings - 408,709 408,709
-------- -------- ---------
Balance at December 31, 1995 341,909 282,459 624,368
Transfer of capital attributable to termination of
Prestolock S-Corporation election 513,275 (513,275) -
Net loss - (76,363) (76,363)
Issuance of 1,052,778 shares of common stock 181,450 - 181,450
--------- -------- ---------
Balance at December 31, 1996 1,036,634 (307,179) 729,455
Issuance of 133,686 shares of common stock (unaudited) 49,500 - 49,500
Net earnings (unaudited) - 394,752 394,752
--------- -------- ---------
Balance at June 30, 1997 (unaudited) $1,086,134 $ 87,573 $1,173,707
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
Noble International, Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Years Ended December 31, Ended June 30,
--------------------------- ---------------------
1996 1997
1994 1995 1996 (Unaudited)
-------- -------- --------- ------- ------
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings (loss) $ 59,795 $ 408,709 $ (76,363) $ 547,956 $ 394,752
Minority interest 38,585 67,195 - - -
Adjustments to reconcile net earnings to
net cash provided by (used in) operations
Loss on disposal of asset - - 1,571 - -
Depreciation of property, plant and
equipment 29,696 103,040 247,339 101,674 205,895
Provision for doubtful accounts 62,058 8,205 - - -
Amortization of goodwill - - 265,885 138,952 135,130
Equity in loss of unconsolidated
subsidiary - - 95,239 - 64,700
Stock issued in exchange for services - - 32,000 - -
Changes in operating assets and liabilities
Increase in accounts receivable (522,093) (208,401) (63,963) (266,784) (1,590,275)
Increase in inventories (257,669) (220,874) (14,760) (116,306) (367,423)
(Increase) decrease in prepaid
expenses (31,711) 26,379 (173,020) (211,266) (191,542)
(Increase) decrease in other assets (19,045) 5,544 - (34,989) (406,368)
Increase in accounts payable 419,886 185,872 488,947 571,133 319,956
Increase in income taxes payable - - 7,200 - 191,649
Increase in accrued liabilities 6,948 16,170 102,427 256,157 226,905
-------- -------- --------- --------- ---------
Net cash (used in) provided by
operating activities (213,550) 391,839 912,502 986,527 (1,016,621)
Cash Flows From Investing Activities
Purchase of property, plant and equipment (179,514) (202,451) (362,801) (35,816) (506,314)
Sale of assets of Padlock Division of
Prestolock, Inc. 500,000 - - - -
Purchase of assets of Prestolock, Inc. (750,000) - - - -
Acquisitions of businesses, net of cash
acquired - - 632,947 632,947 -
-------- -------- --------- --------- ---------
Net cash (used in) provided by
investing activities (429,514) (202,451) 270,146 597,131 (506,314)
Cash Flows From Financing Activities
Proceeds from notes payable - related parties 151,500 (60,348) 1,310,000 1,300,000 35,427
Repayments of notes payable - related parties - - (26,499) (1,152) (5,000)
Capital lease payments (10,222) (49,600) - - -
Proceeds from issuance of common stock 340,909 - - - -
Prestolock shares acquired by minority
shareholders 109,091 10,000 - - -
</TABLE>
F-7
<PAGE>
Noble International, Ltd. and Subsidiaries
Consolidated Statements of Cash Flows - Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31, Six Months Ended
-------------------------- June 30,
1996 1997
1994 1995 1996 (Unaudited)
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cash Flows From Financing Activities (Continued)
Distributions to shareholders of acquired entities - (62,009) (1,282,859) (1,282,859) -
Proceeds from long-term debt - - 4,213,151 1,940,000 -
Payments on long-term debt - (20,348) (6,164,034) (5,303,093) (373,350)
Net proceeds from note payable to bank 54,081 (9,081) 1,237,708 2,145,000 1,600,687
-------- -------- --------- --------- ---------
Net cash provided by (used in)
financing activities 645,359 (191,386) (712,533) (1,202,104) 1,257,764
-------- -------- --------- --------- ---------
Net increase (decrease) in cash 2,295 (1,998) 470,115 381,554 (265,171)
Cash at beginning of period 1,000 3,295 1,297 1,297 471,412
-------- -------- --------- --------- ---------
Cash at end of period $ 3,295 $ 1,297 $ 471,412 $ 382,851 $ 206,241
========= ========= =========== =========== ===========
Supplemental cash flow disclosure Cash paid for:
Interest $ 22,000 $ 21,000 $ 392,417 $ 153,286 $ 428,682
========= ========= =========== =========== ===========
Taxes $ - $ 8,000 $ 37,830 $ - $ 20,000
========= ========= =========== =========== ===========
Fair value of assets acquired,
including goodwill $ 6,207,434 $ 6,207,434
Liabilities assumed (907,436) (907,436)
Debt issued (6,221,719) (6,221,719)
Cash paid 288,774 288,774
--------- ---------
Net cash acquired $ 632,947 $ 632,947
=========== ===========
</TABLE>
Supplemental Disclosure of Non-cash Financing Activity:
During the year ended December 31, 1995 the Company entered into capital
lease transactions for equipment aggregating $109,491.
During 1996, the Company borrowed $500,000 under a land contract to purchase
land and building owned by a former shareholder of Monroe.
During 1996, the Company financed the $6,350,000 acquisition price of a
subsidiary, of which, through December 31, 1996, $5,850,000 had been paid.
Notes payable - related party of $61,040 were retired in 1996 by the
issuance of 50,132 shares of the Company's common stock.
During the period ended June 30, 1997, the Company acquired Skandy Corp. by
issuance of 133,686 shares of common stock valued at $49,500.
During the period ended June 30, 1997, the Company financed the purchase of
$813,293 of machinery and equipment by the issuance of a note payable to
Utilase, Inc.
The accompanying notes are an integral part of these financial statements
F-8
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note A - Basis of Presentation, Nature of Operations and Summary of Significant
Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements as of and for the year ended
December 31, 1996, include Noble International, Ltd and its wholly-owned
subsidiaries, Prestolock International, Ltd. ("Prestolock"); Monroe Engineering
Products, Inc. ("Monroe") and Cass River Coating, Inc. (dba Vassar Industries,
"Vassar"). ("Noble" or collectively the "Company"). At June 30, 1997, and for
the six months then ended, the consolidated financial statements also include
Skandy Corp. and Utilase Production Process, Inc.
Noble's investment in DCT Component Systems, Inc. (DCT) is accounted for under
the equity method. (Note I)
The consolidated financial statements as of December 31, 1995 and for year then
ended and for the period from February 22, 1994 through December 31, 1994
include Noble and Prestolock. Prior to January 1, 1996, Noble and Prestolock had
a common controlling shareholder. Effective January 1, 1996, Noble acquired
Prestolock by issuing 2,673,704 shares of Noble common stock in exchange for all
of the issued and outstanding stock of Prestolock. This transaction has been
accounted for in a manner similar to a pooling of interests due to the common
control and include Prestolock's results of operations from February 22, 1994,
the date the controlling shareholder of Noble acquired Prestolock. The assets
acquired by the principal shareholder on February 22, 1994 consisted of:
Padlock division assets $500,000
Accounts receivable 80,469
Inventory 100,200
Property and equipment 69,331
--------
$750,000
=========
On July 21, 1994, the Company sold the Padlock division for $500,000. Income
earned by this division through July 21, 1994 was not significant.
The effect of the Prestolock consolidation on net earnings and related per share
amounts for the years ended December 31, 1994 and 1995 were as follows:
1994 1995
-------- --------
Increase in net earnings $120,580 $348,924
Increase in earnings per share $ .08 $ .12
The assets of Prestolock were recorded at their historical cost basis and no
goodwill was recorded.
All significant intercompany balances and transactions have been eliminated in
consolidation.
F-9
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note A - Basis of Presentation, Nature of Operations and Summary of Significant
Accounting Policies (Continued)
Nature of Operations
Noble is a holding company which through its subsidiaries manufactures a variety
of components and provides design, engineering, painting, assembly and other
services for the automotive industry. One of its subsidiaries is a distributor
of tooling components. (Note L) The principal market for its products is the
United States.
Significant Accounting Policies
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
Interim Financial Data
The consolidated financial statements and related notes thereto as of June 30,
1997 and for the six months ended June 30, 1996 and 1997 are unaudited. The
information reflects all adjustments, consisting only of normal recurring
entries, that, in the opinion of management, are necessary to present fairly the
financial position, results of operations and cash flows of the Company for the
periods indicated. Results of operations for the interim periods are not
necessarily indicative of the results of operations for the full fiscal year.
Cash and Cash Equivalents
For purposes of the statement of cash flows, all investments with a maturity of
less than three months are considered to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for using
the straight line and various accelerated methods over the estimated useful
lives of the assets which range from 5 to 39 years for buildings and
improvements and 3 to 10 years for machinery and equipment. Expenditures for
maintenance and repairs are charged to expense as incurred.
Goodwill
Goodwill is the excess of cost over the fair value of net assets acquired and is
amortized over a 20 year period on the straight line method. On an ongoing
basis, management reviews the valuation and amortization of goodwill. As part of
the review, the Company estimates the value of and the estimated undiscounted
future net income expected to be generated by the related subsidiary to
determine that no impairment has occurred.
F-10
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note A - Basis of Presentation, Nature of Operations and Summary of Significant
Accounting Policies (Continued)
Income Taxes (Continued)
Through December 31, 1995, Prestolock was taxed under Subchapter S of the
Internal Revenue Code. As a result, federal income taxes were payable personally
by the shareholders of Prestolock. Accordingly, the financial statements for
1994 and 1995 do not provide for federal income taxes attributable to
Prestolock's earnings.
The Company records the provision for federal and state income taxes pursuant to
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." ("Statement 109")
Under the asset and liability method mandated by Statement 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and the effect
of operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the period that includes
the enactment date.
Fair Value of Financial Instruments
The Company's financial instruments include long-term debt. The carrying value
of the debt approximates its estimated fair value based upon quoted market
prices.
Minority Interest
Minority interest represents the minority shareholders' interest in Prestolock.
Minority interest amounted to 24% and 12% at December 31, 1994 and 1995,
respectively.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Earnings per share.
Earnings per share are based on the weighted average number of common shares
outstanding during each year. The 133,686 shares issued in January, 1997 have
been deemed outstanding for all periods presented for purposes of computing
earnings per share. The weighted average number of shares outstanding during
1994, 1995, and 1996 was 1,535,170, 2,807,390 and 3,820,390, respectively and
3,277,293 and 3,860,160 at June 30, 1996 and June 30, 1997, respectively.
F-11
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note B - Inventories
The major components of inventories were as follows:
December 31, June 30, 1997
1995 1996 (Unaudited)
-------- --------- --------------
Raw materials and purchased parts $289,588 $ 434,776 $ 710,935
Work in process - 4,987 1,179
Finished goods 85,620 1,565,427 1,705,093
Unbilled customer tooling 203,535 280,171 235,577
-------- --------- ---------
$578,743 $2,285,361 $2,652,784
========= =========== ===========
Note C - Property, Plant and Equipment
Property, plant and equipment consisted of the following:
December 31, June 30, 1997
1995 1996 (Unaudited)
-------- --------- -------------
Buildings and improvements $ - $1,199,077 $1,237,615
Machinery and equipment 521,042 881,813 2,138,399
Furniture and fixtures 56,783 93,445 167,428
-------- --------- ---------
577,825 2,174,335 3,543,442
Less accumulated depreciation
and amortization 132,736 379,376 585,271
-------- --------- ---------
445,089 1,794,959 2,958,171
Land - 53,800 53,800
-------- --------- ---------
$445,089 $1,848,759 $3,011,971
========= =========== ===========
Note D - Line of Credit and Long-Term Debt
The Company has a secured line of credit facility with a bank, which allows it
to borrow up to $3,000,000 subject to qualifying accounts receivable and
inventory. At December 31, 1996 the outstanding balance was $1,402,708
($3,003,395 at June 30, 1997) and availability was $2,163,000 ($45,000 at June
30, 1997). Interest is payable monthly at one percent over the bank's prime
lending rate. (Effective rate of 9.25% at December 31, 1996). The facility
expires on April 30, 1997. Subsequent amendments to the agreement increased the
borrowing base to $3,500,000 and extended the maturity to November 30, 1997.
F-12
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note D - Line of Credit and Long-Term Debt (Continued)
Long-term debt consisted of the following:
June 30,
December 31, 1997
1996 (Unaudited)
------------ -----------
Term note, payable in monthly installments of
$78,125 commencing on January 1, 1997,
plus interest at 1.5% above the bank's
prime lending rate (effective rate of
9.75% at December 31, 1996). The note is
collateralized by accounts receivable,
inventory, equipment, and the issued and
outstanding common stock of the company
and the Company's subsidiaries. The note
is due December 2000. $3,750,000 $3,437,500
Term note, payable in monthly installments,
of $5,600, including interest at one
percent above the bank's prime lending
rate (effective rate of 9.25% at December
31, 1996). The note is secured by real
estate and is due September 2001. 463,151 451,187
Unsecured term note, payable in monthly
installments of $2,500 plus interest at a
rate of 5%. The note is due September
2001. 141,750 126,750
Land contract, payable in monthly
installments of $7,280, including
interest at a rate of 8%. The note is
secured by a building and is due
September 2004. 503,331 479,119
Other 31,266 21,592
--------- ---------
4,889,498 4,516,148
Less current maturities 1,059,021 1,052,550
--------- ---------
$3,830,477 $3,463,598
========== ===========
The aggregate maturities of long-term debt by year as of December 31, 1996 are
as follows:
1997 $1,059,021
1998 1,057,689
1999 1,059,604
2000 1,063,439
2001 434,745
Thereafter 215,000
---------
$4,889,498
===========
F-13
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note D - Line of Credit and Long-Term Debt (Continued)
The Company's loan agreement underlying the $3,750,000 term loan contains
restrictive covenants including the maintenance of certain financial ratios. The
loan agreement also restricts the payment of dividends, repurchase of common
stock, and acquisition of fixed assets. As of December 31, 1996, the Company was
in violation of certain of the covenants. On April 25, 1997, the Company's
lender waived these defaults and amended the covenant provisions such that the
Company was in compliance with the terms of the amended covenants.
Note E - Leases
The Company leases buildings and equipment under operating leases with unexpired
terms ranging from a month to month basis to three years. Rent expense for all
operating leases was approximately $55,800, $69,900 and $193,000 for the years
ended December 31, 1994, 1995 and 1996, respectively and $85,000 and $154,000
for the six months ended June 30, 1996 and 1997.
The Company has capital lease agreements for computer equipment and machinery.
At December 31, 1995 and 1996, property and equipment includes $125,529 and
$109,491, respectively and accumulated depreciation includes $23,564 and
$50,004, respectively, recorded under capital leases. The related obligation of
approximately $30,000 is included in current liabilities at December 31, 1996.
Future aggregate minimum rentals under the above lease agreements are not
significant.
Note F - Income Taxes
Income taxes have been charged (credited) to operations as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1994 1995 1996 1996 1997
------ ------- ------ -------- ------
(unaudited)
<S> <C> <C> <C> <C> <C>
Current:
Federal $ - $ - $ 7,200 $283,000 $204,000
State and local 7,600 30,562 - - 8,211
------ ------- ------- -------- --------
7,600 30,562 7,200 283,000 212,211
Deferred:
Federal - - (15,000) - -
Increase in valuation allowance - - 15,000 - -
------ ------- ------- -------- --------
- - - - -
------ ------- ------- -------- --------
Total income tax expense $7,600 $30,562 $ 7,200 $283,000 $212,211
======= ======== ======== ========= =========
</TABLE>
F-14
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note F - Income Taxes (Continued)
A reconciliation of the actual federal income tax (benefit) expense to the
expected amounts computed by applying the statutory tax rate percent to earnings
or losses before income taxes is as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1994 1995 1996 1996 1997
------- -------- ------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Expected federal income
tax (benefit) $ 11,700 $ 149,350 $ (23,500) $283,000 $206,000
Prestolock earnings not
subject to tax (41,000) (118,630) - - -
Nondeductible items - - 10,200 - 3,000
Net operating loss not
utilized 20,900 - - - -
Utilization of net operating
loss - (20,900) - - -
State taxes (2,584) (10,391) - - (3,000)
Increase in valuation allowance - - 15,000 - -
Surtax exemption and
other, net 10,984 571 5,500 - (2,000)
-------- -------- ------- -------- --------
Actual income tax (benefit)
expense $ - $ - $ 7,200 $283,000 $204,000
========= ========= ======== ========= =========
</TABLE>
Deferred income tax assets and liabilities at December 31, 1996 and 1995 and
June 30, 1997 are not significant.
Note G - Related Party Transactions
Notes payable to related parties consisted of the following:
<TABLE>
<CAPTION>
June 30,
December 31, 1997
1995 1996 (Unaudited)
-------- --------- -----------
<S> <C> <C> <C>
Land contract, payable to the former principal
shareholder and an officer of Monroe,
interest only payments due monthly at an
annual interest rate of 12%. The contract
is secured by real estate acquired in
connection with the purchase of Monroe
and is due April 1998 $ - $ 500,000 $500,000
</TABLE>
F-15
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note G - Related Party Transactions (Continued)
<TABLE>
<CAPTION>
December 31, June 30, 1997
1995 1996 (Unaudited)
-------- --------- ------------
<S> <C> <C> <C>
Term note, payable to the former principal
shareholder of, and an officer of Monroe,
with imputed interest at 8.5%. The note
is secured by a personal guaranty of an
officer of Noble and is due on the earlier
of the closing of a public offering of
Noble's common stock or December 31, 1997. - 487,613 500,000
Unsecured demand notes, payable to a related
party, interest only payments due monthly
at an annual interest rate of 10%. 90,000 390,000 -
Promissory note to related party, interest
only payments due monthly at 10%. The
note matures on December 31, 1998 - - 390,000
Unsecured term note, payable to Prestolock
minority shareholder in annual
installments of $20,348 plus interest at
an annual interest rate of 7%. 81,391 - -
Unsecured term note payable to the principal
shareholder of Noble due in April 2000
with interest at 7%. Amounts outstanding
are subordinated to the bank financing
discussed in Note D. - 1,000,000 1,000,000
Note payable to Utilase, Inc. $850,000 due on
the earlier of the closing of an initial
public offering of the Company's Common
Stock or December 31, 1997. The note is
secured by machinery and equipment and
interest has been imputed at 8.5%. - - 836,333
Other 1,151 5,000 -
------- --------- ---------
172,542 2,382,613 3,226,333
Less current maturities 111,500 882,613 1,336,333
------- ---------- ---------
$ 61,042 $1,500,000 $1,890,000
========= =========== ===========
</TABLE>
The aggregate maturities of notes payable to related parties as of December 31,
1996 are as follows:
1997 $ 882,613
1998 500,000
1999 -
2000 1,000,000
---------
$2,382,613
===========
F-16
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note H - Significant Customers
For the year ended December 31, 1995, three customers accounted for 68% (42%,
14% and 12%) of net sales.
The Company had one customer which accounted for 37% of consolidated net sales
in 1996.
One customer accounted for 39% of consolidated net sales during the six months
ended June 30, 1996 and 1997.
Note I - Acquisitions
1. DCT Component Systems, Inc.
On July 1, 1996, the Company acquired 1,343 shares of common stock of DCT,
representing 37.5% of DCT's outstanding stock in exchange for $1. Concurrent
with the transaction, the following agreements were executed.
o Stock Redemption Agreement - DCT entered into a stock redemption agreement
with its president whereby DCT at anytime has the option and upon death or
termination of employment is required to redeem the 269 shares owned by
him. Effective April 7, 1997 Noble acquired the 269 shares from the
president of DCT upon his severance from the Company thereby increasing
Noble's ownership to 45%.
o Purchase Option - The Company has an option, through July, 2001, to acquire
from certain shareholders of DCT, an additional 14.1% of DCT's outstanding
stock in exchange for $1.00.
Pursuant to the terms of the option agreement, the option cannot be
exercised until the later of the occurrence of the following events.
1) January 1, of the year following the write off of certain
intercompany debt between DCT and an affiliated company controlled
by the selling shareholders of DCT (see debt forgiveness
discussion below)
2) the payment by DCT of at least $100,000 principal amount pursuant
to a certain promissory note to a company controlled by the
selling shareholder of DCT.
o Put/Call Agreement - From July 1, 1998 through June 30, 2000, the selling
shareholders of DCT have the right to sell all, but not less than all, of
their shares to the Company. The price required to be paid by the Company
will be based on earnings before interest, taxes, depreciation and
amortization, with further modifications as defined, for the 12 months
preceding the date of the put, multiplied by a factor of three.
From July 1, 2000 through June 30, 2002, the Company has a call option on
all, but not less than all, of the shares owned by the selling
shareholders. The price is based on the same formula as the put price
except the multiple is four. If exercised, twenty five percent of the
purchase price is payable in cash with the balance payable in equal
quarterly installments over a five year period with interest at 10%.
F-17
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note I - Acquisitions (Continued)
1. DCT Component Systems, Inc. (Continued)
o Debt Forgiveness - The selling shareholders and DCT agreed to write-off and
forgive all existing intercompany and shareholder debt except for a
promissory note for $960,000. The intercompany debt was with a company
controlled by one of the selling shareholders. The amount and nature of
debt forgiven and written off during the year ended December 31, 1996 was
as follows:
Intercompany $15,325,865
Shareholders and former shareholders 1,515,579
----------
$16,841,444
===========
o Executive Bonus Pool - DCT adopted an Executive Bonus Pool (Pool), awards
from which are at the sole discretion of DCT's Board of Directors. The Pool
will be twenty percent of earnings before taxes, as defined. In
consideration for the forgiveness of the intercompany debt discussed above,
one-half of the bonus pool for the period January 1, 1997 through December
31, 1999 will be payable to an affiliate of the company controlled by the
selling shareholders. (See Note M)
o Management Agreement - The Company and DCT entered into a management
agreement whereby DCT will pay the Company $100,000 per year.
o Voting Agreement - The Company received irrevocable proxies from the other
shareholders of DCT providing the Company the authority to direct the vote
of the shareholder on all matters except with respect to the merger,
liquidation or sale of substantially all of DCT, or other extraordinary
matters.
o Indemnification Agreement - The Company agreed to indemnify the selling
shareholders and certain entities controlled by the selling shareholder
against 59.1% of any liabilities arising from claims which maybe brought
against the indemnitors arising from their guarantees of certain
indebtedness of DCT.
Condensed financial information of DCT as of December 31, 1996 and June 30, 1997
and for the year and six month period then ended, follows:
December 31, June 30, 1997
1996 (unaudited)
----------- -------------
Balance Sheet Data
Current Assets $ 7,188,030 $ 7,600,177
Current Liabilities $ 8,892,215 11,520,668
Equity (deficit) $(3,686,546) (3,879,896)
Operating Data
Net Sales $22,988,115 $13,239,791
Gross Profit $ 2,542,579 $ 1,399,063
Net loss $ (387,524) $ (145,542)
F-18
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note I - Acquisitions (Continued)
1. DCT Component Systems, Inc. (Continued)
The acquisition of the DCT shares has been accounted for under the equity method
of accounting, and accordingly the Company's proportionate share of DCT's
results of operations for the period from July 1, 1996 through December 31, 1996
is reflected in the accompanying financial statements as equity in losses of
unconsolidated affiliate.
2. Monroe Engineering Products, Inc.
Effective January 1, 1996, Noble acquired all of the outstanding shares of
Monroe Engineering Products, Inc. (Monroe) in exchange for $6,350,000 payable in
installments over 16 months. At December 31, 1996, $500,000 remains to be paid
which is due on April 30, 1997 and is guaranteed by the principal shareholder of
the Company. The Company also acquired the real estate utilized by Monroe for
$500,000 pursuant to the terms of a land contract which requires monthly
interest payments of $4,931 for two years ending May 1, 1998 at which point the
entire principal amount is due.
Simultaneously with the acquisition, the Company entered into an Employment and
Deferred Compensation Agreement with one of the selling shareholders providing
for the employment of such person by the Company for 28 months and at an annual
salary of $200,000 and payments of $2,000 per month for a three year period
commencing May 1, 1998.
The acquisition of Monroe has been accounted for under the purchase method, and
accordingly the results of operations of Monroe from January 1, 1996 are
included in the accompanying financial statements.
3. Vassar
Effective January 1, 1996, the Company acquired all of the common stock of
Vassar in exchange for $200,000.
In addition, the Company entered into consulting agreements with the selling
shareholders of Vassar whereby the Company will pay to such selling shareholders
$1,800,000 as follows: 24 monthly payments of $25,000 followed by sixty monthly
installments of $20,000. The Company's obligations under the agreement have been
collateralized by the equipment and fixtures at Vassar.
The shareholders of Vassar retain an option to repurchase 25% of the stock of
Vassar for $1 which expires when the Company's obligations under the consulting
agreements are discharged.
F-19
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note I - Acquisitions (Continued)
3. Vassar
In January, 1997 the Company and two of the selling shareholders representing
twenty percent of the commitment referred to above, amended their consulting
agreements. Pursuant to the terms of the amendment, these consultants will
receive an aggregate of $120,000 within thirty days after the closing of a
public offering of the Company's common stock. This payment will satisfy the
Company's obligations under the amendment. In March, 1997 two of the selling
shareholders sued the Company for payments allegedly owed pursuant to their
consulting agreements. The Company believes it was entitled to cease payments
under these agreements due to breaches of covenants not to compete. During the
year ended December 31, 1996, $120,000 was paid to these consultants. Since the
Company ceased payments, $75,000 has been accrued and is included in the
accompanying interim financial statements as of and for the six months ended
June 30, 1997.
The acquisition of Vassar has been accounted for as a purchase, and,
accordingly, the results of operations of Vassar from January 1, 1996 are
included in the accompanying financial statements.
4. Pro-Forma Information
The following unaudited pro forma consolidated results of operations for the
year ended December 31, 1995 is presented as if the Monroe and Vassar
acquisitions had been made at January 1, 1995. The unaudited pro forma
information is not necessarily indicative of either the results of operations
that would have occurred had the purchase been made at January 1, 1995 or the
future results of the combined operations.
Net sales $15,992,703
Net earnings $ 1,078,744
Earnings per share $ .40
Note J - New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Accounting Standards No. 128, Earnings Per Share ("Statement 128"),
which: (i) replaces the presentation of primary earnings per share (EPS) with a
presentation of basic EPS; (ii) requires dual presentation of basic and diluted
EPS on the face of the consolidated statements of income regardless of whether
basic and diluted EPS are the same; and (iii) requires a reconciliation of the
numerator and denominator used in computing basic and diluted EPS. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted EPS is computed in a manner similar to
fully diluted EPS pursuant to APB Opinion 15.
F-20
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note J - New Accounting Pronouncements (Continued)
Statement 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods; earlier application is not
permitted. Statement 128 requires restatement of all prior-period EPS data
presented. The adoption of this standard is not expected to have a material
effect on the disclosure of earnings per share in the financial statements.
The Company intends to adopt a stock option plan (The 1997 Plan) prior to the
completion of a planned public offering. The plan will provide for the grant to
employees, officers, directors, consultants and independent contractors
non-qualified stock options as well as for the grant to employees of qualified
stock options. The plan will have a ten year term. Under the 1997 plan, 700,000
shares of the Company's common stock will be reserved for issuance.
The Plan will be administered by the Compensation Committee of the Board of
Directors, which will have the authority, subject to certain limitations, to
grant options and to establish the terms and conditions for vesting and exercise
thereof. The exercise price of the incentive stock options granted will be no
less than the fair market value of the common stock on the date of grant. The
exercise price of its non-qualified options is required to be no less than the
fair market value of the common stock on the date of grant. The terms of the
options will not exceed ten years from the date of grant.
The Company intends to account for the stock option plan under APB Opinion No.
25, "Accounting for Stock Issued To Employees." The disclosures required by SFAS
No. 123, "Accounting for Stock Based Compensation" will be provided.
Note K - Preferred Stock
Effective December 31, 1996, in connection with the retirement by DCT of a
$1,000,000 promissory note to a related party through the exchange of 10,000
shares of DCT's 10% cumulative mandatory redeemable preferred stock, the Company
entered into an exchange agreement with the holder of the DCT preferred.
Pursuant to the agreement, at any time subsequent to the completion of an
initial public offering by Noble, the DCT preferred shares are convertible into
an equivalent number of preferred shares of Noble. The Noble preferred shares
will have similar rights and preferences as provided for by the DCT shares. On
April 1, 1997 the Company authorized 150,000 shares of preferred stock. At June
30, 1997, $925,000 of preferred shares were outstanding at DCT. (See Note M)
F-21
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note L - Industry Segments
In 1994 and 1995, the Company's operations were restricted to automotive
component supply.
Effective for the year ended December 31, 1996, the Company classifies its
operations into two industry segments: automotive component supply (Prestolock
and Vasser) and tooling component supply (Monroe). The Company's operations by
business segment for the year ended December 31, 1996 follows:
<TABLE>
<CAPTION>
Automotive Tooling
Component Component
Supply Supply Corporate Consolidated
---------- --------- --------- ------------
<S> <C> <C> <C> <C>
Net sales $11,088,560 $5,098,251 $ - $16,186,811
Operating profit (loss) 175,306 1,469,624 (1,132,815) 512,115
Identifiable assets 3,902,299 7,394,180 357,901 11,654,380
Depreciation and amortization 232,684 280,540 - 513,224
Capital expenditures 362,801 500,000 - 862,801
Investment in unconsolidated
subsidiary (95,239) - - (95,239)
Equity in loss of
unconsolidated subsidiary (95,239) - - (95,239)
</TABLE>
Note M - Subsequent Events
The following events occurred subsequent to December 31, 1996
o Skandy Corp. Acquisition - Effective January 1, 1997, the Company acquired
100% of the issued and outstanding common shares of Skandy Corp. (Skandy)
in exchange for 133,686 shares of the Company's stock. Skandy is a
manufacturers representative firm and was owned by a relative of the
principal shareholder of the Company. The acquisition of Skandy Corp. will
be accounted for in a manner similar to a pooling of interests. The 133,686
shares were valued at $49,500, which approximates Skandy's net book value
at the date of this acquisition.
o Utilase, Inc. - Effective March 1, 1997, Utilase Production Process, Inc. a
newly formed, wholly-owned subsidiary (Utilase) of Noble acquired certain
of the operating assets of Utilase, Inc. a wholly-owned subsidiary of DCT,
Inc. DCT, Inc. is controlled by the same principals who controlled DCT
(Note K) prior to the DCT acquisition by the Company. The purchase price
was $850,000 represented by a non-interest bearing note, collateralized by
the acquired assets, with $750,000 due on July 31, 1997 and $50,000 payable
on each of February 1, 1998 and 1999. The business acquired provides laser
welding, cutting and heat treating of metal products for the automotive
industry. The debt and assets acquired were recorded at approximately
$814,000, the discounted value of the note at 8.50%.
F-22
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note M - Subsequent Events (Continued)
o On April 7, 1997 the Company entered into a stock purchase agreement where
by the Company will acquire all of the outstanding stock of Utilase, Inc.
(see above). The stock purchase agreement provides for a purchase price of
$8,200,000 payable in cash from the proceeds of a public offering, and
$10,134,554 in subordinated promissory notes. Additionally, certain
individuals will receive payments of $1,400,000 in exchange for covenants
not to compete. The Company also agreed to issue 11,698 shares of its
common stock annually for a period of five years commencing in 1999, as
partial consideration for one of these covenants. Utilase will provide
laser-welded tailored blanks to the automotive industry.
o On March 15, 1997, Noble and the other shareholders of DCT modified certain
of the purchase and related agreements entered into on July 1, 1996 (Note
J) whereby subject to the occurrence of certain events; and in
contemplation of a proposed public offering of common stock by Noble, the
following will occur:
o On or before July 1, 1997, Noble shall pay $960,000 owed to the selling
shareholders by DCT pursuant to a promissory note with an original
maturity of June 30, 1998.
o Noble shall acquire the remaining shares of DCT in exchange for a
promissory note ("purchase note"). The shares shall be valued as of
December 31, 1998 pursuant to a put formula, but in no event less than
$1,000,000. The promissory note will be interest bearing and be due on
February 15, 1999 and will be collateralized by the acquired shares.
o The principal selling shareholder will serve as a member of Noble's
board of directors and its chairman until December 31, 1999.
o Noble will acquire the entity (CTIC) controlled by the selling
Shareholder of DCT, that owns the facilities in which DCT operates.
Pursuant to this agreement, Noble will assume the debt underlying
these facilities which approximates $4,600,000 at December 31, 1996.
($ at June 30, 1997)
o Upon payment of the purchase note, DCT's obligation to remit one-half
of the bonus pool, as defined, to an affiliate of the selling
shareholders, will terminate.
F-23
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note M - Subsequent Events (Continued)
o On August 26, 1997, Noble and the selling shareholders of Utilase and DCT
entered into an Agreement of Amendment whereby Noble's right to acquire the
Utilase shares and the March 15, 1997 agreement covering the acquisition
price of the DCT shares are contingent upon the simultaneous occurrence of
each of the following:
o Noble's completion of the purchase of the Utilase shares
o Noble's payment of the $850,000 note issued in connection with the
March 1, 1997 asset acquisition by UPP (the due date of which was
extended to the earlier of December 31, 1997 or the consumation of a
public offering of the Company's common stock)
o Noble's payment of $1,000,000 to the selling shareholders of DCT in
exchange for their shares
o Noble's purchase of CTIC from the selling shareholders of DCT
o Noble's payment of the $960,000 promissory note owed by DCT to
the selling shareholders and any accrued interest thereon.
Additionally, it was agreed that any failure by Noble to fulfill any of
its obligations under the various purchase agreements as amended,
underlying the acquisition of Utilase, and the asset acquisition
agreement entered into by UPP will render the agreements null and void.
o On April 1, 1997, the board of directors and shareholders of the
Company approved an increase in the number of authorized common shares
to 20,000,000.
o On September 11, 1997, the Board of Directors approved a 334.213 to 1
stock split. All share and per share data have been restated to reflect
to stock split.
o Effective July 30, 1997, Noble issued 38,000 shares of its Series A,
10% cumulative preferred shares and 64,841 common shares to an
off-shore investment fund, the majority owner of which is an entity
in which Noble's majority shareholder holds a 31% equity interest, in
exchange for $3,800,000.
o On June 30, 1997, The Holder of the DCT Preferred Shares (Note K)
notified the company of his intent to convert the shares to preferred
shares of the company concurrent with the closing of an initial public
offering of the Company's common stock.
o The issuance of the preferred and common shares effective July 30, 1997,
constituted a default under the $3,750,000 term loan discussed in Note D.
On September 11, 1997, the lender waived any default attributable to the
issuance of the new shares.
F-24
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Monroe Engineering Products, Inc.
We have audited the accompanying balance sheet of Monroe Engineering Products,
Inc. (a Michigan corporation) as of December 31, 1995, and the related
statements of earnings and retained earnings, and cash flows for each of the two
years in the period ended December 31, 1995. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Monroe Engineering Products,
Inc. as of December 31, 1995, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
Detroit, Michigan
March 4, 1997
F-25
<PAGE>
Monroe Engineering Products, Inc.
Balance Sheets
December 31, 1995
- --------------------------------------------------------------------------------
ASSETS
Current Assets
Cash $ 678,472
Accounts receivable - trade 353,131
Inventories 1,525,653
Prepaid expenses 14,026
---------
Total Current Assets 2,571,282
Property and Equipment
Machinery and equipment 107,268
Furniture and fixtures 61,315
Leasehold improvements 43,684
---------
212,267
Less accumulated depreciation (204,534)
---------
Net property and equipment 7,733
Other assets 53,442
---------
$2,632,457
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 163,333
Distribution payable 1,124,100
Accounts payable - trade 149,123
Accrued liabilities 13,200
---------
Total Current Liabilities 1,449,756
Long-Term Debt, net of current maturities 141,751
Shareholders' Equity
Common stock - voting, par value $10 per share:
authorized 2,600 shares, issued and outstanding
944 shares 9,440
Common stock - non-voting, par value $10 per share:
authorized 2,400 shares, issued and outstanding
906 shares 9,060
Retained earnings 1,022,450
---------
Total shareholders' equity 1,040,950
---------
$2,632,457
===========
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE>
Monroe Engineering Products, Inc.
Statements of Earnings and Retained Earnings
December 31,
- --------------------------------------------------------------------------------
1994 1995
--------- ---------
Net sales $5,254,071 $5,384,064
Cost of sales 2,078,653 2,164,544
--------- ---------
Gross profit 3,175,418 3,219,520
Selling, general and administrative expenses 1,745,729 2,094,402
--------- ---------
Operating profit 1,429,689 1,125,118
Other income (expense)
Interest expense (64,905) (36,556)
Interest income 9,697 27,804
Sundry, net (353) 7,737
--------- ---------
(55,561) (1,015)
--------- ---------
Net earnings 1,374,128 1,124,103
Retained earnings - beginning of year 615,849 1,589,977
Distributions (400,000) (1,691,630)
--------- ---------
Retained Earnings - end of year $1,589,977 $1,022,450
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
Monroe Engineering Products, Inc.
Statements of Cash Flows
December 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities
Net earnings $1,374,128 $1,124,103
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 30,912 21,049
Gain on sale of property and equipment - (7,634)
Changes in assets and liabilities
(Increase) decrease in accounts receivable (120,781) 76,261
Increase in inventories (84,814) (221,035)
Increase in prepaid expenses (58) (12,708)
Increase in other assets (3,000) (1,500)
Decrease (increase) in accounts payable (130,337) 49,996
Decrease in accrued liabilities 9,260 3,200
--------- ---------
Net cash provided by operating activities 1,075,310 1,031,732
Cash Flows From Investing Activities
Purchases of property and equipment (53,137) (1,668)
Proceeds from sale of property and equipment - 63,500
--------- ---------
Net cash (used in) provided by investing activities (53,137) 61,832
Cash Flows From Financing Activities
Repayment of loan payable - stockholder - (754,005)
Proceeds from loan payable - stockholder 754,005 -
Principal payments of long-term debt (913,333) (163,333)
Distributions to shareholders' (400,000) (567,530)
--------- ---------
Net cash used in financing activities (559,328) (1,484,868)
--------- ---------
Net increase (decrease) in cash 462,845 (391,304)
Cash at beginning of year 606,931 1,069,776
--------- ---------
Cash at end of year $1,069,776 $ 678,472
========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 64,905 $ 36,556
========== ===========
Non-cash financing activities:
During 1995, the Company declared a distribution of earnings in the amount
of $1,124,100 which was paid in 1996.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-28
<PAGE>
Monroe Engineering Products, Inc.
Notes to Financial Statements
December 31, 1994 and 1995
- --------------------------------------------------------------------------------
Note A - Nature of Operations
The Company is a distributor of various tooling components. The principal market
for its products is the United States.
Note B - Significant Accounting Policies
Inventories
Inventories consist of finished goods purchased from manufacturers. Inventory is
stated at the lower of cost (moving average) or market (net realizable value).
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for using
the straight line and various accelerated methods over the estimated useful
lives of the assets which range from 5 to 15 years for buildings and improvement
3 to 10 years for machinery and equipment.
Income Taxes
The shareholders of the Company have elected Subchapter S corporation status
under the Internal Revenue Code. Accordingly, federal income taxes on the net
earnings of the Company are payable personally by its shareholders.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Note C - Long-Term Debt
Notes payable at December 31, 1995 consisted of an unsecured note in the amount
of $171,500. Required monthly payments through September 2001 are $2,500 plus
interest at a rate of 5%.
Contract payable - claim settlement in the amount of $133,334 at December 31,
1995 represented the balance due on a settlement with a former employee.
F-29
<PAGE>
Monroe Engineering Products, Inc.
Notes to Financial Statements - Continued
December 31, 1994 and 1995
- --------------------------------------------------------------------------------
Note D - Lease Obligations
The Corporation leases its office facilities at a monthly rental amount of
$1,771. This lease expires June 30, 1999. Total rent paid on this lease was
$21,255 for the years ended December 31, 1994 and 1995.
The Corporation leases its warehouse facilities from a stockholder on a month to
month basis at a monthly rental amount of $2,500. Total rent paid on this lease
was $30,000 for the years ended December 31, 1994 and 1995.
Future minimum rental payments are as follows:
Year
-----
1996 $21,255
1997 21,255
1998 21,255
1999 10,628
-------
$74,393
========
Note E - Related Party Transactions
Included in interest expense is $54,005 and $27,156 paid to a stockholder during
the years ended December 31, 1994 and 1995, respectively. These amounts were
paid in connection with a $700,000 advance in 1994 which was paid in 1995.
Note F - Significant Customers and Suppliers
Major Customers
For the years ended December 31, 1994 and 1995, 15.5% and 14.8%,
respectively, of the corporation's sales were to one customer in the
machine tool industry.
Major Suppliers
For the years ended December 31, 1994 and 1995, 83.3% and 81.3%,
respectively, of the materials inventory was purchased from two suppliers.
For the years ended December 31, 1994 and 1995, approximately 76% of the
Company's revenue was derived from sales of these two suppliers' product line.
Note G - Sale of the Company
Effective January 1, 1996 all of the Company's outstanding shares were acquired
by Noble International, Ltd. (Noble) in exchange for a $6,350,000 installment
note.
F-30
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
DCT Component Systems, Inc.
We have audited the accompanying balance sheets of DCT Component Systems, Inc.
(a Michigan corporation) as of December 31, 1995 and 1996 and the related
statements of operations, shareholders' deficit and cash flows for each of the
three years in the period ended December 31, 1996. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe 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 consolidated financial position of DCT Component
Systems, Inc. as of December 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Detroit, Michigan
May 9, 1997 (except for Note M
as to which the date is September 15, 1997)
F-31
<PAGE>
DCT Component Systems, Inc.
Balance Sheets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30,
December 31, 1997
ASSETS 1995 1996 (unaudited)
---------- ---------- ----------
<S> <C> <C> <C>
Current Assets
Cash $ 3,875 $ 608,563 $ 517,600
Accounts receivable
Trade (net of allowance of $186,000
in 1995 and $125,000 in 1996 and
$131,733 at June 30, 1997) 2,395,917 3,318,382 3,620,241
Related parties 407,048 233,392 231,177
Inventories 2,310,426 2,255,388 2,349,693
Unbilled customer tooling 82,120 419,065 638,901
Prepaid expenses and other assets 179,723 150,209 117,534
Deferred income taxes - 196,000 118,000
Notes receivable, current maturities 7,031 7,031 7,031
---------- ---------- ----------
Total Current Assets 5,386,140 7,188,030 7,600,177
Property and Equipment - net 4,766,500 4,234,833 3,881,072
Note Receivable, net of current maturities 36,248 29,217 26,730
---------- ---------- ----------
$10,188,888 $11,452,080 $11,507,979
============ ============ ============
Current Liabilities
Note payable to bank $ 2,576,298 $ 2,896,076 $ 4,045,538
Current maturities of long-term debt 2,787,052 982,425 2,763,655
Accounts payable
Trade 3,213,302 3,854,128 3,910,813
Related parties 277,358 225,990 361,906
Accrued liabilities 1,222,092 933,596 438,756
---------- ---------- ----------
Total Current Liabilities 10,076,102 8,892,215 11,520,668
Long-term Debt, net of current maturities 3,263,125 3,603,411 1,350,207
Notes Payable - Related Parties 16,638,127 960,000 960,000
Deferred Income Taxes - 683,000 632,000
Commitments and Contingencies (Note I) - - -
Redeemable Preferred Stock
$100 par value, authorized 10,000 shares,
issued and outstanding 10,000 and 9,250
shares at December 31, 1996 and
June 30, 1997 - 1,000,000 925,000
Shareholders' Deficit
Common stock - $1 par value, authorized -
200,000 shares issued and outstanding 2,000 at
December 31, 1995 and 3,582 shares at December 31,
1996 and June 30, 1997 2,000 3,582 3,582
Additional paid-in capital 857,250 17,345,112 17,345,112
Accumulated deficit (20,647,716) (21,035,240) (21,228,590)
---------- ---------- ----------
Total shareholders' deficit (19,788,466) (3,686,546) (3,879,896)
---------- ---------- ----------
$10,188,888 $11,452,080 $11,507,979
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
DCT Component Systems, Inc.
Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
Years Ended December 31, June 30,
------------------------------------------- ---------------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales $27,719,743 $23,335,664 $22,988,115 $10,655,537 $13,239,791
Cost of sales 28,523,220 22,724,107 20,445,536 9,438,517 11,840,728
---------- ---------- ---------- ---------- ----------
Gross (loss) profit (803,477) 611,557 2,542,579 1,217,020 1,399,063
Selling, general and
administrative expenses 5,406,531 3,196,468 1,961,680 1,025,549 1,006,688
---------- ---------- ---------- ---------- ----------
Operating (loss) profit (6,210,008) (2,584,911) 580,899 191,471 392,375
Other (income) expense
Interest expense 1,328,758 2,300,562 937,337 418,345 513,175
Gain (loss) on sale of
property and equipment 493,207 (10,326) 4,721 - -
Interest income (87,276) (70,376) (3,349) (953) (1,060)
Sundry, net (28,112) 6,427 (105,286) (92,367) (1,198)
---------- ---------- ---------- ---------- ----------
1,706,577 2,226,287 833,423 325,025 510,917
---------- ---------- ---------- ---------- ----------
Loss before income taxes (7,916,585) (4,811,198) (252,524) (133,554) (118,542)
Income tax expense - deferred - - 135,000 - 27,000
---------- ---------- ---------- ----------- ----------
Net loss $ (7,916,585) $ (4,811,198) $ (387,524) $ (133,554) $ (145,542)
============ ============ ============ ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
DCT Component Systems, Inc.
Statement of Shareholders' Deficit
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional
Common Paid-in Accumulated
Stock Capital Deficit Total
-------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Balance January 1, 1994 $2,000 $ 857,250 $ (7,919,933) $(7,060,683)
Net loss - - (7,916,585) (7,916,585)
------ ---------- ----------- ----------
Balance December 31, 1994 2,000 857,250 (15,836,518) (14,977,268)
Net loss - - (4,811,198) (4,811,198)
------ ---------- ----------- ----------
Balance December 31, 1995 2,000 857,250 (20,647,716) (19,788,466)
Debt forgiveness - 16,489,444 - 16,489,444
Issuance of 1,582 shares of
common stock 1,582 (1,582) - -
Net loss - - (387,524) (387,524)
------ ---------- ----------- ----------
Balance December 31, 1996 3,582 17,345,112 (21,035,240) (3,686,546)
Preferred stock dividends (unaudited) - - (47,808) (47,808)
Net loss (unaudited) - - (145,542) (145,542)
------ ---------- ----------- ----------
Balance June 30, 1997
(unaudited) $3,582 $17,345,112 $(21,228,590) $(3,879,896)
======= ============ ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
DCT Component Systems, Inc.
Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Years Ended December 31, Ended June 30,
------------------------------------- ----------------------
1994 1995 1996 1996 1997
----------- ----------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows (Used In) Provided By Operating Activities
Net earnings (loss) (7,916,585) $(4,811,198) $ (387,524) $ (133,554) $ (145,542)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities
Deferred income taxes - - 135,000 - 27,000
Depreciation and amortization 1,811,874 1,583,115 719,941 359,700 370,587
Loss (gain) on sale of property and equipment 493,207 (10,326) 4,721 -
Changes in assets and liabilities
(Increase) decrease in accounts receivable (2,157,596) 3,676,352 (829,585) (627,295) (299,644)
(Increase) decrease in inventories (958,266) 1,745,335 (281,907) 128,230 (314,141)
Decrease (increase) in prepaid expenses 174,418 (80,721) 29,514 117,190 32,675
Decrease in notes receivable 375,175 339,834 7,031 2,274 2,487
(Decrease) increase in accounts payable (418,488) (1,850,345) 589,458 511,029 192,601
(Decrease) increase in accrued liabilities (528) 730,990 (288,496) (718,501) (517,648)
----------- ----------- ---------- ---------- ----------
Net cash (used in) provided by operating
activities (8,596,789) 1,323,036 (301,847) (360,927) (651,625)
Cash Flows Used In Investing Activities
Purchases of property and equipment (870,950) (37,011) (201,431) (85,615) (16,826)
Proceeds from sale of property and equipment 757,583 19,121 8,416 - -
----------- ----------- ---------- ---------- ----------
Net cash used in investing activities (113,367) (17,890) (193,015) (85,615) (16,826)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE>
DCT Component Systems, Inc.
Statements of Cash Flows - Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Years Ended December 31, Ended June 30,
----------------------------------- ----------------------
1994 1995 1996 1996 1997
----------- ---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows Provided By (Used In) Financing Activities
Dividends paid - - - - (25,000)
Preferred stock redemption - - - - (75,000)
Repayment of notes payable - related parties (1,000,000) - - - -
Proceeds from notes payable - related parties 11,639,218 4,359,431 795,298 373,555 -
Principal payments of long-term debt (4,497,094) (2,651,912) (2,835,040) (920,680) (471,974)
Proceeds from long-term debt 1,930,963 282,509 2,819,514 - -
Net proceeds (repayments) note payable to bank 732,925 (3,412,746) 319,778 1,042,209 1,149,462
--------- --------- ---------- ---------- ----------
Net cash provided by (used in) financing activities 8,806,012 (1,422,718) 1,099,550 495,084 577,488
--------- --------- ---------- ---------- ----------
Net increase (decrease) in cash 95,856 (117,572) 604,688 48,542 (90,963)
Cash - beginning of period 25,591 121,447 3,875 3,875 608,563
--------- --------- ---------- ---------- ----------
Cash - end of period $ 121,447 $ 3,875 $ 608,563 $ 52,417 $ 517,600
=========== ========== ========== ========== ===========
Supplemental Disclosure of Cash Flow Information
Cash paid for interest $ 1,383,646 $1,084,759 $ 960,298 $ 418,345 $ 540,085
============ ========== ========== ========== ===========
</TABLE>
Supplemental Disclosure of Non-Cash Financing Activities
During 1996, various related parties forgave $16,841,444 in notes payable,
net of $80,776 in accounts receivable, in conjunction with the sale of 37.5%
of DCT's common stock to Noble International, Ltd. See Note K.
During 1996, a $1,000,000 demand note payable to an officer of a company
related through common ownership was exchanged for $1,000,000 in mandatory
redeemable preferred stock. See Note L.
Dividends of $22,808 payable on the preferred stock are included in accrued
liabilities at June 30, 1997.
The accompanying notes are an integral part of these financial statements.
F-36
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note A - Nature of Operations
DCT Component Systems, Inc. (DCT) is a Michigan based manufacturer that
primarily produces stamped parts for automotive related companies located
primarily in North America.
Note B - Summary of Accounting Policies
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
Interim Financial Data
The consolidated financial statements and related notes thereto as of June 30,
1997 and for the six months ended June 30, 1996 and 1997 are unaudited. The
information reflects all adjustments, consisting only of normal recurring
entries, that, in the opinion of management, are necessary to present fairly the
financial position, results of operations and cash flows of DCT for the periods
indicated. Results of operations for the interim periods are not necessarily
indicative of the results of operations for the full fiscal year.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market (net
realizable value).
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for using
the straight line and various accelerated methods over the estimated useful
lives of the assets which range from 5 to 40 years for buildings and
improvements and 3 to 15 years for furniture and fixtures and machinery and
equipment. Expenditures for maintenance and repairs are charged to expense
as incurred.
Unbilled Customer Tooling
The costs to manufacture and supply customer-owned tooling are recorded as
unbilled tooling costs when incurred. Amounts incurred are charged to cost of
sales and revenue is recognized when the tooling is shipped and billed to
customers.
Income Taxes
DCT records the provision for federal and state income taxes pursuant to
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases, and the effect of operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the period that includes the enactment date.
F-37
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the three
months ended March 31, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note B - Summary of Accounting Policies (Continued)
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from the estimates.
Fair Value of Financial Instruments
DCT's financial instruments include long-term debt. The carrying value of the
long-term debt approximates its estimated fair value based upon quoted market
prices.
Note C - Inventories
The major components of inventories were as follows:
<TABLE>
<CAPTION>
December 31, June 30, 1997
1995 1996 (unaudited)
---------- ---------- --------------
<S> <C> <C> <C>
Raw materials and purchased parts $ 879,187 $ 663,046 $ 683,622
Work in process 488,663 717,212 561,666
Finished goods 670,481 875,130 1,104,405
Perishable tooling 272,095 - -
--------- --------- ---------
$ 2,310,426 $ 2,255,388 $2,349,693
=========== =========== ==========
Note D - Property and Equipment
Property and equipment consisted of the following:
December 31, June 30, 1997
1995 1996 (unaudited)
---------- ---------- ---------------
Leasehold improvements $ 694,279 $ 694,279 $ 683,000
Machinery and equipment 10,739,419 10,924,198 10,952,303
Furniture and fixtures 229,826 229,826 229,826
---------- ---------- ----------
11,663,524 11,848,303 11,865,129
Less accumulated depreciation 6,897,024 7,613,470 7,984,057
---------- ---------- ----------
$ 4,766,500 $ 4,234,833 $ 3,881,072
=========== =========== ===========
</TABLE>
Note E - Note Payable to Bank and Long-Term Debt
DCT has a secured line of credit facility with a lender, which allows it to
borrow up to $7,000,000 based upon a percentage of certain balance sheet
accounts. $2,896,076 was outstanding at December 31, 1996 ($4,045,538 at June
30, 1997) and $383,209 ($177,081 at June 30, 1997) was available. Interest is
payable monthly at 2.625% over the bank's prime lending rate (effective rate of
10.875% at December 31, 1996). This credit facility expires on June 1, 1998.
F-38
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note E - Note Payable to Bank and Long-Term Debt (Continued)
Long-term debt consisted of the following:
June 30,
December 31, 1997
1995 1996 (unaudited)
--------- --------- ----------
Term loan, payable in monthly
installments of $46,992, plus interest
at the bank's prime lending rate plus
2.625% (10.875% at December 31, 1996)
with a balloon payment of $1,785,690 on
June 1, 1998. The loan is collateralized
by all the assets of DCT. $ - $2,584,560 $2,302,608
Term loans, payable to former
shareholders in monthly installments of
$10,000, including interest at a rate of
8%, increasing to $15,000 and $20,000 in
August, 1997 and August, 1998,
respectively. The loans are
collateralized by stock of DCT. 529,287 314,108 265,875
Unsecured term loan, payable to a former
shareholder, calling for semi-annual
interest payments until June 1, 2000
when the principal balance is due. A
portion of this loan was forgiven during
1996. (See Note K.) 171,829 65,924 65,924
Unsecured term loan, calling for monthly
interest payments at a rate of 12%,
through July 1, 1998, thereafter
principal payments of $6,879 plus
interest at a rate of 8% through June 1,
2003. A portion of this loan was
forgiven during 1996. (See Note K.) 884,133 412,763 412,763
Term loans, payable in monthly
installments of $31,542, including
interest at a rate of 8.25%. The loans
are collateralized by various property
and equipment and are due in November,
2000. 1,506,740 1,208,481 1,066,692
Demand loan, calling for monthly
interest payments at the bank's prime
lending rate plus 1%. The loan was
cross-collateralized with the line of
credit and other bank debt. The
principal was due and paid in 1996. 1,093,750 - -
Demand loan, calling for monthly
interest payments at the bank's prime
lending rate plus 1.5%. The loan was
cross-collateralized with the line of
credit and other bank debt. The loan was
due and paid in 1996. 124,176 - -
F-39
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note E - Note Payable to Bank and Long-Term Debt (Continued)
December 31, June 30, 1997
1995 1996 unaudited)
--------- --------- -----------
Term loans, payable in monthly
installments of $33,336 plus interest at
the bank's prime lending rate plus 1%.
The loan was cross-collateralized with
the line of credit and other bank debt.
The loan was due and paid in 1996. 593,223 - -
Unsecured term loan, payable in monthly
installments of $31,250 plus interest at
a rate of 8.75%. The loan was due and
paid in 1996. 125,000 - -
Unsecured demand loan, calling for
monthly interest payments at a rate of
12%. As of December 31, 1996, the loan
was paid off by the issuance of
$1,000,000 of mandatory redeemable
preferred stock. See Note L. 1,000,000 - -
Unsecured non-interest bearing term
loan, payable in monthly installments of
$6,207. The loan was due and paid in
1996. 22,039 - -
--------- --------- ---------
6,050,177 4,585,836 4,113,862
Less current portion 2,787,052 982,425 2,763,655
--------- --------- ---------
$3,263,125 $3,603,411 $1,350,207
=========== ========== ===========
The aggregate maturities of long-term debt by year at December 31, 1996 are as
follows:
1997 $ 982,425
1998 1,091,001
1999 987,802
2000 909,599
2001 477,420
Thereafter 137,589
---------
$4,585,836
===========
The $2,584,560 ($2,302,608 at June 30, 1997) term loan agreement and credit
facility contain restrictions on acquisitions, dividend payments, and advances
to officers and shareholders. At December 31, 1996 and June 30, 1997, all
long-term debt and the notes payable to related parties are subordinated to the
line of credit and the $2,584,560 term loan. At December 31, 1996 DCT was in
default of certain covenants contained in the secured line of credit facility
and the $2,584,560 term loan. On April 29,1997, the lender agreed to waive the
defaults under these agreements (See Note M).
F-40
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note F - Income Taxes
The tax effects of temporary differences that give rise to significant deferred
tax assets and liabilities at December 31, 1996 and 1995 are as follows:
Deferred Deferred
Tax Tax
December 31, 1996 Assets Liabilities
----------------- --------- -----------
Property and equipment depreciation $ - $683,000
Allowance for doubtful accounts 43,000 -
Inventory 87,000 -
Other, net 66,000 -
-------- ---------
$196,000 $683,000
========= =========
Deferred Deferred
Tax Tax
December 31, 1995 Assets Liabilities
----------------- --------- -----------
Property and equipment depreciation $ - $365,000
Allowance for doubtful accounts 63,000 -
Inventory 40,000 -
Net operating loss carryover 5,255,000 -
Other, net 154,000 -
--------- --------
5,512,000 365,000
Less: Valuation allowance 5,147,000 -
--------- --------
$ 365,000 $365,000
=========== =========
F-41
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note F - Income Taxes (Continued)
Deferred Deferred
Tax Tax
June 30, 1997 Assets Liabilities
---------------- --------- ----------
Property and equipment depreciation $ - $632,000
Allowance for doubtful accounts 45,000 -
Inventory - -
Net operating loss carryover 83,000 -
Other, net 73,000 -
-------- --------
201,000 632,000
Less: Valuation allowance (83,000) -
-------- --------
$118,000 $632,000
======== ========
A reconciliation of the expected income tax benefit computed at statutory rates
to the actual benefit reflected in the accompanying consolidated financial
statements follows.
<TABLE>
<CAPTION>
Years ended December 31, Six Months
Ended June 30,
1994 1995 1996 1996 1997
---------- ---------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
Expected tax (benefit) at
statutory rates $(2,692,000) $(1,636,000) $ (85,000) $(45,000) $(56,000)
Increase (decrease) in valuation
allowance 2,692,000 1,636,000 (5,147,000) 45,000 83,000
Tax effect of debt forgiveness
included as a component of
additional paid in capital - - 5,360,000 - -
Other, net - - 7,000 - -
---------- ---------- --------- -------- -------
Income tax expense $ - $ - $ 135,000 $ - $ 27,000
============ ============ =========== ======== ========
</TABLE>
Note G - Related Party Transactions
DCT leases facilities under a month-to-month operating lease from an entity
related through common ownership. The lease currently requires monthly payments
of $47,000. The total amount of rent paid to the related party during the years
ended December 31, 1994, 1995 and 1996 was $562,000, $564,000, and $564,000,
respectively, and $282,000 for each of the six months periods ended June 30,
1996 and 1997.
DCT has sales to and purchases from an entity related through common ownership.
Sales to this company were approximately $210,000, $451,000 and $328,000 in
1994, 1995 and 1996, respectively. Sales for the six months ended June 30, 1996
and 1997 were $109,038 and $61,460. DCT purchased approximately $620,000, $0 and
$233,000 in 1994, 1995 and 1996, respectively. Purchases for the six months
ended June 30, 1996 and 1997 were $62,612 and $125,971.
During the year ended December 31, 1996 and for the six months ended June 30,
1997 and 1996, DCT paid management fees of $83,333, $33,332 and $58,999,
respectively, to Noble International, Ltd., a 37.5% (45% at June 30, 1997)
shareholder of DCT. (Note K)
F-42
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note G - Related Party Transactions (Continued)
Notes payable - related parties consisted of the following:
December 31, June 30, 1997
1995 1996 (unaudited)
--------- --------- -------------
Unsecured term loan, payable to an
entity related through common ownership,
calling for monthly interest only
payments at a rate of 10%. The loan is
due on June 30, 1998. $ - $960,000 $960,000
Unsecured demand loan, payable to an
entity related through common ownership,
bearing interest at 8%. This loan was
forgiven during 1996. (See Note K.) 15,490,567 - -
Unsecured demand loans, payable to
stockholders, bearing no interest. These
loans were forgiven during 1996. (See
Note K.) 1,147,560 - -
---------- -------- --------
$16,638,127 $960,000 $960,000
=========== ======== ========
Note H - Significant Customer
DCT has one customer which accounts for 10% or more of net sales. Sales to this
customer were approximately $6,042,000, $7,041,000 and $7,260,000 during 1994,
1995 and 1996, respectively. ($4,199,000 and $5,124,000 for the six months ended
June 30, 1996 and 1997), respectively.
Note I - Commitments and Contingencies
DCT and an entity related through common ownership ("related entity") were
co-makers on two notes payable to the General Retirement System of the City of
Detroit ("Retirement System"). The notes aggregated $34,000,000 with interest at
10%.
In October, 1996, the related entity and the Retirement System restructured the
debt whereby the related entity issued $23,650,000 of 15% cumulative preferred
stock and a note for $15,000,000 which bears interest at 12.5%. The note matures
in July 2003 and is collateralized, in part, by the Company's common stock.
The proceeds from the original notes, and the preferred stock and debt issued in
connection with the restructuring in October of 1996 have been recorded by the
related entity.
Although the related entity has confirmed its intention to repay the note, DCT
remains liable as a co-maker. (See Note M)
F-43
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note J - Profit Sharing Plan
DCT maintains a profit-sharing plan for substantially all employees established
pursuant to Internal Revenue Code Section 401(k). DCT at its discretion, may
match up to 6% of participating employees' annual wages. Participating employees
may also contribute up to 6% of their annual compensation. There were no
contributions made to the plan by DCT during the years ended December 31, 1994,
1995 and 1996, and the six months ended June 30, 1996 and 1997.
Note K - Change in Ownership
On July 1, 1996, Noble International, Ltd. (Noble) acquired 1,343 common shares
of DCT, representing 37.5% of The Company's outstanding stock in exchange for
$1. Concurrent with the transaction, the following agreements were executed.
o Stock Redemption Agreement - DCT entered into a stock redemption agreement
with its president whereby the Company at its discretion or upon his death
or termination will redeem the 269 shares owned by him. The purchase price,
which is payable at DCT's option in a lump sum or in five annual
installments is based on the change in book value per share (as defined) of
DCT subsequent to January 1, 1997. Effective April 7, 1997, Noble acquired
the 269 shares from the president of DCT upon his severance from DCT
thereby increasing Noble's ownership to 45%.
o Purchase Option - Noble has an option, through July, 2001, to acquire from
the selling stockholders of DCT, an additional 14.1% of DCT's outstanding
stock in exchange for $1.00. Upon exercise of the option, Noble would own
59.1% of the issued and outstanding shares of DCT.
Pursuant to the terms of the option agreement, the option cannot be
exercised until the later of the occurrence of the following events.
1) January 1, of the year following the write off of certain intercompany
debt between DCT and an affiliated company controlled by the selling
shareholders of DCT (see debt forgiveness discussion below)
2) the payment by DCT of at least $100,000 principal amount pursuant to a
certain promissory note to a company controlled by the selling
shareholder of DCT.
In the event the option is exercised, Noble must simultaneously acquire a 59.1%
interest in a partnership controlled by the selling shareholders of DCT. The
partnership owns the facilities out of which DCT operates. (See Note G)
o Put/Call Agreement - The selling stockholders have the right to put all,
but not less than all, of their shares to Noble. The put price is based on
earnings before interest, taxes, depreciation and amortization, with
further modifications as defined, for the twelve months preceding the date
of the put, multiplied by a factor of three. The put will be effective from
July 1, 1998 through June 30, 2000.
F-44
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note K - Change in Ownership (Continued)
Noble has a call option on all, but not less than all, of the shares owned
by the selling shareholders. The call price is based on the same formula as
the put price except the multiple is four. If exercised, twenty five
percent of the purchase price is immediately due with the balance payable
in equal quarterly installments over a five year period with interest at
10%. The call will be effective from July 1, 2000 through June 30, 2002.
o Debt Forgiveness - The selling stockholders and DCT agreed to write-off all
existing intercompany and stockholder debt except for a promissory note for
$960,000. The intercompany debt including interest of $1,244,538, was with
a company controlled by the selling stockholders. The amount and nature of
debt forgiven was as follows:
Intercompany $15,325,865
Stockholder and former stockholders 1,515,579
----------
$16,841,444
============
The debt forgiven exceeded the available net operating loss carryover by
approximately $1,035,000. This amount has been used to reduce the tax basis
in property and equipment and accordingly, the amount reflected as
additional contributed capital is net of $352,000 of deferred income taxes.
o Executive Bonus Pool - DCT adopted an Executive Bonus Pool (Pool), awards
from which are at the sole discretion of the Board of Directors. The Pool
will be twenty percent of earnings before taxes, as defined. In
consideration for the forgiveness of the intercompany debt discussed above,
one-half of the bonus pool for the period January 1, 1997 through December
31, 1999 will be payable to the company controlled by the selling
shareholders that forgave the related debt.
o Management Agreement - Noble and DCT entered into a management agreement
whereby the Company will pay Noble $100,000 per year. Payments under this
agreement amounted to $83,333 for 1996.
o Voting Agreement - Noble received irrevocable proxies from the remaining
shareholders providing Noble the authority to direct the vote of the
shareholder on all matters except: The merger, liquidation or sale of
substantially all of DCT; the acquisition of a business entity for greater
than $250,000 in cash; or any single capital expenditure in excess of
$250,000.
o Indemnification Agreement - Noble agreed to indemnify the selling
shareholders and certain entities controlled by one of the selling
shareholder against 59.1% of any liabilities arising from claims which may
be brought against the indemnitors arising from their guarantees of certain
indebtedness of DCT.
F-45
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note L - Redeemable Preferred Stock
On December 31, 1996 DCT authorized 10,000 shares of $100 par value preferred
stock and issued them in full payment of a $1,000,000 promissory note owed to an
officer of a subsidiary of Noble. Dividends on the preferred stock are
cumulative and stated at 10%. Concurrently with the issuance of the preferred
stock, DCT and the holder entered into a put agreement whereby the holder can
put 375 shares at par to DCT quarterly through October, 2001, and can put 2,500
shares at par during December 2001. Unexercised puts can be accumulated and
exercised subsequent to the original put date. Simultaneously with the execution
of these agreements, Noble and the holder executed an exchange agreement whereby
the holder, at any time after the completion of an initial public offering by
Noble, can convert the 10,000 preferred shares of DCT into the equivalent number
of Noble preferred shares. During the six months ended June 30, 1997, $75,000 of
this preferred stock was redeemed.
Note M - Subsequent Events
On September 4, 1997 and September 11, 1997, DCT received waivers of defaults
under the term loan agreement and credit facility (Note E) relating to the
payment of dividends on, and redemptions of, the preferred stock.
Pursuant to the terms of resolutions adopted by the Retirement System (Note I)
on June 18, 1997 and September 10, 1997, DCT was discharged,
contemporaneously with the closing of the Final DCT Acquisition, as a
co-maker on The Notes and the collateral interests in the Company's Common
Stock was released.
F-46
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Utilase, Inc.
We have audited the accompanying balance sheets of Utilase, Inc. (a Michigan
corporation and a wholly owned subsidiary of DCT Companies, Inc.) as of December
31, 1996 and 1995, and the related statements of operations, shareholder's
equity and cash flows for each of the three years in the period ended December
31, 1996. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Utilase, Inc. as of December
31, 1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
Detroit, Michigan
May 12, 1997 (except for Note L,
as to which the date is September 15, 1997)
F-47
<PAGE>
Utilase, Inc.
Balance Sheets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30,
December 31, 1997
ASSETS 1995 1996 (unaudited)
--------- --------- ----------
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 900 $ 405,972 $ 1,127,719
Accounts receivable, net of allowance of $2,000 in
1995 and $24,000 in 1996 and at June 30, 1997 1,525,313 1,638,747 2,229,423
Inventories 192,470 233,605 160,735
Prepaid expenses and other 21,436 20,389 85,952
Note receivable - current portion - - 836,333
--------- --------- ----------
Total Current Assets 1,740,119 2,298,713 4,440,162
--------- --------- ----------
Property and Equipment, net 3,362,422 4,928,930 6,959,247
Other Assets 61,739 61,104 110,217
Note Receivable - Related Parties, net 3,565,753 - -
--------- --------- ----------
$8,730,033 $7,288,747 $11,509,626
========== ========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Note payable to bank $1,545,302 $ - $ 841,688
Accounts payable
Bank overdraft 119,596 - -
Trade 473,782 635,225 2,516,192
Related parties 96,355 239,201 25,256
Accrued liabilities 71,925 291,619 410,879
Deferred income taxes 140,000 70,000 70,000
Federal income tax payable 249,611 351,953 319,000
Current maturities of long-term debt 429,996 789,999 380,695
--------- --------- ----------
Total Current Liabilities 3,126,567 2,377,997 4,563,710
Note Payable - Related Parties - Net 3,284,799 1,250,893 2,826,867
Long-Term Debt, net of current maturities 1,009,171 1,536,503 957,647
Deferred income taxes 129,000 177,000 177,000
Commitments and Contingencies (Notes H and K) - - -
Shareholder's Equity
Common stock - $1 par value, 50,000 shares
authorized 1,000 shares issued and outstanding 1,000 1,000 1,000
Additional contributed capital 1,588,314 1,703,414 1,703,414
Retained earnings (accumulated deficit) (408,818) 241,940 1,279,988
--------- --------- ----------
Total Shareholder's Equity 1,180,496 1,946,354 2,984,402
--------- --------- ----------
$8,730,033 $7,288,747 $11,509,626
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-48
<PAGE>
Utilase, Inc.
Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
Years Ended December 31, June 30,
---------------------------------------------- ----------------------
1994 1995 1996 1996 1997
--------- --------- --------- ---------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales $5,725,098 $6,115,760 $9,305,436 $4,205,451 $6,704,864
Cost of sales 3,976,792 4,718,559 5,804,356 2,373,034 3,453,293
--------- --------- --------- --------- ---------
Gross profit 1,748,306 1,397,201 3,501,080 1,832,417 3,251,571
Selling and administrative expenses 1,302,439 1,790,567 2,059,630 1,131,820 1,496,152
--------- --------- --------- --------- ---------
Operating profit 445,867 (393,366) 1,441,450 700,597 1,755,419
Other income (expense)
Gain on sale of equipment - 1,135,478 - - 4,759
Miscellaneous (income expense),
net 88,793 36,694 132,374 2,494 20,008
Interest income 129,823 397,169 38,633 - 112,279
Interest expense (299,509) (555,355) (631,746) (293,613) (289,417)
--------- --------- --------- --------- ---------
(80,893) 1,013,986 (460,739) (296,107) (152,371)
--------- --------- --------- --------- ---------
Earnings before
income taxes 364,974 620,620 980,711 404,490 1,603,048
Income tax expense 369,700 211,011 329,953 138,000 565,000
--------- --------- --------- --------- ---------
Net earnings (loss) $ (4,726) $ 409,609 $ 650,758 $ 266,490 $1,038,048
=========== =========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-49
<PAGE>
Utilase, Inc.
Statements of Shareholders' Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Retained
Additional Earnings
Common Contributed (Accumulated
Stock Capital Deficit) Total
------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 $1,000 $1,588,314 $ (813,701) $ 775,613
Net loss - - (4,726) (4,726)
------ --------- --------- ---------
Balance at December 31, 1994 1,000 1,588,314 (818,427) 770,887
Net earnings - - 409,609 409,609
------ --------- --------- ---------
Balance at December 31, 1995 1,000 1,588,314 (408,818) 1,180,496
Rent absorbed by affiliated
company (Note D) - 115,100 - 115,100
Net earnings - - 650,758 650,758
------ --------- --------- ---------
Balance at December 31, 1996 1,000 1,703,414 241,940 1,946,354
Net earnings (unaudited) - - 1,038,048 1,038,048
------ --------- --------- ---------
Balance at June 30, 1997
(unaudited) $1,000 $1,703,414 $1,279,988 $2,984,402
======= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-50
<PAGE>
Utilase, Inc.
Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31, Six Months Ended June 30,
------------------------------------ -------------------------
1994 1995 1996 1996 1997
-------- --------- --------- ---------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings (loss) $ (4,726) $ 409,609 $ 650,758 $ 266,490 $1,038,048
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities
Depreciation and amortization 540,064 519,908 558,185 288,341 235,179
Gain on sale of equipment - (1,135,478) - - (4,759)
Deferred income taxes (benefit) 280,900 (38,600) (22,000) - -
Rent absorbed by affiliated Company - - 115,100 55,700 -
Imputed interest income - - - - (23,040)
Changes in assets and liabilities
Accounts payable and accrued liabilities 160,582 5,790 523,913 521,147 1,786,282
Accounts receivable 530,718 (602,652) (113,434) 60,406 (590,676)
Prepaid expenses and other assets 23,486 16,191 1,682 12,426 (114,676)
Inventories (43,031) (9,895) (41,135) (735) 72,870
Income taxes payable 88,800 160,811 102,342 (111,611) (32,953)
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities 1,576,793 (674,316) 1,775,411 1,092,164 2,366,275
Cash Flows Provided by (Used In) Investing Activities
Additions to property and equipment (795,460) (1,738,588) (2,124,693) (1,929,574) (3,074,030)
Issuance of notes receivable - related party,
net of collections (1,322,187) (388,148) 3,565,753 641,811 -
Proceeds from disposal of equipment - 1,240,000 - - -
--------- --------- --------- --------- ---------
Net cash used in investing activities (2,117,647) (886,736) 1,441,060 (1,287,763) (3,074,030)
</TABLE>
F-51
<PAGE>
Utilase, Inc.
Statements of Cash Flows - Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Years Ended December 31, Ended June 30,
---------------------------------- ------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows From Financing Activities
Bank overdraft - 119,596 (119,596) (119,596) -
Proceeds from long-term debt 500,000 - 1,536,500 1,192,335 132,261
Repayment of long-term debt (388,333) (322,500) (649,165) - (1,120,421)
Net borrowings (repayment) under notes payable to bank 620,181 (780,381) (1,545,302) 629,923 841,688
Net borrowings (repayment) of notes payable - related party (150,285) 2,504,528 (2,033,836) (1,357,075) 1,575,974
--------- --------- --------- --------- ---------
Net cash provided by (used) financing activities 581,563 1,521,243 (2,811,399) 345,587 1,429,502
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents 40,709 (39,809) 405,072 149,988 721,747
Cash and cash equivalents beginning of period - 40,709 900 900 405,972
--------- --------- --------- --------- ---------
Cash and cash equivalents end of period $ 40,709 $ 900 $ 405,972 $ 150,888 $1,127,719
=========== ========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-52
<PAGE>
Utilase, Inc.
Notes to Financial Statements
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note A - Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Utilase, Inc. ("Utilase") is a manufacturer and fabricator of automotive parts
using laser welding technology. Utilase is a wholly owned subsidiary of DCT,
Inc. Through February 28, 1997, Utilase was comprised of two divisions, Blank
Welding Technologies and Production Services (Note L). The principal market for
its products is the United States.
Significant Accounting Policies
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
Interim Financial Data
The consolidated financial statements and related notes thereto as of June 30,
1997 and for the six months ended June 30, 1996 and 1997 are unaudited. The
information reflects all adjustments, consisting only of normal recurring
entries, that, in the opinion of management, are necessary to present fairly the
financial position, results of operations and cash flows of Utilase for the
periods indicated. Results of operations for the interim periods are not
necessarily indicative of the results of operations for the full fiscal year.
Cash Equivalents
For purposes of the statement of cash flows, Utilase considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.
Inventory Valuation
Inventories are valued at lower of cost or market. Cost is determined using the
first-in, first-out (FIFO) method for raw materials and the specific
identification method for all other inventories.
Property and Equipment
Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful lives of the assets which range
from 5 to 40 years for improvements and 3 to 15 years for machinery and
equipment.
Fair Value of Financial Instruments
Utilase's financial instruments include long-term debt. The carrying value of
the long-term debt approximates its market value based upon quoted market
prices.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-53
<PAGE>
Utilase, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note B - Inventories
The major components of inventories were as follows:
December 31, June 30, 1997
1995 1996 (unaudited)
-------- -------- --------------
Raw materials $ 13,880 $ 33,015 $ 31,245
Finished goods 122,984 195,790 129,490
Spare parts 55,606 4,800 -
-------- -------- --------
$192,470 $233,605 $160,735
========= ========= =========
Note C - Property and Equipment
Property and equipment at December 31 is as follows:
December 31, June 30, 1997
1995 1996 (unaudited)
--------- --------- -------------
Machinery and equipment $3,716,990 $4,519,645 $2,621,137
Leasehold and improvements 646,053 646,053 75,459
Office and computer equipment 493,601 496,667 176,070
Construction-in-process 723,436 2,042,408 5,061,438
--------- --------- ---------
5,580,080 7,704,773 7,934,104
Less - Accumulated depreciation (2,217,658) (2,775,843) (974,857)
--------- --------- ---------
$3,362,422 $4,928,930 $6,959,247
========== ========== ==========
Note D - Related Party Transactions
Purchases and Accounts Payable
Utilase purchases stamping services from parties that are related through common
ownership. These purchases totaled $319,170, $280,905 and $218,071 in 1994, 1995
and 1996, respectively and resulted in accounts payable of $90,283 and $9,613 at
December 31, 1995 and 1996 and $15,868 at June 30, 1997. These purchases totaled
$232,215 and $138,217 for the six months ended June 30, 1996 and 1997.
Employee Lease Expense
Effective May 1, 1994, Utilase began leasing salaried employees from a
company related through common ownership. The cost of leased employees,
including related payroll taxes and fringe benefits, for the years ended
December 31, 1994, 1995 1996 was $328,392, $641,838 and $777,522, respectively
and is included in selling and administrative expenses in the accompanying
statements of operations. During the six months ended June 30, 1996 and 1997,
lease expense was $499,182 and $747,928, respectively.
F-54
<PAGE>
Utilase, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note D - Related Party Transactions (Continued)
Effective January 1, 1995, Utilase began leasing hourly employees from a company
related through common ownership. The cost of leased hourly employees, including
related payroll taxes and fringe benefits, was $1,867,028, $2,096,413 for the
years ended December 31, 1995 and 1996, respectively, and is included as cost of
sales in the accompanying statements of operations. The cost of leased hourly
employees for the six months ended June 30, 1996 and 1997, was $867,257 and
$1,114,033, respectively.
Selling and Administrative
Beginning in 1995, selling and administrative expenses include allocations to
Utilase of corporate administrative expenses incurred by Utilase's parent
company. Such allocations amounted to $805,200 and $626,485 for the years ended
December 31, 1995 and 1996 and $308,741 and $304,959 for the six months ended
June 30, 1996 and 1997, respectively.
Note Receivable
At December 31, 1995, Utilase had a note receivable from a related entity
totaling $3,565,753. This note was unsecured with interest at 10% in 1995 and
1996, respectively. Total interest income related to this note was $145,823 and
$397,169 in 1994 and 1995, respectively.
Notes Payable
At December 31, 1995, 1996 and June 30, 1997, Utilase had notes payable to DCT,
Inc. totaling $3,284,799, $1,250,893 and $2,826,867, respectively. Total
interest expense related to these notes was $38,196, $171,492 and $247,605 for
the year ended December 31, 1994, 1995 and 1996, respectively, and $100,381 and
$196,297 for the six months ended June 30, 1996 and 1997.
Facilities Rental
Utilase rents a facility from an entity related through common ownership. The
total amount of rent paid to the related party during each of the years ended
December 31, 1994 and 1995 was $118,800. During the year ended December 31,
1996, $3,700 was paid and no further rent was charged, accordingly $115,100
($55,700 at June 30, 1996) has been reflected as expense and additional paid in
capital. This facility was used by the Production Services Division (see
Note L).
Note E - Note Payable to Bank
Outstanding debt under a revolving line-of-credit with a bank totaled $1,545,302
at December 31, 1995 (none at December 31, 1996 and $841,688 at June 30, 1997).
The interest rate on Utilase's line-of-credit is prime plus 2% (10.25% at
December 31, 1996 and 10.5% at June 30, 1997) and is collateralized by eligible
accounts receivable and inventory, as defined in the agreement.
F-55
<PAGE>
Utilase, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note F - Long-Term Debt
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
June 30,
December 31, 1997
1995 1996 (unaudited)
--------- --------- -----------
<S> <C> <C> <C>
Note payable to bank secured by equipment
interest at the prime rate plus 2%
(effective rate of 10.25% at
December 31, 1996 and June 30,
1997), payable in monthly
installments of $8,333 plus interest
through May 1999 $ 366,667 $ 250,002 $ -
Note payable to bank secured by
equipment and guaranteed by
shareholders/officers of Utilase,
interest at 7.6% payable in monthly
installments of $27,500 plus
interest through December 31, 1998 1,072,500 687,500 -
Note payable to bank collateralized by
accounts receivable, inventory and
equipment. Payable in monthly
installments of $30,000 plus
interest at 2% above the bank's
prime lending rate (effective rate
of 10.25% at December 31, 1996 and
June 30, 1997). - 1,389,000 1,209,000
Notes payable in sixty monthly
installments of $2,750, including
interest from 8.9% to 9.9% collateralized
by equipment. - - 129,342
--------- --------- ---------
1,439,167 2,326,502 1,338,342
Less current maturities (429,996) (789,999) (380,695)
--------- --------- ---------
$1,009,171 $1,536,503 $ 957,647
=========== =========== ==========
</TABLE>
The aggregate maturities of long-term debt by year are as follows:
1997 $790,000
1998 790,000
1999 437,502
2000 309,000
--------
$2,326,502
===========
F-56
<PAGE>
Utilase, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note G - Income Taxes
Prior to May 1, 1994, Utilase was a Subchapter S corporation under the
provisions of the Internal Revenue Code. As such, taxable income of Utilase was
included in the individual tax returns of shareholders for federal income tax
purposes. As of May 1, 1994, Utilase elected to be taxed as a Subchapter C
Corporation under the provisions of the Internal Revenue Code, and recorded
deferred tax assets and liabilities based on the difference between the
financial statements bases and tax bases of corresponding liabilities and assets
using enacted tax rates in effect for the year in which the differences are
expected to reverse.
Utilase files its tax return as part of the DCT, Inc. consolidated group. DCT,
Inc. allocates tax amounts to its individual subsidiaries to approximate the tax
provision, assets and liabilities that would be recorded if the entities filed
their tax returns on a separate company basis.
The provision (credit) for federal and state income taxes consists of the
following:
<TABLE>
<CAPTION>
Six months
Year Ended December 31, Ended June 30,
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Currently payable $ 88,800 $249,611 $351,953 $138,000 $565,000
Deferred 280,900 (38,600) (22,000) - -
-------- -------- -------- -------- --------
Total provision (credit) $369,700 $211,011 $329,953 $138,000 $565,000
========= ========= ========= ========= =========
</TABLE>
The tax effects of temporary differences that give rise to significant deferred
tax liabilities at December 31, 1995 and 1996 follows.
December 31,
----------------------------
1995 1996
-------- --------
Property and equipment depreciation $129,000 $177,000
Change from cash to accrual basis of
tax accounting 140,000 70,000
-------- --------
$269,000 $247,000
======== ========
Note H - Operating Leases
The Company leases a facility under an operating lease expiring February 15,
1999. Total rent expense under the lease for the years ended December 31, 1994,
1995 and 1996 was $106,968, $148,566 and $145,658, respectively. Total rent
expense for the six months ended June 30, 1996 and 1997 was $71,574 and
$144,112, respectively.
Minimum future rental payments under this non-cancelable operating lease are:
1997 $148,167
1998 148,167
1999 12,347
In 1997, the Company entered into an eight year operating lease for a facility
in Canada requiring monthly payments of approximately $20,500 ($27,900
Canadian).
F-57
<PAGE>
Utilase, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note I - Significant Customers
Substantially all of the Utilase's revenues resulted from sales to major
automotive suppliers in North America. During 1994, two customers accounted for
48%, and during 1995 and 1996 three customers accounted for 51% of revenues.
Three customers accounted for 56% of revenues for the six months ended June 30,
1996 and five customers accounted for 72% of revenues for the six months ended
June 30, 1997.
Note J - Health Insurance
Utilase is self-insured for a portion of the health insurance provided to
employees. Utilase is liable for the first $75,000 of claims per employee each
year. Claims exceeding $75,000 are paid by an insurance carrier. As of December
31, 1995 and 1996, Utilase has recorded an accrual which management believes is
adequate to cover the costs of claims incurred under this program.
Note K - Commitments and Contingencies
Utilase is involved in various legal proceedings which have arisen in the
ordinary course of its business. Management believes that the outcome of these
proceedings will not have a materially adverse effect on Utilase's financial
position or results of operations.
Utilase, its parent and other affiliated companies were co-makers or guarantors
on two notes payable to the General Retirement System of The City of Detroit
("Retirement System"). The notes aggregated $34,000,000 with interest at 10%
through July 2003. Additional interest accrues at 1.25% through July 2003, at
which time a balloon payment is due for the remaining principal and interest.
In October, 1996, the parent company and the Retirement System restructured the
debt whereby the parent company issued $23,650,000 of preferred stock and a note
for $15,000,000 which bears interest at 12.5%. The note matures in July 2003,
and is collateralized, in part, by Utilase's common stock, property and
equipment.
The proceeds for the original notes and the preferred stock and debt issued in
connection with the restructuring in October 1996 have been recorded by the
parent company.
Although the parent company has confirmed its intention to repay the note, the
Company remains contingently liable. (Note L)
Note L - Subsequent Events
Effective March 1, 1997 Utilase sold the operating assets of its Production
Services Division to a subsidiary of Noble International, Ltd. (Noble) in
exchange for a $850,000, non-interest bearing promissory note. The note is
payable in installments of $750,000 due no later than July 31, 1997 and $50,000
each on February 1, 1998 and 1999. The face amount of the note has been
discounted at 8.5%. The Company recorded a gain of $4,759 on the sale.
On April 7, 1997, the shareholders of Utilase entered into an agreement to sell
all of the issued and outstanding shares of Utilase to Noble. The stock purchase
agreement provides for a purchase price of $8,200,000 payable in cash from the
proceeds of a proposed public offering of Noble and $10,134,555 in subordinated
promissory notes. Additionally, certain individuals will receive payments of
$1,400,000 in exchange for covenants not to compete.
F-58
<PAGE>
Utilase, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996 and for the six
months ended June 30, 1996 and 1997 (unaudited)
- --------------------------------------------------------------------------------
Note L - Subsequent Events (Continued)
On August 26, 1997 the selling shareholder of Utilase and Noble entered into an
Agreement of Amendment whereby Noble's right to acquire the Utilase shares are
contingent upon the simultaneous occurrence of certain events, including Noble's
payment of the $850,000 promissory note the due date of which was extended to
the earlier of December 31, 1997 or the consummation of a public offering of the
Company's common stock. Any failure by Noble to fulfill any of its obligations
under the purchase agreements, as amended, underlying the acquisitions of
Utilase and its Production Services Division will render the agreements null and
void.
Pursuant to the terms of resolutions adopted by the Retirement System (Note K)
on June 18, 1997 and September 10, 1997, the Retirement System discharged,
contemporaneously with the closing of the Utilase Acquisition, its
security interests in Utilase's common stock and its lien against the assets of
Utilase.
F-59
<PAGE>
================================================================================
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 representations must not
be relied upon as having been authorized by the Company or the Underwriters.
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, to any person or by anyone in any jurisdiction in such offer or
solicitation would be unlawful. Neither the delivery of this Prospectus nor any
offer or sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company or that
the information contained herein is correct as of any time subsequent to the
date hereof.
-------------------------
TABLE OF CONTENTS
Prospectus Summary.......................................................... 3
Risk Factors................................................................ 9
Use of Proceeds............................................................. 14
Dividend Policy............................................................. 15
Dilution.................................................................... 16
Capitalization.............................................................. 17
Pro Forma Financial Data.................................................... 18
Selected Financial Data..................................................... 24
Management's Discussion and Analysis of
Financial Condition and Results of Operations............................. 25
Business.................................................................... 30
Management.................................................................. 38
Principal Shareholders...................................................... 42
Certain Transactions........................................................ 43
Description of Capital Stock................................................ 46
Shares Eligible for Future Sale............................................. 48
Underwriting................................................................ 49
Legal Matters............................................................... 50
Experts..................................................................... 50
Additional Information ..................................................... 51
Index to Financial Statements............................................... F-1
-------------------------
Until , 1997 (25 days after the date hereof) all dealers effecting
transactions in the Common Stock, 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.
================================================================================
<PAGE>
================================================================================
3,300,000 Shares
[LOGO] NOBLE
INTERNATIONAL, LTD
Common Stock
---------------
PROSPECTUS
---------------
BlueStone Capital Partners, L.P. Rodman & Renshaw, Inc.
___________, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses Of Issuance And Distribution
The expenses of this offering are estimated to be as follows. All of such
expenses will be paid by the Registrant.
ITEM
- -------------------------------------------------------------------------------
Securities and Exchange Commission Registration Fee...................$12,700
National Association of Securities Dealers, Inc. Filing Fee............ 4,691
AMEX Fees..............................................................27,500
Printing Expenses(1)(2)................................................
Transfer Agent and Registrar Fees(1)(2)................................
Accounting Fees and Expenses(1)(2).....................................
Legal Fees and Expenses(1)(2) (not including Blue Sky).................
Blue Sky Fees and Expenses(1)(2).......................................
Miscellaneous Expenses(1)(2)...........................................
--------
Total(1)(2).......................................................
========
- --------------------
(1) Estimated.
(2) To be filed by Amendment.
Item 14. Indemnification of Directors and Officers
Sections 561 through 571 of the Michigan Business Corporation Act set forth
the conditions and limitations governing the indemnification of officers,
directors and other persons as follows:
"Section 561. INDEMNIFICATION FOR EXPENSES, JUDGMENTS, FINES AND
SETTLEMENTS; PLEA OF NOLO CONTENDERE, EFFECT. A corporation shall have
power to 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 and
whether formal or informal, other than an action by or in the right of the
corporation, by reason of the fact that he or she 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, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise, whether for profit or not,
against expenses, including attorneys' fees, judgments, penalties, fees and
amounts paid in settlement actually and reasonably incurred by him or her
in connection with such action, suit or proceeding if the person acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation or its shareholders, and
with respect to any criminal action or proceeding, if the person had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit, or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, does not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the
best interests of the corporation
II-1
<PAGE>
or its shareholders, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
"Section 562. INDEMNIFICATION FOR EXPENSE INCURRED FOR DEFENSE OR
SETTLEMENT OF LITIGATION; NEGLIGENCE OR MISCONDUCT; EXTENT OF
INDEMNIFICATION. A corporation has the power to indemnify a person who was
or is a party or is threatened to be made a party to a threatened, pending,
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he or she 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,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise,
whether for profit or not, against expenses, including attorneys' fees, and
amounts paid in settlement actually and reasonably incurred by the person
in connection with the action or suit, if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to
the best interests of the corporation or its shareholders. Indemnification
shall not be made for a claim, issue, or matter in which the person has
been found liable to the corporation except to the extent authorized in
section 564c.
"Section 563. SUCCESS IN DEFENSE OF LITIGATION. To the extent that a
director, officer, employee, or agent of a corporation has been successful
on the merits or otherwise in defense of an action, suit, or proceeding
referred to in section 561 or 562, or in defense of a claim, issue, or
matter in the action, suit, or proceeding, he or she shall be indemnified
against actual and reasonable expenses, including attorneys' fees, incurred
by him or herein connection with the action, suit or proceeding and an
action, suit or proceeding brought to enforce the mandatory indemnification
provided in this subsection.
"Section 564a. DETERMINING PERMISSIBILITY OF INDEMNIFICATION AND
REASONABLENESS OF EXPENSES.
(1) An indemnification under section 561 or 562, unless ordered by the
court, shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee, or agent is proper in the circumstances because he or she has met
the applicable standard of conduct set forth in sections 561 and 562 and
upon an evaluation of the reasonableness of expenses and amounts paid in
settlement. This determination and evaluation shall be made in any of the
following ways:
(a) By a majority vote of a quorum of the board consisting of
directors who are not parties or threatened to be made parties to the
action, suit, or proceeding.
(b) If a quorum cannot be obtained trader subdivision (a), by
majority vote of a committee duly designated by the board and consisting
solely of 2 or more directors not at the time parties or threatened to be
made parties to the action, suit, or proceeding.
(c) By independent legal counsel in a written opinion, which
counsel shall be selected in 1 of the following ways:
(i) By the board or its committee in the manner prescribed in
subdivision (a) or (b).
(ii) If a quorum of the board cannot be obtained under
subdivision (a) and a committee cannot be designated under subdivision (b),
by the board.
(d) By all independent directors who are not parties or threatened
to be made parties to the action, suit, or proceeding.
(e) By the shareholders, but shares held by directors, officers,
employees, or agents who are parties or threatened to be made parties to
the action, suit, or proceeding may not be voted.
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<PAGE>
(2) In the designation of a committee under subsection (1)(b) or in the
selection of independent legal counsel under subsection (1)(c)(ii), all
directors may participate.
(3) If a person is entitled to indemnification under section 561 or 562
for a portion of expenses, including reasonable attorneys' fees, judgments,
penalties, lines, and amounts paid in settlement, but not for the total
amount, the corporation may indemnify the person for the portion of the
expenses, judgments, penalties, fines, or amounts paid in settlement for
which the person is entitled to be indemnified.
"Section 564b. ADVANCEMENT OF REASONABLE EXPENSES PRIOR TO FINAL
DISPOSITION; CONDITIONS.
(1) A corporation may pay or reimburse the reasonable expenses incurred
by a director, officer, employee, or agent who is a party or threatened to
be made a party to an action, suit, or proceeding in advance of final
disposition of the proceeding if all of the following apply:
(a) The person furnishes the corporation a written affirmation of
his or her good faith belief that he or she has met the applicable standard
of conduct set forth in sections 561 and 562.
(b) The person furnishes the corporation a written undertaking,
executed personally or on his or her behalf, to repay the advance if it is
ultimately determined that he or she did not meet the standard of conduct.
(c) A determination is made that the facts then known to those
making the determination would not preclude indemnification under this act.
(2) The undertaking required by subsection (1)(b) must be an unlimited
general obligation of the person but need not be secured.
(3) Determinations and evaluations under this section shall be made in
the manner specified in section 564a.
"Section 564c. APPLICATION TO COURT FOR INDEMNIFICATION. A director,
officer, employee, or agent of the corporation who is a party or threatened
to be made a party to an action, suit, or proceeding may apply for
indemnification to the court conducting the proceeding or to another court
of competent jurisdiction. On receipt of an application, the court after
giving any notice it considers necessary may order indemnification if it
determines that the person is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or not
he or she met the applicable standard of conduct set forth in sections 561
and 562 or was adjudged liable as described in section 562, but if he or
she was adjudged liable, his or her indemnification is limited to
reasonable expenses incurred.
"Section 565. NONEXCLUSIVITY OF STATUTE; RIGHTS OF OTHER PERSONS;
CONTINUATION OF RIGHTS.
(1) The indemnification or advancement of expenses provided under
sections 561 to 564c is not exclusive of other rights to which a person
seeking indemnification or advancement of expenses may be entitled under
the articles of incorporation, bylaws, or a contractual agreement. The
total amount of expenses advanced or indemnified from all sources combined
shall not exceed the amount of actual expenses incurred by the person
seeking indemnification or advancement of expenses.
(2) The indemnification provided for in sections 561 to 565 continues
as to a person who ceases to be a director, officer, employee, or agent and
shall inure to the benefit of the heirs, personal representatives, and
administrators of the person.
"Section 567. INSURANCE AGAINST LIABILITY. A 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,
partner,
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<PAGE>
trustee, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against
him or her and incurred by him or her in any such capacity or arising out
of his or her status as such, whether or not the corporation would have
power to indemnify him or her against liability under sections 561 to 565.
"Section 569. CORPORATION; CONSTRUCTION OF REFERENCES TO. For purposes
of sections 561 to 567, "corporation" includes all constituent corporations
absorbed in a consolidation or merger and the resulting or surviving
corporation, so that a person who is or was a director, officer, partner,
trustee, employee, or agent of such constituent corporation or is or was
serving at the request of the constituent corporation as a director,
officer, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, or other enterprise whether for profit
or not shall stand in the same position under the provisions of this
section with respect to the resulting or surviving corporation as the
person would if he or she had served the resulting or surviving corporation
in the same capacity.
"Section 571. DEFINITIONS. For the purposes of sections 561 to 567:
(a) "Fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan.
(b) "Other enterprises" shall include employee benefit plans.
(c) "Serving at the request of the corporation" shall include any
service as a director, officer, employee, or agent of the corporation which
imposes duties on, or involves services by, the director, officer,
employee, or agent with respect to an employee benefit plan, its
participants, or its beneficiaries.
(d) A person who acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be considered to have acted
in a manner "not opposed to the best interests of the corporation or its
shareholders" as referred to in sections 561 and 562."
Article VIII of the Registrant's Articles of Incorporation limit the
liability for breaches of fiduciary duty by directors to the fullest extent
provided by law as follows:
"A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for a breach of
fiduciary duty as a director, except for liability (a) for any breach of
the director's duty of loyalty to the corporation or its shareholders; (b)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (c) resulting from a violation of
ss.551(1) of the Michigan Business Corporation Act; or (d) for any
transaction from which the director derived an improper personal benefit.
In the event the Michigan Business Corporation Act is amended to authorize
corporate action further eliminating liability of directors of a
corporation, this Article VIII shall be deemed to be amended to include
such further elimination of liability such that the liability of directors
of the corporation is limited to the fullest extent permitted by the
Michigan Business Corporation Act, as so amended. Any repeal, modification
or adoption of any provisions in these Articles of Incorporation
inconsistent with this Article shall not adversely affect any right or
protection of a director of the corporation existing at the time of such
repeal, modification or adoption."
Article VII of the Registrant's Bylaws provides for indemnification of the
Registrant's directors, officers and agents, to advance expenses for defense of
litigation and to purchase and maintain insurance on behalf of any director or
officer of the Registrant 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 director or officer against
any liability under the provisions of such Article or Michigan law and authorize
the Board to extend such indemnity to others as follows:
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<PAGE>
"7.1. Third Party Proceeding. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to a
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal,
other than an action by or in the right of the Corporation, by reason of
the fact that he or she is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director,
officer, partner, or trustee of another foreign or domestic corporation,
partnership, joint venture, trust, or other enterprise, whether for profit
or not, against expenses, including attorneys' fees, judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by
him or her in connection with the action, suit, or proceeding, If the
person acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the Corporation or its
shareholders, and the person submits a written claim for indemnification as
hereinafter provided, and with respect to a criminal action or proceeding,
if the person had no reasonable cause to believe his or her conduct was
unlawful, and the person submits a written claim for indemnification as
hereinafter provided. The termination of an action, suit, or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, does not, of itself, create a presumption that the
person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the Corporation
or its shareholders, or, with respect to a criminal action or proceeding,
did not have reasonable cause to believe that his or her conduct was
unlawful. The right to indemnification conferred in this Section shall be a
contract right. The Corporation may, by action of its Board of Directors,
or by action of any person to whom the Board of Directors has delegated
such authority, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indemnification
of directors and officers.
"7.2. Derivative Shareholder Liability. The Corporation shall indemnify
any person who was or is a party to or is threatened to be made a party to
a threatened, pending, or completed action or suit by or in the right of
the Corporation to procure a judgment in its favor by reason of the fact
that he or she is or was a director or officer of the Corporation, or is or
was serving at the request of the Corporation as a director, officer,
partner, or trustee of another foreign or domestic corporation,
partnership, joint venture, trust, or other enterprise, whether for profit
or not, against expenses, including attorneys' fees, and amounts paid in
settlement actually and reasonably incurred by the person in connection
with the action or suit, if the person acted in good faith and in a manner
the person reasonably believed to be in or not opposed to the best
interests of the Corporation or its shareholders, and the person submits a
written claim of indemnification as hereinafter provided. However,
indemnification shall not be made for a particular action, issue, or matter
in which the person has been found liable to the Corporation unless and
only to the extent that the court in which the action or suit was brought
(or another court of competent jurisdiction) has determined upon
application that, despite the adjudication of liability but in view of all
the relevant circumstances, the person is fairly and reasonably entitled to
indemnification for the reasonable expenses he or she incurred. The right
to indemnification conferred in this Section shall be a contract right. The
Corporation may, by action of its Board of Directors, or by action of any
person to whom the Board of Directors has delegated such authority, provide
indemnification to employees and agents of the Corporation with the same
scope and effect as the foregoing indemnification of directors and
officers.
"7.3. Determination of Indemnification. Any indemnification under
Section 7.1 or 7.2 of this Article, unless ordered by a court, shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in
the circumstances because he or she has met the applicable standard of
conduct set forth in Section 7.1 or 7.2 of this Article and upon an
evaluation of the reasonableness of expenses and amounts paid in
settlement. This determination and evaluation shall occur within 30 days
after a written claim for indemnification has been received by the
Corporation, and shall be made in any of the following ways:
(1) By a majority vote of a quorum of the board consisting of directors
who are not parties or threatened to be made parties to the action, suit or
proceeding;
(2) If the quorum described in subparagraph (1) is not obtainable, then
by a majority of a committee duly designated by the board and consisting
solely of two or more directors not at the time parties or threatened to be
made parties to the action, suit, or proceeding;
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<PAGE>
(3) By independent legal counsel in a written opinion, which counsel
shall be selected in one of the following ways:
(A) By the board or its committee in the manner prescribed in
subparagraphs (1) and (2),
(B) If a quorum of the board cannot be obtained under subparagraph
(1) and a committee cannot be designated under subparagraph (2), by the
board;
(4) By all independent directors who are not parties or threatened to
be made parties to the action, suit, or proceeding; and
(5) By the shareholders, but shares held by directors, officers,
employees, or agents who are parties or threatened to be made parties to
the action, suit, or proceeding may not be voted.
In the designation of a committee under subparagraph (2) or in the
selection of independent legal counsel under subparagraph (3)(B), all
directors may participate.
If a person is entitled to indemnification under Sections 7.1 or 7.2 of
this Article for a portion of expenses, including reasonable attorneys'
fees, judgments, penalties, fines, and amounts paid in settlement, but not
for the total amount thereof, the Corporation shall indemnify the person
for the portion of the expenses, judgments, penalties, fines, or amounts
paid in settlement for which the person is entitled to be indemnified.
"7.4. Payment of Defense Expenses in Advance. The Corporation shall pay
or reimburse the reasonable expenses incurred by a director or officer who
is a party or threatened to be made a party to an action, suit, or
proceeding in advance of final disposition of the proceeding if all of the
following apply:
(1) The person furnishes the Corporation a written affirmation of his
or her good faith belief that he or she has met the applicable standard of
conduct set forth in Sections 7.1 and 7.2.
(2) The person furnishes the Corporation a written undertaking,
executed personally or on his or her behalf to repay the advance if it is
ultimately determined that he or she did not meet the standard of conduct.
(3) A determination is made that the facts then known to those making
the determination would not preclude indemnification under this section or
the Michigan Business Corporation Act.
The undertaking shall be by unlimited general obligation of the person
on whose behalf advances are made but need not be secured. Determination of
payments under Section 7.4 shall be made in the manner described in Section
7.3(1)-(5).
"7.5. Right of Officer or Director to Bring Suit. If a claim for
indemnification under this Section is not paid in full by the Corporation
within forty-five (45) days after a written claim has been received by the
Corporation, the officer or director who submitted the claim (hereinafter
the "indemnitee") may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in
whole or in part in any such suit or in a suit brought by the Corporation
to recover advances, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such claim. In any action brought by
the indemnitee to enforce a right under this Section (other than an action
brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required
undertaking, if any, has been tendered to the Corporation) it shall be a
defense that, and in any action brought by the Corporation to recover
advances the Corporation shall be entitled to recover such advances if, the
indemnitee has not met the applicable standard of conduct set forth in
Section 7.1 or Section 7.2. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of
such action that indemnification of the indemnitee is proper in the
circumstances because he or she has met the applicable standard of conduct
set forth in Sections 7.1 or 7.2, nor an actual determination by the
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<PAGE>
Corporation (including its Board of Directors, independent legal counsel,
or its shareholders) that the indemnitee has not met such applicable
standard of conduct, shall be a defense to an action brought by the
indemnitee or create a presumption that the indemnitee has not met the
applicable standard of conduct. In any action brought by the indemnitee to
enforce a right hereunder or by the Corporation to recover payments by the
Corporation of advances, the burden of proof shall be on the Corporation.
"7.6. Other Indemnification. The indemnification or advancement of
expenses provided under Sections 1 through 5 is not exclusive to other
rights to which a person seeking indemnification or advancement of expenses
may be entitled under the Corporation's Articles of Incorporation, bylaws,
or a contractual agreement. However, the total amount of expenses advanced
or indemnified from all sources combined shall not exceed the amount of
actual expenses incurred by the person seeking indemnification or
advancement of expenses. The indemnification provided for in Sections 7.1
through 7.5 continues as to a person who ceases to be a director, officer,
partner, or trustee and shall inure to the benefit of the heirs, executors,
and administrations of the person.
"7.7. Liability Insurance. The Corporation may 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, partner, trustee, employee, or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity or arising out of his or her status as
such, whether or not the Corporation would have power to indemnify him or
her against liability under the Michigan Business Corporation Act or this
section.
"7.8. Definitions. For purposes of this section, "the Corporation"
includes all constituent corporations absorbed in a consolidation or merger
and the resulting or surviving corporation, so that a person who is or was
a director, officer, employee, or agent of the constituent corporation or
is or was serving at the request of the constituent corporation as a
director, officer, partner, trustee, employee, or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other
enterprise whether for profit or not shall stand in the same position under
the provisions of this paragraph with respect to the resulting or surviving
corporation as the person would if he or she had served the resulting or
surviving corporation in the same capacity.
"7.9. Employee Benefit Plans. For purposes of this section, "other
enterprises" shall include employee benefit plans; "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit
plan; and "serving at the request of the Corporation" shall include any
service as a director or officer of the Corporation which imposes duties
on, or involves services by, the director or officer with respect to an
employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he or she reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit
plan shall be considered to have acted in a manner "not opposed to the best
interests of the Corporation or its shareholders" as referred to in
Sections 7.1 and 7.2.
"7.10. Severability. The invalidity or unenforceability of any
provision of this Article VII shall not effect the validity or
enforceability of the remaining provisions of this Article VII."
Reference is made to Section __ of the Underwriting Agreement, a copy of
which is filed as part of Exhibit 1.1 to the Registration Statement, for
information concerning indemnification arrangements among the Registrant and the
Underwriters.
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Item 15. Recent Sales Of Unregistered Securities
No securities of the Registrant which were not registered under the
Securities Act of 1933, as amended, have been issued or sold by the Registrant
within the past three years except for the following:
<TABLE>
<CAPTION>
Name or Class of Number of
Persons Date of Sale Shares Consideration
- --------------------------- ---------------------- ---------------------- ---------------------------------
<S> <C> <C> <C>
Robert J. Skandalaris 1/1/96 66,843 Issued as an antidilution
adjustment in connection with
the Prestolock Acquisition.
Mark A. Davis 1/1/96 267,371 Issued for services valued at
$32,000.
Prestolock shareholders 1/1/96 2,673,704 Issued pursuant to a Stock
Exchange Agreement between Noble
and Prestolock.
Richard G. Skandalaris 10/15/96 50,132 Issued in consideration of
cancellation of $61,042.82 of
indebtedness.
Richard G. Skandalaris 1/1/97 133,686 Issued pursuant to a Stock
Exchange Agreement between
Noble and Skandy.
</TABLE>
The Company believes that the foregoing transactions were exempt from the
registration provisions of the Securities Act of 1933 pursuant to Section 4(2)
of such Act.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits. The following exhibits are filed herewith and made a part
hereof:
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Page
- ------ ---------------------- ----
<S> <C> <C>
1.1 Form of Underwriting Agreement
2.1(1) Stock Purchase Agreement dated April 7, 1997 among the Company,
Utilase, Inc., the Shareholders of Utilase, Inc.
3.1 Certificate of Amendment to the Articles of Incorporation of the Company
3.2 Amended and Restated Bylaws of the Company
4.1 Form of Representatives' Warrant Agreement, including form of
Warrant
4.2(1) Forms of Series A Subordinated Promissory Notes
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<PAGE>
4.3(3) Forms of Series B Subordinated Promissory Notes
4.4(1) Forms of Series C Subordinated Promissory Notes
4.5(1) Forms of Series D Subordinated Promissory Notes
5.1(2) Opinion of Bruck & Perry, A Professional Corporation as to the
legality of the securities being registered
10.1 Bill of Sale dated February 25, 1994 pertaining to the assets acquired
by Prestolock International, Ltd. from Midlantic National Bank
10.2 Trademark Agreement entered into February 25, 1994 between Prestolock
International, Ltd. and Presto Lock, Inc.
10.3 Asset Purchase Agreement dated as of July 21, 1994 between Prestolock
International, Ltd. and the Eastern Company for the sale of certain
assets
10.4 Non-Competition Agreement dated as of July 21, 1994 between Prestolock
International, Ltd. and the Eastern Company
10.5 Trademark License Agreement dated July 21, 1994 between Prestolock
International, Ltd. and the Eastern Company
10.6 Sales Service Consulting Agreement dated July 21, 1994 between
Prestolock International, Ltd. and the Eastern Company
10.7 Tax Free Stock Exchange Agreement made effective as of January 1, 1996
between the Company and Robert J. Skandalaris and Daniel J. Brunell
10.8(1) Stock Purchase Agreement dated January 1, 1996 among the Company and
Cass River Coatings, Inc., Gene Oldford, Kevin Redding, Chris
Frampton, Jan Wojeichowski, Pat Patterson, and Jim Lamb
10.9 Consulting Agreement dated January 31, 1996 between Cass River
Coatings, Inc. and Eugene Oldford
10.10 Consulting Agreement dated January 31, 1996 between Cass River
Coatings, Inc. and Kevin Redding
10.11 Consulting Agreement dated January 31, 1996 between Cass River
Coatings, Inc. and Chris Frampton
10.12 Consulting Agreement dated January 31, 1996 between Cass River
Coatings, Inc. and Jan Wojeichowski
10.13 Consulting Agreement dated January 31, 1996 between Cass River
Coatings, Inc. and Pat Patterson
10.14 Consulting Agreement dated January 31, 1996 between Cass River
Coatings, Inc. and Jim Lamb
10.15(1) Stock Option Agreement dated January 31, 1996 between Cass River
Coatings, Inc. and Gene Oldford, Kevin Redding, Chris Frampton, Jan
Wojeichowski, Pat Patterson, and Jim Lamb
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<PAGE>
10.16 Security Agreement dated January 31, 1996 between Cass River Coatings,
Inc. and Eugene Oldford, Kevin Redding, Chris Frampton, Jan
Wojeichowski, Pat Patterson, and Jim Lamb
10.17 Land Contract dated October 26, 1994 between Cass River Investment
Company and Cass River Coatings, Inc.
10.18(1) Stock Purchase Agreement dated January 1, 1996 between the Company and
Richard J. Reason, individually and as Trustee of his Revocable Living
Trust dated April 9, 1979 and The Richard J. Reason Irrevocable Trust
for the Benefit of Victoria Aldrich and Peter Reason dated October 12,
1992
10.19(1) Promissory Note dated January 1, 1996 in the original principal amount
of $2,231,000 delivered by the Company in favor of The Richard J.
Reason Irrevocable Trust for the Benefit of Victoria Aldrich and Peter
Reason dated October 12, 1992
10.20(1) Promissory Note dated January 1, 1996 in the original principal amount
of $4,119,000 delivered by the Company in favor of Richard J. Reason,
Trustee of his Revocable Living Trust dated April 9, 1979
10.21(1) Guaranty of Robert Skandalaris ($500,000) dated January 1, 1996 for
the benefit of The Richard J. Reason Irrevocable Trust for the Benefit
of Victoria Aldrich and Peter Reason dated October 12, 1992
10.22(1) Memorandum of Land Contract dated April 30, 1996 between Richard J.
Reason Agreement of Trust dated April 9, 1979 and Monroe Engineering
Products, Inc.
10.23(1) Guaranty of Robert Skandalaris dated April 30, 1996 of Monroe
Engineering Products, Inc.'s obligations under Land Contract
10.24(1) Employment and Deferred Compensation Agreement dated January 1, 1996
between Monroe Engineering Products, Inc. and Richard Reason, as
amended December 30, 1996
10.25 Loan Agreement dated April 30, 1996 among Comerica Bank and the
Registrant, Monroe Engineering Products, Inc., Prestolock
International, Ltd. and Cass River Coatings, Inc. including Amendment
No. 3 dated April 30, 1997
10.26(1) Stock Purchase Agreement dated July 1, 1996, between DCT Component
Systems, Inc., a Michigan corporation, James Bronce Henderson, III,
David C. Stone, the Company, and Peter Raab
10.27(1) Stock Redemption Agreement dated July 1, 1996 between Peter Raab and
DCT Components Systems, Inc.
10.28(1) Management Agreement dated July 1, 1996 between DCT Component Systems,
Inc. and the Company
10.29(1) Voting Agreement and Irrevocable Proxies dated July 1, 1996 by and
among DCT Component Systems, Inc., James Bronce Henderson III, and
David C. Stone, and Robert Skandalaris as the representative of the
Company
10.30(1) Shareholder Agreement among the Company, James Bronce Henderson, III,
David C. Stone, Peter Raab and DCT Component Systems, Inc. dated
July 1, 1996
10.31(1) Executive Bonus Pool for DCT Components Systems, Inc.
10.32(1) License Agreement dated July 1, 1996, by and between James Bronce
Henderson, III and John C. Fox as licensors, and DCT Component
Systems, Inc., as licensee
10.33 Employment Agreement between DCT Component Systems, Inc. and Peter
Raab dated July 18, 1994, as amended June 30, 1996
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<PAGE>
10.34 Loan and Security Agreement dated June 27, 1996 between DCT Component
Systems, Inc. and the CIT Group/Credit Finance, Inc.
10.35 Loan Agreement between DCT Component Systems, Inc. and Deutsche
Financial Services Holding Company
10.36(1) Line of Credit Promissory Note ($960,000) made by DCT Component
Systems, Inc. in favor of DCT Companies, Inc.
10.37(1) Put Agreement dated December 31, 1996 by DCT Component Systems, Inc.
in favor of Richard J. Reason as Trustee of the Richard J. Reason
Revocable Living Trust dated April 9, 1979 and agreed to by the
Company
10.38(1) Conversion Agreement dated December 31, 1996 among DCT Component
Systems, Inc., the Company and Holder
10.39 Memorandum of Understanding dated July 1, 1996 and August 3, 1996
outlining terms and conditions pursuant to which James Bronce
Henderson III and Norma M. Stone agree to loan funds to DCT Component
Systems, Inc.
10.40 Stock Exchange Agreement dated as of January 1, 1997 among the
Company, Richard G. Skandalaris and Skandy Corp.
10.41(1) Asset Purchase Agreement dated February 28, 1997 and effective March
1, 1997 between Utilase Production Process, Inc. and Utilase, Inc.
10.42(1) Promissory Note dated February 28, 1997 made by the Company and
Utilase Production Process, Inc. in favor of Utilase, Inc. in the
principal amount of $850,000.
10.43(1) Security Agreement dated February 28, 1997 among the Company and
Utilase Production Process, Inc. and Utilase, Inc.
10.44(1) Escrow Agreement dated April 7, 1997 among the Company, Utilase, Inc.,
and Jaffe, Raitt, Heuer & Weiss
10.45(1) Form of Non-Compete Agreement between Utilase, Inc. and James Bronce
Henderson III
10.46(1) Form of Non-Compete Agreement between the Company and Jeffrey A. Moss
10.47(1) Form of Non-Compete Agreement between Utilase, Inc. and DCT, Inc.
10.48(1) Employment Agreement dated April 7, 1997 between Utilase, Inc. and
John K. Baysore
10.49(1) Registration Rights Agreement dated April 7, 1997 among the Company,
Utilase, Inc., James Bronce Henderson, III and Jeffrey A. Moss
10.50(1) Shareholders' Agreement dated April 7, 1997 among the Company,
Utilase, Inc., Robert J. Skandalaris and James Bronce Henderson, III
10.51 Shareholder Agreement
10.52 Voting Agreement and Power of Attorney
10.53 1997 Stock Option Plan of Registrant
10.54 $300,000 Promissory Note dated January 15, 1996 in favor of James D.
Skandalaris
10.55 $90,000 Promissory Note dated March 1, 1994 in favor of James D.
Skandalaris
10.56 $1,000,000 Promissory Note dated April 30, 1996 in favor of Robert J.
Skandalaris
10.57 Agreement of Amendment dated August 26, 1997 among the Company,
Utilase Production Process, Inc., Robert J. Skandalaris, DCT, Inc.,
DCT Component Systems, Inc., Utilase, Inc., James Bronce Henderson,
III, John K. Baysore and David C. Stone
10.58 Letter Agreement between James D. Skandalaris, the Company and
Prestock regarding extension of promissory notes.
21.1(1) Subsidiaries of the Registrant
23.1 Consent of Grant Thornton LLP
II-11
<PAGE>
23.2(2) Consent of Bruck & Perry, A Professional Corporation (included in its
opinion to be filed as Exhibit 5.1 to the Registration Statement)
24.1(1) Power of Attorney (contained on Page II-14, the signature page)
27.1 Financial Data Schedule
99.1(1) Consent of James Bronce Henderson III to identification as director
nominee
99.2(1) Consent of David C. Stone to identification as director nominee
99.3(1) Consent of Peter Sugar to identification as director nominee
99.4(1) Consent of Troy D. Wiseman to identification as director nominee
99.5(1) Consent of Anthony R. Tersigni to identification as director nominee
99.6(2) Consent of to identification as director nominee
99.7 Letter Agreement dated March 15, 1997 among DCT Companies, Inc., James
Bronce Henderson III, David C. Stone and the Company
99.8 Commitment Letter from Comerica Bank to Utilase, Inc. and Robert J.
Skandalaris dated March 26, 1997
99.9 Commitment Letter from NBD Bank to the Company dated September 5, 1997
</TABLE>
- --------------------------------
(1) Incorporated herein by reference to the Company's Registration Statement on
Form S-1, filed May 14, 1997 (No. 333-27149).
(2) To be filed by Amendment.
(3) Amended from prior filing.
II-12
<PAGE>
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To 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 in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining liability under the Securities Act
of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denomination and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described above 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 against the registrant 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 that:
(1) For purposes of determining any liability under the Securities Act of
1933, 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.
(2) For the purpose of determining any liability under the Securities Act
of 1933, 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-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to its registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bloomfield
Hills, State of Michigan, on September 18, 1997.
NOBLE INTERNATIONAL, LTD.
By: /s/ Michael C. Azar
-------------------------------------
Michael C. Azar
Secertary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*
- ------------------------------- President, Chief Executive Officer September 18, 1997
Robert J. Skandalaris and Director (Principal Executive
Officer)
*
- ------------------------------ Treasurer, Chief Executive Officer September 18, 1997
Richard V. Balgenorth and Director (Principal Financial
and Accounting Officer)
/s/ Michael C. Azar
- ------------------------------ Director September 18, 1997
Michael C. Azar
/s/ Michael C. Azar
- ------------------------------
Michael C. Azar
as Attorney-in-fact
</TABLE>
II-14
NOBLE INTERNATIONAL, LTD.
3,300,000 Shares of Common Stock
(No par value per share)
UNDERWRITING AGREEMENT
New York, New York
_______ __, 1997
BlueStone Capital Partners, L.P.
Rodman & Renshaw, Inc.
as Representatives of the
Several Underwriters named
in Schedule A hereto
c/o BlueStone Capital Partners, L.P.
575 Fifth Avenue
New York, New York 10017
Dear Sirs:
Noble International, Ltd., a Michigan corporation (the
"Company"), proposes to issue and sell to the underwriters (the "Underwriters")
named in Schedule A to this Underwriting Agreement (the "Agreement"), for whom
BlueStone Capital Partners, L.P. ("BlueStone") and Rodman & Renshaw, Inc. are
acting as representatives (hereinafter sometimes referred to together as the
"Representatives") three million three hundred thousand (3,300,000) shares of
common stock, no par value per share (the "Offered Shares"), which Offered
Shares are presently authorized but unissued shares of the common stock, no par
value per share (individually a "Common Share" and collectively the "Common
Shares"), of the Company. In addition, the Representatives, in order to cover
over-allotments in the sale of the Offered Shares, may purchase from the
Company, for their own accounts, up to an aggregate of four hundred ninety-five
thousand (495,000) Common Shares (the "Optional Shares"; the Offered Shares and
the Optional Shares are hereinafter sometimes collectively referred to as the
"Shares"). The Shares are described in the Registration Statement, as defined
below. The Company also proposes to issue and sell to the Representatives for
their own accounts and/or the accounts of their designees, warrants to purchase
an aggregate of three hundred thirty thousand (330,000) Common Shares (the
"Warrant Shares") at an exercise price of $____ per Warrant Share [120% of the
initial
<PAGE>
public offering price per Share] (the "Representatives' Warrants"), which sale
will be consummated in accordance with the terms and conditions of the form of
Representatives' Warrant Agreement filed as an exhibit to the Registration
Statement.
The Representatives hereby warrant to the Company that they
have been authorized by each of the Underwriters to enter into this Underwriting
Agreement on their behalf and to act for them in the manner herein provided. The
Company hereby confirms its respective agreements with the Representatives and
each of the Underwriters, on whose behalf the Representatives are signing this
Agreement, as follows:
1. Purchase and Sale of Offered Shares. On the basis of
the representations and warranties herein contained, but subject to the terms
and conditions herein set forth, the Company hereby agrees to sell the Offered
Shares to the Underwriters, severally, and each Underwriter agrees severally and
not jointly, to purchase from the Company, at a purchase price of $____ per
share, the number of Offered Shares set forth opposite the name of such
Underwriter in Schedule A attached hereto, plus any additional Offered Shares
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof. The Underwriters plan to offer the Offered
Shares to the public at a public offering price of $____ per share.
2. Payment and Delivery.
(a) Payment for the Offered Shares will be made
to the Company by wire transfer against delivery of the Offered Shares to the
Representatives. Such payment and delivery will be made at 10:00 A.M. New York
City time, on the third business day following the Effective Date (the fourth
business day following the Effective Date in the event that trading of the
Offered Shares commences on the day following the Effective Date), the date and
time of such payment and delivery being herein called the "Closing Date." The
certificates representing the Offered Shares to be delivered will be in such
denominations and registered in such names as the Representatives may request
not less than two full business days prior to the Closing Date, and will be made
available to the Representatives for inspection, checking and packaging at the
office of , the Company's transfer agent, at not less than one full business day
prior to the Closing Date.
(b) On the Closing Date, the Company will sell
the Representatives' Warrants to the Representatives or to their designees
(limited to officers, directors and partners of the Representatives and
Underwriters). The Representatives' Warrants will be in the form of, and in
accordance with, the provisions of
-2-
<PAGE>
the Representatives' Warrant Agreement attached as an exhibit to the
Registration Statement. The aggregate purchase price for the Representatives'
Warrants is $330. The Representatives' Warrants will be restricted from sale,
transfer, assignment or hypothecation for a period of one year from the
Effective Date, except to officers, directors or partners of the Representatives
and Underwriters and members of the selling group and/or their officers,
directors or partners. Payment for the Representatives' Warrants will be made to
the Company by check or checks payable to its order on the Closing Date against
delivery of the certificates representing the Representatives' Warrants. The
certificates representing the Representatives' Warrants will be in such
denominations and such names as the Representatives may request prior to the
Closing Date.
3. Option to Purchase Optional Shares.
(a) For the purposes of covering any
overallotments in connection with the distribution and sale of the Offered
Shares as contemplated by the Prospectus as defined below, the Representatives
are hereby granted an option to purchase for their own accounts, and not as
representatives of the Underwriters, all or any part of the Optional Shares from
the Company. The purchase price to be paid for the Optional Shares will be the
same price per Optional Share as the price per Offered Share set forth in
Section 1 hereof. The option granted hereby may be exercised by the
Representatives as to all or any part of the Optional Shares at any time within
45 days after the Effective Date. The Representatives will not be under any
obligation to purchase any Optional Shares prior to the exercise of such option.
(b) The option granted hereby may be exercised
by the Representatives by giving oral notice to the Company, which must be
confirmed by a letter, telex or telegraph setting forth the number of Optional
Shares to be purchased, the date and time for delivery of and payment for the
Optional Shares to be purchased and stating that the Optional Shares referred to
therein are to be used for the purpose of covering over-allotments in connection
with the distribution and sale of the Offered Shares. If such notice is given
prior to the Closing Date, the date set forth therein for such delivery and
payment will not be earlier than either two full business days thereafter or the
Closing Date, whichever occurs later. If such notice is given on or after the
Closing Date, the date set forth therein for such delivery and payment will not
be earlier than two (2) full business days thereafter. In either event, the date
so set forth will not be more than 15 full business days after the date of such
notice. The date and time set forth in such notice is herein called the "Option
Closing Date." Upon exercise of such option, the Company will become obligated
to convey to the Representatives, and, subject to the terms and
-3-
<PAGE>
conditions set forth in Section 3(d) hereof, the Representatives will become
obligated to purchase, the number of Optional Shares specified in such notice.
(c) Payment for any Optional Shares purchased
will be made to the Company by wire transfer against delivery of the Optional
Shares purchased to the Representatives. The certificates representing the
Optional Shares to be delivered will be in such denominations and registered in
such names as the Representatives request not less than two full business days
prior to the Option Closing Date, and will be made available to the
Representatives for inspection, checking and packaging at the aforesaid office
of the Company's transfer agent or correspondent not less than one full business
day prior to the Option Closing Date.
(d) The obligation of the Representatives to
purchase and pay for any of the Optional Shares is subject to the accuracy and
completeness (as of the date hereof and as of the Option Closing Date) of and
compliance in all material respects with the representations and warranties of
the Company herein, to the accuracy and completeness of the statements of the
Company or its officers made in any certificate or other document to be
delivered by the Company pursuant to this Agreement, to the performance in all
material respects by the Company of its obligations hereunder, to the
satisfaction by the Company of the conditions, as of the date hereof and as of
the Option Closing Date, set forth in Section 3(b) hereof, and to the delivery
to the Representatives of opinions, certificates and letters dated the Option
Closing Date substantially similar in scope to those specified in Sections 5 and
6(b), (c), (d) and (e) hereof, but with each reference to "Offered Shares" and
"Closing Date" to be, respectively, to the Optional Shares and the Option
Closing Date.
4. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with, the several Underwriters
that:
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Michigan,
with full power and authority, corporate and other, to own or lease, as the case
may be, and operate, its properties, whether tangible or intangible, and to
conduct its business as described in the Registration Statement and to execute,
deliver and perform this Agreement and the Representatives' Warrant Agreement
and to consummate the transactions contemplated hereby and thereby. The Company
has no subsidiaries other than Prestolock International, Ltd., a corporation
duly organized and validly existing under the laws of the State of Michigan
("Prestolock"), Monroe Engineering Products, Inc., a corporation duly organized
and validly existing under the laws of the State of Michigan ("Monroe"),
-4-
<PAGE>
Cass River Coating, Inc. (dba Vassar Industries), a corporation duly organized
and validly existing under the laws of the State of Michigan ("Vassar"), Skandy
Corp., a corporation duly organized and validly existing under the laws of the
State of Michigan ("Skandy"), Utilase Production Process, Inc., a corporation
duly organized and validly existing under the laws of the State of Michigan
("UPP"), and DCT Component Systems, Inc., a corporation duly organized and
validly existing under the laws of the State of Michigan ("DCT"), as well as two
subsidiaries to be acquired on the Closing Date, Utilase, Inc., a corporation
duly organized and validly existing under the laws of the State of Michigan
("Utilase"), and Competitive Technologies Investment Company, a co-partnership
duly organized and validly existing under the laws of the State of Michigan
("CTIC") (collectively, the "Subsidiaries"). Unless the context otherwise
requires, all references to the "Company" in this Agreement shall include the
Subsidiaries, provided that it is understood and agreed that the Company is
relying on the representation and warranties of the sellers of the Common Stock
of Utilase and CTIC to the Company (the "Utilase and CTIC Sellers") with respect
to the representations and warranties contained herein as they relate to DCT and
Utilase. Each of the Company and the Subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
wherein such qualification is necessary and failure so to qualify could have a
material adverse effect on the financial condition, results of operations,
business or properties of the Company or any Subsidiary. Each of the
Subsidiaries has full power and authority to own or lease, as the case may be,
and operate its properties and to conduct its business as described in the
Prospectus. The Company owns 45% of the issued and outstanding shares of capital
stock of DCT and all of the issued and outstanding shares of capital stock of
each of the Subsidiaries other than DCT, Utilase and CTIC, in each case free and
clear of any security interests, liens, encumbrances, claims and charges, and
all of such shares have been duly authorized and validly issued and are fully
paid and nonassessable. On the Closing Date, the Company will own all of the
issued and outstanding shares of capital stock of all of its Subsidiaries, free
and clear of any security interests, liens, encumbrances, claims and charges
and all of such shares have been duly authorized and validly issued and are
fully paid and nonassessable. There are no options or warrants for the purchase
of, or other rights to purchase, or outstanding securities convertible into or
exchangeable for, any capital stock or other securities of any Subsidiary.
(b) This Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company, and the Representatives' Warrant Agreement, when executed and delivered
by the Company on the Closing Date, will be the valid and binding obligation of
the Company, enforceable against the Company in accordance with their respective
terms. The execution, delivery and performance of this Agreement and the
Representatives' Warrant Agreement by the Company, the consummation by the
Company of the transactions herein and therein contemplated and the compliance
by the Company with the terms of this Agreement and the Representatives' Warrant
Agreement have been duly authorized by all necessary corporate action and do not
and will not, with or without the giving of notice or the lapse of time, or
both, (i) result in any violation of the Company's or of any Subsidiary's
Certificate of Incorporation or By-laws, each
-5-
<PAGE>
as amended; (ii) result in a breach of or conflict with any of the terms or
provisions of, or constitute a default under, or result in the modification or
termination of, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any Subsidiary pursuant to any indenture, mortgage, note, contract,
commitment or other agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company, any Subsidiary or any of their
respective properties or assets is or may be bound or affected; (iii) violate
any existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company, any Subsidiary or any of their respective properties or business; or
(iv) have any effect on any permit, certification, registration, approval,
consent, order, license, franchise or other authorization (collectively, the
"Permits") necessary for the Company or any Subsidiary to own or lease and
operate their respective businesses or the ability of the Company to make use
thereof.
(c) No Permits of any court or governmental
agency or body, other than under the Securities Act of 1933, as amended (the
"Act"), the Regulations (as hereinafter defined) and applicable state securities
or Blue Sky laws, are required (i) for the valid authorization, issuance, sale
and delivery of the Shares to the Underwriters, and (ii) the consummation by the
Company of the transactions contemplated by this Agreement and the
Representatives' Warrant Agreement or, if so required, all such Permits, have
been duly obtained and are in full force and effect.
(d) The Company has prepared in conformity with
the requirements of the Act and the rules and regulations (the "Regulations") of
the Securities and Exchange Commission (the "Commission") and filed with the
Commission a registration statement (File No. 333-27149) on Form S-1 and has
filed one or more amendments thereto, covering the registration of the Shares
under the Act, including the related preliminary prospectus or preliminary
prospectuses (each thereof being herein called a "Preliminary Prospectus") and a
proposed final prospectus. Each Preliminary Prospectus was endorsed with the
legend required by Item 501(b)(8) of Regulation S-K of the Regulations and, if
applicable, Rule 430A of the Regulations. Such registration statement including
any documents incorporated by reference therein and all financial schedules and
exhibits thereto, as amended at the time it becomes effective, and the final
prospectus included therein are herein, respectively, called the "Registration
Statement" and the "Prospectus," except that, (i) if the prospectus filed by the
Company pursuant to Rule 424(b) of the Regulations differs from the Prospectus,
the term "Prospectus" shall mean the prospectus filed pursuant to Rule 424(b),
and (ii) if the Registration Statement is amended or such Prospectus is
-6-
<PAGE>
supplemented after the date the Registration Statement is declared effective by
the Commission (the "Effective Date") and prior to the Option Closing Date, the
terms "Registration Statement" and "Prospectus" shall include the Registration
Statement as amended or supplemented.
(e) Neither the Commission nor, to the best of
the Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the best of the Company's knowledge, threatened to institute any
proceedings with respect to such an order.
(f) The Registration Statement when it becomes
effective, the Prospectus (and any amendment or supplement thereto) when it is
filed with the Commission pursuant to Rule 424(b), and both documents as of the
Closing Date and the Option Closing Date referred to below, will contain all
statements which are required to be stated therein in accordance with the Act
and the Regulations and will in all material respects conform to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, on such
dates, will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not apply to
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company in connection with the Registration
Statement or Prospectus or any amendment or supplement thereto by the
Representatives, or by any Underwriter through the Representatives, expressly
for use therein.
(g) The Company had at the date or dates
indicated in the Prospectus a duly authorized and outstanding capitalization as
set forth in the Registration Statement and the Prospectus. Based on the
assumptions stated in the Registration Statement and the Prospectus, the Company
will have on the Closing Date the adjusted stock capitalization set forth
therein. Except as set forth in the Registration Statement or the Prospectus, on
the Effective Date and on the Closing Date, there will be no options to
purchase, warrants or other rights to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments to issue or sell
shares of the Company's capital stock or any such warrants, convertible
securities or obligations. Except as set forth in the Prospectus, no holder of
any of the Company's securities has any rights, "demand," "piggyback" or
otherwise, to have such securities registered under the Act.
-7-
<PAGE>
(h) The descriptions in the Registration
Statement and the Prospectus of contracts and other documents are accurate and
present fairly the information required to be disclosed, and there are no
contracts or other documents required to be described in the Registration
Statement or Prospectus or to be filed as exhibits to the Registration Statement
under the Act or the Regulations which have not been so described or filed as
required.
(i) Grant Thornton LLP, the accountants who have
certified certain of the consolidated financial statements of Noble
International, Ltd. and the Subsidiaries, and the financial statements of each
of Monroe, DCT and Utilase [and CTIC] (collectively, the "Financial Statements")
filed and to be filed with the Commission as part of the Registration Statement
and the Prospectus, are independent public accountants within the meaning of the
Act and Regulations. The Financial Statements and schedules and the notes
thereto filed as part of the Registration Statement and included in the
Prospectus are complete, correct and present fairly the financial position of
the Company, Monroe, DCT and Utilase [and CTIC] as of the dates thereof, and the
results of operations and changes in financial position of the Company, Monroe,
DCT and Utilase [and CTIC] for the periods indicated therein, all in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved except as otherwise stated in the Registration
Statement and the Prospectus. The selected financial data set forth in the
Registration Statement and the Prospectus present fairly the information shown
therein and have been compiled on a basis consistent with that of the audited
and unaudited financial statements included in the Registration Statement and
the Prospectus.
(j) Each of the Company and the Subsidiaries has
filed with the appropriate federal, state and local governmental agencies, and
all appropriate foreign countries and political subdivisions thereof, all tax
returns, including franchise tax returns, which are required to be filed or has
duly obtained extensions of time for the filing thereof and has paid all taxes
shown on such returns and all assessments received by it to the extent that the
same have become due; and the provisions for income taxes payable, if any, shown
on the Financial Statements filed with or as part of the Registration Statement
are sufficient for all accrued and unpaid foreign and domestic taxes, whether or
not disputed, and for all periods to and including the dates of such Financial
Statements. Except as disclosed in writing to the Representatives, neither the
Company nor any Subsidiary has executed or filed with any taxing authority,
foreign or domestic, any agreement extending the period for assessment or
collection of any income taxes and is not a party to any pending action or
proceeding by any foreign or domestic governmental agency for assessment or
collection of taxes; and no claims for assessment or
-8-
<PAGE>
collection of taxes have been asserted against the Company or any Subsidiary.
(k) The outstanding Common Shares and
outstanding options and warrants to purchase Common Shares have been duly
authorized and validly issued. The outstanding Common Shares are fully paid and
nonassessable. The outstanding options and warrants to purchase Common Shares
constitute the valid and binding obligations of the Company, enforceable in
accordance with their terms. None of the outstanding Common Shares or options or
warrants to purchase Common Shares has been issued in violation of the
preemptive rights of any shareholder of the Company. None of the holders of the
outstanding Common Shares is subject to personal liability solely by reason of
being such a holder. The offers and sales of the outstanding Common Shares and
outstanding options and warrants to purchase Common Shares were at all relevant
times either registered under the Act and the applicable state securities or
Blue Sky laws or exempt from such registration requirements. The authorized
Common Shares and outstanding options and warrants to purchase Common Shares
conform to the descriptions thereof contained in the Registration Statement and
Prospectus. Except as set forth in the Registration Statement and the
Prospectus, on the Effective Date and the Closing Date, there will be no
outstanding options or warrants for the purchase of, or other outstanding rights
to purchase, Common Shares or securities convertible into Common Shares.
(l) No securities of the Company have been sold
by the Company or by or on behalf of, or for the benefit of, any person or
persons controlling, controlled by, or under common control with the Company
within the three years prior to the date hereof, except as disclosed in the
Registration Statement.
(m) The issuance and sale of the Shares and the
Warrant Shares have been duly authorized and, when the Shares and the Warrant
Shares have been issued and duly delivered against payment therefor as
contemplated by this Agreement and the Representatives' Warrant Agreement,
respectively, the Shares and the Warrant Shares will be validly issued, fully
paid and nonassessable, and the holders thereof will not be subject to personal
liability solely by reason of being such holders. Neither the Shares nor the
Warrant Shares will be subject to preemptive rights of any shareholder of the
Company.
(n) The issuance and sale of the
Representatives' Warrants have been duly authorized and, when issued, paid for
and delivered as contemplated by the Representatives' Warrant Agreement, the
Representatives' Warrants will constitute valid and binding obligations of the
Company, enforceable as to the Company in accordance with their terms. The
Representatives' Warrants will
-9-
<PAGE>
not be subject to preemptive rights of any shareholder of the Company. The
Warrant Shares have been duly reserved for issuance upon exercise of the
Representatives' Warrants in accordance with the provisions of the
Representatives' Warrant Agreement. The Representatives' Warrants conform to the
description thereof contained in the Registration Statement and the Prospectus.
(o) Neither the Company nor any Subsidiary is in
violation of, or in default under, (i) any term or provision of its certificate
of incorporation or by-laws, each as amended; (ii) any material term or
provision or any financial covenants of any indenture, mortgage, contract,
commitment or other agreement or instrument to which it is a party or by which
it or any of its property or business is or may be bound or affected; or (iii)
any existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company, any Subsidiary or any of the their respective properties or business.
The Company owns, possesses or has obtained all governmental and other
(including those obtainable from third parties) Permits necessary to own or
lease, as the case may be, and to operate its properties, whether tangible or
intangible, and to conduct the business and operations of the Company as
presently conducted, and all such Permits are outstanding and in good standing,
and there are no proceedings pending or to the best of the Company's knowledge,
threatened (nor, to the best of the Company's knowledge, is there any basis
therefor), which seek to cancel, terminate or limit such Permits.
(p) Except as set forth in the Prospectus, there
are no claims, actions, suits, proceedings, arbitrations, investigations or
inquiries before any governmental agency, court or tribunal, domestic or
foreign, or before any private arbitration tribunal, pending, or, to the best of
the Company's knowledge, threatened against the Company or any Subsidiary or
involving the Company's or any Subsidiary's properties or business which, if
determined adversely to the Company or any Subsidiary would, individually or in
the aggregate, result in any material adverse change in the financial position,
shareholders' equity, results of operations, properties, business, management or
affairs or business prospects of the Company or any Subsidiary or which question
the validity of the capital stock of the Company or this Agreement or of any
action taken or to be taken by the Company pursuant to, or in connection with,
this Agreement; nor, to the best of the Company's knowledge, is there any basis
for any such claim, action, suit, proceeding, arbitration, investigation or
inquiry. There are no outstanding orders, judgments or decrees of any court,
governmental agency or other tribunal naming the Company or any Subsidiary and
enjoining the Company or any Subsidiary from taking, or requiring the Company or
any Subsidiary to take, any action, or
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to which the Company or any Subsidiary or the Company's or any Subsidiary's
properties or business is bound or subject.
(q) Neither the Company nor any of its affiliates
has incurred any liability for any finder's fees or similar payments in
connection with the transactions herein contemplated.
(r) Each of the Company and the Subsidiaries
owns or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, service marks, copyrights, rights, trade secrets,
confidential information, processes and formulations used or proposed to be used
in the conduct of its business as described in the Prospectus (collectively the
"Intangibles"); to the best of the Company's knowledge, neither the Company nor
any Subsidiary has infringed or is infringing upon the rights of others with
respect to the Intangibles; and, except as set forth in the Prospectus, neither
the Company nor any Subsidiary has received any notice of conflict with the
asserted rights of others with respect to the Intangibles which could, singly or
in the aggregate, materially adversely affect its business as presently
conducted or the prospects, financial condition or results of operations of the
Company or any Subsidiary and the Company knows of no basis therefor; and, to
the best of the Company's knowledge, no others have infringed upon the
Intangibles of the Company or any Subsidiary.
(s) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus and the
latest Financial Statements, neither the Company nor any Subsidiary has incurred
any material liability or obligation, direct or contingent, or entered into any
material transaction, whether or not incurred in the ordinary course of
business, or any material loss or interference with its business from fire,
storm, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree; and
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, there have not been, and prior to the Closing Date
referred to below there will not be, any changes in the capital stock or any
material increases in the long-term debt of the Company or any Subsidiary or any
material adverse change in or affecting the general affairs, management,
financial condition, shareholders' equity, results of operations or prospects of
the Company or any Subsidiary, other than as set forth or contemplated in the
Prospectus.
(t) Each of the Company and the Subsidiaries has
good and marketable title in fee simple to all real property and good title to
all personal property (tangible and intangible) owned by it, free and clear of
all security interests, charges, mortgages, liens, encumbrances and defects,
except such as are
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described in the Registration Statement and Prospectus or such as do not
materially affect the value or transferability of such property and do not
interfere with the use of such property made, or proposed to be made, by the
Company or any Subsidiary. The leases, licenses or other contracts or
instruments under which the Company and the Subsidiaries lease, hold or are
entitled to use any property, real or personal, are valid, subsisting and
enforceable only with such exceptions as are not material and do not interfere
with the use of such property made, or proposed to be made, by the Company or
any Subsidiary, and all rentals, royalties or other payments, if any, accruing
thereunder which became due prior to the date of this Agreement have been duly
paid, and neither the Company nor, to the best of the Company's knowledge, any
other party is in default thereunder and, to the best of the Company's
knowledge, no event has occurred which, with the passage of time or the giving
of notice, or both, would constitute a default thereunder. Neither the Company
nor any Subsidiary has received notice of any violation of any applicable law,
ordinance, regulation, order or requirement relating to its owned or leased
properties. Each of the Company and the Subsidiaries has adequately insured its
properties against loss or damage by fire or other casualty and maintains, in
adequate amounts, such other insurance as is usually maintained by companies
engaged in the same or similar businesses located in its geographic area.
(u) Each contract or other instrument (however
characterized or described) to which the Company or a Subsidiary is a party or
by which their respective properties or businesses is or may be bound or
affected and to which reference is made in the Prospectus has been duly and
validly executed, is in full force and effect in all material respects and is
enforceable against the parties thereto in accordance with its terms, and none
of such contracts or instruments has been assigned by the Company or any
Subsidiary, and neither the Company nor, to the best of the Company's knowledge,
any other party is in default thereunder and, to the best of the Company's
knowledge, no event has occurred which, with the lapse of time or the giving of
notice, or both, would constitute a default thereunder.
None of the material provisions of such contracts or
instruments violates any existing applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court having jurisdiction over the
Company or any Subsidiary or any of their respective assets or businesses.
(v) The employment, consulting, confidentiality
and non-competition agreements between the Company and its officers, employees
and consultants and between the Subsidiaries and their respective officers,
employees and consultants, described in the Registration Statement, are binding
and enforceable obligations
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upon the respective parties thereto in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other similar laws or arrangements affecting
creditors' rights generally and subject to principles of equity.
(w) Except as set forth in the Prospectus, the
Company has no employee benefit plans (including, without limitation, profit
sharing and welfare benefit plans) or deferred compensation arrangements that
are subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended.
(x) Except as set forth in the Prospectus, to
the best of the Company's knowledge, no labor problem exists with any of the
Company's employees or any of the Subsidiaries' employees or is imminent which
could adversely affect the Company or any Subsidiary.
(y) Neither the Company nor any Subsidiary has,
directly or indirectly, at any time (i) made any contributions to any candidate
for political office, or failed to disclose fully any such contribution in
violation of law or (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than, in each case, payments or contributions
required or allowed by applicable law. The Company's internal accounting
controls and procedures are sufficient to cause the Company to comply in all
material respects with the Foreign Corrupt Practices Act of 1977, as amended.
(z) The Shares have been approved for listing on
the American Stock Exchange ("AMEX").
(aa) The Company has provided to Tenzer
Greenblatt LLP, counsel to the several Underwriters ("Underwriters' Counsel"),
all material agreements, certificates, correspondence and other items, documents
and information requested by such counsel's Corporate Review Memorandum dated
August 26, 1997.
Any certificate signed by an officer of the Company
or by an officer of a Subsidiary and delivered to the Representatives or to
Underwriters' Counsel shall be deemed to be a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
5. Certain Covenants of the Company. The Company
covenants with the several Underwriters as follows:
(a) The Company will not at any time, whether
before the Effective Date or thereafter during such period as the Prospectus is
required by law to be delivered in connection with
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<PAGE>
the sales of the Shares by the Representatives or a dealer, file or publish any
amendment or supplement to the Registration Statement or Prospectus of which the
Representatives have not been previously advised and furnished a copy, or to
which the Representatives shall object in writing.
(b) The Company will use its best efforts to
cause the Registration Statement to become effective and will advise the
Representatives promptly, and, if requested by the Representatives, confirm such
advice in writing, (i) when the Registration Statement, or any post-effective
amendment to the Registration Statement or any supplemented Prospectus is filed
with the Commission; (ii) of the receipt of any comments from the Commission;
(iii) of any request of the Commission for amendment or supplementation of the
Registration Statement or Prospectus or for additional information; and (iv) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending the use of
any Preliminary Prospectus, or of the suspension of the qualification of the
Shares for offering or sale in any jurisdiction, or of the initiation of any
proceedings for any of such purposes. The Company will use its best efforts to
prevent the issuance of any such stop order or of any order preventing or
suspending such use and to obtain as soon as possible the lifting thereof, if
any such order is issued.
(c) The Company will deliver to each
Underwriter, without charge, from time to time until the Effective Date, as many
copies of each Preliminary Prospectus as each Underwriter may reasonably
request, and the Company hereby consents to the use of such copies for purposes
permitted by the Act. The Company will deliver to each Underwriter, without
charge, as soon as the Registration Statement becomes effective, and thereafter
from time to time as requested, such number of copies of the Prospectus (as
supplemented, if the Company makes any supplements to the Prospectus) as each
Underwriter may reasonably request. The Company has furnished or will furnish to
each of the Representatives a signed copy of the Registration Statement as
originally filed and of all amendments thereto, whether filed before or after
the Registration Statement becomes effective, a copy of all exhibits filed
therewith and a signed copy of all consents and certificates of experts.
(d) The Company will comply with the Act, the
Regulations, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder so as to permit the continuance
of sales of and dealings in the Offered Shares and in any Optional Shares which
may be issued and sold. If, at any time when a prospectus relating to the Shares
is required to be delivered under the Act, any event occurs as a result of which
the Registration Statement and Prospectus as then
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amended or supplemented would include an untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, or if it shall
be necessary to amend or supplement the Registration Statement and Prospectus to
comply with the Act or the regulations thereunder, the Company will promptly
file with the Commission, subject to Section 5(a) hereof, an amendment or
supplement which will correct such statement or omission or which will effect
such compliance.
(e) The Company will furnish such proper
information as may be required and otherwise cooperate in qualifying the Shares
for offering and sale under the securities or Blue Sky laws relating to the
offering in such jurisdictions as the Representatives may reasonably designate,
provided that no such qualification will be required in any jurisdiction where,
solely as a result thereof, the Company would be subject to service of general
process or to taxation or qualification as a foreign corporation doing business
in such jurisdiction.
(f) The Company will make generally available to
its security holders, in the manner specified in Rule 158(b) under the Act, and
deliver to the Representatives and Underwriters' Counsel as soon as practicable
and in any event not later than 45 days after the end of its fiscal quarter in
which the first anniversary date of the effective date of the Registration
Statement occurs, an earning statement meeting the requirements of Rule 158(a)
under the Act covering a period of at least 12 consecutive months beginning
after the effective date of the Registration Statement.
(g) For a period of three years from the
Effective Date, the Company will deliver to the Representatives, on a timely
basis (i) a copy of each report or document, including, without limitation,
reports on Forms 8-K, 10-C, 10-K and 10-Q and exhibits thereto, filed or
furnished to the Commission, any securities exchange or the National Association
of Securities Dealers, Inc. (the "NASD") on the date each such report or
document is so filed or furnished; (ii) as soon as practicable, copies of any
reports or communications (financial or other) of the Company mailed to its
security holders; (iii) as soon as practicable, a copy of any Schedule 13D, 13G,
14D-1 or 13E-3 received or prepared by the Company from time to time; (iv)
quarterly statements setting forth such information regarding the Company's
results of operations and financial position (including balance sheet, profit
and loss statements and data regarding backlog) as is regularly prepared by
management of the Company; and (v) such additional information concerning the
business and financial condition of the Company as the Representatives may from
time to time reasonably request and which can be prepared or obtained by the
Company without
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<PAGE>
unreasonable effort or expense. The Company will furnish to its shareholders
annual reports containing audited financial statements and such other periodic
reports as it may determine to be appropriate or as may be required by law.
(h) Neither the Company nor any person that con-
trols, is controlled by or is under common control with the Company will take
any action designed to or which might be reasonably expected to cause or result
in the stabilization or manipulation of the price of the Common Stock.
(i) If the transactions contemplated by this
Agreement are consummated, BlueStone shall retain the $50,000 previously paid to
it, and the Company will pay or cause to be paid the following: all costs and
expenses incident to the performance of the obligations of the Company under
this Agreement, including, but not limited to, the fees and expenses of
accountants and counsel for the Company; the preparation, printing, mailing and
filing of the Registration Statement (including financial statements and
exhibits), Preliminary Prospectuses and the Prospectus, and any amendments or
supplements thereto; the printing and mailing of the Selected Dealer Agreement;
the issuance and delivery of the Shares to the Representatives; all taxes, if
any, on the issuance of the Shares; the fees, expenses and other costs of
qualifying the Shares for sale under the "Blue Sky" or securities laws of those
states in which the Shares are to be offered or sold including the fees and
disbursements of Underwriters' Counsel incurred in connection therewith, and the
cost of printing and mailing the "Blue Sky Survey"; the filing fees incident to
securing any required review by the NASD; the cost of furnishing to the several
Underwriters copies of the Registration Statement, Preliminary Prospectuses and
the Prospectus as herein provided; the costs of placing "tombstone
advertisements" in any publications which may be selected by the
Representatives, and all other costs and expenses incident to the performance of
the Company's obligations hereunder which are not otherwise specifically
provided for in this Section 5(i).
In addition, at the Closing Date or the Option
Closing Date, as the case may be, the Representatives will deduct from the
payment for the Offered Shares $_______________ (less the sum of $50,000
previously paid to BlueStone), as payment for the Representatives' accountable
expense allowance relating to the transactions contemplated hereby, which amount
will include the fees and expenses of Underwriters' Counsel (other than those
payable by the Company in connection with "Blue Sky" qualifications referred to
in the preceding paragraph).
(j) If the transactions contemplated by this
Agreement or related hereto are not consummated because the Company
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<PAGE>
decides not to proceed with the offering for any reason or if the
Representatives decide not to proceed with the offering because of a breach by
the Company of its representations, warranties or covenants in this Agreement or
as a result of adverse changes in the affairs of the Company, the Company will
reimburse the Representatives for all of their accountable expenses reasonably
incurred in connection with the offering. If the Representatives decide not to
proceed with the offering for any other reason the Company will reimburse the
Representatives for their accountable expenses up to the $50,000 previously paid
to BlueStone. In no event, however, will the Representatives, in the event the
offering is terminated, be entitled to retain or receive more than an amount
equal to their actual accountable out-of-pocket expenses.
(k) The Company intends to apply the net
proceeds from the sale of the Shares for the purposes set forth in the
Prospectus. The Company will file with the Commission all required reports on
Form SR in accordance with the provisions of Rule 463 promulgated under the Act
and will provide a copy of each such report to the Representatives and
Underwriters' Counsel.
(l) During the period of twelve (12) months
following the date hereof, neither the Company nor any of its officers,
directors or shareholders will offer for sale, sell, transfer, pledge or
otherwise dispose of (other than gifts or sales or other dispositions exempt
from registration pursuant to Section 4(2) of the Act where the transferees
thereof agree in writing to be bound by this Section 5(l)), directly or
indirectly, any securities of the Company, in any manner whatsoever, whether
pursuant to Rule 144 of the Regulations or otherwise, and no holder of
registration rights relating to securities of the Company will execute any such
registration rights, in either case, without the prior written consent of
BlueStone. The Company will deliver to the Representatives the undertakings as
of the date hereof of its officers, directors and shareholders to this effect.
(m) The Company will not file any registration
statement relating to the offer or sale of any of the Company's securities,
including any registration statement on Form S-8, during the twelve (12) months
following the date hereof without BlueStone's prior written consent.
(n) The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with
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management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(o) The Company will use its best efforts to
maintain the listing of the Shares on the AMEX for so long as the
Shares are qualified for such listing.
(p) The Company will, concurrently with the
Effective Date, register the class of equity securities of which the Shares are
a part under Section 12(g) of the Exchange Act and the Company will maintain
such registration for a minimum of five (5) years after the Effective Date.
(q) Subject to the sale of the Offered Shares,
BlueStone and its successors will have the right to designate a nominee for
election, at its or their option, as a member of the Board of Directors of the
Company, and the Company will use its best efforts to cause such nominee to be
elected and continued in office as a director of the Company until the
expiration of two (2) years following the Closing Date. Each of the Company's
current officers, directors and shareholders agrees to vote all of the Common
Shares owned by such person or entity so as to elect and continue in office such
nominee of BlueStone. Following the election of such nominee as a director, such
person shall receive no more or less compensation than is paid to other
non-officer directors of the Company for attendance at meetings of the Board of
Directors of the Company and shall be entitled to receive reimbursement for all
reasonable costs incurred in attending such meetings including, but not limited
to, food, lodging and transportation. The Company agrees to indemnify and hold
such director harmless, to the maximum extent permitted by law, against any and
all claims, actions, awards and judgments arising out of his service as director
and, in the event the Company maintains a liability insurance policy affording
coverage for the acts of its officers and directors, to include such director as
an insured under such policy. The rights and benefits of such indemnification
and the benefits of such insurance shall, to the extent possible, extend to
BlueStone insofar as it may be or may be alleged to be responsible for such
director or advisor.
If BlueStone does not exercise its option to
designate a member of the Company's Board of Directors, BlueStone shall
nonetheless have the right to send a representative (who need not be the same
person from meeting to meeting) to observe each meeting of the Board of
Directors. The Company agrees to give BlueStone notice of each such meeting and
to provide BlueStone with an agenda and minutes of the meeting no later than it
gives such notice and provides such items to the directors. So long as
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BlueStone shall have the right to nominate a director to the Company's Board,
the Company's Board of Directors shall be comprised of five (5) members, unless
otherwise agreed in writing by BlueStone.
(r) The Company shall retain a transfer agent
for the Common Shares, reasonably acceptable to BlueStone, for a period of one
(1) year following the Effective Date. In addition, for a period of three (3)
years following the Effective Date, the Company, at its own expense, shall cause
its transfer agent to provide BlueStone, if so requested in writing, with copies
of the Company's daily transfer sheets and when requested by BlueStone, a
current list of the Company's security holders, including a list of the
beneficial owners of securities held by a depository trust company and other
nominees.
(s) The Company hereby agrees, at its sole cost
and expense, to supply and deliver to Underwriters' Counsel, within a reasonable
period from the date hereof, five bound volumes, including the Registration
Statement, as amended or supplemented, all exhibits to the Registration
Statement, the Prospectus and all other underwriting documents.
(t) The Company shall, within 10 days of the
date hereof, have applied for listing in Standard & Poor's Corporation Records
Service (including annual report information) or Moody's Industrial Manual
(Moody's OTC Industrial Manual not being sufficient for these purposes) and
shall use its best efforts to have the Company listed in such manual and shall
maintain such listing for a period of three (3) years following the Effective
Date.
(u) For a period of three (3) years from the
Effective Date, the Company shall provide BlueStone, on a not less than annual
basis, with internal forecasts setting forth projected results of operations for
each quarterly and annual period in the two (2) fiscal years following the
respective dates of such forecasts. Such forecasts shall be provided to
BlueStone more frequently than annually if prepared more frequently by
management, and revised forecasts shall be prepared and provided to BlueStone
when required to reflect more current information, revised assumptions or actual
results that differ materially from those set forth in the forecasts.
(v) For a period of three (3) years following
the Effective Date, the Company shall continue to retain Grant Thornton LLP (or
such other nationally recognized accounting firm as is acceptable to BlueStone)
as the Company's independent public accountants.
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(w) For a period of three (3) years following
the Effective Date, the Company, at its expense, shall cause its independent
certified public accountants, as described in Section 5(v) above, to review (but
not audit) the Company's financial statements for each of the first three fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's 10-Q quarterly report and the mailing of quarterly
financial information to shareholders.
(x) For a period of two (2) years following the
Effective Date, the Company will not offer or sell any of its securities
pursuant to Regulation S of the Act without the prior written consent of
BlueStone.
(y) For a period of twenty-five (25) days
following the Effective Date, the Company will not issue press releases or
engage in any other publicity without BlueStone's prior written consent, other
than normal and customary releases issued in the ordinary course of the
Company's business or those releases required by law.
(z) For a period of three (3) years following
the Effective Date, the Company will cause its Board of Directors to meet,
either in person or telephonically, a minimum of four (4) times per year and
will hold a shareholder's meeting at least once per annum.
6. Conditions of the Underwriters' Obligation to Purchase
Shares from the Company. The obligation of the several Underwriters to purchase
and pay for the Offered Shares which they have agreed to purchase from the
Company is subject (as of the date hereof and the Closing Date) to the accuracy
of and compliance in all material respects with the representations and
warranties of the Company herein, to the accuracy of the statements of the
Company or its officers made pursuant hereto, to the performance in all material
respects by the Company of its obligations hereunder, and to the following
additional conditions:
(a) The Registration Statement will have become
effective not later than 9:30 A.M., New York City time, on the day following the
date of this Agreement, or at such later time or on such later date as the
Representatives may agree to in writing; prior to the Closing Date, no stop
order suspending the effectiveness of the Registration Statement will have been
issued and no proceedings for that purpose will have been initiated or will be
pending or, to the best of the Representatives' or the Company's knowledge, will
be contemplated by the Commission; and any request on the part of the Commission
for additional information will have been complied with to the satisfaction of
Underwriters' Counsel.
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(b) At the time that this Agreement is executed
and at the Closing Date, there will have been delivered to the Representatives a
signed opinion of Bruck & Perry, A Professional Corporation, counsel for the
Company ("Company Counsel"), dated as of the date hereof or the Closing Date, as
the case may be (and any other opinions of counsel referred to in such opinion
of Company Counsel or relied upon by Company Counsel in rendering their
opinion), reasonably satisfactory to Underwriters' Counsel, to the effect that:
(i) The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Michigan, with full power and authority, corporate and other, and with
all Permits necessary to own or lease, as the case may be, and operate its
properties, whether tangible or intangible, and to conduct its business as
described in the Registration Statement. The Company has no subsidiaries other
than the Subsidiaries. Each of the Subsidiaries is a corporation duly organized
and validly existing under the laws of its state of incorporation. Unless the
context otherwise requires, all references to the "Company" in this opinion
shall include the Subsidiaries. Each of the Company and the Subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and the failure to so
qualify could have a material adverse effect on the financial condition, results
of operations, business or properties of the Company or any of the Subsidiaries.
Each of the Subsidiaries has full power and authority, corporate and other, with
all Permits necessary to own or lease, as the case may be, and operate its
properties and to conduct its business as described in the Prospectus.
The Company owns all of the issued and outstanding
shares of capital stock of the Subsidiaries [for effective date opinion only --
carve out part of stock of DCT and all stock of Utilase and CTIC], free and
clear of any security interests, liens, encumbrances, claims and charges, and
all of such shares have been duly authorized and validly issued and are fully
paid and nonassessable.
(ii) The Company has full power
and authority, corporate and other, to execute, deliver and perform this
Agreement and the Representatives' Warrant Agreement and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Representatives' Warrant Agreement by the
Company, the consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms of this Agreement
and the Representatives' Warrant Agreement have been duly authorized by all
necessary corporate action, and this Agreement
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[for Closing Date opinion add: and the Representatives' Warrant Agreement] has
been duly executed and delivered by the Company. This Agreement is (assuming for
the purposes of this opinion that it is valid and binding upon the other party
thereto), and the Representatives' Warrant Agreement, when executed and
delivered by the Company on the Closing Date, will be, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, subject, as to enforcement of remedies, to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the rights of
creditors generally and the discretion of courts in granting equitable remedies
and except that enforceability of the indemnification provisions set forth in
Section 7 hereof and the contribution provisions set forth in Section 8 hereof
may be limited by the federal securities laws or public policy underlying such
laws.
(iii) The execution, delivery and
performance of this Agreement and the Representatives' Warrant Agreement by the
Company, the consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms of this Agreement
and the Representatives' Warrant Agreement do not, and will not, with or without
the giving of notice or the lapse of time, or both, (A) result in a violation of
the Articles of Incorporation or By-Laws, each as amended, of the Company or any
Subsidiary, (B) result in a breach of or conflict with any terms or provisions
of, or constitute a default under, or result in the modification or termination
of, or result in the creation or imposition of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company or any
the Subsidiary pursuant to any indenture, mortgage, note, contract, commitment
or other material agreement or instrument to which the Company or any Subsidiary
is a party or by which the Company or any Subsidiary or any of the Company's or
any Subsidiary's properties or assets are or may be bound or affected; (C)
violate any existing applicable law, rule, regulation, judgment, order or decree
of any governmental agency or court, domestic or foreign, having jurisdiction
over the Company or any Subsidiary or any of the Company's or any Subsidiary's
properties or business; or (D) have any effect on any Permit necessary for the
Company or any Subsidiary to own or lease and operate its properties or conduct
its business or the ability of the Company to make use thereof.
(iv) To the best of Company
Counsel's knowledge, no Permits of any court or governmental agency or body
(other than under the Act, the Regulations and applicable state securities or
Blue Sky laws) are required for the valid authorization, issuance, sale and
delivery of the Shares or the Representatives' Warrants, and the consummation by
the Company of
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the transactions contemplated by this Agreement or the Representatives' Warrant
Agreement.
(v) The Registration Statement
has become effective under the Act; to the best of Company Counsel's knowledge,
no stop order suspending the effectiveness of the Registration Statement has
been issued, and no proceedings for that purpose have been instituted or are
pending, threatened or contemplated under the Act or applicable state securities
laws.
(vi) The Registration Statement
and the Prospectus, as of the Effective Date, and each amendment or supplement
thereto as of its effective or issue date (except for the financial statements
and other financial data included therein or omitted therefrom, as to which
Company Counsel need not express an opinion) comply as to form in all material
respects with the requirements of the Act and Regulations.
(vii) The descriptions in the
Registration Statement and the Prospectus of statutes, regulations, government
classifications, contracts and other documents (including opinions of such
counsel); and the response to [Item 13 for Form SB-2] have been reviewed by
Company Counsel, and, based upon such review, are accurate in all material
respects and present fairly the information required to be disclosed, and there
are no material statutes, regulations or government classifications, or, to the
best of Company Counsel's knowledge, material contracts or documents, of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement, which are
not so described or filed as required.
None of the material provisions of the
contracts or instruments described above violates any existing applicable law,
rule, regulation, judgment, order or decree of any governmental agency or court
having jurisdiction over the Company or any Subsidiary or any of their assets or
businesses. To the best of Company Counsel's knowledge, the Company is not in
default under any contract or agreement material to its business or under any
promissory note or other evidence of indebtedness for borrowed funds.
(viii) The outstanding Common
Shares and outstanding options and warrants to purchase Common Shares have been
duly authorized and validly issued. The outstanding Common Shares are fully paid
and nonassessable. The outstanding options and warrants to purchase Common
Shares constitute the valid and binding obligations of the Company, enforceable
in accordance with their terms. None of the outstanding Common Shares or options
or warrants to purchase Common Shares has been issued in violation of
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the preemptive rights of any shareholder of the Company. None of the holders of
the outstanding Common Shares is subject to personal liability solely by reason
of being such a holder. The offers and sales of the outstanding Common Shares
and outstanding options and warrants to purchase Common Shares were at all
relevant times either registered under the Act and the applicable state
securities or Blue Sky laws or exempt from such registration requirements. The
authorized Common Shares and outstanding options and warrants to purchase Common
Shares conform to the descriptions thereof contained in the Registration
Statement and Prospectus. To the best of Company Counsel's knowledge, except as
set forth in the Prospectus, no holders of any of the Company's securities has
any rights, "demand", "piggyback" or otherwise, to have such securities
registered under the Act.
(ix) The issuance and sale of
the Shares and the Warrant Shares have been duly authorized and, when the Shares
and the Warrant Shares have been issued and duly delivered against payment
therefor as contemplated by this Agreement and the Representatives' Warrant
Agreement, respectively, the Shares and the Warrant Shares will be validly
issued, fully paid and nonassessable, and the holders thereof will not be
subject to personal liability solely by reason of being such holders. None of
the Offered Units, the Shares nor the Warrant Shares are subject to preemptive
rights of any shareholder of the Company. The certificates representing the
Shares are in proper legal form.
(x) The issuance and sale of the
Representatives' Warrants have been duly authorized and, when paid for, issued
and delivered pursuant to the terms of the Representatives' Warrant Agreement,
they will constitute the valid and binding obligations of the Company,
enforceable as to the Company in accordance with their terms, to issue and sell
the Warrant Shares. The Representatives' Warrants will not be subject to
preemptive rights of any shareholder of the Company. The Warrant Shares have
been duly reserved for issuance upon exercise of the Representatives' Warrants
in accordance with the provisions of the Representatives' Warrant Agreement. The
Representatives' Warrants conform to the descriptions thereof contained in the
Registration Statement and the Prospectus.
(xi) Upon delivery of the
Offered Shares to the Underwriters against payment therefor as provided in this
Agreement, the Underwriters (assuming they are bona fide purchasers within the
meaning of the Uniform Commercial Code) will acquire good title to the Offered
Shares, free and clear of all liens, encumbrances, equities, security interests
and claims.
(xii) Assuming that the
Representatives exercise the over-allotment option to purchase any of the
Optional Shares and make payment therefor in accordance with the terms of this
Agreement, upon delivery of the Optional Shares so purchased to the
Representatives hereunder, the Representatives (assuming
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they are bona fide purchasers within the meaning of the Uniform Commercial Code)
will acquire good title to such Optional Shares, free and clear of any liens,
encumbrances, equities, security interests and claims.
(xiii) To the best of Company
Counsel's knowledge, there are no claims, actions, suits, proceedings,
arbitrations, investigations or inquiries before any governmental agency, court
or tribunal, foreign or domestic, or before any private arbitration tribunal,
pending or threatened against the Company or any Subsidiary, or involving the
Company's or any Subsidiary's properties or business, other than as described in
the Prospectus, such description being accurate, and other than litigation
incident to the kind of business conducted by the Company which, individually
and in the aggregate, is not material.
(xiv) Each of the Company and the
Subsidiaries owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, service marks, copyrights, rights,
trade secrets, confidential information, processes and formulations used or
proposed to be used in the conduct of its business as described in the
Prospectus (collectively the "Intangibles"); to the best of Company Counsel's
knowledge, neither the Company nor any Subsidiary has infringed nor is
infringing upon the rights of others with respect to the Intangibles; and, to
the best of Company Counsel's knowledge, neither the Company nor any Subsidiary
has received any notice that it has or may have infringed, is infringing upon or
is conflicting with the asserted rights of others with respect to the
Intangibles which might, singly or in the aggregate, materially adversely affect
its business, results of operations or financial condition and such counsel is
not aware of any licenses with respect to the Intangibles which are required to
be obtained by the Company or any Subsidiary.
Company Counsel has participated in reviews and
discussions in connection with the preparation of the Registration Statement and
the Prospectus, and in the course of such reviews and discussions and such other
investigation as Company Counsel deemed necessary, no facts came to its
attention which lead it to believe that (A) the Registration Statement (except
as to the financial statements and other financial data contained therein, as to
which Company Counsel need not express an opinion), on the Effective Date,
contained any untrue statement of a material fact required to be stated therein
or omitted to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or that (B) the Prospectus contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
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In rendering its opinion pursuant to this Section
6(b), Company Counsel may rely upon the opinion of counsel of DCT, Utilase and
CTIC with respect to opinions that relate to such entities, and may rely upon
the certificates of government officials and officers of the Company as to
matters of fact, provided that Company Counsel shall state that they have no
reason to believe, and do not believe, that they are not justified in relying
upon such opinions or such certificates of government officials and officers of
the Company as to matters of fact, as the case may be.
The opinion letters delivered pursuant to this
Section 6(b) shall state that any opinion given therein qualified by the phrase
"to the best of our knowledge" is being given by Company Counsel after due
investigation of the matters therein discussed.
(c) At the Closing Date, there will have been
delivered to the Representatives a signed opinion of Underwriters' Counsel,
dated as of the Closing Date, to the effect that the opinions delivered pursuant
to Section 6(b) hereof appear on their face to be appropriately responsive to
the requirements of this Agreement, except to the extent waived by the
Representatives, specifying the same, and with respect to such other related
matters as the Representatives may require.
(d) At the Closing Date (i) the Registration
Statement and the Prospectus and any amendments or supplements thereto will
contain all material statements which are required to be stated therein in
accordance with the Act and the Regulations and will conform in all material
respects to the requirements of the Act and the Regulations, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (ii) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there will not have been any
material adverse change in the financial condition, results of operations or
general affairs of the Company from that set forth or contemplated in the
Registration Statement and the Prospectus, except changes which the Registration
Statement and the Prospectus indicate might occur after the Effective Date;
(iii) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no material
transaction, contract or agreement entered into by the Company, other than in
the ordinary course of business, which would be required to be set forth in the
Registration Statement and the Prospectus, other than as set forth therein; and
(iv) no action, suit or proceeding at law or in equity will be pending or, to
the best of the Company's knowledge, threatened against the Company which is
required to be set forth in the Registration Statement and the Prospectus, other
than as set forth therein, and no proceedings will be pending or, to the
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best of the Company's knowledge, threatened against the Company before or by any
federal, state or other commission, board or administrative agency wherein an
unfavorable decision, ruling or finding would materially adversely affect the
business, property, financial condition or results of operations of the Company,
other than as set forth in the Registration Statement and the Prospectus. At the
Closing Date, there will be delivered to the Representatives a certificate
signed by the Chairman of the Board or the President or a Vice President of the
Company, dated the Closing Date, evidencing compliance with the provisions of
this Section 6(d) and stating that the representations and warranties of the
Company set forth in Section 4 hereof were accurate and complete in all material
respects when made on the date hereof and are accurate and complete in all
material respects on the Closing Date as if then made; that the Company has
performed all covenants and complied with all conditions required by this
Agreement to be performed or complied with by the Company prior to or as of the
Closing Date; and that, as of the Closing Date, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been initiated or, to the best of his knowledge, are
contemplated or threatened. In addition, the Representatives will have received
such other and further certificates of officers of the Company as the
Representatives or Underwriters' Counsel may reasonably request.
(e) At the time that this Agreement is executed
and at the Closing Date, the Representatives will have received a signed letter
from Grant Thornton LLP, dated the date such letter is to be received by the
Representatives and addressed to them, confirming that it is a firm of
independent public accountants within the meaning of the Act and Regulations and
stating that: (i) insofar as reported on by it, in its opinion, the financial
statements of the Company included in the Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Act and the
applicable Regulations; (ii) on the basis of procedures and inquiries (not
constituting an examination in accordance with generally accepted auditing
standards) consisting of a reading of the unaudited interim financial statements
of the Company, if any, appearing in the Registration Statement and the
Prospectus and the latest available unaudited interim financial statements of
the Company, if more recent than that appearing in the Registration Statement
and Prospectus, inquiries of officers of the Company responsible for financial
and accounting matters as to the transactions and events subsequent to the date
of the latest audited financial statements of the Company, and a reading of the
minutes of meetings of the shareholders, the Board of Directors of the Company
and any committees of the Board of Directors, as set forth in the minute books
of the Company, nothing has come to its attention which, in its judgment, would
indicate that (A) during the period from the date of the latest financial
statements of the Company appearing in the Registration Statement and Prospectus
to a specified date not more than three business days prior to the date of such
letter, there have been any
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decreases in net current assets or net assets as compared with amounts shown in
such financial statements or decreases in net sales or decreases in total or per
share net income compared with the corresponding period in the preceding year or
any change in the capitalization or long-term debt of the Company, except in all
cases as set forth in or contemplated by the Registration Statement and the
Prospectus, and (B) the unaudited interim financial statements of the Company,
if any, appearing in the Registration Statement and the Prospectus, do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Regulations or are not fairly presented in
conformity with generally accepted accounting principles and practices on a
basis substantially consistent with the audited financial statements included in
the Registration Statement or the Prospectus; and (iii) it has compared specific
dollar amounts, numbers of shares, numerical data, percentages of revenues and
earnings, and other financial information pertaining to the Company set forth in
the Prospectus (with respect to all dollar amounts, numbers of shares,
percentages and other financial information contained in the Prospectus, to the
extent that such amounts, numbers, percentages and information may be derived
from the general accounting records of the Company, and excluding any questions
requiring an interpretation by legal counsel) with the results obtained from the
application of specified readings, inquiries and other appropriate procedures
(which procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter, and found them to be in
agreement.
(f) There shall have been duly tendered to the
Representatives certificates representing the Offered Shares to be sold on the
Closing Date.
(g) The NASD shall have indicated that it has no
objection to the underwriting arrangements pertaining to the sale of the Offered
Shares by the Underwriters or the sale of the Shares by the Representatives.
(h) No action shall have been taken by the
Commission or the NASD the effect of which would make it improper, at any time
prior to the Closing Date or the Option Closing Date, as the case may be, for
any member firm of the NASD to execute transactions (as principal or as agent)
in the Shares, and no proceedings for the purpose of taking such action shall
have been instituted or shall be pending, or, to the best of the
Representatives' or the Company's knowledge, shall be contemplated by the
Commission or the NASD. The Company represents at the date hereof, and shall
represent as of the Closing Date or Option Closing Date, as the case may be,
that it has no knowledge that any such action is in fact contemplated by the
Commission or the NASD.
(i) The Common Shares have been approved for
listing on AMEX.
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(j) All proceedings taken at or prior to the
Closing Date or the Option Closing Date, as the case may be, in connection with
the authorization, issuance and sale of the Shares shall be reasonably
satisfactory in form and substance to the Representatives and to Underwriters'
Counsel, and such counsel shall have been furnished with all such documents,
certificates and opinions as they may request for the purpose of enabling them
to pass upon the matters referred to in Section 7(c) hereof and in order to
evidence the accuracy and completeness of any of the representations, warranties
or statements of the Company, the performance of any covenants of the Company,
or the compliance by the Company with any of the conditions herein contained.
(k) As of the date hereof, the Company will have
delivered to the Underwriters the written undertakings of its officers,
directors and security holders and/or registration rights holders, as the case
may be, to the effect of the matters set forth in Sections 5(l) and (q).
(l) As of the date hereof and as of the Closing
Date, the Company will have delivered to the Underwriters (i) an agreement of
the [DCT and] Utilase and CTIC Sellers, in favor of the Underwriters,
containing any and all representations and warranties with respect to [DCT and]
Utilase and CTIC as to which the Company is relying pursuant to Section 4
hereof and (ii) an opinion of counsel to [DCT and] Utilase and CTIC, addressed
to the Underwriters, containing any and all opinions with respect to [DCT and]
Utilase and CTIC as to which Company counsel is relying pursuant to Section 6(b)
hereof.
If any of the conditions specified in this Section
6 have not been fulfilled, this Agreement may be terminated by the
Representatives on notice to the Company.
7. Indemnification.
(a) The Company agrees to indemnify and hold
harmless each Underwriter, including specifically each person that may be
substituted for an Underwriter as provided in Section 10 hereof, each officer,
director, partner, employee and agent of any Underwriter, and each person, if
any, who controls any of the Underwriters within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, from and against any and all
losses, claims, damages, expenses or liabilities, joint or several (and actions
in respect thereof), to which they or any of them may become subject under the
Act or under any other statute or at common law or otherwise, and, except as
hereinafter provided, will reimburse each of the Underwriters and each such
person, if any, for any legal or other expenses reasonably incurred by them or
any of them in connection with investigating or defending any actions, whether
or not resulting in any liability, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of
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a material fact contained (i) in the Registration Statement, in any Preliminary
Prospectus or in the Prospectus (or the Registration Statement or Prospectus as
from time to time amended or supplemented) or (ii) in any application or other
document executed by the Company, or based upon written information furnished by
or on behalf of the Company, filed in any jurisdiction in order to qualify the
Shares under the securities laws thereof (hereinafter "application"), or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, in light of the circumstances under which
they were made, unless such untrue statement or omission was made in such
Registration Statement, Preliminary Prospectus, Prospectus or application in
reliance upon and in conformity with information furnished in writing to the
Company in connection therewith by the Underwriter or any such person through
the Underwriter expressly for use therein; provided, however, that the indemnity
agreement contained in this Section 7(a) with respect to any Preliminary
Prospectus will not inure to the benefit of the Underwriter (or to the benefit
of any other person that may be indemnified pursuant to this Section 7(a)) if
(A) the person asserting any such losses, claims, damages, expenses or
liabilities purchased the Shares which are the subject thereof from such
Underwriter or other indemnified person; (B) such Underwriter or other
indemnified person failed to send or give a copy of the Prospectus to such
person at or prior to the written confirmation of the sale of such Shares to
such person; and (C) the Prospectus did not contain any untrue statement or
alleged untrue statement or omission or alleged omission giving rise to such
cause, claim, damage, expense or liability.
(b) Each Underwriter (including specifically
each person that may be substituted for an Underwriter as provided in Section 11
hereof) agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the Registration Statement and
each person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, from and against any and all
losses, claims, damages, expenses or liabilities, joint or several (and actions
in respect thereof), to which they or any of them may become subject under the
Act or under any other statute or at common law or otherwise, and, except as
hereinafter provided, will reimburse the Company and each such director, officer
or controlling person for any legal or other expenses reasonably incurred by
them or any of them in connection with investigating or defending any actions,
whether or not resulting in any liability, insofar as such losses, claims,
damages, expenses, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained (i) in
the Registration Statement, in any Preliminary Prospectus or in the Prospectus
(or the Registration Statement or Prospectus as from time to time amended or
supplemented) or (ii) in any application (including any application for
registration of the Shares under state securities or Blue Sky laws), or arise
out of or are based
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upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading, in light of the circumstances under which they were made, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by such Underwriter, or by the Representatives on behalf of such
Underwriter, expressly for use therein.
(c) Promptly after receipt of notice of the
commencement of any action in respect of which indemnity may be sought against
any indemnifying party under this Section 7, the indemnified party will notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party will, subject to the provisions hereinafter stated, assume
the defense of such action (including the employment of counsel satisfactory to
the indemnified party and the payment of expenses) insofar as such action
relates to an alleged liability in respect of which indemnity may be sought
against the indemnifying party. After notice from the indemnifying party of its
election to assume the defense of such claim or action, the indemnifying party
shall no longer be liable to the indemnified party under this Section 7 for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that if, in the reasonable judgment of the
indemnified party or parties, it is advisable for the indemnified party or
parties to be represented by separate counsel, the indemnified party or parties
shall have the right to employ a single counsel to represent the indemnified
parties who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the indemnified parties thereof against the
indemnifying party, in which event the fees and expenses of such separate
counsel shall be borne by the indemnifying party. Any party against whom
indemnification may be sought under this Section 7 shall not be liable to
indemnify any person that might otherwise be indemnified pursuant hereto for any
settlement of any action effected without such indemnifying party's consent.
8. Contribution. To provide for just and equitable
contribution, if (i) an indemnified party makes a claim for indemnification
pursuant to Section 8 hereof (subject to the limitations thereof) and it is
finally determined, by a judgment, order or decree not subject to further
appeal, that such claim for indemnification may not be enforced, even though
this Agreement expressly provides for indemnification in such case; or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the Exchange
Act, or otherwise, then the Company (including, for this purpose, any
contribution made by or on behalf of any director of the Company, any officer of
the Company who signed the Registration Statement and any controlling person of
the Company) as one entity and the Underwriters (including, for this purpose,
any contribution by or on behalf of each person, if any, who
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controls any Underwriter within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and each officer, director, partner, employee and
agent of any of the Underwriters) as a second entity, shall contribute to the
losses, liabilities, claims, damages and expenses whatsoever to which any of
them may be subject, so that the Underwriters are responsible for the proportion
thereof equal to the percentage which the underwriting discount per Share set
forth on the cover page of the Prospectus represents of the initial public
offering price per Share set forth on the cover page of the Prospectus and the
Company is responsible for the remaining portion; provided, however, that if
applicable law does not permit such allocation, then, if applicable law permits,
other relevant equitable considerations such as the relative fault of the
Company and the Underwriters in connection with the facts which resulted in such
losses, liabilities, claims, damages and expenses shall also be considered. The
relative fault, in the case of an untrue statement, alleged untrue statement,
omission or alleged omission, shall be determined by, among other things,
whether such statement, alleged statement, omission or alleged omission relates
to information supplied by the Company or by the Underwriters, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement, alleged statement, omission or alleged omission. The
Company, on one hand, and the Underwriters, on the other hand, agree that it
would be unjust and inequitable if the respective obligations of the Company and
the Underwriters for contribution were determined by pro rata or per capita
allocation of the aggregate losses, liabilities, claims, damages and expenses or
by any other method of allocation that does not reflect the equitable
considerations referred to in this Section 8. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person, if any, who
controls any of the Underwriters within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, partner, employee
and agent of any of the Underwriters will have the same rights to contribution
as the Underwriters, and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who has signed the Registration Statement and each
director of the Company will have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 8. Anything in
this Section 8 to the contrary notwithstanding, no party will be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 8 is intended to supersede, to the
extent permitted by law, any right to contribution under the Act or the Exchange
Act or otherwise available.
9. Survival of Indemnities, Contribution, Warranties
and Representations. The respective indemnity and contribution
agreements of the Company and the Underwriters contained in
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Sections 7 and 8 hereof, and the representations and warranties of the Company
contained in this Agreement shall remain operative and in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of the Underwriters, the Company or any of
its directors and officers or any controlling person referred to in said
Sections, and shall survive the delivery of, and payment for, the Shares.
10. Substitution of Underwriters.
(a) If one or more Underwriters should default
in its or their obligation to purchase and pay for any Offered Shares hereunder
and if the aggregate number of such Offered Shares which all Underwriters so
defaulting have agreed to purchase does not exceed 10% of the total number of
the Offered Shares, the non-defaulting Underwriters will be obligated severally
to purchase and pay for (in addition to the number of Offered Shares set forth
opposite their names in Schedule A attached hereto) the full number of Offered
Shares agreed to be purchased by all defaulting Underwriters, and not so
purchased, in proportion to their respective commitments hereunder. In such
event the Representatives, for the accounts of the several nondefaulting
Underwriters, may take up and pay for all or any part of such additional Offered
Shares to be purchased by each such Underwriter under this Section 10(a), and
may postpone the Closing Date to a time not exceeding three full business days
after the Closing Date determined as provided in Section 2 hereof.
(b) If one or more Underwriters should default
in its or their obligation to purchase and pay for any Offered Shares hereunder
and if the aggregate number of such Offered Shares which all Underwriters so
defaulting have agreed to purchase exceeds 10% of the total number of Offered
Shares, or if one or more Underwriters for any reason permitted hereunder should
cancel its or their obligation to purchase and pay for Offered Shares hereunder,
the non-cancelling and non-defaulting Underwriters (hereinafter called the
"remaining Underwriters") will have the right to purchase such Offered Shares in
such proportion as may be agreed among them at the Closing Date determined as
provided in Section 2 hereof. If the remaining Underwriters do not purchase and
pay for such Offered Shares at such Closing Date, the Closing Date will be
postponed for 24 hours and the remaining Underwriters will have the right to
purchase such Offered Shares, or to substitute another person or persons to
purchase the same, or both, at such postponed Closing Date. If purchasers have
not been found for such Offered Shares by such postponed Closing Date, the
Closing Date will be postponed for a further 24 hours, and the Company will have
the right to substitute another person or persons, reasonably satisfactory to
the Representatives to purchase such Offered Shares at such second postponed
Closing Date. If it shall be arranged for the remaining Underwriters or
substituted underwriters to take up the Firm Shares of the defaulting
Underwriter or Underwriters as provided in this Section, (A) the Company shall
have the right to
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postpone the time of delivery for a period of not more than three (3) full
Business Days, in order to effect whatever changes may thereby be made necessary
in the Registration Statement or the Prospectus or in any other documents or
arrangements, and the Company agrees promptly to file any amendments to the
Registration Statement or supplements to the Prospectus which may thereby be
made necessary. If the Company has not found such purchasers for such Offered
Shares by such second postponed Closing Date, then this Agreement will
automatically terminate, and neither the Company nor the remaining Underwriters
will be under any obligation under this Agreement (except that the Company and
the Underwriters will remain liable to the extent provided in Sections 7 and 8
hereof and the Company will also remain liable to the extent provided in Section
5(j) hereof). As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 10(b). Nothing in
Section 11 hereof will relieve a defaulting Underwriter from the liability for
its default and nothing in this Section 10(b) will obligate any Underwriter to
purchase or find purchasers for any Offered Shares in excess of those agreed to
be purchased by such Underwriter under the terms of Section 2 hereof.
11. Termination of Agreement.
(a) The Company, by written or telegraphic
notice to the Representatives, or the Representatives, by written or telegraphic
notice to the Company, may terminate this Agreement prior to the earlier of (i)
11:00 A.M., New York City time, on the first full business day after the
Effective Date; or (ii) the time when the Underwriters, after the Registration
Statement becomes effective, release the Offered Shares for public offering. The
time when the Underwriters "release the Offered Shares for public offering" for
the purposes of this Section 11 means the time when the Underwriters release for
publication the first newspaper advertisement, which is subsequently published,
relating to the Offered Shares, or the time when the Underwriters release for
delivery to members of a selling group copies of the Prospectus and an offering
letter or an offering telegram relating to the Offered Shares, whichever will
first occur.
(b) This Agreement, including without
limitation, the obligation to purchase the Shares and the obligation to purchase
the Optional Shares after exercise of the option referred to in Section 3
hereof, are subject to termination in the absolute discretion of the
Underwriters, by notice given to the Company prior to delivery of and payment
for all the Offered Shares or the Optional Shares, as the case may be, if, prior
to such time, any of the following shall have occurred: (i) the Company
withdraws the Registration Statement from the Commission or the Company does not
or cannot expeditiously proceed with the public offering; (ii) the
representations and warranties in Section 4 hereof are not materially correct or
cannot be complied with; (iii) trading in securities generally on the New York
Stock Exchange or AMEX will
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have been suspended; (iv) limited or minimum prices will have been established
on either such Exchange; (v) a banking moratorium will have been declared either
by federal or New York State authorities; (vi) any other restrictions on
transactions in securities materially affecting the free market for securities
or the payment for such securities, including the Offered Shares or the Optional
Shares, will be established by either of such Exchanges, by the Commission, by
any other federal or state agency, by action of the Congress or by Executive
Order; (vii) trading in any securities of the Company shall have been suspended
or halted by any national securities exchange, the NASD or the Commission;
(viii) there has been a materially adverse change in the condition (financial or
otherwise), prospects or obligations of the Company; (ix) the Company will have
sustained a material loss, whether or not insured, by reason of fire, flood,
accident or other calamity; (x) any action has been taken by the government of
the United States or any department or agency thereof which, in the judgment of
the Representatives, has had a material adverse effect upon the market or
potential market for securities in general; or (xi) the market for securities in
general or political, financial or economic conditions will have so materially
adversely changed that, in the judgment of the Representatives, it will be
impracticable to offer for sale, or to enforce contracts made by the
Underwriters for the resale of, the Offered Shares or the Optional Shares, as
the case may be.
(c) If this Agreement is terminated pursuant to
not consummated because any condition of the Underwriters' obligations hereunder
is not satisfied or because of any refusal, inability or failure on the part of
the Company to comply with any of the terms or to fulfill any of the conditions
of this Agreement, or if for any reason the Company shall be unable to or does
not perform all of its obligations under this Agreement, the Company will not be
liable to any of the Underwriters for damages on account of loss of anticipated
profits arising out of the transactions covered by this Agreement, but the
Company will remain liable to the extent provided in Sections 5(j), 7, 8 and 9
of this Agreement.
12. Information Furnished by the Underwriter to the Company.
It is hereby acknowledged and agreed by the parties hereto that for the purposes
of this Agreement, including, without limitation, Sections 4(f), 7(a), 7(b) and
8 hereof, the only information given by the Underwriters to the Company for use
in the Prospectus are the statements set forth in the last sentence of the last
paragraph on the cover page, the statement appearing in the last paragraph on
page 2 with respect to stabilizing the market price of Shares, the information
in the _____ paragraph on page __ with respect to concessions and reallowances,
the table on page ___ regarding the offering syndicate, and the information in
the _____, _____, _____ and _____ full paragraphs on page ___ with respect to
discretionary accounts, the determination of the public offering
-35-
<PAGE>
price, stabilizing the market price of the Shares and BlueStone, respectively,
as such information appears in any Preliminary Prospectus and in the Prospectus.
13. Notices and Governing Law. All communications
hereunder will be in writing and, except as otherwise provided, will be
delivered at, or mailed by certified mail, return receipt requested, or
telecopied to, the following addresses: if to BlueStone, the Representatives, or
the Underwriters, to BlueStone Capital Partners, L.P., 575 Fifth Avenue, New
York, New York 10017, Facsimile No. (212) 297-5695, with a copy to Tenzer
Greenblatt LLP, Attention: Robert J. Mittman, Esq., 405 Lexington Avenue, New
York, New York 10174, Facsimile No. (212) 885-5001; if to the Company at 33
Bloomfield Hills Parkway, Suite 155, Bloomfield Hills, Michigan 48304,
Attention: President, Facsimile No. (810) 594-9501 with a copy to Bruck & Perry,
A Professional Corporation, Attention: Teresa Tormey Fineman, Esq., 500 Newport
Center Drive, Suite 700, Newport Beach, California 92660, Facsimile No. (714)
719-6020.
This Agreement shall be deemed to have been made and delivered
in New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of New York. The Company (1) agrees that any legal suit, action or proceeding
arising out of or relating to this Agreement shall be instituted exclusively in
New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York, (2) waives any objection
which the Company may have now or hereafter to the venue of any such suit,
action or proceeding, and (3) irrevocably consents to the jurisdiction of the
New York State Supreme Court, County of New York, and the United States District
Court for the Southern District of New York in any such suit, action or
proceeding. The Company further agrees to accept and acknowledge service of any
and all process which may be served in any such suit, action or proceeding in
the New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York and agrees that service of
process upon the Company mailed by certified mail to the Company's address shall
be deemed in every respect effective service of process upon the Company in any
such suit, action or proceeding.
14. Parties in Interest. This Agreement is made solely for the
benefit of the several Underwriters, the Company and, to the extent expressed,
any person controlling the Company or the Underwriters, each officer, director,
partner, employee and agent of the Underwriters, the directors of the Company,
its officers who have signed the Registration Statement, and their respective
executors, administrators, successors and assigns, and, no other person will
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" will not include any purchaser of the Shares from any
of the Underwriters, as such purchaser.
-36-
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the
Underwriters in accordance with its terms.
Very truly yours,
NOBLE INTERNATIONAL, LTD.
By:___________________
Name:
Title:
Confirmed and accepted in
New York, N.Y., as of the
date first above written:
BLUESTONE CAPITAL PARTNERS, L.P.
By:___________________________
Name: Kerry J. Dukes
Title: President
RODMAN & RENSHAW, INC.
By:___________________________
Name:
Title:
Acting on behalf of themselves
as the Representatives of the
several Underwriters named in
Schedule A hereto.
-37-
<PAGE>
2
SCHEDULE A
TO THE UNDERWRITING AGREEMENT
<TABLE>
<CAPTION>
Underwriter Number of Shares
- ----------- ----------------
<S> <C>
BlueStone Capital Partners, L.P...........................................
Rodman & Renshaw, Inc. ...................................................
Total............................................................ 3,300,000
=========
</TABLE>
-38-
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE * CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
Received (FOR BUREAU USE ONLY)
MAY 22 1997 097A#8625 0523 ORG%FI
- ----------------------------
097A#8626 0523 ORG%FI
FILED
- ---------------------------- MAY 22 1997
Administrator
MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
CORPORATION SECURITIES & LAND DEVELOPMENT BUREAU
EFFECTIVE DATE:
- --------------------------------------------------------------------------------
========================================
Name PH. 517-663-2525 Ref # 73100
Attn: Cheryl J. Bixby
Address MICHIGAN RUNNER SERVICE
P.O. Box 266
Eaton Rapids, MI. 48827-0266
========================================
Document will be returned to the name and address you enter above
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Profit Corporations
(Please read information and instructions on the last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 nonprofit corporations), the
undersigned corporation executes the following Certificate:
- --------------------------------------------------------------------------------
1. The present name of the corporation is:
Noble International, Ltd.
2. The identification number assigned by the Bureau is: 033-244
3. The location of the registered office is:
33 Bloomfield Hills Parkway, Suite 155, Bloomfield Hills, Michigan 48304
___________________________________________________________, Michigan__________
(Street Address) (City) (ZIP Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. Article III of the Articles of Incorporation is hereby amended to read as
follows:
The total authorized shares:
1. Common Shares: 20,000,000
Preferred Shares: 150,000
2. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
The Preferred Stock may be issued, from time to time, in one or more series
as authorized by the Board of Directors. Prior to issuance of shares of each
series, the Board of Directors by resolution shall designate that series to
distinguish it from all other series and classes of stock of the Corporation,
shall specify the number of shares to be included in the series and shall set
the terms, preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or
conditions of redemption. Subject to the express terms of any other series of
Preferred Stock outstanding at the time and notwithstanding any other provision
of these Articles of Incorporation, the Board of Directors may increase or
decrease the number of shares of, or alter the designation or classify or
reclassify, any unissued shares of any series of Preferred Stock by setting or
changing, in any one or more respects, from time to time before issuing the
shares, the terms, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or other distributions, qualifications
or terms or conditions of redemption of the shares of any series of Preferred
Stock.
- --------------------------------------------------------------------------------
<PAGE>
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS CONSENT
OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD OF DIRECTORS
OR TRUSTEES; OTHERWISE, COMPLETE SECTION (b). DO NOT COMPLETE BOTH.
a. |_| The foregoing amendment to the Articles of Incorporation was duly
adopted on the ______________day of ___________________________,
19_______ , in accordance with the provisions of the Act by the unanimous
consent of the incorporator(s) before the first meeting of the Board of
Directors or Trustees.
Signed this_____________day of__________________, 19__________.
- ----------------------------------------- -----------------------------------
(Signature) (Signature)
- ----------------------------------------- -----------------------------------
(Type or Print Name) (Type or Print Name)
- ----------------------------------------- -----------------------------------
(Signature) (Signature)
- ----------------------------------------- -----------------------------------
(Type or Print Name) (Type or Print Name)
b. |X| The foregoing amendment to the Articles of Incorporation was duly adopted
on the 1st day of April, 1997. The amendment:(check one of the following)
|_| was duly adopted in accordance with Section 611(2) of the Act by the
vote of the shareholders if a profit corporation, or by the vote of
the shareholders or members if a nonprofit corporation, or by the vote
of the directors if a nonprofit corporation organized on a nonstock
directorship basis. The necessary votes were cast in favor of the
amendment.
|_| was duly adopted by the written consent of all directors pursuant to
Section 525 of the Act and the corporation is a nonprofit corporation
organized on a nonstock directorship basis.
|X| was duly adopted by the written consent of the shareholders or members
having not less than the minimum number of votes required by statute
in accordance with Section 407(1) and (2) of the Act if a nonprofit
corporation, or Section 407(1) of the Act if a profit corporation.
Written notice to shareholders who have not consented in writing has
been given. (Note: Written consent by less than all of the
shareholders or members is permitted only if such provision appears in
the Articles of Incorporation.)
|_| was duly adopted by the written consent of all the shareholders or
members entitled to vote in accordance with section 407(3) of the Act
if a nonprofit corporation, or Section 407(2) of the Act if a profit
corporation.
Signed this First day of April, 1996
By /s/Robert J. Skandalaris
---------------------------------------------------------
(Only Signature of President, Vice-President, Chairperson,
or Vice-Chairperson)
Robert J. Skandalaris President
---------------------------------------------------------
(Type or Print Name) (Type or Print Title)
<PAGE>
BYLAWS
OF
NOBLE INTERNATIONAL, LTD.
A Michigan Corporation
ARTICLE I
OFFICE
1.1 Registered Office. The registered office of Noble International,
Ltd., a Michigan corporation (hereinafter called the "Corporation"), shall be
located at such place in the State of Michigan as has been most recently
designated in the files of the Michigan Department of Commerce, either by the
articles of incorporation or by a certificate of change of registered office or
annual report changing the location of such office. The Corporation may also
have an office or offices at such other place or places within and without the
State of Michigan as the board of directors may from time to time determine.
1.2 Principal Office. The principal office for the transaction of the
business of the Corporation shall be 33 Bloomfield Hills Parkway, Suite 155,
Bloomfield Hills, Michigan 48304. The Board of Directors (hereinafter called the
"Board") is hereby granted full power and authority to change the principal
office from one location to another.
1.3 Other Offices. The Corporation may also have an office or offices at
such other place or places, either within or without the State of Michigan, as
the Board may from time to time determine or as the business of the Corporation
may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 Annual Meetings. Annual meetings of the shareholders of the
Corporation for the purpose of electing directors and for the transaction of
such other business as may properly come before such meetings in accordance with
Section 2.11 of these Bylaws may be held at such time, date and place as the
Board shall determine by resolution.
2.2 Special Meetings. A special meeting of the shareholders for the
transaction of any proper business may be called at any time only by the Board.
2.3 Place of Meetings. All meetings of the shareholders shall be held at
such places within or without the State of Michigan, as may from time to time be
designated by the Board and specified in the respective notices or waivers of
notice thereof.
1
<PAGE>
2.4 Notice of Meetings.
(a) Except as otherwise required by law, written notice of each
meeting of the shareholders, whether annual or special, shall be given not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each shareholder of record entitled to vote at such meeting. If mailed, notice
is given when deposited in the United States mail, postage prepaid, directed to
the shareholder at his address as it appears on the records of the Corporation.
Except as otherwise expressly required by law, no publication of any notice of a
meeting of the shareholders shall be required. Every notice of a meeting of the
shareholders shall state the place, date and hour of the meeting, and in the
case of a special meeting, shall also state the purpose or purposes for which
the meeting is called. Notice of any meeting of shareholders shall not be
required to be given to any shareholder who shall have waived such notice and
such notice shall be deemed waived by any shareholder who shall attend such
meeting in person or by proxy, except as a shareholder who shall attend such
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. Except as otherwise expressly required by law, notice of any adjourned
meeting of the shareholders need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken.
(b) Whenever notice is required to be given to any shareholder to
whom (i) notice of two consecutive annual meetings, and all notices of meetings
or of the taking of action by written consent without a meeting to such person
during the period between such two consecutive annual meetings, or (ii) all, and
at least two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the Corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any person shall deliver to the Corporation a written notice setting
forth his then current address, the requirement that notice be given to such
person shall be reinstated. In the event that the action taken by the
Corporation is such as to require the filing of a certificate under any of the
other sections, the certificate need not state that notice was not given to
persons to whom notice was not required to be given pursuant to this section.
2.5 Quorum. Except as provided by law, the holders of record of a
majority in voting interest of the shares of stock of the Corporation entitled
to be voted thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the shareholders of the
Corporation or any adjournment thereof. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum, and by any greater number of shares otherwise required to
take such action by applicable law or the Certificate of Incorporation. In the
absence of a quorum at any meeting or any adjournment thereof, a majority in
voting interest of the shareholders present in person or by proxy and entitled
to vote thereat or, in the absence therefrom of all the shareholders, any
officer entitled to preside at, or to act as secretary of, such meeting may
adjourn such meeting from time to time. At any such adjourned meeting at which a
quorum is present any business may be transacted which might have been
transacted at the meeting as originally called.
2
<PAGE>
2.6 Voting.
(a) Each shareholder shall, at each meeting of the shareholders,
be entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 2.10 of these
Bylaws as the record date for the determination of shareholders entitled to
notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed,
then (A) at the close of business on the day next preceding the day on which
notice of the meeting shall be given or (B) if notice of the meeting shall be
waived, at the close of business on the day next preceding the day on which the
meeting shall be held.
(b) Voting shall in all cases be subject to the provisions of
the Michigan Business Corporation Act and to the following provisions:
(i) Subject to Section 2.6(b)(vii), shares held by an
administrator, executor, guardian, conservator, custodian or other fiduciary may
be voted by such holder either in person or by proxy, without a transfer of such
shares into the holder's name; and shares standing in the name of a trustee may
be voted by the trustee, either in person or by proxy, but no trustee shall be
entitled to vote shares held by such trustee without a transfer of such shares
into the trustee's name.
(ii) Shares standing in the name of a receiver may be
voted by such receiver; and shares held by or under the control of a receiver
may be voted by such receiver without the transfer thereof into the receiver's
name if authority to do so is contained in the order of the court by which such
receiver was appointed.
(iii) Subject to the provisions of the Michigan Business
Corporation Act, and except where otherwise agreed in writing between the
parties, a shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
3
<PAGE>
(iv) Shares standing in the name of a minor may be voted
and the Corporation may treat all rights incident thereto as exercisable by the
minor, in person or by proxy, whether or not the Corporation has notice, actual
or constructive, of the non-age, unless a guardian of the minor's property has
been appointed and written notice of such appointment given to the Corporation.
(v) Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent or proxy holder as the
bylaws of such other corporation may prescribe or, in the absence of such
provision, as the Board of Directors of such other corporation may determine or,
in the absence of such determination, by the chairman of the board, president or
any vice president of such other corporation, or by any other person authorized
to do so by the board, president or any vice president of such other
corporation. Shares which are purported to be executed in the name of a
corporation (whether or not any title of the person signing is indicated) shall
be presumed to be voted or the proxy executed in accordance with the provisions
of this subdivision, unless the contrary is shown.
(vi) Shares of its own stock belonging to the Corporation
or to another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes.
(vii) Shares held by the Corporation in a fiduciary
capacity, and shares of the Corporation held in a fiduciary capacity by any
subsidiary, shall not be entitled to vote on any matter, except to the extent
that the settlor or beneficial owner possesses and exercises a right to vote or
to give the Corporation binding instructions as to how to vote such shares.
(viii) If shares stand of record in the names of two or
more persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by the
entirety, voting trustees, persons entitled to vote under a shareholder voting
agreement or otherwise, or if two or more persons (including proxyholders) have
the same fiduciary relationship respecting the same shares, unless the Secretary
of the Corporation is given written notice to the contrary and is furnished with
a copy of the instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall have the
following effect:
(A) If only one votes, such act binds all;
(B) If more than one vote, the act of the majority
so voting binds all;
4
<PAGE>
(C) If more than one vote, but the vote is evenly
split on any particular matter, each fraction may vote the securities in
question proportionately. If the instrument so filed or the registration of the
shares shows that any such tenancy is held in unequal interests, a majority or
even split for the purpose of this section shall be a majority or even split in
interest.
(c) Any such voting rights may be exercised by the shareholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such shareholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting. A validly executed proxy which
does not state that it is irrevocable shall continue in full force and effect
unless revoked by the person executing it, prior to the vote pursuant thereto,
by a writing delivered to the Corporation stating that the proxy is revoked or
by a subsequent proxy executed by, or attendance at the meeting and voting in
person by the person executing the proxy; provided, however, that no such proxy
shall be valid after the expiration of three (3) years from the date of such
proxy, unless otherwise provided in the proxy. The revocability of a proxy that
states on its face that it is irrevocable shall be governed by the provisions of
the Michigan Business Corporation Act.
(d) At any meeting of the shareholders all matters, except as
otherwise provided in the Articles of Incorporation, in these Bylaws or by law,
shall be decided by the vote of a majority in voting interest of the
shareholders present in person or by proxy and entitled to vote thereat and
thereon, a quorum being present.
(e) The vote at any meeting of the shareholders on any question
need not be written ballot, unless so directed by the chairman of the meeting;
provided, however, that any election of directors at any meeting must be
conducted by written ballot upon demand made by any shareholder or shareholders
present at the meeting before the voting begins. On a vote by ballot each ballot
shall be signed by the shareholder voting, or by his proxy, if there be such
proxy, and it shall state the number of shares voted.
2.7 No Action Without a Meeting. No action which is required to be taken
or which may be taken at any annual or special meeting of shareholders may be
taken without a meeting.
2.8 List of Shareholders. The Secretary of the Corporation shall prepare
and make, at least ten (10) days before every meeting of shareholders, a
complete list of the shareholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each shareholder and the number
of shares registered in the name of each shareholder. Such list shall be open to
the examination of any shareholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any shareholder who is present.
5
<PAGE>
2.9 Judges. If at any meeting of the shareholders a vote by written
ballot shall be taken on any question, the chairman of such meeting may appoint
a judge or judges to act with respect to such vote. Each judge so appointed
shall first subscribe an oath faithfully to execute the duties of a judge at
such meeting with strict impartiality and according to the best of his ability.
Such judges shall: (i) decide upon the qualification of the voters; (ii) report
the number of shares represented at the meeting and entitled to vote on such
question; (iii) conduct the voting and accept the votes; and (iv) when the
voting is completed, ascertain and report the number of shares voted
respectively for and against the question. Reports of judges shall be in writing
and subscribed and delivered by them to the Secretary of the Corporation. The
judges need not be shareholders of the Corporation, and any officer of the
Corporation may be a judge on any question other than a vote for or against a
proposal in which he shall have a material interest.
2.10 Fixing Date for Determination of Shareholders of Record.
(a) In order that the Corporation may determine the shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board, and
which record date shall not be more than sixty (60) nor less than ten (10) days
before the date of such meeting.
(b) In order that the Corporation may determine the shareholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the shareholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining shareholders for any
such purpose shall be at the close of business on the day on which the Board
adopts the resolution relating thereto.
If no record is fixed by the Board, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
shareholders of record entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of the meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
2.11 Shareholder Proposals at Annual Meetings.
(a) If any shareholder notifies the Corporation of his intention
to present a proposal for action at a forthcoming meeting of the Corporation's
shareholders, the Corporation shall set forth the proposal in its proxy
statement and identify it in its form of proxy and provide means by which
security holders can specify a choice between approval or disapproval of, or
abstention with respect to, such proposal. Notwithstanding the foregoing, the
Corporation shall not be required to include the proposal in its proxy statement
or form of proxy unless the shareholder (herein the "proponent") has complied
with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934,
as amended:
6
<PAGE>
(1) At the time he submits the proposal, the proponent
shall be a record or beneficial owner of at least 1% or $1,000 in market value
of securities entitled to be voted at the meeting and have held such securities
for at least one year, and he shall continue to own such securities through the
date on which the meeting is held. If the Corporation requests documentary
support for a proponent's claim that he is the beneficial owner of at least 1%
or $1,000 in market value of such voting securities of the Corporation or that
he has been a beneficial owner of the securities for one or more years, the
Corporation shall make such request within 14 calendar days after receiving the
security holder proposal and the proponent shall furnish appropriate
documentation within 21 calendar days after receiving the request. Appropriate
documentation of the proponent's claim of beneficial ownership shall include:
(i) a written statement by a record owner or an
independent third party, accompanied by the proponent's written statement that
the proponent intends to continue ownership of such securities through the date
on which the meeting is held; or
(ii) a copy of a Schedule 13D, Schedule 13G, Form
13F, Form 3 and/or Form 4, or amendments thereto, filed with the Securities and
Exchange Commission and furnished to the Corporation by the proponent, provided
that such filings indicate the proponent's beneficial ownership as of or prior
to the date on which the relevant one year period commences, and are supported
by
(A) a copy of all subsequent amendments
reporting a change in ownership level,
(B) the proponent's affidavit,
declaration, affirmation or other similar document provided for under applicable
state law attesting that the proponent continued to be the beneficial owner of
at least 1% or $1,000 in market value of such voting securities of the
Corporation throughout the required one year period and as of the date of the
affidavit, declaration, affirmation or other similar document provided for under
applicable state law, and
(C) the proponent's written statement that
the proponent intends to continue ownership of such securities through the date
on which the meeting is held.
7
<PAGE>
In the event the Corporation includes the proponent's proposal in its proxy
soliciting material for the meeting and the proponent fails to comply with the
requirement that he continuously hold such securities through the meeting date,
the Corporation shall not be required to include any proposals submitted by the
proponent in its proxy material for any meeting held in the following two
calendar years.
(2) At the time he submits a proposal, a proponent shall
provide Corporation in writing with his name, address, the number of the
Corporation's voting securities that he holds of record or beneficially, the
dates upon which he acquired such securities, and documentary support for a
claim of beneficial ownership. A proposal may be presented at the meeting either
by the proponent or his representative who is qualified under state law to
present the proposal on the proponent's behalf at the meeting. In the event that
the proponent or his representative fails, without good cause, to present the
proposal for action at the meeting, the Corporation shall not be required to
include any proposals submitted by the proponent in its proxy solicitation
material for any meeting held in the following two calendar years.
(3) The proponent shall submit his proposal sufficiently
far in advance of the meeting so that it is received by the Corporation within
the following time periods:
(i) A proposal to be presented at an annual
meeting shall be received at the Corporation's principal executive offices not
less than 120 days in advance of the date of the Corporation's proxy statement
released to security holders in connection with the previous year's annual
meeting of security holders, except that if no annual meeting was held in the
previous year or the date of the annual meeting has been changed by more than 30
calendar days from the date contemplated at the time of the previous year's
proxy statement, a proposal shall be received by the Corporation a reasonable
time before the solicitation is made.
(ii) A proposal to be presented at any meeting
other than an annual meeting specified in paragraph (a)(3)(i) of this section
shall be received a reasonable time before the solicitation is made.
(b) The number of proposals, forms of supporting statement,
identification of the proponent in the Corporation's proxy statement and
circumstances under which the Corporation may omit a proposal shall be
determined in accordance with Rule 14a-8 under the Securities Exchange Act of
1934, as amended.
2.12 Notice of Shareholder Nominees.
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(a) Nominations of persons for election to the Board of the
Corporation shall be made only at a meeting of shareholders and only (i) by or
at the direction of the Board or (ii) by any shareholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in Section 2.11. Such shareholder's notice shall
set forth: (i) as to each person whom the shareholder proposes to nominate for
election or re-election as a director, all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to the Securities
Exchange Act of 1934, as amended, (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); and (ii) as to the shareholder giving the notice (A) the name and
address, as they appear on the Corporation's books, of such shareholder, and (B)
the class and number of shares of the Corporation which are beneficially owned
by such shareholder. Notwithstanding the foregoing, nothing in this Section 2.12
shall be interpreted or construed to require the inclusion of information about
any such nominee in any proxy statement distributed by, at the discretion of, or
on behalf of the Board.
(b) The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this Section 2.12, and if the
chairman should so determine, the chairman shall so declare to the meeting and
the defective nomination shall be disregarded.
ARTICLE III
BOARD OF DIRECTORS
3.1 General Powers. The property, business and affairs of the
Corporation shall be managed by or under the direction of the Board.
3.2 Number and Term of Office. The number of directors shall be no less
than seven (7) and no more than eleven (11) or such other number as may be fixed
by the shareholders at any annual meeting or special meeting or by the Board at
any regular or special meeting, subject in either case to the provisions of the
Certificate of Incorporation. Directors need not be shareholders. The initial
number of directors shall be seven (7). Each director shall hold office until
the next annual meeting and until a successor has been elected and qualified, or
he resigns, or he is removed in a manner consistent with these Bylaws.
3.3 Election of Directors. The directors shall be elected annually by
the shareholders of the Corporation and the persons receiving the greatest
number of votes in accordance with the system of voting established by these
Bylaws shall be the directors.
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3.4 Resignation and Removal of Directors. Any director of the
Corporation may resign at any time by giving written notice to the Corporation.
Any such resignation shall take effect at the time specified therein, or, if the
time be not specified, it shall take effect immediately upon its receipt; and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective. Any or all of the directors may be removed
with or without cause if such removal is approved by the affirmative vote of a
majority of the outstanding shares entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before his term of office expires.
3.5 Vacancies. Except as otherwise provided in the Certificate of
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors or any other cause, may
be filled by a majority of the remaining directors, though less than a quorum.
Each director so chosen to fill a vacancy shall hold office until his successor
shall have been elected and qualified or until he shall resign or shall have
been removed in the manner hereinafter provided.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election by
written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
3.6 Place of Meeting, Etc. The Board may hold any of its meetings at
such place or places within or without the State of Michigan as the Board may
from time to time by resolution designate or as shall be designated by the
person or persons calling the meeting or in the notice or a waiver of notice of
any such meeting. Directors may participate in any regular or special meeting of
the Board by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board can hear
each other, and such participation shall constitute presence in person at such
meeting.
3.7 First Meeting. The Board shall meet as soon as practicable after
each annual election of directors and notice of such first meeting shall not be
required.
3.8 Regular Meetings. Regular meetings of the Board may be held at such
times as the Board shall from time to time by resolution determine. If any day
fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day not a legal holiday. Except as may be
required by law or specified herein, notice of regular meetings need not be
given.
3.9 Special Meetings. Special meetings of the Board shall be held
whenever called by the Chairman of the Board, the President or any two or more
directors. Except as otherwise provided by law or by these Bylaws, notice of the
time and place of each such special meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least five (5)
days before the day on which the meeting is to be held, or shall be sent to him
at such place by telegraph or cable or be delivered personally not less than
forty-eight (48) hours before the time at which the meeting is to be held.
Except where otherwise required by law or by these Bylaws, notice of the purpose
of a special meeting need not be given. Notice of any meeting of the Board shall
not be required to be given to any director who is present at such meeting,
except a director who shall attend such 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.
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3.10 Quorum and Manner of Acting. Except as otherwise provided in these
Bylaws, in the Certificate of Incorporation or by law, the presence of a
majority of the authorized number of directors shall be required to constitute a
quorum for the transaction of business, at any meeting of the Board, and all
matters shall be decided at any such meeting, a quorum being present, by the
affirmative votes of a majority of the directors present. A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of directors, provided any action taken is approved by at least a
majority of the required quorum for such meeting. In the absence of a quorum, a
majority of directors present at any meeting may adjourn the same from time to
time until a quorum shall be present. Notice of an adjourned meeting need not be
given. The directors shall act only as a Board, and the individual directors
shall have no power as such.
3.11 Action by Consent. Any action required or permitted to be taken at
any meeting of the Board or of any committee thereof may be taken without a
meeting if a written consent thereto is signed by all members of the Board or of
such committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or committee.
3.12 Compensation. The directors shall receive only such compensation
for their services as directors as may be allowed by resolution of the Board.
The Board may also provide that the Corporation shall reimburse each such
director for any expense incurred by him on account of his attendance at any
meetings of the Board or Committees of the Board. Neither the payment of such
compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
3.13 Committees of Directors.
(a) The Board 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. Any such committee, to the extent
provided in the resolution of the Board and except as otherwise limited by law,
shall have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it;
provided, however, that no such committee shall have the power or authority to
act on behalf of the Board with regard to:
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(i) the approval of any action which, under the Michigan
Business Corporation Act, also requires shareholders' approval or approval of
the outstanding shares;
(ii) the filling of vacancies on the Board of Directors
or in any committees;
(iii) the fixing of compensation of the directors for
serving on the Board or on any committee;
(iv) the amendment or repeal of Bylaws or the adoption of
new Bylaws;
(v) the amendment or repeal of any resolution of the
Board of Directors which by its express terms is not so amendable or repealable;
(vi) a distribution to the shareholders of the
Corporation, except at a rate or in a periodic amount or within a price range
determined by the Board of Directors; or
(vii) the appointment of any other committees of the
Board of Directors or the members thereof.
(b) Meetings and action of committees shall be governed by, and
held and taken in accordance with, the provisions of these Bylaws dealing with
the place of meetings, regular meetings, special meetings and notice, quorum,
waiver of notice, adjournment, notice of adjournment and action without meeting,
with such changes in the context of these Bylaws as are necessary to substitute
the committee and its members for the Board of Directors and its members, except
that the time or regular meetings of committees may be determined by resolutions
of the Board of Directors. Notice of special meetings of committees shall also
be given to all alternate members, who shall have the right to attend all
meetings of the committee. The Board of Directors or a committee may adopt rules
for the government of such committee not inconsistent with the provisions of
these Bylaws.
Any such committee shall keep written minutes of its meetings and report
the same to the Board at the next regular meeting of the Board. In the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
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3.14 Other Committees. The Board may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of one or more non-employee directors and one or more other disinterested
persons, who need not be directors, for the purpose of providing advice to the
Board regarding any matter, including but not limited to the compensation of
officers and other key employees. For the purposes of this Section, a
"disinterested person" means any person having no significant interest in the
actions of the committee, as determined by the Board. Any such committee, to the
extent provided in the resolution of the Board and except as otherwise limited
by law, shall assist the Board in exercising its powers and authority in the
management of the business and affairs of the Corporation, but shall not itself
exercise such powers and authority. Any such committee shall keep written
minutes of its meetings and report the same to the Board at the next regular
meeting of the Board. In the absence or disqualification of a member of any such
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint any disinterested person to act at the meeting in the place
of any such absent or disqualified member. The compensation and reimbursement of
expenses of the members of any such committee shall be determined by resolution
passed by a majority of the whole Board. Neither the payment of such
compensation nor the reimbursement of such expenses shall be construed to
preclude any such member from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
3.15 Certain Transactions. In the absence of fraud, no contract or other
transaction between the Corporation and any other corporation, and no act of the
Corporation, shall in any way be affected or invalidated by the fact that any of
the directors of the Corporation are financially or otherwise interested in, or
are directors or officers of, such other corporations; and, in the absence of
fraud, any director, individually, or any firm of which any director may be a
member, may be a party to, or may be financially or otherwise interested in, any
contract or transaction of the Corporation; provided, in any case, that the fact
that he or such firm is so interested shall be disclosed or shall have been
known to the Board of Directors or committee. Any director of the Corporation
who is also a director or officer of any such other corporation or who is so
interested may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation that shall authorize any
such contract, act or transaction, and may vote thereat to authorize any such
contract, act or transaction, with full force and effect as if he were not such
director or officer of such other corporation or not so interested.
ARTICLE IV
OFFICERS
4.1 Corporate Officers.
(a) The officers of the Corporation shall be a Chairman of the
Board, a President (Chief Executive Officer), one or more Vice Presidents (the
number thereof and their respective titles to be determined by the Board), a
Secretary, Chief Operating Officer, Chief Financial Officer (Treasurer) and such
other officers as may be appointed at the discretion of the Board in accordance
with the provisions of Section 4.1(b).
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(b) In addition to the officers specified in Section 4.1(a), the
Board may appoint such other officers as the Board may deem necessary or
advisable, including one or more Assistant Secretaries and one or more Assistant
Treasurers, each of whom shall hold office for such period, have such authority
and perform such duties as the Board may from time to time determine. The Board
may delegate to any officer of the Corporation or any committee of the Board the
power to appoint, remove and prescribe the duties of any officer provided for in
this Section 4.1(b).
(c) Any number of offices may be held by the same person.
4.2 Election, Term of Office and Qualifications. The officers of the
Corporation, except such officers as may be appointed in accordance with
Sections 4.1(b) or 4.5, shall be appointed annually by the Board at the first
meeting thereof held after the election of the Board. Each officer shall hold
office until such officer shall resign or shall be removed by the Board (either
with or without cause) or otherwise disqualified to serve, or the officer's
successor shall be appointed and qualified.
4.3 Removal. Any officer of the Corporation may be removed, with or
without cause, at any time at any regular or special meeting of the Board by a
majority of the directors of the Board at the time in office or, except in the
case of an officer appointed by the Board, by any officer of the Corporation or
committee of the Board upon whom or which such power of removal may be conferred
by the Board.
4.4 Resignations. Any officer may resign at any time by giving written
notice of his resignation to the Board, the President or the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time is not specified, upon receipt thereof by the Board,
President or Secretary, as the case may be; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
4.5 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or other cause may be filled for the unexpired portion
of the term thereof in the manner prescribed in these Bylaws for regular
appointments or elections to such office.
4.6 Chairman of the Board. The Chairman of the Board of the Corporation
shall be preside at all meetings of the shareholders and at all meetings of the
Board in the absence of the President.
4.7 President. The President shall be the chief executive officer of the
Corporation. He shall preside at all meetings of the Board of Directors. The
President shall have, subject to the control of the Board, general and active
supervision and management over the business of the Corporation and over its
several subordinate officers, assistants, agents and employees. The President
shall have such other powers and duties as may from time to time be assigned to
him by the Chairman of the Board, the Board or as prescribed by the Bylaws.
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4.8 Vice Presidents. Each Vice President shall have such power and
perform such duties as the Board may from time to time prescribe. At the request
of the President, or in the case of the President's absence or inability to act
upon the request of the Board, a Vice President 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.
4.9 Chief Operating Officer. The Chief Operating Officer shall have,
subject to the control of the Board, general and active supervision and
management over the operations of the Corporation, the subsidiaries, and over
its several subordinate officers, assistants, agents and employees. The Chief
Operating Officer shall have such other powers and duties as may from time to
time be assigned to him by the Chairman of the Board, the Board or as prescribed
by the Bylaws. In the absence of the President he shall assume powers and duties
of the President as are delegated to him by a majority of the Board of
Directors.
4.10 Chief Financial Officer (Treasurer). The Chief Financial Officer
(Treasurer) shall supervise, have custody of, and be responsible for all funds
and securities of the Corporation. The Chief Financial Officer (Treasurer) shall
deposit all such funds in the name of the Corporation in such banks, trust
companies or other depositories as shall be selected by the Board or in
accordance with authority delegated by the Board. The Chief Financial Officer
(Treasurer) shall receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever. The Chief Financial Officer (Treasurer)
shall exercise general supervision over expenditures and disbursements made by
officers, agents and employees of the Corporation and the preparation of such
records and reports in connection therewith as may be necessary or desirable.
The Chief Financial Officer (Treasurer) shall, in general, perform all other
duties incident to the office of Chief Financial Officer (Treasurer) and such
other duties as from time to time may be assigned to the Chief Financial Officer
(Treasurer) by the Board.
4.11 Secretary. The Secretary shall have the duty to record the
proceedings of all meetings of the Board, of the shareholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose. The Secretary shall see that all notices are
duly given in accordance with these Bylaws and as required by law; shall be
custodian of the seal of the Corporation and shall affix and attest the seal to
all documents to be executed on behalf of the Corporation under its seal; and,
in general, he shall perform all the duties incident to the office of Secretary
and such other duties as may from time to time be assigned to him by the Board.
4.12 Compensation. The compensation of the officers of the Corporation
shall be fixed from time to time by the Board. None of such officers shall be
prevented from receiving such compensation by reason of the fact that he is also
a director of the Corporation. Nothing contained herein shall preclude any
officer from serving the Corporation, or any subsidiary corporation, in any
other capacity and receiving proper compensation therefor.
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ARTICLE V
CONTRACTS, CHECKS, DRAFTS,
BANK ACCOUNTS, ETC.
5.1 Execution of Contracts. The Board, except as in these Bylaws
otherwise provided, may authorize any officer or officers, agent or agents, to
enter into any contract or execute any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances; and unless so authorized by the Board or by these Bylaws, no officer,
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or in any account.
5.2 Checks, Drafts, Etc. All checks, drafts or other orders for payment
of money, notes or other evidence of indebtedness, issued in the name of or
payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such person shall give such bond, if any, as the
Board may require.
5.3 Deposits. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board may select, or as may be
selected by any officer or officers, assistant or assistants, agent or agents,
or attorney or attorneys of the Corporation to whom such power shall have been
delegated by the Board. For the purpose of deposit and for the purpose of
collection for the account of the Corporation, the President, any Vice President
or the Chief Financial Officer, (or any other officer or officers, assistant or
assistants, agent or agents or attorney or attorneys of the Corporation who
shall from time to time be determined by the Board), may endorse, assign and
deliver checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation.
5.4 General and Special Bank Accounts. The Board may from time to time
authorize the opening and keeping of general and special bank accounts with such
banks, trust companies or other depositories as the Board may select or as may
be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
6.1 Certificates for Stock.
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(a) The shares of the Corporation shall be represented by
certificates, provided that the Board may provide by resolution or resolutions
that some or all of any or all classes or series of its stock shall be
uncertificated shares. Any such resolution shall not apply to shares represented
by a certificate until such certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board, every holder of
stock represented by certificates and upon request every holder of
uncertificated shares shall be entitled to have a certificate, in such form as
the Board shall prescribe, signed by, or in the name of, the Corporation by the
President or Vice President, and by the Chief Financial Officer (Treasurer) or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation representing the number of shares registered in certificate form.
Any of or all of the signatures on the certificates may be a facsimile. In case
any officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon, any such certificates, shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued,
such certificate may nevertheless be issued by the Corporation with the same
effect as though the person who signed such certificate, or whose facsimile
signature shall have been placed thereupon, were such officer, transfer agent or
registrar at the date of issue.
(b) A record shall be kept of the respective names of the
persons, firms or corporations owning the stock represented by such
certificates, the number and class of shares represented by such certificates,
respectively, and the respective dates thereof, and in case of cancellation, the
respective dates of cancellation. Every certificate surrendered to the
Corporation for exchange or transfer shall be canceled, and no new certificate
or certificates shall be issued in exchange for any existing certificate until
such existing certificate shall have been so canceled, except in cases provided
for in Section 6.4.
6.2 Transfers of Stock. Transfers of shares of stock of the Corporation
shall be made only on the books of the Corporation by the registered holder
thereof, or by such holder's attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.3, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
6.3 Regulations. The Board may make such rules and regulations as it may
deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
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6.4 Lost, Stolen, Destroyed and Mutilated Certificates. In any case of
loss, theft, destruction or mutilation of any certificate of stock, another may
be issued in its place upon proof of such loss, theft, destruction or mutilation
and upon the giving of a bond of indemnity to the Corporation in such form and
in such sum as the Board may direct; provided, however, that a new certificate
may be issued without requiring any bond when, in the judgment of the Board, it
is proper to do so.
6.5 Payment for Shares. Certificates for shares may be issued prior to
full payment under such restrictions and for such purposes as the Board may
provide; provided, however, that on any certificate issued to represent any
partly paid shares, the total amount of the consideration to be paid therefor
and the amount paid thereon shall be stated.
ARTICLE VII
INDEMNIFICATION
7.1 Third Party Proceeding. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to a threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal, other than an
action by or in the right of the Corporation, by reason of the fact that he or
she is or was a director or officer of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, partner, or trustee of
another foreign or domestic corporation, partnership, joint venture, trust, or
other enterprise, whether for profit or not, against expenses, including
attorneys' fees, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with the action,
suit, or proceeding, If the person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation or its shareholders, and the person submits a written claim for
indemnification as hereinafter provided, and with respect to a criminal action
or proceeding, if the person had no reasonable cause to believe his or her
conduct was unlawful, and the person submits a written claim for indemnification
as hereinafter provided. The termination of an action, suit, or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, does not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the Corporation or its shareholders,
or, with respect to a criminal action or proceeding, did not have reasonable
cause to believe that his or her conduct was unlawful. The right to
indemnification conferred in this Section shall be a contract right. The
Corporation may, by action of its Board of Directors, or by action of any person
to whom the Board of Directors has delegated such authority, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
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7.2 Derivative Shareholder Liability. The Corporation shall indemnify
any person who was or is a party to or is threatened to be made a party to a
threatened, pending, or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he or
she is or was a director or officer of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, partner, or trustee of
another foreign or domestic corporation, partnership, joint venture, trust, or
other enterprise, whether for profit or not, against expenses, including
attorneys' fees, and amounts paid in settlement actually and reasonably incurred
by the person in connection with the action or suit, if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed to
the best interests of the Corporation or its shareholders, and the person
submits a written claim of indemnification as hereinafter provided. However,
indemnification shall not be made for a particular action, issue, or matter in
which the person has been found liable to the Corporation unless and only to the
extent that the court in which the action or suit was brought (or another court
of competent jurisdiction) has determined upon application that, despite the
adjudication of liability but in view of all the relevant circumstances, the
person is fairly and reasonably entitled to indemnification for the reasonable
expenses he or she incurred. The right to indemnification conferred in this
Section shall be a contract right. The Corporation may, by action of its Board
of Directors, or by action of any person to whom the Board of Directors has
delegated such authority, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
7.3 Determination of Indemnification. Any indemnification under Section
7.1 or 7.2 of this Article, unless ordered by a court, shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
Section 7.1 or 7.2 of this Article and upon an evaluation of the reasonableness
of expenses and amounts paid in settlement. This determination and evaluation
shall occur within 30 days after a written claim for indemnification has been
received by the Corporation, and shall be made in any of the following ways:
(1) By a majority vote of a quorum of the board consisting of
directors who are not parties or threatened to be made parties to the
action, suit or proceeding;
(2) If the quorum described in subparagraph (1) is not
obtainable, then by a majority of a committee duly designated by the
board and consisting solely of two or more directors not at the time
parties or threatened to be made parties to the action, suit, or
proceeding;
(3) By independent legal counsel in a written opinion, which
counsel shall be selected in one of the following ways:
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(A) By the board or its committee in the manner
prescribed in subparagraphs (1) and (2),
(B) If a quorum of the board cannot be obtained under
subparagraph (1) and a committee cannot be designated under subparagraph
(2), by the board;
(4) By all independent directors who are not parties or
threatened to be made parties to the action, suit, or proceeding; and
(5) By the shareholders, but shares held by directors, officers,
employees, or agents who are parties or threatened to be made parties to
the action, suit, or proceeding may not be voted.
In the designation of a committee under subparagraph (2) or in
the selection of independent legal counsel under subparagraph (3)(B),
all directors may participate.
If a person is entitled to indemnification under Sections 7.1 or
7.2 of this Article for a portion of expenses, including reasonable
attorneys' fees, judgments, penalties, fines, and amounts paid in
settlement, but not for the total amount thereof, the Corporation shall
indemnify the person for the portion of the expenses, judgments,
penalties, fines, or amounts paid in settlement for which the person is
entitled to be indemnified.
7.4 Payment of Defense Expenses in Advance. The Corporation shall pay or
reimburse the reasonable expenses incurred by a director or officer who is a
party or threatened to be made a party to an action, suit, or proceeding in
advance of final disposition of the proceeding if all of the following apply:
(1) The person furnishes the Corporation a written affirmation of
his or her good faith belief that he or she has met the applicable
standard of conduct set forth in Sections 7.1 and 7.2.
(2) The person furnishes the Corporation a written undertaking,
executed personally or on his or her behalf to repay the advance if it
is ultimately determined that he or she did not meet the standard of
conduct.
(3) A determination is made that the facts then known to those
making the determination would not preclude indemnification under this
section or the Michigan Business Corporation Act.
The undertaking shall be by unlimited general obligation of the
person on whose behalf advances are made but need not be secured.
Determination of payments under Section 7.4 shall be made in the manner
described in Section 7.3(1)-(5).
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7.5 Right of Officer or Director to Bring Suit. If a claim for
indemnification under this Section is not paid in full by the Corporation within
forty-five (45) days after a written claim has been received by the Corporation,
the officer or director who submitted the claim (hereinafter the "indemnitee")
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim. If successful in whole or in part in any such suit
or in a suit brought by the Corporation to recover advances, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
claim. In any action brought by the indemnitee to enforce a right under this
Section (other than an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final disposition where the
required undertaking, if any, has been tendered to the Corporation) it shall be
a defense that, and in any action brought by the Corporation to recover advances
the Corporation shall be entitled to recover such advances if, the indemnitee
has not met the applicable standard of conduct set forth in Section 7.1 or
Section 7.2. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its shareholders) to have made a
determination prior to the commencement of such action that indemnification of
the indemnitee is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Sections 7.1 or 7.2, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its shareholders) that the indemnitee has not met such
applicable standard of conduct, shall be a defense to an action brought by the
indemnitee or create a presumption that the indemnitee has not met the
applicable standard of conduct. In any action brought by the indemnitee to
enforce a right hereunder or by the Corporation to recover payments by the
Corporation of advances, the burden of proof shall be on the Corporation.
7.6 Other Indemnification. The indemnification or advancement of
expenses provided under Sections 7.1 through 7.5 is not exclusive to other
rights to which a person seeking indemnification or advancement of expenses may
be entitled under the Corporation's Articles of Incorporation, bylaws, or a
contractual agreement. However, the total amount of expenses advanced or
indemnified from all sources combined shall not exceed the amount of actual
expenses incurred by the person seeking indemnification or advancement of
expenses. The indemnification provided for in Sections 7.1 through 7.5 continues
as to a person who ceases to be a director, officer, partner, or trustee and
shall inure to the benefit of the heirs, executors, and administrations of the
person.
7.7 Liability Insurance. The Corporation may 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, partner, trustee, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity or arising out of his or her status as such, whether or not the
Corporation would have power to indemnify him or her against liability under the
Michigan Business Corporation Act or this section.
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7.8 Definitions. For purposes of this section, "the Corporation"
includes all constituent corporations absorbed in a consolidation or merger and
the resulting or surviving corporation, so that a person who is or was a
director, officer, employee, or agent of the constituent corporation or is or
was serving at the request of the constituent corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise whether for
profit or not shall stand in the same position under the provisions of this
paragraph with respect to the resulting or surviving corporation as the person
would if he or she had served the resulting or surviving corporation in the same
capacity.
7.9 Employee Benefit Plans. For purposes of this section, "other
enterprises" shall include employee benefit plans; "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
"serving at the request of the Corporation" shall include any service as a
director or officer of the Corporation which imposes duties on, or involves
services by, the director or officer with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good faith and in a
manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be considered to have acted
in a manner "not opposed to the best interests of the Corporation or its
shareholders" as referred to in Sections 7.1 and 7.2.
7.10 Severability. The invalidity or unenforceability of any provision
of this Article VII shall not effect the validity or enforceability of the
remaining provisions of this Article VII.
ARTICLE VIII
MISCELLANEOUS
8.1 Seal. The Board shall provide a corporate seal, which shall be in
the form of a circle and shall bear the name of the Corporation and words and
figures showing that the Corporation was incorporated in the State of Michigan
and the year of incorporation.
8.2 Waiver of Notices. Whenever notice is required to be given by these
Bylaws or the Articles of Incorporation or by law, the person entitled to said
notice may waive such notice in writing, either before or after the time stated
therein, and such waiver shall be deemed equivalent to notice. Attendance of a
person at a meeting (whether in person or by proxy in the case of a meeting of
shareholders) shall constitute a waiver of notice of such meeting, except when
the person attends a 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. Neither the business to be transacted at,
nor the purpose of any regular or special meeting of the shareholders, directors
or members of a committee of directors need be specified in any written waiver
of notice.
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8.3 Amendments. These Bylaws may be amended, altered, changed, added to
or repealed by the affirmative vote of a majority of shares entitled to vote at
any regular or special meeting of the shareholders if notice of the proposed
amendment, alteration, change, addition or repeal be contained in the notice of
the meeting, or by the affirmative vote of a majority of the Board at a regular
or special meeting of the Board; provided that, any Bylaws made by the
affirmative vote of a majority of the Board as provided herein may be amended,
altered, changed, added to or repealed by the affirmative vote of a majority of
the shares entitled to vote at any regular or special meeting of the
shareholders.
8.4 Representation of Other Corporations. The President, any Vice
President or the Secretary of this Corporation is authorized to vote, represent
and exercise on behalf of this Corporation all rights incident to any and all
shares of any other corporation or corporations standing in the name of this
Corporation. The authority herein granted to said officers to vote or represent
on behalf of this Corporation any and all shares held by this Corporation in any
other corporation or corporations may be exercised either by such officers in
person or by any person authorized to do so by proxy or power of attorney duly
executed by said officers.
8.5 Stock Purchase Plans. The Corporation may adopt and carry out a
stock purchase plan or agreement or stock option plan or agreement providing for
the issue and sale for such consideration as may be fixed of its unissued
shares, or of issued shares acquired or to be acquired, to one or more of the
employees or directors of the Corporation or of a subsidiary or to a trustee on
their behalf and for the payment for such shares in installments or at one time,
and may provide for aiding any such persons in paying for such shares by
compensation for services rendered, promissory notes, or otherwise.
Any stock purchase plan or agreement or stock option plan or agreement
may include, among other features, the fixing of eligibility for participation
therein, the class and price of shares to be issued or sold under the plan or
agreement, the number of shares which may be subscribed for, the method of
payment therefor, the reservation of title until full payment therefor, the
effect of the termination of employment and option or obligation on the part of
the Corporation to repurchase the shares, the time limits of and termination of
the plan and any other matters, not in violation of applicable law, as may be
included in the plan as approved or authorized by the Board or any committee of
the Board.
8.6 Construction and Definitions. Unless the context requires otherwise,
the general provisions, rules of construction and definitions in the Michigan
Business Corporation Act shall govern the construction of these Bylaws. Without
limiting the generality of this provision, the singular number includes the
plural, the plural number includes the singular, and the term "person" includes
both a corporation and a natural person.
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WARRANT AGREEMENT dated as of ________ __, 1997 between
Nobie International, Ltd., a Michigan corporation (the "Company"), on one hand,
and BlueStone Capital Partners, L.P. and Rodman & Renshaw, Inc. (hereinafter
referred to as the "Representatives"), on the other hand.
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Representatives,
in their individual capacity and not as representatives of the several
Underwriters (defined below), warrants ("Warrants") to purchase up to 330,000
shares (the "Shares") of common stock of the Company, no par value per share
(the "Common Stock"), in connection with the proposed public offering (the
"Public Offering") by the Company of 3,300,000 shares of Common Stock at an
initial public offering price of $____ per share of Common Stock, pursuant to
the underwriting agreement (the "Underwriting Agreement") dated _______ __, 1997
between the Representatives, as representatives of the several underwriters
named in Schedule A to the Underwriting Agreement (the "Underwriters") and the
Company; and
WHEREAS, the Warrants issued pursuant to this Agreement are
being issued by the Company to the Representatives or officers and partners of
the Representatives and/or, at the Representatives' direction, to members of the
selling group or underwriting syndicate and/or their officers or partners;
NOW, THEREFORE, in consideration of the premises, the payment
by the Representatives to the Company of THREE HUNDRED AND THIRTY DOLLARS
($330), the agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Grant.
The Representatives, and/or their designees who are officers
or partners of the Representatives or members of the selling group or
underwriting syndicate in connection with the Public Offering, are hereby
granted the right to purchase, at any time from ______ __, 1998 until 5:00 P.M.,
New York City time, on ________ __, 2002, (the "Warrant Exercise Term"), up to
330,000 Shares at an initial exercise price (subject to adjustment as provided
in Article 8 hereof) of $_______ per Share.
2. Warrant Certificates.
The warrant certificates (the "Warrant Certificates")
delivered and to be delivered pursuant to this Agreement shall be in the form
set forth as Exhibit A, attached hereto and made a part hereof, with such
appropriate insertions, omissions,
<PAGE>
substitutions and other variations as required or permitted by this Agreement.
3. Exercise of Warrants.
3.1 Cash Exercise. The Warrants initially are
exercisable at a price of $______ per Share, payable in cash or by check to the
order of the Company, or any combination of cash or check, subject to adjustment
as provided in Article 8 hereof. Upon surrender of a Warrant Certificate with
the annexed Form of Election to Purchase duly executed, together with payment of
the Exercise Price (as hereinafter defined) for the Shares purchased, at the
Company's principal offices in Michigan (presently located at 33 Bloomfield
Hills Parkway, Suite 155, Bloomfield Hills, Michigan 48304) the registered
holder of a Warrant Certificate ("Holder" or "Holders") shall be entitled to
receive a certificate or certificates for the Shares so purchased. The purchase
rights represented by each Warrant Certificate are exercisable at the option of
the Holder thereof, in whole or in part (but not as to fractional shares of the
Common Stock). In the case of the purchase of less than all the Shares
purchasable under any Warrant Certificate, the Company shall cancel said Warrant
Certificate upon the surrender thereof and shall execute and deliver a new
Warrant Certificate of like tenor for the balance of the Shares purchasable
thereunder.
3.2 Cashless Exercise. At any time during the
Warrant Exercise Term, the Holder may, at its option, exchange a Warrant
Certificate, in whole or in part (a "Warrant Exchange"), into the number of
Shares determined in accordance with this Section 3.2, by surrendering a Warrant
Certificate at the principal office of the Company or at the office of its
transfer agent, accompanied by a notice stating such Holder's intent to effect
such exchange, the number of Shares to be exchanged and the date on which the
Holder requests that such Warrant Exchange occur (the "Notice of Exchange"). The
Warrant Exchange shall take place on the date specified in the Notice of
Exchange or, if later, the date the Notice of Exchange is received by the
Company (the "Exchange Date"). Certificates for the Shares issuable upon such
Warrant Exchange and, if applicable, a new Warrant Certificate of like tenor
evidencing the balance of the Shares remaining subject to the surrendered
Warrant Certificate, shall be issued as of the Exchange Date and delivered to
the Holder within three (3) days following the Exchange Date. In connection with
any Warrant Exchange, a Warrant Certificate shall represent the right to
subscribe for and acquire the number of Shares (rounded to the next highest
integer) equal to (i) the number of Shares specified by the Holder in its Notice
of Exchange (the "Total Number") less (ii) the number of Shares equal to the
quotient obtained by dividing (A) the product of the Total Number and the
existing Exercise Price (as hereinafter defined) by (B) the current market value
of a share of Common Stock.
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4. Issuance of Certificates.
Upon the exercise of the Warrants, the issuance of
certificates for the Shares shall be made forthwith (and in any event within
three business days thereafter) without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Article 5
hereof) be issued in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the
Shares shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future Chairman or Vice Chairman of the Board of
Directors or President or Vice President of the Company under its corporate seal
reproduced thereon, attested to by the manual or facsimile signature of the
present or any future Secretary or Assistant Secretary of the Company. Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
The Warrant Certificates and, upon exercise of the Warrants,
in part or in whole, certificates representing the Shares shall bear a legend
substantially similar to the following:
"The securities represented by this certificate and the other
securities issuable upon exercise thereof have not been registered
under the Securities Act of 1933, as amended (the "Act"), and may not
be offered or sold except (i) pursuant to an effective registration
statement under the Act, (ii) to the extent applicable, pursuant to
Rule 144 under the Act (or any similar rule under such Act relating to
the disposition of securities), or (iii) upon the delivery by the
holder to the Company of an opinion of counsel, reasonably satisfactory
to counsel to the issuer, stating that an exemption from registration
under such Act is available."
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<PAGE>
5. Restriction on Transfer of Warrants.
The Holder of a Warrant Certificate, by its acceptance
thereof, covenants and agrees that the Warrants are being acquired as an
investment and not with a view to the distribution thereof, and that the
Warrants may not be sold, transferred, assigned, hypothecated or otherwise
disposed of, in whole or in part, for a period of one (1) year from the date
hereof, except to officers or partners of the Representatives or to any member
of the selling group or underwriting syndicate participating in the distribution
to the public of the Common Stock and/or their respective officers or partners.
6. Price.
6.1 Initial and Adjusted Exercise Price. The
initial exercise price of each Warrant shall be $____ per Share. The adjusted
exercise price shall be the price which shall result from time to time from any
and all adjustments of the initial exercise price in accordance with the
provisions of Article 8 hereof.
6.2 Exercise Price. The term "Exercise Price"
herein shall mean the initial exercise price or the adjusted exercise price,
depending upon the context.
7. Registration Rights.
7.1 Registration Under the Securities Act of
1933. The Warrants and the Shares have not been registered for purposes of
public distribution under the Securities Act of 1933, as amended (the "Act").
7.2 Registrable Securities. As used herein the
term "Registrable Security" means each of the Shares and any shares of Common
Stock issued upon any stock split or stock dividend in respect of such Shares;
provided, however, that with respect to any particular Registrable Security,
such security shall cease to be a Registrable Security when, as of the date of
determination, (i) it has been effectively registered under the Act and disposed
of pursuant thereto, (ii) registration under the Act is no longer required for
the immediate public distribution of such security or (iii) it has ceased to be
outstanding. The term "Registrable Securities" means any and/or all of the
securities falling within the foregoing definition of a "Registrable Security."
In the event of any merger, reorganization, consolidation, recapitalization or
other change in corporate structure affecting the Common Stock, such adjustment
shall be made in the definition of "Registrable Security" as is appropriate in
order to prevent any dilution or enlargement of the rights granted pursuant to
this Article 7.
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7.3 Piggyback Registration. If, at any time
during the seven years following the date of this Agreement, the Company
proposes to prepare and file one or more post-effective amendments to the
registration statement filed in connection with the Public Offering or any new
registration statement or post-effective amendments thereto covering equity or
debt securities of the Company, or any such securities of the Company held by
its shareholders (in any such case, other than in connection with a merger,
acquisition or pursuant to Form S-8 or successor form), (for purposes of this
Article 7, collectively, a "Registration Statement"), it will give written
notice of its intention to do so by registered mail ("Notice"), at least thirty
(30) business days prior to the filing of each such Registration Statement, to
all holders of the Registrable Securities. Upon the written request of such a
holder (a "Requesting Holder"), made within twenty (20) business days after
receipt of the Notice, that the Company include any of the Requesting Holder's
Registrable Securities in the proposed Registration Statement, the Company
shall, as to each such Requesting Holder, use its best efforts to effect the
registration under the Act of the Registrable Securities which it has been so
requested to register ("Piggyback Registration"), at the Company's sole cost and
expense and at no cost or expense to the Requesting Holders; provided, however,
that if, in the written opinion of the Company's managing underwriter, if any,
for such offering, the inclusion of all or a portion of the Registrable
Securities requested to be registered, when added to the securities being
registered by the Company or the selling shareholder(s), will exceed the maximum
amount of the Company's securities which can be marketed (i) at a price
reasonably related to their then current market value, or (ii) without otherwise
materially adversely affecting the entire offering, then the Company may exclude
from such offering all or a portion of the Registrable Securities which it has
been requested to register.
Notwithstanding the provisions of this Section 7.3, the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 7.3 (irrespective of whether any written request
for inclusion of such securities shall have already been made) to elect not to
file any such proposed Registration Statement, or to withdraw the same after the
filing but prior to the effective date thereof.
7.4 Demand Registration.
(a) At any time during the Warrant Exercise
Term, any "Majority Holder" (as such term is defined in Section 7.4(d) below) of
the Registrable Securities shall have the right (which right is in addition to
the piggyback registration rights provided for under Section 7.3 hereof),
exercisable by written notice to the Company (the "Demand Registration
Request"), to have the Company prepare and file with the Securities and Exchange
Commission (the "Commission"), on one occasion, at the
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<PAGE>
sole expense of the Company, a Registration Statement and such other documents,
including a prospectus, as may be necessary (in the opinion of both counsel for
the Company and counsel for such Majority Holder), in order to comply with the
provisions of the Act, so as to permit a public offering and sale of the
Registrable Securities by the holders thereof, for nine (9) consecutive months.
Notwithstanding the foregoing, in the event the Company is engaged in a
transaction involving a merger or acquisition which requires the filing of
financial statements with the Commission, then the Holders agree that a Demand
Registration Request will not be effective for 75 days following the
consummation of such transaction, provided that the Company gives written notice
of such transaction to the Holders within five (5) business days of the Demand
Registration Request.
(b) The Company covenants and agrees to
give written notice of any Demand Registration Request to all holders of the
Registrable Securities within ten (10) days from the date of the Company's
receipt of any such Demand Registration Request. After receiving notice from the
Company as provided in this Section 7.4(b), holders of Registrable Securities
may request the Company to include their Registrable Securities in the
Registration Statement to be filed pursuant to Section 7.4(a) hereof by
notifying the Company of their decision to include such securities within ten
(10) days of their receipt of the Company's notice.
(c) In addition to the registration
rights provided for under Section 7.3 and subsection (a) of this Section 7.4, at
any time during the Warrant Exercise Term, any Majority Holder (as defined below
in Section 7.4(d)) of Registrable Securities shall have the right, exercisable
by written request to the Company, to have the Company prepare and file with the
Commission, on one occasion in respect of all holders of Registrable Securities,
a Registration Statement so as to permit a public offering and sale of such
Registrable Securities for nine (9) months, provided, however, that all
registration expenses (including the Company's legal and accounting fees,
printing expenses and blue sky fees and expenses) and all other costs incident
thereto shall be at the expense of the holders of the Registrable Securities
included in such Registration Statement. If a Majority Holder shall give notice
to the Company at any time of its or their desire to exercise the registration
rights granted pursuant to this Section 7.4(c), then within ten (10) days after
the Company's receipt of such notice, the Company shall give notice to the other
holders of Registrable Securities, advising them that the Company is proceeding
with such registration and offering to include therein the Registrable
Securities of such holders, provided they furnish the Company with such
appropriate information in connection therewith as the Company shall reasonably
request in writing.
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<PAGE>
(d) The term "Majority Holder" as used
in this Section 7.4 shall mean any holder or any combination of holders of
Registrable Securities, if included in such holders' Registrable Securities are
that aggregate number of Shares (including Shares already issued and Shares
issuable pursuant to the exercise of outstanding Warrants) as would constitute a
majority of the aggregate number of Shares (including Shares already issued and
Shares issuable pursuant to the exercise of outstanding Warrants) included in
all of the Registrable Securities.
7.5 Covenants of the Company With Respect to
Registration. The Company covenants and agrees as follows:
(a) In connection with any registration
under Section 7.4 hereof, the Company shall file the Registration Statement as
expeditiously as possible, but in no event later than thirty (30) business days
following receipt of any demand therefor, shall use its best efforts to have any
such Registration Statements declared effective at the earliest possible time,
and shall furnish each holder of Registrable Securities such number of
prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs,
fees and expenses in connection with all Registration Statements filed pursuant
to Sections 7.3 and 7.4(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, and blue sky fees and expenses.
The holders of Registrable Securities included in any Registration Statement
filed pursuant to Section 7.4(c) hereof will pay all costs, fees and expenses in
connection with such registration.
(c) The Company will take all necessary
action which may be required in qualifying or registering the Registrable
Securities included in a Registration Statement for offering and sale under the
securities or blue sky laws of such states as are reasonably requested by the
holders of such securities, provided that the Company shall not be obligated to
execute or file any general consent to service of process or to qualify as a
foreign corporation to do business under the laws of any such jurisdiction.
(d) The Company shall indemnify any
holder of the Registrable Securities to be sold pursuant to any Registration
Statement and any underwriter or person deemed to be an underwriter under the
Act and each person, if any, who controls such holder or underwriter or person
deemed to be an underwriter within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise,
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<PAGE>
arising from such registration statement to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to indemnify
the Underwriters contained in Section 7 of the Underwriting Agreement and to
provide for just and equitable contribution as set forth in Section 8 of the
Underwriting Agreement.
(e) Any holder of Registrable Securities
to be sold pursuant to a Registration Statement, and its successors and assigns,
shall severally, and not jointly, indemnify, the Company, its officers and
directors and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss,
claim, damage or expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which they may become subject under the Act, the Exchange Act or otherwise,
arising from information furnished in writing by or on behalf of such holder, or
its successors or assigns, for specific inclusion in such Registration Statement
to the same extent and with the same effect as the provisions contained in
Section 7 of the Underwriting Agreement pursuant to which the Underwriters have
agreed to indemnify the Company and to provide for just and equitable
contribution as set forth in Section 8 of the Underwriting Agreement.
(f) Nothing contained in this Agreement
shall be construed as requiring any Holder to exercise his Warrants prior to the
initial filing of any Registration Statement or the effectiveness thereof.
(g) The Company shall deliver promptly to
each holder of Registrable Securities which are being registered pursuant to
Section 7.3 hereof, upon the request of such holder, and to the managing
underwriter, if any, copies of all correspondence between the Commission and the
Company, and its counsel or auditors relating to discussions with the Commission
or its staff with respect to the Registration Statement and permit each such
holder and managing underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
Registration Statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. Such investigation shall include access to books, records and
properties and opportunities to discuss the business of the Company with its
officers and independent auditors, all to such reasonable extent and at such
reasonable times and as often as any such holder or managing underwriter shall
reasonably request.
8. Adjustments of Exercise Price and Number of
Shares.
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8.1 Computation of Adjusted Price. Except as
hereinafter provided, in case the Company shall at any time after the date
hereof issue or sell any shares of Common Stock (other than the issuances or
sales referred to in Section 8.6 hereof), including shares held in the Company's
treasury and shares of Common Stock issued upon the exercise of any options,
rights or warrants to subscribe for shares of Common Stock (other than the
issuances or sales of Common Stock pursuant to rights to subscribe for such
Common Stock distributed to all the shareholders of the Company and Holders of
Warrants pursuant to Section 8.8 hereof) and shares of Common Stock issued upon
the direct or indirect conversion or exchange of securities for shares of Common
Stock, for a consideration per share less than either the Exercise Price in
effect immediately prior to the issuance or sale of such shares or the "Market
Price" (as defined in Section 8.1(vi) hereof) per share of Common Stock or
without consideration, then forthwith upon such issuance or sale, the Exercise
Price shall (until another such issuance or sale) be reduced to the price
(calculated to the nearest full cent) equal to the quotient derived by dividing
(A) an amount equal to the sum of (X) the product of (a) the total number of
shares of Common Stock outstanding immediately prior to such issuance or sale,
multiplied by (b) the lower of (i) the Exercise Price in effect immediately
prior to such issuance or sale or (ii) the "Market Price" (as defined in
subsection (vi) of this Section 8.1 hereof) per share of Common Stock on the
date immediately prior to the issuance or sale of such shares, plus, (Y) the
aggregate of the amount of all consideration, if any, received by the Company
upon such issuance or sale, by (B) the total number of shares of Common Stock
outstanding immediately after such issuance or sale; provided, however, that in
no event shall the Exercise Price be adjusted pursuant to this computation to an
amount in excess of the Exercise Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of Common
Stock, as provided by Section 8.3 hereof.
For the purposes of any computation to be made in accordance
with this Section 8.1, the following provisions shall be applicable:
(i) In case of the issuance or
sale of shares of Common Stock for a consideration part or all of which shall be
cash, the amount of the cash consideration therefor shall be deemed to be the
amount of cash received by the Company for such shares (or, if shares of Common
Stock are offered by the Company for subscription, the subscription price, or,
if such securities shall be sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering price of such
offering) before deducting therefrom any compensation paid or discount allowed
in the sale, underwriting or purchase thereof by underwriters or dealers or
others performing similar services, or any expenses incurred in connection
therewith.
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<PAGE>
(ii) In case of the issuance or
sale (otherwise than as a dividend or other distribution on any stock of the
Company) of shares of Common Stock for a consideration part or all of which
shall be other than cash, the amount of the consideration therefor other than
cash shall be deemed to be the value of such consideration as determined in good
faith by the Board of Directors of the Company.
(iii) Shares of Common Stock
issuable by way of dividend or other distribution on any stock of the Company
shall be deemed to have been issued immediately after the opening of business on
the day following the record date for the determination of shareholders entitled
to receive such dividend or other distribution and shall be deemed to have been
issued without consideration.
(iv) The reclassification of
securities of the Company other than shares of Common Stock into securities
including shares of Common Stock shall be deemed to involve the issuance of such
shares of Common Stock for a consideration other than cash immediately prior to
the close of business on the date fixed for the determination of security
holders entitled to receive such shares, and the value of the consideration
allocable to such shares of Common Stock shall be determined as provided in
subsection (ii) of this Section 8.1.
(v) The number of shares of
Common Stock at any one time outstanding shall include the aggregate number of
shares issued or issuable upon the exercise of options, rights, warrants and
upon the conversion or exchange of convertible or exchangeable securities.
(vi) As used herein, the phrase
"Market Price" at any date shall be deemed to be the last reported sale price,
or, in case no such reported sale takes place on such day, the average of the
last reported sale prices for the last three trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading or as reported in the NASDAQ National
Market System, or, if the Common Stock is not listed or admitted to trading on
any national securities exchange or quoted on the NASDAQ National Market System,
the closing bid price as furnished by the National Association of Securities
Dealers, Inc. through NASDAQ or similar organization if NASDAQ is no longer
reporting such information, or if the Common Stock is not quoted on NASDAQ, as
determined in good faith by resolution of the Board of Directors of the Company,
based on the best information available to it for the two days immediately
preceding such issuance or sale and the day of such issuance or sale.
8.2 Options, Rights, Warrants and Convertible
and Exchangeable Securities. Except in the case of the Company issuing rights to
subscribe for shares of Common Stock
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<PAGE>
distributed to all the shareholders of the Company and Holders of Warrants
pursuant to Section 8.8 hereof, if the Company shall at any time after the date
hereof issue options, rights or warrants to subscribe for shares of Common
Stock, or issue any securities convertible into or exchangeable for shares of
Common Stock, (i) for a consideration per share less than (a) the Exercise Price
in effect immediately prior to the issuance of such options, rights or warrants,
or such convertible or exchangeable securities, or (b) the Market Price, or (ii)
without consideration, the Exercise Price in effect immediately prior to the
issuance of such options, rights or warrants, or such convertible or
exchangeable securities, as the case may be, shall be reduced to a price
determined by making a computation in accordance with the provisions of Section
8.1 hereof, provided that:
(a) The aggregate maximum number of
shares of Common Stock issuable under all the outstanding options, rights or
warrants shall be deemed to be issued and outstanding at the time all the
outstanding options, rights or warrants were issued, and for a consideration
equal to the minimum purchase price per share provided for in the options,
rights or warrants at the time of issuance, plus the consideration (determined
in the same manner as consideration received on the issue or sale of shares in
accordance with the terms of the Warrants), if any, received by the Company for
the options, rights or warrants, and if no minimum price is provided in the
options, rights or warrants, then the consideration shall be equal to zero;
provided, however, that upon the expiration or other termination of the options,
rights or warrants, if any thereof shall not have been exercised, the number of
shares of Common Stock deemed to be issued and outstanding pursuant to this
subsection (a) (and for the purposes of subsection (v) of Section 8.1 hereof)
shall be reduced by such number of shares as to which options, warrants and/or
rights shall have expired or terminated unexercised, and such number of shares
shall no longer be deemed to be issued and outstanding, and the Exercise Price
then in effect shall forthwith be readjusted and thereafter be the price which
it would have been had adjustment been made on the basis of the issuance only of
shares actually issued or issuable upon the exercise of those options, rights or
warrants as to which the exercise rights shall not have expired or terminated
unexercised.
(b) The aggregate maximum number of
shares of Common Stock issuable upon conversion or exchange of any convertible
or exchangeable securities shall be deemed to be issued and outstanding at the
time of issuance of such securities, and for a consideration equal to the
consideration (determined in the same manner as consideration received on the
issue or sale of shares of Common Stock in accordance with the terms of the
Warrants) received by the Company for such securities, plus the minimum
consideration, if any, receivable by the Company upon the conversion or exchange
thereof; provided, however, that upon the termination of the right to convert or
exchange such conver-
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<PAGE>
tible or exchangeable securities (whether by reason of redemption or otherwise),
the number of shares deemed to be issued and outstanding pursuant to this
subsection (b) (and for the purpose of subsection (v) of Section 8.1 hereof)
shall be reduced by such number of shares as to which the conversion or exchange
rights shall have expired or terminated unexercised, and such number of shares
shall no longer be deemed to be issued and outstanding and the Exercise Price
then in effect shall forthwith be readjusted and thereafter be the price which
it would have been had adjustment been made on the basis of the issuance only of
the shares actually issued or issuable upon the conversion or exchange of those
convertible or exchangeable securities as to which the conversion or exchange
rights shall not have expired or terminated unexercised.
(c) If any change shall occur in the
price per share provided for in any of the options, rights or warrants referred
to in subsection (a) of this Section 8.2, or in the price per share at which the
securities referred to in subsection (b) of this Section 8.2 are convertible or
exchangeable, the options, rights or warrants or conversion or exchange rights,
as the case may be, shall be deemed to have expired or terminated on the date
when such price change became effective in respect of shares not theretofore
issued pursuant to the exercise or conversion or exchange thereof, and the
Company shall be deemed to have issued upon such date new options, rights or
warrants or convertible or exchangeable securities at the new price in respect
of the number of shares issuable upon the exercise of such options, rights or
warrants or the conversion or exchange of such convertible or exchangeable
securities.
8.3 Subdivision and Combination. In case the
Company shall at any time subdivide or combine the outstanding shares of Common
Stock, the Exercise Price shall forthwith be proportionately decreased in the
case of subdivision or increased in the case of combination.
8.4 Adjustment in Number of Shares. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Article 8,
the number of Shares issuable upon the exercise of each Warrant shall be
adjusted to the nearest full Share by multiplying a number equal to the Exercise
Price in effect immediately prior to such adjustment by the number of Shares
issuable upon exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
8.5 Reclassification, Consolidation, Merger,
etc. In case of any reclassification or change of the outstanding shares of
Common Stock (other than a change in par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or in the
case of any consolidation of the Company with, or merger of the Company into,
another
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<PAGE>
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a result of
a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holders shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holders were the owners of the shares of
Common Stock underlying the Warrants immediately prior to any such events at a
price equal to the product of (x) the number of shares issuable upon exercise of
the Warrants and (y) the Exercise Price in effect immediately prior to the
record date for such reclassification, change, consolidation, merger, sale or
conveyance as if such Holders had exercised the Warrants.
8.6 No Adjustment of Exercise Price in Certain
Cases. No adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the
Common Stock in the public offering concurrent herewith; or
(b) Upon the issuance or sale of shares
of Common Stock upon the exercise of the Warrants; or
(c) Upon (i) the issuance of options
pursuant to the Company's employee stock option plan in effect
on the date hereof or the issuance or sale by the Company of
any shares of Common Stock pursuant to the exercise of any
such options, or (ii) the issuance or sale by the Company of
any shares of Common Stock pursuant to the exercise of any
options or warrants previously issued and outstanding on the
date hereof; or
(d) If the amount of said adjustment shall
be less than 2 cents (2(cent)) per Share, provided, however,
that in such case any adjustment that would otherwise be
required then to be made shall be carried forward and shall be
made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried
forward, shall amount to at least 2 cents (2(cent)) per Share.
8.7 Dividends and Other Distributions with
Respect to Outstanding Securities. In the event that the Company shall at any
time prior to the exercise of all Warrants declare a dividend (other than a
dividend consisting solely of shares of Common Stock or a cash dividend or
distribution payable out of current or retained earnings) or otherwise
distribute to its shareholders any monies, assets, property, rights, evidences
of
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<PAGE>
indebtedness, securities (other than shares of Common Stock), whether issued by
the Company or by another person or entity, or any other thing of value, the
Holder or Holders of the unexercised Warrants shall thereafter be entitled, in
addition to the shares of Common Stock or other securities receivable upon the
exercise thereof, to receive, upon the exercise of such Warrants, the same
monies, property, assets, rights, evidences of indebtedness, securities or any
other thing of value that they would have been entitled to receive at the time
of such dividend or distribution. At the time of any such dividend or
distribution, the Company shall make appropriate reserves to ensure the timely
performance of the provisions of this Subsection 8.7.
8.8 Subscription Rights for Shares of Common
Stock or Other Securities. In the case the Company or an affiliate of the
Company shall at any time after the date hereof and prior to the exercise of all
the Warrants issue any rights to subscribe for shares of Common Stock or any
other securities of the Company or of such affiliate to all the shareholders of
the Company, the Holders of the unexercised Warrants shall be entitled, in
addition to the shares of Common Stock or other securities receivable upon the
exercise of the Warrants, to receive such rights at the time such rights are
distributed to the other shareholders of the Company.
9. Exchange and Replacement of Warrant Certificates.
Each Warrant Certificate is exchangeable without expense, upon
the surrender thereof by the registered Holder at the principal executive office
of the Company, for a new Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of Shares in
such denominations as shall be designated by the Holder thereof at the time of
such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests.
The Company shall not be required to issue certificates
representing fractions of shares of Common Stock and shall not be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock.
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<PAGE>
11. Reservation and Listing of Securities.
The Company shall at all times reserve and keep available out
of its authorized shares of Common Stock, solely for the purpose of issuance
upon the exercise of the Warrants, such number of shares of Common Stock as
shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Warrants and payment of the Exercise Price therefor,
all shares of Common Stock issuable upon such exercise shall be duly and validly
issued, fully paid, non-assessable and not subject to the preemptive rights of
any shareholder. As long as the Warrants shall be outstanding, the Company shall
use its best efforts to cause all shares of Common Stock issuable upon the
exercise of the Warrants to be listed on AMEX or listed on such national
securities exchanges as the Company's Common Stock is listed at such time.
12. Notices to Warrant Holders.
Nothing contained in this Agreement shall be construed as
conferring upon the Holder or Holders the right to vote or to consent or to
receive notice as a shareholder in respect of any meetings of shareholders for
the election of directors or any other matter, or as having any rights
whatsoever as a shareholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, any of the following events
shall occur:
(a) the Company shall take a record of the
holders of its shares of Common Stock for the purpose of entitling them to
receive a dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or retained
earnings, as indicated by the accounting treatment of such dividend or
distribution on the books of the Company; or
(b) the Company shall offer to all the holders
of its Common Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of
the Company (other than in connection with a consolidation or merger) or a sale
of all or substantially all of its property, assets and business as an entirety
shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least twelve (12) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to
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<PAGE>
vote on such proposed dissolution, liquidation, winding up or sale. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be. Failure to give such notice or any defect therein shall not affect
the validity of any action taken in connection with the declaration or payment
of any such dividend or distribution, or the issuance of any convertible or
exchangeable securities or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
13. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to a registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in
Section 3 of this Agreement or to such other address as the Company may
designate by notice to the Holders.
14. Supplements and Amendments.
The Company and BlueStone may from time to time supplement or
amend this Agreement without the approval of any Holders of Warrant Certificates
in order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and BlueStone may deem necessary or desirable and which the
Company and the BlueStone deem not to adversely affect the interests of the
Holders of Warrant Certificates.
15. Successors.
All the covenants and provisions of this Agreement by or for
the benefit of the Company and the Holders inure to the benefit of their
respective successors and assigns hereunder.
16. Termination.
This Agreement shall terminate at the close of business on
________ __, 2005. Notwithstanding the foregoing, this Agreement will terminate
on any earlier date when all Warrants have been exercised and all the Shares
issuable upon exercise of the Warrants have been resold to the public; provided,
however, that the provisions of Section 7.4 shall survive such termination until
the close of business on _______ __, 2008.
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<PAGE>
17. Governing Law.
This Agreement and each Warrant Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of New York
and for all purposes shall be construed in accordance with the laws of said
State.
18. Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to any
person or corporation other than the Company and the Representatives and any
other registered holder or holders of the Warrant Certificates, Warrants or the
Shares any legal or equitable right, remedy or claim under this Agreement; and
this Agreement shall be for the sole and exclusive benefit of the Company and
the Representatives and any other holder or holders of the Warrant Certificates,
Warrants or the Shares.
19. Counterparts.
This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
[SEAL] NOBLE INTERNATIONAL, LTD.
By:
Name:
Title:
Attest:
- -----------------------
BLUESTONE CAPITAL PARTNERS, L.P.
By:
Name:
Title:
RODMAN & RENSHAW, INC.
By:
Name:
Title:
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<PAGE>
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, _______ __, 2002
No. W- _______ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _______________
____________ or registered assigns, is the registered holder of _______ Warrants
to purchase, at any time from ______ __, 1998 until 5:00 P.M. New York City time
on ______ __, 2002 ("Expiration Date"), up to _____ shares ("Shares") of
fully-paid and non-assessable common stock, no par value ("Common Stock"), of
Noble International, Ltd., a Michigan corporation (the "Company"), at the
initial exercise price, subject to adjustment in certain events (the "Exercise
Price"), of $____ per Share upon surrender of this Warrant Certificate and
payment of the Exercise Price at an office or agency of the Company, but subject
to the conditions set forth herein and in the warrant agreement dated as of
_______ __, 1997 between the Company and BlueStone Capital Partners, L.P. and
Rodman & Renshaw, Inc. (the "Warrant Agreement"). Payment of the Exercise Price
may be made in cash, or by certified or official bank check in New York Clearing
House funds payable to the order of the Company, or any combination of cash or
check.
No Warrant may be exercised after 5:00 P.M., New York City
time, on the Expiration Date, at which time all Warrants evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is
<PAGE>
hereby referred to in a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events, the Exercise Price and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax, or
other governmental charge imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: ___________, 1997 Noble International, Ltd.
[SEAL] By:__________________________
Name:
Title:
Attest:
- ----------------------
-3-
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase _________ Shares and
herewith tenders in payment for such Shares cash or a certified or official bank
check payable in New York Clearing House Funds to the order of Noble
International, Ltd. in the amount of $ , all in accordance with the terms
hereof. The undersigned requests that a certificate for such Shares be
registered in the name of , whose address is __________________, and that such
Certificate be delivered to __________________, whose address is _____________.
Dated: Signature:
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
________________________________
________________________________
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ________________________________________
hereby sells, assigns and transfers unto
_____________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________, Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate)
________________________________
________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
<PAGE>
SUBORDINATED PROMISSORY NOTE - SERIES B (DCT, INC.)
$1,679,127 Bloomfield Hills, Michigan
Dated: As of [month/day of Closing Date], 1997
FOR VALUE RECEIVED, NOBLE INTERNATIONAL, LTD., a Michigan corporation
("Borrower"), promises to pay to the order of DCT, Inc., a Michigan corporation
("Lender"), at its office at 20101 Hoover, Detroit Michigan 48025 or at such
other place as Lender may designate in writing, the principal sum of ONE MILLION
SIX HUNDRED SEVENTY-NINE THOUSAND ONE HUNDRED TWENTY-SEVEN AND NO/100 DOLLARS
($1,679,127.00), plus interest on the unpaid principal balance at the rates and
in the manner provided below, all in lawful money of the United States of
America, in accordance with the terms hereof.
The principal sum owing hereunder, together with all unpaid accrued
interest, shall be due and payable on [month/day of Closing Date], 2001 (the
"Due Date"), [subject to the terms and conditions of that subordination
agreement (the "Subordination Agreements") dated [month/day of Closing Date],
1997, by and between Lender and Comerica Bank, as agent for and on behalf of the
banks (the "Banks") which are parties to that certain Amended and Restated Noble
International, Ltd. $__________ Credit Agreement dated ____________, 1997, among
the Banks and Borrower.]
Interest on the principal balance outstanding under this promissory
note ("Note") shall accrue at the rate of six percent (6.0%) per annum (the
"Effective Rate") until [month/day of Closing Date], 1999, or until the date
paid if principal and accrued interest are paid in full prior to [month/day of
Closing Date], 1999. If not paid in full on or before [month/day of Closing
Date], 1999, interest on the principal balance, plus interest on unpaid accrued
interest, shall thereafter accrue at the rate of ten percent (10.0%) per annum
(the "Premium Rate"), compounded quarterly, but accrued daily until paid.
[Subject to the terms and conditions of the Subordination Agreement,]
it is agreed that the principal balance of this Note and all accrued and unpaid
interest, including interest accrued at the Premium Rate, shall become due and
payable at the place of payment aforesaid at the option of Lender, in the event
this Note is not paid in full on or before [month/day of Closing Date], 1999,
and remains unpaid after that date which is 90 days after [month/day of Closing
Date], 1999. Lender shall have the right to accelerate regardless of any prior
forbearance. If suit is brought to collect this Note pursuant to this
acceleration option, all costs and expenses of collection, including reasonable
attorneys' fees shall be added to and become part of the total indebtedness.
[Subject to the terms and condition of the Subordination Agreement,]
this Note may be paid in full or in part at any time without payment of any
prepayment fee or penalty. All payments received hereunder shall, at the option
of Lender, first be applied against accrued and unpaid interest and the balance
against principal. If Borrower elects to prepay less than all of the
indebtedness
<PAGE>
evidenced by all of the then issued and outstanding notes of this series,
Borrower shall pay to Lender the same proportion of the principal or interest of
the indebtedness evidenced by this Note that is paid to the holder of any other
issued and outstanding note of this series. Borrower expressly assumes all risks
of loss or delay in the delivery of any payments made by mail, and no course of
conduct or dealing shall affect Borrower's assumption of these risks.
This Note is part of a series of subordinated notes (the "Series
Subordinated Notes") designated and issued by Borrower as Series A, Series B,
Series C and Series D. So long as any amount of principal or unpaid interest
remains outstanding under any of the Series Subordinated Notes, Borrower shall
not, without the prior written consent of holders of Series Subordinated Notes
with an aggregate outstanding principal balance of not less than 67% of the
total aggregate outstanding principal balance under all Series Subordinated
Notes:
1. declare or pay any dividend or other distribution on any shares of its
capital stock other than in shares of capital stock; or
2. redeem or set apart funds for the purchase or redemption of any shares
of its capital stock through a sinking fund or otherwise Provided,
however, that so long as there does not exist an Event of Default
under any of the Series Subordinated Notes, this restriction shall not
apply to (A) the repurchase of shares of Common Stock of Borrower from
officers or directors of Borrower, or its subsidiaries, pursuant to
agreements under which Borrower has the option to repurchase such
shares at cost or at cost plus interest at a rate not in excess of 8%
per annum upon the occurrence of certain events, such as the
termination of employment; provided further, however, that the total
amount applied to the repurchase of shares of Common Stock shall not
exceed $200,000 during any twelve month period (which maximum amount
shall be increased upon any payment of principal under the Series
Subordinated Notes by the percentage that any such principal payment
bears to the total outstanding principal under all Series Subordinated
Notes), or (B)the repurchase of shares of Common Stock of Borrower
from Robert J. Skandalaris at any time after [month/day of Closing
Date], 1999, pursuant to agreements under which Borrower has the
option to repurchase such shares at cost or at cost plus interest at a
rate not in excess of 8% per annum upon the occurrence of certain
events, such as the termination of his employment; provided further,
however, that the total amount applied to the repurchase of shares of
Common Stock from Mr. Skandalaris shall not exceed 20% of the total
shares of Borrower's Common Stock held by Mr. Skandalaris.
If Borrower defaults in the payment of this Note when due, or in the
event of the appointment of a receiver, trustee, or custodian for any part of
the property of Borrower, or the assignment for the benefit of creditors by
Borrower or the inability of Borrower to meet Borrower's obligations as they
become due, or the commencement of any proceedings under any bankruptcy or
insolvency laws by or against Borrower, [and subject to the terms and conditions
of the Subordination Agreement,]
-2-
<PAGE>
the entire principal amount of this Note remaining at the time unpaid, together
with accrued interest thereon, shall, at the election of Lender and without
notice, demand or presentment, become immediately due and payable at the place
of payment aforesaid, and all costs and expenses of collection, including
reasonable attorneys' fees shall be added to and become part of the total
indebtedness.
If Borrower defaults in the payment of this Note when due, or if
Borrower fails to comply with the restrictions set forth in this Note, an Event
of Default shall occur and, then or at any time thereafter during the uncured
continuance of any such Event of Default, the Borrower shall not, without the
prior written consent of holders of Series Subordinated Notes with an aggregate
outstanding principal balance of not less than 67% of the total aggregate
outstanding principal balance under all Series Subordinated Notes:
1. effect any sale, lease, assignment, transfer or other conveyance,
other than as security for a loan from a Senior Lender (as defined
herein), of all or substantially all of the assets of Borrower or any
of its subsidiaries, or any consolidation or merger involving Borrower
or any of its subsidiaries, except in each case any such transaction
solely to, with or among the Borrower and its subsidiaries, or any
reclassification or other change of any stock, or any recapitalization
of Borrower; or
2. permit any subsidiary to issue or sell, or obligate itself to issue
or sell, except to Borrower or to any wholly-owned subsidiary of
Borrower, any stock of such subsidiary.
Acceptance by Lender of any payment in an amount less than the amount
then due shall be deemed an acceptance on account only, and Borrower's failure
to pay the entire amount then due shall be and continue to be a default. Upon
the occurrence of any default, neither the failure of Lender promptly to
exercise its right to declare the outstanding principal and accrued unpaid
interest hereunder to be immediately due and payable, nor the failure of the
Lender to demand strict performance of any other obligation of the Borrower or
any other person who may be liable hereunder, shall constitute a waiver of any
such rights, nor a waiver of such rights in connection with any future default
on the part of the Borrower or any other person who may be liable hereunder.
Borrower and all endorsees, sureties and guarantors hereof, if any,
hereby jointly and severally waive presentment for payment, demand, notice of
non-payment, notice of protest or protest of this Note, and Lender diligence in
collection or bringing suit, and do hereby consent to any and all extensions of
time, renewals, waivers or modifications as may be granted by Lender with
respect to payment or any other provisions of this Note. The liability of
Borrower under this Note shall be absolute and unconditional, without regard to
the liability of any other party. This Note has been executed in the State of
Michigan, and all rights and obligations hereunder shall be governed by the laws
of the State of Michigan.
This Note is unsecured and the obligations hereunder are subordinated
to all obligations of Borrower to any Senior Lender (as defined herein). For
purposes of this Note, "Senior Lender" shall include any entity which is a
"qualified institutional buyer" as defined in Section 1(a) of Rule 144A
-3-
<PAGE>
of the Rules and Regulations promulgated under the Securities Act of 1933, as
amended.
This Note shall be binding upon the Borrower and its successors and
assigns, and the benefits hereof shall inure to the Lender and its successors;
provided, however, this Note shall not be assigned nor transferred by Lender
prior to the Due Date.
BORROWER: BORROWER'S ADDRESS:
NOBLE INTERNATIONAL LTD., 33 Bloomfield Hills Parkway
a Michigan corporation Suite 155
Bloomfield Hills, Michigan 48304
By:
---------------------------------
Robert J. Skandalaris, President
-4-
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS that Midlantic National Bank (the "Bank") in
consideration of Seven Hundred Fifty Thousand ($750,000.00) Dollars paid and
delivered to it by Prestolock Acquisition Corp., a Michigan corporation (the
"Buyer"), receipt of which is hereby acknowledged, does hereby grant, bargain
and sell to the Buyer such right, title and interest as the Bank may have in
certain assets described on Exhibit "A" annexed hereto and made a part hereof
(the "Assets"), to have and to hold for its own use forever.
The Bank hereby warrants to the Buyer that:
1. Presto Lock, Inc. ("Presto") was indebted to the Bank in a
specified amount not less than Seven Hundred Fifty Thousand ($750,000.00)
Dollars immediately prior to the surrender of the Assets by Presto to the
Bank;
2. The Bank was a holder of a valid and subsisting first priority
security interest in the Assets as security for the indebtedness described
in paragraph 1. hereinabove;
3. The Bank became the owner of the Assets pursuant to a surrender by
Presto to the Bank in accordance with N.J.S.A. 12A:9-503 and the Bank has
the right to dispose of the Assets pursuant to the loan documents which
evidenced Presto's obligations to the Bank and N.J.S.A. 12A:9-5O4; and
4. By virtue of this Bill of Sale the Bank hereby conveys to the Buyer
whatever right, title and interest in and to the Assets that Presto had
immediately prior to the surrender.
The Buyer agrees to assume all risks, costs and obligations of the removal
of the Assets from their present location and the Bank makes no representation
of warranty to the Buyer as to the Buyer's ability to secure possession of the
Assets.
THE BUYER ACCEPTS THE ASSETS "AS IS, WHERE IS". THE BANK HAS NOT HERETOFORE
AND DOES NOT HEREBY MAKE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
WITH RESPECT TO THE MERCHANTABILITY, CONDITION, QUALITY, OR FITNESS OF ANY ITEM
OF THE ASSETS FOR ANY PARTICULAR PURPOSE, AS TO THE ENFORCEABILITY OF ANY
ACCOUNTS OR CONTRACTS, OR ANY OTHER WARRANTIES AS TO THE QUALITY OR CONDITION OF
THE ASSETS WHICH MAY EXIST BY OPERATION OF LAW, COURSE OF DEALING, OR USAGE OF
TRADE.
The Bank and the Buyer agree that there are no understandings, agreements
or representations, express or implied, by course of dealing, usage of trade or
otherwise, not specified herein respecting the transaction contemplated by this
Bill of Sale; and no such understanding shall be admissible to explain, modify
or contradict this Bill of Sale in any way.
<PAGE>
The Buyer acknowledges and agrees that the Bank makes no representations or
warranty that any patent, trademark, copyright, trade secret, proprietary
information, shop right or other intellectual property right of any third party
shall not be infringed by the exercise by the Buyer of any rights granted or
transferred hereunder or the use or sale by the Buyer of any of the Assets
transferred hereunder.
At any time and from time to time from the date hereof, upon the reasonable
request of the Buyer, the Bank shall do, execute, acknowledge and deliver, or
cause to be done, executed, acknowledged or delivered, all such further
reasonable acts, deeds, assignments, transfers, conveyances, and assurances as
may be reasonably required for the better assigning, transferring, granting,
conveying, assuring and confirming to the Buyer, or for aiding in the reducing
to the possession of the Buyer, title to and possession of any and all of the
Assets transferred and assigned hereby; provided, however, that the Bank shall
not be obligated to expend money or commence or participate as a party or
otherwise in any arbitration, litigation or similar proceeding in order to
fulfill its obligations hereunder.
IN WITNESS WHEREOF, the Bank and the Buyer have executed this Bill of Sale this
25th day of February, 1994.
ATTEST: Midlantic National Bank
By: /s/ Alan H. Strauss By: /s/ David L. Raphaels, AVP
---------------------------- -----------------------------
Alan H. Strauss, V.P. David L. Raphaels, AVP
ATTEST: Prestolock Acquisition Corp.
By: /s/ By: /s/ Robert J. Skandalaris
---------------------------- -----------------------------
TRADEMARK AGREEMENT
THIS TRADEMARK AGREEMENT (the "Agreement"), made and entered into this 25th
day of February 1994, by and between PRESTOLOCK ACQUISITION CORP., a Michigan
corporation having its place of business at 21 Kercheval Avenue, Suite 250,
Grosse Pointe Farms, Michigan 48236, U.S.A., (hereinafter referred to as
"Prestolock"), and Presto Lock, Inc., a New Jersey corporation, having a place
of business at 100 Outwater Lane, Garfield, New Jersey 07026, U.S.A.,
(hereinafter called "Licensee").
RECITALS:
WHEREAS, Prestolock is the owner of certain trademarks relating to various
products, including locks and luggage; and
WHEREAS, Licensee desires to acquire a license from Prestolock to enable it
to use such trademarks on certain products on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and undertakings hereinafter set forth, the parties hereto agree as follows:
1. As used herein:
a. The term "Licensed Products" shall mean luggage hardware.
b. The term "Licensed Trademarks" shall mean those trademarks set
forth in Exhibit A, and any applications and registrations
therefore, anywhere in the world.
c. The term "Territory" shall mean anywhere in the world.
2. In consideration of $1.00 and other valuable consideration, Prestolock
hereby grants to Licensee the exclusive right and license to utilize in the
Territory the Licensed Trademarks on Licensed Products made by Licensee in
compliance with the terms and conditions
<PAGE>
thereof. Prestolock shall not grant any other party the right or license to
utilize the Licensed Trademarks with respect to the Licensed Products in the
Territory.
3. Licensee may use the Licensed Trademarks only on or referring to
Licensed Products; further, Licensee agrees not to utilize any Licensed
Trademark in connection with Licensed Products containing padlocks of any kind,
unless such padlocks have been purchased directly from Prestolock.
4. Licensee shall use the Licensed Trademarks only with respect to Licensed
Products which comply with reasonable commercial standards. Prestolock shall not
assign or transfer the Licensed Trademarks except to an assignee or transferee
which shall agree in writing to use the Licensed Trademarks only with respect to
products (other than Licensed Products) which comply with reasonable commercial
standards.
5. Licensee recognizes Prestolock's title to the Licensed Trademarks and
shall not at any time do or suffer to be done any act that will impair the
rights of Prestolock in and to the Licensed Trademarks. Licensee shall not
acquire and shall not claim any title to said Licensed Trademarks adverse to
Prestolock by virtue of the license granted to Licensee, or through Licensee's
past, present or future use of the Licensed Trademarks, or any variation
thereof, it being the intention of the parties that all use of the Licensed
Trademarks by Licensee shall at all times inure to the benefit of Prestolock.
6. The parties shall notify each other of any infringement of the Licensed
Trademarks by any third party promptly upon becoming aware of any such
infringement.
7. This Agreement and the rights and privileges herein granted may be
assigned by Licensee effective upon receipt of written notice of same by
Prestolock.
2
<PAGE>
8. Upon termination of this Agreement, Licensee shall cease using the
Licensed Trademarks or any variation thereof.
9. All notices, deliveries, consents, waivers or requests permitted or
required pursuant to this Agreement shall be sufficient and deemed to have been
served when sent by prepaid cable, telex or facsimile with simultaneous mailing
of a copy thereof by registered or certified air mail to the addresses stated
above, or at such other addresses of which the parties may have notified each
other.
10. This Agreement is binding on and shall inure to the benefit of the
parties to this Agreement and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed in their respective corporate names by duly authorized officers thereof.
ATTEST PRESTOLOCK ACQUISITION CORP.
/s/Mark A. Davis By: /s/Robert J. Skandalaris
- ------------------------- -------------------------
ITS: President
-------------------------
Date: 2/25/94
------------------------
Witness LICENSEE
/s/David L. Rapheals By: /s/Eberbard Franzen
- -------------------------------- --------------------------
ITS: President
-------------------------
Date: 2/25/94
------------------------
3
<PAGE>
EXHIBIT A
U.S. Registered Marks:
Trademark U.S. Registration No. Date of Registration
- --------- --------------------- --------------------
PRESTO 1,125,143 Sept. 18, 1979
PRESTO 904,582 Dec. 22, 1970
PRESTOLOCK 904,702 Dec. 22, 1970
ASSET PURCHASE AGREEMENT
Dated as of July 21, 1994
By and Between
THE EASTERN COMPANY
as Purchaser
and
PRESTOLOCK INTERNATIONAL, LTD.
as Seller
----------
<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT made as of the 21st day of July, 1994, by and among THE EASTERN
COMPANY, a Connecticut corporation having its principal office at 112 Bridge
Street, Naugatuck, Connecticut 06770 (hereinafter the "Purchaser"), and
PRESTOLOCK INTERNATIONAL LTD., a Michigan corporation having an office at 205
Robin Road, Paramus, New Jersey 07652 (hereinafter the "Seller").
W I T N E S S E T H:
WHEREAS, the Seller is engaged in the business of developing, manufacturing
and selling various locks and latching devices (hereinafter the "Seller's
Business"); and
WHEREAS, included in the Seller's Business is a padlock product line
marketed under the name "Prestolock" and variations thereof (hereinafter the
"Padlock Product Line"); and
WHEREAS, the Purchaser desires to acquire certain assets of the Seller
constituting or utilized in the production and marketing of the Padlock Product
Line and thereafter to manufacture, develop and market the Padlock Product Line.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements hereinafter contained, the parties hereto agree as follows:
ARTICLE I
SALE OF ASSETS
1.1 Sale of Assets. Seller agrees that, subject to the terms and conditions
of this Agreement, Seller will convey, sell, assign, transfer and deliver to the
Purchaser at the Closing hereinafter specified, whatever right, title and
interest Seller possesses in and
<PAGE>
to all of the following categories of assets and properties of the Seller which
are used solely in connection with the Padlock Product Line of every kind and
description wherever located, owned or controlled by the Seller as of the close
of business on the Closing Date (excluding assets of the Seller used in
connection with its other product lines and those assets specified below)
including without limitation, the following:
(a) Equipment. All of the machinery and equipment listed in SCHEDULE 1.1
(a) attached hereto and made a part hereof, together with all related
components, spare parts, tools, dies, jigs, fixtures and equipment used for the
maintenance and repair thereof or otherwise used by the Seller in its Padlock
Product Line operations;
(b) Tooling. All tooling utilized to manufacture the various padlocks
constituting the Padlock Product Line, wherever located, whether in the
possession of Seller or in the possession of third party vendors or others;
(c) Intellectual Property. All United States and foreign patents, patent
applications, copyrights, trade names, trademarks and service marks, registered
or unregistered, trade secrets and confidential and proprietary information,
related to or used in connection with the Padlock Product Line, including, in
particular, the names "Hot Lock," "Jock Lock," and "Travel Lock," but, subject
to Section 1.5 below, excluding the names "Presto-Lock" and "Presto." Without
limiting the foregoing, it is understood that the Purchaser will acquire all
right, title and interest of the Seller in the so-called "gun lock" patent (and,
if available, the "back to zero" patent) as part of the intellectual property
being transferred;
2
<PAGE>
(d) Certain Records & Software. All blueprints, engineering drawings,
manuals and similar records, plans, research records, computer programs,
software, vendor lists, customer lists, marketing information, advertising,
artwork and promotional material, studies, reports and technical specifications,
and all other material, records, files, documents, correspondence, reports and
data belonging to or, subject to the owner's rights therein, used by the Seller
with respect to the Padlock Product Line;
(e) Inventory. All inventory pertaining to the Padlock Product Line
consisting of finished goods, finished parts, spare parts, replacement and
component parts;
(f) Government Rights. To the extent permitted by law, all governmental
licenses, permits, certificates, approvals, applications or registrations and
similar rights obtained from governments and governmental agencies;
(g) Claims and other Intangibles. All claims, causes of action, judgments,
rights of recovery, license and technology agreements, designs, processes,
procedures, and manufacturing know-how pertaining to the Padlock Product Line.
The assets and properties to be conveyed, transferred, assigned and
delivered as set forth in this Section 1 are hereinafter collectively referred
to as the "Assets", and shall include, without limitation, all property of the
Seller hereafter acquired by the Seller prior to the Closing Date, which is
intended to be used as part of the Assets, but shall not include, under any
circumstances, the following assets (hereinafter the "Excluded, Assets"):
(A) All cash, cash equivalents, securities and tax refunds,
(B) All accounts receivable,
3
<PAGE>
(C) Real estate and improvements thereon,
(D) All other assets of the Seller not described in Subsections 1.1(a)
through 1.1(9) above, and
(E) All records relating to the Excluded Assets.
1.2. Price and Consideration. The purchase price of the Assets (herein
called the "Purchase Price") shall be FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($50O,000.00). The Purchase Price shall be allocated as set forth in SCHEDULE
1.2(a) attached hereto and paid at Closing subject to Section 7.2 below with
respect to exchange of consideration.
1.3. Excluded Liabilities. The Purchaser shall not assume, and shall not be
responsible for the payment, performance or discharge of any debts, liabilities
or obligations of the Seller of any kind or nature whatsoever, whether existing
or hereafter arising, other than the Assumed Obligations, as hereinafter
defined. All of the foregoing liabilities covered by this Section 1.3 shall
hereinafter be referred to as the "Excluded Liabilities". Notwithstanding the
foregoing, the Purchaser will assume all customer contracts which it believes
will not be a loss or break-even and will, in its discretion, assume any supply
orders which it determines will be needed for the production and sale of the
Padlock Product Line (the "Assumed Obligations"). The Purchaser shall review all
customer contracts and supply orders promptly and shall give notice of those it
will not assume as soon as possible, in no event later than July ___, 1994.
Seller may cancel or otherwise deal with such customer contracts and supply
orders which Purchaser determines not to assume after such date as it deems
appropriate. The parties shall
4
<PAGE>
execute and deliver at the Closing an Assignment and Assumption Agreement in the
form of EXHIBIT 1.3 attached hereto and take such other action and execute such
documents as may be necessary or reasonably requested by either party to assure
the effective assignment of and assumption of the Assumed Obligations.
1.4. Non-Competition Agreement. There shall be delivered at Closing a
Non-Competition Agreement in the form of EXHIBIT 1.4 attached hereto executed by
the Seller and Purchaser. The parties agree that the undertaking by the Seller
not to compete with the Purchaser is a material part of this Agreement and
therefore shall be a Purchasers' condition of closing.
1.5 License Agreement. There shall be delivered at Closing a Trademark/
Trade Name License Agreement in the form of EXHIBIT 1.5 attached hereto,
executed by the Seller and Purchaser. The Parties agree that the undertaking by
the Seller to provide Purchaser with this License Agreement is a material part
of this Agreement and therefore shall be a Purchaser's condition of Closing.
1.6 Sales Service Consulting Agreement. Seller and Purchaser shall, at the
Closing, enter into a Sales Service Consulting Agreement in the form of EXHIBIT
1.6 attached hereto.
ARTICLE II
REPRESENTATIONS & WARRANTIES
2.0 Representations of Seller. Seller represents, warrants and agrees as
follows:
5
<PAGE>
2.1 Seller. The Seller is a corporation duly organized, validly existing
and in good standing under the laws of the state of Michigan and has the
corporate power and authority to make, execute, deliver and perform this
Agreement, and this Agreement has been duly authorized and approved by all
required corporate action of Seller.
2.2 Options. Except as set forth in SCHEDULE 2.2, attached hereto, there
are no outstanding options, calls or contracts relating to the Assets.
2.3 Consents. Except as set forth in SCHEDULE 2.3, no consents or approvals
of any public body or authority and no consents or waivers from other parties to
licenses, franchises, permits, indentures, agreements or other instruments are
(i) required for the lawful consummation of the transactions contemplated
hereby, or (ii) necessary in order that the Padlock Product Line business can be
conducted by the Purchaser. The consummation of the transactions contemplated
hereby will not cause a default in any contract or agreement to which the Seller
is a party or by which it or the Assets are bound.
2.4 Books and Records. Except as set forth in SCHEDULE 2.4 attached hereto,
the records and books of account of the Seller which have been (or will
hereafter be) made available to Purchaser are, and will be, correct and
complete, and have been, and to the Closing Date will be, regularly kept and
maintained on a consistent basis with preceding years. The Seller does not have
any of its records, systems, controls, data or information recorded, stored,
maintained, operated or otherwise wholly or partly dependent upon or held by any
means (including any electronic, mechanical or photographic process, whether
computerized or not) which are not under the exclusive
6
<PAGE>
ownership and direct control of the Seller (including all means of access
thereto and therefrom).
2.5 Machinery and Equipment. Except as set forth in SCHEDULE 2.5 attached
hereto, all machinery, equipment, tools and other related tangible personal
property (other than inventory) included in the Assets are in reasonable working
condition and repair, ordinary wear and tear excepted, and are owned by the
Seller. Except as disclosed in SCHEDULE 2.5 attached hereto, the tooling
utilized to manufacture the products of the Padlock Product Line is in
reasonable working condition, available for delivery at Closing or in the
possession of suppliers who are obligated to turn over such tooling to the
Seller or its designee.
2.6 Title to Properties; Encumbrances. Except as set forth in SCHEDULE 2.6
attached hereto, the Seller has good, valid and marketable title to, and is
owner of all of Assets being sold under this Agreement (tangible and
intangible), in each case subject to no encumbrance, lien, security interest,
charge or other restriction or adverse right of any kind or character arising,
created or attaching on or after February 25, 1994. Copies of all title transfer
documents and agreements have been delivered to Purchaser and are true, correct
and complete.
2.7 Restrictive Documents. Except as set forth in SCHEDULE 2.7 attached
hereto, the Seller is not subject to, or a party to, any mortgage, lien, lease,
license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or, to Seller's knowledge, any other
restriction of any kind or character which materially and adversely affects the
Padlock Product Line or any of the Assets, or which
7
<PAGE>
would prevent consummation of the transactions contemplated by this Agreement,
compliance by the Seller with the terms, conditions and provisions hereof or the
continued operation of the Seller's Padlock Product Line business after the date
hereof or the Closing Date (as hereinafter defined) on substantially the same
basis as heretofore operated or which would restrict the ability of the Seller
to acquire any property or conduct business in any area.
2.8 Litigation. Except as set forth in SCHEDULE 2.8 attached hereto, there
is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before (or to the best knowledge,
information and belief of the Seller any investigation by) any court,
governmental or other instrumentality or agency, or, to the best knowledge,
information and belief of the Seller, threatened against the Seller, or any of
its rights which could materially and adversely affect the right or ability of
the Purchaser to carry on the Padlock Product Line business, or which could
materially and adversely affect the rights of the Purchaser to exploit the
intellectual property being acquired. The Seller is not subject to any judgment,
order or decree entered in any lawsuit or proceeding which may have a material
adverse effect on any of its operations or business practices or on its ability
to convey the Assets or conduct the Padlock Product Line business in any area.
2.9 Product Warranty. To Seller's knowledge, each product manufactured,
sold, leased, installed, delivered or service performed by the Seller has been
in conformity with all applicable contractual commitments and all express and
implied warranties. No product manufactured, sold, leased, installed, delivered
or service
8
<PAGE>
performed by the Seller is subject to any guaranty, warranty or other indemnity
beyond the applicable standard express terms and conditions of sale or lease,
copies of which have been delivered to the Purchaser.
2.10 Product Liability. To Seller's knowledge, Seller has no liability (and
knows of no basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim or demand against the Seller which
could give rise to any liability) arising out of any injury to persons or
property as a result of the ownership, possession or use of any Padlock Product
Line product manufactured, sold, leased, installed or delivered by the Seller.
2.11 Intellectual Property. The operation of the Padlock Product Line
business requires no rights under Intellectual Property (as hereinafter defined)
other than rights under Intellectual Property of the Seller listed on Part I of
SCHEDULE 2.11 attached hereto and rights granted to the Seller pursuant to
agreements listed on Part II of SCHEDULE 2.11. Within the six month period
immediately prior to the date of this Agreement, the business of the Seller made
use of no Intellectual Property rights other than rights under Intellectual
Property of the Seller listed on Part I of SCHEDULE 2.11 and rights granted to
the Seller pursuant to agreements listed on Part II of SCHEDULE 2.11. Except as
otherwise set forth on Part III of SCHEDULE 2.11, the Seller owns all right,
title and interest in the Intellectual Property listed on SCHEDULE 2.11
including, without limitation, exclusive rights to use and license the same.
Each item of Intellectual Property listed on Part I of SCHEDULE 2.11 has been
duly registered with, filed in, or issued by the appropriate domestic or foreign
governmental agency, to the extent
9
<PAGE>
required, and each such registration, filing and issuance remains in full force
and effect. Except as set forth on Part III of SCHEDULE 2.11, no claim adverse
to the interests of the Seller in the Intellectual Property or agreements listed
in SCHEDULE 2.11 has been made. To the best knowledge, information and belief of
the Seller, no such claim has been threatened or asserted, no basis exists for
any such claim, and no Person has infringed or otherwise violated the Seller's
rights in any of the Intellectual Property or agreements listed on Part I or
Part II of SCHEDULE 2.11, except as set forth on Part III of SCHEDULE 2.1 1. No
person or entity has any rights in the name Presto-Lock (or any variation
thereof) except as set forth in Part III of SCHEDULE 2.11. Except as set forth
on Part III of SCHEDULE 2.11, no litigation is pending wherein the Seller is
accused of infringing or otherwise violating the Intellectual Property rights of
another, or of breaching a contract conveying rights under Intellectual
Property. To the best knowledge, information and belief of the Seller, no such
claim has been asserted or threatened against the Seller, nor are there any
facts that would give rise to such a claim. For purposes of this Section 2. 11,
"Intellectual Property" means domestic and foreign patents, patent applications,
registered and unregistered trade marks and service marks, registered and
unregistered copyrights, proprietary or copyrighted computer programs,
proprietary or copyrighted data bases, trade secrets and proprietary
information.
2.12 Compliance with Laws. To Seller's knowledge, Seller is in compliance
in all material respects with all applicable laws, regulations, orders,
judgments and decrees which would affect the Padlock Product Line business.
Except as set forth in SCHEDULE 2.12, the Seller is not now under investigation
with respect to any violation
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of any applicable law, regulation, order or requirement which would impair
Purchaser's ability to operate the Padlock Product Line business. The Seller has
filed all reports required to be filed with any governmental, regulatory or
administrative agency or authority in connection with its operation of the
Padlock Product Line business.
2.13 Interests in Clients, Suppliers Etc, Except as set forth in SCHEDULE
2.13 attached hereto, the Seller does not possess, directly or indirectly, any
financial interest in, or is a director, officer or employee of, any
corporation, firm, association or business organization which is a client,
supplier, customer, lessor, lessee, or competitor of the Seller. Ownership of
securities of a company whose securities are registered under the Securities
Exchange Act of 1934 not in excess of 1% of any class of such securities shall
not be deemed to be a financial interest for purposes of this Section 2.13.
2.14 Disclosure. None of this Agreement, any Schedule, Exhibit or
certificate attached hereto or delivered in accordance with the terms hereof or
any document or statement in writing which has been supplied by or on behalf of
the Seller in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact, or omits any statement of a
material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact known to the Seller which materially
and adversely affects the business or prospects of the Padlock Product Line,
which has not been set forth either in this Agreement, or in a Schedule, Exhibit
or certificate attached hereto or delivered in accordance with the terms hereof
or in a document or statement in writing which has been supplied by or on behalf
of the Seller in connection with the transactions contemplated by this
Agreement.
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2.15 Broker's or Finder's Fees. No agent, broker, person or firm acting on
behalf of the Seller is, or will be, entitled to any commission or broker's or
finder's fees from any of the parties hereto, or from any Person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated by this Agreement.
2.16 Copies of Documents. The Seller has caused to be made available for
inspection and copying by the Purchaser and its advisers, true, complete and
correct copies of all documents referred to in this Article II or in any
Schedule attached hereto.
ARTICLE III
REPRESENTATIONS OF PURCHASER
3.0 Representations of Purchaser. Purchaser represents, warrants and agrees
as follows:
3.1 Existence and Good Standing of Purchaser, Power and Authority. The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the state of Connecticut and has the corporate power and
authority to make, execute, deliver and perform this Agreement, and this
Agreement has been duly authorized and approved by all required corporate action
of Purchaser.
3.2 Restrictive Documents. The Purchaser is not subject to any charter,
by-law, mortgage, lien, lease, agreement, instrument, order, law, rule,
regulation, judgment or decree, or any other restriction of any kind or
character, which would prevent consummation of the transactions contemplated by
this Agreement.
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3.3 Broker's or Finder's Fees. No agent, broker, person or firm acting on
behalf of the Purchaser is, or will be, entitled to any commission or broker's
or finder's fees from any of the parties hereto, or from any Person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated by this Agreement.
ARTICLE IV
CONDUCT OF BUSINESS; EXCLUSIVE DEALING; REVIEW
4.1 Conduct of Business of the Company. During the period from the date of
this Agreement to the Closing Date, the Seller shall conduct its Padlock Product
Line business only by selling finished goods from inventory in the ordinary and
usual course of business with Purchaser's consent, and agrees to use its best
efforts to preserve intact its sales organization and maintain satisfactory
relationships with licensors, suppliers, distributors, clients, sales
representatives and others having business relationships with it with respect to
the Padlock Product Line. Notwithstanding the immediately preceding sentence,
prior to the Closing Date, except as may be first approved by Purchaser or as is
otherwise permitted or required by this Agreement, the Seller agrees with
respect to the Padlock Product Line business:
(a) to refrain from entering into any customer order, contract or
commitment or any contracts which involve the licensing of Intellectual
Property,
(b) to duly comply with all laws and regulations applicable to it in the
conduct of its business, including without limitation federal export and import
laws and the rules, orders, regulations and guidelines thereunder so far as they
may be applicable,
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(c) to use its best efforts to maintain the Assets in substantially their
present order and condition, subject only to normal wear and tear,
(d) not to take any action, or omit to take any action, which would cause
the representations and warranties contained in Article II hereof to be untrue
or incorrect.
During the period from the date of this Agreement to the Closing Date, the
Seller shall confer on a regular and frequent basis with one or more designated
representatives of Purchaser to report material matters and to report the
general status of ongoing Padlock Product Line operations. The Seller shall
notify Purchaser of any unexpected emergency or other change in the normal
course of its business or in the operation of its properties and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or adjudicatory proceedings
involving the Padlock Product Line and shall keep Purchaser fully informed of
such events and permit its representatives prompt access to all materials
prepared in connection therewith.
4.2 Exclusive Dealing. During the period from the date of this Agreement to
the completion of the Closing, the Seller will not:
(a) solicit, initiate or encourage the submission of any proposal or offer
from any person relating to any (i) liquidation, dissolution or
recapitalization, (ii) merger or consolidation, (iii) acquisition or purchase of
securities or assets, or (iv) similar transaction or business combination
involving the Seller; or
(b) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any
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effort or attempt by any person to do or seek any of the foregoing. The Seller
will notify the Purchaser immediately if any person makes any proposal, offer,
inquiry or contact with respect to any of the foregoing.
4.3 Review of the Seller. Purchaser may, prior to the Closing Date, through
its representatives, make such review of the properties, books and records of
the Seller pertaining to the Padlock Product Line and its financial and legal
condition as they deem necessary or advisable to familiarize themselves with
such properties and other matters. Should the Purchaser, its accountants or
agents, however, ascertain any facts that are not as represented in this
Agreement, they shall immediately disclose said facts to the Seller, who may
undertake to take such action as will cause the warranties and representations
to be true and correct as of the Closing Date. The Seller shall permit Purchaser
and its representatives to have, after the date of execution of this Agreement,
full access to the premises and to all the books and records of the Seller, and
the Seller will furnish Purchaser with such financial and operating data and
other information with respect to the Padlock Product Line business and the
Assets as Purchaser shall from time to time reasonably request. In the event of
termination of this Agreement, Purchaser shall keep confidential any material
information obtained from the Seller concerning the Sellers properties,
operations and business (unless readily ascertainable from public or published
information or trade sources) until the same ceases to be material (or becomes
so ascertainable) and, at the request of the Seller, shall return to the Seller
all copies of any schedules, statements, documents or other written information
obtained in connection therewith.
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ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS
5.0 Conditions to Purchaser's Obligations. The purchase of the Assets by
Purchaser on the Closing Date is conditioned upon satisfaction, on or prior to
the Closing, of the following conditions:
5.1 Opinion of the Company's Counsel. The Seller shall have furnished
Purchaser with a favorable opinion, dated as of the Closing Date, of Howard &
Howard, counsel to Seller, in form and substance satisfactory to Purchaser and
its counsel, to the effect set forth in EXHIBIT 5.1 attached hereto.
5.2 No Material Adverse Change. Since the date hereof and prior to the
Closing, there shall have been no material adverse change in the assets or
liabilities, the business or condition, financial or otherwise, of the Seller
with respect to the Padlock Product Line, and the Seller shall have delivered to
Purchaser a certificate, dated as of the Closing, to such effect.
5.3 Truth of Representations and Warranties. The representations and
warranties of the Seller contained in this Agreement or in any Schedule attached
hereto shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and the Seller shall have delivered to Purchaser a certificate, dated
as of the Closing Date, to such effect.
5.4 Performance of Agreements. All of the agreements of the Seller to be
performed on or before the Closing pursuant to the terms hereof shall have been
duly
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performed, and the Seller shall have delivered to Purchaser a certificate, dated
as of the Closing, to such effect.
5.5 No Litigation Threatened. No action or proceedings shall have been
instituted or, to the best knowledge, information and belief of the Seller,
threatened before a court or other government body or by any public authority to
restrain or prohibit any of the transactions contemplated hereby, and the Seller
shall have delivered to Purchaser a certificate, dated as of the Closing, to
such effect.
5.6 Non-Competition. The Seller shall have entered into and delivered a non
competition agreement in the form of EXHIBIT 1.4.
5.7 License Agreements. The Seller shall have entered into a license
agreement with the Purchaser, in the form of EXHIBIT 1.5 attached hereto.
5.8 Sales Service Consulting Agreement. The Seller shall have entered into
a sales service consulting agreement with the Purchaser, in the form of EXHIBIT
1.6 attached hereto
5.9 Certificates. The Seller shall have delivered to the Purchaser a
certificate from the Secretary of State of the state of Michigan to the effect
that Seller is in good standing in such state and a certificate from the
Secretary or an Assistant Secretary of the Seller certifying that this Agreement
and the transactions contemplated herein have been duly and validly authorized
by required corporate action.
5.10 Absence of Insolvency Action. There shall be no action pending or
threatened by any creditor of the Seller under the laws of any jurisdiction
pertaining to bankruptcy, insolvency or receivership which materially affects
the ability of the Seller to
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operate the business or which would deprive the Purchaser of the benefits of
this Agreement.
ARTICLE VI
CONDITIONS TO SELLER'S OBLIGATIONS
6.0 Conditions to Seller's Obligations. The sale of the Assets by the
Seller on the Closing is conditioned upon satisfaction, on or prior to such
date, of the following conditions:
6.1 Opinion of Purchaser's Counsel. Purchaser shall have furnished Seller
with an opinion, dated as of the Closing Date, of Gager & Henry, counsel to
Purchaser, in form and substance satisfactory to Seller and its counsel, to the
effect set forth in EXHIBIT 6.1 attached hereto.
6.2 Certificates. Purchaser shall have delivered to Seller a certificate
from the Secretary of State of the state of Connecticut to the effect that
Purchaser is in good standing in such state, and a certificate from the
Secretary or an Assistant Secretary of the Purchaser certifying that this
Agreement and the transactions contemplated herein have been duly and validly
authorized by required corporate action.
6.3 Truth of Representations and Warranties. The representations and
warranties of Purchaser contained in this Agreement shall be true and correct on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of such date, and Purchaser shall have
delivered to Seller a certificate, dated the Closing Date, to such effect.
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6.4 Performance of Agreements. All of the agreements of Purchaser to be
performed on or before the Closing pursuant to the terms hereof shall have been
duly performed, and Purchaser shall have delivered to Seller a certificate,
dated the Closing, to such effect.
6.5 Non-Competition Agreement. The Purchaser shall have entered into the
Non-Competition Agreement with the Seller as provided in Section 1.4 above.
ARTICLE VII
CLOSING AND EXCHANGE OF CONSIDERATION
7.1 Closing. The Closing of this Agreement shall take place at the offices
of Messrs. Gager & Henry, One Exchange Place, Waterbury, Connecticut, at 10:00
a.m., local time, July __, 1994, or at such other time, date and place as the
parties may agree upon in writing. Such time and dates are herein referred to as
the "Closing Date." The parties, however, agree to use their best efforts to
exchange documents by mail or courier, to be received simultaneously on or
before the Closing Date, in which event funds will be wire transferred to the
Seller as required by Section 7.2 below.
7.2 Exchange of Consideration. In reliance on the representations and
warranties contained herein, and subject to the terms and conditions of this
Agreement, on the Closing Date:
(a) The Purchaser will deliver to the Seller by certified or bank check or
by wire transfer the sum of S500,000. Closing by mail or courier shall require
wire transfer.
(b) As provided in Article I, the Seller will assign, transfer and deliver
to the Purchaser all of Seller's right, title and interest in and to the Assets,
which Assets shall
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be free and clear of all liens, charges, encumbrances, security interests,
restrictions and adverse rights of any kind arising or created on or after
February 25, 1994. Purchaser shall not be required to pay any transfer taxes.
All Assets shall be delivered FOB Seller's place of business, 205 Robin Road,
Paramus, New Jersey, except those Assets listed in SCHEDULE 7.2(b) attached
hereto which shall be delivered FOB the location specified in said SCHEDULE
7.2(b).
(c) The Purchaser shall assume the contractual liabilities of Seller for
customer purchase contracts and supply orders which it has not rejected, as
provided in Section 1.3 hereinabove, by one or more agreements in the form of
EXHIBIT 1.3 attached hereto.
(d) The Purchaser and Seller shall enter into the Non-Competition Agreement
in the form of EXHIBIT 1.4 attached hereto.
(e) The Purchaser and Seller shall enter into the License Agreement in the
form of EXHIBIT 1.5 attached hereto.
(f) The Purchaser and Seller shall enter into the Sales Service Consulting
Agreement in the form of EXHIBIT 1.6 attached hereto.
(g) The Seller will deliver to the Purchaser the various certificates,
instruments and documents referred to in Article V above.
(h) The Purchaser will deliver to the Seller the various certificates,
instruments, and documents referred to in Article Vl above.
7.3 Instruments of Transfer and Delivery. The Seller agrees that the
transfer of the Assets will be effected by bills of sale, endorsements,
assignments and such other
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good and sufficient instruments of transfer in form and substance satisfactory
to Purchaser and its counsel, as shall be effective to convey and vest in the
Purchaser all of Seller's right, title and interest in said Assets, free and
clear of all liens, encumbrances, security interests, charges, restrictions,
adverse rights, liabilities or obligations created or arising after February 25,
1994. Seller further agrees that it will, at reasonable times on or after the
Closing Date, upon the request of the Purchaser, do, execute, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered all such
further acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may be reasonably required to transfer Seller's right, title and
interest in the Assets to the Purchaser.
(a) The Seller further agrees to deliver to the Purchaser at the Closing
all of its customer order lists, contracts and commitments, books, records and
other data relating to the Padlock Product Line business to the extent provided
in Section 1.1 above, and including, without limitation, all its notebooks and
other records relating to trade secrets, inventions, processes, discoveries and
improvements, whether or not patentable.
(b) The Seller agrees that simultaneously with the aforesaid delivery, all
such steps will be taken as may be requisite to put the Purchaser in actual
possession and operating control of all the Assets wherever located. It is
understood, however, that the Purchaser shall have a period of ten (10) days
commencing on the Closing Date to remove all tools, equipment and inventory
constituting part of the Assets from the Premises of the Seller
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(c) After the Closing, at reasonable times and on reasonable notice, the
Seller shall have access to the Padlock Product Line books and records delivered
to Purchaser pertaining to the Seller's operations and business prior to the
Closing, and the Purchaser shall have access to the books and records retained
by the Seller pertaining to the Padlock Product Line business prior to the
Closing.
7.4 Post Closing Agreements. The parties agree that from and after the
Closing Date the following agreements will take effect:
(a) All responsibility for termination, severance, benefits and questions
relating thereto with respect to Seller's employees while they were employed by
Seller will remain the obligation of the Seller, and the Seller agrees to
indemnify and hold the Purchaser harmless from and against all loss, cost,
damages, claims and liabilities with respect thereto.
(b) All debts, obligations and liabilities of the Seller (including those
purchase contracts and supply orders, if any, which Purchaser elects not to
assume pursuant to Sect on 1.3 hereof, but excluding the Assumed Obligations)
shall not be assumed by the Purchaser hereunder and shall remain the full
responsibility and liability of the Seller. The Seller agrees, without
limitation of the foregoing, to make payment in full to all of its suppliers and
sales representatives as to debts, obligations and liabilities of the Seller
owed to them with respect to products or services rendered in connection with
the Padlock Product Line within thirty (30) days after the Closing. The Seller
hereby agrees to indemnify and hold the Purchaser harmless from and against any
and all debts, obligations and liabilities of the Seller. For purposes of this
Agreement, "debts,
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obligations and liabilities" of the Seller shall not include debts, obligations
or liabilities of third parties which in any way predate February 26, 1994.
(c) All liabilities of the Seller assumed by the Purchaser herein shall
become and all liabilities of the Purchaser shall remain the full responsibility
and liability of the Purchaser. The Purchaser hereby agrees to indemnify and
hold the Seller harmless from and against any and all debts, obligations and
liabilities of the Seller assumed by the Purchaser herein and all liabilities of
the Purchaser.
(d) Seller will pay, perform, discharge and satisfy any product warranty
claims or demands for products manufactured or sold by it or for its account
prior to the Closing, and the Seller will indemnify and hold the Purchaser
harmless from and against all loss, cost, damages, claims and liabilities with
respect thereto. If Seller requires replacement padlocks to satisfy its
obligations under this Subsection (d) which are made by the Purchaser (or in its
inventory), then Purchaser agrees to sell such padlocks to the Seller at the
Purchasers actual cost plus ten percent (10%).
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS: INDEMNITY
8.1. Survival of Representations The respective representations and
warranties of the Seller and Purchaser contained in this Agreement or in any
Schedule attached hereto shall survive the Closing contemplated hereby, but
shall expire and be of no further force and effect (except as to then pending
claims for indemnity) after January 31, 1996.
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8.2 Indemnification by Seller. The Seller agrees to indemnify and hold
Purchaser harmless from and against and in respect of any and all damages,
losses, claims, demands, liabilities, costs and expenses (including, without
limitation, reasonable counsel fees and expenses) suffered or paid, directly or
indirectly, (i) as a result of or arising out of the failure of any
representation or warranty made by the Seller in this Agreement, in any Schedule
attached hereto, or in any certificate or other instrument furnished to the
Purchaser in connection herewith to be true and correct in all respects as of
its date or (ii) as a result of or arising out of the nonfulfillment of any
obligation, covenant or condition on the part of the Seller to be paid,
performed or delivered pursuant to this Agreement (including, without
limitation, Sellers obligations under Section 7.4 above).
8.3 Indemnification by Purchaser. Purchaser agrees to indemnify and hold
the Seller harmless from and against all damages, losses, costs, claims, demands
and liabilities (including, without limitation, reasonable counsel fees and
expenses) suffered or paid, directly or indirectly, (i) as a result of or
arising out of the failure of any representation or warranty made by Purchaser
in this Agreement to be true and correct in all respects as of the date of this
Agreement, and (ii) as a result of or arising out of the nonfulfillment of any
obligation, covenant or condition on the part of the Purchaser to be performed
or delivered pursuant to this Agreement (including, without limitation,
Purchaser's obligations under Section 7.4 above).
8.4 Limitations. The obligations to indemnify and hold harmless pursuant to
Sections 8.2 and 8.3 shall survive the consummation of the transactions
contemplated
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by this Agreement for the period provided in Section 8.1, except the obligations
to indemnify as to claims presented within said respective periods shall
continue until resolved.
(a) Notwithstanding the foregoing, as to any claim involving intentional
misrepresentation by or on behalf of the Seller, the Seller's obligation of
indemnification set forth in Section 8.2 shall continue without time limit
except as provided by the applicable state statute of limitations.
(b) A claim will be deemed covered by Section 8.2 or Section 8.3 if it
arises within the period set forth in Section 8.1 and notice is given to the
party against whom it is made no later than fifteen (15) days after expiration
of said period.
(c) Any recovery by Purchaser for indemnification shall be limited as
follows:
(i) Purchaser shall not be entitled to recover any amount for
indemnification claims under this Article VIII unless and until the
aggregate amount which Purchaser is entitled to recover in respect to such
claims exceeds S25,000.00 (the "Deductible"), in which event the entire
amount which Purchaser is entitled to recover in respect of all such
claims, less the Deductible, shall be payable; and
(ii) The maximum amount recoverable by Purchaser for indemnification
claims under this Article VIII shall in the aggregate be equal to
S250,000.00.
(d) The indemnification provided in this Article VIII shall be the sole and
exclusive legal remedy for any inaccuracy or any breach of representation or
warranty made by any party in this Agreement and no party hereto shall seek any
other legal remedy which might otherwise be available to either party.
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(e) A claim will not be covered by Section 8.2 or Section 8.3 unless the
party entitled to assert such claim gives notice to the other party against whom
it is made within sixty (60) days from the date on which the claiming party
discovers such claim. This limitation, however, shall not affect calculation of
the Deductible, nor shall any such claim not presented within said 60 days be
applied to reduce the maximum amount recoverable under Section 8.4(c).
8.5 Matters Involving Third Parties. If any third party shall notify any
party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnification against any other party (the "Indemnifying
Party") under this Article V111, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged. In the
event any Indemnifying Party notifies the Indemnified Party within fifteen (15)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then:
(a) the Indemnifying Party will defend the Indemnified Party against the
matter with counsel of its choice reasonably satisfactory to the Indemnified
Party,
(b) the Indemnified Party may retain separate co-counsel at its sole cost
and expense,
(c) the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the matter without the written consent
of the
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Indemnifying Party (not to be withheld unreasonably), and
(d) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all liability with respect thereto, without the written
consent of the Indemnified Party.
In the event no Indemnifying Party notifies the Indemnified Party within
fifteen (15) days after the Indemnified Party has given notice of the matter
that the Indemnifying Party has the option to assume the defense thereof, the
Indemnified Party may defend against, or enter into any settlement with respect
to, the matter in any manner it reasonably may deem appropriate.
8.6 Purchaser's Right of Setoff. In the event that the Purchaser reasonably
believes that it is entitled to indemnification from the Seller under this
Agreement, then the Purchaser shall be entitled to withhold payments coming due
under the Non-Competition Agreement in an amount reasonably sufficient to cover
the full amount of the claim until such time as the actual liability of the
Seller to make indemnification is finally determined. The Purchaser shall notify
Seller promptly of its intention to withhold payments and the amount which it
considers reasonably sufficient to cover the claim which has arisen. If the
Seller does not believe the amount is reasonable and if thereafter the parties
cannot negotiate a mutually acceptable amount to be withheld, then the matter
shall be referred to arbitration at Hartford, Connecticut before a single
arbitrator in accordance with the rules of commercial arbitration established by
the American Arbitration Association then in effect. The parties may, however,
by mutual agreement
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submit said issue to some other Alternative Dispute Resolution process. In any
event, the determination by said arbitrator or other ADR body shall be binding
and conclusive on the parties and not subject to appeal to any court or other
tribunal. In the event it is thereafter determined that the Purchaser is
entitled to indemnification from the Seller, the Purchaser may first setoff
against such withheld payments, and then against future payments if the withheld
payments are insufficient, the amount of the liability of the Seller to it. Said
withholding and/or setoff shall be evidenced by written notice given to the
Seller in the manner provided in Section 9.5 below. If it is determined however
that the Purchaser was not entitled to indemnification then the amount withheld
shall be promptly paid to the Seller, together with interest at the rate of 7%
per annum from the date of withholding; likewise if the amount of such
indemnification as finally determined is less than the amount withheld then said
excess amount plus interest at said rate on said excess amount shall be paid
over to the party entitled thereto.
ARTICLE IX
MISCELLANEOUS
9.1 Expenses. The parties hereto shall pay all of their own expenses
relating to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel, accountants and
financial advisers.
9.2 Governing Law. The interpretation and construction of this Agreement,
and all matters relating hereto, shall be governed by the laws of the State of
Connecticut applicable to agreements executed and to be performed solely within
such State.
9.3 Captions. The Article, Section and other captions used herein are for
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reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
9.4 Notices. Any notice or other communication required or permitted
hereunder shall be sufficiently given if delivered in person or sent by national
courier service, by telex, telecopy or by Express, registered or certified mail,
postage prepaid, addressed as follows:
If to the Seller, at:
Prestolock International, Ltd. FAX: (810) 433-3172
Attn: Robert J. Skandalaris, Chairman
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Ml 48304
and a copy to:
Howard & Howard FAX: (810) 645-1568
Attn: Mark A. Davis, Esq.
The Pinehurst Office Center, Suite 250
1400 North Woodward Avenue
Bloomfield Hills, Ml 48304-2856
If to Purchaser, at:
The Eastern Company FAX: (203) 723-8653
Attn: Donald E. Whitmore, Jr., Vice President
112 Bridge Street
Naugatuck, CT 06770
and a copy to:
Gager & Henry FAX: (203) 757-7888
Attn: Curtis V. Titus, Esq.
One Exchange Place
P.O. Box 2480
Waterbury, CT 06722-2480
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or such other address or number as shall be furnished in writing by any such
party, and such notice or communication shall be deemed to have been given as of
the date so delivered, sent by telecopier, telex or mailed.
9.5 Parties in Interest. This Agreement may not be transferred, assigned,
pledged or hypothecated by any party hereto, other than by operation of law.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
9.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one instrument.
9.7 Entire Agreement. This Agreement, together with the Schedules and
Exhibits attached hereto and the other documents referred to herein which form a
part hereof, contains the entire understanding of the parties hereto with
respect to the subject matter hereof and the transactions contemplated herein.
This Agreement supersedes all prior negotiations, agreements and understandings
between the parties with respect to such subject matter and transactions.
9.8 Amendments. This Agreement may not be waived, amended, supplemented or
modified orally, but only by an agreement in writing signed by the Purchaser and
the Seller
9.9 Severability. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
30
<PAGE>
9.10 Third Party Beneficiaries. Each party hereto intends that neither this
Agreement, nor any portion thereof or anything expressed or implied, shall
benefit or create any right, remedy or cause of action in or on behalf of any
Person other than the parties hereto.
9.11 Unanimity. This Agreement shall not become valid or effective or a
binding legal obligation on any party hereto until duly executed by the
Purchaser and the Seller. Until such complete execution, it shall constitute a
continuing offer by the Purchaser which may be withdrawn at any time.
IN WITNESS WHEREOF, Purchaser and Seller have caused their respective
corporate names to be hereunto subscribed by their respective officers thereunto
duly authorized, all as of the day and year first above written.
SELLER: PURCHASER:
PRESTOLOCK INTERNATIONAL, LTD THE EASTERN COMPANY
By /s/ Robert J. Skandalaris By /s/ S.G. Sanelli
------------------------- ----------------
Robert J. Skandalaris Steven G. Sanelli
Its Chairman Its Vice President
31
<PAGE>
NONCOMPETITION AGREEMENT
AGREEMENT made and entered into this 21st day of July, 1994 by and between
THE EASTERN COMPANY, a Connecticut corporation having its principal office at
112 Bridge Street, Naugatuck, Connecticut 06770 (hereinafter the "Company"), and
PRESTOLOCK INTERNATIONAL, LTD., a Michigan corporation having an office at 205
Robin Road, Paramus, New Jersey 07652 (hereinafter "Seller").
W I T N E S S E T H :
WHEREAS, the Company and the Seller have entered into an Asset Purchase
Agreement dated July 21, 1994 (the "Purchase Agreement") pursuant to which the
Seller is transferring that portion of its assets pertaining to its Padlock
Product Line business; and
WHEREAS, a condition of closing under the Purchase Agreement is that the
parties enter into this Noncompetition Agreement on the terms and conditions
contained herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the parties agree as follows:
1. Definitions. For purposes of this Agreement:
(a) the term "Padlock Product Line Business" shall mean the business
of manufacturing, assembling, purchasing, designing, marketing and selling
wheel-dialed padlocks, gunlocks and deadbolts; and
(b) all other capitalized terms used herein which have not been
defined shall have the same definitions ascribed to them in the Purchase
Agreement.
2. Restrictions Against Competition During the term of this Agreement (such
period not to include any period of violation or period of time required for
litigation to enforce this covenant), Seller will not, either itself or through
any parent, subsidiary or affiliated corporation, joint venture or any entity in
which it has a controlling interest, conduct, own, invest in, or otherwise
engage in any business (whether by carrying on
<PAGE>
research, development, manufacturing, assembling, marketing, selling or
otherwise) in the Territory defined below, which is competitive with the Padlock
Product Line Business as heretofore conducted by Seller and as conducted by the
Company, nor will it or any of said corporations or other entities render any
services to any person or entity engaged in such activities or acquire any
direct or indirect interest in such person or entity as a shareholder,
principal, agent, trustee, consultant or in any other capacity relating to the
Padlock Product Line Business.
(a) As used herein, the term "Territory" means United States, its
territories and possessions, and any other country or independent
governmental entity in the world in which the Seller heretofore or the
Company may hereafter markets, sells, distributes or has manufactured for
its account any products constituting part of the Padlock Product Line.
(b) Notwithstanding the restrictions set forth above, the Seller
directly or indirectly may own, solely as an investment, securities of any
public company which directly or indirectly conducts a business engaged in
the manufacture or sale of products constituting the Padlock Product Line,
if the Seller is not the owner of more than five percent (5%) of the
outstanding stock of such company or is otherwise a controlling person, or
a member of a group which controls such company.
3. Term. The term of this Agreement shall commence on the date hereof and
shall terminate on December 31, 2000.
4. Remedies for Breach. The Seller specifically acknowledges the necessity
for this noncompetition covenant, given the nature of the Company's business.
The parties agree that the remedy at law for any breach or threatened breach of
any obligation under this Agreement will be inadequate and in addition to any
other rights and remedies to which the Company might be entitled to hereunder,
by law or in equity, the Company shall be entitled to injunctive relief or
specific performance and (subject to the exception set forth below)
reimbursement for all attorney's fees and other expenses incurred in connection
with the enforcement hereof. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages from Seller. The
2
<PAGE>
foregoing remedies are exclusive of any remedies provided for in the Purchase
Agreement and no limitation of remedies contained in the Purchase Agreement
(including the time during which they are available) shall be construed to apply
to or limit in any way the remedies available under this Agreement.
Notwithstanding the foregoing, in the event that a court of competent
jurisdiction hearing an action brought by the Company against the Seller under
this Agreement determines that the Seller did not violate the restrictions
against competition contained in Section 2 above, then the Seller shall be
entitled to an award by the court of its costs and expenses, including
reasonable attorney's fees, incurred in connection with defending against said
action; provided, however, the Seller shall not be entitled to reimbursement for
said costs and expenses if it is the successful party in said proceeding by
virtue of the court finding that any portion of this Agreement is illegal,
invalid or unenforceable or by reason of any provisions in this Agreement being
held to be excessively broad as to time, duration, geographical scope, activity
or subject.
5. Severability. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein. If, moreover, any one or more of the
provisions contained in this Agreement shall, for any reason, be held to be
excessively broad as to time, duration, geographical scope, activity or subject,
it shall be construed, by limiting and reducing it, so as to be enforceable to
the fullest extent compatible with the applicable law as it shall then appear.
6. Amendment This Agreement may be amended, modified, superseded or
terminated, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by Seller
and the Company, or, in the case of a waiver, by or on behalf of the party or
parties waiving compliance.
7. Non-Waiver. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right at a
later time to enforce the same. No waiver by any party of any condition, or of
any breach of any term,
3
<PAGE>
covenant, representation or warranty contained in this Agreement, in any one or
more instances, shall be deemed to be construed as a further or continuing
waiver of any such condition or breach or a waiver of any other condition or of
any breach of any other term, covenant, representation or warranty contained in
this Agreement.
8. Binding Effect. This Agreement and the rights and obligations hereunder
shall inure to the benefit of, and be binding upon, the Seller's and the
Company's successors and assigns; provided, however, the Seller may not assign
any rights hereunder without the consent of the Company. The rights of the
Company hereunder shall pass to any successor to its business and affairs by
merger, consolidation, acquisition of substantially all of its assets or
substantially all of its stock; and further provided the Company may assign this
Agreement to a parent, affiliate or subsidiary corporation or to a purchaser of
the Padlock Product Line Business.
9. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally or to a local or national courier service, or mailed by
registered, certified, or express mail, return receipt requested addressed to
the addresses herein designated or to such other address as may be designated in
writing by notice given by the party in the same manner as herein specified:
If to the Seller, at:
Prestolock International, Ltd. FAX: (810) 433-3172
Attn: Robert J. Scandalaris, Chairman
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, MI 48304
and a copy to:
Howard & Howard FAX: (810) 645-1568
Attn: Mark A. Davis, Esq.
The Pinehurst Office Center, Suite 250
1400 North Woodward Avenue
Bloomfield Hills, MI 48304-2856
4
<PAGE>
It to Company, at:
The Eastern Company FAX: (203) 723-8653
Attn: Donald E. Whitmore, Jr., Vice President
112 Bridge Street
Naugatuck, CT 06770
and a copy to:
Gager & Henry FAX: (203) 757-7888
Attn: Curtis V. Titus, Esq.
One Exchange Place
P.O. Box 2480
Waterbury, CT 06722-2480
10. Captions. The captions contained in this Agreement are for convenient
reference only shall not in any way affect the meaning or interpretation of this
Agreement.
11. Governing Law. The Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
IN WITNESS WHEREOF, the Company and the Seller have caused their respective
corporate names to be hereunto subscribed, each by its officer "hereunto duly
authorized, as of the day and year first above written.
SELLER: COMPANY:
PRESTOLOCK INTERNATIONAL, LTD. THE EASTERN COMPANY
By /s/Robert J. Skandalaris By /s/Steven G. Sanelli
------------------------ ---------------------
Robert J. Skandalaris Steven G. Sanelli
Its Chairman Its Vice President
5
TRADEMARK LICENSE AGREEMENT
THIS TRADEMARK LICENSE AGREEMENT (the "Agreement"), made and entered into
this 21st day of July, 1994, by and between PRESTOLOCK INTERNATIONAL, LTD., a
Michigan corporation,, having an office at 205 Robin Road, Paramus, New Jersey
07652, U.S.A., (hereinafter referred to as "Prestolock"), and THE EASTERN
COMPANY, a Connecticut corporation, having its principal office at 112 Bridge
Street, Naugatuck, Connecticut 06770, U.S.A., (hereinafter called "Licensee").
R E C I T A L S:
WHEREAS, Prestolock is the owner of certain trademarks relating to various
products, including locks and luggage; and
WHEREAS, Licensee desires to acquire a license from Prestolock to enable it
to use such trademarks on certain products on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and undertakings hereinafter set forth, the parties hereto agree as follows:
1. As used herein:
(a) The term "Licensed Products" shall mean wheel-dialed padlocks,
gunlocks and deadbolts.
(b) The term "Licensed Trademarks" shall mean those trademarks set
forth in Exhibit A, and any applications and registrations therefore,
anywhere in the world.
(c) The term "Territory" shall mean anywhere in the world.
<PAGE>
2. In consideration of $1 00 and other good and valuable consideration
received to its satisfaction from Licensee, Prestolock hereby grants to Licensee
the exclusive right and license to utilize in the Territory the Licensed
Trademarks on Licensed Products made by Licensee in compliance with the terms
and conditions thereof. Prestolock shall not grant any other party the right or
license to utilize the Licensed Trademarks with respect to the Licensed Products
in the Territory.
3. Licensee may use the Licensed Trademarks only on or referring to
Licensed Products.
4. Licensee shall use the Licensed Trademarks only with respect to Licensed
Products which comply with reasonably commercial standards. Prestolock shall not
assign or transfer the Licensed Trademarks except to an assignee or transferee
which shall agree in writing to use the Licensed Trademarks only with respect to
products (other than Licensed Products) which comply with reasonable commercial
standards.
5. Licensee recognizes Prestolock's title to the Licensed Trademarks and
shall not at any time do or suffer to be done any act that will impair the
rights of Prestolock in and to the Licensed Trademarks. Licensee shall not
acquire and shall not claim any title to said Licensed Trademarks adverse to
Prestolock by virtue of the license granted to Licensee, or through Licensee's
past, present or future use of the Licensed Trademarks, or any variation
thereof, it being the intention of the parties that all use of the Licensed
Trademarks by Licensee shall at all times inure to the benefit of Prestolock as
well as Licensee.
2
<PAGE>
6. The parties shall notify each other of any unauthorized use of the
Licensed Trademarks by any third party promptly upon becoming aware of any such
infringement. Prestolock shall promptly take all action as may be available to
it to halt such unauthorized use. Licensee shall cooperate fully with Prestolock
in investigating any such instance and, on Prestolock's request, shall assist
and participate in any action which Prestolock shall take with respect thereto,
including permitting any such action to be taken in Licensee's name, either
alone or with Prestolock. All expenses of any such action shall be borne by
Prestolock.
7. This Agreement and the rights and privileges herein granted may not be
assigned by Licensee without the written consent of Prestolock, except that this
Agreement and the rights and privileges herein granted may be assigned by
Licensee to a purchaser of Licensee's entire padlock product line, or other
assignee of said product line, effective upon receipt of written notice of
assignment by Prestolock.
8. This Agreement shall terminate upon Licensee's failure to cure its
breach of the terms herein within thirty (30) days of receipt of written notice
of said breach.
9. Upon termination of this Agreement, Licensee shall cease using the
Licensed Trademarks or any variation thereof.
10. All notices, deliveries, consents, waivers or requests permitted or
required pursuant to this Agreement shall be sufficient and deemed to have been
served when sent by prepaid cable, telex or facsimile with simultaneous mailing
of a copy thereof by registered or certified air mail to the addresses stated
above, or at such other addresses of which the parties may have notified each
other.
3
<PAGE>
11. This Agreement is binding on and shall inure to the benefit of the
parties to this Agreement and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed in their respective corporate names by duly authorized officers thereof.
ATTEST: PRESTOLOCK INTERNATIONAL LTD.
____________________________________ By /s/Robert J. Skandalaris
-------------------------
Robert J. Skandalaris
Its Chairman
Date: July , 1994
ATTEST: THE EASTERN COMPANY
____________________________________ By /s/Steven G. Sanelli
-------------------------
Steven G. Sanelli
Its Vice President
Date: July ,1994
4
SALES SERVICE CONSULTING AGREEMENT
THIS AGREEMENT is made and entered into this 21st day of July 1994, by and
between PRESTOLOCK INTERNATIONAL, LTD. , a Michigan corporation having an office
at 205 Robin Road, Paramus, New Jersey 07652 (hereinafter the "Company"), and
THE EASTERN COMPANY, a Connecticut corporation with its principal place of
business located at 112 Bridge Street, Naugatuck, Connecticut 06770 ("Eastern").
RECITALS
A. The Company is in the business of manufacturing, marketing and selling
wheel-dialed padlocks, gunlocks and deadbolts (hereinafter the "Padlock Product
Line" and "Padlock Product Line Business" as appropriate); and
B. Pursuant to an Asset Purchase Agreement between the Company and Eastern
dated July 21, 1994 hereinafter the "Purchase Agreement"), the Company has sold
and transferred all of its assets, tangible and intangible, pertaining to the
Padlock Product Line Business to Eastern which intends to utilize said assets in
its own padlock and other locking devices businesses; and,
C. The Company has acquired experience, knowledge and technical skills with
respect to the products constituting the Padlock Product Line Business which
would be of great value and assistance to Eastern in adding such products to its
own locking device product lines, particularly with respect to customers,
suppliers, marketing channels and technical matters.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements hereinbelow contained, the parties agree as follows:
1. START-UP ASSISTANCE. The Company agrees that it shall provide upon the
reasonable request of Eastern during the period beginning on the date hereof and
ending on December 31, 1995, up to twenty (20) hours per calendar month of
advice, services, and consulting assistance in connection with:
(a) The establishment by Eastern of successful mutually beneficial
relationships for the continuing manufacture and supply of Padlock Product
Line locks to its customers, including those customers formerly serviced by
the Company; and,
(b) The startup and use of the technology and proprietary information
previously used by the Company in connection with the manufacture,
assembly, distribution and sale of its Padlock Product Line products,
including, without limitation the use by Eastern of technology and
proprietary information as well as detailed customer requirements and the
procedures and protocols for dealing with suppliers.
2. CONSULTING SERVICES. In addition, following the startup phase of
integrating the Padlock Product Line products into its own product lines,
Eastern may require advisory and consulting services in connection with
technology changes or other production and marketing matters regarding said
products. The Company agrees to provide Eastern up to twenty (20) hours per
calendar month of advice and consultation concerning the production and
marketing of
2
<PAGE>
products included in the Padlock Product Line upon the reasonable request of
Eastern from time to time after December 31, 1995 and continuing through
December 31, 2000; provided that the Company shall not be obligated to provide
such services at the time requested if the then-employed personnel required to
provide such services cannot be reasonably be made available to Eastern because
of illness or conflicting responsibilities to the Company and its business of
such personnel. Such services shall be provided as soon thereafter as feasible.
3. COMPENSATION. In consideration of the availability of the foregoing
advice, services and assistance to be provided to Eastern by the Company,
Eastern agrees to pay to the Company an annual incentive service fee (the
"Incentive Fee") for each of the six (6) calendar years commencing on January 1,
1995 at the rate of three percent (3%) of Gross Sales of products constituting
part of the Company's Padlock Product Line. Those products constituting part of
the Padlock Product Line are listed in Appendix A attached hereto and made a
part hereof. It is understood and agreed, however, that there shall be included
in the products constituting part of the Padlock Product Line for purposes of
calculating the incentive fees such brass locks as may be substituted for the
Company's Lock No. 2360.
(a) Payments shall be due and payable to the Company on the 31st day
of January of each year following the close of the prior calendar year for
which such commissions are earned, the first payment being due on January
31, 1996.
3
<PAGE>
(b) Eastern will make available its books and records with respect to
Padlock Product Line sales by Eastern for inspection by the Company's
independent auditors at reasonable times during normal business hours (but
not more frequently than one audit period in any twelve month calendar
period) solely for the purpose of verifying Gross Sales and the calculation
of the Incentive Fees. Such inspection shall be at the Company's expense,
and the Company shall cause such auditors to keep all information obtained
from such inspection confidential at all times.
(c) The Incentive Fees provided in this Section 3 shall be paid by
Eastern to the Company and shall be the only payments required from
Eastern. The Company shall bear all costs and expenses associated with the
provision of such advice, services and assistance to Eastern, including
without limitation, all wages, salaries and other compensation or benefits
to any personnel or management of the Company.
4. RIGHT OF SETOFF. This Agreement is entered into pursuant to the Purchase
Agreement in which and pursuant to which the Company, has made certain
warranties and representations and has agreed to perform or refrain from taking
certain action. In the event that pursuant to the indemnification provisions of
the Purchase Agreement the Company becomes liable to Eastern for breach of any
of the representations, warranties or undertakings made in the Purchase
Agreement, Eastern shall be entitled to make payments coming due under this
Agreement by setting off against such payments the amount of such liability of
the Company to Eastern.
4
<PAGE>
Such setoff may commence to be exercised at any time after a claim arises under
the Purchase Agreement by Eastern withholding the payments temporarily until
such time as the amount of liability of the Company is finally determined,
subject to the procedure set forth in Section 8.6 of the Purchase Agreement,
which is hereby incorporated by reference and made a part hereof.
5. RELATIONSHIP. It is expressly understood and agreed that the Company is
an independent contractor and is not in any manner an agent or employee of
Eastern, nor authorized nor empowered to conduct business under the name of or
for the account of Eastern. The Company is not authorized to transact business,
incur obligations, sell goods, or assign or create any obligation of any kind,
expressed or implied, on behalf of Eastern or to bind Eastern in any way
whatsoever, or to make any promise, warranty or representation on behalf of
Eastern with respect to its products or any other matter. The Company is not
authorized to accept any service of process upon Eastern or to receive any
notice of any nature whatsoever on behalf of Eastern.
All of the Company's foregoing obligations under this Agreement to provide
personnel are subject to the reasonable availability of such persons and the
Company will not be required to hire additional personnel or consultants to
perform such services. The Company shall, in its sole discretion, determine the
reasonableness of any request made hereunder by Eastern.
Furthermore, should the Company enter into competition with Eastern by
violation of its obligations under a certain
5
<PAGE>
Noncompetition Agreement between it and Eastern of even date herewith, and
Eastern is required to bring legal proceedings against the Company to enjoin
such violation of the Noncompetition Agreement and is successful in such
litigation, then Eastern shall be entitled to withhold payment of the incentive
fees coming due under this Agreement until such violation ceases.
6. DISPUTE RESOLUTION. Because of the compensation payments provided for in
Section 3 above are being paid only after the close of the year in which they
are earned, time is of the essence for the payment of such Incentive Fees.
Accordingly, if payment is not made on the date required, then the Company may
make written demand for immediate payment within ten (10) business days after
the date of the notice, within which time Eastern shall respond either with
payment or an explanation of why payment is delayed. Should Eastern either (i)
not respond, (ii) make partial payment acknowledged as such by it, or (iii)
provide a reason for continued delay unacceptable to the Company, then in any
such event, and under any other circumstances when a dispute may arise regarding
the amount of the payment due under this Agreement, either party may cause the
matter to be resolved by arbitration at Hartford, Connecticut before a single
arbitrator in accordance with the rules of commercial arbitration established by
the American Arbitration Association then in effect. The parties may, however,
by mutual agreement, submit any such issue to some other Alternative Dispute
Resolution ("ADR") process. The determination by said arbitrator
6
<PAGE>
or other ADR body shall be binding and conclusive on the parties and not subject
to appeal to any court or other tribunal.
(a) The following are reasonable and acceptable reasons for delay and
shall not entitle the Company to commence the foregoing dispute resolution
procedures:
(i) the commencement of an audit process by the Company which
interferes with the year end determination and calculation of the
Incentive Fees for the year just ended;
(ii) delays in such determination and calculation due to war,
riot, labor unrest, fire, flood, earthquake or other natural disaster
beyond the control or anticipation of Eastern.
(b) The arbitrator or other ADR body shall determine the aggregate
gross sales for the period in question of products listed in Appendix A and
calculate the Incentive Fees based solely on such sales; and shall also
determine the actual amount of Incentive Fees, if any, paid with respect to
such period to the Company. The difference between the Incentive Fees due
and Incentive Fees paid, if any, shall be awarded to the Company (the
"Company Award"). If any such Company Award is made to the Company, then
the arbitrator or other ADR body shall also determine whether Eastern is
entitled to exercise a right of setoff or withholding as provided for in
Sections 4 and 5 of this Agreement (either at the time of the failure to
pay or at the time of entering the Company Award), it being understood that
if any legal proceeding (including arbitration or ADR) is pending as a
result of which such issues of
7
<PAGE>
setoff or withholding will be determined, then the decision of the legal
body handling that matter shall be conclusive on these issues and the
proceeding under this Agreement shall await such outcome. The arbitrator or
other ADR body will then enter the said Company Award against Eastern in
favor of the Company in the amount found due, or if no amount is due then
the award shall be in favor of Eastern (the "Eastern Award") absolving it
from payment of any additional Incentive Fees for the period in question.
The findings of the arbitrator or other ADR body on the issues of
withholding and setoff shall be included in any Company Award and any
amount for which the Company is entitled to setoff shall become a credit
against the amount due from Eastern to the Company and any amount which
Eastern is entitled to withhold shall become a contingent amount not
payable until the right to withhold ceases or becomes the right of setoff,
in which case it shall become a credit against that unpaid portion of the
Award. If a Company Award is entered, payment of the amount then due and
not subject to setoff or withholding shall be made within five (5) business
days after the entry. But if payment of such current amount is not made
within five (5) business days after entry of the Company Award, then
failure to make such payment shall be a default of this Agreement and
interest at the rate of seven percent (7%) per annum shall accrue until
paid. The Company shall be entitled to have a judgment for the amount found
due in a Company Award entered against Eastern in any court of competent
jurisdiction.
8
<PAGE>
(c) The arbitrator or other ADR body may award to the prevailing party
in the proceeding its costs and expenses, including reasonable attorneys'
fees, incurred in connection with the proceeding before the arbitrator or
other ADR body and such amount shall be payable within thirty (30) days
after the final decision rendered therein.
7. ASSIGNABILITY. Any assignment by either party of this Agreement, or any
assignment or delegation of any right, duty or claim of such party arising
hereunder, without the express prior written consent of the other party, shall
be null and void and of no force or effect, and such party shall be liable to
the other party for any claims, losses or damages, including reasonable
attorneys' fees, arising from any attempted assignment or delegation made other
than in compliance herewith; provided, however, (i) the Company may assign its
rights (but not delegate any of its duties) to any person or entity who acquires
substantially all of its assets, or with whom it merges or consolidates, and
(ii) Eastern may assign its rights to any person or entity who acquires
substantially all of the Padlock Product Line from Eastern and which assumes its
obligations under this Agreement, subject to Section 8 below.
8. SUCCESSOR LIABILITY. Eastern agrees that in the event of any sale,
exchange, merger or other transaction which results in more than fifty percent
(50%) of the ownership or control of the business of manufacturing and selling
Padlock Product Line products being transferred to any party other than Eastern
or any of its
9
<PAGE>
Affiliates prior to the end of the term of this Agreement, Eastern shall require
as a condition to such transaction that the subsequent owner or controlling
person expressly agree to be bound by and to assume, pay, perform, and discharge
all of Eastern's obligations under this Agreement, Eastern itself to also remain
liable jointly and severally.
9. SEVERABILITY. If any provision of this Agreement shall be held
unenforceable, invalid or void for any reason, such provision shall be
automatically voided and shall not be part of this Agreement, but the
enforceability or validity of the remaining provisions of this Agreement shall
not be affected thereby.
10. HEADINGS. The headings contained in this Agreement are for the purpose
of reference only and shall not be considered a part of, or control or affect
the meaning or construction of, this Agreement.
11. APPLICABLE LAW. The interpretation of all of the provisions of this
Agreement and the relations thereunder shall be in accordance with the laws of
the State of Connecticut.
12. NOTICES. Any writing or notices required or provided for hereunder to
the Company or Eastern shall be mailed or delivered or sent by national courier
service to that party at the address first hereinabove set forth in this
Agreement or to such subsequent address as may be given by notice to the other
party.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
PRESTOLOCK INTERNATIONAL, LTD. THE EASTERN COMPANY
By /s/ Robert J. Skandalaris By /s/ Steven G. Sanelli
------------------------- -----------------------
Its Chairman Its Vice President
11
TAX FREE STOCK EXCHANGE AGREEMENT
Pursuant to Internal Revenue Code ss.351
between
NOBLE INTERNATIONAL, LTD.
and
ROBERT J. SKANDALARIS
and DANIEL J. BRUNELL
Effective as of
January 1, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I - EXCHANGE OF COMMON SHARES................................. 1
1.01 Purchase of Common Shares................................. 1
1.02 Payment and Delivery...................................... 1
1.03 Internal Revenue Code Section 351 ........................ 1
ARTICLE II - REPRESENTATIONS OF NOBLE................................. 1
2.01 Authorization............................................. 1
2.02 Binding Obligations 2
2.03 No Conflict............. 2
ARTICLE III - REPRESENTATIONS OF SHAREHOLDERS......................... 2
3.01 Authorization............................................. 2
3.02 Binding Obligation........................................ 2
3.03 No Conflict............................................... 2
3.04 Investment Intent......................................... 2
ARTICLE IV - AFFIRMATIVE COVENANTS OF NOBLE .......................... 3
4.01 Financial Statements and Other Reports.................... 3
4.02 Inspection............. .................................. 3
ARTICLE V - MISCELLANEOUS............................................. 3
5.01 Expenses; Indemnities ................................... 3
5.02 Survival ................................................. 3
5.03 Remedies ................................................. 3
5.04 Notices................................................... 3
5.05 Consent to Jurisdiction ................................. 4
5.06 Successors and Assigns .................................. 4
5.07 Amendments and Waivers ................................... 4
5.08 Entire Agreement ......................................... 5
5.09 Governing Law............................................. 5
5.10 Severability ............................................ 5
5.11 Headings ................................................ 5
5.12 Counterparts; Effectiveness ............................. 5
5.13 Rights and Remedies ...................................... 5
<PAGE>
STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (this Agreement") is made and entered into
effective as of January 1, 1996, by and between Noble International Ltd., a
Michigan corporation ("Noble"), Robert J. Skandalaris and Daniel J. Brunell
(collectively "Shareholders").
WHEREAS, Noble desires to issue and exchange with Shareholders and
Shareholders desire to exchange and acquire from Noble the Common Shares (as
hereinafter defined) on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements set forth
herein. and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged. the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
EXCHANGE OF COMMON SHARES
1.01 Purchase of Common Shares. Subject to the terms and conditions hereof,
Shareholders shall acquire from Noble and Noble shall issue to Shareholders
Eight Thousand (8,000) shares of Noble's common stock (the "Noble Shares") on
the date hereof in exchange for Thirty Nine Thousand Nine Hundred Fifty Six
(39,956) common shares of Prestolock International, Ltd. ("Prestolock Shares").
1.02 Payment and Delivery. Upon the execution and delivery of this
Agreement by Noble and Shareholders. Noble will deliver to Shareholders
individual certificates representing the Noble Shares. registered in the name of
Shareholders in the amounts set forth in Exhibit A and Shareholders shall
deliver to Noble the Prestolock Shares.
1.03 Internal Revenue Code Section 351. It is the intent of the parties
hereto that the exchange described herein shall qualify as a tax free exchange
pursuant to IRC ss.351.
ARTICLE II
REPRESENTATIONS OF NOBLE
Noble represents and warrants to Shareholders as follows
2.01 Authorization. It has the full capacity, power and authority to
execute, deliver and perform, its obligations under this Agreement and it has
taken all necessary corporate action to authorize the execution, delivery and
performance of its obligations hereunder and to consummate the transactions
contemplated hereby
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2.02 Binding Obligations. This Agreement, when executed and delivered by
the parties. will be its legally valid and binding obligation. enforceable
against it in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy. insolvency. reorganization, moratorium or
similar laws affecting creditors' rights generally and by general principles of
equity.
2.03 No Conflict. The execution, delivery and performance by it of this
Agreement and the consummation of the transactions contemplated hereby does not
and will not: (i) violate any provisions of law applicable to it; (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any of its contractual obligations; (iii) result in or
require the creation or imposition of any lien upon any of its properties or
assets; or (iv) require any approval or consent of any person under any
contractual obligations. except for such approvals or consents as have been
obtained and disclosed in writing to Shareholders.
ARTICLE III
REPRESENTATIONS OF SHAREHOLDERS
Shareholders individually represent and warrant to Noble as follows:
3.01 Authorization. Each has the full legal capacity, power and authority
to execute, deliver and perform their obligations under this Agreement.
3.02 Binding Obligation. This Agreement, when executed and delivered by the
parties, will be their legally valid and binding obligation, enforceable against
them in accordance with its terms. except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general principles of equity.
3.03 No Conflict. The execution, delivery and performance by them of this
Agreement and the consummation of the transactions contemplated hereby does not
and will not: (i) violate any provisions of law applicable to them; (ii)
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any of their contractual obligations; (iii) result
in or require the creation or imposition of any lien upon any of their
properties or assets; or (i) require any approval or consent of any Person.
3.04 Investment Intent. They are acquiring the Noble Shares for their own
account for investment purposes only and the Noble Shares are not being
purchased with a view towards resale or distribution; and they are able to bear
the economic risk of ownership of the Noble Shares for an indefinite period of
time and have no present or foreseeable need to dispose of any portion of their
investment in Noble and are aware that they will be unable to readily liquidate
their investment in Noble.
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ARTICLE IV
AFFIRMATIVE COVENANTS OF NOBLE
From and after the date hereof, so long as any of the Noble Shares remain
outstanding, Noble shall perform and comply with, and shall cause each of its
Subsidiaries to perform and comply with, all covenants in this Article IV
applicable to such Person as follows:
4.01 Financial Statements and Other Reports. Noble will maintain, and cause
each of its subsidiaries to maintain, a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in conformity with GAAP. Noble will deliver to each
holder of the Noble Shares, with reasonable promptness, such business or
financial information and data with respect to Noble or any subsidiary as from
time to time may be reasonably requested by any holder of the Noble Shares.
4.02 Inspection. Noble shall permit any authorized representative(s)
designated by any holder of the Noble Shares to visit and inspect any of the
properties of Noble or any of its subsidiaries, including its and their
financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and business with its
and their officers and independent certified public accountants, at such
reasonable times during normal business hours and as often as may be reasonably
requested.
ARTICLE V
MISCELLANEOUS
5.01 Expenses; Indemnity. Noble shall pay its costs, fees and expenses
incurred by it in connection with the negotiation, review, documentation,
preparation and closing of this Agreement. Shareholders shall pay all costs,
fees and expenses incurred by them in connection with the negotiation, review,
documentation, preparation and closing of this Agreement.
5.02 Survival. All representations, warranties, agreements and covenants
contained herein shall survive the execution and delivery of this Agreement, and
the purchase of the Noble Shares contemplated hereby and any disposition
thereof, notwithstanding any investigation made at any time by any of the
parties hereto.
5.03 Remedies. Each holder of any of the Noble Shares will be entitled to
enforce its rights under this Agreement specifically and to exercise all other
rights existing in its favor. Money damages may not be an adequate remedy for
any breach of the provisions of this Agreement and, accordingly, the parties may
apply to any court of law or equity of competent jurisdiction (as contemplated
by Section 5.05) for specific performance and/or injunctive relief in order to
enforce or prevent any violation of the provisions of this Agreement.
5.04 Notices. Any notice, request, claim, demand or other communication to
be given or delivered under or by reason of the provisions of this Agreement
will be in writing and will be
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deemed to have been given when delivered personally or mailed by certified or
registered mail, return receipt requested, and postage prepaid, to the
recipient, Such notices, demands and other communications will be sent as
follows:
(i) If to Noble:
Noble International, Ltd.
Suite 155
33 Bloomfield Hills Parkway
Bloomfield Hills, Michigan 48304-2944
(ii) If to Shareholders, as set forth in the records of Noble.
or, in either of the foregoing cases to such other address as such party may
hereafter specify for such purpose by notice to the other party referred to
above.
5.05 CONSENT TO JURISDICTION. NOBLE AND SHAREHOLDERS HEREBY CONSENT TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF MICHIGAN
AND IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT
SHALL BE LITIGATED IN SUCH COURTS. NOBLE AND SHAREHOLDERS WAIVE ANY OBJECTION
WHICH IT OR THEY MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE
CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVE PERSONAL SERVICE OF ANY
AND ALL PROCESS UPON IT AND THEM AND CONSENT THAT ALL SUCH SERVICE OF PROCESS BE
MADE BY MAIL OR MESSENGER DIRECTED TO IT OR THEM AT THE ADDRESSES SET FORTH IN
SECTION 5.04 AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE
EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE: BEEN
POSTED TO THE PARTIES ADDRESS SET FORTH IN SECTION 5.04. NOTHING CONTAINED IN
THIS SECTION 5.05 SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW.
5.06 Successors and Assigns. Except as otherwise provided herein, all of
the terms and provisions of this Agreement shall be binding upon, shall inure to
the benefit of and shall be enforceable by the respective successors and assigns
of the parties hereto. Robert J. Skandalaris may assign his rights or
obligations hereunder without the written consent of Noble.
5.07 Amendments and Waivers. Except as otherwise provided herein, any
provision of this Agreement may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by Noble and the holders of a
majority of the then outstanding Noble Shares issued and sold hereunder. Except
as otherwise provided in this Agreement, any failure of either of the parties to
comply with any obligation, covenant, agreement or condition herein may be
waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation,
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<PAGE>
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
5.08 Entire Agreement. This Agreement shall constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede all other
understandings, oral or written, with respect to the subject matter hereof.
5.09 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MICHIGAN. WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
5.10 Severability Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable under any applicable law in any jurisdiction. such provision will
be ineffective only to the extent of such invalidity, illegality or
unenforceability in such jurisdiction. without invalidating the remainder of
this Agreement in such jurisdiction or any provision hereof in any other
jurisdiction.
5.11 Headings. The Section and Subsection headings of the Articles
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
5.12 Counterparts; Effectiveness. This Agreement and any amendments,
waivers, consents or supplements may be executed in any number of counterparts,
each of which shall be an original. with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto.
5.13 Rights and Remedies Cumulative. Except as otherwise provided herein,
the rights and remedies herein provided shall be cumulative and not exclusive of
any other rights or remedies provided by law or otherwise.
IN WITNESS WHEREOF, the parties have duly executed this Agreement effective
as of the date first above written.
NOBLE INTERNATIONAL, LTD.
By: /s/ MARK A. DAVIS
___________________________
Its: President
_____________________________
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SHAREHOLDERS
/s/ Robert J. Skandalaris
- -----------------------------------
Robert J. Skandalaris
/s/ Daniel J. Brunell
- -----------------------------------
Daniel J. Brunell
6
<PAGE>
EXHIBIT A
EXCHANGE AGREEMENT
Shareholder No. of Prestolock No. of Noble
Shares Tendered Shares Received
Robert J. Skandalaris 35,000 7,000
Daniel J. Brunell 4,956 1,000
7
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is entered into as of the 31st day
of January, 1996, between CASS RIVER COATINGS, INC., a Michigan corporation
(hereinafter referred to as "Company"), and GENE OLDFORD (hereinafter referred
to as the "Consultant");
R E C I T A L S
WHEREAS, concurrently with the execution and delivery hereof, the Company,
Consultant and certain other shareholders of Company have executed a Stock
Purchase Agreement whereby Noble International, Ltd. is purchasing from
Consultant and certain other shareholders all of the issued and outstanding
shares of stock of the Company; and
WHEREAS, Consultant has special talents, knowledge and experience which is
of substantial and material value to the Company, and Company desires to avail
itself of such talents, knowledge and experience; and
WHEREAS, Consultant has acquired from Company certain proprietary and
confidential business and technical information relating to Company, and Company
desires to protect such proprietary and confidential business and technical
information.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
agreements set forth herein between the parties and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
1. Term of Agreement. The term of this Agreement is for seven (7) years.
2. Consulting Agreement. The Company hereby engages Consultant during the
term of this Agreement and the Consultant hereby accepts such engagement as a
consultant upon the terms and conditions set forth herein. During the term of
this Agreement, Consultant shall make himself available by personal or
telephonic presence during reasonable business hours for consultations and the
giving of advice and information with respect to the Company's business as
presently conducted, for a period of not more than one hundred fifty (150) hours
per annum.
3. Compensation. Beginning on the thirtieth (30th) day following the date
hereof, and as compensation for his services as described above, the Company
shall pay the Consultant Nine Hundred Thousand and 00/100 Dollars ($900,000.00)
which shall be payable in eighty four (84) consecutive monthly installments as
follows: (i) twenty four (24) consecutive monthly installments of Twelve
Thousand Five Hundred Dollars ($12,500.00); and (ii) sixty (60) consecutive
monthly installments of Ten Thousand Dollars
<PAGE>
($10,000.00). Such compensation shall be the Consultant's entire compensation
due hereunder, and Consultant shall have no power to incur any debts or
obligations on behalf of the Company. Notwithstanding the foregoing, payments to
Consultant during the first twelve (12) months following the date hereof, shall
be made only: (i) from pre-tax profits over and above the first One Hundred
Thousand (5100,000.00) Dollars, if any; or (ii) if gross sales for the same
period shall exceed Five Million Five Hundred Thousand Dollars ($5,500,000.00).
The aforementioned pre-tax profit or gross sales shall be calculated on an
annualized cumulative basis beginning January 1, 1996. To the extent that actual
compensation paid during the first twelve (12) consecutive months falls short of
the required payment, the shortfall amount shall be paid in consecutive monthly
installments of Ten Thousand Dollars ($10,000.00) beginning in month eighty-five
(85) and continuing thereafter until such time when the shortfall has been paid
in full.
4. Security. As security for the obligations of Company hereunder, Company
hereby grants to Consultant a security interest in all machinery, equipment and
fixtures of Company which security interest shall be subordinate to any bank or
finance company debt. The security agreement shall be in substantially the form
attached hereto as Appendix I and recorded in applicable UCC financing
statements.
5. Effective Date. The effective date of this Agreement shall be January
31, 1996.
6. Notice to the Consultant Regarding his Tax Duties and Liabilities. The
Consultant agrees to accept full responsibility for any and all taxes that may
be lawfully due to any governmental unit and to hold the Company harmless from
and against any liability for the non-payment of taxes due to any governmental
unit with respect to payment of compensation to the Consultant. The Consultant
waives any and all claims from the Company to any form of workers' compensation
insurance coverage or compensation provided under federal, state or local law
which affects employees and employers, and agrees to carry and provide his own
insurance for injury or sickness or retirement, whether in the form of Social
Security or otherwise.
7. Holding Out to General Public. The Consultant represents and affirms
that he is acting as an independent contractor, holding itself out as such to
the general public, and maintains his office and principal place of business at
his own address, and that this Agreement is not exclusive. Consultant is not
acting as an agent or employee of Company.
8. Claim, Liability Loss or Damage as a Result of Second Party's
Negligence. The Consultant shall indemnify and hold the Company harmless from
and against any claim, liability, loss or damage, including reasonable
attorneys' fees, arising by reason of the death or bodily injury of persons,
injury to property or other loss or damage resulting from the Consultant's
alleged or actual negligent act or omission.
<PAGE>
9. Worker's Compensation. The Consultant shall be responsible for
maintaining and providing his personal worker's compensation insurance.
10. Non-Competition. During the term of this Agreement, Consultant will
not, directly or indirectly, whether as an employee, consultant, director,
shareholder, owner (except for ownership in any corporation listed on the New
York or American Stock Exchange not to exceed one (1%) percent of the issued and
outstanding shares of such corporation's capital stock), invest or otherwise
engage in, or have any interest in, or provide any services to, any corporation,
partnership, proprietorship, financial association or business which competes
directly or indirectly with the business of Company or any affiliates thereof,
as currently being conducted, or may in the future be conducted, in any
geographic area where Company or any affiliate thereof conducts business.
11. Hold Harmless. Consultant hereby agrees to defend, indemnify and hold
harmless the Company and any affiliated company, and their respective present
and former shareholders, officers, directors and employees and their attorneys
and agents, and their predecessors, successors, insurers, assigns, heirs,
executors and administrators (collectively referred to as the "Indemnitee"),
from and against any and all claims, demands, causes of action, actions,
judgments, liabilities, losses, costs and expenses, including attorneys' fees
and costs, as they occur, brought against, imposed upon, or incurred or suffered
by, the Indemnitee which in any way relate to the failure of the Consultant to
comply with the terms and conditions of this Agreement.
12. Assignment. This Agreement is assignable by Company in connection with
the sale of all or substantially all of the assets of Company. This Agreement
may not be assigned by Consultant. This Agreement shall inure to the benefit of
and shall be binding upon Company and its successors and assigns and the
respective heirs and legal representatives of Consultant.
13. Severability. The provisions of this Agreement are severable. If any
article, section, paragraph or provision of this Agreement shall be
unenforceable or invalid, it shall not affect the enforceability or validity of
any one or more of the other articles, sections, paragraphs and provisions.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Michigan.
<PAGE>
IN WITNESS WHEREOF, we have affixed our signatures this the date first
above referenced.
COMPANY
Cass River Coatings, Inc.,
a Michigan corporation
By: /s/ MARK A. DAVIS
----------------------------------------
Its: Vice President
CONSULTANT
/s/ GENE OLDFORD
----------------------------------------
GENE OLDFORD
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is entered into as of the 31st day
of January, 1996, between CASS RIVER COATINGS, INC., a Michigan corporation
(hereinafter referred to as "Company"), and KEVIN REDDING (hereinafter referred
to as the "Consultant");
R E C I T A L S
WHEREAS, concurrently with the execution and delivery hereof, the Company,
Consultant and certain other shareholders of Company have executed a Stock
Purchase Agreement whereby Noble International, Ltd. is purchasing from
Consultant and certain other shareholders all of the issued and outstanding
shares of stock of the Company; and
WHEREAS, Consultant has special talents, knowledge and experience which is
of substantial and material value to the Company, and Company desires to avail
itself of such talents, knowledge and experience; and
WHEREAS, Consultant has acquired from Company certain proprietary and
confidential business and technical information relating to Company, and Company
desires to protect such proprietary and confidential business and technical
information.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
agreements set forth herein between the parties and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
1. Term of Agreement. The term of this Agreement is for seven (7) years.
2. Consulting Agreement. The Company hereby engages Consultant during the
term of this Agreement and the Consultant hereby accepts such engagement as a
consultant upon the terms and conditions set forth herein. During the term of
this Agreement, Consultant shall make himself available by personal or
telephonic presence during reasonable business hours for consultations and the
giving of advice and information with respect to the Company's business as
presently conducted, for a period of not more than one hundred fifty (150) hours
per annum.
3. Compensation. Beginning on the thirtieth (30th) day following the date
hereof, and as compensation for his services as described above, the Company
shall pay the Consultant One Hundred Eighty Thousand and 00/100 Dollars
($180,000.00) which shall be payable in eighty four (84) consecutive monthly
installments as follows: (i) twenty four (24) consecutive monthly installments
of Two Thousand Five Hundred Dollars ($2,500.00); and (ii) sixty (60)
consecutive monthly installments of Two Thousand Dollars
<PAGE>
($2,000.00). Such compensation shall be the Consultant's entire compensation due
hereunder, and Consultant shall have no power to incur any debts or obligations
on behalf of the Company. Notwithstanding the foregoing, payments to Consultant
during the first twelve (12) months following the date hereof, shall be made
only; (i) from pre-tax profits over and above the first One Hundred Thousand
($100,000.00) Dollars, if any; or (ii) if gross sales for the same period shall
exceed Five Million Five Hundred Thousand Dollars ($5,500,000.00). The
aforementioned pre-tax profit or gross sales shall be calculated on an
annualized cumulative basis beginning January 1, 1996. To the extent that actual
compensation paid during the first twelve (12) consecutive months falls short of
the required payment, the shortfall amount shall be paid in consecutive monthly
installments of Two Thousand Dollars (S2, 000. 00) beginning in month
eighty-five (85) and continuing thereafter until such time when the shortfall
has been paid in full.
4. Security. As security for the obligations of Company hereunder, Company
hereby grants to Consultant a security interest in all machinery, equipment and
fixtures of Company which security interest shall be subordinate to any bank or
finance company debt. The security agreement shall be in substantially the form
attached hereto as Appendix I and recorded in applicable UCC financing
statements.
5. Effective Date. The effective date of this Agreement shall be January
31, 1996.
6. Notice to the Consultant Regardinq his Tax Duties and Liabilities. The
Consultant agrees to accept full responsibility for any and all taxes that may
be lawfully due to any governmental unit and to hold the Company harmless from
and against any liability for the non-payment of taxes due to any governmental
unit with respect to payment of compensation to the Consultant. The Consultant
waives any and all claims from the Company to any form of workers' compensation
insurance coverage or compensation provided under federal, state or local law
which affects employees and employers, and agrees to carry and provide his own
insurance for injury or sickness or retirement, whether in the form of Social
Security or otherwise.
7. Holding Out to General Public. The Consultant represents and affirms
that he is acting as an independent contractor, holding itself out as such to
the general public, and maintains his office and principal place of business at
his own address, and that this Agreement is not exclusive. Consultant is not
acting as an agent or employee of Company.
8. Claim, Liability. Loss or Damage as a Result of Second Party's
Negligence. The Consultant shall indemnify and hold the Company harmless from
and against any claim, liability, loss or damage, including reasonable
attorneys' fees, arising by reason of the death or bodily injury of persons,
injury to property or other loss or damage resulting from the Consultant's
alleged or actual negligent act or omission.
<PAGE>
9. Worker's Compensation. The Consultant shall be responsible for
maintaining and providing his personal worker's compensation insurance.
10. Non-Competition. During the term of this Agreement, Consultant will
not, directly or indirectly, whether as an employee, consultant, director,
shareholder, owner (except for ownership in any corporation listed on the New
York or American Stock Exchange not to exceed one (1%) percent of the issued and
outstanding shares of such corporation's capital stock), invest or otherwise
engage in, or have any interest in, or provide any services to, any corporation,
partnership, proprietorship, financial association or business which competes
directly or indirectly with the business of Company or any affiliates thereof,
as currently being conducted, or may in the future be conducted, in any
geographic area where Company or any affiliate thereof conducts business.
11. Hold Harmless. Consultant hereby agrees to defend, indemnify and hold
harmless the Company and any affiliated company, and their respective present
and former shareholders, officers, directors and employees and their attorneys
and agents, and their predecessors, successors, insurers, assigns, heirs,
executors and administrators (collectively referred to as the "Indemnitee"),
from and against any and all claims, demands, causes of action, actions,
judgments, liabilities, losses, costs and expenses, including attorneys' fees
and costs, as they occur, brought against, imposed upon, or incurred or suffered
by, the Indemnitee which in any way relate to the failure of the Consultant to
comply with the terms and conditions of this Agreement.
12. Assignment. This Agreement is assignable by Company in connection with
the sale of all or substantially all of the assets of Company. This Agreement
may not be assigned by consultant. This Agreement shall inure to the benefit of
and shall be binding upon Company and its successors and assigns and the
respective heirs and legal representatives of Consultant.
13. Severability. The provisions of this Agreement are severable. If
any article, section, paragraph or provision of this Agreement shall be
unenforceable or invalid, it shall not affect the enforceability or validity of
any one or more of the other articles, sections, paragraphs and provisions.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Michigan.
<PAGE>
IN WITNESS WHEREOF, we have affixed our signatures this the date first
above referenced.
COMPANY
Cass River Coatings, Inc.,
a Michigan corporation
By: /s/ MARK A. DAVIS
----------------------------------------
Its: Vice President
CONSULTANT
/s/ KEVIN REDDING
----------------------------------------
KEVIN REDDING
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is entered into as of the 31st day
of January, 1996, between CASS RIVER COATINGS, INC., a Michigan corporation
(hereafter referred to as "Company"), and CHRIS FRAMPTON (hereinafter referred
to as the "Consultant");
R E C I T A L S
WHEREAS, concurrently with the execution and delivery hereof, the Company,
Consultant and certain other shareholders of Company have executed a Stock
Purchase Agreement whereby Noble International, Ltd. is purchasing from
Consultant and certain other shareholders all of the issued and outstanding
shares of stock of the Company; and
WHEREAS, Consultant has special talents, knowledge and experience which is
of substantial and material value to the Company, and Company desires to avail
itself of such talents, knowledge and experience; and
WHEREAS, Consultant has acquired from Company certain proprietary and
confidential business and technical information relating to Company, and Company
desires to protect such proprietary and confidential business and technical
information.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
agreements set forth herein between the parties and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
1. Term of Agreement. The term of this Agreement is for seven (7) years.
2. Consulting Agreement. The Company hereby engages Consultant during the
term of this Agreement and the Consultant hereby accepts such engagement as a
consultant upon the terms and conditions set forth herein. During the term of
this Agreement, Consultant shall make himself available by personal or
telephonic presence during reasonable business hours for consultations and the
giving of advice and information with respect to the Company's business as
presently conducted, for a period of not more than one hundred fifty (150) hours
per annum.
3. Compensation. Beginning on the thirtieth (30th) day following the date
hereof, and as compensation for his services as described above, the Company
shall pay the Consultant One Hundred Eighty Thousand and 00/100 Dollars
($180,000.00) which shall be payable in eighty four (84) consecutive monthly
installments as follows: (i) twenty four (24) consecutive monthly installments
of Two Thousand Five Hundred Dollars ($2,500.00); and (ii) sixty (60)
consecutive monthly installments of Two Thousand Dollars
<PAGE>
($2,000.00). Such compensation shall be the Consultant's entire compensation due
hereunder, and Consultant shall have no power to incur any debts or obligations
on behalf of the Company. Notwithstanding the foregoing, payments to Consultant
during the first twelve (12) months following the date hereof, shall be made
only: (i) from pre-tax profits over and above the first One Hundred Thousand
($100,000.00) Dollars, if any; or (ii) if gross sales for the same period shall
exceed Five Million Five Hundred Thousand Dollars ($5,500,000.00). The
aforementioned pre-tax profit or gross sales shall be calculated on an
annualized cumulative basis beginning January 1, 1996. To the extent that actual
compensation paid during the first twelve (12) consecutive months falls short of
the required payment, the shortfall amount shall be paid in consecutive monthly
installments of Two Thousand Dollars ($2,000.00) beginning in month eighty-five
(85) and continuing thereafter until such time when the shortfall has been paid
in full.
4. Security. As security for the obligations of Company hereunder, Company
hereby grants to Consultant a security interest in all machinery, equipment and
fixtures of Company which security interest shall be subordinate to any bank or
finance company debt. The security agreement shall be in substantially the form
attached hereto as Appendix I and recorded in applicable UCC financing
statements.
5. Effective Date. The effective date of this Agreement shall be January
31, 1996.
6. Notice to the Consultant Regarding his Tax Duties and Liabilities. The
Consultant agrees to accept full responsibility for any and all taxes that may
be lawfully due to any governmental unit and to hold the Company harmless from
and against any liability for the non-payment of taxes due to any governmental
unit with respect to payment of compensation to the Consultant. The Consultant
waives any and all claims from the Company to any form of workers' compensation
insurance coverage or compensation provided under federal, state or local law
which affects employees and employers, and agrees to carry and provide his own
insurance for injury or sickness or retirement, whether in the form of Social
Security or otherwise.
7. Holding Out to General Public. The Consultant represents and affirms
that he is acting as an independent contractor, holding itself out as such to
the general public, and maintains his office and principal place of business at
his own address, and that this Agreement is not exclusive. Consultant is not
acting as an agent or employee of Company.
8. Claim, Liability Loss or Damage as a Result of Second Party's
Negligence. The Consultant shall indemnify and hold the Company harmless from
and against any claim, liability, loss or damage, including reasonable
attorneys' fees, arising by reason of the death or bodily injury of persons,
injury to property or other loss or damage resulting from the Consultant's
alleged or actual negligent act or omission.
<PAGE>
9. Worker's Compensation. The Consultant shall be responsible for
maintaining and providing his personal worker's compensation insurance.
10. Non-Competition. During the term of this Agreement, Consultant will
not, directly or indirectly, whether as an employee, consultant, director,
shareholder, owner (except for ownership in any corporation listed on the New
York or American Stock Exchange not to exceed one (1%) percent of the issued and
outstanding shares of such corporation's capital stock), invest or otherwise
engage in, or have any interest in, or provide any services to, any corporation,
partnership, proprietorship, financial association or business which competes
directly or indirectly with the business of Company or any affiliates thereof,
as currently being conducted, or may in the future be conducted, in any
geographic area where Company or any affiliate thereof conducts business.
11. Hold Harmless. Consultant hereby agrees to defend, indemnify and hold
harmless the Company and any affiliated company, and their respective present
and former shareholders, officers, directors and employees and their attorneys
and agents, and their predecessors, successors, insurers, assigns, heirs,
executors and administrators (collectively referred to as the "Indemnitee"),
from and against any and all claims, demands, causes of action, actions,
judgments, liabilities, losses, costs and expenses, including attorneys' fees
and costs, as they occur, brought against, imposed upon, or incurred or suffered
by, the Indemnitee which in any way relate to the failure of the Consultant to
comply with the terms and conditions of this Agreement.
12. Assignment. This Agreement is assignable by Company in connection with
the sale of all or substantially all of the assets of Company. This Agreement
may not be assigned by Consultant. This Agreement shall inure to the benefit of
and shall be binding upon Company and its successors and assigns and the
respective heirs and legal representatives of Consultant.
13. Severability. The provisions of this Agreement are severable. If any
article, section, paragraph or provision of this Agreement shall be
unenforceable or invalid, it shall not affect the enforceability or validity of
any one or more of the other articles, sections, paragraphs and provisions.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Michigan.
<PAGE>
IN WITNESS WHEREOF, we have affixed our signatures this the date first
above referenced.
COMPANY
Cass River Coatings, Inc.,
a Michigan corporation
By:/s/ MARK A. DAVIS
--------------------------
Its: Vice President
CONSULTANT
/s/ CHRIS FRAMPTON
-----------------------------
CHRIS FRAMPTON
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is entered into as of the 31st day
of January, 1996, between CASS RIVER COATINGS, INC., a Michigan corporation
(hereinafter referred to as "Company"), and JAN WOJCIECHOWSKI (hereinafter
referred to as the "Consultant");
R E C I T A L S
WHEREAS, concurrently with the execution and delivery hereof, the Company,
Consultant and certain other shareholders of Company have executed a Stock
Purchase Agreement whereby Noble International, Ltd. is purchasing from
Consultant and certain other shareholders all of the issued and outstanding
shares of stock of the Company; and
WHEREAS, Consultant has special talents, knowledge and experience which is
of substantial and material value to the Company, and Company desires to avail
itself of such talents, knowledge and experience; and
WHEREAS, Consultant has acquired from Company certain proprietary and
confidential business and technical information relating to Company, and Company
desires to protect such proprietary and confidential business and technical
information.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
agreements set forth herein between the parties and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged the
parties hereby agree as follows:
l. Term of Agreement. The term of this Agreement is for seven (7) years
2. Consulting Agreement. The Company hereby engages Consultant during the
term of this Agreement and the Consultant hereby accepts such engagement as a
consultant upon the terms and conditions set forth herein. During the term of
this Agreement, Consultant shall make himself available by personal or
telephonic presence during reasonable business hours for consultations and the
giving of advice and information with respect to the Company's business as
presently conducted, for a period of not more than one hundred fifty (150) hours
per annum.
3. Compensation. Beginning on the thirtieth (30th) day following the date
hereof, and as compensation for his services as described above, the Company
shall pay the Consultant One Hundred Eighty Thousand and 00/100 Dollars
($180,000.00) which shall be payable in eighty four (84) consecutive monthly
installments as follows: (i) twenty four (24) consecutive monthly installments
of Two Thousand Five Hundred Dollars ($2,500.00); and (ii) sixty (60)
consecutive monthly installments of Two Thousand Dollars
<PAGE>
($2,000.00). Such compensation shall be the Consultant's entire compensation due
hereunder, and Consultant shall have no power to incur any debts or obligations
on behalf of the Company. Notwithstanding the foregoing, payments to Consultant
during the first twelve (12) months following the date hereof, shall be made
only: (i) from pre-tax profits over and above the first One Hundred Thousand
($100,000.00) Dollars, if any; or (ii) if gross sales for the same period shall
exceed Five Million Five Hundred Thousand Dollars ($5,500,000.00). The
aforementioned pre-tax profit or gross sales shall be calculated on an
annualized cumulative basis beginning January 1, 1996. To the extent that actual
compensation paid during the first twelve (12) consecutive months falls short of
the required payment, the shortfall amount shall be paid in consecutive monthly
installments of Two Thousand Dollars ($2,000.00) beginning in month eighty-five
(85) and continuing thereafter until such time when the shortfall has been paid
in full.
4. Security. As security for the obligations of Company hereunder, Company
hereby grants to Consultant a security interest in all machinery, equipment and
fixtures of Company which security interest shall be subordinate to any bank or
finance company debt. The security agreement shall be in substantially the form
attached hereto as Appendix I and recorded in applicable UCC financing
statements.
5. Effective Date. The effective date of this Agreement shall be January
31, 1996.
6. Notice to the Consultant Regarding his Tax Duties and Liabilities. The
Consultant agrees to accept full responsibility for any and all taxes that may
be lawfully due to any governmental unit and to hold the Company harmless from
and against any liability for the non-payment of taxes due to any governmental
unit with respect to payment of compensation to the Consultant. The Consultant
waives any and all claims from the Company to any form of workers' compensation
insurance coverage or compensation provided under federal, state or local law
which affects employees and employers, and agrees to carry and provide his own
insurance for injury or sickness or retirement, whether in the form of Social
Security or otherwise.
7. Holding Out to General Public. The Consultant represents and affirms
that he is acting as an independent contractor, holding itself out as such to
the general public, and maintains his office and principal place of business at
his own address, and that this Agreement is not exclusive. Consultant is not
acting as an agent or employee of Company.
8. Claim Liability, Loss or Damage as a Result of Second Party's
Negligence. The Consultant shall indemnify and hold the Company harmless from
and against any claim, liability, loss or damage, including reasonable
attorneys' fees, arising by reason of the death or bodily injury of persons,
injury to property or other loss or damage resulting from the Consultant's
alleged or actual negligent act or omission.
<PAGE>
9. Worker's Compensation. The Consultant shall be responsible for
maintaining and providing his personal worker's compensation insurance.
10. Non-Competition. During the term of this Agreement, Consultant will
not, directly or indirectly, whether as an employee, consultant, director,
shareholder, owner (except for ownership in any corporation listed on the New
York or American Stock Exchange not to exceed one (1%) percent of the issued and
outstanding shares of such corporation's capital stock), invest or otherwise
engage in, or have any interest in, or provide any services to, any corporation,
partnership, proprietorship, financial association or business which competes
directly or indirectly with the business of Company or any affiliates thereof,
as currently being conducted, or may in the future be conducted, in any
geographic area where Company or any affiliate thereof conducts business.
11. Hold Harmless. Consultant hereby agrees to defend, indemnify and hold
harmless the Company and any affiliated company, and their respective present
and former shareholders, officers, directors and employees and their attorneys
and agents, and their predecessors, successors, insurers, assigns, heirs,
executors and administrators (collectively referred to as the "Indemnitee"),
from and against any and all claims, demands, causes of action, actions,
judgments, liabilities, losses, costs and expenses, including attorneys' fees
and costs, as they occur, brought against, imposed upon, or incurred or suffered
by, the Indemnitee which in any way relate to the failure of the Consultant to
comply with the terms and conditions of this Agreement.
12. Assignment. This Agreement is assignable by Company in connection with
the sale of all or substantially all of the assets of Company. This Agreement
may not be assigned by Consultant. This Agreement shall inure to the benefit of
and shall be binding upon Company and its successors and assigns and the
respective heirs and legal representatives of Consultant.
13. Severability. The provisions of this Agreement are severable. If any
article, section, paragraph or provision of this Agreement shall be
unenforceable or invalid, it shall not affect the enforceability or validity of
any one or more of the other articles, sections, paragraphs and provisions.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Michigan.
<PAGE>
IN WITNESS WHEREOF, we have affixed our signatures this the date first
above referenced.
COMPANY
Cass River Coatings, Inc.,
a Michigan corporation
By:/s/MARK A. DAVIS
-------------------------
Its: Vice President
CONSULTANT
/s/JAN WOJCIECHOWSKI
---------------------------
JAN WOJCIECHOWSKI
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is entered into as of the 31st day
of January, 1996, between CASS RIVER COATINGS, INC., a Michigan corporation
(hereinafter referred to as "Company"), and PAT PATTERSON (hereinafter referred
to as the "Consultant");
R E C I T A L 8
WHEREAS, concurrently with the execution and delivery hereof, the Company,
Consultant and certain other shareholders of Company have executed a Stock
Purchase Agreement whereby Noble International, Ltd. is purchasing from
Consultant and certain other shareholders all of the issued and outstanding
shares of stock of the Company; and
WHEREAS, Consultant has special talents, knowledge and experience which is
of substantial and material value to the Company, and Company desires to avail
itself of such talents, knowledge and experience; and
WHEREAS, Consultant has acquired from Company certain proprietary and
confidential business and technical information relating to Company, and Company
desires to protect such proprietary and confidential business and technical
information.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
agreements set forth herein between the parties and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
1. Term of Agreement. The term of this Agreement is for seven (7) years.
2. Consulting Agreement. The Company hereby engages Consultant during the
term of this Agreement and the Consultant hereby accepts such engagement as a
consultant upon the terms and conditions set forth herein. During the term of
this Agreement, Consultant shall make himself available by personal or
telephonic presence during reasonable business hours for consultations and the
giving of advice and information with respect to the Company's business as
presently conducted, for a period of not more than one hundred fifty (150) hours
per annum.
3. Compensation. Beginning on the thirtieth (30th) day following the date
hereof, and as compensation for his services as described above, the Company
shall pay the Consultant One Hundred Eighty Thousand and 00/100 Dollars
($180,000.00) which shall be payable in eighty four (84) consecutive monthly
installments as follows: (i) twenty four (24) consecutive monthly installments
of Two Thousand Five Hundred Dollars ($2,500.00); and (ii) sixty (60)
consecutive monthly installments of Two Thousand Dollars
<PAGE>
($2,000.00). Such compensation shall be the Consultant's entire compensation due
hereunder, and Consultant shall have no power to incur any debts or obligations
on behalf of the Company. Notwithstanding the foregoing, payments to Consultant
during the first twelve (12) months following the date hereof, shall be made
only: (i) from pre-tax profits over and above the first One Hundred Thousand
($100,000.00) Dollars, if any; or (ii) if gross sales for the same period shall
exceed Five Million Five Hundred Thousand Dollars ($5,500,000.00). The
aforementioned pre-tax profit or gross sales shall be calculated on an
annualized cumulative basis beginning January 1, 1996. To the extent that actual
compensation paid during the first twelve (12) consecutive months falls short of
the required payment, the shortfall amount shall be paid in consecutive monthly
installments of Two Thousand Dollars ($2,000.00) beginning in month eighty-five
(85) and continuing thereafter until such time when the shortfall has been paid
in full.
4. Security. As security for the obligations of Company hereunder, Company
hereby grants to Consultant a security interest in all machinery, equipment and
fixtures of Company which security interest shall be subordinate to any bank or
finance company debt. The security agreement shall be in substantially the form
attached hereto as Appendix I and recorded in applicable UCC financing
statements.
5. Effective Date. The effective date of this Agreement shall be January
31, 1996.
6. Notice to the Consultant Regarding his Tax Duties and Liabilities. The
Consultant agrees to accept full responsibility for any and all taxes that may
be lawfully due to any governmental unit and to hold the Company harmless from
and against any liability for the non-payment of taxes due to any governmental
unit with respect to payment of compensation to the Consultant. The Consultant
waives any and all claims from the Company to any form of workers' compensation
insurance coverage or compensation provided under federal, state or local law
which affects employees and employers, and agrees to carry and provide his own
insurance for injury or sickness or retirement, whether in the form of Social
Security or otherwise.
7. Holding Out to General Public. The Consultant represents and affirms
that he is acting as an independent contractor, holding itself out as such to
the general public, and maintains his office and principal place of business at
his own address, and that this Agreement is not exclusive. Consultant is not
acting as an agent or employee of Company.
8. Claim, Liability, Loss or Damage as a Result of Second Party's
Negligence. The Consultant shall indemnify and hold the Company harmless from
and against any claim, liability, loss or damage, including reasonable
attorneys' fees, arising by reason of the death or bodily injury of persons,
injury to property or other loss or damage resulting from the Consultant's
alleged or actual negligent act or omission.
<PAGE>
9. Worker's Compensation. The Consultant shall be responsible for
maintaining and providing his personal worker's compensation insurance.
10. Non-competition. During the term of this Agreement, Consultant will
not, directly or indirectly, whether as an employee, consultant, director,
shareholder, owner (except for ownership in any corporation listed on the New
York or American Stock Exchange not to exceed one (1%) percent of the issued and
outstanding shares of such corporation's capital stock), invest or otherwise
engage in, or have any interest in, or provide any services to, any corporation,
partnership, proprietorship, financial association or business which competes
directly or indirectly with the business of Company or any affiliates thereof,
as currently being conducted, or may in the future be conducted, in any
geographic area where Company or any affiliate thereof conducts business.
11. Hold Harmless. Consultant hereby agrees to defend, indemnify and hold
harmless the Company and any affiliated company, and their respective present
and former shareholders, officers, directors and employees and their attorneys
and agents, and their predecessors, successors, insurers, assigns, heirs,
executors and administrators (collectively referred to as the "Indemnitee"),
from and against any and all claims, demands, causes of action, actions,
judgments, liabilities, losses, costs and expenses, including attorneys' fees
and casts, as they occur, brought against, imposed upon, or incurred or suffered
by, the Indemnitee which in any way relate to the failure of the Consultant to
comply with the terms and conditions of this Agreement.
12. Assignment. This Agreement is assignable by Company in connection with
the sale of all or substantially all of the assets of Company. This Agreement
may not be assigned by Consultant. This Agreement shall inure to the benefit of
and shall be binding upon Company and its successors and assigns and the
respective heirs and legal representatives of Consultant.
13. Severability. The provisions of this Agreement are severable. If any
article, section, paragraph or provision of this Agreement shall be
unenforceable or invalid, it shall not affect the enforceability or validity of
any one or more of the other articles, sections, paragraphs and provisions.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Michigan.
<PAGE>
IN WITNESS WHEREOF, we have affixed our signatures this the date first
above referenced.
COMPANY
Cass River Coatings, Inc.,
a Michigan corporation
By: /s/ MARK A. DAVIS
----------------------------------------
Its: Vice President
CONSULTANT
/s/ PAT PATTERSON
----------------------------------------
PAT PATTERSON
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is entered into as of the 31st day
of January, 1996, between CASS RIVER COATINGS, INC., a Michigan corporation
(hereinafter referred to as "Company"), and JIM LAMB (hereinafter referred to as
the "Consultant");
R E C I T A L S
WHEREAS, concurrently with the execution and delivery hereof, the Company,
Consultant and certain other shareholders of Company have executed a Stock
Purchase Agreement whereby Noble International, Ltd. is purchasing from
Consultant and certain other shareholders all of the issued and outstanding
shares of stock of the Company; and
WHEREAS, Consultant has special talents, knowledge and experience which is
of substantial and material value to the Company, and Company desires to avail
itself of such talents, knowledge and experience; and
WHEREAS, Consultant has acquired from Company certain proprietary and
confidential business and technical information relating to Company, and Company
desires to protect such proprietary and confidential business and technical
information.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
agreements set forth herein between the parties and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
1. Term of Agreement. The term of this Agreement is for seven (7) years.
2. Consulting Agreement. The Company hereby engages Consultant during the
term of this Agreement and the Consultant hereby accepts such engagement as a
consultant upon the terms and conditions set forth herein. During the term of
this Agreement, Consultant shall make himself available by personal or
telephonic presence during reasonable business hours for consultations and the
giving of advice and information with respect to the Company's business as
presently conducted, for a period of not more than one hundred fifty (150) hours
per annum.
3. Compensation. Beginning on the thirtieth (30th) day following the date
hereof, and as compensation for his services as described above, the Company
shall pay the Consultant One Hundred Eighty Thousand and 00/100 Dollars
($180,000.00) which shall be payable in eighty four (84) consecutive monthly
installments as follows: (i) twenty four (24) consecutive monthly installments
of Two Thousand Five Hundred Dollars ($2,500.00); and (ii) sixty (60)
consecutive monthly installments of Two Thousand Dollars
<PAGE>
($2,000.00). Such compensation shall be the Consultant's entire compensation due
hereunder, and Consultant shall have no power to incur any debts or obligations
on behalf of the Company. Notwithstanding the foregoing, payments to Consultant
during the first twelve (12) months following the date hereof, shall be made
only: (i) from pre-tax profits over and above the first One Hundred Thousand
($100,000.00) Dollars, if any; or (ii) if gross sales for the same period shall
exceed Five Million Five Hundred Thousand Dollars ($5,500,000.00). The
aforementioned pre-tax profit or gross sales shall be calculated on an
annualized cumulative basis beginning January 1, 1996. To the extent that actual
compensation paid during the first twelve (12) consecutive months falls short of
the required payment, the shortfall amount shall be paid in consecutive monthly
installments of Two Thousand Dollars ($2,000.00) beginning in month eighty-five
(85) and continuing thereafter until such time when the shortfall has been paid
in full.
4. Security. As security for the obligations of Company hereunder, Company
hereby grants to Consultant a security interest in all machinery, equipment and
fixtures of Company which security interest shall be subordinate to any bank or
finance company debt. The security agreement shall be in substantially the form
attached hereto as Appendix I and recorded in applicable UCC financing
statements.
5. Effective Date. The effective date of this Agreement shall be January
31, 1996.
6. Notice to the Consultant Regarding his Tax Duties and Liabilities. The
Consultant agrees to accept full responsibility for any and all taxes that may
be lawfully due to any governmental unit and to hold the Company harmless from
and against any liability for the non-payment of taxes due to any governmental
unit with respect to payment of compensation to the Consultant. The Consultant
waives any and all claims from the Company to any form of workers' compensation
insurance coverage or compensation provided under federal, state or local law
which affects employees and employers, and agrees to carry and provide his own
insurance for injury or sickness or retirement, whether in the form of Social
Security or otherwise.
7. Holding Out to General Public. The Consultant represents and affirms
that he is acting as an independent contractor, holding itself out as such to
the general public, and maintains his office and principal place of business at
his own address, and that this Agreement is not exclusive. Consultant is not
acting as an agent or employee of Company.
8. Claim, Liability, Loss or Damage as a Result of Second Party's
Negligence. The Consultant shall indemnify and hold the Company harmless from
and against any claim, liability, loss or damage, including reasonable
attorneys' fees, arising by reason of the death or bodily injury of persons,
injury to property or other loss or damage resulting from the Consultant's
alleged or actual negligent act or omission.
<PAGE>
9. Worker's Compensation. The Consultant shall be responsible for
maintaining and providing his personal worker's compensation insurance.
10. Non-Competition. During the term of this Agreement, Consultant will
not, directly or indirectly, whether as an employee, consultant, director,
shareholder, owner (except for ownership in any corporation listed on the New
York or American Stock Exchange not to exceed one (1%) percent of the issued and
outstanding shares of such corporation's capital stock), invest or otherwise
engage in, or have any interest in, or provide any services to, any corporation,
partnership, proprietorship, financial association or business which competes
directly or indirectly with the business of Company or any affiliates thereof,
as currently being conducted, or may in the future be conducted, in any
geographic area where Company or any affiliate thereof conducts business.
11. Hold Harmless. Consultant hereby agrees to defend, indemnify and hold
harmless the Company and any affiliated company, and their respective present
and former shareholders, officers, directors and employees and their attorneys
and agents, and their predecessors, successors, insurers, assigns, heirs,
executors and administrators (collectively referred to as the "Indemnitee"),
from and against any and all claims, demands, causes of action, actions,
judgments, liabilities, losses, costs and expenses, including attorneys' fees
and costs, as they occur, brought against, imposed upon, or incurred or suffered
by, the Indemnitee which in any way relate to the failure of the Consultant to
comply with the terms and conditions of this Agreement.
12. Assignment. This Agreement is assignable by Company in connection with
the sale of all or substantially all of the assets of Company. This Agreement
may not be assigned by Consultant. This Agreement shall inure to the benefit of
and shall be binding upon Company and its successors and assigns and the
respective heirs and legal representatives of Consultant.
13. Severability. The provisions of this Agreement are severable. If any
article, section, paragraph or provision of this Agreement shall be
unenforceable or invalid, it shall not affect the enforceability or validity of
any one or more of the other articles, sections, paragraphs and provisions.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Michigan.
<PAGE>
IN WITNESS WHEREOF, we have affixed our signatures this the date first
above referenced.
COMPANY
Cass River Coatings, Inc.,
a Michigan corporation
By: /s/ MARK A. DAVIS
----------------------------------------
Its: Vice President
CONSULTANT
/s/ JIM LAMB
----------------------------------------
JIM LAMB
<PAGE>
SECURITY AGREEMENT
THIS AGREEMENT made and entered into this 31 day of January, A.D. 1996,
by and between:
GENE OLDFORD, KEVIN REDDING, CHRIS
FRAMPTON, JAN WOJCIECHOWSKI, PAT
PATTERSON AND JIM LAMB
(hereinafter "Secured Parties")
and
CASS RIVER COATINGS, INC.,
a Michigan Corporation
(hereinafter "Borrower")
IN CONSIDERATION of those certain Consulting Agreements of even date
herewith entered into by Secured Parties and Borrower (hereinafter
"Obligation"), and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. GRANT OF SECURITY INTEREST: Borrower hereby grants to Secured Parties,
jointly and severally, a continuing security interest in the Collateral
described in Paragraph No. 2 hereinafter to secure the Obligations, including
all renewals and extensions thereof from Secured Parties to Borrower, plus all
interest, costs, expenses and reasonable attorney fees, which may be made or
incurred by Secured Parties in the disbursement, administration and collection
of said Obligations, and in the protection, maintenance and liquidation of the
Collateral. All statements of account rendered by Secured Parties to Borrower
relating to Borrower's Liabilities, including all statements of principal,
interest, expenses and costs owing by Borrower to Secured Parties, shall be
presumed correct and accurate and constitute an account stated between Borrower
and Secured Parties unless within thirty (30) days after mailing thereof to
Borrower by registered or certified mail addressed to Borrower at its principal
place of business. Borrower shall deliver to Secured Parties by registered or
certified mail addressed to Secured Parties at its principal place of business,
written objection thereto specifying the error or errors, if any, contained in
any such statement. This Agreement shall be and become effective when, and
continue in effect as long as any Obligations of Borrower to Secured Parties are
outstanding and unpaid. Borrower will not, outside of the ordinary course of
business, sell, assign, transfer, pledge, alienate, or otherwise dispose of or
encumber any Collateral to any third party while this Agreement is in effect
without the written consent of Secured Parties, except that Borrower may pledge
such assets to the financial institution financing Borrower's purchase and
Borrower' operation and Secured Parties' interest shall be subordinate to such
pledge.
- 1 -
<PAGE>
2. COLLATERAL: The Collateral covered by this Agreement is all the
Borrower's property described below, where an "x" or check mark has been placed
on the line applicable thereto, which it now owns or shall hereafter acquire or
create, immediately upon the acquisition or creation thereof, and includes, but
is not limited to, any items listed on any schedule or list attached hereto.
__ A. ACCOUNTS: Accounts, Documents, Chattel Paper, Instruments, Contract
Rights, General Intangibles, Choses in Action, including any right to any
refund of any taxes heretofore or hereafter paid to any governmental
authority (all of which are hereinafter individually and collectively
referred to as "Accounts"), regardless of whether any such Accounts are
acceptable or unacceptable to Secured Parties or whether any such Accounts
have been scheduled to Secured Parties on any schedule or list attached
hereto or otherwise given to Secured Parties.
__ B. INVENTORY: All Inventory, goods, tangible property, stock in trade,
wares and merchandise used in or sold in the ordinary course of business,
including Goods whose sale, lease or other disposition by Borrower has
given rise to any Accounts, and which Goods have been returned to, or
repossessed by or stopped in transit by Borrower.
X__ C. EQUIPMENT: All Equipment, including all machinery, furniture,
furnishings and vehicles, and all substitutions, improvements and
replacements thereof and additions thereto, by way of example, but not
limited to the Attached Exhibit "A".
X__ D. FIXTURES: All Fixtures, whether now or to be hereafter attached, to the
following described real property: See Attached Exhibit "A" ______.
__ E. CROPS: All Crops, grown, growing, or to be grown and located on the
following described real property: See Attached Exhibit
__ F. SPECIFIC: Assignment rights in any State of Michigan Liquor Control
Commission license pursuant to the terms of a Reassignment or Assignment
Agreement attached hereto and made a part hereof, subject to the consent
and approval of the State of Michigan Liquor Control Commission.
3. BORROWER'S WARRANTIES: Except as allowed under paragraph 1 hereof,
financing statement has been filed with respect to the Collateral; except as
allowed under paragraph 1 hereof, Borrower is absolute owner of the Collateral,
and it is not encumbered other than by this security interest (and the same will
be true of Collateral acquired hereafter when acquired); all account borrowers
and obligors, whose obligations are part of the Collateral, are to the extent
permitted by law prevented from asserting against Secured Parties any claims or
defenses they have against Borrower.
- 2 -
<PAGE>
4. PERFECTION OF SECURITY INTEREST: Borrower shall execute and deliver to
Secured Parties, concurrently with Borrower's execution of this Agreement and at
any time hereafter at the request of Secured Parties, and pay the cost of the
filing and recording same in all public offices deemed necessary by Secured
Parties, all financing statements, continuation financing statements,
assignments, certificates of title, applications for vehicle titles, affidavits,
reports, notices, letters of authority and all other documents that Secured
Parties may reasonably request, in form satisfactory to Secured Parties, to
perfect and maintain Secured Parties' security interests in the Collateral in
order to fully consummate all of the transactions contemplated hereunder.
Borrower shall make appropriate entries on its books and records disclosing
Secured Parties' security interests in the Collateral.
5. AGREEMENTS OF BORROWER:
A. Borrower will take adequate care of the Collateral; insure the
Collateral for such hazards and in such amounts as Secured Parties direct,
policies to be satisfactory to Secured Parties; pay all costs necessary to
obtain, preserve, and enforce this security interest, collect the Obligation,
and preserve the Collateral, including, but not limited to, taxes, assessments,
insurance premiums, repairs, reasonable attorneys' fees and legal expenses,
rent, storage costs, and expenses of sale; furnish Secured Parties with any
information on the Collateral requested by Secured Parties; allow Secured
Parties to inspect the Collateral and inspect and copy all records relating to
the Collateral and the Obligation; sign any papers furnished by Secured Parties
which are necessary to obtain and maintain this security interest; assist
Secured Parties in complying with the Federal Assignment of Claims Act, where
necessary to enable Secured Parties to become an assignee under that Act; take
necessary steps to preserve the liability of account borrowers, obligators, and
secondary parties whose obligations are part of the Collateral; notify Secured
Parties of any material change occurring in or to the Collateral, or in material
fact or circumstance warranted or represented by Borrower in this Agreement or
furnished to Secured Parties, or if any event of default occurs.
B. Outside of the ordinary course of business, Borrower will not, without
Secured Parties' consent, remove the Collateral from the locations specified
herein; allow the Collateral to become an accession to other goods; sell, lease,
otherwise transfer the Collateral.
6. DEFAULT:
A. Any of the following is an event of default: failure of Borrower to pay
the Obligation in accordance with its terms, or to perform any act or duty
required by this Agreement; falsity of any warranty or representation in this
Agreement when made; substantial change in any fact warranted or represented in
this Agreement; involvement of Borrower in bankruptcy or insolvency proceedings;
death, dissolution, or other termination of Borrower's existence; substantial
loss, theft, destruction, sale, reduction in value, encumbrance of, damage to,
or
- 3 -
<PAGE>
change in the Collateral; filing any financing statement with regard to the
Collateral, other than relating to this security interest, except as permitted
in paragraph 1 hereof.
B. When an event of default occurs, Secured Parties shall provide Borrower
written notice thereof by certified or registered mail and Borrower shall have
ten (10) days from date of notice to cure said default. Should Borrower not cure
said default within the allotted time then the entire Obligation becomes
immediately due and payable at Secured Parties' option without further notice to
Borrower, and Secured Parties may proceed to enforce payment of same and
exercise any and all of the rights and remedies available to a secured party
under the Uniform Commercial Code as well as all other rights and remedies. When
Borrower is in default, Borrower, upon demand by Secured Parties, shall assemble
the Collateral and make it available to Secured Parties at a place reasonably
convenient to both parties. Borrower is entitled to any surplus and shall be
liable to Secured Parties for any deficiency, arising from accounts, contract
rights, or chattel paper included in the Collateral through sale thereof to
Secured Parties.
C. Borrower agrees that the Secured Parties shall in the event of any
default have the right to peacefully retake any of the goods Borrower waives any
right it may have in such instance, to a judicial hearing prior to such
retaking.
7. GENERAL: Time shall be deemed of the very essence of this Agreement.
Except as otherwise defined in this Agreement, all terms in this Agreement shall
have the meanings provided by the Michigan Uniform Commercial Code and Secured
Parties shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if it takes such action for
that purpose as Borrower requests in writing, but failure of the Secured Parties
to comply with any such request shall not of itself be deemed a failure to
exercise reasonable care, and failure of the Secured Parties to preserve or
protect any rights with respect to such Collateral against any prior parties or
to do any act with respect to the preservation of such Collateral not so
requested by Borrower shall not be deemed a failure to exercise reasonable care
in the custody and preservation of such Collateral. Any delay on the part of the
Secured Parties in exercising any power, privilege, or right hereunder, or under
any other instrument executed by Borrower to Secured Parties in connection
herewith shall not operate as a waiver thereof, and no single or partial
exercise thereof, or the exercise of any other power, privilege, or right shall
preclude other or further exercise thereof, or the exercise of any other power,
privilege, or right. The waiver by Secured Parties of any default by Borrower
shall not constitute a waiver of any subsequent defaults, but shall be
restricted to the default so waived. If any part of this Agreement shall be
contrary to any law which Secured Parties might seek to apply or enforce, or
should otherwise be defective, the other provisions of this Agreement shall not
be affected thereby, but shall continue in full force and effect. All rights,
remedies and powers of Secured Parties hereunder are irrevocable and cumulative,
and not alternative or exclusive, and shall be in addition to all rights,
remedies and powers given hereunder of in or by any other instruments or by the
Michigan Uniform Commercial Code, or any other laws now existing or hereafter
enacted.
- 4 -
<PAGE>
8. This Agreement has been delivered in Michigan, and shall be construed in
accordance with the laws of the State of Michigan. Whenever possible each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
9. The rights and privileges of the Secured Parties hereunder shall inure
to the benefit of its successor and assigns and this Agreement shall be binding
on all heirs, executors, administrators, assigns, and successors of Borrower.
Witness: Cass River Coating, Inc.
/s/Illegible /s/ MARK A. DAVIS
- ---------------------- --------------------------------
By:
"Borrower"
/s/JANET WOJCIECHOWSKI
- ----------------------
TICOR TITLE INSURANCE LAND CONTRACT
FORM 1971
================================================================================
THIS CONTRACT, made this 26th day of October, 1994 between Cass
Parties River Investment Company, a Michigan co-partnership hereinafter
referred to as "Seller", whose address is 1012 Holland Avenue
Port Huron, MI 48060
and Cass River Coatings, Inc., a Michigan Corporation hereinafter
referred to as "Purchaser", whose address is 211 Sherman Street
Vassar, MI 48768
WITNESSETH:
1. Seller Agrees:
Description (a) To sell and convey to Purchaser land in the City of
of Land Vassar, County of Tuscola, Michigan, described as:
See attached schedule "A"
, hereinafter referred to as "the land", together with all
tenements, hereditaments, improvements, and appurtenances,
including any lighting or plumbing fixtures, shades, Venetian
blinds, curtain rods, storm windows, storm doors, screens,
awnings, and
now on the land, subject to any applicable building and use
restrictions and to any easements affecting the land.
(b) That the full consideration for the sale of the land to
Purchaser is:
($ 600,000.00) dollars, of which the sum of Zero Dollars ($ Zero)
dollars has been paid to Seller prior to the delivery hereof, the
receipt of which is hereby acknowledged, and the additional sum
of Six Hundred Thousand no/100 ($ 600,000.00 ) dollars, is to be
Terms of paid to Seller, with interest on any part thereof at any time
Payment unpaid at the rate of 8 per cent per annum while Purchaser is not
in default, and at the rate of 9 per cent per annum, computed
upon the balance of the purchase price then unpaid, during the
period of any default in payment. Such additional purchase money
and interest is to be paid in monthly installments of Seven
Thousand Two Hundred Seventy-Nine 66/100 7279.66) dollars each,
or more at Purchaser's option, on the 1st day of each month,
beginning November 1, 1994; such payments to be applied first
upon interest and the balance on principal. All of the purchase
money and interest shall, however, be fully paid within 10 years
from the date hereof, anything herein to the contrary
notwithstanding.
Seller's (c) To execute and deliver to Purchaser or his assigns, upon
Duty to payment in full of all sums owing hereon, less the amount then
Convey owing on any unpaid mortgage or mortgages, and the surrender of
the duplicate of this contract, a good and sufficient warranty
deed conveying title to the land, subject to abovementioned
restrictions and easements and to any then unpaid mortgage or
mortgages, but free from all other encumbrances, except such as
may be herein set forth or shall have accrued or attached since
the date hereof through the acts of omissions of persons other
than Seller or his assigns.
Furnishing
Evidence
of Title
Purchaser's 2. Purchaser Agrees:
Duties
(a) To purchase the land and pay Seller the sum aforesaid,
with interest thereon as above provided.
Maintenance (b) To use, maintain and occupy the land in accordance with
Premises any and all building and use restrictions applicable thereto.
(c) To keep the land in accordance with all police, sanitary
or other regulations imposed by any governmental authority.
(d) To keep and maintain the land and the buildings thereon
in as good condition as they are at the date hereof and not to
commit waste, remove or demolish any improvements thereon or
otherwise diminish the value of Seller's security, without the
written consent of Seller.
To Pay Taxes (e) To pay all taxes and special assessments hereafter
and Keep levied on the land before any penalty for non-payment attaches
Premises thereto, and submit receipts to Seller upon request, as evidence
Insured of payment thereof; and also at all times to keep the buildings
now or hereafter on the land insured against loss and damage, in
manner and to an amount approved by Seller, and to deliver the
policies as issued to Seller with the premiums fully paid.
<PAGE>
Dower If the wife of Seller has dower rights in the land, she
Rights agrees, by joining in the execution of this contract, to join in
executing the deed to be given in fulfillment hereof.
Capacity Any individual parties hereto represent themselves to be of
of Parties full age. Any corporate parties hereto represent themselves to be
existing corporations with their charters in full force and
effect.
Interpretation The pronouns and relative words herein used are written in
of Contract the masculine and singular. If, however, more than one person
joins in the execution hereof as Seller or Purchaser, or either
party be of the feminine sex or a corporation, such words shall
be read as if written in plural, feminine or neuter,
respectively. The covenants herein shall bind the heirs,
devisees, legatees, successors and assigns of the respective
parties.
Signatures Signed, sealed and delivered by the parties in duplicate the day
and year first above written.
IN PRESENCE OF:
/s/Jori Taylor /s/Brian J. Molloy, Jr. (L.S)
------------------------ ---------------------------
Jori Taylor Brian J. Molloy, Jr.
/s/Stephen E. Oldford (L.S)
------------------------ ---------------------------
Stephen E. Oldford
/s/Eugene Oldford (L.S)
------------------------ ---------------------------
Eugene Oldford
above three signatures are
Cass River Investment partners
/s/Carol Sullivan /s/Jim Lamb (L.S)
------------------------ ---------------------------
Jim Lamb,
Vice President
Cass River Coatings, Inc.
/s/Christan Frampton (L.S)
---------------------------
Christan Frampton,
Vice President
Cass River Coatings, Inc.
Individual STATE OF MICHIGAN
Acknowl- COUNTY OF ss.
edgment
On this day of 19 before me
appeared
to me known to be the person described in and who executed
the foregoing instrument and acknowledged that executed the
same as free act and deed.
My commission expires 19
----------------------------
----------------------------
Notary Public,
County, Michigan
Corporate STATE OF MICHIGAN
Acknowl- COUNTY OF ss.
edgment
On this day of 19 before me
appeared
to me personally known, who being by me sworn, did (1)
say that (2) the
of
the corporation named in and which executed the within
instrument, and that the seal affixed to said instrument is the
corporate seal of said corporation, and that said instrument was
signed and sealed in behalf of said corporation by authority of
its board of directors; and said
acknowledged said instrument to be the free act and deed of said
corporation.
My commission expires 19
----------------------------
----------------------------
Notary Public,
County, Michigan
Note: If more than one officer acknowledges insert at (1)
"each for himself," and (2) "they are respectively"
-----------------------------------------------------------
Instrument Business
Drafted by: Address:
----------------------------- -------------------------
-------------------------
Execution Copy
LOAN AGREEMENT
THIS LOAN AGREEMENT, made as of the 30th day of April, 1996, by and among
Noble International, Ltd., a Michigan corporation of 33 Bloomfield Hills
Parkway, Suite 155, Bloomfield Hills, Michigan 48304 ("Noble"), Monroe
Engineering Products, Inc., a Michigan corporation of 33 Bloomfield Hills
Parkway, Suite 155, Bloomfield Hills, Michigan 48304 ("Monroe"), Prestolock
International, Ltd., a Michigan corporation of 33 Bloomfield Hills Parkway,
Suite 155, Bloomfield Hills, Michigan 48304 ("Prestolock") and Cass River
Coatings, Inc., a Michigan corporation of 33 Bloomfield Hills Parkway, Suite
155, Bloomfield Hills, Michigan 48304 ("CRC") (Noble, Monroe, Prestolock and CRC
collectively identified as "Companies" and individually as a "Company") and
COMERICA BANK, a Michigan banking corporation of Detroit, Michigan (herein
called "Bank");
RECITALS
A. Companies desire to obtain certain credit facilities from Bank.
B. Bank is willing to extend such credit facilities on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, Companies and Bank agree as follows:
WITNESSETH:
1. DEFINITIONS
For the purposes of this Agreement the following terms will have the
following meanings:
"Account" shall mean any right of Companies to payment for goods sold or
leased or for services rendered, whether or not such right to payment has been
earned by performance, excluding all interest and service charges thereon.
"Account Debtor" shall mean the party who is obligated on or under any
Account.
"Acquisition" shall mean the acquisition by Noble of all of the issued and
outstanding shares of capital stock of Monroe, in accordance with the terms of
the Purchase Agreement.
"Acquisition Documents" means the Purchase Agreement and all agreements,
documents and instruments executed and delivered
<PAGE>
pursuant thereto or in connection with the foregoing, each as amended from time
to time.
"Adjusted Net Worth" shall mean as of any date of determination, Net Worth
as of such date plus the outstanding principal amount as of such date of Noble's
indebtedness to Robert J. Skandalaris under the Note dated April 30, 1996, in
the principal amount of $1,000,000 to the extent such indebtedness is
subordinated to Noble's indebtedness to Bank pursuant to the Subordination
Agreement.
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling (including but not limited to all directors
and executive officers of such person), controlled by, or under direct or
indirect common control with such person. A person shall be deemed to control a
corporation for the purposes of this definition if such person possesses,
directly or indirectly, the power (i) to vote 10% or more of the securities
having ordinary voting power for the election of directors of such corporation
or (ii) to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.
"Bonus" shall mean the $960,000 bonus payable by Monroe to Richard J.
Reason prior to December 31, 1996.
"Capital Expenditure" shall mean, without duplication, any payment made
directly or indirectly for the purpose of acquiring or constructing fixed
assets, real property or equipment which in accordance with generally accepted
accounting principles would be added as a debit to the fixed asset account of
the person making such expenditure, including, without limitation, amounts paid
or payable under any conditional sale or other title retention agreement or
under any lease or other periodic payment arrangement which is of such a nature
that payment obligations of the lessee or obligor thereunder would be required
by generally accepted accounting principles to be capitalized and shown as
liabilities on the balance sheet of such lessee or obligor.
"Capital Lease" of any person shall mean any lease of any property (whether
real, personal or mixed) by that person as lessee which, in conformity with
GAAP, is, or is required to be accounted for as a capital lease on the balance
sheet of that person, together with any renewals of such leases (or entry into
new leases) on substantially similar terms.
"Debt" shall mean all liabilities of any or all of the companies and their
consolidated Subsidiaries, all as determined in accordance with generally
accepted accounting principles consistently applied.
2
<PAGE>
"Debt Service Coverage Ratio" shall mean a ratio, the numerator of which is
net income of Companies and their consolidated Subsidiaries for the four
preceding fiscal quarters, plus, to the extent deducted in determining net
income, depreciation, amortization and interest expense during such period,
plus, the Bonus to the extent deducted in determining net income for such period
less Capital Expenditures made by Companies during such period and the
denominator of which is all payments of principal and interest with respect to
indebtedness of Companies and Capital Leases due during such period, all as
determined in accordance with generally accepted accounting principles
consistently applied.
"Eligible Accounts" shall mean trade Accounts arising in the ordinary
course of the business of Companies which meet the following requirements:
(a) it is not owing more than ninety (90) days after the date of the
original invoice or other writing evidencing such Account;
(b) it arises from the sale or lease of goods and such goods have been
shipped or delivered to the Account Debtor under such Account, or it
arises from services rendered and such services have been performed;
(c) it is evidenced by an invoice, dated not later than the date of
shipment or performance, rendered to such Account Debtor or some other
evidence of billing acceptable to Bank;
(d) it is not evidenced by any note, trade acceptance, draft or other
negotiable instrument or by any chattel paper, unless such note or
other document or instrument previously has been endorsed and
delivered by the applicable Company to Bank;
(e) it is a valid, legally enforceable obligation of the Account Debtor
thereunder and is not subject to any counterclaim or other defense on
the part of such Account Debtor or to any claim on the part of such
Account Debtor denying liability thereunder in whole or in part;
(f) it is not subject to any sale of accounts, any rights of offset,
assignment, lien or security interest whatsoever other than to Bank;
(g) it is not owing by a subsidiary or affiliate of any of the Companies,
nor by an Account Debtor which (i) does not maintain its chief
executive office in the United States of America, (ii) is not
organized under the laws of Canada or the United States of America, or
any state
3
<PAGE>
or province thereof unless the Account Debtor is a Canadian subsidiary
of General Motors, Ford or Chrysler or is Textron of Canada, or (iii)
is the government of any foreign country or sovereign state, or of any
state, province, municipality or other instrumentality thereof;
(h) it is not an account owing by the United States of America or any
state or political subdivision thereof, or by any department, agency,
public body corporate or other instrumentality of any of the
foregoing, unless all necessary steps are taken to comply with the
Federal Assignment of Claims Act of 1940, as amended, or with any
comparable state law, if applicable, and all other necessary steps are
taken to perfect Bank's security interest in such account;
(i) it is not owing by an Account Debtor for which any of the Companies
has received a notice of (i) the death of the Account Debtor or any
partner of the Account Debtor, (ii) the dissolution, liquidation,
termination of existence, insolvency or business failure of the
Account Debtor, (iii) the appointment of a receiver for any part of
the property of the Account Debtor, or (iv) an assignment for the
benefit of creditors, the filing of a petition in bankruptcy, or the
commencement of any proceeding under any bankruptcy or insolvency laws
by or against the Account Debtor;
(j) it is not an account billed in advance, payable on delivery, for
consigned goods, for guaranteed sales, for unbilled sales, for
progress billings, payable at a future date in accordance with its
terms, subject to a retainage or holdback by the Account Debtor or
insured by a surety company: and
(k) it is not owing by any Account Debtor whose obligations Bank, acting
in its sole discretion, shall have notified Companies are not deemed
to constitute Eligible Accounts.
"Eligible Inventory" shall be valued at the lesser of cost or present
market value in accordance with generally accepted accounting principles,
consistently applied, and shall mean all of the Inventory of each of the
Companies which is in good and merchantable condition, is not obsolete or
discontinued, and which would properly be classified as "raw materials",
"work-in-process" or as "finished goods inventory" under generally accepted
accounting principles, consistently applied, excluding (a) consigned goods and
inventory located outside the United States of America, (b) inventory covered by
or subject to a seller's right to repurchase, or any consensual or nonconsensual
lien or security interest (including without limitation purchase money security
interests) other than in favor of Bank, whether senior or junior to
4
<PAGE>
Bank's security interest, and (c) inventory that Bank, acting in its reasonable
discretion, after having notified Companies, excludes. Inventory which is at any
time Eligible Inventory, but which subsequently fails to meet any of the
foregoing requirements, shall forthwith cease to be Eligible Inventory.
"Excess Cash Flow" shall mean for any applicable calendar year, Companies
net income (after tax) for such fiscal year, plus depreciation and amortization
expense for such year, plus the cash portion of the Bonus paid to Richard J.
Reason during such period, less the amount of required principal payments
(including the principal component of Capital Leasing obligations) with respect
to Companies indebtedness for borrowed money during such period, and less the
amount of Companies' Capital Expenditures during such period (but not exceeding
$700,000).
"Event of Default" shall mean any of the Events of Default specified in
Section 11 hereof.
"Indebtedness" shall mean all loans, advances, indebtedness, obligations
and liabilities of Companies (or any of them) to Bank under this Agreement,
together with all other indebtedness, obligations and liabilities whatsoever of
Companies (or any of them) to Bank arising under or in connection with this
Agreement, whether matured or unmatured, liquidated or unliquidated, direct or
indirect, absolute or contingent, joint or several, due or to become due, now
existing or hereafter arising.
"Inventory" shall mean all goods wherever located, now owned or later
acquired by a Company, which are held for sale or lease or furnished to be
furnished under any contract of service (including, without limit, any such
goods which are returned to or repossessed by a Company) or which are raw
materials, work in process or materials used or consumed in a Company's business
and any other property constituting "inventory" under the Michigan Uniform
Commercial Code, being Act No. 174 of the Michigan Public Acts of 1962, as
amended.
"Line of Credit Maturity Date" shall mean April 30, 1997.
"Line of Credit Note" shall mean the Note described in Section 2.1 hereof
made by Companies to Bank in the form annexed to this Agreement as Exhibit "A".
"Line/Term Note" shall mean the Note described in Section 5.1 hereof made
by Companies to Bank in the form annexed to the Agreement as Exhibit "B".
"Line/Term Loan Maturity Date" shall mean December 1, 2000.
"Net Worth" shall mean as of any date of determination, all amounts that
would be included under stockholder's equity on a
5
<PAGE>
balance sheet of Companies and their consolidated subsidiaries determined in
accordance with generally accepted accounting principles consistently applied,
less loans and advances to directors, officers and employees of any of the
Companies.
"Note" shall mean the Line of Credit Note or the Line/Term Note, as the
case may be, and "Notes" shall refer to all of them.
"Prime Rate" shall mean the per annum interest rate established by Bank as
its prime rate for its borrowers as such rate may vary from time to time, which
rate is not necessarily the lowest rate on loans made by Bank at any such time.
"Purchase Agreement" shall mean the Stock Purchase Agreement by and among
Noble, Richard J. Reason, Individually And As Trustee Of His Revocable Living
Trust Dated April 9, 1979, And The Richard J. Reason Irrevocable Trust For The
Benefit Of Victoria Aldrich And Peter Reason Dated October 12, 1992.
"Reserve" shall initially mean $560,000. Upon payment in full of the
$2,500,000 payment to the Seller due June 15, 1996, the Reserve shall be reduced
to zero.
"Seller" shall mean Richard J. Reason, individually and as Trustee of the
Richard J. Reason Revocable Living Trust dated April 9, 1979.
"Stock Option Agreement" shall mean that certain Stock Option Agreement
dated as of January 31, 1996 among Noble, Gene Oldford, Kevin Redding, Chris
Frampton, Jan Wojciechowski, Pat Patterson and Jim Lamb, without taking into
account any amendments or modifications thereof.
"Subsidiary" shall mean a corporation of which more than fifty percent
(50%) of the outstanding voting stock is owned by Companies, or either of them,
either directly or indirectly through one or more intermediaries.
2. THE INDEBTEDNESS: Line of Credit
2.1 Bank may make advances to Companies and Companies jointly and severally
may borrow at any time and from time to time from the effective date hereof
until the Line of Credit Maturity Date, not to exceed Three Million Dollars
($3,000,000) ("Commitment Amount") in aggregate principal amount at any one time
outstanding. All of the advances under this Section 2 shall be evidenced by a
note in the form annexed hereto as Exhibit "A" ("Line of Credit Note") under
which advances, repayments and readvances may be made, subject to the terms and
conditions of this Agreement; provided, however, Bank shall not be obligated to
make any advances to Companies.
6
<PAGE>
2.2 The principal indebtedness represented by the Line of Credit Note and
all interest thereon shall be payable on or before the Line of Credit Maturity
Date. Companies agree to pay interest on the unpaid principal balance of the
Line of Credit Note from time to time outstanding at a per annum rate equal to
one percent (1%) above Bank's Prime Rate. Upon the occurrence of any Event of
Default hereunder, interest shall accrue on the unpaid principal balance at the
per annum rate of four percent (4%) above Bank's Prime Rate. Interest shall be
payable monthly commencing on May 1, 1996 and on the first day of each month
thereafter. Interest shall be computed on a daily basis using a year of 360 days
for the actual number of days elapsed, and in such computation effect shall be
given to any change in the interest rate resulting from a change in the Prime
Rate on the date of such change in the Prime Rate.
2.3 Companies may request advances by filing with Bank a Request for Draw
and Certificate of Compliance (as of the date of the borrowing) in form similar
to that annexed hereto as Exhibit "C", executed by an authorized officer of each
of the Companies. Bank may, at its option, lend under the Line of Credit Note
upon the telephone request of an authorized officer of each of the Companies
and, in the event Bank makes any such advance upon a telephone request, the
requesting officers shall mail to Bank, on the same day as such telephone
request, a Request for Draw and Certificate of Compliance in the form attached
as Exhibit "C".
2.4 Bank shall not be obligated to make any advance if at the time of such
request for advance, the sum of the advances outstanding under this Section 2
plus the amount of the Reserve added to the amount requested should exceed the
sum of (A) eighty five percent (85%) of the sum of the companies' Eligible
Accounts and (B) fifty percent (50%) of Eligible Inventory; provided, however,
the amount available to be advanced under this subclause (B) shall not exceed
$1,000,000,
2.5 The companies, or any of them, may prepay the Line of Credit Note in
whole or in part without premium or penalty.
2.6 The sum of the aggregate principal amount at any one time outstanding
under the Line of Credit Note plus the amount of the Reserve shall never exceed
the formula set forth in Section 2.4 hereof. Companies shall immediately make
all payments necessary to comply with this provision.
3. [Reserved]
4. [Reserved]
5. LINE/TERM LOAN
5.1 Bank agrees to lend to Companies at any time and from time to time from
the date hereof until December 31, 1996 sums not
7
<PAGE>
to exceed Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000) in
aggregate principal amount at any one time outstanding. Borrowings hereunder
shall be evidenced by a Line of Credit/Term Note in form similar to that annexed
hereto as Exhibit "B" under which advances and repayments but not readvances may
be made, subject to the terms and conditions of this Agreement.
5.2 The indebtedness represented by the Line/Term Note shall be repaid in
monthly principal and interest installments each equal to the amount necessary
to fully amortize the principal outstanding under this Section 5 on December 31,
1996 over the remaining term of the Line/Term Note (assuming an interest rate
equal to the rate applicable under this Section 5 on December 15, 1996),
commencing on January 1, 1997 until December 1, 2000, when the entire unpaid
balance of principal and interest thereon shall be due and payable. Companies
agree to pay interest on the unpaid principal balance of the Line/Term Note from
time to time outstanding at a per annum rate equal to one and one half percent
(1 1/2%) above Bank's Prime Rate, provided, however, upon the occurrence of any
Event of Default payable at a per annum rate of four and one half percent (4
1/2%) above the rate otherwise then in effect. Interest payments shall be made
monthly, commencing on the first day of the month immediately following the
month in which the initial advance under the Line/Term Note is made and on the
first day of each calendar month thereafter. Interest shall be computed on a
daily basis using a year of 360 days, and in such computation effect shall be
given to any change in the interest rate resulting from a change in the Prime
Rate on the date of such change in the Prime Rate. All payments shall be applied
first to accrued interest and the remainder to principal. The installments set
forth above are calculated at an assumed fixed interest rate and an assumed
amortization term. In the event the Bank's prime rate changes, the Bank, at its
sole option, may from time to time recalculate the periodic installment amount
so that the remaining periodic installments will fully amortize the remaining
loan balance within the remaining amortization term in equal installments at the
interest rate then being charged under this Agreement for the Line/Term Note.
COMPANIES AGREE TO PAY THE PERIODIC INSTALLMENTS AS THEY MAY BE RECALCULATED BY
THE BANK, AT THE BANK'S SOLE OPTION, FROM TIME TO TIME AND ACKNOWLEDGES THAT A
RECALCULATION SHALL NOT AFFECT THE MATURITY DATE OR THE OTHER TERMS AND
PROVISIONS OF THIS AGREEMENT OR THE LINE/TERM NOTE.
5.3 Bank shall not be obligated to lend under this Agreement unless
Companies shall have first filed with Bank a Request for Draw and a Certificate
of Compliance (as of the date of the borrowing) in form similar to that annexed
hereto as Exhibit "C", executed by an authorized officer of each of the
Companies.
5.4 Disbursements under the Line/Term Note shall be used only to repay
Companies' obligations to the Seller incurred in connection with the
Acquisition. The initial advance under the
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Line/Term Note shall not exceed $1,940,000. The second and final advance under
the Line/Term Note shall be not more than $1,810,000 and shall not be disbursed
unless Bank's Letter of Credit No. 532700 has been returned to Bank undrawn for
cancellation.
5.5 The Line of Credit Note may be prepaid in whole or in part without
premium or penalty. All partial prepayments shall be applied to principal
installments due under the Line/Term Note in the inverse order of their
maturities.
5.6 At the request of Companies, Bank has issued its Letter of Credit No.
532700 in favor of Seller as beneficiary to secure a portion of the purchase
price payable in connection with the Acquisition. In connection with such Letter
of Credit, Companies shall pay to Bank a letter of credit commission fee in the
amount of two percent (2%) per annum, payable semi-annually in advance. Such
Letter of Credit shall be subject to the terms of this Agreement and the Standby
Letter of Credit Application and Agreement executed in connection therewith.
5.7 On or before April 30 of each year, Companies shall make a mandatory
prepayment of the Line/Term Note in an amount equal to seventy five percent
(75%) of Excess Cash Flow for the fiscal year next preceding such April 30. Such
mandatory prepayments shall be applied to the principal payments due under the
Line/Term Note (in the inverse order of their maturities).
6. CONDITIONS AND SECURITY
6.1 Companies agree to furnish Bank, prior to the initial borrowing
hereunder, in form to be satisfactory to Bank, with (i) an opinion of Companies'
counsel with respect to the legal matters referred to in Sections 6.1 through
6.3 hereof and such other matters reasonably requested by Bank; (ii) certified
copies of resolutions of the Board of Directors of each of the Companies
evidencing approval of the borrowings hereunder, (iii) certified copies of each
of the Companies' Articles of Incorporation and Bylaws, and (iv) a certificate
of good standing from each jurisdiction in which any Company conducts business
or in which any Company's activities require it to be qualified to do business.
6.2 As security for all Indebtedness of Companies to Bank hereunder and
under the Notes as herein provided, Companies agree to furnish, execute and
deliver to Bank or cause to be furnished, executed and delivered to Bank prior
to or simultaneously with the initial borrowing hereunder, in form to be
satisfactory to Bank and supported by appropriate resolution in certified form,
authorizing same, the following:
(a) Security Agreements granting to Bank security interests in all of each
of the Companies' tangible and intangible
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personal property, whether now owned or hereafter acquired;
(b) Security Agreement from Noble granting to Bank a security interest in
all of the issued and outstanding shares of the capital stock of
Monroe (subject to liens in favor of the Seller until June 15, 1996),
CRC (subject to the rights of the Option Holders under and as defined
in the Stock Option Agreement) and Prestolock;
(c) Security Agreements granting to Bank first priority security interests
in all of the issued and outstanding shares of the capital stock of
Noble;
(d) A Subordination Agreement from Robert J. Skandalaris subordinating
Noble's indebtedness to him to Noble's indebtedness to Bank
("Subordination Agreement").
(e) Financing Statements required or requested by Bank to perfect all
security interests to be conferred upon Bank under this Agreement and
to accord Bank a perfected security position under the Uniform
Commercial Code.
To the extent that any of the Companies has heretofore given a security interest
to Bank to certain of the foregoing and such documents and agreements comply
with the requirements of this Agreement, it is hereby agreed that such documents
and agreements shall remain in full force and effect for the purposes of this
Agreement, but Bank may, if it deems it necessary or desirable, require
execution of a new agreement or agreements or amendments to such agreements.
6.3 Prior to the initial Advance under this Agreement, companies shall have
provided to the Bank evidence satisfactory to the Bank of (a) the consummation
of the Acquisition on terms and conditions acceptable to Bank and (b) a
$1,000,000 loan by Robert J. Skandalaris to Noble which is subordinated to
Noble's indebtedness to Bank pursuant to the Subordination Agreement.
6.4 Upon execution of this Agreement, Company shall pay to Bank a
non-refundable closing fee in the amount of $30,000, which fee shall be deemed
fully earned upon execution of this Agreement. The Bank acknowledges the prior
receipt of $10,000 of such fee.
7. REPRESENTATIONS AND WARRANTIES
Each of the Companies represents and warrants and such representations and
warranties shall be deemed to be continuing representations and warranties
during the entire life of this Agreement:
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7.1 It is a corporation duly organized and existing in good standing under
the laws of the jurisdiction of its incorporation and is duly qualified to do
business and in good standing in every jurisdiction in which such qualification
is material to its business and operation or the ownership or lease of its
properties; execution, delivery and performance of this Agreement and other
documents and instruments required under this Agreement, and the issuance of the
Notes by Companies are within its corporate powers, have been duly authorized,
are not in contravention of law or the terms of its Articles of Incorporation or
Bylaws, and do not require the consent or approval of any governmental body,
agency or authority; and this Agreement and the other documents and instruments
required under this Agreement and the Notes, when issued and delivered, will be
valid and binding in accordance with their terms.
7.2 The execution, delivery and performance of this Agreement and any other
documents and instruments required under this Agreement, and the issuance of the
Notes by Companies are not in contravention of the unwaived terms of any
indenture, agreement or undertaking to which either Company is a party or by
which any Company is bound.
7.3 No litigation or other proceeding before any court or administrative
agency is pending, or to the knowledge of its officers is threatened against
Companies or any Subsidiary of any of the Companies, the outcome of which could
materially impair any of the Companies' or any Subsidiary's financial condition
or their ability to carry on their businesses taken as a whole.
7.4 There are no security interests in, liens, mortgages, or other
encumbrances on any of companies' or any Subsidiary's assets, except to Bank, or
as permitted in this Agreement.
7.5 None of the Companies nor any Subsidiary maintains or contributes to
any employee pension benefit plan subject to title IV of the "Employee
Retirement Income Security Act of 1974" (herein called "ERISA"), except those
set forth in attached Exhibit "D". There is no unfunded past service liability
of the pension plan and there is no accumulated funding deficiency within the
meaning of ERISA, or any existing material liability with respect to any pension
plan owed to the Pension Benefit Guaranty Corporation ("PBGC") or any successor
thereto, except any funding deficiency for which an application to the PBGC for
waiver is pending or for which a waiver has been granted by the PBGC.
7.6 The financial statements of Companies dated December 31, 1995,
previously furnished Bank, are complete and correct in all material respects and
fairly present the financial condition of Companies and their consolidated
Subsidiaries; since said date there has been no material adverse change in the
financial condition of either of the Companies or any of the Subsidiaries; to
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the knowledge of its officers, none of the Companies nor any of the Subsidiaries
have any contingent obligations (including any liability for taxes) not
disclosed by or reserved against in said financial statements and at the present
time there are no material unrealized or anticipated losses from any present
commitment of any of the Companies or Subsidiaries.
7.7 All tax returns and tax reports of Companies and each Subsidiary
required by law to have been filed have been duly filed or extensions obtained,
and all taxes, assessments and other governmental charges or levies (other than
those presently payable without penalty and those currently being contested in
good faith for which adequate reserves have been established) upon Companies or
any Subsidiary (or any of its properties) which are due and payable have been
paid for which the failure to pay would materially adversely affect its business
or the value of its property or assets (taken as a whole). The charges, accruals
and reserves on the books of Companies and the Subsidiaries in respect of the
Federal income tax for all periods are adequate in the opinion of Companies.
7.8 There are no subsidiaries of any Company.
7.9 Each Company and its Subsidiaries are, in the conduct of their
business, in compliance in all material respects with all federal, state or
local laws, statutes, ordinances and regulations applicable to any of them, the
enforcement of which, if such Company or any Subsidiary were not in compliance,
would reasonably be expected to materially adversely affect its business or the
value of its property or assets (taken as a whole). Each Company and its
Subsidiaries have all approvals, authorizations, consents, licenses, orders and
other permits of all governmental agencies and authorities, whether federal,
state or local, required to permit the operation of their business as presently
conducted, except such approvals, authorizations, consents, licenses, orders and
other permits with respect to which the failure to have would reasonably be
expected to materially adversely affect its business or the value of its
property or assets (taken as a whole).
7.10 Except as otherwise previously disclosed in writing by Companies to
Bank none of the Companies nor any Subsidiary is party to any litigation or
administrative proceeding, nor so far as is known by it is any litigation or
administrative proceeding threatened against it or any other Company or
Subsidiary, which in either case (A) asserts or alleges that any of the
Companies or any Subsidiary violated Environmental Laws (as defined herein), (B)
asserts or alleges that any of the Companies or any Subsidiary is required to
clean up, remove, or take remedial or other response action due to the disposal,
depositing, discharge, leaking or other release of any hazardous substances or
materials, or (C) asserts or alleges that any of the Companies or any Subsidiary
is required to pay all or a portion of the cost of any past, present, or future
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cleanup, removal or remedial or other response action which arises out of or is
related to the disposal, depositing, discharge, leaking or other release of any
hazardous substances or materials by any of the Companies or any Subsidiary.
7.11 To the best of its knowledge, after due inquiry, except as otherwise
previously disclosed in writing by Companies to Bank, there are no conditions
existing currently or likely to exist during the term of this Agreement which
would subject any of the Companies or any Subsidiary to material damages,
penalties, injunctive relief or cleanup costs under any applicable Environmental
Laws or which require or are likely to require material cleanup, removal,
remedial action or other response pursuant to applicable Environmental Laws by
any of the Companies or any Subsidiary.
7.12 Except as otherwise previously disclosed in writing by companies to
Bank, none of the Companies nor any Subsidiary is subject to any judgment,
decree, order or citation related to or arising out of applicable Environmental
Laws and to the best of its knowledge, after due inquiry, except as otherwise
previously disclosed in writing to the Bank, neither of the Companies nor any
Subsidiary has been named or listed as a potentially responsible party by any
governmental body or agency in a matter arising under any applicable
Environmental Laws.
7.13 Each of the Companies and the Subsidiaries have all material permits,
licenses and approvals required under applicable Environmental Laws.
7.14 None of the Companies is an "investment company" within the meaning of
the Investment company Act of 1940, as amended. None of the Companies is engaged
principally, or as one of its important activities, directly or indirectly, in
the business of extending credit for the purpose of purchasing or carrying
margin stock, and none of the proceeds of any of the loans hereunder will be
used, directly or indirectly, for any purpose which would violate the provisions
of Regulation U or X of the Board of Governors of the Federal Reserve System.
Terms for which meanings are provided in Regulation U of the Board of Governors
of the Federal Reserve System or any regulations substituted therefor, as from
time to time in effect, are used in this paragraph with such meanings.
7.15 Each Company has good and valid title to the property pledged,
mortgaged or otherwise encumbered or to be encumbered by it under the loan
documents to which such Company is a party.
8. AFFIRMATIVE COVENANTS
Each of the Companies covenants and agrees that it will, and will cause
each of its Subsidiaries to, so long as any indebtedness remains outstanding
under this Agreement:
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8.1 Preserve and maintain their corporate existence and such of their
rights, licenses and privileges as are material to their business and
operations; and qualify and remain qualified to do business in each jurisdiction
in which such qualification is material to their business and operations or the
ownership of their properties.
8.2 Comply in all material respects with all applicable laws, rules,
regulations and orders of any governmental authority, noncompliance with which
could materially and adversely affect the financial condition or operations of
any of the Companies or any Subsidiary.
8.3 Maintain adequate insurance (and increase such insurance coverage in
such manner and to such extent as prudent business judgment and present practice
would dictate) with responsible insurance companies or associations in such
amounts and covering such risks as is customary with companies engaged in
similar businesses and having similar properties similarly situated. In the case
of all insurance policies covering property mortgaged or pledged to the Bank or
property in which the Bank shall have a security interest, other than those
policies protecting against casualty liability to strangers, all such insurance
policies shall provide that the loss payable thereunder shall be payable to the
applicable company or Subsidiary and the Bank as their respective interests may
appear; all said policies or copies thereof, including all endorsements, to be
deposited with the Bank. If either of the Companies or any Subsidiary shall fail
to maintain such insurance, the Bank shall have the option to do so, and if it
so does Companies agree to repay the Bank, with interest at the Default Interest
Rate.
8.4 Permit the Bank, through its authorized attorneys, accountants, and
representatives, to examine each of the Companies' and Subsidiaries' books,
accounts, records, ledgers and assets of every kind and description at all
reasonable times upon oral or written request of the Bank, including collateral
audits, in each case at the expense of the Companies.
8.5 Keep proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and business
of each of the Companies and Subsidiaries so as to permit each of the Companies
to present financial statements prepared in accordance with generally accepted
accounting principles consistently applied.
8.6 Furnish to the Bank the following:
(a) prompt notification of any condition or event which constitutes or
with the running of time and/or the giving of notice would constitute
an Event of Default under this Agreement, and promptly inform
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the Bank of any material adverse change in any of the Companies' or
any Subsidiary's financial condition;
(b) as soon as available and in any event within 30 days after the end of
each month, excluding the last month of each fiscal year, the combined
and individual balance sheets and statements of profit and loss and
surplus of the Companies and their consolidated Subsidiaries at the
end of such month, duly certified (subject to year-end review
adjustments) by the chief financial officer of each of the Companies
as having been prepared in accordance with generally accepted
accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 7.6;
(c) as soon as available and in any event within 90 days after the end of
each fiscal year of the Companies, combined and individual audited
financial statements of Companies and their consolidated Subsidiaries
for such year, including a balance sheet as of the close of such
fiscal year, statements of income and retained earnings and changes in
financial position for such year, prepared in accordance with
generally accepted accounting principles consistently applied and
certified by independent certified public accountants acceptable to
the Bank;
(d) within fifteen (15) days after and as of the end of each month, a
report showing each of the Companies' accounts receivable and
inventory, in substantially the form attached as Exhibit "H",
certified by an officer of each of the Companies; and
(e) promptly, and in form to be satisfactory to Bank, such other
information as Bank may request from time to time.
8.7 Furnish to the Bank concurrently with the delivery of each of the
financial statements required by Section 8.6(c) and, within 45 days after the
end of each of Companies' fiscal quarters, a statement prepared and certified by
the chief financial officer of each of the companies (or in such officer's
absence, a responsible senior officer of each of the Companies) (a) setting
forth all computations necessary to show compliance by Companies with each of
the financial covenants contained in Sections 8.10, 8.12 and 8.13 of this
Agreement, (b) stating that to the best of such officer's knowledge as of the
date thereof, no condition or event which constitutes an Event of Default
hereunder or which with
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the running of time and/or the giving of notice would constitute an Event of
Default hereunder has occurred and is continuing or exists, or if such exists,
specifying in detail the nature and period of existence thereof and any action
taken with respect thereto or contemplated to be taken by Companies, and (c)
stating that the signers have personally reviewed this Agreement and that such
certificate is based on an examination sufficient to assure that such
certificate is accurate.
8.8 Pay and discharge all taxes and other governmental charges and all
contractual obligations calling for the payment of money, before the same shall
become overdue, unless and to the extent only that such payment is being
contested in good faith.
8.9 At all times meet the minimum funding requirements of ERISA with
respect to its and its Subsidiaries' employee benefit plans subject to such Act;
as soon as possible and in any event within thirty (30) days after it knows or
has reason to know:
(a) of the occurrence of any event which would constitute a reportable
event under Section 4043(b) of Title IV of ERISA;
(b) that the PBGC or such Company (or any Subsidiary) has instituted or
will institute proceedings under such Title to terminate an employee
pension plan;
(c) of the appointment of a trustee by a United States District Court to
administer an employee pension plan;
(d) of the withdrawal of such Company or any Subsidiary from any employee
pension plan; or
(e} of the failure of such Company's or any Subsidiary's pension plans to
satisfy the minimum funding requirements for any plan year as
established in the Internal Revenue Code of 1986, as amended;
deliver to the Bank a certificate of the chief financial officer of such Company
setting forth details as to such reportable event or events and the action it
(or any Subsidiary) proposes to take with respect thereto, together with a copy
of any notice of such reportable event or events which may be required to be
filed with the PBGC, or any intent to institute such proceedings, or any notice
to the PBGC that the plan is to be terminated, as the case may be. (For all
purposes of this Section, each of Companies (and each Subsidiary) shall be
deemed to have knowledge of all facts attributable to the plan administrator
under such Title); and furnish to the Bank (or cause the plan administrator to
furnish the Bank) a copy of the annual return (including all schedules and
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attachments) for each plan covered by Title IV, and filed with the Internal
Revenue service by either of the Companies (or any Subsidiary), not later than
ten (10) days after such report has been so filed.
8.10 On a combined statement basis, maintain at all times Adjusted Net
Worth of not less than the following amounts for the periods set forth below:
From the date hereof through December 31, 1996 ............... $1,500,000
From January 1, 1997 through December 31, 1997 ............... $2,400,000
From January 1, 1998 through December 31, 1998 ............... $3,300,000
From January 1, 1999 and thereafter .......................... $4,200,000
8.11 Promptly notify the Bank of and permit the Bank, at the Bank's option,
to remedy any default in connection with any security documents which might
impair the Bank's security; and reimburse the Bank for any monies advanced and
any reasonable cost or expense incurred in connection with remedying any such
default together with interest from the date that any such advance is made or
cost or expense is incurred at the Default Interest Rate.
8.12 On a combined statement basis, maintain at all times a ratio of Debt
to Adjusted Net Worth of not more than the following ratios for the periods set
forth below:
From the date hereof through December 31, 1996 .............. 10.0 to 1.0
From January 1, 1997 through December 31, 1997 .............. 9.0 to 1.0
From January 1, 1998 through December 31, 1998 .............. 8.0 to 1.0
From January 1, 1999 and thereafter ......................... 7.0 to 1.0
8.13 On a combined statement basis maintain a Debt Service Coverage Ratio
of not less than 1.4 to 1.0.
9. NEGATIVE COVENANTS
Each of the Companies covenants and agrees that, so long as any
indebtedness remains outstanding under this Agreement, it will not, and will
cause its Subsidiaries not to, without the prior written consent of Bank:
9.1 Affirmatively pledge or mortgage any of its assets, whether now owned
or hereafter acquired, or create, suffer or permit to exist any lien, security
interest in, or encumbrance thereon, except:
(a) to the Bank; and
(b) Permitted Encumbrances as set forth in Exhibit "E" annexed hereto.
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9.2 Purchase, acquire, issue or redeem any of its capital stock or make any
material change in its capital structure or general business objects or purpose.
9.3 Enter into any merger or consolidation or sell, lease, transfer, or
dispose of all, substantially all, or any material part of its assets, except in
the ordinary course of its business.
9.4 Guarantee, endorse, or otherwise become secondarily liable for or upon
the obligations of others, except for the following;
(a) by endorsement for deposit in the ordinary course of business; and
(b) guaranties to the Bank.
9.5 Become or remain obligated for any indebtedness for borrowed money, or
for any indebtedness incurred in connection with the acquisition of any
property, real or personal, tangible or intangible, except:
(a) current unsecured trade, utility or nonextraordinary accounts payable
arising in the ordinary course of either Company's or its
Subsidiaries' business;
(b) to Bank;
(c) existing indebtedness described in Exhibit "F" attached hereto.
9.6 Purchase or otherwise acquire or become obligated for the purchase of
all or substantially all of the assets or business interests of any person, firm
or corporation or any shares of stock of any corporation, trusteeship or
association or in any other manner effectuate or attempt to effectuate an
expansion of the present business by acquisition, except the Acquisition.
9.7 Declare or pay any dividend on, or make any other distribution with
respect to (whether by reduction of capital or otherwise) any shares of its
capital stock, except dividend" payable in capital stock of the Companies.
9.8 Make or allow to remain outstanding any investment (whether such
investment shall be of the character of investment in shares of stock, evidences
of indebtedness or other securities or otherwise) in, or any loans or advances
to, any person, firm, corporation or other entity or association, except:
(a) advances made for expenses or purchases in the ordinary course of
business; and
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(b) loans or advances made to officers, directors, or employees of either
of the Companies or any Subsidiary, not to exceed in the aggregate One
Million Four Hundred Thousand Dollars ($1,400,000) at any one time
outstanding (determined on a combined basis for Companies);
9.9 Allow any fact, condition or event to occur or exist with respect to
any employee pension and/or profit sharing plan of any of the Companies or any
Subsidiaries, which shall constitute grounds for termination of such plan by the
PBGC or for the appointment by a United States District Court of a trustee to
administer any such plan.
9.10 Sell, assign or confer a security interest in any account, contract,
note, trade acceptance or other receivable, except to Bank.
9.11 Make any Capital Expenditure during any calendar year if, after giving
effect thereto, the aggregate amount of all Capital Expenditures made by
Companies on a combined basis) during such period would exceed $700,000.
9.12 Enter into any transaction or series of transactions with any
Affiliate other than on terms and conditions as favorable to Companies or the
Subsidiary (as applicable) as would be obtainable in a comparable arm's-length
transaction with a person other than an Affiliate.
9.13 Pay compensation to Noble's officers (consisting of the Chairman, the
President and two Vice Presidents) and directors (on a combined basis for all
Companies) in excess of $600,000 during 1996 and $800,000 in any year
thereafter, including, salary, bonus and deferred payments.
10. ENVIRONMENTAL PROVISIONS
10.1 For the purposes of this Agreement the term "Environmental Laws" shall
mean all federal, state and local laws including statutes, regulations,
ordinances, codes, rules, and other governmental restrictions and requirements,
relating to environmental pollution, contamination or other impairment of any
nature, any hazardous or other toxic substances of any nature, whether liquid,
solid and/or gaseous, including smoke, vapor, fumes, soot, acids, alkalis,
chemicals, wastes, by-products, and recycled materials. These Environmental Laws
shall include but not be limited to the Federal Solid Waste Disposal Act, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976, the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Federal Superfund
Amendments and Reauthorization Act of 1986, regulations of the Environmental
Protection Agency, regulations of
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the Nuclear Regulatory Agency, regulations of any state department of natural
resources or state environmental protection agency now or at any time hereafter
in effect and local health department ordinances.
10.2 Each of the Companies shall timely comply in all material respects
with all applicable Environmental Laws.
10.3 Each of the Companies shall provide to the Bank, immediately upon
receipt, copies of any correspondence, notice, pleading, citation, indictment,
complaint, order, decree, or other document from any source asserting or
alleging a circumstance or condition which requires or may require a financial
contribution by any of the Companies or any Subsidiary or a cleanup, removal,
remedial action, or other response by or on the part of any of the Companies or
any Subsidiary under applicable Environmental Laws or which seeks damages or
civil, criminal or punitive penalties from any Company or any Subsidiary for an
alleged violation of Environmental Laws.
10.4 Each of the Companies shall promptly notify the Bank in writing as
soon as it becomes aware of any condition or circumstance which makes the
environmental warranties contained in this Agreement incomplete or inaccurate in
any material respect as of any date.
10.5 In the event of any condition or circumstance that makes any
environmental warranty, representation and/or agreement incomplete or inaccurate
in any material respect as of any date, Companies shall, at their sole expense,
if reasonably requested by Bank, retain an environmental professional
consultant, reasonably acceptable to Bank, to conduct a thorough and complete
environmental audit regarding the changed condition and/or circumstance and any
environmental concerns arising from that changed condition and/or circumstance.
A copy of the environmental consultant's report will be promptly delivered to
both Bank and Companies upon completion.
10.6 At any time any of the Companies, directly or indirectly through any
professional consultant or other representative, determines to undertake an
environmental audit, assessment or investigation, it shall promptly provide the
Bank with written notice of the initiation of the environmental audit, fully
describing the purpose and intended scope of the environmental audit. Upon
receipt, Companies will promptly provide to the Bank copies of all final
findings and conclusions of any such environmental investigation. Preliminary
findings and conclusions shall be provided if final reports have not been
completed and delivered to the Bank within 60 days following completion of the
preliminary findings and conclusions.
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10.7 Each of the Companies hereby indemnifies, saves and holds the Bank and
any of its past, present and future officers, directors, shareholders,
employees, representatives and consultants harmless from any and all loss,
damages, suits, penalties, costs, liabilities and expenses (including but not
limited to reasonable investigation, environmental audit(s), and legal expenses)
arising out of any claim, loss or damage of any property, injuries to or death
of persons, contamination of or adverse affects on the environment, or any
violation of any applicable Environmental Laws, caused by or in any way related
to any real property owned, leased or operated by Companies, or due to any acts
of either of the Companies, its officers, directors, shareholders, employees,
consultants and/or representatives. In no event shall the Companies be liable
hereunder for any loss, damages, suits, penalties, costs, liabilities or
expenses (i) arising from any act of gross negligence of the Bank, or its agents
or employees or (ii) arising from any action taken by Bank while it is in
possession of any such real property.
It is expressly understood and agreed that the indemnifications granted
herein are intended to protect the Bank, its past, present and future officers,
directors, shareholders, employees, consultants and representatives from any
claims that may arise by reason of the security interest, liens and/or mortgages
granted to the Bank, or under any other document or agreement given to secure
repayment of any indebtedness from either of the Companies, whether or not such
claims arise before or after the Bank has foreclosed upon and/or otherwise
become the owner of any such property. All obligations of indemnity as provided
hereunder shall be secured by the collateral documents.
It is expressly agreed and understood that the provisions hereof shall and
are intended to be continuing and shall survive the repayment of any
indebtedness from Companies to the Bank.
10.8 Each of the Companies and its Subsidiaries have and shall maintain all
permits, licenses and approvals required under applicable Environmental Laws.
11. DEFAULTS
11.1 Upon non-payment of any installment of the principal or interest on
any of the Notes when due in accordance with the terms thereof and continuance
thereof for ten (10) days, the Notes shall automatically become immediately due
and payable.
11.2 upon occurrence of any of the following events (said events together
with any event described in Sections 11.1 and 11.3, herein called "Events of
Default" ):
(a) default in the observance or performance of any of the covenants or
agreements of any of the Companies
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herein set forth, and continuance thereof for thirty (30) days after
notice to Companies by Bank;
(b) any representation or warranty made by any of the Companies herein, or
in any instrument submitted pursuant hereto shall prove to be
incorrect in any material respect when made;
(c) default by any of the Companies or any Subsidiary in the due payment,
after expiration of any applicable period of notice and cure, of any
other amounts owing to Bank from time to time;
(d) default by any of the Companies or any Subsidiary in the due payment
of any of its indebtedness in the principal amount of $100,000.00 or
more except for obligations being contested in good faith, or in the
observance or performance of any term, covenant or condition in any
agreement or instrument evidencing, securing or relating to such
indebtedness, and such default shall be continued for a period
sufficient to permit acceleration of the indebtedness;
(e) default in the observance or performance of any of the covenants or
agreements of any of the Companies or any other person set forth in
any collateral document of security given to secure the indebtedness
hereunder, and continuation of such default beyond any period of
notice and cure, specified in any such document;
(f) the entry against any of the Companies or any Subsidiary of one or
more judgments or decrees involving an aggregate liability of
$100,000.00 or more, which has or have become non-appealable and shall
remain undischarged, unsatisfied by insurance and unstayed for more
than 30 days, whether or not consecutive; or the issuance and levy of
a writ of attachment or garnishment against the property of either of
the companies or any Subsidiary in an action claiming $100,000.00 or
more, and which is not released or appealed and bonded in a manner
satisfactory to Bank;
(g) if any of the Companies or Subsidiary shall fail to meet its minimum
funding requirements under ERISA with respect to any employee benefit
plan established or maintained by such Company (or any Subsidiary) or
if any such plan shall be the subject of termination proceedings
(whether voluntary or involuntary) and there shall result
22
<PAGE>
from such termination proceedings a material liability of any of the
Companies (or any Subsidiary) to the PBGC upon the consolidated
operations, business, property, assets, financial condition or credit
of Companies and Subsidiaries taken as a whole;
(h) if there shall occur, with respect to any pension plan maintained by
any of the Companies or any Subsidiary, any reportable event (within
the meaning of Section 4043(b) of ERISA) which Bank shall determine in
good faith constitutes a ground for the termination of any such plan,
and if such event continues for thirty (30) days after Bank has given
written notice to Companies, provided that termination of such plan or
appointment of such trustee would, in the reasonable opinion of Bank,
have a material adverse effect upon the consolidated operations,
business, property, assets, financial condition or credit of Companies
and Subsidiaries taken as a whole;
(i) if there shall be any change for any reason whatsoever in the
management, ownership or control of any of the Companies which shall
in the sole judgment of Bank adversely affect future prospects for the
successful operation of any Company or any Subsidiary;
(j) if Bank shall for any reason deem itself to be insecure; or
(k) the revocation of the Subordination Agreement;
then, or at any time thereafter, unless such Event of Default is remedied, Bank
may give notice to Companies declaring all outstanding indebtedness hereunder to
be due and payable, whereupon all indebtedness then outstanding hereunder shall
immediately become due and payable without further notice and demand, as the
case may be.
11.3 If a creditors' committee shall have been appointed for the business
of any of the Companies or any Subsidiary; or if Companies or any Subsidiary
shall have made a general assignment for the benefit of creditors or shall have
been adjudicated bankrupt, or shall have filed a voluntary petition in
bankruptcy or for reorganization or to effect a plan or arrangement with
creditors; or shall file an answer to a creditor's petition or other petition
filed against it, admitting the material allegations thereof for an adjudication
in bankruptcy or for a reorganization; or shall have applied for or permitted
the appointment of a receiver, or trustee or custodian for any of its property
or
23
<PAGE>
assets; or such receiver, trustee or custodian shall have been appointed for any
of its property or assets (otherwise than upon application or consent of any of
the Companies or any Subsidiary) and such receiver, trustee or custodian so
appointed shall not have been discharged within forty five (45) days after the
date of his appointment, or if an order shall be entered, and shall not be
dismissed or stayed within forty five (45) days from its entry, approving any
petition for reorganization of any of the Companies or any Subsidiary; then the
Notes and all indebtedness then outstanding hereunder shall automatically become
immediately due and payable.
11.4 Upon the occurrence and during the continuance of an Event of Default,
unless all of the Indebtedness is then immediately fully paid, Bank shall have
and may exercise any one or more of the rights and remedies for which provision
is made for a secured party under the UCC, under the Security Agreements or
under any other document contemplated hereby or for which provision is provided
by law or in equity, including, without limitation, the right to take possession
and sell, lease or otherwise dispose of any or all of the collateral and to set
off against the Indebtedness any amount owing by Bank to Companies (or any of
them) and/or any property of Companies (or any of them) in possession of Bank.
Companies agree, upon request of Bank, to assemble the collateral and make it
available to Bank at any place designated by Bank which is reasonably convenient
to Bank and Companies.
11.5 All of the Indebtedness shall constitute one loan secured by Bank's
security interest in the collateral and by all other security interests,
mortgages, liens, claims, and encumbrances now and from time to time hereafter
granted from Companies to Bank. Upon the occurrence and during the continuance
of an Event of Default which is not cured within the cure period, if any,
provided hereunder, Bank may in its sole discretion apply the collateral to any
portion of the Indebtedness. The proceeds of any sale or other disposition of
the collateral authorized by this Agreement shall be applied by Bank, first upon
all expenses authorized by the Michigan Uniform Commercial Code (or other
applicable law) or otherwise in connection with the sale and all reasonable
attorneys' fees and legal expenses incurred by Bank; the balance of the proceeds
of such sale or other disposition shall be applied in the payment of the
Indebtedness, first to interest, then to principal, then to other Indebtedness
and the surplus, if any, shall be paid over to Companies or to such other Person
or Persons as may be entitled thereto under applicable law. Companies shall
remain liable for any deficiency, which Companies shall pay to Bank immediately
upon demand.
11.6 The remedies provided for herein are cumulative to the remedies for
collection of the Indebtedness as provided by law, in equity or by any mortgage,
security agreement or other document contemplated hereby. Nothing herein
contained is intended, nor
24
<PAGE>
shall it be construed, to preclude Bank from pursuing any other remedy for the
recovery of any other sum to which Bank may be or become entitled for the breach
of this Agreement by Companies.
11.7 Upon the occurrence and during the continuance of any Event of
Default, Companies shall immediately upon demand by Bank deposit with Bank cash
collateral in the amount equal to the maximum amount available to be drawn at
any time under any Letter of Credit then outstanding.
12. MISCELLANEOUS
12.1 The obligations and liabilities of Companies under this Agreement are
joint and several. This Agreement shall be binding upon and shall inure to the
benefit of Companies and Bank and their respective successors and assigns.
12.2 No delay or failure of Bank in exercising any right, power or
privilege hereunder shall affect such right, power or privilege, nor shall any
single or partial exercise thereof preclude any further exercise thereof, or the
exercise of any other power, right or privilege. The rights of Bank under this
Agreement are cumulative and not exclusive of any right or remedies which Bank
would otherwise have.
12.3 All notices with respect to this Agreement shall be deemed to be
completed upon mailing by certified mail as follows;
To Companies:
33 Bloomfield Hills Parkway
Bloomfield Hills, MI 48304-2944
Attention: Robert J. Skandalaris
To Bank:
One Detroit Center
500 Woodward Avenue, 6th Floor
Detroit, Michigan 48226
Attention: Metropolitan Banking D
12.4 Companies shall pay all reasonable closing costs and expenses,
including, by way of description and not limitation, outside attorney fees, and
lien search fees incurred by Bank in connection with the commitment,
consummation and closing of this Agreement. All of said amounts required to be
paid by Companies may, at Bank's option, be charged by Bank as an advance
against the proceeds of the Notes. All reasonable costs, including attorney
fees, incurred by Bank in reviewing, revising, protecting or enforcing any of
its or any of the Bank's rights against Companies or defending Bank from any
claims or liabilities by any party or otherwise incurred by Bank in connection
with an Event of Default or the enforcement of this Agreement or the related
documents, including by way of description and not limitation, such charges in
25
<PAGE>
any court or bankruptcy proceedings or arising out of any or action by any
person against Bank which would not have been asserted were it not for Bank's
relationship with Companies hereunder or otherwise, shall also be paid by
Companies.
12.5 This Agreement shall become effective upon the execution hereof by
Bank and both of the Companies.
12.6 On any event of default or default as described in this Agreement or
any default in payment of any liability above mentioned, Bank may, without
notice to anyone, declare the Notes due forthwith, take all action, remedial and
otherwise, as provided herein or in the Security Agreements or other document,
instrument, or agreement of security or of collateral, and collect, deal with
and dispose of all or any part of any security without notice in any manner
permitted or authorized by the Michigan Uniform Commercial Code or other
applicable law. Bank may apply the proceeds and any deposits or credits in part
or full payment of any of said liabilities (including reasonable attorneys' fees
and expenses), whether due or not, in any manner or other Bank elects.
12.7 No amendments or waiver of any provision of this Agreement nor consent
to any departure by either of the Companies therefrom shall in any event be
effective unless the same shall be in writing and signed by the Bank, and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No amendment, waiver or
consent with respect to any provision of this Agreement shall affect any other
provision of this Agreement.
12.8 Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, it shall be done in accordance with GAAP.
12.9 All sums payable by Companies to Bank under this Agreement or the
other documents contemplated hereby shall be paid directly to Bank at its
principal office set forth in Section 11.3 hereof in immediately available
United States funds, without set off, deduction or counterclaim. In its sole
discretion, Bank may charge any and all deposit or other accounts (including
without limit an account evidenced by a certificate of deposit) of Companies (or
any of them) with Bank for all or a part of any Indebtedness then due; provided,
however, that this authorization shall not affect Companies' obligation to pay,
when due, any Indebtedness whether or not account balances are sufficient to pay
amounts due.
12.10 Any payment of the Indebtedness made by mail will be deemed tendered
and received only upon actual receipt by Bank at the address designated for such
payment, whether or not Bank has
26
<PAGE>
authorized payment by mail or any other manner, and shall not be deemed to have
been made in a timely manner unless received on the date due for such payment,
time being of the essence. Companies expressly assume all risks of loss or
liability resulting from non-delivery or delay of delivery of any item of
payment transmitted by mail or in any other manner. Acceptance by Bank of any
payment in an amount less than the amount then due shall be deemed an acceptance
on account only, and the failure to pay the entire amount then due shall be and
continue to be an Event of Default, and at any time thereafter and until the
entire amount then due has been paid, Bank shall be entitled to exercise any and
all rights conferred upon it herein upon the occurrence of an Event of Default.
Upon the occurrence and during the continuance of an Event of Default, Companies
waive the right to direct the application of any and all payments at any time or
times hereafter received by Bank from or on behalf of Companies. Upon the
occurrence and during the continuance of an Event of Default, Companies agree
that Bank shall have the continuing exclusive right to apply and to reapply any
and all payments received at any time or times hereafter against the
Indebtedness in such manner as Bank may deem advisable, notwithstanding any
entry by Bank upon any of its books and records. Companies expressly agree that
to the extent that Bank receives any payment or benefit and such payment or
benefit, or any part thereof, is subsequently invalidated, declared to be
fraudulent or preferential, set aside or is required to be repaid to a trustee,
receiver, or any other party under any bankruptcy act, state or federal law,
common law or equitable cause, then to the extent of such payment or benefit,
the Indebtedness or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if such payment or benefit had not been
made and, further, any such repayment by Bank, to the extent that Bank did not
directly receive a corresponding cash payment, shall be added to and be
additional Indebtedness payable upon demand by Bank.
12.11 THE UNDERSIGNED AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING
(OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE,
KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE NOTES.
12.12 This Agreement and the Notes shall be governed by and construed in
accordance with Michigan law, and Companies submit, in any legal proceeding
related to this Agreement or the Notes, to the nonexclusive in personam
jurisdiction of any court of competent jurisdiction sitting the State of
Michigan and agree to a suit being brought in any such court; waive any
objection that it may now have or hereafter have to the venue of such proceeding
in any such court or that such proceeding was brought in an inconvenient court;
agree that service of process and any such legal proceeding
27
<PAGE>
may be made, and shall be conclusively deemed sufficient and adequate, by
mailing of copies thereof (by registered or certified mail, if practicable)
postage prepaid, or by teletransmission to each Company at its address set forth
herein or such other address of which the Bank shall be notified in writing, in
which event, service shall be deemed complete upon the filing with the court of
a copy of the process mailed or sent and an affidavit attesting the mailing or
sending. Companies agree that nothing herein shall affect the Bank's right to
affect service or process in any other manner permitted by law.
WITNESS the due execution hereof as of the day and year first above
written.
COMERICA BANK NOBLE INTERNATIONAL, LTD.
By: /s/ TIMOTHY J. DILLON By: /s/ ROBERT J. SKANDALARIS
------------------------------ ----------------------------
Its: Vice President Its: Chairman
PRESTOLOCK INTERNATIONAL, LTD.
By: /s/ ROBERT J. SKANDALARIS
----------------------------
Its: Chairman
CASS RIVER COATINGS, INC.
By: /s/ ROBERT J. SKANDALARIS
----------------------------
Its: Chairman
28
<PAGE>
MONROE ENGINEERING PRODUCTS, INC.
By: /s/ ROBERT J. SKANDALARIS
----------------------------
Its: Chairman
29
<PAGE>
EXHIBIT "A"
LINE OF CREDIT NOTE
Detroit, Michigan
$3,000,000 April 30, 1996
On or before April 30, 1997, Noble International, Ltd., Monroe Engineering
Products, Inc., Cass River Coatings, Inc., and Prestolock International, Ltd.,
each a Michigan corporation (individually a "Company" and collectively referred
to as "Companies"), jointly and severally hereby promise to pay to the order of
COMERICA BANK, a Michigan banking corporation, at 100 Renaissance Center,
Detroit, Michigan 48243 ("Bank"), or at such other place as the holder of this
Note may designate in writing from time to time, in legal tender of the United
States, the indebtedness or so much of the sum of Three Million Dollars
($3,000,000) as may from time to time have been advanced and then be outstanding
hereunder pursuant to the Loan Agreement dated as of April 30, 1996, as may be
amended from time to time, made by and between companies and Bank (herein called
"Agreement"), together with interest thereon as hereinafter set forth.
The indebtedness outstanding under this Note from time to time shall bear
interest at a per annum rate equal to one percent (1%) above Bank's Prime Rate.
Upon the occurrence of any event of default hereunder or under the Loan
Agreement, interest shall accrue on the unpaid balance hereunder at a per annum
rate equal to four percent (4%) above the Prime Rate. Interest shall be payable
monthly on the unpaid principal balance from time to time outstanding commencing
on May 1, 1996 and on the first day of each month thereafter until April 30,
1997, when the entire unpaid balance of principal and interest shall be due and
payable. Interest shall be computed on a daily basis using a year of 360 days,
and, in such computation, effect shall be given to any change in the interest
rate resulting from a change in the Prime Rate on the date of such change in the
Prime Rate. "Prime Rate" shall mean the rate of interest established by Bank as
its prime rate as the same may be changed from time to time, which may not
necessarily be Bank's lowest rate for loans.
This Note is a note under which advances, repayments and readvances may be
made from time to time, subject to the terms and conditions of the Agreement.
This Note evidences borrowing under, is subject to, is secured in accordance
with, and may be matured under, the terms of the Agreement, to which reference
is hereby made. As additional security for this Note, Companies grant Bank a
lien on all property and assets including deposits and other credits of the
Companies, at any time in possession or control of or owing by Bank for any
purpose.
Companies hereby waive presentment for payment, demand, protest and notice
of dishonor and nonpayment of this Note and
<PAGE>
agree that no obligation hereunder shall be discharged by reason of any
extension, indulgence, release, or forbearance granted by any holder of this
Note to any party now or hereafter liable hereon or any present or subsequent
owner of any property, real or personal, which is now or hereafter security for
this Note. Any transferees of, or endorser, guarantor or surety paying this Note
in full shall succeed to all rights of Bank, and Bank shall be under no further
responsibility for the exercise thereof or the loan evidenced hereby. Nothing
herein shall limit any right granted Bank by other instrument or by law.
If the interest and principal hereof are not fully paid at maturity hereof
(whether by demand or otherwise), Companies shall pay the holder hereof all its
reasonable costs of collection of said principal and interest including, but not
limited to, reasonable attorney fees.
All agreements between Companies and the Bank pertaining to the
indebtedness described herein are expressly limited so that in no event
whatsoever shall the amount of interest paid or agreed to be paid to the Bank
exceed the highest rate of interest permissible under applicable law. If, from
any circumstances whatsoever, fulfillment of any provision of the Loan
Agreement, this Note or any other instrument securing this Note or all or any
part of the indebtedness secured thereby, at the time performance of such
provision shall be due, shall involve exceeding the interest limitation validly
prescribed by law which a court of competent jurisdiction may deem applicable
hereto, then, the obligation to be fulfilled shall be reduced to an amount
computed at the highest rate of interest permissible under such applicable law,
and if, for any reason whatsoever, the Bank shall ever receive as interest an
amount which would be deemed unlawful under such applicable law, such interest
shall be automatically applied to the payment of the principal amount described
herein or otherwise owed by Companies to Bank (whether or not then due and
payable), and not to the payment of interest.
THE UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS
A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING
(OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE,
KNOWINGLY AND VOLUNTARILY AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO THIS NOTE.
2
<PAGE>
All capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Agreement.
NOBLE INTERNATIONAL, LTD.
By: _______________________________
Its: ______________________________
PRESTOLOCK INTERNATIONAL, LTD.
By: _______________________________
Its: ______________________________
CASS RIVER COATINGS, INC.
By: _______________________________
Its: ______________________________
MONROE ENGINEERING PRODUCTS, INC.
By: _______________________________
Its: ______________________________
3
<PAGE>
EXHIBIT "B"
LINE OF CREDIT/TERM NOTE
$3,750,000 Detroit, Michigan
Dated: April 30, 1996
FOR VALUE RECEIVED, Noble International, Ltd., Monroe Engineering Products,
Inc., Cass River Coatings, Inc., and Prestolock International, Ltd., each a
Michigan corporation (herein collectively called "Companies") hereby jointly and
severally promise to pay to the order of COMERICA BANK, a Michigan banking
corporation, at 100 Renaissance Center, Detroit, Michigan 48243 ("Bank"), or at
such other place as the holder of this Note may designate in writing from time
to time, in legal tender of the United States, the principal sum of Three
Million Seven Hundred Fifty Thousand Dollars (53,750,000), or so much thereof as
may be advanced under the terms of the Loan Agreement between Companies and Bank
of even date herewith, together with interest thereon from the date hereof at a
per annum rate of one and one half percent (1 1/2%) above Bank's Prime Rate
thereafter. Upon the occurrence of any Event of Default, as defined in the Loan
Agreement, interest shall accrue on the unpaid principal balance of the Note at
a per annum rate of four and one half percent (4 l/2%) above the rate otherwise
then in effect. Interest shall be computed on a daily basis using a year of 360
days, assessed for the actual number of days elapsed, and, in such computation,
immediate effect shall be given to any change in the interest rate resulting
from a change in such Prime Rate on the date of such change in said Prime Rate.
"Prime Rate" shall mean that rate of interest established by Bank as its prime
rate for its borrowers as the same may be changed from time to time which may
not necessarily be the Bank's lowest rate for loans.
Companies agree to pay interest at the above-described rate on the unpaid
principal balance of this Note from time to time outstanding monthly commencing
on the first day of the month immediately following the month in which the
initial advance under this Note is made and on the first day of each month
thereafter.
The principal indebtedness outstanding under this Note shall be repaid in
forty eight (48) successive monthly installments of principal and interest each
equal to the amount necessary to fully amortize the principal outstanding under
this Note over the remaining term of this Note, commencing on January 1, 1997
and continuing on the first day of each month thereafter until December l, 2000
when the entire unpaid balance of principal and interest thereon shall be due
and payable. The amount of the installment payments may be adjusted from time to
time as provided in the Loan Agreement.
<PAGE>
This Note evidences indebtedness incurred by Companies under the Loan
Agreement, the terms and conditions of which are hereby incorporated herein.
Upon an Event of Default, as defined in the Loan Agreement, Bank shall be
entitled to all of the rights and remedies described therein or to which it is
entitled under applicable law.
If the interest and principal hereof are not fully paid at maturity hereof
(whether by demand or otherwise), Companies shall pay the holder hereof all its
reasonable costs of collection of said principal and interest including, but not
limited to, reasonable attorney fees.
All agreements between the Companies and the Bank pertaining to the
indebtedness described herein are expressly limited so that in no event
whatsoever shall the amount of interest paid or agreed to be paid to the Bank
exceed the highest rate of interest permissible under applicable law. If, from
any circumstances whatsoever, fulfillment of any provision of the Loan
Agreement, this Note or any other instrument securing this Note or all or any
part of the indebtedness secured thereby, at the time performance of such
provision shall be due, shall involve exceeding the interest limitation validly
prescribed by law which a court of competent jurisdiction may deem applicable
hereto, then, the obligation to be fulfilled shall be reduced to an amount
computed at the highest rate of interest permissible under such applicable law,
and if, for any reason whatsoever, the Bank shall ever receive as interest an
amount which would be deemed unlawful under such applicable law, such interest
shall be automatically applied to the payment of the principal amount described
herein or otherwise owed by Companies to Bank, (whether or not then due and
payable) and not to the payment of interest.
Companies hereby waive presentment, demand, protest and notice of dishonor
and agree that no obligation hereunder shall be discharged by any extension,
indulgence or release given to any guarantor or other person or by the release
or non-enforcement of any security or guaranty given in connection herewith.
Nothing herein shall limit any right granted Bank by other instrument or by law.
This Note may be prepaid in whole or in part at any time without penalty or
premium.
NOBLE INTERNATIONAL, LTD.
By: _______________________________
Its: ______________________________
2
<PAGE>
PRESTOLOCK INTERNATIONAL, LTD.
By: _______________________________
Its: ______________________________
CASS RIVER COATINGS, INC.
By: _______________________________
Its: ______________________________
MONROE ENGINEERING PRODUCTS, INC.
By: _______________________________
Its: ______________________________
3
<PAGE>
EXHIBIT "C"
REQUEST FOR ADVANCE
TO: COMERICA BANK (the "Bank")
The undersigned hereby request(s) an advance in the amount of
________________________________________________________________________________
_________________ DOLLARS ($____________________) against the __________________
dated April 30, 1996, of undersigned to the Bank in the face amount of _________
_______________________________________________________________Dollars
($_____________________).
The proceeds of this advance shall be deposited to the Account No.
____________________________________ of the undersigned with the Bank or as
follows: _______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_________________.
Undersigned warrant(s) that no condition exists or event has occurred which
constitutes or, with the running of time would constitute a default under that
certain Loan Agreement dated April 30, 1996, by and between undersigned and the
Bank.
Dated this ____________________ day of _______________, l9 __ .
NOBLE INTERNATIONAL, LTD.
By: _______________________________
Its: ______________________________
PRESTOLOCK INTERNATIONAL, LTD.
By: _______________________________
Its: ______________________________
<PAGE>
CASS RIVER COATINGS, INC.
By: _______________________________
Its: ______________________________
MONROE ENGINEERING PRODUCTS, INC.
By: _______________________________
Its: ______________________________
2
<PAGE>
EXHIBIT "D"
ERISA
None.
<PAGE>
EXHIBIT "E"
"Permitted Encumbrances" means
(a) liens for taxes or assessments or governmental charges or levies not
yet due or delinquent, or which can thereafter be paid without penalty, or which
are being contested in good faith by proceedings diligently pursued:
(b) unfilled inchoate mechanics' and materialmen's liens for construction
work in progress;
(c) workmen's, repairmen's, warehousemen's and carriers' liens and other
similar liens, if any, arising in the ordinary course of business;
(d) all of the following, if they do not in the opinion of Bank, upon
advice of its legal counsel or professional engineer, individually or in the
aggregate materially impair the use of any of company's material properties by
Company via: any easements, restrictions, mineral, oil, gas and mining rights
and reservations, zoning laws and defects in title;
(e) any lien for the satisfaction and discharge of which a sum of money
deemed adequate by Bank is on deposit with Bank or an institution acceptable to
Bank;
(f) liens created by or resulting from any litigation or other proceeding
(including liens arising out of judgments or awards against a Company) with
respect to which such Company is in good faith prosecuting an appeal or
proceeding for review, if such liens do not in the opinion of counsel for Bank
individually or in the aggregate materially impair the use of any of such
Company's material properties by such Company;
(g) other liens of a nature comparable to those described in clauses (a)
through (f) above which do not in the opinion of Bank, upon advice of its legal
counsel or professional engineer, individually or in the aggregate materially
impair the use of any of a Company's material properties by such Company;
(h) security interest in favor of Messrs. Frampton, Oldford, Redding,
Wojciechowski, Patterson and Lamb in machinery and equipment of Cass River
Coatings' Inc. evidenced by Michigan Secretary of State filing D060853.
(i) security interest in favor of CRA, Inc. in specified computer system
leased by Prestolock International, Ltd. as evidenced by filing no, 1616822.
(j) existing mortgages on Companies' real property located in Petosky and
Vassar, Michigan.
<PAGE>
(k) any other lien, encumbrance or charge acceptable to and approved in
writing by Bank.
5
<PAGE>
EXHIBIT "F"
Indebtedness
Indebtedness described in the financial statements dated December 31, 1995
previously delivered by Companies to Bank.
6
<PAGE>
AMENDMENT NO. 3 TO LOAN AGREEMENT
Amendment dated as of the 30th day of April, 1997, by and between Noble
International, Ltd., Monroe Engineering Products, Inc., Prestolock
International, Ltd. and Cass River Coatings, Inc., each a Michigan corporation
(individually a "Company" and collectively, "Companies") and Comerica Bank, a
Michigan banking corporation ("Bank").
RECITALS:
A. Companies and Bank entered into a Loan Agreement dated April 30, 1996,
as amended by an Amendment dated September 26, 1996 and an Amendment dated March
_ , 1997 ("Agreement"). Pursuant to the Agreement, Companies executed and
delivered to Bank a Line of Credit Note dated April 30, 1996 ("Note").
B. Companies and Bank desire further to amend the Agreement and to amend
the Note.
NOW, THEREFORE, Companies and Bank agree as follows;
1. The definition of Line of Credit Maturity Date is amended to read in its
entirety as follows;
"'Line of Credit Maturity Date' shall mean July 31, 1997."
2. Section 8.10 of the Agreement is amended to read in its entirety as
follows:
"8.10 On a combined statement basis, maintain at all times Adjusted Net
Worth of not less than the following amounts for the periods set forth below:
From the date hereof through December 31, 1996 $1,500,000
From January 1, 1997 through March 30, 1997 $1,870,000
From March 31, 1997 through June 29, 1997 $2,120,000
From June 30, 1997 through September 29, 1997 $2,370,000
From September 30, 1997 through December 30, 1997 $3,120,000
December 31, 1997 and thereafter $3,870,000"
3. The Note is amended to change the maturity date from April 30, 1997 to
July 31, 1997.
4. Companies hereby represent and warrant that, after giving effect to the
amendments contained herein, (a) the execution, delivery and performance of this
Amendment and any other documents and instruments required under this Amendment
or the Agreement are within each Company's corporate powers, have been duly
authorized, are not in contravention of law or the terms of any Company's
Articles of Incorporation or Bylaws, and do not require the consent
<PAGE>
or approval of any governmental body, agency, or authority; and this Amendment
and any other documents and instruments required under this Amendment or the
Agreement will be valid and binding in accordance with their terms; (b) the
continuing representations and warranties of Companies set forth in Sections 7.1
through 7.5 and 7.7 through 7.15 of the Agreement are true and correct on and as
of the date hereof with the same force and effect as made on and as of the date
hereof; (c) the continuing representations and warranties of Companies set forth
in Section 7.6 of the Agreement are true and correct as of the date hereof with
respect to the most recent financial statements furnished to the Bank by
Companies in accordance with Section 8.6 of the Agreement; and (d) no event of
default, or condition or event which, with the giving of notice or the running
of time, or both, would constitute an event of default under the Agreement, has
occurred and is continuing as of the date hereof.
5. This Amendment shall be deemed effective upon execution hereof by
Companies and Bank.
6. Except as modified or waived hereby, all of the terms and conditions of
the Agreement and the Note shall remain in full force and effect.
WITNESS the due execution hereof as of the day and year first written
above.
COMERICA BANK NOBLE INTERNATIONAL, LTD.
By: /s/ TIMOTHY J. DILLON By: /s/ RICHARD V. BALGENORTH
------------------------------ ------------------------------
Its: Vice President Its: Chief Financial Officer
------------------------------ ------------------------------
PRESTOLOCK INTERNATIONAL, LTD.
By: /s/ ROBERT J. SKANDALARIS
------------------------------
Its: President
------------------------------
2
<PAGE>
CASS RIVER COATINGS, INC.
By: /s/ RICHARD V. BALGENORTH
------------------------------
Its: Chairman
------------------------------
MONROE ENGINEERING PRODUCTS, INC.
By: /s/ RICHARD V. BALGENORTH
------------------------------
Its: Treasurer
------------------------------
3
July 18, 1994
Mr. Peter Raab
65 Lothrop
Grosse Pointe Farms, MI 48236
EMPLOYMENT AGREEMENT
Dear Pete:
This letter contains the terms and conditions upon which DCT Components,
Inc., formerly known as Nothdurft Tool & Manufacturing, Inc., Whitehead
Manufacturing Co., Inc., Groves Manufacturing, Inc. and NTM Fasteners, Inc.
(herein collectively the "Corporation") will employ you.
1. Title and Duties.
You shall render services in an executive capacity as Chairman and Chief
Executive Officer of the Corporation. You shall serve as a member of the Board
of Directors while an employee of the Corporation. Your duties shall be
consistent with the general duties of supervision and management as determined
by the Board of Directors of the Corporation.
In addition, you shall have the following specific duties:
(a) Develop an operating and profit plans and budgets for approval by
the Board of Directors;
(b) Develop plans and programs to achieve, maintain or enhance the
quality awards and recognition of the Corporation;
(c) Develop and implement a management training and development
program; and
<PAGE>
Mr. Peter Raab
July _____, 1994
Page 2
(d) Assure that all necessary and appropriate management systems,
policies and procedures are in place and operational; and
(e) Such other duties as shall be customarily associated with the
position of Chief Executive Officer.
Your office will be in the principal business office of the Corporation in
Clinton Township, Michigan, but you agree to take such trips and temporary
assignments away from this office as may be required in the performance of your
responsibilities as Chairman and Chief Executive Officer.
You shall devote your full business time and effort to the performance of
your duties for the Corporation. Your services to the Corporation shall he
rendered to the best of your ability and with loyalty to the Corporation. You
shall not, during the term of this Agreement, render services to any person,
firm, or corporation in any business that is competitive with the business of
the Corporation; nor shall you have any interest, direct or indirect, in any
business that is competitive with the business of the Corporation, other than
ownership of not more than two (2%) percent of the outstanding stock of any
corporation whose stock is held of record by more than 500 stockholders and is
actively traded.
2. Term.
The term of your employment with the corporation shall commence July 18,
1994 (the "Employment Date" ) and shall be terminable by either party upon
thirty (30) days written notice, as
<PAGE>
Mr. Peter Raab
July _____, 1994
Page 3
set forth in Paragraph 4(c) herein.
3. Compensation and Benefits.
Your compensation for the services you render shall be as follows:
(a) Salary.
The Corporation shall pay you an annual salary of $150,000.00
payable in weekly installments (less applicable withholding and
payroll taxes). This salary level will be reviewed annually. Salary
increases will be awarded based upon performance. Provided, however,
for each year that the Corporation is profitable (using the aggregate
profits and losses of each entity included in the definition of
Corporation) your percentage salary increase shall be not less than
the percentage Consumer Price Increase for that year in the
metropolitan Detroit area.
(b) Bonus.
You shall be entitled to a bonus based upon the profitability of
the Corporation as well as a subjective review of your overall
performance and meeting the management goals and objectives as
established by the Board of Directors. The total bonus for which you
will be eligible is 100% of your salary. The portion of your bonus
based upon profitability shall be 75% of your total bonus and shall be
computed using a formula tied to the profitability of the Corporation
as a percentage of total sales and
<PAGE>
Mr. Peter Raab
July ____, 1994
Page 4
shall be paid annually by March 15, for the preceding calendar year's
performance or parts thereof.
For your bonus computation based upon profitability, a factor
shall be applied to each year's pre-tax profit percentage of sales
based upon the following formula:
Years ending December 31st Factor
-------------------------- ------
1994, 1995, 1996 20x
1997, 1998 15x
1999 and thereafter 10x
By way of example, if the annual profit as a percentage of sales is 6%
for the year ending December 31, 1996, your bonus, based upon
profitability, would be 20 times 6% or 120% of your salary, provided,
however, the aggregate bonus based upon profit percentage cannot
exceed 75% of your annual salary. In addition to the annual profit
percentage bonus, you shall be eligible for an additional annual bonus
based upon the overall performance of the Corporation and your
achieving your management objectives. In awarding this bonus, the
Board will consider the Corporation's overall profitability and cost
percentages, quality awards, management team and operating systems and
your achieving your management objectives. This bonus award shall also
be paid by March 15, for the preceding calendar year's performance or
parts thereof. For purposes of this Agreement, the term "pre-tax
profit" shall be the pre-tax profit of the Corporation as computed by
the certified public accountant regularly retained by the Corporation
in
<PAGE>
Mr. Peter Raab
July ____, 1994
Page 5
accordance with generally accepted accounting principles consistently
applied. It is our intention that you have a realistic opportunity to
earn a bonus of up to 100% of your then annual salary when considering
both of the components outlined above.
(c) Equity Participation Plan.
Upon the completion of your eighteenth (18th) month of
employment, you will be entitled to participate in future equity
growth in the Corporation through a phantom stock plan, stock
appreciation rights plan, equity participation contract or similar
plan to be developed by the Corporation and mutually agreed upon. Your
equity participation plan would have the following attributes:
(i) Months 19 to 30 1%
Months 31 to 43 2%
Months 44 to 56 3%
Months 57 to 69 4%
Months 70 to 82 5%
You would be entitled to receive the applicable percentage
increase above net book value (stockholder equity) as of December 31,
1995, as computed by the certified public accountant then serving the
Corporation in accordance with generally accepted accounting
principles consistently applied, upon termination of your employment
with the Corporation and in accordance with the payment terms
incorporated into the plan;
<PAGE>
Mr. Peter Raab
July ____, 1994
Page 6
(ii) Each of the applicable years allocation under the plan
shall be immediately vested; and
(iii) Upon your termination of employment any payments you may be
entitled to under the plan shall be paid in accordance with
the terms of the plan.
(d) Business Expenses.
The Corporation shall reimburse you for business travel and
entertainment expenses consistent with the Corporation's policies as
they exist from time to time.
(e) Automobile Allowance.
The Corporation shall pay you a One Thousand and no/100
($1,000.00) Dollar per month car allowance to cover all of your
automobile expenses.
(f) Life Insurance.
The Corporation shall pay the annual premium on a Seven Hundred
Sixty-Nine Thousand and no/100 ($769,000.00) Dollar term life
insurance policy on your life to be owned by you and you shall have
the right to designate the beneficiary.
(g) Disability Insurance.
The Corporation shall pay the premium on, or, shall reimburse the
premium to you for a Five Thousand and no/100 ($5,000.00) Dollars per
month disability income insurance policy.
<PAGE>
Mr. Peter Raab
July ____, 1994
Page 7
(h) Vacation.
You shall be entitled to five (5) weeks vacation per year.
(i) Detroit Athletic Club.
The Corporation shall reimburse you for all dues and assessments
for your membership in the Detroit Athletic Club.
(j) Young Presidents Organization.
The Corporation shall be responsible for your annual dues and the
cost for you to attend an area conference or university on alternating
years. The annual cost shall not exceed $8,000.00 unless otherwise
mutually agreed.
(k) Health Insurance.
The Corporation shall provide health insurance coverage for you
and your family in accordance with the Corporation's plan in effect
from time to time. For the first ninety (90) days, the Corporation
shall reimburse your COBRA coverage costs from your former employer.
(1) Other Benefits.
You shall be allowed to participate in all other benefit plans
provided to employees in accordance with their respective eligibility
requirements, including by way of example, the 401(k) and profit
sharing plan.
<PAGE>
Mr. Peter Raab
July ____, 1994
Page 8
4. Termination.
(a) Automatic Termination.
This Agreement shall automatically terminate upon your death or
disability. Disability shall mean physical or mental illness which, in
the reasonable opinion of the Board of Directors of the Corporation,
results in your inability to perform the duties required under this
Agreement for a period of three (3) consecutive months. Such
disability shall constitute a termination for cause, as described in
Subparagraph (b) below.
(b) Termination for Cause.
This Agreement may be terminated by the Corporation for cause
immediately upon written notice to you specifying with particularity
the basis for termination. Termination shall be deemed to be "for
cause" if you have been dismissed for dishonesty, conviction of a
felony, material breach of this Agreement (including breach of
confidentiality as set forth in Paragraph 5 below) and gross
insubordination or performing duties in an unsatisfactory manner.
Provided, however, if you are being terminated by the Corporation for
"performing duties in an unsatisfactory manner", prior to your
termination, the Corporation shall be obligated to give you notice in
writing of those duties which you are performing not to the
satisfaction of the Corporation. After the receipt of said notice, you
shall have one hundred eighty (180) days to improve your performance
and during
<PAGE>
Mr. Peter Raab
July ____, 1994
Page 9
this period the Corporation shall provide written evaluations every
thirty (30) days of your performance. After the one hundred eighty
(180) day period, if the Corporation still has determined that you are
performing your duties in an unsatisfactory manner, your termination
for cause shall be effective upon the expiration of the one hundred
eighty (180) day period. In the event of any termination for cause as
provided in this Paragraph 4(b), you shall no longer be an employee of
the Corporation and shall have no rights hereunder. In the event of
termination for cause, all payments and benefits, including any
accrued bonus for the previous fiscal year and equity participation
plan, as provided herein shall terminate on the effective date of your
termination.
(c) Termination Without Cause.
This Agreement my be terminated by either you or the Corporation
without cause upon thirty (30) days prior written notice.
(d) Severance Benefits.
If (i) this Agreement is terminated by the Corporation pursuant
to Paragraph 4(c) during the first thirty-six (36) months of the
Agreement, you shall be entitled to receive in addition to
compensation set forth in Paragraph 3(a), severance benefits equal to
twelve (12) months salary and benefits excluding any bonus to which
you might otherwise have been entitled (less applicable withholding
and payroll taxes) but reduced by the amount
<PAGE>
Mr. Peter Raab
July ____, 1994
Page 10
of your salary for such period from any other employment and payable
at the time such salary payments would otherwise be made. You shall
promptly advise the Corporation of any reemployment. Such payments
shall be in full settlement of any and all claims at law or in equity
you may have against the Corporation.
Other than Severance Benefits provided in this Paragraph 4(d),
your compensation and benefits are payable only through the date of
termination of your employment. Any salary payable to you for the
period prior to termination shall be prorated on a daily basis. Should
the Corporation be sold and you are thereafter terminated within
twelve (12) months of the date of sale, the severance payments to
which you shall be entitled shall be for twelve (12) months. Sale is
hereby understood to include a sale or transfer of controlling stock
interest.
Upon any termination of this Agreement, your obligations under
Paragraph 5 of this Agreement will survive. Provided that the economic
responsibilities of the Corporation are met in a timely fashion.
5. Confidential Information, Inventions, Etc.
(a) You shall not during the term of this Agreement or after
termination, directly or indirectly,
(i) Attempt to induce any employee of the Corporation to render
services for any other employer; or
(ii) Use or furnish to anyone (except as
<PAGE>
Mr. Peter Raab
July ____, 1994
Page 11
required in the ordinary course of performing your employment duties
for the Corporation) any confidential information, invention,
discoveries, technical data, product data, financial data or trade
secrets relating to the Corporation's business, including information
relating to processes, or contracts involved in such business, or the
design, production, sale, or distribution of any products of the
Corporation, or the personnel of the Corporation or their compensation
or employment arrangements, or the identity of, or products purchased,
or customers of, or prices paid by, customers of the Corporation.
Records prepared by you or that come into your possession during your
employment are and remain the property of the Corporation, and when
your employment terminates, such records and any copies or summaries
must be left with the Corporation. The Corporation shall be entitled
to injunctive relief if you violate this Paragraph, in addition to any
other remedy provided by law.
(b) You will treat as for the sole benefit of the Corporation, and
fully and promptly disclose and assign to the Corporation, without
additional compensation, all ideas, discoveries, inventions and
improvements, whether patentable or not, which relate to the business,
activities or interests of the Corporation or which result from or relate
to the subject matter of any work which you may do for, on the premises of,
at the expense of, or on behalf of the Corporation, and which are or have
been
<PAGE>
Mr. Peter Raab
July ____, 1994
Page 12
made, conceived or reduced to practice by you, alone or jointly with
others, during or after usual working hours, either on or off your job,
while you are employed by the Corporation. All such ideas, discoveries,
inventions and improvements which you may claim to have been conceived by
you, solely or jointly, within six (6) months after the termination of such
employment shall be presumed to have been made during such employment
unless you prove otherwise.
At the Corporation's expense, at any time during or after such employment,
you will sign all papers and do such other acts as the Corporation deems
necessary or desirable or may reasonably require of you to assign and protect
the Corporation's or its nominee's rights to such ideas, discoveries, inventions
and improvements, including applying for, obtaining and enforcing patents,
trademarks or copyrights on such ideas, discoveries, inventions and improvements
in any and all countries of the world.
6. Covenant Not To Compete.
You agree that for a period of two (2) years following termination of this
Agreement either by you or the Corporation, you shall not enter into any
arrangement or understanding, be employed by, engage in, be connected with, or
have any interest in, directly or indirectly as owner, partner, shareholder,
director, manager, supervisor, or any other kind of employee, agent, consultant,
or advisor, any entity which competes
<PAGE>
Mr. Peter Raab
July ____, 1994
Page 13
with the Corporation anywhere in the States of Michigan, Indiana, Ohio and
Illinois or the Province of Ontario, Canada. Excluded from this Paragraph is
your ownership of not more than two (2%) percent of the outstanding stock of any
corporation whose stock is held of record by more than 500 stockholders and is
actively traded. The Corporation shall be entitled to injunctive relief if you
violate this Paragraph, in addition to any other remedy provided by law.
7. Successors or Assigns.
This Agreement shall be binding upon the successors and assigns of the
Corporation, any assigns of all or substantially all of its business, and any
other corporation into which the Corporation may be merged or with which it may
be consolidated. This Agreement, and any rights you my have to receive payments,
may not be assigned or pledged by you.
8. Other.
Any dispute or claim involving this Agreement shall be settled by an
arbitration in Southfield, Michigan under the commercial rules of the American
Arbitration Association. Any dispute or claim shall be deemed waived unless
arbitration is demanded within ninety (90) days of the occurrence giving rise to
the dispute or claim. The arbitrator shall have no authority to change any
provision of this Agreement; the arbitrator's sole authority shall be to
interpret or apply the provisions of this
<PAGE>
Mr. Peter Raab
July , 1994
Page 14
Agreement. The decision of the arbitrator shall be final and binding and the
exclusive remedy for any alleged breach of the employment relationship. Judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction.
Any notice given pursuant to this Agreement shall be deemed given when sent
by nationally recognized courier service, registered or certified mail, postage
prepaid and return receipt requested, addressed to the appropriate party; if to
the Corporation, at 20101 Hoover Road, Detroit, Michigan 48205, and if to you,
at the address indicated above, unless notice of a different address has been
given.
This Agreement contains our entire agreement and supersedes all prior oral
or written understandings and agreements. We can modify this Agreement only by a
writing signed by both you and the Corporation. This Agreement is governed by
Michigan law.
If you agree with the terms of this letter, please sign and return the
enclosed copy to make it our binding agreement. This letter has been approved by
the Corporation's Board of Directors.
DCT COMPONENTS, INC.
By: /s/ Bronce Henderson
---------------------------
Bronce Henderson
Its: Director
Accepted, and Agreed:
/s/Peter Raab
- --------------------- Dated: 9/2, 1994
Peter Raab
<PAGE>
AMENDMENT OF EMPLOYMENT AGREEMENT
This Amendment of Employment Agreement (hereinafter referred to as "Amendment")
is made and entered into this 30th day of June, 1996 by and between DCT
Component Systems, Inc. (hereinafter referred to as the "Corporation") and Peter
Raab (hereinafter referred to as the "Employee").
WITNESSETH
WHEREAS, the Corporation and Employee entered into an Employment Agreement dated
July 18, 1994 whereby the Corporation agreed to employ the Employee as the
Chairman and Chief Executive of the Corporation (hereinafter referred to as
"Employment Agreement"), and the Employee agreed to be employed by the
Corporation on such basis, a copy of which is attached hereto as Exhibit A and
thereby made a part hereof;
WHEREAS, simultaneously herewith, the Corporation is selling to the Employee,
and the Employee is purchasing from the Corporation, Two Hundred Sixty-Nine
(269) shares of the common stock of the Corporation pursuant to a stock Purchase
Agreement of even date herewith (hereinafter referred to as "Stock Purchase
Agreement");
WHEREAS, simultaneously herewith, the Corporation is adopting an Executive Bonus
Pool Plan whereby the Corporation shall provide bonuses to certain key employees
and managers of the Corporation, including officers and directors, based upon
the pre-tax earnings of the Corporation, for which the Employee will be eligible
(hereinafter referred to as "Bonus Pool Plan");
WHEREAS, in consideration of the benefits to which Employee shall become
entitled to under the Stock Purchase Agreement and the Bonus Pool Plan, Employee
has agreed to amend the Employment Agreement to eliminate certain provisions of
the Employment Agreement regarding bonuses to be provided by, and equity
participation in, the Corporation;
NOW THERFORE, for and in consideration of the promises and mutual agreements
herewith set forth, the parties hereto agree as follows:
Section 1. Bonus. The parties hereby agree that the Employment
Agreement is amended to delete Section 3(b) of the Employment Agreement
in its entirety.
<PAGE>
Section 2. Equity Participation Plan. The parties hereby agree that
the Employment Agreement is amended to delete Section 3 (c) of the
Employment Agreement in its entirety
Section 3. Waiver. Employee waives and any and all rights whether
absolute or contingent, accrued or unaccrued, that he may have under
Section 3 (b) and Section 3 (c) of the Employment Agreement.
Section 4. Continuation. Except as provided above, the Employment
Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
as of the day first above written.
WITNESSETH: "EMPLOYEE"
/s/ Peter Raab
- ---------------- --------------------
Peter Raab
- ----------------
"CORPORATION"
DCT COMPONENT SYSTEMS, INC.
a Michigan Corporation
By: /s/ Robert J. Skandalaris
- ----------------- --------------------------
- ----------------- ITS: CEO
--------------------
2
LOAN AND SECURITY AGREEMENT
This Agreement is between the undersigned Borrower and the undersigned
Lender concerning loans and other credit accommodations to be made by Lender to
Borrower.
SECTION 1. PARTIES
1.1 "Borrower" is the person, firm, corporation or other entity, identified
as the Borrower in Section 10.6(c) and its successors and assigns. If more than
one Borrower is specified in Section 10.6(c), all references to Borrower shall
mean each of them, jointly and severally, individually and collectively, and the
successors and assigns of each.
1.2 "Lender" is The CIT Group/Credit Finance, Inc., a Delaware corporation,
and its successors and assigns.
SECTION 2. LOANS AND OTHER CREDIT ACCOMMODATIONS
2.1 Revolving Loans. Lender shall, subject to the terms and conditions
contained herein, make revolving loans to Borrower ("Revolving Loans") in
amounts requested by Borrower from time to time, but not in excess of the Net
Availability existing immediately prior to the making of the requested loan and
provided the requested loan would not cause the outstanding Obligations to
exceed the Maximum Credit.
(a) The "Maximum Credit" is set forth in Section 10.1(a).
(b) The "Gross Availability" shall be calculated at any time as the
sum of:
(i) the product obtained by multiplying the outstanding amounts
of Eligible Trade Accounts, Eligible Tooling Accounts and Eligible
Chrysler Accounts, in each case net of all taxes, discounts,
allowances and credits given or claimed, by the applicable Eligible
Accounts Percentages described in Section 10.l(b)(l) consisting of the
Eligible Trade Accounts Percentage set forth in Section 10.l(b)(l)(i)
for Eligible Trade Accounts, the Eligible Tooling Accounts Percentage
set forth in Section 10.l(b)(l)(ii) for Eligible Tooling Accounts and
the Eligible Chrysler Accounts Percentage set forth in Section
10.(b)(l)(iii) for Eligible Chrysler Accounts, but the amounts so
added shall not exceed any applicable sublimits set forth in Section
10.1(c), and
(ii) the product(s) obtained by multiplying the applicable
Eligible Inventory Percentage(s), if any, set forth in Section
10.1(b)(2) by the values (as
<PAGE>
determined by Lender based on the lower of cost or market value) of
Eligible Inventory, but the amounts so added shall not exceed any
sublimits set forth in Section 10.1(c),
minus any Reserves.
(c) The "Net Availability" shall be calculated at any time as an
amount equal to the Gross Availability minus the aggregate amount of all
then-outstanding Obligations to Lender other than the then outstanding
principal balance of the Term Loan, if any.
(d) "Eligible Accounts" are accounts created by Borrower in the
ordinary course of its business which are and remain acceptable to Lender
for lending purposes. General criteria for Eligible Accounts are set forth
below but may be revised from time to time by Lender, in its sole judgment,
on fifteen (15) days' prior written notice to Borrower. Lender shall, in
general, deem accounts to be Eligible Accounts if:
(1) such accounts arise from bona fide completed transactions and
have not remained unpaid for more than the number of days after the
invoice date set forth in Section 10.1(d);
(2) the amounts of the accounts reported to Lender are absolutely
owing to Borrower and do not arise from sales on consignment,
guaranteed sale or other terms under which payment by the account
debtors may be conditional or contingent;
(3) the account debtor's chief executive office or principal
place of business is located in the continental United States;
(4) such accounts do not arise from progress billings or
retainages or bill and hold sales;
(5) there are no contra relationships, setoffs, counterclaims or
disputes existing with respect thereto and there are no other facts
existing or threatened which would impair or delay the collectibility
of all or any portion thereof;
(6) the goods giving rise thereto were not at the time of the
sale subject to any liens except those permitted in this Agreement;
(7) such accounts are not accounts with respect to which the
account debtor or any officer or employee thereof is an officer,
employee or agent of or is affiliated with Borrower, directly or
indirectly, whether by virtue of family membership, ownership,
control, management or otherwise;
2
<PAGE>
(8) such accounts are not accounts with respect to which the
account debtor is the United States or any State or political
subdivision thereof or any department, agency or instrumentality of
the United States, any State or political subdivision, unless there
has been compliance with the Assignment of Claims Act or any similar
State or local law, if applicable;
(9) Borrower has delivered to Lender or Lender's representative
such original documents as Lender may have requested pursuant to
Section 5.8 hereof in connection with such accounts and Lender shall
have received a verification of such account, satisfactory to it, if
sent to the account debtor or any other obligor or any bailee pursuant
to Section 5.4 hereof;
(10) there are no facts existing or threatened which might result
in any adverse change in the account debtor's financial condition;
(11) such accounts owed by a single account debtor (other than
the account debtors set forth in Section 10.l(f)) or its affiliates do
not represent more than twenty (20%) percent of all otherwise Eligible
Accounts (accounts excluded from Eligible Accounts solely by reason of
this subsection (11) shall nevertheless be considered Eligible
Accounts to the extent of the amount of such accounts which does not
exceed twenty (20%) percent of all otherwise Eligible Accounts);
(12) such accounts are not owed by an account debtor who is or
whose affiliates are past due upon other accounts owed to Borrower
comprising more than fifty percent (50%) of the accounts of such
account debtor or its affiliates owed to Borrower;
(13) such accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the amount of any customer
credit limits as established by Borrower or credit limits on such
accounts as established by Lender, and changed, from time to time by
Lender on notice to Borrower (accounts excluded from Eligible Accounts
solely by reason of this subsection (13) shall nevertheless be
considered Eligible Accounts to the extent the amount of such accounts
does not exceed such customer credit limit); and
(14) such accounts are owed by account debtors deemed
creditworthy at all times by Lender.
(e) "Eligible Accounts Percentages" shall mean any or all of the
Eligible Trade Accounts Percentage, Eligible Tooling Accounts Percentage
and Eligible Chrysler Accounts Percentage, as defined in Section
10.l(b)(l).
(f) "Chrysler" shall mean Chrysler Corporation, with an address at 800
Chrysler Drive, Auburn Hills, Michigan 4832-2757.
3
<PAGE>
(g) "DCTWA" shall mean DCT Welding and Assembly, Inc., a Michigan
corporation.
(h) "Eligible Trade Accounts" are any Eligible Accounts which
constitute trade receivables of Borrower, excluding any and all trade
receivables owing to Borrower by Chrysler.
(i) "Eligible Tooling Accounts" are any Eligible Accounts which
constitute tooling receivables of Borrower in which the account debtor of
such account has acknowledged in writing the acceptance of the die.
(j) "Eligible Chrysler Accounts" are any Eligible Accounts which
constitute trade receivables and are owing to Borrower by Chrysler.
(k) "Eligible Inventory" is inventory owned by Borrower which is and
remains acceptable to Lender for lending purposes and is located at one of
the addresses set forth in Section 10.6(e). Eligible Inventory shall not
include (i) inventory in the possession of a bailee, consignee,
warehouseman or processor or located at a location leased by Borrower,
unless such bailee, consignee, warehouseman, processor or landlord, as
applicable, delivers to Lender an agreement in form and substance
satisfactory to Lender, together with such Uniform Commercial Code
financing statements as Lender shall require or (ii) inventory located at a
location owned by Borrower which is subject to a mortgage in favor of any
person other than Lender, unless such person delivers to Lender an
agreement in form and substance satisfactory to Lender.
(1) "Eligible Equipment" is equipment owned by Borrower, which is and
remains acceptable to Lender for lending purposes and is located at one of
the addresses set forth in Section 10.6(f).
(m) "Eligible Raw Materials Inventory" is all Eligible Inventory which
constitutes components and service parts.
(n) "Eligible Finished Goods Inventory" is all Eligible Inventory
which constitutes finished goods and coiled steel.
(o) Lender shall have a continuing right to deduct reserves in
determining the Gross Availability ("Reserves"), and to increase and
decrease such Reserves from time to time, if and to the extent that, in
Lender's sole judgment, such Reserves are necessary to protect Lender
against any state of facts which does, or would, with notice or passage of
time or both, constitute an Event of Default or have an adverse effect on
any Collateral. Lender may, at its option, implement Reserves by
designating as ineligible a sufficient amount of accounts and/or inventory
which would otherwise be Eligible Accounts or Eligible Inventory so as to
reduce Gross Availability by the amount of the intended Reserve.
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(p) Subject to the terms and conditions hereof, including but not
limited to the existence of sufficient Gross Availability and Net
Availability, Borrower agrees to borrow amounts from time to time such that
the aggregate outstanding Revolving Loans and term loans, if any, shall at
all times equal or exceed the principal amount set forth in Section 10.1(e)
as the Minimum Borrowing. Borrower covenants, represents and warrants to
Lender that it will maintain Gross Availability and Net Availability at all
times in amounts sufficient to permit Borrower to comply with the Minimum
Borrowing requirement; provided, however, that if Borrower fails to do so,
whether or not sufficient Gross Availability or Net Availability shall
exist at any time or from time to time, interest shall nevertheless accrue
on the Obligations as if Borrower has at all times borrowed such amounts as
would have been sufficient to maintain the outstanding Revolving Loans at
an amount equal to such Minimum Borrowing (and Lender shall have the right
to charge Borrower's loan account for such additional interest); and,
provided, further, however that such accrual of interest shall not impose
upon Lender any obligation to make loans to Borrower to increase the
outstanding Revolving Loans to such Minimum Borrowing.
2.2 Term Loan. The principal amount of the term loan being made
contemporaneously with the initial Revolving Loans by Lender to Borrower is
$2,819,513.75, as set forth in Section 10.2 (the "Term Loan"). Borrower
unconditionally promises to pay to the order of Lender the principal sum of
$2,819,513.75, which sum shall be payable in 23 consecutive monthly installments
on the first day of each month commencing August, 1996. The first 22
installments shall be in the amount of $46,992.00 each and shall be paid in
addition to any other payments of interest or fees otherwise due and payable to
Lender in connection with the Term Loan. The final installment shall be made on
the first day of June, 1998 in the amount of the then unpaid principal balance
hereof and shall include all accrued and unpaid interest thereon.
2.3 Accommodations.
(a) Lender may, in its sole discretion, issue or cause to be issued,
from time to time at Borrower's request and on terms and conditions and for
purposes satisfactory to Lender, credit accommodations consisting of
letters of credit, merchandise purchase guaranties or other guaranties or
indemnities for Borrower's account ("Accommodations"). Borrower shall
execute and perform additional agreements relating to the Accommodations in
form and substance acceptable to Lender and the issuer of any
Accommodations, all of which shall supplement the rights and remedies
granted herein. Any payments made by Lender or any affiliate of Lender in
connection with the Accommodations shall constitute additional Revolving
Loans to Borrower.
(b) In addition to the fees and costs of any issuer in connection with
issuing or administering Accommodations, Borrower shall pay monthly to
Lender, on the first day of each month, a charge on open Accommodations at
the rate per annum set forth in Section 10.3(a) (the "Accommodation
Charges").
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(c) No Accommodation will be issued unless the full amount of the
Accommodation requested, plus fees and costs for issuance, is less than the
Net Availability existing immediately prior to the issuance of the
requested Accommodation, or if the requested Accommodation would cause the
outstanding Obligations to exceed the Maximum Credit, or cause the open
amount of Accommodations to exceed, at any time, the Accommodation sublimit
set forth in Section 10.3(b).
(d) All indebtedness, liabilities and obligations of any sort
whatsoever, however arising, whether present or future, fixed or
contingent, secured or unsecured, due or to become due, paid or incurred,
arising or incurred in connection with any Accommodation shall be included
in the term "Obligations", as defined herein, and shall include, without
limitation, (i) all amounts due or which may become due under any
Accommodation; (ii) all amounts charged or chargeable to Borrower or to
Lender by any bank, other financial institution or correspondent bank which
opens, issues or is involved with such Accommodations; (iii) Lender's
Accommodation Charges and all fees, costs and other charges of any issuer
of any Accommodation; and (iv) all duties, freight, taxes, costs, insurance
and all such other charges and expenses which may pertain directly or
indirectly to any Obligations or Accommodations or to the goods or
documents relating thereto.
(e) Borrower unconditionally agrees to indemnify and hold Lender
harmless from any and all loss, claim or liability (including reasonable
attorneys' fees) arising from any transactions or occurrences relating to
any Accommodation established or opened for Borrower's account, the
Collateral relating thereto and any drafts thereunder, including any such
loss or claim due to any action taken by an issuer of any Accommodation.
Borrower further agrees to indemnify and hold Lender harmless for any
errors or omissions in connection with the Accommodations, whether caused
by Lender, by the issuer of any Accommodation or otherwise. Borrower's
unconditional obligation to indemnify and hold Lender harmless under this
provision shall not be modified or diminished for any reason or in any
manner whatsoever, except for Lender's gross negligence or wilful
misconduct. Borrower agrees that any charges made to Lender by any issuer
of any Accommodation shall be conclusive on Borrower and may be charged to
Borrower's account.
(f) Lender shall not be responsible for: the conformity of any goods
to the documents presented; the validity or genuineness of any documents;
delay, default, or fraud by the Borrower or shipper and/or anyone else in
connection with the Accommodations or any underlying transaction.
(g) Borrower agrees that any action taken by Lender, if taken in good
faith, or any action taken by an issuer of any Accommodation, under or in
connection with any Accommodation, shall be binding on Borrower and shall
not create any resulting liability to Lender. In furtherance thereof,
Lender shall have the full right and authority to clear and resolve any
questions of non-compliance of documents; to give any instructions as
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to acceptance or rejection of any documents or goods; to execute for
Borrower's account any and all applications for steamship or airway
guarantees, indemnities or delivery orders; to grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
or documents; and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions
of any of the applications or Accommodations. All of the foregoing actions
may be taken in Lender's sole name, and the issuer thereof shall be
entitled to comply with and honor any and all such documents or instruments
executed by or received solely from Lender, all without any notice to or
any consent from Borrower. None of the foregoing actions described in this
subsection (g) may be taken by Borrower without Lender's express written
consent.
2.4 Certain Amounts Due on Demand. Lender may, in its sole discretion, make
or permit Revolving Loans, Accommodations or other Obligations in excess of the
Maximum Credit, Gross or Net Availability or applicable formulas or sublimits.
All or any portion of such excess(es) shall become immediately due and payable
upon Lender's demand.
SECTION 3. INTEREST AND FEES
3.1 (a) Interest on the Revolving Loans and the Term Loan shall be payable
by Borrower on the first day of each month and shall be calculated at the per
annum rate set forth as the Interest Rate in Section 10.4(a). Interest on the
Revolving Loans shall be calculated upon the closing daily balances in the loan
account of Borrower for each day during the immediately preceding month. The
Interest Rate shall increase or decrease by an amount equal to each increase or
decrease, respectively, in the Prime Rate, effective as of the date of each such
change. Interest shall be calculated on the basis of a three hundred sixty (360)
day year and actual days elapsed. On and after any Event of Default or
termination or non-renewal hereof, interest on all unpaid matured obligations
shall accrue at a rate equal to two percent (2%) per annum in excess of the
Interest Rate otherwise payable until such time as all Obligations are
indefeasibly paid in full (notwithstanding entry of any judgment against
Borrower or the exercise of any other right or remedy by Lender), and all such
interest shall be payable on demand. In no event shall charges constituting
interest exceed the rate permitted under any applicable law or regulation, and
if any provision of this Agreement is in contravention of any such law or
regulation, such provision shall be deemed amended to conform thereto.
(b) The "Prime Rate" is the rate of interest publicly announced by Chase
Manhattan Bank, or its successor, in New York, New York from time to time as its
prime rate (or the equivalent rate charged from time to time by its successor).
The Prime Rate is not intended to be the lowest rate of interest charged by
Chase Manhattan Bank or its successor to its borrowers.
3.2 Borrower shall pay Lender on the date hereof a Closing Fee in the
amount set forth in Section 10.4(b), which fee is fully earned and payable as of
the date hereof.
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3.3 Borrower shall pay Lender on each anniversary of the date hereof a
Facility Fee in the amount set forth in Section 10.4(c), which fee is fully
earned as of the date hereof.
3.4 Borrower shall pay Lender monthly, on the first day of each month
during the initial and each renewal Term an Account Servicing Fee for the
immediately preceding month (or part thereof) in the amount set forth in Section
10.4(d).
3.5 Borrower shall pay Lender monthly, on the first day of each month, in
arrears, an Unused Line Fee for each month during the initial and each renewal
Term at the rate per annum set forth in Section 10.4(e), calculated upon the
amount, if any, by which the Maximum Credit exceeds the average daily
outstanding principal balance of all Revolving Loans, Accommodations and any
Term Loan, in each case during the preceding month.
3.6 At Lender's option, all principal, interest, fees, costs, expenses and
other charges provided for in this Agreement, or in any other agreement now or
hereafter existing between Lender and Borrower, may be charged to any loan
account of Borrower maintained by Lender. Interest, fees for Accommodations, the
Unused Line Fee and any other amounts payable by Borrower to Lender based on a
per annum rate shall be calculated on the basis of actual days elapsed over a
360-day year.
3.7 For purpose of calculating any interest, fees, balances or expenses,
the outstanding daily principal balance of the Revolving Loans shall be deemed
to be zero in the event the outstanding daily principal balance of the Revolving
Loans is a credit balance (i.e., less than zero).
SECTION 4. GRANT OF SECURITY INTEREST
4.1 To secure the prompt and complete payment and performance in full of
all Obligations, Borrower hereby grants to Lender a continuing security interest
in and lien upon, and a right of setoff against, and Borrower hereby assigns and
pledges to Lender, all of the Collateral, including any Collateral not deemed
eligible for lending purposes.
4.2 "Obligations" shall mean any and all Revolving Loans, Term Loans,
Accommodations and all other indebtedness, liabilities and obligations of every
kind, nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, whether arising
under this Agreement or otherwise, whether now existing or hereafter arising,
whether arising before, during or after the initial or any renewal Term or after
the commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar statute, whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, original, renewed or extended and whether
arising directly or howsoever acquired by Lender including from any other entity
outright, conditionally or as collateral security, by
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assignment, merger with any other entity, participations or interests of Lender
in the obligations of Borrower to others, assumption, operation of law,
subrogation or otherwise and shall also include all amounts chargeable to
Borrower under this Agreement or in connection with any of the foregoing.
4.3 "Collateral" shall mean all of the following property of Borrower:
(a) All now owned and hereafter acquired right, title and interest of
Borrower in, to and in respect of all: accounts, interests in goods
represented by accounts, returned, reclaimed or repossessed goods with
respect thereto and rights as an unpaid vendor; contract rights; chattel
paper; investment property; general intangibles (including, but not limited
to, tax and duty refunds, registered and unregistered patents, trademarks,
service marks, copyrights, trade names, applications for the foregoing,
trade secrets, goodwill, processes, drawings, blueprints, customer lists,
licenses, whether as licensor or licensee, choses in action and other
claims, and existing and future leasehold interests in equipment, real
estate and fixtures); documents (including, but not limited to, any and all
bills of lading, dock warrants, clock receipts, warehouse receipts, and
orders for delivery of goods and all other documents of title);
instruments; letters of credit, bankers' acceptances or guaranties; cash
monies, deposits, securities, bank accounts, deposit accounts, credits and
other property now or hereafter held in any capacity by Lender, its
affiliates or any entity which, at any time, participates in Lender's
financing of Borrower or at any other depository or other institution;
investment property; agreements or property securing or relating to any of
the items referred to above;
(b) All now owned and hereafter acquired right, title and interest of
Borrower in, to and in respect of goods, including, but not limited to:
(i) All inventory, wherever located, whether now owned or
hereafter acquired, of whatever kind, nature or description, including
all raw materials, work-in-process, finished goods, and materials to
be used or consumed in Borrower's business; and all names or marks
affixed to or to be affixed thereto for purposes of selling same by
the seller, manufacturer, lessor or licensor thereof;
(ii) All equipment and fixtures, wherever located, whether now
owned or hereafter acquired, including, without limitation, all
machinery, equipment, motor vehicles, furniture and fixtures, and any
and all additions, substitutions, replacements (including spare
parts), and accessions thereof and thereto; and
(iii) All consumer goods, farm products, crops, timber, minerals
or the line (including oil and gas), wherever located, whether now
owned or hereafter acquired, of whatever land, nature or description;
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(c) All now owned and hereafter acquired right, title and interests of
Borrower in, to and in respect of any other personal property in or upon
which Lender has or may hereafter have a security interest, lien or right
of setoff;
(d) All present and future books and records relating to any of the
above including, without limitation, all computer programs, printed output
and computer readable data in the possession or control of the Borrower,
any computer service bureau or other third party; and
(e) All products and proceeds of the foregoing in whatever form and
wherever located, including, without limitation, all insurance proceeds and
all claims against third parties for loss or destruction of or damage to
any of the foregoing.
SECTION 5. COLLECTION AND ADMINISTRATION
5.1 Borrower is authorized to collect the accounts and any other proceeds
of Collateral on behalf of and in trust for Lender, at Borrower's expense, but
such authority shall automatically terminate upon an Event of Default. Lender
may modify or terminate such authority at any time whether or not an Event of
Default has occurred and directly collect the accounts and other monetary
obligations included in the Collateral. Borrower shall, at Borrower's expense
and in the manner requested by Lender from time to time, direct that remittances
and all other proceeds of accounts and other Collateral shall be (a) sent to a
post office box designated by and/or in the name of Lender, or in the name of
Borrower, but as to which access is limited to Lender and/or (b) deposited into
a bank account maintained in the name of Lender and/or a blocked bank account
under arrangements with the depository bank under which all funds deposited to
such blocked bank account are required to be transferred solely to Lender.
Regardless whether any such bank account is maintained in the name of Borrower
or Lender, Borrower shall bear the risk of loss for any reason of all funds in
such bank account. In connection therewith, Borrower shall execute such post
office box and/or blocked bank account agreements as Lender shall specify.
5.2 All Obligations shall be payable at Lender's office designated in
Section 10.6(a) or at Lender's bank designated in Section 10.6(b) or at such
other bank or place as Lender may expressly designate from time to time for
purposes of this Section 5.2. Lender shall apply all proceeds of accounts or
other Collateral received by Lender and all other payments in respect of the
Obligations to the Revolving Loans whether or not then due or to any other
Obligations then due, in whatever order or manner Lender shall determine. For
purposes of determining Gross Availability and Net Availability, remittances and
other payments with respect to the Collateral and Obligations will be treated as
credited to the loan account of Borrower maintained by Lender and Collateral
balances to which they relate, upon the date of Lender's receipt of advice from
Lender's bank that such remittances or other payments have been credited to
Lender's account or in the case of remittances or other payments received
directly in kind by Lender, upon the date of Lender's deposit thereof at
Lender's bank, subject to final payment and
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collection. In computing interest charges, the loan account of Borrower
maintained by Lender will be credited with remittances and other payments three
(3) Business Days after Lender's receipt of advice of deposit for remittances
and other payments in Lender's account at Lender's bank designated in Section
10.6(b) or at such other financial institution as Lender may designate.
"Business Day" shall mean any day other than a Saturday, Sunday or any other day
on which Lender or banks in Chicago, Illinois or New York, New York are
authorized to close.
5.3 Lender shall render to Borrower monthly a loan account statement. Each
statement shall be considered correct and binding upon Borrower as an account
stated, except to the extent that Lender receives, within sixty (60) days after
the mailing of such statement, written notice from Borrower of any specific
exceptions by Borrower to that statement.
5.4 Lender may, at any time, whether or not an Event of Default has
occurred, without notice to or assent of Borrower, (a) notify any account debtor
that the accounts and other Collateral which includes a monetary obligation have
been assigned to Lender by Borrower and that payment thereof is to be made to
the order of and directly to Lender, (b) send, or cause to be sent by its
designee, requests (which may identify the sender by a pseudonym) for
verification of accounts and other Collateral directly to any account debtor or
any other obligor or any bailee with respect thereto, and (c) demand, collect or
enforce payment of any accounts or such other Collateral, but without any duty
to do so, and Lender shall not be liable for any failure to collect or enforce
payment thereof. At Lender's request, all invoices and statements sent to any
account debtor, other obligor or bailee, shall state that the accounts and such
other Collateral have been assigned to Lender and are payable directly and only
to Lender.
5.5 Borrower hereby appoints Lender and any designee of Lender as
Borrower's attorney-in-fact and authorizes Lender or such designee, at
Borrower's sole expense, to exercise at any times in Lender's or such designee's
discretion all or any of the following powers, which powers of attorney, being
coupled with an interest, shall be irrevocable until all Obligations have been
paid in full: (a) receive, take, endorse, assign, deliver, accept and deposit,
in the name of Lender or Borrower, any and all cash, checks, commercial paper,
drafts, remittances and other instruments and documents relating to the
Collateral or the proceeds thereof, (b) transmit to account debtors, other
obligors or any bailees notice of the interest of Lender in the Collateral or
request from account debtors or such other obligors or bailees at any time, in
the name of Borrower or Lender or any designee of Lender, information concerning
the Collateral and any amounts owing with respect thereto, (c) notify account
debtors or other obligors to make payment directly to Lender, or notify bailees
as to the disposition of Collateral, (d) take or bring, in the name of Lender or
Borrower, all steps, actions, suits or proceedings deemed by Lender necessary or
desirable to effect collection of or other realization upon the accounts and
other Collateral, (e) after an Event of Default, change the address for delivery
of mail to Borrower and to receive and open mail addressed to Borrower, (f)
after an Event of Default, extend the time of payment of, compromise or settle
for cash, credit, return of merchandise, and upon any terms or conditions, any
and all accounts or other Collateral which includes a monetary obligation and
discharge or release the account debtor or other obligor, without
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affecting any of the Obligations and (g) execute in the name of Borrower and
file against Borrower in favor of Lender financing statements or amendments with
respect to the Collateral.
5.6 Borrower hereby releases and exculpates Lender, its officers, employees
and designees, from any liability arising from any acts under this Agreement or
in furtherance thereof, whether as attorney-in-fact or otherwise, whether of
omission or commission, and whether based upon any error of judgment or mistake
of law or fact, except for willful misconduct. Lender shall have no liability to
Borrower for lost profits or other special or consequential damages incurred as
a result of Lender's enforcing its rights and remedies hereunder.
5.7 After written notice by Lender to Borrower and automatically, without
notice, after an Event of Default, Borrower shall not, without the prior written
consent of Lender in each instance, (a) grant any extension of time of payment
of any of the accounts or any other Collateral which includes a monetary
obligation, (b) compromise or settle any of the accounts or any such other
Collateral for less than the full amount thereof, (c) release in whole or in
part any account debtor or other person liable for the payment of any of the
accounts or any such other Collateral or (d) grant any credits, discounts,
allowances, deductions, return authorizations or the like with respect to any of
the accounts or any such other Collateral.
5.8 At such times as Lender may request and in the manner specified by
Lender, Borrower shall deliver to Lender or Lender's representative original
invoices, agreements, proofs of rendition of services and delivery of goods and
other documents evidencing or relating to the transactions which gave rise to
accounts or other Collateral, together with customer statements, schedules
describing the accounts or other Collateral and/or statements of account and
confirmatory assignments to Lender of the accounts or other Collateral, in form
and substance satisfactory to Lender and duly executed by Borrower. Without
limiting the provisions of Section 5.2, Borrower's granting of credits,
discounts, allowances, deductions, return authorizations or the like will be
promptly reported to Lender in writing. In no event shall any such schedule or
confirmatory assignment (or the absence thereof or omission of any of the
accounts or other Collateral therefrom) limit or in any way be construed as a
waiver, limitation or modification of the security interests or rights of Lender
or the warranties, representations and covenants of Borrower under this
Agreement. Any documents, schedules, invoices or other paper delivered to Lender
by Borrower may be destroyed or otherwise disposed of by Lender six (6) months
after receipt by Lender, unless Borrower requests their return in writing in
advance and makes prior arrangements for their return, at Borrower's expense.
5.9 From time to time as requested by Lender, at the sole expense of
Borrower, Lender or its designee shall have access, prior to an Event of Default
during reasonable business hours and on or after an Event of Default at any
time, to all of the premises where Collateral is located for the purposes of
inspecting the Collateral, and all Borrower's books and records, and Borrower
shall permit Lender or its designee to make such copies of such books and
records or extracts therefrom as Lender may request. Without expense to Lender,
Lender may use such of Borrower's personnel, equipment, including computer
equipment, programs, printed output
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and computer readable media, supplies and premises for the collection of
accounts and realization on other Collateral as Lender, in its sole discretion,
deems appropriate. Borrower hereby irrevocably authorizes all accountants and
third parties to disclose and deliver to Lender at Borrower's expense all
financial information, books and records, work papers, management reports and
other information in their possession regarding Borrower.
SECTION 6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Borrower hereby represents, warrants and covenants to Lender the following,
the truth and accuracy of which, and compliance with which, shall be continuing
conditions of the making of loans or other credit accommodations by Lender to
Borrower:
6.1 Borrower shall keep and maintain its books and records in accordance
with generally accepted accounting principles, consistently applied. Borrower
shall, at its sole expense (i) on or before the fifteenth (15th) day of each
month, deliver to Lender true and complete monthly agings of its accounts
receivable and accounts and notes payable and monthly internally prepared
interim financial statements and (ii) on the first business day of each week,
deliver to Lender weekly inventory reports for the immediately preceding week,
all in such form, and together with such other information with respect to the
business of Borrower or any guarantor, as Lender may request. Annually, Borrower
shall deliver audited financial statements of Borrower accompanied by the report
and opinion thereon of independent certified public accountants acceptable to
Lender, as soon as available, but in no event later than ninety (90) days after
the end of Borrower's fiscal year, provided that with respect to Borrower's
fiscal year ending December 31, 1995, Borrower shall deliver to Lender audited
financial statements accompanied by the report and opinion of certified public
accounts acceptable to Lender on or before July 31, 1996.
6.2 Borrower may from time to time render invoices to account debtors under
its trade names set forth in Section 10.6(h) after Lender has received prior
written notice from Borrower of the use of such trade names and as to which,
Borrower agrees that: (a) each trade name does not refer to another corporation
or other legal entity, (b) all accounts and proceeds thereof (including any
returned merchandise) invoiced under any such trade names are owned exclusively
by Borrower and are subject to the security interest of Lender and the other
terms of this Agreement and (c) all schedules of accounts and confirmatory
assignments including any sales made or services rendered using the trade name
shall show Borrower's name as assignor and Lender is authorized to receive,
endorse and deposit to any loan account of Borrower maintained by Lender all
checks or other remittances made payable to any trade name of Borrower
representing payment with respect to such sales or services.
6.3 Borrower shall promptly notify Lender in writing of any loss, damage,
investigation, action, suit, proceeding or claim relating to a material portion
of the Collateral or which may result in any material adverse change in
Borrower's business, assets, liabilities or condition, financial or otherwise.
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6.4 Borrower's books and records concerning accounts and its chief
executive office are and shall be maintained only at the address set forth in
Section 10.6(d). Borrower's only other places of business and the only other
locations of Collateral, if any, are and shall be the addresses set forth in
Section 10.6 hereof, except Borrower may change such locations or open a new
place of business after thirty (30) days prior written notice to Lender. Prior
to any change in location or opening of any new place of business, Borrower
shall execute and deliver or cause to be executed and delivered to Lender such
financing statements, financing documents and security and other agreements as
Lender may reasonably require, including, without limitation, those described in
Section 6.14.
6.5 Borrower has and at all times will continue to have good and marketable
title to all of the Collateral, free and clear of all liens, security interests,
claims or encumbrances of any kind except (i) those in favor of Lender and (ii)
those set forth on Schedule A hereto.
6.6 Borrower shall not directly or indirectly: (a) sell, lease, transfer,
assign, abandon or otherwise dispose of any part of the Collateral or any
material portion of its other assets (other than sales of inventory to buyers in
the ordinary course of business) or (b) consolidate with or merge with or into
any other entity, or permit any other entity to consolidate with or merge with
or into Borrower or (c) form or acquire any interest in any firm, corporation or
other entity.
6.7 Borrower shall at all times maintain, with financially sound and
reputable insurers, casualty insurance with respect to the Collateral and other
assets. All such insurance policies shall be in such form, substance, amounts
and coverage as may be satisfactory to Lender and shall provide for thirty (30)
days' prior written notice to Lender of cancellation or reduction of coverage.
Borrower hereby irrevocably appoints Lender and any designee of Lender as
attorney-in-fact for Borrower to obtain at Borrower's expense, any such
insurance should Borrower fail to do so and, after an Event of Default, to
adjust or settle any claim or other matter under or arising pursuant to such
insurance or to amend or cancel such insurance. Borrower shall deliver to Lender
evidence of such insurance and a lender's loss payable endorsement satisfactory
to Lender as to all existing and future insurance policies with respect to the
Collateral. Borrower shall deliver to Lender, in kind, all instruments
representing proceeds of insurance received by Borrower. Lender may apply any
insurance proceeds received at any time to the cost of repairs to or replacement
of any portion of the Collateral and/or, at Lender's option, to payment of or as
security for any of the Obligations, whether or not due, in any order or manner
as Lender determines.
6.8 Borrower is and at all times will continue to be in compliance with the
requirements of all material laws, rules, regulations and orders of any
governmental authority relating to its business (including laws, rules,
regulations and orders relating to taxes, payment and withholding of payroll
taxes, employer and employee contributions and similar items, securities,
employee retirement and welfare benefits, employee health and safety, or
environmental matters) and all material agreements or other instruments binding
on Borrower or its property. All of Borrower's inventory shall be produced in
accordance with the
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requirements of the Federal Fair Labor Standards Act of 1938, as amended and all
rules, regulations and orders related thereto. Borrower shall pay and discharge
all taxes, assessments and governmental charges against Borrower or any
Collateral prior to the date on which penalties are imposed or liens attach with
respect thereto, unless the same are being contested in good faith and, at
Lender's option, Reserves are established for the amount contested and penalties
which may accrue thereon.
6.9 With respect to each account deemed an Eligible Account, except as
reported in writing to Lender, Borrower has no knowledge that any of the
criteria for eligibility are not or are no longer satisfied. As to each account,
except as disclosed in writing to Lender at the time such account arises (a)
each is valid and legally enforceable and represents an undisputed bona fide
indebtedness incurred by the account debtor for the sum reported to Lender, (b)
each arises from an absolute and unconditional sale of goods, without any right
of return or consignment, or from a completed rendition of services, (c) each is
not, at the time such account arises, subject to any defense, offset, dispute,
contra relationship, counterclaim, or any given or claimed credit, allowance or
discount and (d) all statements made and all unpaid balances and other
information appearing in the invoices, agreements, proofs of rendition of
services and delivery of goods and other documentation relating to the accounts,
and all confirmatory assignments, schedules, statements of account and books and
records with respect thereto, are true and correct and in all respects what they
purport to be.
6.10 With respect to Borrower's equipment, Borrower shall keep the
equipment in good order and repair, and in running and marketable condition,
ordinary wear and tear excepted.
6.11 Borrower shall at all times maintain working capital and net worth
(each as determined in accordance with generally accepted accounting principles,
in effect on the date hereof, consistently applied) in the amounts set forth in
Section 10.5 and Borrower shall not, directly or indirectly, expend or commit to
expend, for fixed or capital assets (including capital lease obligations) an
amount in excess of the capital expenditure limit set forth in Section 10.5 in
any fiscal year of Borrower.
6.12 Borrower will not, directly or indirectly: (a) lend or advance money
or property to, guarantee or assume indebtedness of, or invest (by capital
contribution or otherwise) in any person, firm, corporation or other entity; or
(b) declare, pay or make any dividend, redemption or other distribution on
account of any shares of any class of stock of Borrower now or hereafter
outstanding; or (c) except as permitted on Schedule B hereto, (1) make any
payment of the principal amount of or interest on any indebtedness owing to any
officer, director, shareholder, or affiliate of Borrower, or (2) make any loans
or advances to any officer, director, employee, shareholder or affiliate of
Borrower, except that Borrower may make loans and advances to an affiliate of
Borrower provided that the aggregate amount of all such loans and advances shall
not exceed $100,000 at any one time; (d) enter into any sale, lease or other
transaction with any officer, director, employee, shareholder or affiliate of
Borrower on terms that are less favorable to Borrower than those which might be
obtained at the time from persons who are not an officer, director, employee,
shareholder or affiliate of Borrower; or (e) enter into any transaction or
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series of transactions, the effect of which would be to generate accounts
receivable in favor of Borrower from any officer, director, employee,
shareholder or affiliate of Borrower, or any combination thereof, in the
aggregate amount not to exceed $100,000 at any one time.
6.13 Borrower shall pay, on Lender's demand, all costs, expenses, filing,
fees and taxes payable in connection with the preparation, execution, delivery,
recording, administration, collection, liquidation, enforcement and defense of
the Obligations, Lender's rights in the Collateral, this Agreement and all other
existing and future agreements or documents contemplated herein or related
hereto, including any amendments, waivers, supplements or consents which may
hereafter be made or entered into in respect hereof, or in any way involving
claims or defense asserted by Lender or claims or defense against Lender
asserted by Borrower, any guarantor or any third party directly or indirectly
arising out of or related to the relationship between Borrower and Lender or any
guarantor and Lender, including, but not limited to the following, whether
incurred before, during or after the initial or any renewal Term or after the
commencement of any case with respect to Borrower or any guarantor under the
United States Bankruptcy Code or any similar statute: (a) all costs and expenses
of filing or recording (including Uniform Commercial Code financing statement
filing taxes and fees, documentary taxes, intangibles taxes and mortgage
recording taxes and fees, if applicable); (b) all title insurance and other
insurance premiums, appraisal fees, fees incurred in connection with any
environmental report, audit or survey and search fees; (c) all fees relating to
the wire transfer of loan proceeds and other funds and fees for resumed checks;
(d) all expenses and costs heretofore and from time to time hereafter incurred
by Lender during the course of periodic field examinations of the Collateral and
Borrower's operations, plus a per diem charge at the rate of $650 per person,
per day for Lender's examiners in the field and office; and (e) the costs, fees
and disbursements of in-house and outside counsel to Lender.
6.14 At the request of Lender, at any time and from time to time, at
Borrower's sole expense, Borrower shall execute and deliver or cause to be
executed and delivered to Lender, such agreements, documents and instruments,
including, waivers, consents and subordination agreements from mortgagees or
other holders of security interests or liens, landlords or bailees, and do or
cause to be done such further acts as Lender, in its discretion, deems necessary
or desirable to create, preserve, perfect or validate any security interest of
Lender or the priority thereof in the Collateral and otherwise to effectuate the
provisions and purposes of this Agreement. Borrower hereby authorizes Lender to
file financing statements or amendments against Borrower in favor of Lender with
respect to the Collateral, without Borrower's signature and to file as financing
statements any carbon, photographic or other reproductions of this Agreement or
any financing statements signed by Borrower.
6.15 On or before the 90th day after the date hereof, Borrower shall
deliver to Lender evidence satisfactory to Lender, in its sole judgment, of the
resolution or payment of the single business tax and property tax assessments
levied on Whitehead Manufacturing owing to the State of Michigan.
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6.16 Except for the Obligations and the indebtedness owed by Borrower
described on Schedule B hereto, Borrower shall not incur, without the prior
written consent of Lender, any indebtedness which exceeds (i) $25,000 to any
individual noteholder and (ii) in the aggregate $100.000.
6.17 Kirmin Die & Tool, Inc. and Kirmin Manufacturing Company jointly and
severally are indebted to Borrower under the terms of a promissory note in the
original principal amount of $70,000. Borrower shall not amend or modify the
terms of payment of the promissory note without the prior written consent of
Lender and shall remit all payments received from Kirmin Die & Tool, Inc. and/or
Kirmin Manufacturing Company on account of the promissory note to the lockbox in
Borrower's name located at P.O. Box 771313, Detroit, Michigan 48277-1313.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES
7.1 All Obligations shall be immediately due and payable, without notice or
demand, and any provisions of this Agreement as to future loans and credit
accommodations by Lender shall terminate automatically, upon the termination or
non-renewal of this Agreement or, at Lender's option, upon or at any time after
the occurrence or existence of any one or more of the following "Events of
Default":
(a) Borrower fails to pay when due any of the Obligations or fails to
perform any of the terms of this Agreement or any other existing or future
financing, security or other agreement between Borrower and Lender or any
affiliate of Lender;
(b) Any representation, warranty or statement of fact made by Borrower
to Lender in this Agreement or any other agreement, schedule, confirmatory
assignment or otherwise, or to any affiliate of Lender, shall prove
inaccurate or misleading;
(c) Any default or event of default shall have occurred under any
agreement, document or instrument given to Lender to secure or in
connection with the Obligations.
(d) Any guarantor revokes, terminates or fails to perform any of the
terms of any guaranty, endorsement or other agreement of such party in
favor of Lender or any affiliate of Lender;
(e) DCTWA fails to make any equity contribution to Borrower required
by and pursuant to the terms of that certain Keepwell Agreement of even
date herewith (the "Keepwell Agreement") by DCTWA in favor of Lender or
DCTWA fails to abide by any provision of the Keepwell Agreement, or any
representation or warranty made by DCTWA in the Keepwell Agreement shall
prove inaccurate or misleading;
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(f) Any judgment or judgments aggregating in excess of $100,000
or any injunction or attachment is obtained against Borrower or any
guarantor which remains unstayed for a period of ten (10) days or is
enforced;
(g) Borrower or any guarantor or a general partner of a guarantor
or Borrower (which is a partnership), being a natural person, dies, or
Borrower or any guarantor which is a partnership or corporation, is
dissolved, or Borrower or any guarantor which is a corporation fails
to maintain its corporate existence in good standing, or the usual
business of Borrower or any guarantor ceases or is suspended;
(h) Any change in the chief executive officer, chief operating
officer, chief financial officer or controlling ownership of Borrower;
(i) Borrower or any guarantor becomes insolvent, makes an
assignment for the benefit of creditors, makes or sends notice of a
bulk transfer or calls a general meeting of its creditors or principal
creditors;
(j) Any petition or application for any relief under the
bankruptcy laws of the United States now or hereafter in effect or
under any insolvency, reorganization, receivership, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction
now or hereafter in effect (whether at law or in equity) is filed by
or against Borrower or any guarantor;
(k) The indictment or threatened indictment of Borrower or any
guarantor under any criminal statute, or commencement or threatened
commencement of criminal or civil proceedings against Borrower or any
guarantor, pursuant to which statute or proceedings the penalties or
remedies sought or available include forfeiture of any of the property
of Borrower or such guarantor;
(1) Any default or event of default under any financing,
security, intercreditor, subordination or other agreement, document or
instrument at any time executed and/or delivered to, with or in favor
of Lender or any of its affiliates by any affiliate of Borrower;
(m) Any default or event of default under any financing, security
or other agreement, document or instrument, at any time executed
and/or delivered by Borrower to, with or in favor of, any person or
entity other than Lender; or
(n) Lender in good faith believes that either (i) the prospect of
payment or performance of the Obligations is impaired or (ii) the
Collateral is not sufficient to secure fully the Obligations.
7.2 Upon the occurrence of an Event of Default and at any time thereafter,
Lender shall have all rights and remedies provided in this Agreement, any other
agreements between
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Borrower and Lender, the Uniform Commercial Code or other applicable law, all of
which rights and remedies may be exercised without notice to Borrower, all such
notices being hereby waived, except such notice as is expressly provided for
hereunder or is not waivable under applicable law. All rights and remedies of
Lender are cumulative and not exclusive and are enforceable, in Lender's
discretion, alternatively, successively, or concurrently on any one or more
occasions and in any order Lender may determine. Without limiting the foregoing,
Lender may (a) accelerate the payment of all Obligations and demand immediate
payment thereof to Lender, (b) with or without judicial process or the aid or
assistance of others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(c) require Borrower, at Borrower's expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender, (d) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (e) extend the time of payment of, compromise or settle
for cash, credit, return of merchandise, and upon any terms or conditions, any
and all accounts or other Collateral which includes a monetary obligation and
discharge or release the account debtor or other obligor, without affecting any
of the Obligations, and/or (f) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, by public or private sales at any
exchange, broker's board, any office of Lender or elsewhere) at such prices or
terms as Lender may deem reasonable, for cash, upon credit or for future
delivery, with the Lender having the right to purchase the whole or any part of
the Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of Borrower, which right or equity of redemption
is hereby expressly waived and released by Borrower. If any of the Collateral is
sold or leased by Lender upon credit terms or for future delivery, the
Obligations shall not be reduced as a result thereof until payment therefor is
finally collected by Lender. If notice of disposition of Collateral is required
by law, seven (7) days prior notice by Lender to Borrower designating the time
and place of any public sale or the time after which any private sale or other
intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrower waives any other notice. In the event
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of any bond
which might otherwise be required.
7.3 Lender may apply the cash proceeds of Collateral actually received by
Lender from any sale, lease, foreclosure or other disposition of the Collateral
to payment of any of the Obligations, in whole or in part (including reasonable
attorneys' fees and legal expenses incurred by Lender with respect thereto or
otherwise chargeable to Borrower) and in such order as Lender may elect, whether
or not then due. Borrower shall remain liable to Lender for the payment of any
deficiency together with interest at the highest rate provided for herein and
all costs and expenses of collection or enforcement, including reasonable
attorneys' fees and legal expenses.
7.4 Lender may, at its option, cure any default by Borrower under any
agreement with a third party or pay or bond on appeal any judgment entered
against Borrower, discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to
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the Collateral and pay any amount, incur any expense or perform any act which,
in Lender's sole judgment, is necessary or appropriate to preserve, protect,
insure, maintain, or realize upon the Collateral. Lender may charge Borrower's
loan account for any amounts so expended, such amounts to be repayable by
Borrower on demand. Lender shall be under no obligation to effect such cure,
payment, bonding or discharge, and shall not, by doing so, be deemed to have
assumed any obligation or liability of Borrower.
SECTION 8. JURY TRIAL WAIVER; CERTAIN OTHER WAIVERS AND CONSENTS
8.1 BORROWER AND LENDER EACH WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING INSTITUTED BY EITHER OF THEM AGAINST THE OTHER WHICH
PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE OBLIGATIONS, THE
COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY BORROWER OR LENDER, OR, IN ANY WAY,
DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN
BORROWER AND LENDER. LENDER SHALL NOT BE LIABLE FOR LOST PROFITS OR OTHER
SPECIAL OR CONSEQUENTIAL DAMAGES INCURRED AS A RESULT OF LENDER'S ENFORCING ITS
RIGHTS AND REMEDIES HEREUNDER.
8.2 BORROWER WAIVES ALL RIGHTS TO INTERPOSE ANY CLAIMS, DEDUCTIONS, SETOFFS
OR COUNTERCLAIMS OF ANY KIND, NATURE OR DESCRIPTION IN ANY ACTION OR PROCEEDING
INSTITUTED BY LENDER WITH RESPECT TO THIS AGREEMENT, THE OBLIGATIONS, THE
COLLATERAL OR ANY MATTER ARISING THEREFROM OR RELATING THERETO, EXCEPT
COMPULSORY COUNTERCLAIMS.
8.3 BORROWER HEREBY IRREVOCABLY SUBMITS AND CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE STATE IN WHICH THE
OFFICE OF LENDER DESIGNATED IN SECTION 10.6(A) IS LOCATED AND ANY OTHER STATE
WHERE ANY COLLATERAL IS LOCATED WITH RESPECT TO ANY ACTION OR PROCEEDING ARISING
OUT OF THIS AGREEMENT, THE OBLIGATIONS, THE COLLATERAL OR ANY MATTER ARISING
THEREFROM OR RELATING THERETO. IN ANY SUCH ACTION OR PROCEEDING, BORROWER WAIVES
PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT OR OTHER PROCESS AND PAPERS
THEREIN AND AGREES THAT THE SERVICE THEREOF MAY BE MADE BY MAIL DIRECTED TO
BORROWER AT ITS CHIEF EXECUTIVE OFFICE SET FORTH HEREIN OR OTHER ADDRESS THEREOF
OF WHICH LENDER HAS RECEIVED NOTICE AS PROVIDED HEREIN, SERVICE TO BE DEEMED
COMPLETE FIVE (5) DAYS AFTER MAILING, OR AS PERMITTED UNDER THE RULES OF EITHER
OF SAID COURTS. ANY SUCH ACTION OR PROCEEDING COMMENCED BY BORROWER AGAINST
LENDER WILL BE LITIGATED ONLY IN A FEDERAL COURT LOCATED IN THE DISTRICT, OR A
STATE COURT IN THE STATE AND COUNTY, IN WHICH THE OFFICE OF LENDER DESIGNATED IN
SECTION 10.6(A) IS
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LOCATED AND BORROWER WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY
OBJECTION TO VENUE IN CONNECTION THEREWITH.
8.4 Lender shall not, by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights or remedies unless such
waiver shall be in writing and signed by an authorized officer of Lender. A
waiver by Lender of any right or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right or remedy which Lender would
otherwise have on any future occasion, whether similar in kind or otherwise.
SECTION 9. TERM OF AGREEMENT; MISCELLANEOUS
9.1 This Agreement shall only become effective upon execution and delivery
by Borrower and Lender and shall continue in full force and effect for a term of
two (2) years from the date hereof and shall be deemed automatically renewed for
successive terms of two (2) years thereafter unless terminated as of the end of
the initial or any renewal term (each a "Term") by either party giving the other
written notice at least sixty (60) days' prior to the end of the then-current
Term.
9.2 Borrower may also terminate this Agreement by giving Lender at least
thirty (30) days prior written notice at any time upon payment in full of all of
the Obligations as provided herein, including the early termination fee provided
below. Lender shall have the right to terminate this Agreement at any time upon
or after the occurrence of an Event of Default. If Lender terminates this
Agreement upon or after the occurrence of an Event of Default, or if Borrower
shall terminate this Agreement as permitted herein effective prior to the end of
the then-current Term, in addition to all other Obligations, including, without
limitation, payment in full of the aggregate then outstanding principal balance
of the Revolving Loans and any Term Loans, Borrower shall pay to Lender, upon
the effective date of termination, in view of the impracticality and extreme
difficulty of ascertaining actual damages and by mutual agreement of the parties
as to a reasonable calculation of Lender's lost profits, an early termination
fee equal to:
(a) if such termination occurs on or prior to the first anniversary of
the date hereof, an amount equal to four percent (4%) of the Maximum
Credit; or
(b) if such termination occurs after (1) such first anniversary or (2)
any automatic renewal of this Agreement pursuant to Section 9.1 hereof, an
amount equal to two percent (2%) of the Maximum Credit.
Notwithstanding anything contained in this Section 9.2 to the contrary, no
early termination fee shall be charged to Borrower if either party terminates
this Agreement pursuant to the terms of Section 9.1 hereof.
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9.3 Upon termination of this Agreement by Borrower, as permitted herein, in
addition to payment of all Obligations which are not contingent, including,
without limitation, payment in full of the aggregate then outstanding principal
balance of the Revolving Loans and any Term Loans, Borrower shall deposit such
amount of cash collateral as Lender determines is necessary to secure Lender
from loss, cost, damage or expense, including reasonable attorneys' fees, in
connection with any open Accommodations or remittance items or other payments
provisionally credited to the Obligations and/or to which Lender has not yet
received final and indefeasible payment.
9.4 Except as otherwise provided, all notices, requests and demands
hereunder shall be (a) made to Lender at its address set forth in Section
10.6(a) and to Borrower at its chief executive office set forth in Section
10.6(d), or to such other address as either party may designate by written
notice to the other in accordance with this provision, and (b) deemed to have
been given or made: if by hand, immediately upon delivery; if by telex, telegram
or telecopy (fax), immediately upon receipt; if by overnight delivery service,
one day after dispatch; and if by first class or certified mail, three (3) days
after mailing.
9.5 If any provision of this Agreement is held to be invalid or
unenforceable, such provision shall not affect this Agreement as a whole, but
this Agreement shall be construed as though it did not contain the particular
provision held to be invalid or unenforceable.
9.6 This Agreement and the Promissory Note referred to in Section 2.2, if
any, contains the entire agreement of the parties as to the subject matter
hereof, all prior commitments, proposals and negotiations concerning the subject
matter hereof being merged herein. Neither this Agreement nor any provision
hereof shall be amended, modified or discharged orally or by course of conduct,
but only by a written agreement signed by an authorized officer of Lender. This
Agreement shall be binding upon and inure to the benefit of each of the parties
hereto and their respective successors and assigns, except that any obligation
of Lender under this Agreement shall not be assignable nor inure to the
successors and assigns of Borrower. Lender may assign or otherwise participate
to one or more banks or other entities all or a portion of its rights and
obligations under this Agreement and each of the other agreements, documents and
instruments executed and/or delivered pursuant hereto and in connection
herewith.
9.7 No termination of this Agreement shall relieve or discharge Borrower of
its Obligations, grants of Collateral, duties and covenants hereunder or
otherwise until such time as all Obligations to Lender have been indefeasibly
paid and satisfied in full, including, without limitation, the continuation and
survival in full force and effect of all security interests and liens of Lender
in and upon all then-existing and thereafter-arising or acquired Collateral and
all warranties and waivers of Borrower.
9.8 All terms used herein which are defined in the Uniform Commercial Code
shall have the meanings given therein unless otherwise defined in this Agreement
and all references to the singular or plural herein shall also mean the plural
or singular, respectively.
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9.9 This Agreement shall be governed by and construed in accordance with
the laws of the State in which the office of Lender set forth in Section 10.6(a)
below is located.
SECTION 10. ADDITIONAL DEFINITIONS AND TERMS
10.1 (a) Maximum Credit: $7,000,000
(b) Gross Availability Formulas:
(1) So long as the accounts dilution rate is less than or equal
to four percent (4%), the Eligible Accounts Percentages
shall be equal to the following:
(i) Eligible Trade Accounts: 85%
(ii) Eligible Tooling Accounts: 85%
(iii) Eligible Chrysler Accounts: 80%
In the event and for so long as the accounts dilution rate
is greater than four percent (4%), the Eligible Accounts
Percentages shall be determined from time to time by Lender
in its sole and absolute discretion.
(2) Eligible Inventory Percentages:
(i) Eligible Finished Goods Inventory Percentage: 60%
(ii) Eligible Raw Materials Inventory Percentage: 40%
(c) Sublimits:
(1) Eligible Tooling Accounts: $1,000,000
(2) Eligible Inventory: the lesser of (i) $2,000,000 and (ii)
100% of outstanding advances against Eligible Accounts
(3) Eligible Raw Materials Inventory: the lesser of (i) $300,000
and (ii) 20% of outstanding advances against Eligible
Inventory
(d) Maximum days after Invoice Date for Eligible Accounts: 90 days
(e) Minimum Borrowing: $3,500,000
(f) Account Debtors: Chrysler Corporation
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General Motors Corporation
Magna International
10.2 Term Loan: $2,189,513.75, repayable in 24 consecutive monthly
installments on the first day of each month commencing July, 1996. The
first 23 monthly installments shall be in the amount of $46,992 each,
and shall be paid in addition to any other payments of interest or
fees otherwise due and payable under the Term Loan. The final
installment shall be made on the first day of June, 1998 in the amount
of the remaining unpaid principal balance and shall include all
accrued and unpaid interest thereon.
10.3 Accommodations:
(a) Lender's Charge for Accommodations: N/A
(b) Sublimit for Accommodations: N/A
10.4 Fees:
(a) Interest Rate: Prime Rate plus 2.625% per annum
(b) Closing Fee: $17,500
(c) Facility Fee: .5% of the Maximum Credit
(d) Account Servicing Fee: N/A
(e) Unused Line Fee: 0.50% per annum
10.5 Financial Covenants: N/A
10.6 (a) Lender's Office:
10 South LaSalle Street
Chicago, Illinois 60603
(b) Lender's Bank:
Bank of America Illinois
231 South LaSalle Street
Chicago, Illinois 60697
(c) Borrower:
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DCT Component Systems, Inc., a Michigan corporation
(d) Borrower's Chief Executive Office:
34660 Centaur
Clinton Township, Michigan 48035
(e) Locations of Eligible Inventory Collateral:
34728 Centaur
Clinton Township, Michigan 48035
34706 Centaur
Clinton Township, Michigan 48035
34660 Centaur
Clinton Township, Michigan 48035
34635 Nova
Mount Clemens, Michigan 48035
34683 Nova
Mount Clemens, Michigan 48035
(f) Locations of Eligible Equipment Collateral:
34728 Centaur
Clinton Township, Michigan 48035
34706 Centaur
Clinton Township, Michigan 48035
34660 Centaur
Clinton Township, Michigan 48035
34635 Nova
Mount Clemens, Michigan 48035
(g) Borrower's Other offices and Locations of Collateral:
All of the locations of the outside processors listed on Schedule
C attached hereto and made a part hereof.
34612 Centaur
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Clinton Township, Michigan 48305
(h) Borrower's Trade Names for Invoicing:
DCT Component Systems, Inc.
Nothdurft Tool & Manufacturing, Inc.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Borrower and Lender have duly executed this Agreement
this 27th day of June, 1996.
LENDER: BORROWER:
THE CIT GROUP/CREDIT FINANCE, INC. DCT COMPONENT SYSTEMS, INC.
By: /s/ John J. Ahusento By: /s/ Peter Raab
------------------------------ -----------------------
Title: Sr. Vice Pres. Title: CEO
--------------------------- --------------------
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IN WITNESS WHEREOF, Borrower and Lender have duly executed this Agreement
this 27th day of June, 1996.
LENDER: BORROWER:
THE CIT GROUP/CREDIT FINANCE, INC. DCT COMPONENT SYSTEMS, INC.
By: By: /s/ Peter RAAB
------------------------------- ---------------------------------
Title: Title: CEO
---------------------------- ------------------------------
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SCHEDULE A
Permitted Liens
1. Liens in favor of Deutsche Credit Corporation, as evidenced by the
following UCC financing statements:
a. UCC financing statement naming Deutsche Credit Corporation as
secured party and DCT Component Systems, Inc. as debtor, filed with the
Michigan Secretary of State on April 14, 1993 as Document No. 30036B;
b. UCC financing statement naming Deutsche Credit Corporation as
secured party and DCT Component Systems, Inc. as debtor, filed with the
Michigan Secretary of State on October 25, 1993 as Document No. 36359B; and
c. UCC financing statement naming Deutsche Credit Corporation as
secured party and DCT Component systems, Inc. as debtor, filed with the
Michigan Secretary of state on April 4, 1994 as Document No. C824992.
2. Liens in favor of Board of Trustees of the General Retirement System of
the City of Detroit, as evidenced by the following financing statements:
a. UCC financing statement naming Board of Trustees of the General
Retirement System of the City of Detroit as secured party and Nothdurft
Tool & Manufacturing, Inc. as debtor, filed with the Michigan Secretary of
State on October 14, 1993 as Document No. C895493; and
b. UCC financing statement naming Board of Trustees of the General
Retirement System of the City of Detroit as secured party and Nothdurft
Tool & Manufacturing, Inc. as debtor, filed in Macomb County, Michigan on
October 17, 1994 as Document No. C131715.
3. Liens in favor of True Industries #1 Incorporated, as evidenced by UCC
Financing Statement naming True Industries #1 Incorporated as secured party and
Nothdurft Tool & Manufacturing Co. as debtor, filed with the Michigan Secretary
of State on March 24, 1993 as Document No. C698470.
4. Liens in favor of Ervin Leasing Company, as evidenced by UCC Financing
Statement naming Ervin Leasing Company as secured party and Nothdurft Tool &
Manufacturing, Inc. as debtor, filed with the Michigan Secretary of State on May
9, 1994 as Document No. C839184.
28
<PAGE>
SCHEDULE B
Subordinated Indebtedness
1. Indebtedness owed by Borrower to Deutsche Credit Corporation in the
principal amount not to exceed $1,787,199.
2. indebtedness owed by Borrower to James B. Henderson III ("Henderson") in
the principal amount not to exceed $997,559.
3. Indebtedness owed by Borrower to DCTWA in the principal amount not to
exceed $15,786,354.
4. Indebtedness owed by Borrower to RJR Investment in the principal amount
not to exceed $1,000,000.
5. Indebtedness owed by Borrower to Luyckx in the principal amount not to
exceed $412,763.
6. Indebtedness owed by Borrower to Mark B. Ponski in the principal amount
not to exceed $65,924.
7. Indebtedness owed by Borrower to David Stone in the principal amount not
to exceed $150,000.
8. Indebtedness owed by Borrower to Fred Nothdurft in the principal amount
not to exceed $428,472.
9. Indebtedness owed by Borrower to Karl Nothdurft in the principal amount
not to exceed $428,572.
29
<PAGE>
SCHEDULE C
DCT COMPONENT SYSTEMS, INC.
OUTSIDE PROCESSORS
<TABLE>
<CAPTION>
===================================================================================
SUPPLIER PHONE # CONTACT
===================================================================================
<S> <C> <C>
AUTOMATED PRODUCTION ASSEMBLIES, INC. 810-293-3990 TOM
- -----------------------------------------------------------------------------------
ACE FINISHING, INC. 810-777-1390 GREG/JOHN
- -----------------------------------------------------------------------------------
AMERICAN METAL PROCESSING COMPANY 810-757-7337 LARRY
- -----------------------------------------------------------------------------------
AUTOMATED DEBURRING EAST 810-755-4053 TONY/MEG
- -----------------------------------------------------------------------------------
C & H WELDING, INC. 810-589-3696 HOWARD
- -----------------------------------------------------------------------------------
CADILLAC PLATING CORP. 810-771-9191 JOHN/NICK
- -----------------------------------------------------------------------------------
CONTROLLED ATMOSPHERE PROCESSING, CO., INC. 313-865-6506 JOHN
- -----------------------------------------------------------------------------------
COATING REMOVAL TECHNOLOGIES, INC. 810-949-3440 BRUCE
- -----------------------------------------------------------------------------------
FINISHING SERVICES, INC. 810-484-1700 MIKE
- -----------------------------------------------------------------------------------
FLEXIBLE PRODUCTS CO. 810-852-5500 ANGIE
- -----------------------------------------------------------------------------------
HY TECH WELDING, INC. 810-598-9900 LEON
- -----------------------------------------------------------------------------------
HI-TECH COATINGS, INC. 810-759-3559 CARL/JERRY
- -----------------------------------------------------------------------------------
KIRMIN DIE & TOOL 313-722-9210 TONY JR.
- -----------------------------------------------------------------------------------
LACY TOOL COMPANY, INC. 810-476-5250 MARY
- -----------------------------------------------------------------------------------
LTC ROLL & ENGINERING CO. 810-465-1023 PETE
- -----------------------------------------------------------------------------------
METAL COTE INC. 810-469-1278 TOM
- -----------------------------------------------------------------------------------
METRO WELDING SUPPLY CORPORATION 313-834-1660 DAVE/GREG
- -----------------------------------------------------------------------------------
MIDWEST PRODUCTS FINISHING, INC. 313-856-5200 JIM/STEVE
- -----------------------------------------------------------------------------------
MID-AMERICA PLASTICS, INC. 810-232-4200 KAREN/GLEN
- -----------------------------------------------------------------------------------
OEM COMPANY INC. 810-364-7110 SUZAN
- -----------------------------------------------------------------------------------
PRECISIONCRAFT CO. 810-954-9510 DOUG
- -----------------------------------------------------------------------------------
PRODUCTION TAPPING CO. 810-773-6610 JUDY/ED
- -----------------------------------------------------------------------------------
RAYMOND INDUSTRIES AND EQUIPMENT SALES, INC. 313-824-6893 JERRY
- -----------------------------------------------------------------------------------
RESPONSE WELDING ENTERPRISES, INC. 810-792-0970 DAVE/MIKE
- -----------------------------------------------------------------------------------
SORAMATIC PRECISION MACHINING, INC. 810-758-1100 BRUCE/RICH
- -----------------------------------------------------------------------------------
SUPERIOR ENAMELING, INC. 810-757-4510 LONNIE
- -----------------------------------------------------------------------------------
SURECOAT INDUSTRIES 810-949-2735 MIKE/ROB
- -----------------------------------------------------------------------------------
THERMO PROCESSING CO., INC. 810-778-4236 LARRY/WANDA
- -----------------------------------------------------------------------------------
TIODIZE/MICHIGAN, INC. 810-348-6050 CARL JONES
- -----------------------------------------------------------------------------------
WOLVERING PLATING, INC. 810-771-5000 TOM
- -----------------------------------------------------------------------------------
WYATT SERVICES, INC. 810-264-8000 BILL
- -----------------------------------------------------------------------------------
UTILASE 313-521-2488 KEVIN/CHARLIE
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================================================
SUPPLIER LOCATION FAX NUMBER
==============================================================================================================================
<S> <C> <C>
AUTOMATED PRODUCTION ASSEMBLIES, INC. 33957 DOREKA, FRASER MI 48026 810-293-3616
- ------------------------------------------------------------------------------------------------------------------------------
ACE FINISHING, INC. 13195 E. EIGHT MILE RD., WARREN MI 48089 810-777-5811
- ------------------------------------------------------------------------------------------------------------------------------
AMERICAN METAL PROCESSING COMPANY 22720 NAGEL, WARREN MI 48089 810-757-8232
- ------------------------------------------------------------------------------------------------------------------------------
AUTOMATED DEBURRING EAST 3461 EAST TEN MILE, WARREN, MI 48091 810-755-6929
- ------------------------------------------------------------------------------------------------------------------------------
C & H WELDING, INC. 1187 SOUTER, TROY MI 48084 810-589-0586
- ------------------------------------------------------------------------------------------------------------------------------
CADILLAC PLATING CORP. 23849 GROESBECK HWY, WARREN MI 48089 810-771-9270
- ------------------------------------------------------------------------------------------------------------------------------
CONTROLLED ATMOSPHERE PROCESSING, CO., INC. 15550 IDAHO, DETROIT MI 48238 313-865-8220
- ------------------------------------------------------------------------------------------------------------------------------
COATING REMOVAL TECHNOLOGIES, INC. 50725 RICHARD WEST BLVD., CHESTERFIELD MI 48051
- ------------------------------------------------------------------------------------------------------------------------------
FINISHING SERVICES, INC. 877 ANN ST. YPSILANTI MI 48197 313-484-0940
- ------------------------------------------------------------------------------------------------------------------------------
FLEXIBLE PRODUCTS CO. 2600 AUBURN COURT, AUBRUN HILLS MI 48326
- ------------------------------------------------------------------------------------------------------------------------------
HY TECH WELDING, INC. 25225 TERRA INDUSTRIAL DR., CHESTERFIELD MI 48051 810-598-9903
- ------------------------------------------------------------------------------------------------------------------------------
HI-TECH COATINGS, INC. 24660 INDUSTRIAL, WARREN MI 48089
- ------------------------------------------------------------------------------------------------------------------------------
KIRMIN DIE & TOOL 36360 ECORSE ROAD, ROMULUS MI 48174 313-722-5410
- ------------------------------------------------------------------------------------------------------------------------------
LACY TOOL COMPANY, INC. 40375 GRAND RIVER, NOVI MI 48375
- ------------------------------------------------------------------------------------------------------------------------------
LTC ROLL & ENGINERING CO. 23500 JOHN GORSUCH DR, MT. CLEMENS MI 48043 810-465-0554
- ------------------------------------------------------------------------------------------------------------------------------
METAL COTE INC. P.O. BOX 79001, DETROIT MI 48279-0464 810-469-4904
- ------------------------------------------------------------------------------------------------------------------------------
METRO WELDING SUPPLY CORPORATION 12620 SOUTHFIELD, DETROIT MI 48223
- ------------------------------------------------------------------------------------------------------------------------------
MIDWEST PRODUCTS FINISHING, INC. 6194 SECTION RD, OTTOWA LAKE MI 42967 313-856-7267
- ------------------------------------------------------------------------------------------------------------------------------
MID-AMERICA PLASTICS, INC. 2033 N. DORT HWY, FLINT MI 48506 810-232-8467
- ------------------------------------------------------------------------------------------------------------------------------
OEM COMPANY INC. 3212 DOVE RD, PORT HURON MI 48060
- ------------------------------------------------------------------------------------------------------------------------------
PRECISIONCRAFT CO. 44395 REYNOLDS, MT. CLEMENS MI 48043 810-954-9113
- ------------------------------------------------------------------------------------------------------------------------------
PRODUCTION TAPPING CO. 29461 GROESBESCK HWY, ROSEVILLE MI 48066 810-773-0168
- ------------------------------------------------------------------------------------------------------------------------------
RAYMOND INDUSTRIES AND EQUIPMENT SALES, INC. P.O. BOX 26129, FRASER MI 48026-6129
- ------------------------------------------------------------------------------------------------------------------------------
RESPONSE WELDING ENTERPRISES, INC. 34012 GROESBECK HWY, CLINTON TWP MI 48035-9904 810-792-0918
- ------------------------------------------------------------------------------------------------------------------------------
SORAMATIC PRECISION MACHINING, INC. 2455 E. TEN MILE RD., WARREN MI 48089
- ------------------------------------------------------------------------------------------------------------------------------
SUPERIOR ENAMELING, INC. 2209 E. EIGHT MILE RD., WARREN MI 48091 810-757-4515
- ------------------------------------------------------------------------------------------------------------------------------
SURECOAT INDUSTRIES 50571 E. RUSSEL SCHMIDT, CHESTERFIELD TWP MI 48051 810-949-2700
- ------------------------------------------------------------------------------------------------------------------------------
THERMO PROCESSING CO., INC. 15570 STURGEON ST., ROSEVILLE MI 48066 810-778-2638
- ------------------------------------------------------------------------------------------------------------------------------
TIODIZE/MICHIGAN, INC. 28966 WALL, WIXOM MI 48393 810-348-2520
- ------------------------------------------------------------------------------------------------------------------------------
WOLVERING PLATING, INC. 29456 GROESBECK, ROSEVILLE MI 48066 810-771-5830
- ------------------------------------------------------------------------------------------------------------------------------
WYATT SERVICES, INC. 6425 SISM DR., STERLING HEIGHTS MI 48313
- ------------------------------------------------------------------------------------------------------------------------------
UTILASE P.O. BOX 67000, DETROIT MI 48267-0448
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
$ 1,306,566,00 Mount Clemens and Detroit Michigan 10/14/93
- ----------------- ------------------------------------------ -------------
(Principal) (City) (State) (Date)
FOR VALUE RECEIVED, the undersigned Maker (if more than one, jointly and
severally) promises to pay to the order of Deutsche Credit Corporation, its
successors or assigns, (hereinafter referred to as Holder) at
2333 Waukeqan Road, Deerfield
----------------------------------------- ------------------------------
(Address) (City)
Illinois 60015
----------------------------------------- ------------------------------
(State) (Zip)
or such other place as the Holder hereof may, from time to time appoint, the
principal sum of One Million Three Hundred Six Thousand Five Hundred Sixty Six
($ 1,306,566.00) Dollars, together with an interest charge of Four Hundred
Twenty Four Thousand One Hundred Twenty Four and 64/100 ($ 424,124.64) Dollars,
which has been precomputed at an annual rate of 8.25 % on the unpaid balance.
Principal and interest shall be payable in Eighty Four (84) consecutive equal
Monthly installments of Twenty Thousand Six Hundred Three and 46/100
($20,603.46) Dollars beginning the day of 19 , and continuing each Month
thereafter, until principal and interest are fully paid. Interest shall be
calculated on the basis of the actual number of days elapsed over a year of 360
days
Notwithstanding anything herein. or construed to the contrary, the Maker and
Holder hereof agree that it shall not be deemed, construed or intended that this
Note shall bear interest at a rate higher than the highest contract rate allowed
by law in the state of Maker, or by federal law, whichever is greater.
All payments shall be in U.S. Dollars and shall be applied first to interest,
then to principal.
Maker shall have the privilege to prepay, at any time, this Note in full, but
not in part, by payment to the Holder hereof the then total outstanding unpaid
principal balance of the Note, plus the accrued and unpaid interest thereon, as
herein provided, plus a prepayment charge calculated as a percentage of the then
total outstanding and unpaid principal balance in accordance with the following
schedule: first (1st) year 3.5%; second (2nd) year 3.0%; third (3rd) year 2.0%;
fourth (4th) year 1.0%; fifth (5th) year 0.5%; sixth (6th) year 0.5%; seventh
(7th) year 0.0%; eighth (8th) year 0.0% and, thereafter 0.0%.
Year(s) for the purpose of calculating the prepayment charge shall mean the
twelve (12) month period measured from the date hereof until the first
anniversary date of the Note and each succeeding twelve (l2) month period
thereafter.
This Note is secured by a Security Agreement, if any, of even date herewith by
and between Holder and Maker hereof.
In the event that any collateral within the subject matter of the Security
Agreement referenced herein, is sold, leased or otherwise disposed of by Maker,
then, in such event, the holder hereof may declare the then unpaid and
outstanding principal balance, together with any interest unpaid thereon,
immediately due and payable as hereinafter provided.
In the event that payment of principal and/or interest is not paid when due,
then the undersigned Maker agrees to pay, from the date of default, interest on
the amount of the [???????????] at the highest contract rate allowed by law in
the state of the Maker, or federal law, whichever is greater, but in no event to
exceed [??] percent per month, until paid in full. In the event that any payment
of principal and/or interest is not paid when [??????????????????????] or
defaults in any of the terms, conditions or provisions hereof, or of the
Security Agreement referenced herein, the Holder has the right to declare the
then outstanding principal balance, together with any interest unpaid thereon,
immediately due and payable and the [?????] Maker agrees to pay interest
thereon, from the date of default, at a rate equal to the highest contract rate
allowed under state, or federal law, whichever is greater, but in any event, not
to exceed three (3%) percent per month.
* material _____initial _____initial
The undesigned Maker agrees to pay all expenses, including reasonable attorneys
fees, incurred in collecting any unpaid amount(s) due hereunder, by suit or
otherwise, [??????] not such amount(s) be accelerated.
** reasonable _____initial _____initial
The Maker, endorsers, guarantors and all parties to this Note hereby waive
presentment for payment, demand, protest, notice of protest and notice of
dishonor to each of them individually, and jointly to any or all of them. The
Holder may extend the time of payment of this Note, postpone the enforcement
hereof, grant any other indulgence and add or release any collateral or any
party primarily or secondarily liable hereon without [????????] or diminishing
the Holders rights or recourse, against the Makers, endorsers, guarantors and
all parties to this Note, which right is hereby [????????] to the Holder hereof.
[????]urft Tool & Manufacturing, Inc. Detroit Center Tool, Inc.
- ----------------------------------------- ----------------------------------
(Maker) print (Co Maker) print
By: By: ?????????
-------------------------------------- -------------------------------
(Signature) (Signature)
Title: President Title: VP
----------------------------------- ----------------------------
By: By:
-------------------------------------- -------------------------------
(Signature) (Signature)
Title: Title:
----------------------------------- ----------------------------
- ----------------------------------------- ----------------------------------
(Witness) (Witness)
(OC RW008 Rev. 9/88)
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding shall set forth the terms and conditions
whereby James Bronce Henderson, III ("Henderson") and Norma M. Stone ("Stone")
agree to loan funds to DCT Components Systems, Inc. ("DCT").
The terms of said loan being acknowledged and consented to by Noble
International Ltd. ("Noble"). Henderson and Stone agree to loan to DCT an amount
equal to fifty (50%) percent of the liability to Chrysler Corporation for the
overpayment by Chrysler Corporation to DCT said amount being approximately
$225,000. The loan to DCT shall be on the following terms and conditions:
1. The effective date of the Note shall be July 1, 1996;
2. The maturity date of the Note shall be the earlier of August 1, 1998
or the refinancing of the debt to CIT;
3. The Note shall bear interest at the rate of ten (10%) percent per
annum;
4. Interest shall accrue on the full amount to be loaned from July 1,
1996 to December 31, 1996; accrued interest being due and payable
January 2, 1997; thereafter, interest shall be paid quarterly on April
1, July 1, October 1, and January 2;
5. There shall be a five (5) day grace period for the payment of
interest. If the interest is not paid within said five (5) days, the
entire amount shall be accelerated and become due and payable;
6. The Note shall be in the form of the attached Exhibit A; and
<PAGE>
The foregoing terms and conditions as well as those addition terms and
conditions as set forth in the Note attached hereto as Exhibit A and
incorporated herein by reference are acceptable to the corporation.
DCT COMPONENTS SYSTEMS, INC.
BY: /s/ Peter RAAB
------------------------------
Its PRES.
------------------------------
Date: 8/3, 1996
ACKNOWLEDGED AND CONSENTED TO:
Noble International Ltd. hereby consents to the
terms and conditions as set forth herein.
BY: /s/ Mark A. Davis
------------------------
Its President
------------------------
Date: July 1, 1996
2
<PAGE>
Exhibit A
PROMISS0RY NOTE
AMOUNT: [_____] DETROIT, MICHIGAN
DUE DATE; August 1, 1998 DATED: July 1, 1996
FOR VALUE RECEIVED, on the Due Date the undersigned, DCT COMPONENT SYSTEMS,
INC., a Michigan corporation, (hereinafter "Borrower"), promises to pay to the
order of JAMES BRONCE HENDERSON, III or NORMA M. STONE] (hereinafter "Payee"),
at Payee's address set forth below, or at such other place as Payee may
designate in writing, the principal sum of [___________________] and no/100
Dollars ($[___________]), plus accrued interest as hereinafter provided, all in
lawful money of the United States of America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate") on a basis of a year of three hundred sixty
(360) days and thirty (30) days in a month, at a fixed rate equal to ten percent
(10%) per annum, except that interest shall be deemed to have accrued hereunder
from and after December 31, 1995.
Interest only on all amounts disbursed hereunder shall be due and payable
on the first (1st) day of each calendar quarter, except that the first
installment of interest shall not be due and payable hereunder until January 2,
1997, with interest payable thereafter on the entire principal amount
outstanding on each April 1, July 1, October 1, and January 2, until all
principal and accrued interest hereunder is paid in full. In any event, all
unpaid principal plus any accrued but unpaid interest outstanding hereunder
shall be due and payable no later than the Due Date.
Nothing herein contained, nor any transaction relating hereto, shall be
construed or so operate as to require the Borrower to pay, or be charged,
interest, at a greater rate than the maximum allowed by the applicable law
relating to this Note. Should any interest or other charges charged, paid or
payable by the Borrower in connection with this Note, or any other document
delivered in connection herewith, result in the charging, compensation, payment
or earning of interest in excess of the maximum allowed by the applicable law as
aforesaid, then any and all such excess shall be and the same is hereby waived
by the holder, and any and all such excess paid shall be automatically credited
against and in reduction of the principal due under this Note. If Payee shall
reasonably determine that the Effective Interest Rate (together with all other
charges or payments related hereto that may be deemed interest) stipulated under
this Note is, or may be usurious or otherwise limited by law, the unpaid balance
of this Note, with accrued interest at the highest rate permitted to be charged
by
<PAGE>
stipulation in writing between Payee and Borrower, at the option of Payee, shall
immediately become due and payable.
Upon failure to pay any installment of interest and/or principal hereunder
within five (5) days of the date when due, or upon default under any other
promissory note, loan agreement, security or any other agreement executed in
connection herewith, or between the Borrower and Payee, or upon dissolution or
termination of the existence of Borrower, or upon the insolvency or business
failure of Borrower, or upon the appointment of a receiver for any of the
property of Borrower, or if Borrower is generally not paying its debts as such
debts become due, or if a custodian is appointed or takes possession of the
property of Borrower, or upon commencement of any proceedings under the
bankruptcy or insolvency laws by or against Borrower, or if any other
indebtedness of Borrower to Payee or a third party shall become due and remain
unpaid by acceleration of maturity or after maturity thereof, or if any writ of
attachment, garnishment, execution or similar process shall be issued against
any property of Borrower, or if the debt of the Borrower to CIT Financial is
refinanced, or if Payee deems itself insecure for any other reason whatsoever,
then and in any such event, Payee may, without notice, declare the entire unpaid
principal balance hereunder and all accrued interest, together with all other
indebtedness of Borrower to Payee, to be immediately due and payable. During any
period(s) this Note is in default, or after the Due Date, or after acceleration
of maturity, the Borrower shall be obligated to Payee and shall pay Payee,
default interest at the rate of the Effective Interest Rate plus five percent
(5%) per annum from the Due Date, the date of acceleration of maturity or the
date of default, as the case may be, until the entire principal balance together
with accrued interest has been paid in full. If this Note is not otherwise in
default, but any required installment is not paid within five (5) days from the
date same is due, then, at the option of the Payee, a late charge of not more
than Five Cents ($.05) for each dollar of the installment so overdue may be
charged. The right of Payee to collect a default interest rate and/or a late
charge is in addition to any other rights of Payee pursuant hereto. Payee may
hold and apply at any time its own indebtedness or liability to Borrower in
payment of any indebtedness hereunder. Notwithstanding anything contained in
this paragraph to the contrary, this Note shall be payable in all events
immediately upon demand by Payee.
Acceptance by Payee of any payment in an amount less than the amount then
due shall be deemed an acceptance on account only, and the failure to pay the
entire amount then due shall be and continue to be an event of default. Borrower
and all endorsers, sureties and guarantors hereof, hereby jointly and severally
waive presentment for payment, demand, notice of nonpayment, notice of protest
of this Note, diligence in collection or bringing suit, and hereby consent to
any and all extensions of time, renewals, waivers, or modifications that may be
granted by Payee with respect
2
<PAGE>
to payment of any other provisions of this Note, and to the release of any
collateral or any part thereof, with or without substitution. The liability of
the Borrower shall be absolute and unconditional, without regard to the
liability of any other party hereto.
This Note is secured by the capital stock of Borrower owned by Peter Raab,
pursuant to the terms of a certain Collateral Pledge and Escrow Agreement of
even date herewith.
WITNESSES: BORROWER:
DCT COMPONENT SYSTEMS, INC.,
a Michigan corporation
- --------------------------------- ------------------------------------
By: Peter Raab
_________________________________ Its: President
ADDRESSES:
BORROWER:
DCT COMPONENT SYSTEMS, INC.
34660 Centaur
Clinton Township, Michigan 48035
Attn: Peter Raab
PAYEE:
[James Bronce Henderson, III,
c/o DCT Companies, Inc.
20101 Hoover Road
Detroit, Michigan 48205]
or
[Norma M. Stone
20 Newberry Place
Grosse Pointe Farms, Michigan 48236]
3
STOCK EXCHANGE AGREEMENT
by and among
NOBLE INTERNATIONAL, LTD.
and
RICHARD G. SKANDALARIS
and
SKANDY CORP.
EFFECTIVE AS OF
January 1, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
ARTICLE 1 - EXCHANGE OF COMMON SHARES
1.01 Exchange of Common Shares 1
1.02 Payment and Delivery 1
1.03 Internal Revenue Code Section 368 1
1.04 Closing and Closing Date 1
ARTICLE II - REPRESENTATIONS OF NOBLE
2.01 Authorization 1
2.02 Binding Obligations 2
2.03 No Conflict 2
ARTICLE III - REPRESENTATIONS OF SHAREHOLDER
3.01 Authorization 2
3.02 Binding Obligation 2
3.03 No Conflict 2
3.04 Investment Intent 2
3.05 Outstanding Obligations 2
ARTICLE IV - REPRESENTATIONS OF SKANDY
4.01 Authorization 3
4.02 Authorized and Outstanding Capital Stock 3
4.03 Binding Obligations 3
4.04 Assignments 3
4.05 No Conflict 3
4.06 Financial Statements 3
4.06 Unreported and Contingent Liabilities 3
ARTICLE V- AFFIRMATIVE COVENANTS OF NOBLE
5.01 Financial Statements and Other Reports 4
5.02 Inspection 4
ARTICLE VI - MISCELLANEOUS
6.01 Expenses 4
6.02 Indemnity 4
6.03 Survival 4
6.04 Remedies 4
6.05 Notices 5
6.06 Consent to Jurisdiction 5
6.07 Successors and Assigns 5
6.08 Amendments and Waivers 5
6.09 Entire Agreement 5
6.10 Governing Law 6
6.11 Severability 6
6.12 Headings 6
6.13 Counterparts; Effectiveness 6
6.14 Rights and Remedies Cumulative 6
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (the "Agreement") is made and entered into
effective as of January 1, 1997, by and between Noble International, Ltd., a
Michigan corporation ("Noble"), Richard G. Skandalaris ("Shareholder" and/or
"Skandalaris") and Skandy Corp. a Michigan corporation ("Skandy").
WHEREAS, Noble desires to issue and exchange with Shareholder and
Shareholder desire to exchange and acquire from Noble the Common Shares (as
hereinafter defined) on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
EXCHANGE OF COMMON SHARES
1.01 Exchange of Common Shares. Subject to the terms and conditions hereof,
Shareholder shall acquire from Noble and Noble shall issue to Shareholder Four
Hundred (400) shares of Noble's common stock (the "Noble Shares") on the date
hereof in exchange for Five Thousand (5,000) common shares of Skandy
Corporation, which represent all of the issued and outstanding capital stock of
Skandy ("Skandy Shares").
1.02 Payment and Delivery. Upon the execution and delivery of this
Agreement by Noble and Shareholder, or as soon thereafter as practically
possible, Noble will deliver to Shareholder individual certificates representing
the Noble Shares, registered in the name of Shareholder and Shareholder shall
deliver to Noble the Skandy Shares.
1.03 Internal Revenue Code Section 368. It is the intent of the parties
hereto that the exchange described herein shall qualify as a tax free exchange
pursuant to IRC ss.368(a)(1)(B).
1.04 Closing and Closing Date. The closing of the transactions contemplated
by this Agreement ("Closing") shall take place at 10:00 a.m., local time, on
January 2, 1997 ("Closing Date") at the offices of Noble, or at such other time,
place and date as shall be mutually agreed on by Noble and Shareholder and shall
be effective as of January 1, 1997.
ARTICLE II
REPRESENTATIONS OF NOBLE
Noble represents and warrants as follows:
2.01 Authorization. It has the full capacity, power and authority to
execute, deliver and perform its obligations under this Agreement and it has
taken all necessary corporate action to authorize the execution, delivery and
performance of its obligations hereunder and to consummate the transactions
contemplated hereby.
1
<PAGE>
2.02 Binding Obligations. This Agreement, when executed and delivered by
the parties, will be its legally valid and binding obligation, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and by general principles of
equity.
2.03 No Conflict. The execution, delivery and performance by it of this
Agreement and the consummation of the transactions contemplated hereby does not
and will not: (I) violate any provisions of law applicable to it; (ii) result in
or require the creation or imposition of any lien upon any of its properties or
assets.
ARTICLE III
REPRESENTATIONS OF SHAREHOLDER
Shareholder individually represents and warrants as follows:
3.01 Authorization. He has the full legal capacity, power and authority to
execute, deliver and perform his obligations under this Agreement. Seller is the
lawful record owner of the Shares, and the same are and shall be delivered to
Noble free and clear of all pledges, security interests, options, liens,
encumbrances and claims or rights of every kind therein or thereto, and the
delivery of such Shares to Buyer pursuant to the provisions of this Agreement
will transfer lawful, valid, marketable title thereto.
3.02 Binding Obligation. This Agreement, when executed and delivered by the
parties, will be his legally valid and binding obligation, enforceable against
him in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general principles of equity.
3.03 No Conflict. The execution, delivery and performance by him of this
Agreement and the consummation of the transactions contemplated hereby does not
and will not: (I) violate any provisions of law applicable to him; (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any of his contractual obligations; (iii) result in or
require the creation or imposition of any lien upon any of his property or
assets; or (iv) require any approval or consent of any Person.
3.04 Investment Intent. He is acquiring the Noble Shares for his own
account for investment purposes only and the Noble Shares are not being
purchased with a view towards resale or distribution; and he is able to bear the
economic risk of ownership of the Noble Shares for an indefinite period of time
and has no present or foreseeable need to dispose of any portion of his
investment in Noble and is aware that he will be unable to readily liquidate his
investment in Noble.
3.05 Outstanding Obligations. Any and all obligations between Shareholder
and Skandy have been completed and are no longer outstanding, including any
obligations for Shareholder loans, compensation, dividends, distributions,
bonuses and/or additional compensation have been satisfied.
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ARTICLE IV
REPRESENTATIONS OF SKANDY
Skandy represents and warrants as follows:
4.01 Authorization. It has the full capacity, power and authority to
execute, deliver and perform its obligations under this Agreement and it has
taken all necessary corporate action to authorize the execution, delivery and
performance of its obligations hereunder and to consummate the transactions
contemplated hereby.
4.02 Authorized and Outstanding Capital Stock. The authorized capital stock
of Skandy consists of Fifty Thousand (50,000) shares of common stock.
Skandalaris is the record owner of five thousand shares, which represent all of
the issues and outstanding shares of the capital stock of Skandy, which have
been validly issued, are fully paid and non-assessable.
4.03 Binding Obligations. This Agreement, when executed and delivered by
the parties, will be its legally valid and binding obligation, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and by general principles of
equity.
4.04 Assignments. It has obtained the necessary assignments and
acknowledgments of its Sales Representative Agreements from its principals who
are not affiliated with Noble, copies of which are attached hereto as Exhibit A.
4.05 No Conflict. The execution, delivery and performance by it of this
Agreement and the consummation of the transactions contemplated hereby does not
and will not: (I) violate any provisions of law applicable to it; (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any of its contractual obligations; (iii) result in or
require the creation or imposition of any lien upon any of its properties or
assets; or (iv) require any approval or consent of any person under any
contractual obligations, except for such approvals or consents as have been
obtained or which it shall make all reasonable efforts to obtain.
4.06 Financial Statements. The balance sheet of Skandy as of December 31,
1996 and the related statements of income, changes in stockholders's equity and
cash flows for the twelve (12) month period then ended, together with the notes
thereto, and the reviewed financial statement of Skandy for the period ending
December 31, 1996 (the "Financial Statements") are in accordance with the books
and records of Skandy, present fairly the financial position and the results of
the operations, changes in stockholders' equity and cash flow of Skandy for the
period then ending, and have been prepared in conformity with generally accepted
accounting principles consistently applied with the prior periods except as may
otherwise by indicated in the notes thereto.
4.07 Unreported and Contingent Liabilities. Except as expressly set forth
in the Financial Statements, and except as otherwise incurred by Skandy in the
ordinary course of its business, Skandy has no obligations or liabilities,
whether accrued, absolute, fixed, known or unknown, contingent or otherwise,
existing, arising out of or relating to any transaction entered into, or state
of facts existing, on or prior to the date of this Agreement. For purposes of
this Section, the phrase "in the ordinary course of business" shall not include
liabilities arising out of breach or contract, breach of warranty, tort
infringement or any violation of law, including, but not limited to, health,
safety and Environmental laws. Skandy is not directly or indirectly liable upon
or with respect to, or obligated in any way to provide funds in respect of, or
to guarantee or assume any indebtedness or obligation of any person or entity.
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ARTICLE V
AFFIRMATIVE COVENANTS OF NOBLE
From and after the date hereof, so long as any of the Noble Shares remain
outstanding, Noble shall perform and comply with, and shall cause each of its
Subsidiaries to perform and comply with, all covenants in this Article V
applicable to such Person as follows:
5.01 Financial Statements and Other Reports. Noble will maintain, and cause
each of its subsidiaries to maintain, a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in conformity with GAAP. Noble will deliver to each
holder of the Noble Shares, with reasonable promptness, such business or
financial information and data with respect to Noble or any subsidiary as from
time to time may be reasonably requested by any holder of the Noble Shares.
5.02 Inspection. Noble shall permit any authorized representative(s)
designated by any holder of the Noble Shares to visit and inspect any of the
properties of Noble or any of its subsidiaries, including its and their
financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and business with its
and their officers and independent certified public accountants, at such
reasonable times during normal business hours and as often as may be reasonably
requested.
ARTICLE VI
MISCELLANEOUS
6.01 Expenses. Noble shall pay its costs, fees and expenses incurred by it
in connection with the negotiation, review, documentation, preparation and
closing of this Agreement. Shareholder shall pay all costs, fees and expenses
incurred by them in connection with the negotiation, review, documentation,
preparation and closing of this Agreement.
6.02 Indemnity. Shareholder agrees to indemnify and hold Noble harmless
from and against any and all liabilities, losses, damages, costs and expenses
(including reasonable attorney fees), incurred or sustained by Noble arising out
of, amongst other things, any actions, claims, demands, breaches or violations
brought by third parties against Skandy which occurred prior to the date first
set forth above, but which were made subsequent to the date hereof.
6.03 Survival. All representations, warranties, agreements and covenants
contained herein shall survive the execution and delivery of this Agreement, and
the purchase of the Noble Shares contemplated hereby and any disposition
thereof, notwithstanding any investigation made at any time by any of the
parties hereto.
6.04 Remedies. Each holder of any of the Noble Shares will be entitled to
enforce its rights under this Agreement specifically and to exercise all other
rights existing in its favor. Money damages may not be an adequate remedy for
any breach of the provisions of this Agreement and, accordingly, the parties may
apply to any court of law or equity of competent jurisdiction (as contemplated
by Section 6.06) for specific performance and/or injunctive relief in order to
enforce or prevent any violation of the provisions of this Agreement.
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6.05 Notices. Any notice, request, claim, demand or other communication to
be given or delivered under or by reason of the provisions of this Agreement
will be in writing and will be deemed to have been given when delivered
personally or mailed by certified or registered mail, return receipt requested,
and postage prepaid, to the recipient. Such notices, demands and other
communication will be sent as follows:
(i) To Noble:
Noble International, Ltd.
Suite 155
33 Bloomfield Hills Parkway
Bloomfield Hills, Michigan 48304-2944
(ii) If to Shareholder, as set forth in the records of Noble,
or, in either of the foregoing cases to such other address as such party may
hereafter specify for such purpose by notice to the other party referred to
above.
6.06 Consent to Jurisdiction. Noble and Shareholder hereby consent to the
jurisdiction of any state or federal court located within the state of Michigan
and irrevocably agree that all actions or proceedings relating to this agreement
shall be litigated in such courts. Noble and Shareholder waive any objection
which it or they may have based on improper venue or forum non conveniens to the
conduct of any proceeding in any such court and waive personal service of any
and all process upon it and them and consent that all such service of process be
made by mail or messenger directed to it or them at the addresses set forth in
section 6.04 and that service so made shall be deemed to be completed upon the
earlier of actual receipt or three (3) days after the same shall have been
posted to the party's address set forth in section 6.04. Nothing contained in
this section 6.05 shall affect the right of any party to serve legal process in
any other manner permitted by law.
6.07 Successors and Assigns. Except as otherwise provided herein, all of
the terms and provisions of this Agreement shall be binding upon, shall inure to
the benefit of and shall be enforceable by the respective successors and assigns
provided that this Agreement shall not be assignable by any party without the
prior written consent of the others, other than by operation of law.
6.08 Amendments and Waivers. Except as otherwise provided herein, any
provision of this Agreement may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by Noble and the holders of a
majority of the then outstanding Noble Shares issued and sold hereunder. Except
as otherwise provided in this Agreement, any failure of either of the parties to
comply with any obligation, covenant, agreement or condition herein may be
waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
6.09 Entire Agreement. This Agreement shall constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede all other
understandings, oral or written, with respect to the subject matter hereof.
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6.10 Governing law. This agreement shall be governed by and construed in
accordance with the internal laws of the state of Michigan. Without regard to
conflicts of laws principles.
6.11 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable under any applicable law in any jurisdiction, such provision will
be ineffective only to the extent of such invalidity, illegality or
unenforceability in such jurisdiction, without invalidating the remainder of
this Agreement in such jurisdiction or any provision hereof in any other
jurisdiction.
6.12 Headings. The Section and Subsection headings of the Articles
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
6.13 Counterparts; Effectiveness. This Agreement and any amendments,
waivers, consents or supplements may be executed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto.
6.14 Rights and Remedies Cumulative. Except as otherwise provided herein,
the rights and remedies herein provided shall be cumulative and not exclusive of
any other rights or remedies provided by law or otherwise.
IN WITNESS WHEREOF, the parties have duly executed this Agreement effective
as of the date first above written.
NOBLE INTERNATIONAL, LTD. SHAREHOLDER
/s/ ROBERT J. SKANDALARIS /s/ ROBERT J. SKANDALARIS
- ------------------------------------------ --------------------------
By: Robert J. Skandalaris Richard G. Skandalaris
Its: President and Chief Executive Officer
SKANDY CORP.
/s/ ROBERT J. SKANDALARIS
- ------------------------------------------
By: Richard G. Skandalaris
Its: President
6
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT ("Agreement") is entered into effective as of
May 1, 1996 by and between the undersigned ("Shareholder") and Noble
International, Ltd. ("Corporation") who agree to the following:
1. Stock Purchase. The Corporation may purchase all of the Shareholders
stock at any time by giving written notice to Shareholder. In addition, upon the
Shareholder's: (I) death, or (ii) termination for any reason as an employee or
Director of the Corporation ("Termination"), the Corporation shall promptly
purchase all of the shares of its stock held by Shareholder.
2. Purchase Price. The purchase price shall be the net book value per share
at the end of the month preceding the date of the Shareholder's death, date of
the Termination or the date upon which the Company gives written notice of its
intention to purchase Shareholder's stock. The accountant regularly retained by
the Corporation shall determine the net book value per share by applying the
accounting principles consistently followed in preparing the financial
statements of the Corporation. This determination of net book value per share
shall be final and binding on all persons.
3. Payment. The Corporation may pay the purchase price in a lump sum or in
five equal annual installments. The lump sum of the first installment shall be
paid at the time of the delivery of the endorsed stock certificates to the
Corporation or if the shares are pledged or assigned, within ten (10) days after
giving notice of its intent to purchase the stock. Any remaining installments
shall be evidenced by a promissory note bearing interest at a fixed annual rate
equal to ten percent (10%). The note shall permit prepayment at any time without
penalty and shall provide for immediate payment of the balance due on default in
payment of principal or interest.
4. Stock Transfer Restriction. The Shareholder may not transfer any shares
of Corporation stock without the prior written consent of the Corporation. This
applies to any disposition or encumbrance, whether voluntary, involuntary, or by
operation of law. Any transfer in violation of this Agreement is void. Shares
transferred with consent shall be held by the transferee subject to the
provisions of this Agreement or such other Agreement the Corporation deems
appropriate.
5. Termination. This Agreement shall terminate upon the Corporation
becoming publicly held.
6. Other. This Agreement shall apply to stock now owned or later acquired
by the Shareholder; may be signed in counterpart; contains the entire agreement
between the parties; cannot be modified except in writing and signed by the
Corporation and the Shareholder; shall be binding on the parties and their legal
representatives, heirs, and assigns; can be specifically enforced; and shall be
governed by Michigan law. Each stock certificate shall bear a legend referring
to this Agreement.
SHAREHOLDER NOBLE INTERNATIONAL, LTD.
/s/ ROBERT J. SKANDALARIS
- ------------------------- ------------------------------------------
By: Robert J. Skandalaris
Its: President and Chief Executive Officer
VOTING AGREEMENT AND POWER OF ATTORNEY
THIS VOTING AGREEMENT AND POWER OF ATTORNEY (this "Agreement and Power of
Attorney"), effective as of December 31, 1996, by and among Noble International,
Ltd. a Michigan corporation (the "Company"), and the persons listed on the
signature pages hereof, being record holders of issued and outstanding Common
Stock of the Company (herein together with any person or persons hereafter
executing and delivering a supplement to this Agreement and Power of Attorney
being collectively referred to as the "Shareholders" and individually as a
"Shareholder") agree as follows:
ARTICLE I
VOTING AGREEMENT
1.1 Voting Agreement. Each Shareholder shall vote all Voting Securities (as
hereinafter defined), whether now owned or hereafter acquired by such
Shareholder, and any Voting Securities that such Shareholder shall otherwise
have the right or power to vote, and/or to take action by written consent, on
all matters of any character whatsoever, only in such manner as may be directed
by Robert J. Skandalaris.
1.2 Proxies. Each Shareholder shall execute and deliver to Robert J.
Skandalaris simultaneously with the execution and delivery of this Agreement and
Power of Attorney, an irrevocable proxy (a "Proxy") to secure the voting
agreements contained in Section 1.1 of this Agreement and Power of Attorney.
Each Shareholder intends that each Proxy and all other proxies executed and
delivered by such Shareholder from time to time under this Agreement and Power
of Attorney shall have the effect of an "irrevocable proxy" under Section 422 of
the Michigan Business Corporation Act, as amended (the "MBCA") and that this
Agreement and Power of Attorney shall be a voting agreement among shareholders
under Section 461 of MBCA. Each Shareholder further agrees that each Proxy and
all other proxies executed and delivered by such Shareholder under this
Agreement and Power of Attorney shall be effective as to said Shareholder and
his or her heirs,
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personal representatives, guardians, conservators, other legal representatives,
successors and assigns, and any transferee of Voting Securities held at any time
by such Shareholder, until such time as this agreement and Power of Attorney
shall be terminated in accordance with Section 3.1 hereof. During the term of
this Agreement and Power of Attorney, each Shareholder further agrees to execute
and deliver such further proxies, consents and other documents and instruments,
and to take such further action, as may be necessary or appropriate to further
secure and/or effectuate the voting agreements provided in this Agreement and
Power of Attorney.
1.3 Definition of Voting Securities and Other Terms. For the purposes of
this Agreement and Power of Attorney, the term "Voting Securities" shall mean
and include the Common Stock of the Company and any and all other securities of
the Company entitling the holder thereof to vote upon any matter submitted to a
vote of shareholders of the Company.
ARTICLE II
POWER OF ATTORNEY
2.1 Power of Attorney. Each Shareholder hereby appoints Robert J.
Skandalaris his, her or its attorney-in-fact (the "Attorney"), with full power
and authority, including power of substitution, acting together or separately,
in the name of and for and on behalf of the undersigned for the purpose of
effecting any action which such Shareholder is entitled to take in his, her or
its capacity as a record owner of Common Stock as fully as could the undersigned
if personally present and acting and as and to the extent that the Attorney may
in his sole discretion determine to be advisable.
2.2 Irrevocable Nature of Appointment. This Agreement and Power of Attorney
and all authority conferred hereby shall be irrevocable and shall not be subject
to termination by operation of law, whether by the death or incapacity or
liquidation or dissolution of any Shareholder or the occurrence of any other
event or events. If after the execution hereof any such event or events shall
occur, actions taken by the Attorney pursuant to this Agreement and Power of
Attorney shall
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be as valid as if such death or incapacity or liquidation or dissolution
regardless of whether or not the Attorney shall have received notice of such
death, incapacity, liquidation, dissolution or other event or events.
2.3 Ratification; Further Actions. Each Shareholder ratifies all that the
Attorney shall do under the authority of this Agreement and Power of Attorney.
During the term of this Agreement and Power of Attorney, each Shareholder shall
take action as may be necessary or appropriate to effectuate any action proposed
by the Attorney including, without limitation, delivering to the possession of
the Attorney certificates evidencing such Shareholder's shares of Common Stock
for safekeeping or transfer.
ARTICLE III
MISCELLANEOUS
3.1 Termination. This Agreement and Power of Attorney shall be effective as
of the date first above written and shall remain fully in effect and enforceable
as against each Shareholder until the date on which such Shareholder shall cease
to own of record any Voting Securities.
3.2 Successors and Assigns. This Agreement and Power of Attorney shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
3.3 Amendment and Waivers. This Agreement and Power of Attorney may be
amended only by a written instrument duly executed by the Company and
shareholders holding a majority of the outstanding shares of Common Stock.
3.4 Legend. All certificates representing Voting Securities at any time
held of record by any Shareholder shall contain a legend on the face of the
certificate substantially as follows:
This certificate is subject to an Irrevocable Proxy and Voting
Agreement and Power of Attorney a copy of which is on file with the
Secretary of the Company.
3.5 Entire Agreement. This Agreement and Power of Attorney, including all
attachments and other writings referenced herein, delivered pursuant hereto,
which form a part
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hereof, shall constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede all other understandings, oral or written,
with respect to the subject matter hereof.
3.6 Applicable Law. This Agreement and Power of Attorney shall be governed
by Michigan law.
3.7 Severability. Whenever possible, each provision of this Agreement and
Power of Attorney will be interpreted in such manner as to be effective and
valid under applicable law, but if any provisions of this Agreement and Power of
Attorney is held to be prohibited by or invalid under applicable law, such
provisions will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement and Power of
Attorney.
3.8 Remedies. The Company and the Shareholders acknowledge and agree that a
violation of any of the terms of this Agreement and Power of Attorney will cause
the Company and the Shareholders immediate, irreparable injury for which an
adequate remedy at law is not available. Therefore, the Company and the
Shareholders agree that each Shareholder shall be entitled to an injunction,
restraining order or other equitable relief from any court of competent
jurisdiction restraining any Shareholder from committing any violations of the
provisions of this Agreement and Power of Attorney.
3.9 Limitation on Liability. Each Shareholder agrees to hold the Attorney
free and harmless from any and all loss, damage or liability and expenses
(including legal fees) which they, jointly and severally, may sustain as a
result of any action taken in good faith pursuant to this Agreement and Power of
Attorney and the Proxy. Without limiting the foregoing, the Attorney shall have
no liability of any kind to any Shareholder in connection with the taking of any
action, or the failure to take any action, in good faith under this Agreement
and Power of Attorney and the Proxy.
3.10 Counterparts; Effectiveness. This Agreement and Power of Attorney and
any amendments, waivers, consents or supplements may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same
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instrument. This Agreement and Power of Attorney shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.
IN WITNESS WHEREOF, the undersigned have executed this Agreement and Power
of Attorney effective as of the day and year first written above.
NOBLE INTERNATIONAL, LTD.
/s/ ROBERT J. SKANDALARIS
-----------------------------------------
By: Robert J. Skandalaris
Its: President and Chief Executive Officer
SHAREHOLDER
-----------------------------------------
5
NOBLE INTERNATIONAL, LTD.
1997 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Noble International, Ltd. 1997 Stock
Option Plan (the "Plan") is to strengthen Noble International, Ltd., a Michigan
corporation ("Corporation"), by providing to employees, officers, directors,
consultants and independent contractors of the Corporation or any of its
subsidiaries (including dealers, distributors, and other business entities or
persons providing services on behalf of the Corporation or any of its
subsidiaries) added incentive for high levels of performance and unusual
efforts to increase the earnings of the Corporation. The Plan seeks to
accomplish this purpose by enabling specified persons to purchase shares of the
common stock of the Corporation, no par value, thereby increasing their
proprietary interest in the Corporation's success and encouraging them to
remain in the employ or service of the Corporation.
2. CERTAIN DEFINITIONS. As used in this Plan, the following words and
phrases shall have the respective meanings set forth below, unless the context
clearly indicates a contrary meaning:
2.1 "Board of Directors": The Board of Directors of the
Corporation.
2.2 "Committee": The Committee which shall administer the
Plan shall consist of a committee of three (3) members of the Board of
Directors as appointed from time to time.
2.3 "Fair Market Value Per Share": The fair market value per
share of the Shares as determined by the Committee in good faith. The Committee
is authorized to make its determination as to the fair market value per share
of the Shares on the following basis: (i) if the Shares are traded only
otherwise than on a securities exchange and are not quoted on the National
Association of Securities Dealers' Automated Quotation System ("NASDAQ"), but
are quoted on the bulletin board or in the "pink sheets" published by the
National Daily Quotation Bureau, the greater of (a) the average of the mean
between the average daily bid and average daily asked prices of the Shares
during the thirty (30) day period preceding the date of grant of an Option, as
quoted on the bulletin board or in the "pink sheets" published by the National
Daily Quotation Bureau, or (b) the mean between the average daily bid and
average daily asked prices of the Shares on the date of grant, as published on
the bulletin board or in such "pink sheets;" (ii) if the Shares are traded on a
securities exchange or on the NASDAQ, the greater of (a) the average of the
daily closing prices of the Shares during the ten (10) trading days preceding
the date of grant of an Option, as quoted in the Wall Street Journal, or (b)
the daily closing price of the Shares on the date of grant of an Option, as
quoted in the Wall Street Journal; or (iii) if the Shares are traded only
otherwise than as described in (i) or (ii) above, or if the Shares are not
publicly traded, the value determined by the Committee in good faith based upon
the fair market value as determined by completely independent and well
qualified experts.
<PAGE>
2.4 "Option": A stock option granted under the Plan.
2.5 "Incentive Stock Option": An Option intended to qualify
for treatment as an incentive stock option under Code Sections 421 and 422, and
designated as an Incentive Stock Option.
2.6 "Nonqualified Option": An Option not qualifying as an
Incentive Stock Option.
2.7 "Optionee": The holder of an Option.
2.8 "Option Agreement": The document setting forth the terms
and conditions of each Option.
2.9 "Shares": The shares of common stock, no par value, of
the Corporation.
2.10 "Code": The Internal Revenue Code of 1986, as amended.
2.11 "Subsidiary": Any corporation of which fifty percent
(50%) or more of total combined voting power of all classes of stock of such
corporation is owned by the Corporation or another Subsidiary (as so defined).
3. ADMINISTRATION OF PLAN.
3.1 In General. This Plan shall be administered by the
Committee. Any action of the Committee with respect to administration of the
Plan shall be taken pursuant to (i) a majority vote at a meeting of the
Committee (to be documented by minutes), or (ii) the unanimous written consent
of its members.
3.2 Authority. Subject to the express provisions of this
Plan, the Committee shall have the authority to: (i) construe and interpret the
Plan, decide all questions and settle all controversies and disputes which may
arise in connection with the Plan and to define the terms used therein; (ii)
prescribe, amend and rescind rules and regulations relating to administration
of the Plan; (iii) determine the purchase price of the Shares covered by each
Option and the method of payment of such price, individuals to whom, and the
time or times at which, Options shall be granted and exercisable and the number
of Shares covered by each Option; (iv) determine the terms and provisions of
the respective Option Agreements (which need not be identical); (v) determine
the duration and purposes of leaves of absence which may be granted to
participants without constituting a termination of their employment for
purposes of the Plan; and (vi) make all other determinations necessary or
advisable to the administration of the Plan. Determinations of the Committee on
matters referred to in this Section 3 shall be conclusive and binding on
-2-
<PAGE>
all parties howsoever concerned. With respect to Incentive Stock Options, the
Committee shall administer the Plan in compliance with the provisions of Code
Section 422 as the same may hereafter be amended from time to time. No member
of the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Option.
4. ELIGIBILITY AND PARTICIPATION.
4.1 In General. Only officers, employees and directors who
are also employees of the Corporation or any Subsidiary shall be eligible to
receive grants of Incentive Stock Options. Officers, employees and directors
(whether or not they are also employees) of the Corporation or any Subsidiary,
as well as consultants, independent contractors or other service providers of
the Corporation or any Subsidiary shall be eligible to receive grants of
Nonqualified Options. Within the foregoing limits, the Committee, from time to
time, shall determine and designate persons to whom Options may be granted. All
such designations shall be made in the absolute discretion of the Committee and
shall not require the approval of the stockholders. In determining (i) the
number of Shares to be covered by each Option, (ii) the purchase price for such
Shares and the method of payment of such price (subject to the other sections
hereof), (iii) the individuals of the eligible class to whom Options shall be
granted, (iv) the terms and provisions of the respective Option Agreements, and
(v) the times at which such Options shall be granted, the Committee shall take
into account such factors as it shall deem relevant in connection with
accomplishing the purpose of the Plan as set forth in Section 1. An individual
who has been granted an Option may be granted an additional Option or Options
if the Committee shall so determine. No Option shall be granted under the Plan
after June 30, 2007, but Options granted before such date may be exercisable
after such date.
4.2 Certain Limitations. In no event shall Incentive Stock
Options be granted to an Optionee such that the sum of (i) aggregate fair
market value (determined at the time the Incentive Stock Options are granted)
of the Shares subject to all Options granted under the Plan which are
exercisable for the first time during the same calendar year, plus (ii) the
aggregate fair market value (determined at the time the options are granted) of
all stock subject to all other incentive stock options granted to such Optionee
by the Corporation, its parent and Subsidiaries which are exercisable for the
first time during such calendar year, exceeds One Hundred Thousand Dollars
($100,000). For purposes of the immediately preceding sentence, fair market
value shall be determined as of the date of grant based on the Fair Market
Value Per Share as determined pursuant to Section 2.3.
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<PAGE>
5. AVAILABLE SHARES AND ADJUSTMENTS UPON CHANGES
IN CAPITALIZATION.
5.1 Shares. Subject to adjustment as provided in Section 5.2
below, the total number of Shares to be subject to Options granted pursuant to
this Plan shall not exceed ( ) Shares. Shares subject to the Plan may be either
authorized but unissued shares or shares that were once issued and subsequently
reacquired by the Corporation; the Committee shall be empowered to take any
appropriate action required to make Shares available for Options granted under
this Plan. If any Option is surrendered before exercise or lapses without
exercise in full or for any other reason ceases to be exercisable, the Shares
reserved therefore shall continue to be available under the Plan.
5.2 Adjustments. As used herein, the term "Adjustment Event"
means an event pursuant to which the outstanding Shares of the Corporation are
increased, decreased or changed into, or exchanged for a different number or
kind of shares or securities, without receipt of consideration by the
Corporation, through reorganization, merger, recapitalization,
reclassification, stock split, reverse stock split, stock dividend, stock
consolidation or otherwise. Upon the occurrence of an Adjustment Event, (i)
appropriate and proportionate adjustments shall be made to the number and kind
of shares and exercise price for the shares subject to the Options which may
thereafter be granted under this Plan, (ii) appropriate and proportionate
adjustments shall be made to the number and kind of and exercise price for the
shares subject to the then outstanding Options granted under this Plan, and
(iii) appropriate amendments to the Option Agreements shall be executed by the
Corporation and the Optionees if the Committee determines that such an
amendment is necessary or desirable to reflect such adjustments. If determined
by the Committee to be appropriate, in the event of an Adjustment Event which
involves the substitution of securities of a corporation other than the
Corporation, the Committee shall make arrangements for the assumptions by such
other corporation of any Options then or thereafter outstanding under the Plan.
Notwithstanding the foregoing, such adjustment in an outstanding Option shall
be made without change in the total exercise price applicable to the
unexercised portion of the Option, but with an appropriate adjustment to the
number of shares, kind of shares and exercise price for each share subject to
the Option. The determination by the Committee as to what adjustments,
amendments or arrangements shall be made pursuant to this Section 5.2, and the
extent thereof, shall be final and conclusive. No fractional Shares shall be
issued under the Plan on account of any such adjustment or arrangement.
6. TERMS AND CONDITIONS OF OPTIONS.
6.1 Intended Treatment as Incentive Stock Options. Incentive
Stock Options granted pursuant to this Plan are intended to be "incentive stock
options" to which Code Sections 421 and 422 apply, and the Plan shall be
construed and administered to
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implement that intent. If all or any part of an Incentive Stock Option shall
not be an "incentive stock option" subject to Sections 421 or 422 of the Code,
such Option shall nevertheless be valid and carried into effect. All Options
granted under this Plan shall be subject to the terms and conditions set forth
in this Section 6 (except as provided in Section 5.2) and to such other terms
and conditions as the Committee shall determine to be appropriate to accomplish
the purpose of the Plan as set forth in Section 1.
6.2 Amount and Payment of Exercise Price.
6.2.1 Exercise Price. The exercise price per Share
for each Share which the Optionee is entitled to purchase under a Nonqualified
Option shall be determined by the Committee but shall not be less than
eighty-five percent (85%) of the Fair Market Value Per Share on the date of the
grant of the Nonqualified Option. The exercise price per Share for each Share
which the Optionee is entitled to purchase under an Incentive Stock Option
shall be determined by the Committee but shall not be less than the Fair Market
Value Per Share on the date of the grant of the Incentive Stock Option;
provided, however, that the exercise price shall not be less than one hundred
ten percent (110%) of the Fair Market Value Per Share on the date of the grant
of the Incentive Stock Option in the case of an individual then owning (within
the meaning of Code Section 425(d)) more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation or of its
parent or Subsidiaries.
6.2.2 Payment of Exercise Price. The consideration
to be paid for the Shares to be issued upon exercise of an Option, including
the method of payment, shall be determined by the Committee and may consist of
promissory notes, shares of the common stock of the Corporation or such other
consideration and method of payment for the Shares as may be permitted under
applicable state and federal laws.
6.3 Exercise of Options.
6.3.1 Each Option granted under this Plan shall be
exercisable at such times and under such conditions as may be determined by the
Committee at the time of the grant of the Option and as shall be permissible
under the terms of the Plan; provided, however, in no event shall an Option be
exercisable after the expiration of ten (10) years from the date it is granted,
and in the case of an Optionee owning (within the meaning of Code Section
425(d)), at the time an Incentive Stock Option is granted, more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Corporation or of its parent or Subsidiaries, such Incentive Stock Option shall
not be exercisable later than five (5) years after the date of grant.
6.3.2 An Optionee may purchase less than the total
number of Shares for which the Option is exercisable, provided that a partial
exercise of an Option may not be for less than One Hundred (100) Shares and
shall not include any fractional shares.
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6.4 Nontransferability of Options. All Options granted under
this Plan shall be nontransferable, either voluntarily or by operation of law,
otherwise than by will or the laws of descent and distribution, and shall be
exercisable during the Optionee's lifetime only by such Optionee.
6.5 Effect of Termination of Employment or Other
Relationship. Except as otherwise determined by the Committee in connection
with the grant of Nonqualified Options, the effect of termination of an
Optionee's employment or other relationship with the Corporation on such
Optionee's rights to acquire Shares pursuant to the Plan shall be as follows:
6.5.1 Termination for Other than Disability or
Cause. If an Optionee ceases to be employed by, or ceases to have a
relationship with, the Corporation for any reason other than for disability or
cause, such Optionee's Options shall expire not later than three (3) months
thereafter. During such three (3) month period and prior to the expiration of
the Option by its terms, the Optionee may exercise any Option granted to him,
but only to the extent such Options were exercisable on the date of termination
of his employment or relationship and except as so exercised, such Options
shall expire at the end of such three (3) month period unless such Options by
their terms expire before such date. The decision as to whether a termination
for a reason other than disability, cause or death has occurred shall be made
by the Committee, whose decision shall be final and conclusive, except that
employment shall not be considered terminated in the case of sick leave or
other bona fide leave of absence approved by the Corporation.
6.5.2 Disability. If an Optionee ceases to be
employed by, or ceases to have a relationship with, the Corporation by reason
of disability (within the meaning of Code Section 22(e)(3)), such Optionee's
Options shall expire not later than one (1) year thereafter. During such one
(1) year period and prior to the expiration of the Option by its terms, the
Optionee may exercise any Option granted to him, but only to the extent such
Options were exercisable on the date the Optionee ceased to be employed by, or
ceased to have a relationship with, the Corporation by reason of disability and
except as so exercised, such Options shall expire at the end of such one (1)
year period unless such Options by their terms expire before such date. The
decision as to whether a termination by reason of disability has occurred shall
be made by the Committee, whose decision shall be final and conclusive.
6.5.3 Termination for Cause. If an Optionee's
employment by, or relationship with, the Corporation is terminated for cause,
such Optionee's Option shall expire immediately; provided, however, the
Committee may, in its sole discretion, within thirty (30) days of such
termination, waive the expiration of the Option by giving written notice of
such waiver to the Optionee at such Optionee's last known address. In the event
of such waiver, the Optionee may exercise the Option only to such extent, for
such time, and upon such terms and conditions as if such Optionee had ceased to
be employed by,
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<PAGE>
or ceased to have a relationship with, the Corporation upon the date of such
termination for a reason other than disability, cause, or death. Termination
for cause shall include termination for malfeasance or gross misfeasance in the
performance of duties or conviction of illegal activity in connection therewith
or any conduct detrimental to the interests of the Corporation. The
determination of the Committee with respect to whether a termination for cause
has occurred shall be final and conclusive.
6.6 Withholding of Taxes. As a condition to the exercise, in
whole or in part, of any Options the Board of Directors may in its sole
discretion require the Optionee to pay, in addition to the purchase price of
the Shares covered by the Option an amount equal to any Federal, state or local
taxes that may be required to be withheld in connection with the exercise of
such Option.
6.7 No Rights to Continued Employment or Relationship.
Nothing contained in this Plan or in any Option Agreement shall obligate the
Corporation to employ or have another relationship with any Optionee for any
period or interfere in any way with the right of the Corporation to reduce such
Optionee's compensation or to terminate the employment of or relationship with
any Optionee at any time.
6.8 Time of Granting Options. The time an Option is granted,
sometimes referred to herein as the date of grant, shall be the day the
Corporation executes the Option Agreement; provided, however, that if
appropriate resolutions of the Committee indicate that an Option is to be
granted as of and on some prior or future date, the time such Option is granted
shall be such prior or future date.
6.9 Privileges of Stock Ownership. No Optionee shall be
entitled to the privileges of stock ownership as to any Shares not actually
issued and delivered to such Optionee. No Shares shall be purchased upon the
exercise of any Option unless and until, in the opinion of the Corporation's
counsel, any then applicable requirements of any laws or governmental or
regulatory agencies having jurisdiction and of any exchanges upon which the
stock of the Corporation may be listed shall have been fully complied with.
6.10 Securities Laws Compliance. The Corporation will
diligently endeavor to comply with all applicable securities laws before any
Options are granted under the Plan and before any Shares are issued pursuant to
Options. Without limiting the generality of the foregoing, the Corporation may
require from the Optionee such investment representation or such agreement, if
any, as counsel for the Corporation may consider necessary or advisable in
order to comply with the Securities Act of 1933 as then in effect, and may
require that the Optionee agree that any sale of the Shares will be made only
in such manner as is permitted by the Committee. The Committee in its
discretion may cause the Shares underlying the Options to be registered under
the Securities Act of 1933, as amended, by the filing of a Form S-8
Registration Statement covering the Options and Shares underlying such Options.
Optionee shall take any action reasonably requested by
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<PAGE>
the Corporation in connection with registration or qualification of the Shares
under federal or state securities laws.
6.11 Option Agreement. Each Incentive Stock Option and
Nonqualified Option granted under this Plan shall be evidenced by the
appropriate written Stock Option Agreement ("Option Agreement") executed by the
Corporation and the Optionee in a form substantially the same as the
appropriate form of Option Agreement attached as Exhibit I or II hereto (and
made a part hereof by this reference) and shall contain each of the provisions
and agreements specifically required to be contained therein pursuant to this
Section 6, and such other terms and conditions as are deemed desirable by the
Committee and are not inconsistent with the purpose of the Plan as set forth in
Section 1.
7. PLAN AMENDMENT AND TERMINATION.
7.1 Authority of Committee. The Committee may at any time
discontinue granting Options under the Plan or otherwise suspend, amend or
terminate the Plan and may, with the consent of an Optionee, make such
modification of the terms and conditions of such Optionee's Option as it shall
deem advisable; provided that, except as permitted under the provisions of
Section 5.2, the Committee shall have no authority to make any amendment or
modification to this Plan or any outstanding Option thereunder which would: (i)
increase the maximum number of shares which may be purchased pursuant to
Options granted under the Plan, either in the aggregate or by an Optionee
(except pursuant to Section 5.2); (ii) change the designation of the class of
the employees eligible to receive Incentive Stock Options; (iii) extend the
term of the Plan or the maximum Option period thereunder; (iv) decrease the
minimum Incentive Stock Option price or permit reductions of the price at which
shares may be purchased for Incentive Stock Options granted under the Plan; or
(v) cause Incentive Stock Options issued under the Plan to fail to meet the
requirements of incentive stock options under Code Section 422. An amendment or
modification made pursuant to the provisions of this Section 7 shall be deemed
adopted as of the date of the action of the Committee effecting such amendment
or modification and shall be effective immediately, unless otherwise provided
therein, subject to approval thereof (1) within twelve (12) months before or
after the effective date by stockholders of the Corporation holding not less
than a majority vote of the voting power of the Corporation voting in person or
by proxy at a duly held stockholders meeting when required to maintain or
satisfy the requirements of Code Section 422 with respect to Incentive Stock
Options, and (2) by any appropriate governmental agency. No Option may be
granted during any suspension or after termination of the Plan.
7.2 Ten (10) Year Maximum Term. Unless previously terminated
by the Committee, this Plan shall terminate on June 30, 2007, and no Options
shall be granted under the Plan thereafter.
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<PAGE>
7.3 Effect on Outstanding Options. Amendment, suspension or
termination of this Plan shall not, without the consent of the Optionee, alter
or impair any rights or obligations under any Option theretofore granted.
8. EFFECTIVE DATE OF PLAN. This Plan shall be effective as of July 1,
1997, the date the Plan was adopted by the Board of Directors, subject to the
approval of the Plan by the affirmative vote of a majority of the issued and
outstanding Shares of common stock of the Corporation represented and voting at
a duly held meeting at which a quorum is present within twelve (12) months
thereafter. The Committee shall be authorized and empowered to make grants of
Options pursuant to this Plan prior to such approval of this Plan by the
stockholders; provided, however, in such event the Option grants shall be made
subject to the approval of both this Plan and such Option grants by the
stockholders in accordance with the provisions of this Section 8.
9. MISCELLANEOUS PROVISIONS.
9.1 Exculpation and Indemnification. The Corporation shall
indemnify and hold harmless the Committee from and against any and all
liabilities, costs and expenses incurred by such persons as a result of any
act, or omission to act, in connection with the performance of such persons'
duties, responsibilities and obligations under the Plan, other than such
liabilities, costs and expenses as may result from the gross negligence, bad
faith, willful conduct and/or criminal acts of such persons.
9.2 Governing Law. The Plan shall be governed and construed
in accordance with the laws of the State of Michigan and the Code.
9.3 Compliance with Applicable Laws. The inability of the
Corporation to obtain from any regulatory body having jurisdiction authority
deemed by the Corporation's counsel to be necessary to the lawful issuance and
sale of any Shares upon the exercise of an Option shall relieve the Corporation
of any liability in respect of the non-issuance or sale of such Shares as to
which such requisite authority shall not have been obtained.
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FORM OF EXHIBIT I
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT ("Agreement") is entered into as
of __________________________, 199_, by and between NOBLE INTERNATIONAL, LTD. a
Michigan corporation ("Corporation"), and _________________ ("Optionee").
R E C I T A L S
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A. On ____________, the Board of Directors of the Corporation adopted,
subject to the approval of the Corporation's shareholders, the Noble
International, Ltd. 1997 Stock Option Plan (the "Plan").
B. Pursuant to the Plan, on ________________, the members of the Board
of Directors of the Corporation serving on the Plan Committee ("Committee")
authorized granting to Optionee options to purchase shares of the common stock,
no par value, of the Corporation ("Shares") for the term and subject to the
terms and conditions hereinafter set forth.
A G R E E M E N T
- - - - - - - - -
It is hereby agreed as follows:
1. CERTAIN DEFINITIONS. Unless otherwise defined herein, or the
context otherwise clearly requires, terms with initial capital letters used
herein shall have the meanings assigned to such terms in the Plan.
2. GRANT OF OPTIONS. The Corporation hereby grants to Optionee,
options ("Options") to purchase all or any part of Shares, upon and subject to
the terms and conditions of the Plan, which is incorporated in full herein by
this reference, and upon the other terms and conditions set forth herein.
3. OPTION PERIOD. The Options shall be exercisable at any time during
the period commencing on the following dates (subject to the provisions of
Section 18) and expiring on the date ______ (_) years from the date of grant,
unless earlier terminated pursuant to Section 7:
[terms of option vesting to be set forth here]
4. METHOD OF EXERCISE. The Options shall be exercisable by Optionee by
giving written notice to the Corporation of the election to purchase and of the
number of Shares Optionee elects to purchase, such notice to be accompanied by
such other executed instruments or documents as may be required by the
Committee pursuant to this Agreement, and unless otherwise directed by the
Committee, Optionee shall at the time of such exercise tender the purchase
price of the Shares he has elected to purchase. An Optionee may purchase less
than the total number of Shares for which the Option is exercisable, provided
that a partial exercise of an Option may not be for less than One Hundred (100)
Shares.
<PAGE>
If Optionee shall not purchase all of the Shares which he is entitled to
purchase under the Options, his right to purchase the remaining unpurchased
Shares shall continue until expiration of the Options. The Options shall be
exercisable with respect of whole Shares only, and fractional Share interests
shall be disregarded.
5. AMOUNT OF PURCHASE PRICE. The purchase price per Share for each
Share which Optionee is entitled to purchase under the Options shall be per
Share.
6. PAYMENT OF PURCHASE PRICE. At the time of Optionee's notice of
exercise of the Options, Optionee shall tender in cash or by certified or bank
cashier's check payable to the Corporation, the purchase price for all Shares
then being purchased. Provided, however, the Board of Directors may, in its
sole discretion, permit payment by the Corporation of the purchase price in
whole or in part with Shares. If the Optionee is so permitted, and the Optionee
elects to make payment with Shares, the Optionee shall deliver to the
Corporation certificates representing the number of Shares in payment for new
Shares, duly endorsed for transfer to the Corporation, together with any
written representations relating to title, liens and encumbrances, securities
laws, rules and regulatory compliance, or other matters, reasonably requested
by the Board of Directors. The value of Shares so tendered shall be their Fair
Market Value Per Share on the date of the Optionee's notice of exercise.
7. EFFECT OF TERMINATION OF EMPLOYMENT. If an Optionee's employment or
other relationship with the Corporation (or a Subsidiary) terminates, the
effect of the termination on the Optionee's rights to acquire Shares shall be
as follows:
7.1 Termination for Other than Disability or Cause. If an
Optionee ceases to be employed by, or ceases to have a relationship with, the
Corporation or a Subsidiary for any reason other than for disability or cause,
such Optionee's Options shall expire not later than three (3) months
thereafter. During such three (3) month period and prior to the expiration of
the Option by its terms, the Optionee may exercise any Option granted to him,
but only to the extent such Options were exercisable on the date of termination
of his employment or relationship and except as so exercised, such Options
shall expire at the end of such three (3) month period unless such Options by
their terms expire before such date. The decision as to whether a termination
for a reason other than disability, cause or death has occurred shall be made
by the Committee, whose decision shall be final and conclusive, except that
employment shall not be considered terminated in the case of sick leave or
other bona fide leave of absence approved by the Corporation.
7.2 Disability. If an Optionee ceases to be employed by, or
ceases to have a relationship with, the Corporation or a Subsidiary by reason
of disability (within the meaning of Code Section 22(e)(3)), such Optionee's
Options shall expire not later than one (1) year thereafter. During such one
(1) year period and prior to the expiration of the Option by its terms, the
Optionee may exercise any Option granted to him, but only to the extent such
Options were exercisable on the date the Optionee ceased to be employed by, or
ceased to have a relationship with, the Corporation or Subsidiary by reason of
disability. The decision as to whether a termination by reason of disability
has occurred shall be made by the Committee, whose decision shall be final and
conclusive.
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<PAGE>
7.3 Termination for Cause. If an Optionee's employment by, or
relationship with, the Corporation or a Subsidiary is terminated for cause,
such Optionee's Option shall expire immediately; provided, however, the
Committee may, in its sole discretion, within thirty (30) days of such
termination, waive the expiration of the Option by giving written notice of
such waiver to the Optionee at such Optionee's last known address. In the event
of such waiver, the Optionee may exercise the Option only to such extent, for
such time, and upon such terms and conditions as if such Optionee had ceased to
be employed by, or ceased to have a relationship with, the Corporation or a
Subsidiary upon the date of such termination for a reason other than
disability, cause or death. Termination for cause shall include termination for
malfeasance or gross misfeasance in the performance of duties or conviction of
illegal activity in connection therewith or any conduct detrimental to the
interests of the Corporation or a Subsidiary. The determination of the
Committee with respect to whether a termination for cause has occurred shall be
final and conclusive.
8. NONTRANSFERABILITY OF OPTIONS. The Options shall not be
transferable, either voluntarily or by operation of law, otherwise than by will
or the laws of descent and distribution and shall be exercisable during the
Optionee's lifetime only by Optionee.
9. ADDITIONAL RESTRICTIONS REGARDING DISPOSITIONS OF SHARES. The
Shares acquired pursuant to the exercise of Options shall be subject to the
restrictions set forth in Exhibit "A" attached hereto and incorporated herein
as if fully set forth.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. As used herein, the
term "Adjustment Event" means an event pursuant to which the outstanding Shares
of the Corporation are increased, decreased or changed into, or exchanged for a
different number or kind of shares or securities, without receipt of
consideration by the Corporation, through reorganization, merger,
recapitalization, reclassification, stock split, reverse stock split, stock
dividend, stock consolidation or otherwise. Upon the occurrence of an
Adjustment Event, (i) appropriate and proportionate adjustments shall be made
to the number and kind and exercise price for the shares subject to the
Options, and (ii) appropriate amendments to this Agreement shall be executed by
the Corporation and Optionee if the Committee determines that such an amendment
is necessary or desirable to reflect such adjustments. If determined by the
Committee to be appropriate, in the event of an Adjustment Event which involves
the substitution of securities of a corporation other than the Corporation, the
Committee shall make arrangements for the assumptions by such other corporation
of the Options. Notwithstanding the foregoing, any such adjustment to the
Options shall be made without change in the total exercise price applicable to
the unexercised portion of the Options, but with an appropriate adjustment to
the number of shares, kind of shares and exercise price for each share subject
to the Options. The determination by the Committee as to what adjustments,
amendments or arrangements shall be made pursuant to this Section 10, and the
extent thereof, shall be final and conclusive. No fractional Shares shall be
issued on account of any such adjustment or arrangement.
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<PAGE>
11. NO RIGHTS TO CONTINUED EMPLOYMENT OR RELATIONSHIP. Nothing
contained in this Agreement shall obligate the Corporation to employ or have
another relationship with Optionee for any period or interfere in any way with
the right of the Corporation to reduce Optionee's compensation or to terminate
the employment of or relationship with Optionee at any time.
12. TIME OF GRANTING OPTIONS. The time the Options shall be deemed
granted, sometimes referred to herein as the "date of grant," shall be .
13. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall not be entitled to
the privileges of stock ownership as to any Shares not actually issued and
delivered to Optionee. No Shares shall be purchased upon the exercise of any
Options unless and until, in the opinion of the Corporation's counsel, any then
applicable requirements of any laws, or governmental or regulatory agencies
having jurisdiction, and of any exchanges upon which the stock of the
Corporation may be listed shall have been fully complied with.
14. SECURITIES LAWS COMPLIANCE. The Corporation will diligently
endeavor to comply with all applicable securities laws before any stock is
issued pursuant to the Options. Without limiting the generality of the
foregoing, the Corporation may require from the Optionee such investment
representation or such agreement, if any, as counsel for the Corporation may
consider necessary in order to comply with the Securities Act of 1933 as then
in effect, and may require that the Optionee agree that any sale of the Shares
will be made only in such manner as is permitted by the Committee. The
Committee may in its discretion cause the Shares underlying the Options to be
registered under the Securities Act of 1933 as amended by filing a Form S-8
Registration Statement covering the Options and the Shares underlying the
Options. Optionee shall take any action reasonably requested by the Corporation
in connection with registration or qualification of the Shares under federal or
state securities laws.
15. INTENDED TREATMENT AS INCENTIVE STOCK OPTIONS. The Options granted
herein are intended to be "incentive stock options" to which Sections 421 and
422 of the Internal Revenue Code of 1986, as amended from time to time ("Code")
apply, and shall be construed to implement that intent. If all or any part of
the Options shall not be subject to Sections 421 and 422 of the Code, the
Options shall nevertheless be valid and carried into effect.
16. PLAN CONTROLS. The Options shall be subject to and governed by the
provisions of the Plan. All determinations and interpretations of the Plan made
by the Committee shall be final and conclusive.
17. SHARES SUBJECT TO LEGEND. If deemed necessary by the Corporation's
counsel, all certificates issued to represent Shares purchased upon exercise of
the Options shall bear such appropriate legend conditions as counsel for the
Corporation shall require.
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<PAGE>
18. CONDITIONS TO OPTIONS.
18.1 Compliance with Applicable Laws. THE CORPORATION'S
OBLIGATION TO ISSUE SHARES OF ITS COMMON STOCK UPON EXERCISE OF THE OPTIONS IS
EXPRESSLY CONDITIONED UPON THE COMPLETION BY THE CORPORATION OF ANY
REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES UNDER ANY STATE AND/OR
FEDERAL LAW OR RULINGS OR REGULATIONS OF ANY GOVERNMENTAL REGULATORY BODY, OR
THE MAKING OF SUCH INVESTMENT REPRESENTATIONS OR OTHER REPRESENTATIONS AND
UNDERTAKINGS BY THE OPTIONEE OR ANY PERSON ENTITLED TO EXERCISE THE OPTION IN
ORDER TO COMPLY WITH THE REQUIREMENTS OF ANY EXEMPTION FROM ANY SUCH
REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES WHICH THE COMMITTEE SHALL,
IN ITS SOLE DISCRETION, DEEM NECESSARY OR ADVISABLE. SUCH REQUIRED
REPRESENTATIONS AND UNDERTAKINGS MAY INCLUDE REPRESENTATIONS AND AGREEMENTS
THAT THE OPTIONEE OR ANY PERSON ENTITLED TO EXERCISE THE OPTION (i) IS NOT
PURCHASING SUCH SHARES FOR DISTRIBUTION AND (ii) AGREES TO HAVE PLACED UPON THE
FACE AND REVERSE OF ANY CERTIFICATES A LEGEND SETTING FORTH ANY REPRESENTATIONS
AND UNDERTAKINGS WHICH HAVE BEEN GIVEN TO THE COMMITTEE OR A REFERENCE THERETO.
18.2 SHAREHOLDER APPROVAL OF PLAN. IF THE OPTIONS GRANTED
HEREBY ARE GRANTED PRIOR TO APPROVAL OF THE PLAN BY THE SHAREHOLDERS OF THE
CORPORATION PURSUANT TO SECTION 8 OF THE PLAN, THE GRANT OF THE OPTIONS MADE
HEREBY IS EXPRESSLY CONDITIONED UPON AND SUCH OPTIONS SHALL NOT BE EXERCISABLE
UNTIL THE APPROVAL OF THE PLAN BY THE SHAREHOLDERS OF THE CORPORATION IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 8 OF THE PLAN.
18.3 Maximum Exercise Period. Notwithstanding any provision
of this Agreement to the contrary, the Options shall expire no later than ten
years from the date hereof or five years if, as of the date hereof, the
Optionee owns or is considered to own by reason of Code Section 425(d) more
than 10% of the total combined voting power of all classes of stock of the
Corporation or any Subsidiary or parent corporation of the Corporation.
19. MISCELLANEOUS.
19.1 Binding Effect. This Agreement shall bind and inure to
the benefit of the successors, assigns, transferees, agents, personal
representatives, heirs and legatees of the respective parties.
19.2 Further Acts. Each party agrees to perform any further
acts and execute and deliver any documents which may be necessary to carry out
the provisions of this Agreement.
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19.3 Amendment. This Agreement may be amended at any time by
the written agreement of the Corporation and the Optionee.
19.4 Syntax. Throughout this Agreement, whenever the context
so requires, the singular shall include the plural, and the masculine gender
shall include the feminine and neuter genders. The headings and captions of the
various Sections hereof are for convenience only and they shall not limit,
expand or otherwise affect the construction or interpretation of this
Agreement.
19.5 Choice of Law. The parties hereby agree that this
Agreement has been executed and delivered in the State of Michigan and shall be
construed, enforced and governed by the laws thereof. This Agreement is in all
respects intended by each party hereto to be deemed and construed to have been
jointly prepared by the parties and the parties hereby expressly agree that any
uncertainty or ambiguity existing herein shall not be interpreted against
either of them.
19.6 Severability. In the event that any provision of this
Agreement shall be held invalid or unenforceable, such provision shall be
severable from, and such invalidity or unenforceability shall not be construed
to have any effect on, the remaining provisions of this Agreement.
19.7 Notices. All notices and demands between the parties
hereto shall be in writing and shall be served either by registered or
certified mail, and such notices or demands shall be deemed given and made
forty-eight (48) hours after the deposit thereof in the United States mail,
postage prepaid, addressed to the party to whom such notice or demand is to be
given or made, and the issuance of the registered receipt therefor. If served
by telegraph, such notice or demand shall be deemed given and made at the time
the telegraph agency shall confirm to the sender, delivery thereof to the
addressee. All notices and demands to Optionee or the Corporation may be given
to them at the following addresses:
If to Optionee: ________________________________________________
________________________________________________
________________________________________________
If to Corporation: Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, MI 48304
Such parties may designate in writing from time to time such other place or
places that such notices and demands may be given.
19.8 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof,
this Agreement supersedes all prior and contemporaneous agreements and
understandings of the parties, and there are no warranties, representations or
other agreements between the parties in
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<PAGE>
connection with the subject matter hereof except as set forth or referred to
herein. No supplement, modification or waiver or termination of this Agreement
shall be binding unless executed in writing by the party to be bound thereby.
No waiver of any of the provisions of this Agreement shall constitute a waiver
of any other provision hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
19.9 Attorneys' Fees. In the event that any party to this
Agreement institutes any action or proceeding, including, but not limited to,
litigation or arbitration, to preserve, to protect or to enforce any right or
benefit created by or granted under this Agreement, the prevailing party in
each respective such action or proceeding shall be entitled, in addition to any
and all other relief granted by a court or other tribunal or body, as may be
appropriate, to an award in such action or proceeding of that sum of money
which represents the attorneys' fees reasonably incurred by the prevailing
party therein in filing or otherwise instituting and in prosecuting or
otherwise pursuing or defending such action or proceeding, and, additionally,
the attorneys' fees reasonably incurred by such prevailing party in negotiating
any and all matters underlying such action or proceeding and in preparation for
instituting or defending such action or proceeding.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date first set forth above.
"CORPORATION"
NOBLE INTERNATIONAL, LTD.,
a Michigan corporation
By:________________________________
"OPTIONEE"
___________________________________
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<PAGE>
[FORM OF] EXHIBIT II
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT ("Agreement") is entered
into as of ________, 199_, by and between NOBLE INTERNATIONAL, LTD., a Michigan
corporation ("Corporation"), and _______________ ("Optionee").
R E C I T A L S
- - - - - - - -
A. On _____________ 1997, the Board of Directors of the Corporation
adopted, subject to the approval of the Corporation's shareholders, the Noble
International, Ltd. 1997 Stock Option Plan (the "Plan").
B. Pursuant to the Plan, on ___________, the members of the Board of
Directors of the Corporation serving on the Plan Committee ("Committee")
authorized granting to Optionee options to purchase shares of the common stock,
no par value, of the Corporation ("Shares") for the term and subject to the
terms and conditions hereinafter set forth.
A G R E E M E N T
- - - - - - - - -
It is hereby agreed as follows:
1. CERTAIN DEFINITIONS. Unless otherwise defined herein, or the
context otherwise clearly requires, terms with initial capital letters used
herein shall have the meanings assigned to such terms in the Plan.
2. GRANT OF OPTIONS. The Corporation hereby grants to Optionee,
options ("Options") to purchase all or any part of ____________ Shares, upon
and subject to the terms and conditions of the Plan, which is incorporated in
full herein by this reference, and upon the other terms and conditions set
forth herein.
3. OPTION PERIOD. The Options shall be exercisable at any time during
the period commencing on the following dates (subject to the provisions of
Section 18) and expiring on the date _____ (_) years from the date of grant,
unless earlier terminated pursuant to Section 7:
Number of Options Date First Exercisable
----------------- ----------------------
[Terms of option vesting to be set forth here]
4. METHOD OF EXERCISE. The Options shall be exercisable by Optionee by
giving written notice to the Corporation of the election to purchase and of the
number of Shares Optionee elects to purchase, such notice to be accompanied by
such other executed instruments or documents as may be required by the
Committee pursuant to this Agreement, and unless otherwise directed by the
Committee, Optionee shall at the time of such exercise tender the purchase
price of the Shares he has elected to purchase. An Optionee may
<PAGE>
purchase less than the total number of Shares for which the Option is
exercisable, provided that a partial exercise of an Option may not be for less
than One Hundred (100) Shares. If Optionee shall not purchase all of the Shares
which he is entitled to purchase under the Options, his right to purchase the
remaining unpurchased Shares shall continue until expiration of the Options.
The Options shall be exercisable with respect of whole Shares only, and
fractional Share interests shall be disregarded.
5. AMOUNT OF PURCHASE PRICE. The purchase price per Share for each
Share which Optionee is entitled to purchase under the Options shall be ___ per
Share.
6. PAYMENT OF PURCHASE PRICE. At the time of Optionee's notice of
exercise of the Options, Optionee shall tender in cash or by certified or bank
cashier's check payable to the Corporation, the purchase price for all Shares
then being purchased. Provided, however, the Board of Directors may, in its
sole discretion, permit payment by the Corporation of the purchase price in
whole or in part with Shares. If the Optionee is so permitted, and the Optionee
elects to make payment with Shares, the Optionee shall deliver to the
Corporation certificates representing the number of Shares in payment for new
Shares, duly endorsed for transfer to the Corporation, together with any
written representations relating to title, liens and encumbrances, securities
laws, rules and regulatory compliance, or other matters, reasonably requested
by the Board of Directors. The value of Shares so tendered shall be their Fair
Market Value Per Share on the date of the Optionee's notice of exercise.
7. EFFECT OF TERMINATION OF RELATIONSHIP OR DEATH. If Optionee's
relationship with the Corporation as an employee terminates (whether
voluntarily or involuntarily because he is not re-elected by the shareholders),
or if optionee dies, all options which have previously vested shall expire six
(6) months thereafter. All unvested options shall laps and automatically
expire. During such six (6) month period (or such shorter period prior to the
expiration of the Option by its own terms), such Options may be exercised by
the Optionee, his executor or administrator or the person or persons to whom
the Option is transferred by will or the applicable laws of descent and
distribution, as the case may be, but only to the extent such Options were
exercisable on the date Optionee ceased to have a relationship with the
Corporation as a director or died.
8. NONTRANSFERABILITY OF OPTIONS. The Options shall not be
transferable, either voluntarily or by operation of law, otherwise than by will
or the laws of descent and distribution and shall be exercisable during the
Optionee's lifetime only by Optionee.
9. ADDITIONAL RESTRICTIONS REGARDING DISPOSITIONS OF SHARES. The
Shares acquired pursuant to the exercise of Options shall be subject to the
restrictions set forth in Exhibit "A" attached hereto and incorporated herein
as if fully set forth.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. As used herein, the
term "Adjustment Event" means an event pursuant to which the outstanding Shares
of the Corporation are increased, decreased or changed into, or exchanged for a
different number or kind of shares or securities, without receipt of
consideration by the Corporation, through
-2-
<PAGE>
reorganization, merger, recapitalization, reclassification, stock split,
reverse stock split, stock dividend, stock consolidation or otherwise. Upon the
occurrence of an Adjustment Event, (i) appropriate and proportionate
adjustments shall be made to the number and kind and exercise price for the
shares subject to the Options, and (ii) appropriate amendments to this
Agreement shall be executed by the Corporation and Optionee if the Committee
determines that such an amendment is necessary or desirable to reflect such
adjustments. If determined by the Committee to be appropriate, in the event of
an Adjustment Event which involves the substitution of securities of a
corporation other than the Corporation, the Committee shall make arrangements
for the assumptions by such other corporation of the Options. Notwithstanding
the foregoing, any such adjustment to the Options shall be made without change
in the total exercise price applicable to the unexercised portion of the
Options, but with an appropriate adjustment to the number of shares, kind of
shares and exercise price for each share subject to the Options. The
determination by the Committee as to what adjustments, amendments or
arrangements shall be made pursuant to this Section 10, and the extent thereof,
shall be final and conclusive. No fractional Shares shall be issued on account
of any such adjustment or arrangement.
11. NO RIGHTS TO CONTINUED EMPLOYMENT OR RELATIONSHIP. Nothing
contained in this Agreement shall obligate the Corporation to employ or have
another relationship with Optionee for any period or interfere in any way with
the right of the Corporation to reduce Optionee's compensation or to terminate
the employment of or relationship with Optionee at any time.
12. TIME OF GRANTING OPTIONS. The time the Options shall be deemed
granted, sometimes referred to herein as the "date of grant," shall be _______.
13. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall not be entitled to
the privileges of stock ownership as to any Shares not actually issued and
delivered to Optionee. No Shares shall be purchased upon the exercise of any
Options unless and until, in the opinion of the Corporation's counsel, any then
applicable requirements of any laws, or governmental or regulatory agencies
having jurisdiction, and of any exchanges upon which the stock of the
Corporation may be listed shall have been fully complied with.
14. SECURITIES LAWS COMPLIANCE. The Corporation will diligently
endeavor to comply with all applicable securities laws before any stock is
issued pursuant to the Options. Without limiting the generality of the
foregoing, the Corporation may require from the Optionee such investment
representation or such agreement, if any, as counsel for the Corporation may
consider necessary in order to comply with the Securities Act of 1933 as then
in effect, and may require that the Optionee agree that any sale of the Shares
will be made only in such manner as is permitted by the Committee. The
Committee may in its discretion cause the Shares underlying the Options to be
registered under the Securities Act of 1933 as amended by filing a Form S-8
Registration Statement covering the Options and the Shares underlying the
Options. Optionee shall take any action reasonably requested by the Corporation
in connection with registration or qualification of the Shares under federal or
state securities laws.
-3-
<PAGE>
15. INTENDED TREATMENT AS NON-QUALIFIED STOCK OPTIONS. The Options
granted herein are intended to be non-qualified stock options described in U.S.
Treasury Regulation ("Treas. Reg.") ss.1.83-7 to which Sections 421 and 422 of
the Internal Revenue Code of 1986, as amended from time to time ("Code") do not
apply, and shall be construed to implement that intent. If all or any part of
the Options shall not be described in Treas. Reg. ss.1.83-7 or be subject to
Sections 421 and 422 of the Code, the Options shall nevertheless be valid and
carried into effect.
16. PLAN CONTROLS. The Options shall be subject to and governed by the
provisions of the Plan. All determinations and interpretations of the Plan made
by the Committee shall be final and conclusive.
17. SHARES SUBJECT TO LEGEND. If deemed necessary by the Corporation's
counsel, all certificates issued to represent Shares purchased upon exercise of
the Options shall bear such appropriate legend conditions as counsel for the
Corporation shall require.
18. CONDITIONS TO OPTIONS.
18.1 Compliance with Applicable Laws. THE CORPORATION'S
OBLIGATION TO ISSUE SHARES OF ITS COMMON STOCK UPON EXERCISE OF THE OPTIONS IS
EXPRESSLY CONDITIONED UPON THE COMPLETION BY THE CORPORATION OF ANY
REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES UNDER ANY STATE AND/OR
FEDERAL LAW OR RULINGS OR REGULATIONS OF ANY GOVERNMENTAL REGULATORY BODY, OR
THE MAKING OF SUCH INVESTMENT REPRESENTATIONS OR OTHER REPRESENTATIONS AND
UNDERTAKINGS BY THE OPTIONEE OR ANY PERSON ENTITLED TO EXERCISE THE OPTION IN
ORDER TO COMPLY WITH THE REQUIREMENTS OF ANY EXEMPTION FROM ANY SUCH
REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES WHICH THE COMMITTEE SHALL,
IN ITS SOLE DISCRETION, DEEM NECESSARY OR ADVISABLE. SUCH REQUIRED
REPRESENTATIONS AND UNDERTAKINGS MAY INCLUDE REPRESENTATIONS AND AGREEMENTS
THAT THE OPTIONEE OR ANY PERSON ENTITLED TO EXERCISE THE OPTION (i) IS NOT
PURCHASING SUCH SHARES FOR DISTRIBUTION AND (ii) AGREES TO HAVE PLACED UPON THE
FACE AND REVERSE OF ANY CERTIFICATES A LEGEND SETTING FORTH ANY REPRESENTATIONS
AND UNDERTAKINGS WHICH HAVE BEEN GIVEN TO THE COMMITTEE OR A REFERENCE THERETO.
18.2 SHAREHOLDER APPROVAL OF PLAN. IF THE OPTIONS GRANTED
HEREBY ARE GRANTED PRIOR TO APPROVAL OF THE PLAN BY THE SHAREHOLDERS OF THE
CORPORATION PURSUANT TO SECTION 8 OF THE PLAN, THE GRANT OF THE OPTIONS MADE
HEREBY IS EXPRESSLY CONDITIONED UPON AND SUCH OPTIONS SHALL NOT BE EXERCISABLE
UNTIL THE APPROVAL OF THE PLAN BY THE SHAREHOLDERS OF THE CORPORATION IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 8 OF THE PLAN.
-4-
<PAGE>
19. MISCELLANEOUS.
19.1 Binding Effect. This Agreement shall bind and inure to
the benefit of the successors, assigns, transferees, agents, personal
representatives, heirs and legatees of the respective parties.
19.2 Further Acts. Each party agrees to perform any further
acts and execute and deliver any documents which may be necessary to carry out
the provisions of this Agreement.
19.3 Amendment. This Agreement may be amended at any time by
the written agreement of the Corporation and the Optionee.
19.4 Syntax. Throughout this Agreement, whenever the context
so requires, the singular shall include the plural, and the masculine gender
shall include the feminine and neuter genders. The headings and captions of the
various Sections hereof are for convenience only and they shall not limit,
expand or otherwise affect the construction or interpretation of this
Agreement.
19.5 Choice of Law. The parties hereby agree that this
Agreement has been executed and delivered in the State of Michigan and shall be
construed, enforced and governed by the laws thereof. This Agreement is in all
respects intended by each party hereto to be deemed and construed to have been
jointly prepared by the parties and the parties hereby expressly agree that any
uncertainty or ambiguity existing herein shall not be interpreted against
either of them.
19.6 Severability. In the event that any provision of this
Agreement shall be held invalid or unenforceable, such provision shall be
severable from, and such invalidity or unenforceability shall not be construed
to have any effect on, the remaining provisions of this Agreement.
19.7 Notices. All notices and demands between the parties
hereto shall be in writing and shall be served either by registered or
certified mail, and such notices or demands shall be deemed given and made
forty-eight (48) hours after the deposit thereof in the United States mail,
postage prepaid, addressed to the party to whom such notice or demand is to be
given or made, and the issuance of the registered receipt therefor. If served
by telegraph, such notice or demand shall be deemed given and made at the time
the telegraph agency shall confirm to the sender, delivery thereof to the
addressee. All notices and demands to Optionee or the Corporation may be given
to them at the following addresses:
If to Optionee: ______________________________________
______________________________________
______________________________________
-5-
<PAGE>
If to Corporation: Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, MI 48304
Such parties may designate in writing from time to time such other place or
places that such notices and demands may be given.
19.8 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof,
this Agreement supersedes all prior and contemporaneous agreements and
understandings of the parties, and there are no warranties, representations or
other agreements between the parties in connection with the subject matter
hereof except as set forth or referred to herein. No supplement, modification
or waiver or termination of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall constitute a waiver of any other provision hereof (whether
or not similar) nor shall such waiver constitute a continuing waiver.
19.9 Attorneys' Fees. In the event that any party to this
Agreement institutes any action or proceeding, including, but not limited to,
litigation or arbitration, to preserve, to protect or to enforce any right or
benefit created by or granted under this Agreement, the prevailing party in
each respective such action or proceeding shall be entitled, in addition to any
and all other relief granted by a court or other tribunal or body, as may be
appropriate, to an award in such action or proceeding of that sum of money
which represents the attorneys' fees reasonably incurred by the prevailing
party therein in filing or otherwise instituting and in prosecuting or
otherwise pursuing or defending such action or proceeding, and, additionally,
the attorneys' fees reasonably incurred by such prevailing party in negotiating
any and all matters underlying such action or proceeding and in preparation for
instituting or defending such action or proceeding.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date first set forth above.
"CORPORATION"
NOBLE INTERNATIONAL, LTD.,
a Michigan corporation
By:________________________________
"OPTIONEE"
___________________________________
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PROMISSORY NOTE
Bloomfield Hills, Michigan
$300,000 January 15,1996
FOR VALUE RECEIVED, the undersigned ("Obligor") promises to pay to the
order of James D. Skandalaris, of Orchard Lake, Michigan 48323 ("Payee"), the
principal amount of Three Hundred Thousand Dollars ($300,000) and interest on
the unpaid principal balance at a rate per annum of ten percent (10%) from the
date of this note.
The principal of this note shall be paid in full on demand. Accrued
interest shall be paid monthly hereafter until the principal balance shall be
paid in full. Obligor may prepay all or part of the principal of this note at
any time.
Each payment upon this note shall be made at Payee's address (set forth
above) or such other place as the holder of this note may direct in writing.
If default occurs in the payment of any installment of principal or
interest or in the payment of any other indebtedness or obligation now or later
owing by Obligor to Payee, and if the default continues for five days after the
holder of this note gives Obligor written notice, or if a voluntary or
involuntary case in bankruptcy, receivership, or insolvency is at any time
instituted by or against Obligor, then the indebtedness evidenced by this note
shall, at the option of the holder, become immediately due and payable, without
notice of demand.
Obligor agrees to pay any and all expenses, including reasonable attorney
fees and legal expenses paid or incurred by the holder in attempting to collect
this note.
Obligor waives demand for payment, presentment, notice of dishonor, and
protest of this note.
This note shall be governed by and interpreted according to the laws of the
state of Michigan.
NOBLE INTERNATIONAL, LTD.
By: /s/ ROBERT J. SKANDALARIS
------------------------------------
Its: Chairman
------------------------------------
PROMISSORY NOTE
Grosse Pointe Farms, Michigan
$90,000 March 1, 1994
FOR VALUE RECEIVED, the undersigned ("Obligor") promises to pay to the
order of James D. Skandalaris, of 2485 Worcester, Orchard Lake, Michigan 48323
("Payee"), the principal amount of Ninety Thousand Dollars ($90,000) and
interest on the unpaid principal balance at a rate per annum of ten percent
(10%) from the date of this note.
The principal of this note shall be paid in full on demand. Accrued
interest shall be paid monthly hereafter until the principal balance shall be
paid in full. Obligor may prepay all or part of the principal of this note at
any time.
Each payment upon this note shall be made at Payee's address (set forth
above) or such other place as the holder of this note may direct in writing.
If default occurs in the payment of any installment of principal or
interest or in the payment of any other indebtedness or obligation now or later
owing by Obligor to Payee, and if the default continues for five days after the
holder of this note gives Obligor written notice, or if a voluntary or
involuntary case in bankruptcy, receivership, or insolvency is at any time
instituted by or against Obligor, then the indebtedness evidenced by this note
shall, at the option of the holder, become immediately due and payable, without
notice of demand.
Obligor agrees to pay any and all expenses, including reasonable attorney
fees and legal expenses paid or incurred by the holder in attempting to collect
this note.
Obligor waives demand for payment, presentment, notice of dishonor, and
protest of this note.
This note shall be governed by and interpreted according to the laws of the
state of Michigan.
PRESTOLOCK INTERNATIONAL, LTD.
By: /s/ ROBERT J. SKANDALARIS
------------------------------------
Its: Chairman
------------------------------------
PROMISSORY NOTE
Bloomfield Hills, Michigan
$1,000,000 April 30, 1996
FOR VALUE RECEIVED, the undersigned ("Obligor") promises to pay to the
order of Robert J. Skandalaris, of 2169 Tottenham, Bloomfield Hills, Michigan
48301 ("Payee"), the principal amount of One Million Dollars ($ 1,000,000) and
interest on the unpaid principal balance at a rate per annum of seven percent
(7%) from the date of this note.
The principal of this note shall be paid in full on April 30, 2000. Accrued
interest shall be paid monthly hereafter until the principal balance shall be
paid in full. Obligor may prepay all or part of the principal of this note at
any time. Payee shall subordinate its interest herein to Obligor's primary
lender, Comerica Bank.
Each payment upon this note shall be made at Payee's address (set forth
above) or such other place as the holder of this note may direct in writing.
If default occurs in the payment of any installment of principal or
interest or in the payment of any other indebtedness or obligation now or later
owing by Obligor to Payee, and if the default continues for five days after the
holder of this note gives Obligor written notice, or if a voluntary or
involuntary case in bankruptcy, receivership, or insolvency is at any time
instituted by or against Obligor, then the indebtedness evidenced by this note
shall, at the option of the holder, become immediately due and payable, without
notice of demand.
Obligor agrees to pay any and all expenses, including reasonable attorney
fees and legal expenses paid or incurred by the holder in attempting to collect
this note.
Obligor waives demand for payment, presentment, notice of dishonor, and
protest of this note.
This note shall be governed by and interpreted according to the laws of the
state of Michigan.
NOBLE INTERNATIONAL, LTD.
By: /s/ ILLEGIBLE
Pay to the order of ----------------------------
Comercia Bank Its: President
By: Robert J. Skandalais ----------------------------
AGREEMENT OF AMENDMENT
THIS AGREEMENT OF AMENDMENT ("Agreement") is entered into this 26th
day of August, 1997, by and among NOBLE INTERNATIONAL, LTD., a Michigan
corporation ("Noble"), UTILASE PRODUCTION PROCESS, INC., a Michigan corporation
("UPP"), ROBERT J. SKANDALARIS ("Skandalaris"), DCT, INC., a Michigan
corporation ("DCT"), DCT COMPONENT SYSTEMS, INC., a Michigan corporation
("Components"), UTILASE, INC., a Michigan corporation ("Utilase"), JAMES BRONCE
HENDERSON, III, INDIVIDUALLY AND AS TRUSTEE UNDER THE JAMES BRONCE HENDERSON,
III DECLARATION OF TRUST DATED JANUARY 18, 1986, AS AMENDED ("Henderson"), JOHN
K. BAYSORE ("Baysore"), and DAVID C. STONE, INDIVIDUALLY AND AS TRUSTEE UNDER
THE DAVID C. STONE AGREEMENT OF TRUST DATED JULY 25, 1980, as amended
("Stone").
W I T N E S S E T H:
WHEREAS, pursuant to the Stock Purchase Agreement dated as of April 7,
1997, by and among Noble, Utilase and the Shareholders of Utilase, being DCT
and Baysore (the "Stock Purchase Agreement"), Noble agreed to acquire the
common stock of Utilase owned by DCT and Baysore on the earlier of the date
that Noble completes an initial public offering ("IPO") of its stock or
December 31, 1997; and
WHEREAS, pursuant to the aforementioned Stock Purchase Agreement,
Noble agreed to and did place in escrow with Jaffe, Raitt, Heuer & Weiss, P.C.,
as escrow agent, Stock Certificate No. 42, registered in the name of Utilase,
evidencing five hundred six (506) shares of Noble common stock ("Escrowed
Shares"), to secure certain of Noble's obligations under the Stock Purchase
Agreement; and
WHEREAS, pursuant to the Asset Purchase Agreement dated as of February
28, 1997, by and among UPP, Utilase and Noble (the "Asset Purchase Agreement"),
UPP and Noble executed and delivered to Utilase a Promissory Note dated
February 28, 1997 (the "UPP Note"), pursuant to which UPP and Noble, jointly
and severally, agreed to pay Utilase (i) the sum of Seven Hundred Fifty
Thousand and no/100 Dollars ($750,000.00) on or before the earlier to occur of
(A) July 31, 1997, or (B) the completion of an IPO of Utilase Welding, Inc.;
(ii) the sum of Fifty Thousand and no/100 Dollars ($50,000.00) on or before
February 1, 1998; and (iii) the sum of Fifty Thousand and no/100 Dollars
($50,000.00) on or before February 1, 1999; and
WHEREAS, pursuant to the Letter Agreement dated March 15, 1997 by and
among DCT Companies, Inc., James Bronce Henderson, III, individually, David C.
Stone, individually, and Noble ("Letter Agreement"), which Letter Agreement
amended certain agreements entered into as of July 1, 1996 relating to
Components, Noble agreed (i) to purchase all of the common stock of Components
owned by Henderson and Stone on the date of the completion of the Noble
<PAGE>
IPO on or about June 30, 1997 ("Components Purchase Date") for a formula
purchase price, provided, however that the purchase price so determined would
not be less than One Million and no/100 Dollars ($1,000,000.00), which purchase
price was to have been paid to Henderson and Stone pursuant to a promissory
note or promissory notes; and (ii) to acquire Henderson's and Stone's remaining
interest in Competitive Technology Investment Company ("Competitive"); and
WHEREAS, pursuant to the Letter Agreement, Noble agreed to pay the
entire principal balance plus accrued interest owing under a certain Line of
Credit Promissory Note dated July 1, 1996 from Components to DCT ("Components
Note") on or before the Components Purchase Date; and
WHEREAS, the parties have agreed that it is in their respective best
interests to amend the foregoing agreements as described below.
NOW, THEREFORE, in consideration of the mutual promises and covenants
described below, the parties agree as follows:
1. Release of Escrowed Shares. Utilase, DCT and Baysore agree to cause
the Escrowed Shares to be released from escrow and returned to Noble for
cancellation by Noble on its books and to release any and all claims and/or
interest Utilase, DCT and/or Baysore have or may have in and to the Escrowed
Shares. This Paragraph 1 shall be deemed to be an Amendment to the Stock
Purchase Agreement as it relates to the Escrowed Shares.
2. Purchase of Stock of Utilase. Noble agrees to close on the purchase
of all of the issued and outstanding common stock of Utilase owned by DCT and
Baysore on or before the earlier to occur of (i) December 31, 1997, or (ii) the
date upon which the underwriting syndicate for Noble deposits the net proceeds
of the IPO into a Noble bank account, (such date being referred to hereinafter
as the "Settlement Date"). Further, clause (iii) of the last sentence of
Section 8.2 of the Stock Purchase Agreement is amended to read as follows:
"that the Company shall use its best efforts to refinance the Interim Financing
Transaction and obtain releases for Noble and its subsidiaries." This Paragraph
2 shall be deemed to be an amendment to the Stock Purchase Agreement.
3. UPP Note. UPP and Noble agree that the entire Eight Hundred Fifty
Thousand and no/100 Dollars ($850,000.00) principal amount due under the UPP
Note shall be due and payable on the earlier to occur of (i) December 31, 1997,
or (ii) the Settlement Date. This Paragraph 3 shall be deemed to be an
amendment to both the Asset Purchase Agreement and the UPP Note.
4. Valuation and Purchase of Stock of Components. Noble
2
<PAGE>
agrees to consummate the purchase of all of the common stock of Components
owned by Henderson and Stone on or before the earlier to occur of (i) December
31, 1997, or (ii) the Settlement Date, for a purchase price of One Million
Dollars ($1,000,000) in immediately available funds. As part of the sale and
purchase of the common stock of Components owned by Henderson and Stone,
Henderson and Stone shall transfer to Noble, and Noble shall acquire from
Henderson and Stone, their remaining interest in Competitive. This Paragraph 4
shall be deemed to be an amendment to the Letter Agreement.
5. Payment of Components Note. Noble and Skandalaris agree that Noble
shall pay to DCT the entire principal balance plus all accrued interest owing
under the Components Note, on or before the earlier to occur of (i) December
31, 1997, or (ii) the Settlement Date. This Paragraph 5 shall be deemed to be
an amendment to the Letter Agreement.
6. Noble's Right to Purchase. Noble's right to acquire the Utilase
shares and Components shares, as described in the Stock Purchase Agreement and
the Letter Agreement, respectively, are expressly contingent upon each and
every one of the following items occurring simultaneously: (i) Noble's
completion of the purchase of the Utilase shares from DCT and Baysore; (ii)
UPP's payment of the Eight Hundred Fifty Thousand and no/100 Dollars
($850,000.00) principal amount due under the UPP Note to DCT; (iii) the payment
by Noble to Henderson and Stone of the sum of One Million and no/100 Dollars
($1,000,000.00), in the aggregate, for their shares in Components; (iv) Noble's
purchase of Competitive from Henderson and Stone; and (v) Noble's payment to
DCT of the balance of the principal and accrued interest under the Components
Note. Noble acknowledges and agrees that its failure to fulfill any of its
obligations under the Stock Purchase Agreement, Asset Purchase Agreement, UPP
Note and the Letter Agreement, as amended hereby ("Agreements"), will result in
the forfeiture of its rights under each of the Agreements other than the
Components Agreement dated July 1, 1996, by and among DCT, Noble, Utilase, UPP,
Skandalaris, Henderson, Stone, Components and Baysore. In the event of a
forfeiture by Noble, each of the Agreements shall be null and void and of no
further force and effect, and Noble and UPP agree to take all actions necessary
to transfer the assets purchased under the Asset Purchase Agreement (the " Job
Shop Assets") back to Utilase.
7. Recitals. The terms, conditions and definitions contained in the
recitals are deemed to be part of the substantive provisions of this Agreement.
8. Other Terms and Conditions. Except as specifically modified and
amended herein, all other terms and conditions of the Stock Purchase Agreement,
the Asset Purchase Agreement, the UPP Note and the Letter Agreement shall
remain in full force and effect.
3
<PAGE>
9. Additional Documentation. The parties agree to execute any and all
documents reasonably required to consummate the foregoing transactions.
As your agreement and consent to the terms and conditions set forth
above, the parties each sign where their respective names are reflected below,
as of the 26th day of August, 1997.
NOBLE INTERNATIONAL, LTD., a UTILASE PRODUCTION PROCESS,
Michigan corporation INC., a Michigan corporation
/s/ Robert J. Skandalaris /s/ Michael C. Azar
_______________________________ ________________________________
By: Robert J. Skandalaris By: Michael C. Azar
Its: President Its: Secretary
/s/ Robert Skandalaris
_______________________________
Robert Skandalaris
DCT COMPONENT SYSTEMS, INC., DCT, INC., a Michigan
a Michigan corporation corporation
/s/ James Bronce Henderson
/s/ David C. Stone ________________________________
_______________________________ By: James Bronce Henderson, III
By: David C. Stone Its: Chief Executive Officer
Its: Secretary
UTILASE, INC., a Michigan
corporation
/s/ James Bronce Henderson /s/ James Bronce Henderson
_______________________________ ________________________________
James Bronce Henderson, III, By: James Bronce Henderson, III
individually and as Trustee Its: President
under the James B. Henderson, III
Declaration of Trust dated
January 18, 1986 as amended
/s/ John K. Baysore /s/ David C. Stone
_______________________________ ________________________________
John K. Baysore David C. Stone, individually
and as Trustee under the David
C. Stone Agreement of Trust
dated July 25, 1980
4
<PAGE>
JAMES SKANDALARIS
--------------------------
2485 Worcester
Orchard Lake, MI 48323
Prestolock International, Ltd.
Board of Directors Re: Promissory Note
33 Bloomfield Hills Pkwy., Ste. 155 ---------------
Bloomfield Hills, MI 48304
Dear Sirs:
This letter serves to amend that certain promissory note dated March 1,
1994 whereby Prestolock International, Ltd., as obligor, promised to pay to me
the sum of Ninety Thousand and 00/100 Dollars ($90,000) with interest on the
unpaid principal balance at the rate of ten percent (10%) (the "Note"). The Note
is currently payable on demand. The Note is hereby amended to provide that the
demand provision will not be exercised prior to December 31, 1998.
Very truly yours,
/s/ James D. Skandalaris
James D. Skandalaris
<PAGE>
Exhibit 23.1
CONSENT OF GRANT THORNTON LLP
We have issued our reports dated May 9, 1997, accompanying the financial
statements of Noble International, Ltd. and DCT Component Systems, Inc., our
report dated March 4, 1997 accompanying the financial statements of Monroe
Engineering Products, Inc., and our report dated May 12, 1997, accompanying
the financial statements of Utilase, Inc., contained in the Registration
Statement and Prospectus. We consent to the use of the aforementioned reports in
the Registration Statement and Prospectus, and to the use of our name as it
appears under the caption "Experts."
/s/ Grant Thornton LLP
Detroit, Michigan
September 17, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 206
<SECURITIES> 0
<RECEIVABLES> 2,855
<ALLOWANCES> 0
<INVENTORY> 2,653
<CURRENT-ASSETS> 6,444
<PP&E> 3,597
<DEPRECIATION> 585
<TOTAL-ASSETS> 14,851
<CURRENT-LIABILITIES> 8,164
<BONDS> 0
0
0
<COMMON> 1,086
<OTHER-SE> 88
<TOTAL-LIABILITY-AND-EQUITY> 14,851
<SALES> 9,734
<TOTAL-REVENUES> 9,734
<CGS> 6,445
<TOTAL-COSTS> 6,445
<OTHER-EXPENSES> 449
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 439
<INCOME-PRETAX> 607
<INCOME-TAX> 212
<INCOME-CONTINUING> 395
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 395
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
March 15, 1997
Robert Skandalaris
Noble International, Ltd.
33 Bloomfield Hills Parkway
Suite 155
Bloomfield Hills, Michigan 48304
Dear Bob:
The purpose of this letter is to set forth the terms upon which Noble
International, Ltd. ("Noble") shall acquire the remaining shares in DCT
Component Systems, Inc. ("Components") from DCT Companies, Inc. ("DCT") and/or
James Bronce Henderson, III ("Henderson") and David C. Stone ("Stone")
(collectively the ("Parties").
The terms as set forth below shall serve to modify the relationship of
Noble, Component, DCT, Henderson and Stone as described in the Shareholder
Agreement dated July 1, 1996, Stock Purchase Agreement dated July 1, 1996,
Management Agreement dated July 1, 1996, License Agreement dated July 1, 1996,
Voting Agreement dated July l, 1996, Irrevocable Proxy of David C. Stone dated
July 1, 1996, Irrevocable Proxy of James Bronce Henderson, III dated July 1,
1996, Indemnification Agreement of Noble International, Ltd. and Peter Raab
dated July 1, 1996, Indemnification Agreement of DCT Companies, Inc. dated July
1, 1996, Assignment and Assumption of Claim as to General Motors Corporation
dated July 1, 1996, Assignment and Assumption of Claim as to TRW dated July 1,
1996, Line of Credit Promissory Note to DCT Component Systems dated July 1, 1996
and the Memorandum of Understanding dated July 1, 1996 (collectively the
"Agreements").
Under the terms of the Agreements, Henderson and Stone would continue to be
Shareholders in Components subject to Noble's option rights and the "put" and
"call" provisions of the Agreements. The Parties now wish to modify their
rights, duties and obligations under the Agreements as follows:
1. Noble intends to complete a private placement or initial public offers
on or about June 30, 1997 ("Settlement Date");
<PAGE>
Robert Skandalaris
Noble International, Ltd.
March 15, 1997
Page 2
2. Noble wishes to acquire on or before the Settlement Date, the
remaining shares of Henderson, Stone and/or DCT in Components not
covered by its option and Henderson's and Stone's remaining interest
in Competitive Technology Investment Company ("Competitive");
3. Henderson, Stone and/or DCT are willing to allow Noble to acquire
their remaining shares in Components and Competitive on the following
terms and conditions:
(i) On or before the Settlement Date, Noble shall pay the entire
principal balance plus accrued interest if any under the Line of
Credit Promissory Note dated July 1, 1996 between Components and
DCT ("Note");
(ii) On or before the Settlement Date Noble shall obtain the release
of the personal guaranty of Henderson and Stone and the keepwell
provision as to DCT from CIT;
(iii) On or before the Settlement Date Noble shall refinance the Bank
of Bloomfield as to the term note to Henderson and Stone or
obtain a release as to them and shall obtain the release of their
guaranty on the real estate mortgage;
(iv) On or before the Settlement Date Noble shall use its best efforts
to obtain the release of the guaranty of Henderson, Stone and DCT
to Deutsche Credit Corporation ("Deutsche"). In the event Noble
is unsuccessful in obtaining the releases from Deutsche, Noble
shall enter into a lease agreement for the equipment covered by
the Deutsche financing which shall be sufficient to fully
amortize the entire Deutsche debt and all fees, costs and
expenses attendant thereto; upon the expiration of the lease
agreement, Noble shall have the right to purchase the leased
equipment for $1.00;
(v) On or before the Settlement Date Noble shall use its best efforts
to obtain the release of the guaranty of Henderson and Stone to
Karl and Fred Nothdurft ("Nothdurft") in the event Noble is
unsuccessful in obtaining the
<PAGE>
Robert Skandalaris
Noble International, Ltd.
March 15, 1997
Page 3
releases from Nothdurft, it shall indemnify Henderson, Stone and
DCT against all judgments, costs, expenses (including attorney
fees), settlements, principal, interest and expenses due
Nothdurft under the Nothdurft Agreements or incurred by them with
respect to Nothdurft;
(vi) Noble shall indemnify Henderson and Stone individually and as
partners in Competitive for all principal, interest, taxes,
assignments, waste, costs, expenses (including attorney fees)
fines, penalties and remediation expenses related to or arising
from the land contracts from Nothdurft Land Company or imposed as
a result of any legal, regulatory or administrative action
relative to the ownership or use of the real and personal
property by Components, Competitive and its partners;
(vii) If applicable, on or before the Settlement Date Noble shall
obtain a release from Mark Ponski of any personal guaranty of
Henderson and Stone of Components' debt to him;
(viii) Noble shall be responsible for all monies due Chrysler, Henderson
and Norma M. Stone shall have no further duty or obligation under
the Memorandum of Understanding dated July l, 1996 ("Memorandum")
whether or not the balance of the transaction as contemplated
herein occurs or not;
(ix) Noble shall acquire the remaining shares of Henderson, Stone
and/or DCT on the Settlement Date in exchange for a promissory
note, the promissory note shall provide that the shares acquired
by Noble shall be valued as of December 31, 1998 utilizing the
Put Value as defined in the Agreements, provided, however, in no
event shall the aggregate price to be paid for the shares be less
than One Million and no/100 ($1,000,000.00) Dollars, the
promissory note shall pay interest at the minimum applicable
federal rate, all principal and interest shall be due and payable
not later than February 15, 1999 as security for
<PAGE>
Robert Skandalaris
Noble International, Ltd.
March 15, 1997
Page 4
the note Noble shall pledge the acquired shares upon such terms
and conditions as shall be mutually agreed upon. "Put Value"
shall mean three (3) times Adjusted EBITDA, the product of which
shall be reduced by (i) the outstanding principal and accrued
interest owing by Components to The CIT Group/Credit Finance Inc.
or Components' then current primary lender(s), on the Valuation
Date, to a maximum reduction of the sum of Five Million Dollars
($5,000,000.00); and (ii) any acquisition debt of Components
approved by the Board of Directors of Components. "Adjusted
EBITDA" shall mean the sum of the earnings of Components,
calculated in accordance with G.A.A.P., consistently applied, by
the independent certified public accountant(s) who last audited
Components' financial statement, except as set forth below before
payment of interest and taxes and before deducting depreciation
and amortization, for the twelve (12) month period ended on the
last day of the month immediately preceding the Valuation Date,
plus all payments made by Components to Noble in excess of One
Hundred Thousand Dollars ($100,000.00) for the twelve (12) month
period ended on the last day of the month immediately preceding
the Valuation Date, plus all payments made as increased salary
for the twelve (12) month period ended on the last day of the
month immediately preceding the Valuation Date. The following
shall be subtracted from earnings for the calculation of Adjusted
EBITDA: the interest or dividend paid during the aforementioned
twelve (12) month look-back period on the balance of any debt or
face value of preferred stock on the books of Components on July
1, 1996, or subsequently placed into an alternative vehicle, due
and owing to Richard J. Reason, RJR Investments, Richard Luyckx,
and/or the Nine Hundred Sixty Thousand Dollars ($960,000.00)
which is owed to DCT.
(x) In addition to the use of Components' NOL's to provide for the
tax consequences of the forgiveness of debt by DCT in 1996, any
excess NOL's not utilized by forgiveness of the DCT
<PAGE>
Robert Skandalaris
Noble International, Ltd.
March 15, 1997
Page 5
debt, may be used by Henderson and Stone for the settlement of
the Internal Revenue Service audit of their personal returns
relative to the inventory adjustments, travel and entertainment
adjustments and valuation of the covenants not to compete for
Karl and Fred Nothdurft;
(xi) The transactions as contemplated herein shall be structured so as
to minimize the tax consequences to Henderson and Stone;
(xii) The indemnification and right to reimbursement from Components
granted to Stone and Stone, Biber & O'Toole, P.C. under the
Bylaws and applicable Michigan statute as to the claims of Thomas
McConnell and Ninowski, Wood & McConnell, Inc. against Stone and
Stone, Biber and O'Toole, P.C. shall remain in full force and
effect against Components;
(xiii) Henderson agrees to serve as a member of Noble's Board of
Directors and its Chairman until December 31, 1999;
(xiv) In addition to any other shares which Henderson and Stone may
have in Noble and as consideration for Henderson's and Stone's
service as members of Noble's Board of Directors, Henderson and
Stone shall also be eligible to participate in any stock option
programs for the outside directors of Noble;
(xv) Noble may, if it chooses, continue to use "DCT" as a part of
Components' name so long as Henderson is a member of its Board of
Directors, Noble agrees to discontinue the use of "DCT" as part
of Components' name following Henderson leaving the Noble Board
of Directors;
(xvi) Immediately upon payment in full of the principal plus accrued
interest, if any, under the Note, and the satisfaction of each of
the preceding items, all supermajority voting provisions
regarding the votes of shareholders or directors contained within
the Agreements, including among others, Article II, Section
<PAGE>
Robert Skandalaris
Noble International, Ltd.
March 15, 1997
Page 6
2.1, Article III, Section 3.2 and 3.3, and Article IV, Section
4.9 of the Shareholders Agreement shall be terminated and of no
further force and effect and subsequent votes of Shareholders and
Directors shall be governed by the Corporation's Bylaws; and
(xvii) Immediately upon the payment in full of the principal plus
accrued interest, if any, under the Note, and upon the
satisfaction of each of the preceding items, without affecting
the forgiveness of Debt as provided for in Section 4.3 of the
Shareholder Agreement, the Corporation's obligation to pay DCT
one-half (1/2) of the Bonus Pool Amount as defined in the
Execution Bonus Pool Plan shall be immediately terminated.
4. Except as specifically modified herein all other terms and conditions
of the Agreements shall remain in full force and effect; and
5. Noble's rights to acquire Henderson's, Stone's and or DCT's shares as
provided herein shall expire on December 31, 1997 unless otherwise
mutually agreed in writing by the Parties.
As your acknowledgment and consent to the terms and conditions set forth
herein, please sign as indicated below and return a copy to me.
Yours Sincerely,
DCT Companies, Inc.
/s/ Bronce Henderson
-----------------------------------------
Bronce Henderson
C.E.O.
/s/ James Bronce Henderson, III
-----------------------------------------
James Bronce Henderson, III
Individually
/s/ David C. Stone
------------------------------------------
David C. Stone
Individually
<PAGE>
Robert Skandalaris
Noble International, Ltd.
March 15, 1997
Page 7
ACKNOWLEDGMENT AND CONSENT
Noble International, Ltd. hereby consents to the terms and conditions as set
forth herein.
Noble International, Ltd.
By: /s/ Michael C. Azar
--------------------------------------
Michael C. Azar
Its: Secretary
Dated: 3/15/97
[logo]
- --------------------------------------------------------------------------------
Comerica Bank
March 26, 1997
Utilase, Inc.
20101 Hoover
Detroit, Michigan 48506
Attention: Rich Colletta
Mr. Robert Skandalaris
33 Bloomfield Hills Parkway
Suite 185
Bloomfield Hills, Michigan 48304
Dear Messrs. Colletta and Skandalaris:
We are pleased to advise you that Comerica Bank ("Bank") has approved the
following credit facility for Utilase, Inc. ("Borrower") for the purposes of
financing the purchase of new machinery and equipment.
The Bank has approved an $8,000,000 secured equipment line of credit.
Advances under this line of credit shall be available until December 31, 1997.
The non-default rate of interest will be a per annum rate equal to 2% above the
Bank's prime rate as it may vary from time to time, which prime rate may not
necessarily be the Bank's lowest rate of loans ("Prime Rate"). On January 1,
1998, the advance will be termed out over a five year term. Principal payments
shall be made monthly and will be based on a five year straight line
amortization.
Advances will be based on a formula of one hundred percent (100%) of the
invoice cost (excluding installation and delivery charges and import fees, if
any) of the machinery and equipment being purchased.
The line of credit is a discretionary line and the Bank will not be
obligated to make any advances. Machinery and equipment purchased with proceeds
of an advance must be acceptable to the Bank.
The Borrower will be required to pay to the Bank a non-refundable closing
fee equal to $100,000 which will be payable $50,000 upon closing, with the
remainder due and payable upon the earlier to occur of the maturity of the
credit facility (or earlier acceleration of the indebtedness) and the date of
the initial public offering of the stock of the Noble International, Ltd.
<PAGE>
[logo]
Mr. Rich Colletta
Mr. Robert Skandalaris
March 26, 1997
Page 2
Interest shall be calculated on the basis of a 360 day year and assessed
for the actual number of days elapsed and effect shall be given to any change in
the Prime Rate on the date of such change in the Prime Rate. Upon the occurrence
of any default, interest shall accrue at a per annum rate equal to 3% above the
otherwise applicable rate.
Security for the loans will consist of the following:
a. A first perfected security interest in all of the Borrower's
fixtures, machinery, equipment, furniture, accounts, chattel
paper, inventory, general intangibles and all other tangible and
intangible personal property now owned or hereafter acquired.
b. A joint and several unconditional guaranty agreement from Robert
Skandalaris and James Skandalaris guarantying the obligations of
the Borrower to the Bank; provided that the aggregate liability
under the guaranty shall be limited to a principal amount equal
to $3,000,000, plus interest thereon and collection costs. This
guaranty shall be secured by a first priorty security interest in
marketable securities which are acceptable to Bank having a
market value as of closing of not less than $3,000,000. The value
of the marketable securities must be maintained at not less than
$2,000,000.
c. A joint and several, unlimited corporate guaranty from DCT
Automation, Inc., Utilase Systems, Inc., Ruthven Industries,
Inc., DCT Welding & Assembly, Inc., DCT Fasteners, DCT
Manufacturing, DCT Packaging Systems, Inc., DCT Advanced
Engineering, Inc. and DCT Company, Inc., which guaranty shall be
secured by liens on all of the assets previously pledged by such
guarantors to the Bank.
d. A joint and several, unlimited corporate guaranty from Noble
International, Ltd. and its subsidiaries, which guaranty shall be
secured by liens on all of the assets previously pledged by such
guarantors to the Bank.
As a condition to closing the loan, the Bank must have received, reviewed
and approved the following:
<PAGE>
[logo]
Mr. Rich Colletta
Mr. Robert Skandalaris
March 26, 1997
Page 3
a. Eveidence of casualty and public liability insurance all
satisfactory to the Bank as to form, amount and insurer.
b. A definitive purchase agreement between Noble and the Borrower
and/or its shareholders relating to the acquisition of certain of
the assets and business interests of the Borrower or the stock of
the Borrower ("Purchase Agreement").
c. The consent to the credit facility from the Board of Trustees of
the General Retirement System of the City of Detroit.
Upon the Bank's receipt and review of the documents and information
described above, the Bank may impose such additional closing requirements as the
Bank deems necessary or desirable in the exercise of its reasonable discretion.
The Bank's obligation to close shall be subject to the following terms and
conditions, in addition to all of the terms and conditions stated above:
1. The loans shall be evidenced and secured by loan documents consistent
with this commitment and otherwise in form satisfactory to the Bank
and its counsel. The loan documents shall include warranties,
representations and agreements to indemnify Bank from any cost
associated with any violations of environmental laws or regulations.
All loan facilities shall be cross-collateralized and cross-defaulted.
The loan documents shall contain, in addition to the other covenants
and default clauses acceptable to the Bank, the following provisions:
(i) Financial covenants acceptable to the Bank, which shall include a
debt service coverage ratio of not less than 1.25 to 1.0.
(ii) The loan documents will provide that in addition to such other
information as may be required in the loan documents or requested
by the Bank, the Borrower will furnish the Bank:
a. Within 90 days after and as at the end of each of the
Borrower's fiscal years an audit report of the Borrower
certified by independent certified public accountants
satisfactory to the Bank.
<PAGE>
[logo]
Mr. Rich Colletta
Mr. Robert Skandalaris
March 26, 1997
Page 4
b. Within 30 days after and as the end of each month, including
the last month of each fiscal year, the balance sheet,
statement of profit loss and surplus of the Borrower,
certified by an authorized officer of the Borrower.
2. The Bank shall have received an opinion of the Borrower's and the
guarantor's legal counsel in form and substance satisfactory to the
Bank.
3. There shall have been no material adverse change in the financial
condition of the Borrower or any guarantor from the date of the loan
application.
4. The Borrower shall have supplied to the Bank such financial
information with respect to the Borrower, all of which financial
information shall be acceptable to the Bank as the Bank requires.
5. Whether or not the loan facilities close, the Borrower shall pay all
out-of-pocket expenses incurred by the Bank, including but not limited
to reasonable attorney fees.
This commitment and the Bank's obligation to close the credit facility
shall automatically expire and become null and void if the credit facility are
not closed on or before April 30, 1997. The provisions in this letter regarding
the Borrower's payment of expenses shall survive any termination of this letter.
This commitment shall automatically expire unless a counterpart executed by
the Borrower is delivered to the Bank on or before March 28, 1997.
This commitment may be terminated at the Bank's option, and in any matter
as the Bank may determine if;
(i) The Borrower shall fail to comply with any of the terms and conditions
hereof; or
(ii) In the event of the filing by or against the Borrower or any guarantor
of a petition in bankruptcy or insolvency or for reorganization, or
for the appointment of a receiver of trustee or the making by the
Borrower or any guarantor of an assignment for the benefit of
creditors or the filing of a petition for arrangement by the Borrower
or any guarantor, which may exist at the time now or hereafter
established for the closing of the credit facility contemplated
hereunder;
<PAGE>
[logo]
Mr. Rich Colletta
Mr. Robert Skandalaris
March 26, 1997
Page 5
(iii) Any material adverse changes in the financial condition, properties
or business prospects of the Borrower or any guarantor occur; or
(iv) If there shall occur any change in the management, ownership or
control of the Borrower (other than any change resulting from the
consummation of the transactions described in the Purchase Agreement).
The terms and conditions of this commitment shall survive the closing of
the credit facility, except where superseded by the loan documents.
The commitments set forth herein shall not be assignable by the Borrower by
operation of law, or otherwise, are not intended to create any rights in favor
of and may not be relied upon by any third party.
This commitment letter contains the entire agreement of the Borrower and
the Bank as of the date hereof and is not subject to or supplemented by any
previous correspondence or discussions between the Borrower and the Bank or any
other document not expressly referenced herein. No change in this commitment
letter shall be binding upon the Bank unless expressed in writing and signed by
the Bank.
It is a pleasure to offer this financing. Should you have any questions
regarding this letter, feel free to call me at 222-2862.
Very truly yours,
COMERICA BANK
By: /s/ Illegible
----------------------------------------
Its: Vice President
<PAGE>
[logo]
Mr. Rich Colletta
Mr. Robert Skandalaris
March 26, 1997
Page 6
Accepted and Agreed:
UTILASE, INC.
By: /s/ James B. Henderson
- ----------------------------------
James B. Henderson
Its: CEO
Dated: March 31, 1997
<PAGE>
FIRST NBD Bank
CHICAGO 611 Woodward Avenue
NBD Detroit, Michigan 48226
Telephone: (313) 225-2810
Fax: (313) 225-2290
Mark L. McClure
Vice President
September 5, 1997
Mr. Richard V. Balgenorth
Chief Financial Officer
Noble International, Ltd.
33 Bloomfield Hills Parkway
Suite 155
Bloomfield Hills, Michigan 48304
Dear Dick:
Noble International, Ltd. ("Noble" or the "Borrower") has requested that NBD
Bank ("NBD") provide a Revolving Credit Facility (the "Credit Facility") in the
aggregate principal amount of $15,000,000 to Noble. The Credit Facility will be
executed, either concurrently or shortly after, Noble receives the proceeds from
its Initial Public Offering. The proceeds from the Initial Public Offering and
the Credit Facility will be used to refinance all material indebtedness of the
Borrower and its subsidiaries as well as for working capital and general
corporate purposes.
NBD Bank is pleased to provide you with a financing commitment for the Credit
Facility on the terms and conditions set forth in the Term Sheet attached hereto
("Term Sheet") and subject to the conditions set forth in this letter, including
the successful completion of Noble's Initial Public Offering and the subsequent
receipt of a minimum of $20,000,000 of proceeds from the Offering. It is our
anticipation that these proceeds will be used for corporate purposes as outlined
in Noble's Form S-1 Registration Statement.
NBD Bank has reviewed certain historical and pro forma financial statements
prepared and delivered by the Borrower to it. NBD has not had the opportunity to
complete its due diligence review and inspection of the assets and liabilities
of the Borrower and its subsidiaries. NBD's commitment is subject to its
respective satisfaction with the foregoing and with the satisfaction of other
such due diligence investigation as may be necessary.
Borrower agrees to reimburse NBD for all out-of-pocket expenses incurred in
connection with the Credit Facility and to indemnify and hold harmless NBD
against all losses, claims, damages, and liabilities of every kind whatsoever
associated with this commitment letter.
NBD's commitment is subject to the preparation, execution, and delivery of a
mutually acceptable Credit Agreement and other loan documents incorporating,
without limitation,
<PAGE>
FIRST
CHICAGO
NBD
Richard V. Balgenorth -2- September 5, 1997
substantially the terms and conditions outlined in the Term Sheet. NBS's
commitment is also subject to determination that there has been absence of a
material adverse change in the business conditions, operations, performance,
properties, and prospects of the Borrower and any of its material subsidiaries,
including acquisitions which are currently contemplated by Noble.
Please indicate your acceptance of this commitment by NBD in the space indicated
below and return a copy of this letter to NBD Bank. This commitment and
undertaking will expire at 5:00 p.m. on September 19, 1997, unless on or prior
to such time NBD shall have received a copy of this letter executed by the
Borrower. Notwithstanding the timely acceptance of the commitment pursuant to
the preceding sentence, the commitment will automatically terminate unless
definitive loan documents are executed on or before November 30, 1997.
Sincerely,
NBD Bank:
By: /s/ Mark L. McClure
----------------------------
Mark L. McClure
Vice President
Its:
----------------------------
Accepted and Agreed to this _____________ day of September, 1997.
NOBLE INTERNATIONAL, LTD.
By:
----------------------------
Its:
----------------------------
<PAGE>
Confidential Noble International Ltd.
- -------------------------------------------------------------------------------
SUMMARY TERM SHEET
- -------------------------------------------------------------------------------
BORROWER: Noble International Ltd. ("Noble" or the
"Company").
LENDER: NBD Bank ("NBD" or the "BANK").
TYPE OR FACILITY:
Revolving Credit: $15,000,000 Two Year Secured Revolving Credit
to include the Issuance of Standby Letters of
Credit (S/L/Cs) up to $3,000,000.
GUARANTORS: All present and future subsidiaries of the
Company.
USE OF PROCEEDS: Working capital and general corporate
purposes.
MATURITY: Two years from date of closing.
PRICING: At the Borrower's Option:
Prime: NBD's Prime rate as it exists from time to
time, plus the Applicable Margin. Minimum
draws of $100,000 and multiples of $25,000.
LIBOR: Adjusted(1) LIBOR plus the Applicable Margin
(1, 2, 3, and 6 month options). Minimum draws
of $1,000,000 and multiples of $100,000.
Footnotes:
(1) Adjusted for maximum Federal Reserve
Board reserve requirements.
APPLICABLE MARGIN: The Applicable Margin is based upon the
following matrix:
Applicable Margin
-------------------------------
Commitment
Funded Senior Debt/EBITDA Prime LIBOR Fee
------------------------- ------- -------- ----------
Less than 1.00:1.00 0 b.p. 125 b.p. 25 b.p.
1.00:1.00 to 1.75:1.00 0 b.p. 150 b.p. 25 b.p.
1.76:1.00 to 2.50:1.00 0 b.p. 175 b.p. 37.5 b.p.
2.51:1.00 to 3.25:1.00* 25 b.p. 200 b.p. 50 b.p.
3.26 or greater 50 b.p. 225 b.p. 50 b.p.
* Initial pricing level from the date of closing through the quarter ended
September 30, 1998. The Applicable Margin will be based upon the pricing
matrix from that point forward.
- -------------------------------------------------------------------------------
NBD Bank -1- September 5, 1997
<PAGE>
Confidential Noble International Ltd.
- -------------------------------------------------------------------------------
PREPAYMENT: Prepayment of LIBOR loans would be subject
to approriate prepayment indemnities.
FEES:
Closing Fee: 75 basis point fee payable to NBD at closing.
Commitment Fee: Based on the pricing matrix, calculated on a
360 day basis and payable quarterly on the
unused portion of the facility.
Legal fees and Other Expenses: All reasonable legal fees of the Bank's
counsel for the account of the Borrower in
addition to other expenses associated with
the preparation and execution of the Facility
Agreement including, but not limited to, the
cost of collateral examinations, appraisals,
and environmental reports.
CAPITAL ADEQUACY: Language will be incorporated into the
Facility Agreement requiring that the
Borrower compensate the Participants for any
change in capital requirements or laws that
would have the effect of reducing the Banks'
yields.
INTEREST PAYMENTS: At the end of each applicable Interest Period
or quarterly, if earlier, calculated on a 360
day basis.
INTEREST PERIODS: Interest Periods may be of 1, 2, 3, or 6
months.
STANDBY LETTERS Expiration of individual Standby Letters of
OF CREDIT Credit will be a maximum of 12 months from
date of issuance.
The Standby Letter of Credit commission will
be at a per annum rate equal to the
Applicable LIBOR margin at the time of
issuance plus 1/8%. Any Standby Letter of
Credit outstanding will be considered usage
for purposes of the borrowing base and in
calculating the Commitment Fee.
COLLATERAL: First security interest in substantially all
assets of the Company and its subsidiaries,
including, but not limited to, Accounts
Receivable, Inventory, Real Estate, Machinery
and Equipment, Common Stock of the Company's
subsidiaries and General Intangibles.
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NBD Bank -2- September 5, 1997
<PAGE>
Confidential Noble International Ltd.
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BORROWING BASE: Loans will be monitored according to the
following Borrowing Base:
85% of Eligible* Accounts Receivable
50% of Eligible* Inventory
35% of Forced Sale Value of Fixed Assets, not
to exceed $4,000,000
* Appropriate adjustments for delinquent
receivables, excessive concentrations, stale
or unsaleable inventory, and other
eligibility requirements as determined by
Bank based upon a field collateral
examination to be conducted.
DOCUMENTATION: The Facility will be subject to a Facility
Agreement, acceptable to all parties and
containing terms and conditions customary for
such a Facility. These terms and conditions
will include, but are not limited to:
(1) representations and warranties.
(2) undertakings including provision of
financial information under agreed
acconting principles; negative pledge,
etc.
(3) provision for increased costs (including
capital adequacy) to Bank.
FINANCIAL COVENANTS: Customary in credit agreements of this
nature, with specific limits to be negotiated
based upon the Company's capital structure
following its Initial Public Offering.
Financial covenants will include, but are not
limited to, the following:
Tangible Capital Funds: Minimum level of consolidated Tangible
Capital Funds.
Total Debt to Limitation on the ratio of Total Debt to
Capitalization: Capitalization, measured at each quarter end.
Senior Funded Debt to Limitation on the ratio of senior debt to
EBITDA: EBITDA, as measured on a four quarter
trailing basis.
Interest Coverage Ratio: Maintenance of a minimum Interest Coverage
Ratio, measured on a four quarter trailing
basis.
Cash Flow Coverage Ratio: Maintenance of a minimum Cash Flow Coverage
Ratio, measured on a four quarter trailing
basis.
All financial covenants tested on a
consolidated basis, and calculated in
accordance with U.S. GAAP unless otherwise
noted.
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NBD Bank -3- September 5, 1997
<PAGE>
Confidential Noble International Ltd.
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NEGATIVE PLEDGE Customary negative covenants subject to
COVENANTS: appropriate baskets, including the following:
(1) Limitation on the sale of assets, the
incurrence of additional senior debt, and
advances to unconsolidated subsidiaries.
(2) Merger and consolidation limitations
(Noble must be the surviving entity).
(3) Limitation on the payment of cash
dividends.
(4) Any individual acquisition with an
aggregate consideration in excess of
$1,500,000 requires NBD's consent.
NON-FINANCIAL Customary non-financial covenants for a
COVENANTS: senior note financing, including:
(1) Maintenance of business lines.
(2) Maintenance of property.
(3) Maintenance of insurance.
(4) Payment of taxes.
(5) Maintenance of corporate existence,
license and permits.
REPORTING Customary in credit agreements of this
REQUIREMENTS: nature, including but not limited to the
following:
(1) Annual audited financial statements, 10K,
and annual report within 90 days of each
fiscal year end.
(2) Quarterly 10Q financial statements within
45 days of each quarter end.
(3) Quarterly compliance certificates signed
by a corporate officer.
(4) Monthly borrowing base certificates
signed by a corporate officer.
(5) Monthly Accounts Receivable Agings and
Inventory Report.
(6) Copies of all required filings required
by the Securities and Exchange
Commission.
(7) Copies of all press releases or other
publicly released information.
GOVERNING LAW: The facility Agreement will be governed by
the laws of the state of Michigan.
COUNSEL TO NBD: Dickinson, Wright, Moon, Van Dusen & Freeman.
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NBD Bank -4- September 5, 1997
<PAGE>
Confidential Noble International Ltd.
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EVENTS OF DEFAULT: Customary in credit agreements of this
nature, including but not limited to the
following:
(1) Failure to pay principal when due;
failure to pay interest or fees within
five days of the due date.
(2) Failure to meet covenants (with grace
periods, where appropriate).
(3) Representations or warranties false in
any material respect when made.
(4) Cross default to other debt of the
Borrower and its Subsidiaries which is
triggered by an event which causes
acceleration thereof or permits holders
thereof to accelerate their debt.
(5) Change of ownership or control.
(6) Other usual defaults with respect to the
Borrower and Subsidiaries, including but
not limited to insolvency, bankruptcy,
ERISA, and judgement defaults.
CONDITION PRECEDENT: (1) Completion of satisfactory loan
documentation.
(2) Completion of Initial Public Offering in
which Noble receives minimum net proceeds
of $20,000,000.
(3) Review of Noble's Business Plan,
including anticipated funding
requirements and financial forecasts.
(4) Completion of satisfactory field
collateral examination by NBD.
(5) Repayment of all existing senior
indebtedness accompanied by the release
of all existing liens.
(6) Satisfactory review of the terms and
conditions of all other debt.
(7) NBD Bank's customary due diligence
investigation.
(8) No material adverse change prior to
closing.
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NBD Bank -5- September 5, 1997
<PAGE>
Confidential Noble International Ltd.
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DEFINITIONS:
Cash Flow Coverage Ratio: The ratio of Earnings before Interest and
Taxes plus Operating Lease Rentals plus
Depreciation and Amortization to Interest
Expense plus Operating Lease Rentals plus
Capital Expenditures plus Current Portion of
Funded Debt.
Current Portion-Funded Debt: That portion of Funded Debt (including
capitalized leases) which comes due within
the current year.
Funded Debt: The sum of all interest-bearing debt not
subordinated to Revolving Credit, including
Capitalized Lease Obligations.
Interest Coverage Ratio: The ratio of Earnings before Interest and
Taxes to Interest Expense.
Tangible Capital Funds: Shall mean the sum of Stockholder's Common
Equity, Preferred Stock and Minority Interest
and any debt which is specifically
subordinated to NBD, less Treasury Stock,
Goodwill and Other Intangible Assets.
Total Capitalization: The sum of Tangible Net Worth and Funded
Debt.
All other defined terms are according to
GAAP.
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NBD Bank -6- September 5, 1997
