Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NOBLE INTERNATIONAL, LTD.
(Exact name of registrant as specified in its charter)
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Michigan 3714 38-3139487
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
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33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
(810) 433-3093
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Michael C. Azar
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
(810) 433-3093
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
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Teresa Tormey Fineman, Esq. Henry O. Smith III, Esq.
Bruck & Perry, A Professional Corporation Proskauer Rose Goetz & Mendelsohn LLP
500 Newport Center Drive, Suite 700 1585 Broadway
Newport Beach, California 92660 New York, New York 10036
(714) 719-6000 (212) 969-3000
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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
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Title of each class of Proposed maximum Amount of
securities to be registered aggregate offering price registration fee
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Common Stock, no par value(2)............................... $ 26,565,000 $ 8,050
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Representative's Warrants................................... $ 1,650 1
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Common Stock, no par value(3)(4)............................ $ 2,772,000 $ 840
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Total...................................................................................... $ 8,891
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(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(2) Includes up to shares issuable pursuant to the Underwriters'
over-allotment option.
(3) Issuable upon exercise of the Representative's Warrants.
(4) 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 Representative's Warrants.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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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.
PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 14, 1997
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"). Prior to the Offering, there has
been no public market for the Common Stock. It is currently estimated that the
initial public offering price of the Common Stock will be between $ and $ per
share. For a discussion of the factors considered in determining the initial
public offering price, see "Underwriting." The closing of the Offering is
conditioned upon the prior or concurrent acquisition by the Company of the
outstanding capital stock of Utilase, Inc. See "Use of Proceeds" and "Certain
Transactions." The Company intends to apply for listing of the Common Stock on
the American Stock Exchange under the symbol [" "].
See "Risk Factors" beginning on page 7 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.
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Underwriting Discounts Proceeds to
Price to Public and Commissions (1) Company (2)
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Per Share.................... $ $ $
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Total (3).................... $ $ $
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(1) Does not include accountable expenses payable to BlueStone Capital
Partners, L.P. and , as representatives (the "Representatives") of the
several underwriters (the "Underwriters") or warrants to purchase
shares of Common Stock issuable to the Representatives
(the "Representatives' Warrants"). The Company has agreed to indemnify
the Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $ ,
including the Representative's non-accountable expense allowance, or $
if the Underwriters' Over-allotment Option (as defined below) is
exercised in full.
(3) The Company has granted the Underwriters an option (the "Over-allotment
Option"), exercisable within 45 days after the date of this Prospectus,
to purchase up to an aggregate of additional shares of Common
Stock, on the same terms set forth above, solely to cover
over-allotments, if any. If the Over-allotment Option is exercised in
full, the total Price to Public, Underwriting Discounts and
Commissions, and Proceeds to the Company will be $ , $ , and $ ,
respectively. See "Underwriting."
The shares of Common Stock are being offered by the Underwriters
subject to prior sale when, as and if delivered to and accepted by them and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the shares will be made against payment 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.
The date of this Prospectus is , 1997.
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[PHOTOS]
Certain persons participating in the Offering may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock, including 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 Representative and/or the
Underwriters. For a description of these activities, see "Underwriting."
The Company intends to furnish its shareholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by independent auditors and will make available quarterly reports for
the first three quarters of each fiscal year containing unaudited financial
information.
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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. As used in
this Prospectus, unless the context otherwise requires, the "Company" or
"Noble" refers to Noble International, Ltd. and its subsidiaries as of the
closing of the Offering (including Prestolock, Monroe, Vassar, Skandy, DCT, UPP
and Utilase, all as defined below). "Prestolock" refers to Prestolock
International, Ltd.; "Monroe" refers to Monroe Engineering Products, Inc.;
"Vassar" refers to Cass River Coatings, Inc., dba Vassar Industries; "Skandy"
refers to Skandy Corp.; "DCT" refers to DCT Component Systems, Inc.; "UPP"
refers to Utilase Production Process, Inc. and "Utilase" refers to Utilase, Inc.
dba Utilase Blank Welding Technologies. The Company has not yet consummated the
Utilase Acquisition (as defined), which is a condition to the consummation of
the Offering. Except with respect to historical financial statements and unless
the context indicates otherwise, all of the companies acquired or to be acquired
pursuant to the Acquisitions (as hereinafter defined) prior to or concurrently
with the consummation of the Offering, are included in the description of the
Company as set forth in this Prospectus.
Except as otherwise indicated herein, the information contained in this
Prospectus assumes that the Underwriters' Over-allotment Option and the
Representative's Warrants are not exercised. All information in this Prospectus
has been adjusted to give effect to a for 1 split of the Common Stock effected
on , 1997. All outstanding share information herein excludes shares currently
held in escrow in connection with the Utilase Acquisition, which shares will be
cancelled on the date of the closing of the Utilase Acquisition which is
expected to occur concurrently with the closing of the Offering. Prospective
investors should carefully consider the information set forth under the heading
"Risk Factors."
The Company
The Company is a diversified automotive component supplier which
manufactures a variety of components and provides design, planning, engineering,
assembly and value-added processing services to original equipment manufacturers
("OEMs") such as General Motors Corporation ("GM"), Chrysler Corporation
("Chrysler") and Ford Motor Company ("Ford") (collectively, the "Big Three"), to
U.S. subsidiaries of foreign OEMs such as Mitsubishi Motors Manufacturing of
America ("Mitsubishi") and to direct suppliers of OEMs ("Tier I suppliers").
Management has made six recent acquisitions in order to obtain design,
engineering, manufacturing and assembly capabilities in an effort to achieve the
Company's goal of becoming a full service supplier of automotive assemblies and
integrated systems.
The Company has entered into a definitive agreement to acquire all of
the outstanding capital stock of Utilase, a leading producer of laser-welded
tailored blanks for the automotive industry. A tailored blank consists of two or
more flat steel sheets of different thicknesses, or alloys and/or coatings which
are edge welded together for later stamping. The use of laser welding technology
to produce tailored blanks provides significant cost, weight and safety benefits
as compared to the use of conventional manufacturing techniques. Management
believes that the production of laser-welded tailored blanks is one of the
fastest growing segments of the automotive component supply business and is at
an early stage in its application. Utilase has developed certain proprietary
technology, equipment and methodologies for laser welding, which the Company
believes provide significant competitive advantages. The Company will acquire
Utilase simultaneously with the consummation of the Offering.
The Company's other operations include: designing, engineering and
assembling automobile glovebox latches under the brand name Prestolock(R);
manufacturing automotive components utilizing progressive die stampings;
painting and coating automotive components; providing other value-added services
such as welding, cutting and drilling, prototyping and mold design and
construction; and the distribution of components used in machine tools and other
industrial equipment.
The automotive component supply industry is undergoing significant
changes, including the consolidation and globalization of suppliers to the Big
Three. Management believes that the Big Three, other OEMs and larger Tier I
suppliers will increasingly seek suppliers which are able to provide broad
product lines, higher value-added products, low cost and reliable delivery. The
Big Three also have been actively reducing their supplier base to those who
accept significant responsibility for product management and meet increasingly
strict standards for product quality, on-time delivery and cost containment.
These suppliers are expected to control all aspects of the production of
automotive assemblies and integrated systems, including design, development,
component sourcing, manufacturing, quality assurance, testing and delivery to
the customer's assembly plant.
3
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Many Tier I suppliers, as well as suppliers to Tier I suppliers ("Tier
II suppliers"), do not have the resources, or in some cases the willingness, to
meet these changing standards and it is anticipated that the Tier I supplier
market will progressively be divided among a decreasing number of key suppliers.
The Company's objective is to become a full-service supplier of automotive
assemblies and integrated systems by capitalizing on the continuing trend toward
supplier consolidation. The key element of the Company's strategic plan is the
identification of new ways to assist OEMs and Tier I suppliers in meeting their
out-sourcing needs. The Company intends to implement its strategic plan through
the adoption of a systems approach, the acquisition of new technologies and the
pursuit of opportunistic acquisitions. The Company's acquisition strategy is to
seek continued growth through the selective acquisition of established
businesses to which management can apply its resources and to the opportunistic
acquisition of growth businesses such as Utilase. The Company's acquisition
strategy focuses on identifying companies for acquisition as a way of expanding
into new markets, adding customers, providing additional product, manufacturing
and service capabilities or increasing automotive model penetration with
existing customers. The Company believes that implementation of its plan should
result in both increased sales volumes with existing customers and the creation
of new business.
Based upon its experience with prior acquisitions, the Company believes
that significant opportunities exist to increase the value of acquired companies
by improving operating efficiency and achieving cost reductions. The Company may
further diversify its holdings by seeking acquisition candidates which are not
strategic to its automotive portfolio. Opportunistic acquisitions will be
considered if management believes in the future of a company's product and can
identify new management, or rely upon existing management, to develop a business
plan which defines a path to increased future earnings.
The Company was founded in 1993 for the purpose of implementing a
strategic acquisition program. The Company completed its first acquisition in
February 1994 by acquiring the assets of Prestolock, Inc. (the "Prestolock
Acquisition"). In January 1996, the Company completed the acquisitions of all of
the outstanding shares of Vassar (the "Vassar Acquisition") and Monroe (the
"Monroe Acquisition"). In July 1996, the Company acquired a minority interest in
DCT as well as rights to purchase the balance of the outstanding shares of DCT,
which rights the Company intends to exercise on or about July 30, 1997 (the "DCT
Acquisition"). In January 1997, the Company acquired all of the outstanding
capital stock of Skandy Corp. (the "Skandy Acquisition"). In February 1997, the
Company, through UPP, acquired certain assets of Utilase (the "UPP
Acquisition"). Concurrently with or prior to the closing of the Offering, the
Company will acquire all of the outstanding shares of Utilase, which the Company
intends to operate under the name Utilase Blank Welding Technologies (the
"Utilase Acquisition"). The Prestolock Acquisition, Vassar Acquisition, Monroe
Acquisition, DCT Acquisition, Skandy Acquisition, UPP Acquisition and Utilase
Acquisition are sometimes collectively referred to herein as the "Acquisitions."
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 (810) 433-3093.
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The Offering
Common Stock offered by the Company.............................. shares
Common Stock outstanding prior to the Offering................... shares
Common Stock outstanding upon completion of the Offering......... shares
Use of Proceeds.................................................. Acquisition of Utilase, payments in
connection with the UPP, Vassar and
Monroe Acquisitions, reduction of
financial institution debt, capital
expenditures and repayment of a
shareholder loan. See "Use of
Proceeds."
Proposed AMEX symbol............................................. [" "]
Risk factors..................................................... Prospective purchasers should
carefully consider the factors
discussed under "Risk Factors."
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4
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Summary Pro Forma Financial Data
The following sets forth summary pro forma financial data for the
Company as of and for the year ended December 31, 1996 and have 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 December 31, 1996 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 are 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 pro forma financial data is based upon
preliminary estimates of values and transaction costs. The actual recording of
the transactions will be based on final values and transaction costs.
Accordingly, the actual recording of the transactions can be expected to differ
from the pro forma financial data. 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 Information:
Year Ended December
31, 1996
---------------------
(in thousands, except
per share data)
Net sales .................................. $ 48,480
Cost of goods sold ......................... 36,837
--------
Gross profit ............................... 11,643
Selling, general and administrative expenses 9,147
--------
Operating profit ........................... 2,496
Interest expense ........................... 2,456
Other (income), net ........................ (369)
--------
Earnings before income taxes ............... 409
Income tax expense ......................... 139
--------
Net earnings ............................... $ 270
========
Pro forma net earnings per share
Weighted average common and common equivalent
shares outstanding .........................
EBITDA(1) .................................. 6,099
Pro Forma Combined Balance Sheet Information:
December 31, 1996
-----------------
Pro Forma
Combined
-----------------
(in thousands)
Current assets ............................. $17,984
Total assets ............................... 61,704
Current liabilities ........................ 10,928
Total liabilities .......................... 39,313
Working capital ............................ 7,056
Current maturities of long term debt ....... 2,275
Long term debt, excluding current maturities 28,209
Shareholders' equity ....................... 22,391
- -------
(1) "EBITDA" is defined herein as income before income taxes, depreciation
and amortization expense and interest expense. EBITDA is presented
because the Company believes it is a widely accepted financial
indicator of a company's ability to service and/or incur debt.
However, EBITDA should not be considered as an alternative to net
income as a measure of operating results or to cash flows as a measure
of liquidity in accordance with generally accepted accounting
principles.
5
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Summary Historical Financial Data
The following sets forth summary historical financial data for the
Company and its consolidated subsidiaries (Prestolock, Monroe and Vassar) for
each of the three fiscal years in the period ended December 31, 1996 and is
derived from financial statements which have been audited by Grant Thornton LLP,
independent certified public accountants. 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. 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 Statements of Operations Information:
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Year Ended December 31,
---------------------------------
1994 1995 1996
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(in thousands, except per share data)
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Net sales ............................................................ $ 3,306 $ 4,442 $ 16,187
Cost of goods sold ................................................... 2,262 2,911 10,587
-------- -------- --------
Gross profit ......................................................... 1,044 1,531 5,600
Selling, general and administrative expenses ......................... 915 1,030 5,094
-------- -------- --------
Operating profit ..................................................... 129 501 506
Equity in loss of unconsolidated subsidiary .......................... -- -- 45
Interest income ...................................................... -- -- (5)
Interest expense ..................................................... 24 24 439
Sundry, net .......................................................... (1) (29) (64)
-------- -------- --------
Earnings before income taxes and minority interest ................... 106 506 91
Minority interest .................................................... 38 67 --
Income tax expense ................................................... 8 30 25
-------- -------- --------
Net earnings.......................................................... $ 60 $ 409 $ 66
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Earnings per share.................................................... $ $ $
======== ======== ========
Weighted average common and common equivalent shares outstanding
EBITDA(1).......................................................... $ 121 $ 566 $ 1,050
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Consolidated Balance Sheet Information:
December 31,
-------------------
1995 1996
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(in thousands)
Current assets ............................. $ 1,326 $ 4,560
Total assets ............................... 1,785 11,654
Current liabilities ........................ 977 5,408
Total liabilities .......................... 1,161 10,782
Working capital (deficiency) ............... 349 (848)
Current maturities of long term debt ....... 112 1,954
Long term debt, excluding current maturities 61 5,330
Shareholders' equity ....................... 624 872
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(1) "EBITDA" is defined herein as income before income taxes, depreciation
and amortization expense and interest expense. EBITDA is presented
because the Company believes it is a widely accepted financial
indicator of a company's ability to service and/or incur debt.
However, EBITDA should not be considered as an alternative to net
income as a measure of operating results or to cash flows as a measure
of liquidity in accordance with generally accepted accounting
principles.
6
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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
In 1996, sales to the automotive industry accounted for approximately
68.5% of the consolidated net sales of the Company (89.5% of pro forma
consolidated net sales giving effect to all of the Acquisitions) with GM and
Chrysler, including their respective Tier I suppliers, accounting for
substantially all of the Company's historical and pro forma net sales to the
automotive industry. Thus, the loss of GM, Chrysler or any of the Company's
other significant customers could have a material adverse effect on the Company.
See "Business." 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 the Company were unable to
generate sufficient production cost savings in the future to offset price
reductions, the Company's gross margins could be adversely affected.
Limited Combined Operating History
The Company has a limited combined 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 results of operations for
1996 do not include the results of operations of DCT, Skandy, UPP or Utilase.
Neither the separate historical financial statements nor the pro forma financial
data included elsewhere herein are necessarily indicative of the results that
would have been achieved if all of the businesses acquired had been operated on
an integrated basis or the results that may be realized on a combined basis in
the future.
Integration of Acquisitions
The automotive component supply industry has undergone, and is likely
to continue to experience consolidation, as OEMs seek to reduce costs and
reduce 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 product, manufacturing
and service capabilities and increase model penetration with existing customers.
Integration of the Acquisitions, and any future acquisitions, will place a
strain upon the Company's financial and managerial resources. The full benefits
of the 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 Acquisitions,
or any future acquisitions, the Company's business could be adversely affected.
Industry Cyclicality and 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 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 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. There can be no assurance that the Company will not be affected by
such cyclical or seasonal fluctuations in the future.
7
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Failure to Obtain Business on New and Redesigned Model Introductions
Certain of the Company's products are subject to obsolescence 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 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. The failure of the Company to
obtain new business on new models or to retain or increase business on
redesigned existing models could adversely affect the Company's business.
Dependence on Continuous Improvement of Technologies
The ability of the Company to continue to meet customer specifications
in respect of performance, cost, quality and service will depend, in part, upon
the Company's ability to remain technologically competitive. The Company's
business may therefore require from time to time significant additional capital
or other resources available to meet this continuing challenge. The inability of
the Company to continuously improve its technologies in order to remain
competitive could have a material adverse effect on the Company's business. See
"Business--Business Strategy."
Design and Engineering Expenditures
OEMs are increasingly requiring Tier I suppliers to provide more design
and engineering input at earlier stages in the product development process, the
costs of which are, in some cases, absorbed by the suppliers. Tier I suppliers
are, in turn, imposing similar requirements on Tier II suppliers. Despite the up
front design and engineering costs incurred, the OEMs and Tier I suppliers are
under no obligation to purchase the subject components or systems. There can be
no assurance that up front design and engineering expenditures incurred by the
Company in the future will not have a material adverse effect on the financial
condition or results of operations of the Company.
Risks of Future Acquisitions
The Company may pursue future growth through opportunistic acquisitions
of assets or companies involved in the automotive component supply or other
industries. The Company routinely reviews such acquisition opportunities and
believes that there are a number of potential acquisition candidates that would
be complementary to its business. Other than the Utilase and DCT Acquisitions,
the Company currently has no agreements, understandings or arrangements with
respect to any acquisition. The Company cannot predict whether it will be
successful in pursuing future acquisition opportunities or what the consequences
of any such acquisition would be.
Potential Need for Additional Financing
Future acquisitions may involve the expenditure of significant funds
and management time. Depending upon the nature, size and timing of future
acquisitions, the Company may be required to obtain additional debt or equity
financing. There can be no assurance that such additional financing will be
available to the Company on acceptable terms or at all.
Maturity of Bank Line
The Company's $3 million revolving line of credit with Comerica Bank
("Comerica") currently expires July 31, 1997. Although there can be no
assurance, management believes that the line of credit will be extended by
Comerica, as required, to facilitate the refinancing and/or restructuring of
substantially all of the Company's credit facilities, which is expected to occur
immediately following 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 following consummation
of the Offering. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation -- Liquidity and Capital Resources."
Contingencies Related to Acquisitions
The Company is subject to several contingencies related to the
Acquisitions. DCT and an entity controlled by its current principal shareholders
are co-makers of two notes payable totaling approximately $39 million to the
General Retirement System of the City of Detroit ("GRS"). Although DCT did not
receive any of the proceeds from these notes, they are secured by a lien on all
real and personal property of DCT. The assets of Utilase, including those
purchased by the Company's subsidiary UPP, are subject to a similar lien in
favor of GRS related to loans made to the same affiliated entity. The Utilase
Acquisition agreement requires Utilase to obtain a release of the GRS lien prior
to the consummation of the acquisition. The
8
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Company also anticipates that the GRS lien on the assets of DCT and UPP will be
released prior to the consummation of the Offering, although no assurances can
be given. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Certain
Transactions."
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. The Company and certain of such former
shareholders have entered into subsequent agreements which, in the Company's
view, have terminated such former shareholders' right to exercise this option,
however, there can be no assurance that such view will prevail and that such
former shareholders will not be able to exercise this option, or a portion
thereof. To date none of such former shareholders has stated an interest in
exercising the option. See "Certain Transactions."
Risk of Customer 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.
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's Delphi Division ("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 any
associated offsite disposal location, 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, 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 have employment agreements with its other executive officers.
The loss of the services of Mr. Skandalaris may have a material adverse effect
on the Company. The Company does not maintain key-person life insurance on the
life of Mr. Skandalaris. See "Management."
9
<PAGE>
Control by Existing Shareholders
Upon completion of the Offering, Robert J. Skandalaris will continue to
own approximately % of the outstanding Common Stock ( % if the Underwriters'
Over-allotment Option is exercised in full) and will have voting control over an
additional approximately % of the outstanding Common Stock ( % if the
Underwriters' Over-allotment Option is exercised in full) pursuant to voting
agreements with other shareholders or as custodian for his minor children. As a
result of such stock ownership and voting agreements, Mr. Skandalaris will be
able to control the vote on 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.
See "Description of Capital Stock." 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."
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."
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 to the
Company for the purpose of paying dividends to holders of Common Stock is
restricted by the Company's current bank loan agreements. The Company expects
that any future lending facilities may include similar restrictions. The
Company's ability to pay dividends is also subject to limitations imposed by the
Company's Series A through D Subordinated Promissory Notes (the "Utilase
Notes") which will be delivered in connection with the Utilase Acquisition. See
"Dividend Policy" and "Certain Transactions."
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 shares of Common
Stock issued and outstanding ( if the Underwriters' Over-allotment
Option is exercised in full). The shares of Common Stock sold in the Offering
will be freely tradeable 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"). Other than the shares of Common Stock
being offered hereby, the currently outstanding shares of Common Stock 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. Subject to the expiration of certain 360-day
"lock up" agreements described herein, shares of Common Stock will be eligible
for sale beginning days from the date of this Prospectus, subject to certain
limitations under Rule 144. See "Description of Capital Stock -- Shares Eligible
for Future Sale."
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 given as to the liquidity of the trading
market for the Common Stock, that an active public market will develop for the
Common Stock or that the Common Stock will trade in the public market subsequent
to the Offering at or above the 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 Representative and are not necessarily
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
10
<PAGE>
the Offering. See "Underwriting." 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.
Immediate and Substantial Dilution to New Investors
Purchasers of Common Stock in the Offering will experience immediate
and substantial dilution in net tangible book value per share. As of December
31, 1996, the Company had a deficiency in net tangible book value of
approximately $( ) 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 Acquisitions and the
anticipated use of proceeds of the Offering, the adjusted net tangible book
value (deficit) of the Company at December 31, 1996 would have been $( ) per
share. This represents an immediate increase in net tangible book value per
share of $ to the Company's present shareholders and an immediate dilution
of $ per share to purchasers in the Offering. See "Dilution."
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.
11
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
shares of Common Stock offered hereby, assuming an initial public offering
price of $ per share, are estimated to be approximately $20,200,000 ($ if the
Underwriters' Over-allotment Option is exercised in full) after deducting
underwriting discounts and estimated offering expenses. The Company expects to
use the net proceeds as follows:
Anticipated Use of Net Proceeds Amount Percentage
- ---------------------------------------- -------------- ----------
Utilase Acquisition .................... $ 9,600,000(1) 47.5%
Reduction of Financial Institution Debt 5,750,000(2) 28.5%
Plant and Equipment .................... 2,500,000(3) 12.4%
Payments in Connection with Acquisitions 1,350,000(4) 6.7%
Repayment of Shareholder Loan .......... 1,000,000(5) 4.9%
----------- -----
Total .................................. $20,200,000 100.0%
- -------------------------
(1) Represents the cash amount payable in connection with the Utilase
Acquisition. See "Certain Transactions."
(2) Includes anticipated payments to Comerica of $2,000,000 and
$2,000,000 on each of the Company's Line of Credit and Line/Term Loan.
At December 31, 1996, the outstanding balance on the Line of Credit was
$1,402,708. Interest on the Line of Credit is payable monthly at 1%
over Comerica's prime lending rate (8.5% at May 1, 1997) and the
facility expires July 31, 1997. At December 31, 1996, the Line/Term
Loan had an outstanding balance of $3,750,000. The principal amount of
the Line/Term Loan is payable in monthly installments of $78,125 and
bears interest at 1.5% above Comerica's prime lending rate. The
Line/Term Loan is due December 31, 2000. Also includes payment of
$1,750,000 to CIT Group/Credit Finance, Inc. ("CIT") under the June 27,
1996 Loan and Security Agreement. At December 31, 1996, the outstanding
balance due CIT was $2,896,076. Interest under the CIT credit facility
is payable monthly at 2.625% over CIT's prime lending rate (8.5% at May
1, 1997). The CIT loan is due June 1, 1998. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
(3) Includes anticipated expenditures of approximately $500,000 for the
Company's new painting and assembly facility in or near Saginaw,
Michigan and approximately $2,000,000 for new equipment for Utilase.
(4) Includes $750,000 payable in connection with the UPP Acquisition,
$100,000 payable in connection with the Vassar Acquisition and $500,000
payable in connection with the Monroe Acquisition. See "Certain
Transactions."
(5) Represents the repayment of a loan from the Company's principal
shareholder. See "Certain Transactions."
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 or all of the proceeds in the best interests of the Company.
If the Underwriters exercise the Over-allotment Option, the Company may utilize
the additional net proceeds to repay additional amounts of financial institution
debt.
12
<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 any future lending facilities may include similar restrictions. Such
restrictions could 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, require the consent of the holders of
67% of the aggregate outstanding principal amount thereof for the Company to
declare or pay any dividend on the Common Stock, other than in shares of capital
stock. See "Certain Transactions."
DILUTION
As of December 31, 1996, the Company had a deficiency in net tangible
book value of $(4.3) million, or approximately $( ) per share. Net tangible book
value per share represents the amount of the Company's total tangible assets,
less liabilities, divided by the number of shares of Common Stock outstanding.
After giving effect to (i) the sale of the shares of Common Stock offered by
this Prospectus at an assumed public offering price of $ , (ii) the Acquisitions
and (iii) the intended use of proceeds of the Offering, the adjusted net
tangible book value (deficit) of the Company at December 31, 1996 would have
been $( ) per share, representing an immediate increase in net tangible book
value per share of $ to existing shareholders and an immediate dilution of
$ to the purchasers of Common Stock in the Offering. The following table
illustrates the per share dilution to investors in the Offering:
<TABLE>
<S> <C>
Assumed offering price per share(1).......................................................... $
--------------
Net tangible book value per share before the Offering...............................
Increase per share attributable to the sale of Common Stock in the Offering(2)......
--------------
Adjusted net tangible book value per share(2)................................................
--------------
Dilution to purchasers in the Offering(3).................................................... $
==============
</TABLE>
- -------------------------
(1) Before deduction of underwriting discounts and estimated offering
expenses payable by the Company.
(2) After deduction of underwriting discounts and estimated offering
expenses payable by the Company.
(3) Dilution to purchasers in the Offering represents the difference
between the assumed offering price per share and the pro forma net
tangible book value (deficit) per share after giving effect to the
Offering, the Acquisitions and the application of the net proceeds of
the Offering.
The following table sets forth on a pro forma basis as of December 31,
1996 the number of shares of Common Stock outstanding, the total consideration
to the Company and the average price per share paid by existing shareholders and
by the purchasers in the Offering at an assumed offering price of $ per share:
<TABLE>
<CAPTION>
Shares Acquired Total Consideration
------------------------------- --------------------------------- Average Price
Number Percent Amount Percent per Share
--------------- ------------- ----------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Existing shareholders......... % $ 523,359 % $
Purchasers in the Offering.... % %
--------------- ------------- ----------------- -------------
% $ 100.00%
=============== ============= ================= =============
</TABLE>
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996 (i) on a historical basis and (ii) on a pro forma basis to
reflect the consummation of the Acquisitions, the sale of the shares of Common
Stock offered hereby at an assumed initial public offering price of $ per share
and the application of the estimated net proceeds therefrom as described in "Use
of Proceeds." This table should be read in conjunction with the consolidated and
pro forma financial statements, including the notes thereto, included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
December 31, 1996
------------------------
Historical Pro Forma
----------- ---------
(in thousands)
<S> <C> <C>
Current maturities of long term debt ......................................... $1,954 $ 2,275
Long-term debt, excluding current maturities(1) .............................. 5,330 27,209
Preferred Stock, none authorized or outstanding historical and $100 par value,
150,000 shares authorized and 10,000 shares outstanding pro
forma(2) ................................................................ -- 1,000
Shareholders' equity:
Common stock, no par value:
shares authorized, (3) shares issued and outstanding
historical and shares pro forma ................................. 523 22,029
Retained earnings (deficit) .................................................. 349 349
------ ------
Total shareholders' equity .............................................. 872 22,378
------ ------
Total capitalization ................................................ $8,156 $52,862
====== ======
</TABLE>
- -------------------------
(1) The Company's long term debt will increase after the Offering due
to the issuance of the Utilase Notes delivered in connection
with the Utilase Acquisition as well as the assumption by the Company
of the long term debt of DCT and Utilase in connection with the DCT and
Utilase Acquisitions. See "Pro Forma Financial Data" and "Certain
Transactions."
(2) Assumes conversion of the outstanding shares of DCT preferred stock
into preferred stock of the Company concurrently with the closing of
the Offering. See "Certain Transactions" and "Description of Capital
Stock--Preferred Stock."
(3) Excludes shares issued in connection with the Skandy Acquisition on
January 1, 1997. See "Certain Transactions."
14
<PAGE>
PRO FORMA FINANCIAL DATA
Introduction
The following pro forma financial data are based upon the historical
financial statements of the Company and have been prepared to illustrate the
effects of the Acquisitions and the Offering. The unaudited pro forma combined
statement of operations for the year ended December 31, 1996 gives effect to the
Acquisitions as if they had been completed as of January 1, 1996. The unaudited
pro forma combined balance sheet as of December 31, 1996 gives effect to the
Acquisitions and the Offering as if such transactions had been completed on
December 31, 1996. The Acquisitions are reflected using the purchase method of
accounting for business combinations.
The pro forma financial data are provided for comparative purposes only and
does not purport to represent the actual financial position or results of
operations of the Company if the Acquisitions had been consummated on the dates
specified, nor are they necessarily indicative of the results of operations that
may be achieved in the future. The pro forma financial data are based upon
preliminary estimates of values and transaction costs. The actual recording of
the transactions will be based on final values and transaction costs.
Accordingly, the actual recording of the transactions can be expected to differ
from the pro forma financial data.
The unaudited pro forma combined statement of operations contains
adjustments which are directly attributable to the Acquisitions. Adjustments to
the pro forma combined operating results 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 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 are 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.
15
<PAGE>
NOBLE INTERNATIONAL, LTD. AND ACQUIRED BUSINESSES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(Year ended December 31, 1996)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Total Pro Forma Pro Forma
Noble DCT Utilase Combined Adjustments Combined
----------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
------------ ------------ ----------- ----------- ------------ ----------
Net sales .......................... $16,187 $22,988 $9,305 $48,480 $48,480
Cost of goods sold ................. 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 expenses ............. 5,094 1,962 2,060 9,116 31(A)(B)(F) 9,147
------------ ------------ ----------- ----------- ------------ ----------
Operating profit.................... 506 580 1,441 2,527 (31) 2,496
Interest expense.................... 439 937 631 2,007 449(C)(F) 2,456
Other (income) expense, net......... (24) (104) (171) (299) (70)(D)(F) (369)
----------- ----------- ---------- ---------- ----------- ----------
Earnings (loss) before income taxes. 91 (253) 981 819 (410) 409
Income tax expense.................. 25 0 330 355 (216)(E) 139
----------- ----------- ---------- ---------- ----------- ----------
Net earnings (loss)................. $66 $(253) $651 $464 $(194) $270
=========== =========== ========== ========== =========== ==========
Pro forma earnings (loss) per share.
Weighted average common and common
equivalent shares outstanding.......
=========== =========== ========== ========== =========== ==========
EBITDA(G)........................... $1,050 $1,405 $2,171 $4,625 $1,475 $6,099
=========== =========== ========== ========== =========== ==========
</TABLE>
- -------------------------
(A) Includes the elimination of $841,021 of compensation expense as a result of
an employment contract entered into between the Company and its Chief
Executive Officer.
(B) Reflects the amortization of goodwill relating to the Acquisitions,
including $842,400 for Utilase and $247,300 for DCT. Also reflects the
amortization of payments by the Company of $200,000 for the covenants not
to compete to be executed in connection with the Utilase Acquisition.
(C) Reflects the interest expense on the Utilase Notes to be issued by the
Company in connection with the Utilase Acquisition and the note issued by
the Company in connection with the DCT Acquisition totalling $623,621 and
$58,300, respectively; as well as interest expense savings from the
reduction of debt resulting from the use of proceeds of the Offering
totalling $658,100.
(D) Reflects the elimination of the equity in loss of DCT as an unconsolidated
subsidiary totalling $44,614.
(E) Reflects the reduction in tax provision based on applying the statutory
income tax rate adjusting for the pro forma income adjustments totalling
$216,000.
(F) Reflects the purchase of Competitive Technologies, Ltd., the landlord
of DCT which will be purchased by the Company concurrently with the closing
of the DCT Acquisition, and the results of operations in 1996. Total net
rent was $25,000. Rent paid by DCT was $564,000, interest expense was
$425,000, depreciation and amortization expense was $147,000, therefore
income was $17,000.
(G) "EBITDA" is defined herein as income before income taxes, depreciation and
amortization expense and interest expense. EBITDA is presented because the
Company believes it is a widely accepted financial indicator of a
company's ability to service and/or incur debt. However, EBITDA should not
be considered as an alternative to net income as a measure of operating
results or to cash flows as a measure of liquidity in accordance with
generally accepted accounting principles.
16
<PAGE>
NOBLE INTERNATIONAL, LTD. AND ACQUIRED BUSINESSES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(Year ended December 31, 1996)
(in thousands)
<TABLE>
<CAPTION>
Total Pro Forma Pro Forma
Noble DCT Utilase Combined Adjustments Combined
------------ ------------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash and cash equivalents....... $471 $609 $406 $1,486 $4,133 $5,619
Accounts receivable, net........ 1,627 3,318 1,639 6,584 6,584
Inventories..................... 2,285 2,255 234 4,774 4,774
Other........................... 177 810 20 1,007 1,007
------------ ------------ ----------- ------------ ----------- -----------
Total current assets............ $4,560 $6,992 $2,299 $13,851 4,133 $17,984
Property, plant and
equipment, net................ 1,849 4,235 4,929 11,013 5,197 16,210
Goodwill, net................... 5,148 0 0 5,148 20,975 26,123
Other........................... 97 29 61 187 1,200 1,387
------------ ------------ ----------- ------------ ----------- -----------
Total assets.................... $11,654 $11,256 $7,289 $30,199 $31,505 $61,704
============ ============ =========== ============ =========== ===========
Liabilities and Shareholders'
Equity
Accounts payable................ $1,360 $3,854 $874 $6,088 $6,088
Accrued liabilities............. 691 934 292 1,917 1,917
Current maturities of financial
institutional debt.............. 2,407 3,460 360 6,227 (5,750) 477
Current maturities of other
term debt...................... 950 418 430 1,798 1,798
Other........................... -- 226 422 648 648
------------ ------------ ----------- ------------ ----------- -----------
Total current liabilities....... $5,408 $8,892 $2,378 $16,678 $(5,750) $10,928
Long term financial institution
excluding current maturities.... 3,208 2,033 1,029 6,270 6,270
Other long term debt, excluding
current maturities.............. 2,122 2,530 1,453 6,105 14,834 20,939
Other........................... 44 177 221 (45) 176
Redeemable preferred stock...... 1,000 1,000 1,000
Shareholders' equity
Common stock.................... 523 17,701 1,704 19,928 1,910 21,838
Retained earnings (accumulated
deficit)........................ 349 (20,900) 548 (20,003) 20,556 553
------------ ------------ ----------- ------------ ----------- -----------
Total liabilities and
shareholders' equity............ $11,654 $11,256 $7,289 $30,199 $31,505 $61,704
============ ============ =========== ============ =========== ===========
</TABLE>
Notes: Please see following page.
17
<PAGE>
NOBLE INTERNATIONAL, LTD. AND ACQUIRED BUSINESSES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(Year ended December 31, 1996)
(in thousands)
(Continued)
NOTE 1. PRO FORMA BALANCE SHEET ADJUSTMENTS
<TABLE>
<CAPTION>
Assets Liabilities and Shareholders' Equity
------------------------------------------ ------------------------------------------------------------
Current Retained
Portion Long term Common Paid in earnings
Cash PP&E Goodwill Other of debt debt Other Stock capital (deficit)
---------- -------- --------- --------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Utilase Acquisition(AA) $(8,200) $16,848 $10,135 $(1) $(1,588) $102
Utilase non-compete
payment (1,400) 1,400
UPP Acquisition (750) 850 100
Shareholder debt
repayment (1,000) (1,000)
DCT purchase(HH) 4,947 1,000 (4) (16,697) 20,648
Utilase non-compete
amortization (200) (200)
Utilase goodwill
amortization(BB) (842) (842)
DCT goodwill
amortization(CC) (247) (247)
Interest on Utilase
note payable(DD) (624) (624)
Interest on the DCT
note payable(II) (58) (58)
Elimination of equity
in loss of
unconsolidated
affiliate (45) 45
Adjustment for
compensation(EE 841 841
Repayment of financial
institution debt(FF) (5,750) (5,750)
Interest on repaid
debt(GG) 658 658
Competitive Technologies
purchase(JJ) 4,347 269 4,599 17
Tax provision
adjustment(KK) 216 216
Offering proceeds 20,200 20,200
----------- -------- --------- --------- -------- -------- -------- -------- -------- --------
$4,133 $5,197 $20,975 $1,200 $(5,750) $14,834 $(45) $(5) $1,915 $20,556
----------- -------- --------- --------- -------- -------- -------- -------- -------- --------
</TABLE>
- -------------------------
(AA) Reflects the Utilase Acquisition using the purchase method of accounting.
(BB) Goodwill for the Utilase Acquisition is being amortized over 20 years.
(CC) Goodwill for the DCT Acquisition is being amortized over 20 years.
(DD) Represents interest on the Utilase Notes issued in connection with the
Utilase Acquisition.
(EE) 1996 compensation expense adjusted as a result of an employment contract
entered into between the Company and its Chief Executive Officer.
(FF) Reflects the reduction of the Company's debt to Comerica and CIT using a
portion of the net proceeds of the Offering.
(GG) Reflects the interest savings from the reduction of the bank debt and
repayment of note to shareholder.
(HH) Reflects the DCT Acquisition using the purchase method of accounting.
(II) Reflects the interest expense on the DCT note payable that arises from
Noble's exercise of its option to purchase.
(JJ) Reflects the purchase of Competitive Technologies, Ltd., the landlord of
DCT.
(KK) Reflects the reduction in tax provision based on applying the statutory
income tax rate adjusting for the pro forma income adjustments.
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SELECTED FINANCIAL DATA
The following selected historical financial data for each of the three
fiscal years in the period ended December 31, 1996 is derived from financial
statements which have been audited by Grant Thornton LLP, independent certified
public accountants, and should be read in conjunction with the financial
statements and notes thereto included elsewhere herein. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Year Ended December 31,
-------------------------------
1994 1995 1996
-------- -------- --------
(in thousands, except per share data)
Statement of Operations Data:
Net sales .................................. $ 3,306 $ 4,442 $ 16,187
Cost of goods sold ......................... 2,262 2,911 10,587
-------- -------- --------
Gross profit ............................... 1,044 1,531 5,600
Selling, general and administrative expenses 915 1,030 5,094
-------- -------- --------
Operating profit ........................... 129 501 506
Equity in loss of unconsolidated subsidiary. -- -- 45
Interest income ............................ -- -- (5)
Interest expense ........................... 24 24 439
Sundry, net ................................ (1) (29) (64)
-------- -------- --------
Earnings before income taxes and minority .. 106 506 91
interest
Minority interest .......................... 38 67 --
Income tax expense ......................... 8 30 25
-------- -------- --------
Net earnings ............................... $ 60 $ 409 $ 66
======== ======== ========
Net earnings per share ..................... $ $ $
======== ======== ========
Weighted average common and common
equivalent shares outstanding
Other Data:
EBITDA(1) .................................. $ 121 $ 566 $ 1,050
======== ======== ========
As of December 31,
1995 1996
-------- --------
(in thousands)
Balance Sheet Data:
Current assets ............................. $ 1,326 $ 4,560
Total assets ............................... 1,785 11,654
Current liabilities ........................ 977 5,408
Total liabilities .......................... 1,161 10,782
Working capital (deficiency) ............... 349 (848)
Current maturities of long-term debt ....... 112 1,954
Long-term debt, excluding current maturities 61 5,330
Shareholders' equity ....................... 624 872
- -------------------------
(1) "EBITDA" is defined herein as income before income taxes, depreciation and
amortization expense and interest expense. EBITDA is presented because the
Company believes it is a widely accepted financial indicator of a
company's ability to service and/or incur debt. However, EBITDA should not
be considered as an alternative to net income as a measure of operating
results or to cash flows as a measure of liquidity in accordance with
generally accepted accounting principles.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company is a diversified automotive component supplier which
manufactures a variety of components and provides design, planning, engineering,
assembly and value-added processing services to OEMs and Tier I suppliers. The
Company was founded in 1993 for the purpose of implementing a strategic
acquisition program. 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 as well as
rights to purchase the balance of the outstanding shares of DCT, which rights
the Company intends to exercise on or about July 30, 1997. 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
or prior to the closing of the Offering, the Company will acquire all of the
outstanding shares of Utilase.
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 obtained 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. Additional assembly operations recently awarded to
Vassar may cause future operating results to differ from historical operating
results. 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. UPP and Utilase are also anticipated to benefit from the
addition of a dedicated sales force. 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, an $8 million secured
equipment line, 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 future operating results to
differ from historical operating results for Utilase.
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.
Results of Operations
Comparison of Fiscal Years Ended December 31, 1996 and December 31, 1995
Net Sales. Net sales increased by 264.4% from $4.4 million for the year
ended December 31, 1995 ("Fiscal 1995"), to $16.2 million for the year ended
December 31, 1996 ("Fiscal 1996"). The significant increase in net sales was
primarily attributable to the Vassar and Monroe Acquisitions, which had net
sales in Fiscal 1996 of $5.5 million and $5.1 million, respectively.
Cost of Goods Sold. Primarily as a result of the Vassar and Monroe
Acquisitions, cost of goods sold increased from $2.9 million for Fiscal 1995 to
$10.6 million for Fiscal 1996. As a percentage of net sales, cost of goods sold
decreased slightly from 65.5% for Fiscal 1995 to 65.4% for Fiscal 1996.
Management attributes the slight decrease to lower cost of sales as a percentage
of net sales for Vassar (64.8%) and Monroe (39.1%) which are included in the
Fiscal 1996 results.
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<PAGE>
Gross Profit. Gross profit increased 265.6% from $1.5 million in Fiscal
1995 to $5.6 million in Fiscal 1996 and the gross margin increased slightly from
34.5% in Fiscal 1995 to 34.6% in Fiscal 1996. The increase in gross profit and
the slight increase in gross margin was attributable to the Vassar and Monroe
Acquisitions.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $5.1 million for Fiscal 1996, an increase of 394.4%
from approximately $1.0 million for Fiscal 1995 as a result of the Vassar and
Monroe Acquisitions during Fiscal 1996. As a percentage of net sales, selling,
general and administrative expenses increased to 31.5% for Fiscal 1996 as
compared to 23.2% for Fiscal 1995, primarily due to the amortization of goodwill
related to the Monroe Acquisition and extraordinary compensation expense.
Interest Expense. Interest expense was $439,000 for Fiscal 1996 as
compared to $24,000 for Fiscal 1995. The increase in interest expense was
primarily attributable to debt incurred in connection with the Vassar and Monroe
Acquisitions.
Net Earnings. Net earnings decreased from $409,000 in Fiscal 1995 to
$66,000 in Fiscal 1996, primarily due to the amortization of goodwill related to
the Monroe Acquisition, a discretionary bonus and increased interest expense.
Comparison of Fiscal Years Ended December 31, 1995 and December 31, 1994
Net Sales. Net sales increased by 34.4% from $3.3 million for the year
ended December 31, 1994 ("Fiscal 1994"), to $4.4 million for Fiscal 1995
primarily due to increases in the number of components being produced as well as
an increase in tooling sales.
Cost of Goods Sold. Cost of goods sold increased from $2.3 million for
Fiscal 1994 to $2.9 million for Fiscal 1995. As a percentage of net sales, cost
of goods sold decreased from 68.4% for Fiscal 1994 to 65.5% for Fiscal 1995.
This decrease was primarily due to manufacturing costs being allocated over a
larger sales base.
Gross Profit. Gross profit increased 46.7% to $1.5 million in Fiscal
1995 as compared to $1.0 million in Fiscal 1994, and the gross profit margin
increased from 31.6% in Fiscal 1994 to 34.5% in Fiscal 1995 primarily as a
result of increased sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $1.0 million for Fiscal 1995, an increase of 12.6%
from $0.9 million for Fiscal 1994. This increase was primarily due to increases
in compensation which were partially affected by a decrease in bad debt expense.
As a percentage of net sales, selling, general and administrative expenses
decreased to 23.2% for Fiscal 1995 as compared to 27.7% for Fiscal 1994.
Interest Expense. Interest expense increased 1.1% from $23,579 for
Fiscal 1994 to $23,836 for Fiscal 1995. As a percentage of net sales,
interest expense decreased to 0.5% for Fiscal 1995 as compared to 0.7% for
Fiscal 1994.
Net Earnings. Net earnings increased 581.7% to $409,000 in Fiscal 1995
as compared to approximately $60,000 in Fiscal 1994, primarily due to increased
sales and improved margins.
Liquidity and Capital Resources
The Company's cash requirements have historically been met through a
combination of cash flow from operations, equipment financing, revolving credit
borrowings, 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 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.
21
<PAGE>
The Company currently has a $3.0 million secured revolving line of
credit facility, subject to qualifying accounts receivable and inventory, with
Comerica which expires on July 31, 1997. At December 31, 1996, the outstanding
balance on the Comerica line of credit was $1,403,000. Interest on the Comerica
Line of Credit is payable monthly at 1% over Comerica's prime lending rate (8.5%
at May 1, 1997). On April 25, 1997, Comerica agreed to waive various technical
defaults by the Company and extend the credit facility to July 31, 1997. DCT
currently has a $7.0 million credit facility with CIT which expires June 1,
1998. Available borrowings on the CIT credit facility were $5,864,000 at
December 31, 1996. Interest on the CIT credit facility is payable monthly at
2.625% over CIT's prime lending rate (8.5% at May 1, 1997). Utilase has a
revolving line of credit facility with Comerica. There was no outstanding
balance on this facility at December 31, 1996. Interest on this facility is
payable monthly at 2% over Comerica's prime lending rate. 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. It is
anticipated that the Company's various credit facilities will be restructured or
refinanced upon the completion 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 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.
The Company intends to utilize a portion of the net proceeds from the
Offering to reduce its outstanding obligations to Comerica and to reduce the
outstanding balance of the CIT credit facility. See "Use of Proceeds." The
Company believes that the proceeds from the Offering, cash flow from operations
and availability under its credit facilities will be sufficient to meet its
currently anticipated working capital and capital expenditure needs for existing
debt service and operations, including all of the Acquisitions, for at least 12
months. The Company may, however, need to raise additional capital to fund the
acquisition and integration of additional businesses. The Company may raise such
funds through bank financing or public or private offerings of its securities.
There can be no assurance that the Company will be able to secure such
additional financing. If the Company is not successful in securing such
financings, the Company's ability to pursue future acquisitions may be impaired.
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.
22
<PAGE>
BUSINESS
General
The Company is a diversified automotive component supplier which
manufactures a variety of components and provides design, planning, engineering,
assembly and value-added processing services to OEMs such as GM, Chrysler and
Ford, to U.S. subsidiaries of foreign OEMs such as Mitsubishi and to Tier I
suppliers. Management has made six recent acquisitions in order to obtain
design, engineering, manufacturing and assembly capabilities in an effort to
achieve the Company's goal of becoming a full service supplier of automotive
assemblies and integrated systems.
The Company has entered into a definitive agreement to acquire all of
the outstanding capital stock of Utilase, a leading producer of laser-welded
tailored blanks for the automotive industry. A tailored blank consists of two or
more flat steel sheets of different thicknesses, or alloys and/or coatings which
are edge welded together for later stamping. The use of laser welding technology
to produce tailored blanks provides significant cost, weight and safety benefits
as compared to the use of conventional manufacturing techniques. Management
believes that the production of laser-welded tailored blanks is one of the
fastest growing segments of the automotive component supply business and is at
an early stage in its application. Utilase has developed certain proprietary
technology, equipment and methodologies for laser welding which the Company
believes provide significant competitive advantages. The Company will acquire
Utilase simultaneously with the consummation of the Offering.
The Company's other operations include: designing, engineering and
assembling automobile glovebox latches under the brand name Prestolock(R);
manufacturing automotive components utilizing progressive die stampings;
painting and coating automotive components; providing other value-added services
such as welding, cutting and drilling, prototyping and mold design and
construction; and the distribution of components used in machine tools and other
industrial equipment.
The automotive component supply industry is undergoing significant
changes, including the consolidation and globalization of suppliers to the Big
Three. Management believes that the Big Three, other OEMs and larger Tier I
suppliers will increasingly seek suppliers which are able to provide broad
product lines, higher value-added products, low cost and reliable delivery. The
Big Three also have been actively reducing their supplier base to those who
accept significant responsibility for product management and meet increasingly
strict standards for product quality, on-time delivery and cost containment.
These suppliers are expected to control all aspects of the production of
automotive assemblies and integrated systems, including design, development,
component sourcing, manufacturing, quality assurance, testing and delivery to
the customer's assembly plant.
Many Tier I suppliers, as well as Tier II suppliers, do not have the
resources, or in some cases the willingness, to meet these changing standards
and it is anticipated that the Tier I supplier market will progressively be
divided among a decreasing number of key suppliers. The Company's objective is
to become a full-service supplier of automotive assemblies and integrated
systems by capitalizing on the continuing trend toward supplier consolidation.
The key element of the Company's strategic plan is the identification of new
ways to assist OEMs and Tier I suppliers in meeting their out-sourcing needs.
The Company intends to implement its strategic plan through the adoption of a
systems approach, the acquisition of new technologies and the pursuit of
opportunistic acquisitions. The Company's acquisition strategy is to seek
continued growth through the selective acquisition of established businesses to
which management can apply its resources and to the opportunistic acquisition of
growth businesses such as Utilase. The Company's acquisition strategy focuses on
identifying companies for acquisition as a way of expanding into new markets,
adding customers, providing additional product, manufacturing and service
capabilities or increasing automotive model penetration with existing customers.
The Company believes that implementation of its plan should result in both
increased sales volumes with existing customers and the creation of new
business.
Based upon its experience with prior acquisitions, the Company believes
that significant opportunities exist to increase the value of acquired companies
by improving operating efficiency and achieving cost reductions. The Company may
further diversify its holdings by seeking acquisition candidates which are not
strategic to its
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<PAGE>
automotive portfolio. Opportunistic acquisitions will be considered if
management believes in the future of a company's product and can identify new
management, or rely upon existing management, to develop a business plan which
defines a path to increased future earnings.
The Company was founded in 1993 for the purpose of implementing a
strategic acquisition program. The Company completed its first acquisition in
February 1994 by acquiring the assets of Prestolock, Inc. In January 1996, the
Company completed the acquisitions of all of the outstanding shares of Vassar
and Monroe. In July 1996, the Company acquired a minority interest in DCT as
well as the right to purchase the balance of the outstanding shares of DCT,
which right the Company intends to exercise on or about July 30, 1997. In
January 1997, the Company acquired all of the outstanding capital stock of
Skandy Corp. In March 1997, the Company, through UPP, acquired certain assets of
Utilase. Concurrently with or prior to the closing of the Offering, the Company
will acquire all of the outstanding shares of Utilase, which the Company intends
to operate under the name Utilase Blank Welding Technologies.
The Company operates in two industry segments, automotive component
supply and tooling component supply. For financial information with regard to
industry segments, see Note L to the Company's consolidated financial statements
included herein.
Industry Overview
In 1995 and 1996, the Big Three had collective market shares of 73.6%
and 73.2%, respectively, of U.S. Combined Car and Truck retail sales, based upon
publicly available information about manufacturers from the American Automobile
Manufacturers Association and data on foreign company imports from Ward's
Automotive Reports, a trade publication. Total unit sales of cars and trucks in
the U.S. were 15.1 million in 1995 and 15.5 million in 1996, of which sales by
the Big Three represented 10.8 million and 11.0 million, respectively. Combined
revenues of the Big Three for 1996 were $377 billion. The Big Three reported
collective earnings of $12.9 billion in 1996 and $4.3 billion for the first
quarter of 1997. The Big Three have indicated that their increased earnings in
recent periods are largely attributable to increased outsourcing of the
approximately 10,000 components used to make the typical vehicle.
The automotive component supply industry is undergoing significant
consolidation as OEMs seek to reduce their supplier base. Under pressure to
reduce their own manufacturing costs and increase economies of scale, in recent
years OEMs have sought to award sole-source contracts to full-service,
value-added suppliers which are capable of manufacturing complete assemblies and
integrated systems rather than individual components.
The shift by OEMs to the purchase of "systems" rather than individual
components and the expansion of supplier responsibilities have prompted
fundamental changes in the automotive component supply industry. By out-sourcing
complete systems, OEMs have been able to reduce their costs associated with the
design and integration of different components, while improving quality by
requiring suppliers to assemble and test major portions of the vehicle prior to
beginning production. As this trend accelerates, OEMs are also demanding that
suppliers perform more up-front design and engineering work.
In keeping with this trend, GM, Ford and Chrysler have each been
actively reducing their supplier base to those Tier I suppliers which accept
significant responsibility for product management and meet increasingly strict
standards for product quality, on-time delivery and lower costs. These Tier I
suppliers favored by OEMs are expected to control all aspects of the
production of increasingly complex systems, including design, development,
component sourcing, manufacturing, quality assurance, testing and delivery to
the OEM's assembly plant.
The Company believes that, in order for a Tier I supplier to sustain or
expand its business, a Tier I supplier will need to possess the scale and
breadth to deliver the engineering and systems integration capabilities that are
being increasingly demanded by OEMs. The Company believes that Tier I
suppliers which fail to develop these capabilities, either internally or through
out-sourcing, will likely be acquired, leave the industry, or become Tier II
24
<PAGE>
or Tier III producers of commodity-oriented, lower value-added products with
lower growth prospects. As a result, it is anticipated that the Tier I supplier
market will be divided among a smaller group of key suppliers.
Management believes that both OEMs and larger Tier I suppliers will
continue to seek suppliers that are able to provide broad product lines, higher
value-added products, low costs and reliable delivery. Management believes that
Tier I supplier consolidation provides an opportunity for the Company to
increase its market share as both a Tier I and Tier II supplier.
Strategy
The Company's objective is to become a full-service supplier of
automotive assemblies and integrated systems by capitalizing on the continuing
trend toward supplier consolidation. The key element of the Company's strategic
plan is the identification of new ways to assist OEMs and Tier I suppliers in
meeting their out-sourcing needs. The Company intends to implement its strategic
plan through the adoption of a systems approach, the acquisition of new
technologies and the pursuit of opportunistic acquisitions. The Company believes
that implementation of its plan should result in both increased sales volumes
and model penetration with existing customers and the creation of new business.
A Systems Approach.
Management has positioned the Company to meet the demands of OEMs and
Tier I suppliers for additional product responsibility and delivery of
integrated systems. The Company has identified numerous individual components it
currently produces which are suitable for additional processing and assembly by
the Company in order to produce an integrated system for delivery to OEMs or
Tier I suppliers. Based upon long term trends in the automotive component supply
industry, the Company believes that the adoption of a systems approach is
crucial to achieving significant growth and increasing profitability. The
starting point of the Company's systems approach is its current and planned
investment in engineering and design capabilities. By expanding these
capabilities, the Company expects to promote further vertical integration of its
manufacturing and assembly operations and to be able to expand the scope and
complexity of projects undertaken by the Company, thereby expanding the
Company's product lines.
Further development of assembly capability will enable the Company to
broaden its systems approach. Management believes that assembly capability,
including quality assurance and product testing, makes a systems approach
feasible for the Company. Design, engineering and manufacturing capabilities
cannot produce an integrated system absent the ability to assemble the product.
In recent periods, the Company has experienced increased demand from its
customers for assembly services, as both OEMs and Tier I suppliers seek to
out-source work and have completed assemblies delivered for installation into an
end product.
The Company believes that current design, engineering and assembly
tasks in connection with the Company's glovebox latch business can be expanded
to include in-house manufacturing of latch components as well as expansion of
design, engineering, manufacturing and assembly tasks 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 steering column shrouds for GM/Delphi. This
business can be expanded to include assembly of the steering columns after
painting. The Acquisitions have also provided the Company with integration
opportunities. For example, as a result of the DCT and UPP Acquisitions, the
Company is now able to integrate the stamping of mini-van door latch components
with laser welding of the latch components in order to produce a value-added
product for delivery to its OEM customer. A significant portion of the Company's
current and prospective assembly business is for GM/Delphi. The Company intends
to establish a new assembly facility to service increased demand near
GM/Delphi's Saginaw Steering Division plant located in Saginaw, Michigan in
order to more efficiently service related assembly business. Management intends
to utilize a portion of the net proceeds of the Offering to establish this
facility. See "Use of Proceeds."
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Capitalizing on Technological Trends.
Management will continue to position the Company to meet the growing
engineering and technological challenges it believes will face suppliers as the
systems outsourced by the OEMs and Tier I suppliers become more complex. The
ability of the Company to meet customer expectations in respect of performance,
cost, quality, reliability and service will depend, in part, upon the Company's
ability to remain technologically competitive. The Company intends to commit the
capital and resources necessary to meet this continuing challenge.
Prior to or concurrently with the closing of the Offering, the Company
will complete the Utilase Acquisition. The Company believes that the Utilase
Acquisition will provide the Company with the opportunity to take a leading role
in the expansion of the use of tailored blanks in the automotive industry. See
"Operations--Laser-Welding and Tailored Blanks," below and "Certain
Transactions." A tailored blank consists of two or more flat steel sheets of
different thicknesses, or alloys and/or coatings which are edge-welded together
for later stamping. Tailored blanks were developed in response to industry
demands for cost and weight reductions. By welding materials of different
thicknesses or strengths or with different coatings into a single piece prior to
stamping, the manufacturer can optimize materials usage and reduce scrap.
Utilase has developed proprietary technology and equipment for pre-weld edge
preparation and laser-welding of tailored blanks which the Company believes
offer competitive advantages. The Company intends to commit significant
resources to capitalizing on its technological advantages in the market for
tailored blanks, which management expects will experience significant growth
over the next several years.
The Company also utilizes robotics and multi-axis laser systems for its
value-added manufacturing services, as well as state of the art computer systems
for its engineering and design services. The Company has also automated various
assembly operations which were done manually. Management believes that these
efforts will result in increased efficiency as well as higher quality.
Identification, Acquisition and Integration of New Operations.
The Company's acquisition strategy focuses on identifying acquisition
candidates which provide the Company with new product, manufacturing and service
capabilities, thereby enabling it to add new markets and new customers and
increase model penetration with existing customers. For instance, as a result of
the acquisition of DCT, the Company acquired significant manufacturing
capabilities which complemented the Company's existing engineering capabilities.
The UPP Acquisition enabled the Company to perform laser welding, cutting and
drilling on components produced by its stamping operation. As a result, the
Company now has the ability to produce completed assemblies incorporating the
components it manufactures.
Pursuing Opportunistic Acquisitions.
Based upon its experience with prior acquisitions, the Company believes
that significant opportunities exist to increase the value of acquired companies
by improving operating efficiency and achieving cost reductions. The Company may
further diversify its holdings by seeking acquisition candidates which are not
strategic to its automotive portfolio. Opportunistic acquisitions will be
considered if management believes in the future of a company's product and can
identify new management, or rely upon existing management, to develop a business
plan which defines a path to increased future earnings.
Operations
Laser-Welding and Tailored Blanks.
The Company, through Utilase, will act as a producer of laser-welded
tailored blanks for the automotive industry. Over the last approximately eight
years, Utilase has developed proprietary technology and equipment for pre-weld
edge preparation and laser welding which the Company believes will provide it
with significant advantages over existing and potential competitors. These
proprietary processes provide consistently high levels of laser-weld quality and
as low as five parts per million weld-failure rates. Utilase currently has
production orders for 27 different parts/applications, including door inners. In
1995 Porsche Engineering Services commissioned a study, which was conducted by
the UltraLight Auto Body consortium, a worldwide group of steel producers, that
identified 18 potential applications for laser welding of tailored blanks per
vehicle. The following diagram identifies such applications. An additional 13
potential applications have been identified by Utilase. These 31 potential
26
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applications, if adopted by OEMs, could provide significant levels of growth in
the tailored blanking segment of the industry.
[Diagram of automotive components identified by the Company for
potential application of laser welded tailored blanking depicted as
skeletal vehicle structure.]
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 sheets 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. Laser welding is
compatible with heavily coated metals. Laser welds have mechanical properties
which are comparable to, or in some cases superior to, the metal sheets being
welded. Laser welds possess a high degree of formability, are resistant to
corrosion and are continuous and narrow in width with little or no distortion.
Laser welds thus provide improved visual aesthetics as well as less likelihood
of the rattling associated with multi-piece, spot-welded assemblies.
The manufacture of steel parts begins with the cutting of part-specific
pieces from larger coils, or rolls, of sheet metal. The cut pieces, known as
blanks, are then stamped or formed into a part for spot-weld assembly into an
end product. Conventional blanks are cut from a single steel coil, with 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 use of material with the required
characteristic throughout the part. Conventional blanks limit the ability to
produce parts from single stampings, resulting in increased design, assembly and
tooling costs, as well as increased waste as a result of cutting irregularly
shaped parts from single sheets of steel.
Tailored blanks are combinations of flat sheet metal of varying
thickness, strength, coatings, and/or alloys which when welded together prior to
stamping result in mechanical properties in the desired location on the finished
part. The use of tailored blanks in automotive applications results in cost,
weight and safety benefits including the reduction of required dies and welds,
the elimination of certain manufacturing costs, improved steel utilization,
reduction in body weight, reduction in use of coated steel, reduction of
engineering costs, improved dimensional accuracy and increased safety.
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-weld operations. Steel utilization is also
improved as a result of the ability to assemble smaller, irregular parts into a
single tailored blank. It is estimated that use of tailored blanks can decrease
manufacturing scrap by as much as 30% in certain applications.
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 mileage. For example, many automotive applications require the use
of zinc-coated steel, which is more expensive and heavier than uncoated steel,
in order to improve corrosion resistance. With conventional blanks, coated steel
must be used for an entire sub-assembly, despite that fact that only a portion
of the sub-assembly requires corrosion resistance. Tailored blanks on the other
hand allow the incorporation of coated steel only where required. 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 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 new models to the public. The Company's
engineering staff typically works with OEM engineers early in the development
phase to design components to meet OEM specifications on new or redesigned
models.
27
<PAGE>
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 the
engineering of a product which fits securely into the glove box is required.
Historically, the Company's primary customer for Prestolock(R) latches has been
GM, with the Company currently supplying approximately 50% of GM's glovebox
latch requirements. Beginning in 1997, the Company also began supplying glovebox
latches to Chrysler and management anticipates that the Company will supply
approximately 70% of Chrysler's 1998 model year requirements.
Manufacturing and Processing.
The Company's manufacturing operations primarily consist of the
production of automotive components utilizing progressive die stampings. These
components are sold primarily to OEMs, including Chrysler, GM and Mitsubishi
Motors Manufacturing of America, as well as to Tier I suppliers. 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. The
Company'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. The Company operates one of only six stamping
facilities approved by Chrysler to provide extrusion stampings.
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 OEM or Tier I supplier 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.
The Company also provides value-added services such as laser welding,
cutting and drilling, prototyping and mold design and construction. By way of
example, UPP welds the latch striker plates for Chrysler's B-van mini-van doors.
UPP also provides cutting services for the reverse transmission bands on certain
Chrysler trucks. The Company also designs, engineers and produces precision
tools and dies for use in its own stamping operations.
Assembly.
Management believes that Prestolock's ability to control production
costs is primarily attributable to the contract manufacturing of latch
components on a competitive bid basis as well as control of labor costs achieved
through contract labor. Management is studying additional automation at the
Prestolock assembly plant in order to increase the efficiency of the assembly
process.
As an extension of its relationship with GM/Delphi, the Company also
provides steering column sequencing and shoe release and air pump assembly
services.
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. Monroe is currently the Company's
only non-automotive industry operation. 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 U.S. source for
certain Kipp(R) adjustable handles. The defendant has filed an appeal. See
"Legal Proceedings" below.
28
<PAGE>
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 which are not competitive with those of
the Company.
Marketing and sales efforts for Utilase are currently handled by a
separate in-house sales force. Orders for tailored blanks are typically placed
by OEMs directly with producers of steel coil. Further processing steps, such as
blanking, are done either by the steel producer or by an independent processor
sub-contracted by the steel producer. 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.
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
in Canada and one in Mexico.
The Monroe catalog has historically been published and mass mailed to
potential customers approximately once every two years. Product information is
also available via an electronic catalog distributed on computer disk. The
complete Monroe catalog, offered primarily to wholesalers, includes the entire
tooling component product line. A specialty catalog featuring Kipp(R) and
Elesa(R) products, which is sized for quick reference use by engineers, is also
published by the Company. Inventory levels of tooling component products which
approximate one-year's sales are continuously maintained, enabling the Company
to provide same-day shipping on most orders. The Company also utilizes a
proprietary computerized inventory system designed to satisfy the delivery needs
of its customers. Management intends to increase sales to existing tooling
component customers and to expand its customer base by offering additional
component parts from the Kipp(R) and Elesa(R) lines.
Customers
Sales to the automotive industry constitute a substantial portion of
the net sales of the Company. The majority of the Company's remaining sales are
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 pro forma consolidated net sales giving effect to all of the
Acquisitions) with GM and Chrysler, including their respective Tier I suppliers,
accounting for substantially all of the Company's historical and pro forma net
sales to the automotive industry. One customer of Monroe accounted for more than
5% of Monroe's net sales.
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
29
<PAGE>
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 Red Spot, 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 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, 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.
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 will hold proprietary technology and equipment which
constitute trade secrets and are not registered 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 May 8, 1997, the Company, including DCT and Utilase, had
approximately 444 employees, including 347 production employees, 50 sales and
clerical employees and 48 management and administrative employees. The foregoing
does not include the approximately 50 production workers at Prestolock and 50
production workers at Utilase, all of whom are leased workers. All of the
Company's operations are non-union except for Vassar, whose production workers
are represented by the Paper Workers Union (AFLCIO). There has been no 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.
30
<PAGE>
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. A notice of appeal has been filed and
both parties have submitted their pleadings in connection with the appeal. The
Company expects a decision on this matter prior to December 31, 1997. The
Company does not believe that an adverse decision on the appeal would have a
material adverse effect on the Company.
On August 18, 1995, a former employee of DCT filed an action against
DCT in Macomb County Circuit Court in the State of Michigan related to a serious
workplace injury. Although no assurance can be given, management believes that
the matter will be resolved within the limits of available policies of
insurance.
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 tortious 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."
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."
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. Although the Company's existing facilities are adequate for current
operations, management anticipates adding additional facilities during the next
12 months in connection with the expansion of its tailored blanking, assembly
and painting operations. 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
Bloomfield Hills, Michigan Engineering
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
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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
Office
Harbor Springs, Michigan Owned(3) 9,600 Tooling Component
Warehouse and 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
Brantford, Ontario, Canada Leased(5) 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 shares of DCT held by Messrs. Henderson and Stone. 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."
(5) Although a lease has been executed, the term of occupancy has not yet
commenced due to the required tenant improvement work to be completed.
Management anticipates that occupancy will commence in late May.
32
<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, Troy D. Wiseman, Anthony R. Tersigni and have been selected and have
agreed to become directors of the Company and Messrs. Richard V. Balgenorth and
Michael C. Azar will resign as directors (but remain as executive officers).
<TABLE>
<CAPTION>
Name Age Position Director Since
- -------------------------------------- ------ -------------------------------------- --------------
<S> <C> <C> <C>
Robert J. Skandalaris 44 President, Chief Executive Officer 1993
and Director
Richard V. Balgenorth 49 Treasurer, Chief Financial Officer 1996
and Director
Michael C. Azar 33 General Counsel, Secretary and 1996
Director
James Bronce Henderson, III 46 Director Nominee (Chairman) --
Peter Sugar 51 Director Nominee --
David C. Stone 49 Director Nominee --
Troy D. Wiseman 31 Director Nominee --
Anthony R. Tersigni 47 Director Nominee --
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. 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.
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.
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 an affiliate of DCT prior to
their acquisitions by the Company. 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."
33
<PAGE>
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.
TROY D. WISEMAN will be appointed to the Board of Directors upon
consummation of the Offering. In 1992, Mr. Wiseman founded and serves as a
Manager and the President of Invest L'Inc. Partners, LLC (and its predecessor
Invest L'Inc.), a consulting firm, of which Robert J. Skandalaris also serves as
a Manager. Since 1994, Mr. Wiseman has also served as the Manager of Invest
L'Inc. Bridge Fund, LLC, a privately held investment fund. From 1987 to 1994,
Mr. Wiseman served as a director and executive officer of CAMI'Z Inc., a
publicly traded apparel company of which he was the co-founder. In 1994,
CAMI'Z, Inc. acquired Chauvin International, Ltd. by merger and changed its name
to B.U.M. International, Inc. Mr. Wiseman remained an executive officer until
August 1995 and served as a director of B.U.M. International, Inc. until late
1996. On April 10, 1996, B.U.M. International, Inc. filed a petition under
Chapter 11 of the U.S. Bankruptcy Code. Mr. Wiseman is a Member 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.
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 a
different subsidiary 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
34
<PAGE>
compensation policies and determine compensation for the Company's 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 years ended December 31,
1996, 1995 and 1994 for services rendered to the Company in all capacities
during such years.
<TABLE>
<CAPTION>
Summary Compensation Table (1)
-----------------------------------------------------------------------
Restricted
Name and Principal Position at Stock
December 31, 1996 Year Salary Bonus Awards
- ----------------------------------------------- ---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Robert J. Skandalaris 1994 -- -- --
President, Chief Executive Officer and
Director
1995 -- -- --
1996 $94,000 $960,000 --
Mark A. Davis 1996 $112,400 -- $32,000(3)
Former President, General Counsel and
Director(2)
</TABLE>
- --------------------
(1) Does not include any value that might be attributable to job-related
personal benefits, the annual value of which has not exceeded the
lesser of 10% of annual salary plus bonus or $50,000 for each executive
officer.
(2) 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.
(3) 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."
Employment Agreements
The Company entered into an Employment Agreement (the "Employment
Agreement") with Robert J. Skandalaris, its President and Chief Executive
Officer, dated April 3, 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 $150,000 per annum from
March 1, 1997 through April 30, 1997 and $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 Board as well as to participation 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. Mr. Skandalaris
received the 1996 bonus based upon his success in implementing the Company's
growth strategy and in consideration of past services performed.
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
35
<PAGE>
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 1989, 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 severance payments equal to his annual base
salary. Mr. Baysore's employment agreement also contains a covenant not to
compete for which Mr. Baysore shall receive $200,000 upon closing of the Utilase
Acquisition. 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 "1997
Plan") prior to the consummation of the Offering. The 1997 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 1997 Plan has a 10 year term.
The purpose of the 1997 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 1997 Plan 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 1997 Plan is administered by a 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 under which
such options may be exercised. The exercise price of incentive stock options
granted under the 1997 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 1997 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 and having 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.
Subject to the foregoing, the Committee has broad discretion to
describe the terms and conditions applicable to options granted under the 1997
Plan. The Committee may at any time discontinue granting options under the 1997
Plan or otherwise suspend, amend or terminate the 1997 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 1997
Plan or any outstanding option which would (i) increase the maximum number of
shares which may be purchased pursuant to options granted under the 1997 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 1997 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
36
<PAGE>
granted under the 1997 Plan, except in connection with certain antidilution
adjustments, or (v) cause qualified stock options issued under the 1997 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 1997 Plan.
The 1997 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 1997 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: (1) breach of the director's duty of
loyalty to the Company or its shareholders; (2) acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law; (3)
a transaction from which the director derives an improper personal benefit; (4)
making an unlawful loan to a director, officer or employee of the Company; and
(5) declaring an unlawful dividend or distribution to shareholders. As a result
of this provision, shareholders of the Company may be unable to recover monetary
damages against directors for actions taken by them which constitute negligence
or gross negligence or which are in violation of their fiduciary duties,
although it may be possible to obtain injunctive or other equitable relief with
respect to such actions. If equitable remedies are found not to be available to
shareholders in any particular case, shareholders may not have any effective
remedy against the challenged conduct.
37
<PAGE>
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 Company's President, a director and principal shareholder;
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. In July 1994, the padlock
division assets were sold to The Eastern Company ("Eastern") resulting in cash
proceeds to Prestolock of $500,000. 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 3% of Eastern's
gross sales of certain 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 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, pursuant to consulting agreements
providing for 24 month payments in the aggregate amount of $25,000 followed by
60 monthly payments in the aggregate amount of $20,000. The Company's
obligations pursuant to the consulting agreements are secured by the equipment
and fixtures of Vassar. The shareholders of Vassar retained 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. In January 1997, the
Company and two of the former Vassar shareholders, including James Lamb,
representing 20% of the aggregate consulting fee commitment, amended their
consulting agreements to provide for payment of 40% of the amount payable over
the term of the consulting agreement within 30 days of the consummation of the
Offering in full satisfaction of the Company's obligations. Approximately
$100,000 of the net proceeds of the Offering will be applied to payment of the
$120,000 payable pursuant to such arrangements. In March 1997, two former Vassar
shareholders including Eugene Oldford, the former controlling shareholder of
Vassar and currently a consultant to the Company, filed a lawsuit against the
Company for payments allegedly owed pursuant to their consulting agreements. The
Company's position is that it was entitled to cease payments under these
consulting agreements due to breaches of covenants not to compete by these
former shareholders. 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 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 acquisition of
all of the outstanding shares of Monroe from Richard J. Reason, individually and
as trustee of two trusts, for aggregate consideration of $6.85 million,
including a stock purchase price of $6.35 million payable in installments and a
real estate purchase price of $500,000 pursuant to a land contract dated April
30, 1996 providing for payments of interest only at the rate of 12% per annum
payable monthly with the principal balance due 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 providing for an annual salary of $200,004
and 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 37.5% of the outstanding shares
of DCT for $1 and the option to acquire, subject to certain limitations, an
additional 14.1% of the outstanding shares for $1 through July 2001. James
Bronce Henderson, III and David C. Stone, shareholders of the Company who will
become directors of the Company upon consummation of the Offering, are the
principal shareholders of DCT. Peter Raab, a former officer of DCT, acquired a
7.5% interest in DCT concurrently with the Company's acquisition. Mr. Raab also
entered into a Stock Redemption Agreement with DCT which terminates on July 1,
1999 providing DCT with the option to repurchase Mr. Raab's shares of DCT common
stock at book value at any time and the obligation to repurchase his shares upon
his death or upon the termination of his employment. Mr. Raab and DCT are
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<PAGE>
currently in dispute with regard to certain matters related to his employment,
which dispute has been submitted for arbitration. In April 1997, DCT delivered
notice to Mr. Raab of its election to exercise its right to repurchase his DCT
shares pursuant to the Stock Redemption Agreement. The Company cannot predict
whether Mr. Raab's employment dispute will have an impact on DCT's ability to
enforce its redemption rights. In connection with the DCT Acquisition, the
selling shareholders of DCT agreed to write-off and forgive all existing
intercompany and shareholder debt except for a promissory note in the principal
amount of $960,000. The intercompany debt was owed to DCT, Inc. ("DCTI"), a
company controlled by Messrs. Henderson and Stone. During the year ended
December 31, 1996 an aggregate of $15,325,865 of intercompany debt and
$1,515,579 of debt to shareholders and former shareholders was forgiven and
written off. The Company also received irrevocable proxies from the other
shareholders of DCT 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 the selling 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, 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. The March 15, 1997 Letter
Agreement provides that: (i) on or before July 1, 1997, the Company shall cause
to be repaid $960,000 owed by DCT to an entity controlled by Messrs. Henderson
and Stone pursuant to an unsecured term loan bearing interest at the rate of 10%
per annum with an original maturity date of June 30, 1998; (ii) the Company
shall acquire the remaining shares of DCT owned by Messrs. Henderson and Stone
in exchange for a promissory note collateralized by the acquired shares and due
February 15, 1999, with the principal balance determined by an earnings formula,
but in no event less than $1 million (the "Purchase Note"); (iii) Mr. Henderson
shall serve as a member of the Company's Board and its chairman until December
31, 1999; and (iv) upon payment of the Purchase Note, DCT's obligation to remit
50% of the bonus pool under DCT's Executive Bonus Pool Plan (discussed below) to
an entity controlled by Messrs. Henderson and Stone will terminate. The Company
intends to complete the DCT Acquisition on or about July 30, 1997.
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. Pursuant to the March 15, 1997 Letter
Agreement, CTIC will be purchased by the Company concurrently with the purchase
of the DCT shares for no additional consideration other than assumption of the
debt encumbering such properties aggregating approximately $4.6 million at
December 31, 1996.
Concurrently with the closing of the Company's acquisition of its
initial 37.5% interest in DCT, the Company and DCT entered into a Management
Agreement under 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. The Management Agreement remains in force so
long as the Company remains a shareholder of DCT and for so long as the Company
is controlled by Robert J. Skandalaris.
Effective January 1, 1996, DCT adopted an Executive Bonus Pool Plan for
the purposes of providing additional incentives for senior management to
increase earnings, attracting and retaining management of outstanding competence
and furthering the identity of interest of senior management with that of DCT's
shareholders. The plan is administered by DCT's Board of Directors. The bonus
pool under the plan consists of 20% of earnings before taxes of DCT. Noble is
eligible to participate in the plan as long as the Management Agreement remains
in effect. An entity controlled by Messrs. Henderson and Stone is entitled to
50% of the bonus pool from January 1, 1997 through December 31, 1999, or until
the balance due pursuant to the Purchase Note is paid in full.
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 shares of Common Stock. Skandy received commissions
for sales representation services provided to Prestolock of $20,460 in 1995 and
$106,387 in 1996.
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<PAGE>
UPP Acquisition
On March 1, 1997, the Company, through its wholly owned subsidiary UPP,
acquired certain assets of Utilase, Inc., a majority owned subsidiary of DCTI.
DCTI is controlled by James Bronce Henderson, III and David C. Stone. The UPP
Acquisition purchase price was $850,000, evidenced by the Company's promissory
note, secured by the assets acquired, which provides for payment of $750,000
upon the earlier of July 31, 1997 or the closing of the Offering and $50,000
payable on each of February 1, 1998 and 1999. The promissory note bears no
stated rate of interest, but provides for a default rate of interest of 10% per
annum. The Company intends to use $750,000 of the net proceeds of the Offering
to make the required payment under the note. 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. The Company believes that such lease is at least as favorable
to the Company as could be obtained from an unaffiliated third party.
Utilase Acquisition
On April 7, 1997, the Company entered into a Stock Purchase Agreement
with Utilase, Inc., and its shareholders, DCTI and John K. Baysore, providing
for the acquisition by the Company of all of the outstanding capital stock of
Utilase. Messrs. Henderson and Stone are the principal shareholders of DCTI. Mr.
Baysore is the President of Utilase and, upon the acquisition of Utilase by the
Company, which is expected to occur currently with the consummation of the
Offering, will remain the President of Utilase. The Stock Purchase Agreement
provides for a purchase price of $8.2 million in cash, payable from the proceeds
of the Offering, and the delivery of the Utilase Notes (Series A, B, C and D) in
the aggregate original principal amount of $10,134,544. The cash portion of the
purchase price will be paid from the net proceeds of the Offering. 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 bear interest at the rate of 6%
per annum until the first anniversary of the closing of the Utilase Acquisition
(the "Utilase Closing Date") in 1998 and then increase to 10% per annum and
become due and payable at the option of the holder if the note is not paid
within 180 days; (ii) the Series B notes in the aggregate principal amount of
$1,779,993 bear interest at the rate of 6% per annum until the second
anniversary of the Utilase Closing Date in 1999 and then increase to 10% per
annum and becomes due and payable at the option of the holder if the notes are
not paid within 90 days; (iii) the Series C notes in the aggregate principal
amount of $3,358,477 bear interest at the rate of 6% per annum until the third
anniversary of the Utilase Closing Date in 2000 and then increase to 10% per
annum and become due and payable at the option of the holder if the notes are
not paid within 90 days; and (iv) the Series D notes in the aggregate principal
amount of $3,109,292 bear interest at the rate of 6.5% per annum until the
fourth anniversary of the Utilase Closing Date in 2001 and then increase to 10%
per annum. 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 (1) declare or pay any
dividend or other distribution on its shares (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, 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 Utilase Notes contemplate a subordination agreement, to be dated as
of the Utilase Closing Date, between the noteholders and Comerica.
The Utilase Stock Purchase Agreement also provides that if the
agreement is terminated under certain circumstances, Utilase will be entitled to
receive________ escrowed shares of Common Stock. The escrowed shares are subject
to surrender to the Company upon the closing of the Utilase Acquisition which is
expected to occur upon the consummation of the Offering. In addition, 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. See "Management -- Employment Agreements."
Jeffrey A. Moss, a director of Utilase and the President of DCTI, will receive
$1 million on the Utilase Closing Date and _____________ shares of 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.
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<PAGE>
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. The Company believes that such
lease is at least as favorable to the Company as could be obtained from an
unaffiliated third party.
Effective May 1, 1994, Utilase began leasing employees from DCTI.
Employee lease expenses for these employees for the years ended December 31,
1994, 1995 and 1996 were $328,392, $2,447,267 and $2,837,935, 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.
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 shares, representing % 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 shares of Common Stock owned by Mr. Davis for $60,000 on
November 27, 1996.
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.
On April 30, 1996, Robert J. Skandalaris made a loan of $1,000,000 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.
The note is subordinated to the Company's obligation to Comerica and is pledged
to Comerica as additional security. The Company intends to use a portion of the
net proceeds of the Offering to repay this note. See "Use of Proceeds."
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding beneficial
ownership of the Common Stock as of May 8, 1997, and as adjusted to reflect the
sale of the shares offered hereby, by (i) persons 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.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Amount and Nature of
Ownership of Common Stock Beneficial Ownership of
Prior to Offering Common Stock After Offering
---------------------------------------- ------------------------------------
Name and Address Shares % Total Shares % Total
- ------------------------------------- --------------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Robert J. Skandalaris(1)(2) 80.26% %
Daniel J. Brunell(1) 5.19% %
Richard G. Skandalaris(1) 6.06% %
Richard V. Balgenorth 2.16% %
Michael C. Azar 1.04% %
James Bronce Henderson, III 3.46% %
Peter Sugar -- --
David C. Stone 4.33% %
Troy D. Wiseman 2.60% %
James D. Skandalaris(1) 5.19% %
All officers and directors as a
group (three persons prior to the
Offering and seven persons after
the Offering) 83.46% %
</TABLE>
- --------------------
(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 shares of Common Stock held by Mr. Skandalaris as
custodian for his three minor children. Also includes shares
of Common Stock over which Mr. Skandalaris exercises voting power
pursuant to certain Voting Agreements and Powers of Attorney. See
"Certain Transactions."
42
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 150,000 shares
of Preferred Stock, $100 par value, of which none are currently outstanding and
shares of Common Stock, no par value, of which
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.
On December 31, 1996, the Company entered into a Conversion Agreement
providing the holder of 10,000 shares of the preferred stock of DCT with the
right to convert such shares into 10,000 shares of Preferred Stock of the
Company. See "Certain Transactions." Upon conversion, the shares of Preferred
Stock issued by the Company would have 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 would 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.
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, if any, as may be 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
43
<PAGE>
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.
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 .
44
<PAGE>
Shares Eligible for Future Sale
Upon completion of the Offering, the Company will have outstanding
shares of Common Stock. All of the shares to be sold in the Offering will be
freely tradeable 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.
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 shareholders of the Company
have entered into lock-up agreements with the Representatives wherein they have
agreed not to sell any of their shares within 12 months after the date of this
Prospectus without the prior written consent of the Representatives. 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.
45
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), represented by BlueStone Capital
Partners, L.P. and (the "Representatives"), have severally agreed to
purchase from the Company the respective number of shares of Common Stock at the
initial public offering price less the underwriting discounts and commissions
set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
- ------------------------------------------------------------------------------------------------ -----------------
<S> <C>
BlueStone Capital Partners, L.P. .............................................................
-----------------
Total.................................................................................
=================
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to certain conditions precedent and that the
Underwriters will purchase all of the shares of Common Stock offered hereby if
any of such shares are purchased.
The Underwriters propose initially to offer the shares to the public at
the public offering price set forth on the cover page of this Prospectus. The
Underwriters may allow to selected dealers who are members of the National
Association of Securities Dealers, Inc. a concession not exceeding $ per share;
and any Underwriter may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain other dealers. After the consummation of the
Offering, the public offering price and concession and discounts may be changed
by the Representatives.
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.
The Company has granted an option to the Underwriters, exercisable
during the 45-day period after the date of this Prospectus, to purchase up to an
additional shares of Common Stock at the same price per share
46
<PAGE>
as the initial shares purchased from the Company. The Underwriters may exercise
such option only to cover over-allotments in the sale of shares that the
Underwriters have agreed to purchase. To the extent that the Underwriters
exercise such option, each of the Underwriters will have a firm commitment,
subject to certain conditions, to purchase the same percentage of the total
option shares as the number of shares to be purchased and offered by that
Underwriter set forth in the preceding table bears to the total number of shares
of Common Stock offered hereby.
The Company has agreed to indemnify, or to contribute to payments made
by, the Underwriters and certain of their controlling persons with respect to
certain civil liabilities, including certain civil liabilities under the
Securities Act.
Subject to certain limited exceptions, the Company, its directors and
officers, and certain other shareholders have agreed not to register, sell,
contract to sell or otherwise dispose of any shares of Common Stock for a period
of 360 days after the date of this Prospectus without the prior written consent
of the Representatives.
Prior to the Offering, there has been no public market for the Common
Stock and there can be no assurance that a regular trading market will develop
upon the completion of the Offering, or if developed, that a public trading
market will be sustained. Consequently, the offering price has been determined
through negotiation between the Company and the Representatives. Such price has
been based upon a number of factors, including estimates of the business
potential of the Company, its history and prospects, the present state of the
Company's development, an assessment of the Company's management, the
consideration of the above factors in relation to market valuations of companies
considered comparable to the Company and the current condition of the industry
and the economy as a whole.
The Company has agreed to pay the Representatives' accountable
expenses. The Company has also agreed to pay the fees and disbursements of
counsel for the Underwriters. In addition, upon completion of the Offering, the
Company will issue the Representatives' Warrants to the Representatives
entitling the Representatives to purchase up to an aggregate of shares of Common
Stock. The Representatives' Warrants may not be exercised for a period of 12
months from the date of this Prospectus. The Representatives' Warrants will be
exercisable in whole or in part for a period of five years thereafter at a price
of $ per share (120% of the initial public offering price set forth
on the cover page of this Prospectus). The Representatives' Warrants provide for
customary anti-dilution adjustments in the event of certain mergers,
acquisitions, stock dividends and capital changes. The Representatives' Warrants
may be transferred only to officers of the Representatives or their successors.
The Representatives' Warrants grant to the holders thereof certain rights with
respect to the registration under the Act of the securities issuable upon
exercise of the Representatives' Warrants.
In February 1996, BlueStone Capital Partners, L.P., one of the
Representatives was organized and registered as a broker-dealer with the
Commission and the National Association of Securities Dealers, Inc. Since its
organization, BlueStone Capital Partners, L.P. has engaged in the investment
banking business. This Offering will be among the first public offerings in
which BlueStone Capital Partners, L.P. has acted as a lead manager. BlueStone
Capital Partners, L.P. has no relationship with the Company or its controlling
persons, except as otherwise noted herein. The principal business function of
BlueStone Capital Partners, L.P. in the Offering is to sell the Common Stock
offered hereby.
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 Proskauer Rose Goetz & Mendelsohn 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.
47
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (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. Statements made in this Prospectus
referring to a document filed as an exhibit to the Registration Statement are
qualified by reference to the exhibit for a complete statement of its terms and
conditions. Copies of the Registration Statement together with exhibits thereto
may be obtained from the Commission at its principal office at 450 Fifth Street,
N.W., 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 American Stock Exchange.
48
<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........................................................F-3
Consolidated Statements of Earnings - For the years ended December 31, 1996, 1995 and 1994.....................F-5
Consolidated Statements of Shareholders' Equity - For the years ended
December 31, 1996, 1995 and 1994.............................................................................F-6
Consolidated Statements of Cash Flows - For the years ended December 31, 1996, 1995 and 1994....................F-7
Notes to Consolidated Financial Statements......................................................................F-9
Monroe Engineering Products, Inc.
Report of Independent Certified Public Accountants..............................................................F-22
Balance Sheet - December 31, 1995...............................................................................F-23
Statements of Earnings and Retained Earnings - For the years ended December 31, 1995 and 1994...................F-24
Statements of Cash Flows - For the years ended December 31, 1995 and 1994.......................................F-25
Statements of Shareholders' Equity - For the years ended December 31, 1995 and 1994.............................
Notes to Financial Statements...................................................................................F-26
DCT Component Systems, Inc.
Report of Independent Certified Public Accountants..............................................................F-28
Balance Sheets - December 31, 1996 and 1995.....................................................................F-29
Statement of Operations - For the years ended December 31, 1996, 1995 and 1994..................................F-31
Statement of Cash Flows - For the years ended December 31, 1996, 1995 and 1994..................................F-33
Statements of Shareholders' Equity - For the years ended December 31, 1996, 1995 and 1994.......................
Notes to Financial Statements...................................................................................F-35
Utilase, Inc.
Report of Independent Certified Public Accountants..............................................................F-43
Balance Sheets - December 31, 1996 and 1995.....................................................................F-44
Statement of Operations - For the years ended December 31, 1996, 1995 and 1994..................................F-45
Statement of Cash Flows - For the years ended December 31, 1996, 1995 and 1994..................................
Statements of Shareholder's Equity - For the year ended December 31, 1996, 1995 and 1994........................F-46
Notes to Financial Statements...................................................................................F-48
</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 earnings, 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.
GRANT THORNTON LLP
Detroit, Michigan
May 9, 1997
F-2
<PAGE>
Noble International, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, 1995 and 1996
<TABLE>
<CAPTION>
==========================================================================================
ASSETS 1995 1996
---------- ----------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 1,297 $ 471,412
Accounts receivable, trade, net of allowance
for doubtful accounts of $21,481 in 1995
and $10,148 in 1996 740,700 1,566,551
Due from shareholder - 60,000
Inventories 578,743 2,285,361
Prepaid expenses and other assets 5,332 177,012
---------- ----------
Total Current Assets 1,326,072 4,560,336
Property, Plant and Equipment, net 445,089 1,848,759
Other Assets
Goodwill, net of accumulated amortization of
$278,421 at December 31, 1996 - 5,148,121
Sundry 13,504 97,164
---------- ----------
13,504 5,245,285
---------- ----------
$ 1,784,665 $11,654,380
=========== ===========
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================
LIABILITIES AND EQUITY 1995 1996
--------- ----------
<S> <C> <C>
Current Liabilities
Note payable to bank $ 45,000 $ 1,402,708
Current maturities of long-term debt - 1,059,021
Current maturities of notes payable - related parties 111,500 895,000
Accounts payable 473,567 1,359,127
Accrued liabilities 188,364 691,231
Dividends payable 158,759 -
--------- ----------
Total Current Liabilities 977,190 5,407,087
Long-Term Debt, excluding current maturities - 3,830,477
Notes payable - related parties, excluding
current maturities 61,042 1,500,000
Deferred Income Taxes - -
Other Long-Term Liabilities 33,655 -
Investment in Unconsolidated Subsidiary - 44,613
Commitments and Contingencies (Note I) - -
Minority Interest 88,410 -
Shareholders' Equity
Common stock, no par value, authorized 60,000
shares, issued and outstanding 9,000 and 11,150
shares in 1995 and 1996, respectively 341,909 523,359
Retained earnings 282,459 348,844
--------- ----------
Total Shareholders' Equity 624,368 872,203
--------- ----------
$ 1,784,665 $11,654,380
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
Noble International Ltd., and Subsidiaries
Consolidated Statements of Earnings
Years Ended December 31,
<TABLE>
<CAPTION>
===========================================================================================
1994 1995 1996
--------- --------- ----------
<S> <C> <C> <C>
Net sales $ 3,305,787 $ 4,442,225 $16,186,811
Cost of goods sold 2,261,460 2,910,696 10,587,175
--------- --------- ----------
Gross profit 1,044,327 1,531,529 5,599,636
Selling, general and administrative expenses 915,420 1,030,263 5,093,935
--------- --------- ----------
Operating profit 128,907 501,266 505,701
Other (income) expense
Equity in loss of unconsolidated subsidiary - - 44,614
Interest income - - (4,632)
Interest expense 23,579 23,836 439,164
Sundry, net (652) (29,036) (64,387)
--------- --------- ----------
22,927 (5,200) 414,759
--------- --------- ----------
Earnings before income taxes
and minority interest 105,980 506,466 90,942
Minority Interest 38,585 67,195 -
--------- --------- ----------
Earnings before income taxes 67,395 439,271 90,942
Income tax expense 7,600 30,562 24,557
--------- --------- ----------
Net earnings $ 59,795 $ 408,709 $ 66,385
=========== =========== ===========
Earnings per share $ 14.25 $ 51.09 $ 6.02
=========== =========== ===========
</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
Years Ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
==========================================================================================
Common Retained
Stock Earnings Total
-------- ----------- --------
<S> <C> <C> <C>
Balance at January 1, 1994, 1,000 shares $ 1,000 $ - $ 1,000
Issuance of 7,000 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
Net earnings - 66,385 66,385
Issuance of 3,150 shares of common stock 181,450 - 181,450
------- -------- --------
Balance at December 31, 1996 $ 523,359 $ 348,844 $ 872,203
========= ========= =========
</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
Years Ended December 31,
<TABLE>
<CAPTION>
==========================================================================================
1994 1995 1996
-------- -------- ---------
Cash Flows From Operating Activities
<S> <C> <C> <C>
Net earnings $ 59,795 $ 408,709 $ 66,385
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
Provision for doubtful accounts 62,058 8,205 -
Amortization of goodwill - - 272,299
Equity in loss of unconsolidated subsidiary - - 44,614
Stock issued in exchange for services - - 32,000
Changes in operating assets and liabilities
Increase in accounts receivable (522,093) (208,401) (63,963)
Increase in inventories (257,669) (220,874) (14,760)
(Increase) decrease in prepaid expenses (31,711) 26,379 (173,020)
(Increase) decrease in other assets (19,045) 5,544 -
Increase in accounts payable 419,886 185,872 488,947
Increase in accrued liabilities 6,948 16,170 126,984
-------- -------- ---------
Net cash (used in) provided by
operating activities (213,550) 391,839 1,028,396
Cash Flows From Investing Activities
Purchase of property, plant and equipment (179,514) (202,451) (362,801)
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 - - (5,415,892)
-------- -------- ---------
Net cash used in investing activities (429,514) (202,451) (5,778,693)
</TABLE>
F-7
<PAGE>
Noble International, Ltd. and Subsidiaries
Consolidated Statements of Cash Flows - Continued
Years Ended December 31,
<TABLE>
<CAPTION>
==========================================================================================
1994 1995 1996
-------- -------- ---------
Cash Flows From Financing Activities
<S> <C> <C> <C>
Proceeds from notes payable - related parties 151,500 (60,348) 1,310,000
Repayments of notes payable - related parties - - (26,499)
Capital lease payments (10,222) (49,600) -
Proceeds from issuance of common stock
by subsidiary 450,000 10,000 -
Distributions to shareholders - (62,009) (1,282,859)
Proceeds from long-term debt - - 4,213,151
Payments on long-term debt - (20,348) (231,089)
Net proceeds from note payable to bank 54,081 (9,081) 1,237,708
-------- -------- ---------
Net cash provided by (used in)
financing activities 645,359 (191,386) 5,220,412
-------- -------- ---------
Net increase (decrease) in cash 2,295 (1,998) 470,115
Cash at beginning of period 1,000 3,295 1,297
-------- -------- ---------
Cash at end of period $ 3,295 $ 1,297 $ 471,412
========= ========= ===========
Supplemental cash flow disclosure
Cash paid for:
Interest $ 22,000 $ 21,000 $ 392,417
========= ========= ===========
Taxes $ - $ 8,000 $ 37,830
========= ========= ===========
Acquisition of Businesses in 1996, net of
cash acquired:
Working capital, other than cash $ - $ - $ (599,650)
Property, plant and equipment - - (839,063)
Goodwill - - (4,831,263)
Other assets - - (53,442)
Long-term debt - - 907,436
--------- --------- -----------
$ - $ - $ 5,415,892
========= ========= ===========
</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 150 shares of the Company's common stock.
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
================================================================================
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"); Cass River Coating, Inc. (dba Vassar Industries,
"Vassar"). ("Noble" or collectively the "Company")
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 each of
the two years then ended 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 8,000 shares of Noble common stock in
exchange for all of the issued and outstanding stock of Prestolock. This
transaction has been accounted for as a change in reporting entity and therefore
the consolidated financial statements 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 $ 28.74 $ 43.62
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
================================================================================
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 M) 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.
Cash and Cash Equivalents
For purposes of the statement of cash flows, all investments purchased 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.
Income Taxes
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.
F-10
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note A - Basis of Presentation, Nature of Operations and Summary of Significant
Accounting Policies (Continued)
Income Taxes (Continued)
For the year ended December 31, 1996, 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 in 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 weighted average number of shares outstanding
during 1994, 1995 and 1996 was 4,195, 8,000 and 11,031, respectively.
Note B - Inventories
The major components of inventories at December 31, were as follows:
1995 1996
-------- ---------
Raw materials and purchased parts $289,588 $ 434,776
Work in process - 4,987
Finished goods 85,620 1,565,427
Unbilled customer tooling 203,535 280,171
-------- ---------
$578,743 $2,285,361
========= ===========
F-11
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note C - Property, Plant and Equipment
Property, plant and equipment consisted of the following at December 31:
1995 1996
-------- ---------
Buildings and improvements $ - $1,199,077
Machinery and equipment 521,042 881,813
Furniture and fixtures 56,783 93,445
-------- ---------
577,825 2,174,335
Less accumulated depreciation and amortization 132,736 379,376
-------- ---------
445,089 1,794,959
Land - 53,800
-------- ---------
$445,089 $1,848,759
========= ===========
Note D - Note Payable to Bank 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 and
availability was $2,163,000. 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.
Long-term debt at December 31, 1996 consisted of the following:
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
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
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
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
F-12
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note D - Line of Credit and Long-Term Debt (Continued)
Other 31,266
---------
4,889,498
Less current maturities 1,059,021
---------
$3,830,477
===========
The aggregate maturities of long-term debt by year 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
===========
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. The Company's lender on April 25, 1997
waived these defaults and amended the covenant provisions such that the Company
was in compliance with the terms of the amended covenants. Additionally, the
line of credit facility was extended through July 31, 1997.
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.
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 rental under the above lease agreements are not
significant.
F-13
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note F - Income Taxes
Income taxes have been charged (credited) to operations as follows for the year
ended December 31:
1994 1995 1996
-------- -------- --------
Current:
Federal $ - $ - $ 24,557
State and local 7,600 30,562 -
--------- --------- --------
$ 7,600 $ 30,562 $ 24,557
========= ========= ========
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:
1994 1995 1996
-------- -------- --------
Expected federal income tax $ 11,700 $ 149,350 $ 19,150
Prestolock earnings not subject to tax (41,000) (118,630) -
Nondeductible items - - 10,200
Net operating loss not utilized 20,900 - -
Utilization of net operating loss - (20,900)
State taxes (2,584) (10,391) -
Surtax exemption and other, net 10,984 571 (4,793)
--------- --------- --------
Actual income tax (benefit) expense $ - $ - $ 24,557
========= ========= ========
Deferred income tax assets and liabilities at December 31, 1996 and 1995 are
not significant.
F-14
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note G - Related Party Transactions
Notes payable to related parties consisted of the following at December 31:
1995 1996
-------- ---------
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
Term note, payable to the former principal
shareholder of, and an officer of Monroe,
bearing no interest. The note is secured by
a personal guaranty of an officer of Noble
and is due April 1997. - 500,000
Unsecured demand note, payable to a related
party, interest only payments due monthly at
an annual interest rate of 10%. 90,000 90,000
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 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
Unsecured note payable to related party with
interest at 10% due on demand. - 300,000
Other 1,151 5,000
-------- ---------
172,542 2,395,000
Less current maturities 111,500 895,000
-------- ---------
$ 61,042 $1,500,000
========= ===========
The maturities of notes payable to related parties are as follows:
1997 $ 895,000
1998 500,000
1999 -
2000 1,000,000
---------
$2,395,000
===========
F-15
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note H - Significant Customer
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 consolidated net sales
aggregating $6,030,000 in 1996.
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.
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.
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.
F-16
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note I - Acquisitions (Continued)
1. DCT Component Systems, Inc. (Continued)
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 is 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%.
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.
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.
F-17
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note I - Acquisitions (Continued)
1. DCT Component Systems, Inc. (Continued)
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 for the year
then ended, follows:
Balance Sheet Data
Current Assets $ 6,992,030
Current Liabilities $ 8,892,215
Equity (deficit) $(3,199,546)
Operating Data
Net Sales $22,988,115
Gross Profit $ 2,542,579
Net loss $ (252,524)
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 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.
F-18
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note I - Acquisitions (Continued)
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 retained 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.
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, the consultants will receive
$120,000 within thirty days after the closing of a public offering of the
Company's common stock.
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.
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 $ 134.81
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 to fully diluted EPS
pursuant to APB Opinion 15
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.
F-19
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996
===============================================================================
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 10,000 DCT preferred shares are
convertible into 10,000 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.
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 494,776 1,523,072 (1,512,147) 505,701
Identifiable assets 3,902,299 7,394,180 357,901 11,654,380
Depreciation and amortization 235,238 12,101 272,299 519,638
Capital expenditures 362,801 500,000 - 862,801
Investment in unconsolidated
subsidiary (43,614) - - (43,614)
Equity in loss of
unconsolidated subsidiary (44,614) - - (44,614)
</TABLE>
Note M - Subsequent Events
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 400 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.
F-20
<PAGE>
Noble International, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note M - Subsequent Events (Continued)
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.
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 35 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, 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.
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.
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.
F-21
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Monroe Engineering Products, Inc.
We have audited the accompanying balance sheets 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
years in the two year period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 years in the two year period then ended in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Detroit, Michigan
March 4, 1997
F-22
<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-23
<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-24
<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 (53,137) 61,832
activities
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-25
<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
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
Inventories
Inventories consist of finished goods purchased from manufacturers. Inventory is
stated at the lower of cost (moving average) 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 15 years for improvements and
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-26
<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-27
<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 years in the three year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Detroit, Michigan
May 9, 1997
F-28
<PAGE>
DCT Component Systems, Inc.
Balance Sheets
December 31,
<TABLE>
<CAPTION>
==========================================================================================
ASSETS 1995 1996
---------- ----------
<S> <C> <C>
Current Assets
Cash $ 3,875 $ 608,563
Accounts receivable
Trade (net of allowance of $186,000
in 1995 and $125,000 in 1996) 2,395,917 3,318,382
Related parties 407,048 233,392
Inventories 2,310,426 2,255,388
Unbilled customer tooling 82,120 419,065
Prepaid expenses and other assets 179,723 150,209
Notes receivable, current maturities 7,031 7,031
---------- ----------
Total Current Assets 5,386,140 6,992,030
Property and Equipment - net 4,766,500 4,234,833
Note Receivable, net of current maturities 36,248 29,217
----------- -----------
$10,188,888 $11,256,080
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT 1995 1996
---------- ----------
<S> <C> <C>
Current Liabilities
Note payable to bank $ 2,576,298 $ 2,896,076
Current maturities of long-term debt 2,787,052 982,425
Accounts payable
Trade 3,213,302 3,854,128
Related parties 277,358 225,990
Accrued liabilities 1,222,092 933,596
---------- ----------
Total Current Liabilities 10,076,102 8,892,215
Long-term Debt, net of current maturities 3,263,125 3,603,411
Notes Payable - Related Parties 16,638,127 960,000
Commitments and Contingencies (Note I) - -
Redeemable Preferred Stock
$100 par value, authorized 10,000 shares,
issued and outstanding 10,000 shares - 1,000,000
Shareholders' Deficit
Common stock - $1 par value, authorized
- 200,000 shares issued and outstanding
2,000 and 3,582 shares at December 31,
1995 and 1996, respectively 2,000 3,582
Additional paid-in capital 857,250 17,697,112
Accumulated deficit (20,647,716) (20,900,240)
---------- ----------
Total shareholders' deficit (19,788,466) (3,199,546)
---------- ----------
$10,188,888 $11,256,080
=========== ===========
</TABLE>
F-30
<PAGE>
DCT Component Systems, Inc.
Statements of Operations
For the years ended December 31,
<TABLE>
<CAPTION>
==========================================================================================
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 27,719,743 $ 23,335,664 $ 22,988,115
Cost of sales 28,523,220 22,724,107 20,445,536
----------- ----------- -----------
Gross (loss) profit (803,477) 611,557 2,542,579
Selling, general and administrative expenses 5,406,531 3,196,468 1,961,680
----------- ----------- -----------
Operating (loss) profit (6,210,008) (2,584,911) 580,899
Other (income) expense
Interest expense 1,328,758 2,300,562 937,337
Gain (loss) on sale of property and
equipment 493,207 (10,326) 4,721
Interest income (87,276) (70,376) (3,349)
Sundry, net (28,112) 6,427 (105,286)
----------- ----------- -----------
1,706,577 2,226,287 833,423
----------- ----------- -----------
Net loss $ (7,916,585) $ (4,811,198) $ (252,524)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
DCT Component Systems, Inc.
Statements of Shareholders' Deficit
For the years ended December 31,
<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 - 16,841,444 - 16,841,444
Issuance of 1,582 shares of
common stock 1,582 (1,582) - -
Net loss - - (252,524) (252,524)
------ ---------- ----------- ----------
Balance December 31, 1996 $3,582 $17,697,112 $(20,900,240) $(3,199,546)
======= ============ ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
DCT Component Systems, Inc.
Statements of Cash Flows
For the years ended December 31,
<TABLE>
<CAPTION>
==================================================================================================
1994 1995 1996
--------- ---------- ----------
<S> <C> <C> <C>
Cash Flows (Used In) Provided By Operating
Activities
Net loss $ (7,916,585) $(4,811,198) $ (252,524)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Interest expense - 1,244,538 -
Depreciation and amortization 1,811,874 1,583,115 719,941
Loss (gain) on sale of property and
equipment 493,207 (10,326) 4,721
Changes in assets and liabilitie
(Increase) decrease in accounts
receivable (2,157,596) 3,676,352 (829,585)
(Increase) decrease in inventories (958,266) 1,745,335 (281,907)
Decrease (increase) in prepaid expenses 174,418 (80,721) 29,514
Decrease in notes receivable 375,175 339,834 7,031
(Decrease) increase in accounts payable (418,488) (1,850,345) 589,458
(Decrease) increase in accrued liabilities (528) 730,990 (288,496)
--------- ---------- ----------
Net cash (used in) provided by
operating activities (8,596,789) 2,567,574 (301,847)
Cash Flows Used In Investing Activities
Purchases of property and equipment (870,950) (37,011) (201,431)
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)
Cash Flows Provided By (Used In) Financing
Activities
Repayment of notes payable - related parties (1,000,000) - -
Proceeds from notes payable - related parties 11,639,218 3,114,893 795,298
Principal payments of long-term debt (4,497,094) (2,651,912) (2,835,040)
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
--------- --------- ----------
Net cash provided by (used in)
financing activities 8,806,012 (2,667,256) 1,099,550
--------- --------- ----------
Net increase (decrease) in cash 95,856 (117,572) 604,688
Cash - beginning of year 25,591 121,447 3,875
--------- --------- ----------
Cash - end of year $ 121,447 $ 3,875 $ 608,563
=========== =========== ============
</TABLE>
F-33
<PAGE>
DCT Component Systems, Inc.
Statements of Cash Flows
For the years ended December 31,
<TABLE>
<CAPTION>
==================================================================================================
1994 1995 1996
---------- ---------- ---------
<S> <C> <C> <C>
Supplemental Disclosure of Cash Flow Information
Cash paid for interest $ 1,383,646 $ 1,084,759 $ 960,298
============ =========== ===========
</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 the Company'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.
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements
December 31, 1994, 1995 and 1996
================================================================================
Note A - Nature of Operations
DCT Component Systems, Inc. (the Company) 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.
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 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, respectively.
Income Taxes
The Company 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 in 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-35
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
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
The Company'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 at December 31 are as follows:
1995 1996
--------- ---------
Raw materials and purchased parts $ 879,187 $ 663,046
Work in process 488,663 717,212
Finished goods 670,481 875,130
Perishable tooling 272,095 -
--------- ---------
$ 2,310,426 $ 2,255,388
=========== ===========
Note D - Property and Equipment
Property and equipment consist of the following at December 31:
1995 1996
---------- ----------
Leasehold improvements $ 694,279 $ 694,279
Machinery and equipment 10,739,419 10,924,198
Furniture and fixtures 229,826 229,826
---------- ----------
11,663,524 11,848,303
Less accumulated depreciation 6,897,024 7,613,470
---------- ----------
$ 4,766,500 $ 4,234,833
========== ===========
F-36
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
===========================================================================================================
Note E - Note Payable to Bank and Long-Term Debt
The Company 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 and $383,209 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).
Long-term debt at December 31, consists of the following:
1995 1996
--------- ---------
<S> <C> <C>
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 the Company. $ - $2,584,560
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
the Company. 529,287 314,108
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
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
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
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 -
</TABLE>
F-37
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
===========================================================================================================
<S> <C> <C>
Note E - Note Payable to Bank and Long-Term Debt (Continued)
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
Less current portion 2,787,052 982,425
---------- ----------
$3,263,125 $3,603,411
========== ==========
</TABLE>
The aggregate maturities of long-term debt by year 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 Company's loan agreement contains restrictions on acquisitions, dividend
payments, and advances to officers and shareholders. At December 31, 1996, 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. The Company 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
F-38
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note F - Income Taxes
Effective January 1, 1994, the Company was approved by the Internal Revenue
Service to be treated as a C Corporation for federal income tax purposes. In
prior years, the Company was treated as an S Corporation for federal income tax
purpose and, therefore, did not incur any federal income tax expense. The
company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes".
The components of deferred tax assets and liabilities at December 31,
consist of the following:
1995 1996
--------- ---------
Total deferred tax assets $5,107,000 $5,136,000
Total deferred tax liability (365,000) (331,000)
Valuation allowance recognized for
deferred tax assets (4,742,000) (4,805,000)
---------- ----------
Net deferred taxes $ - $ -
========== ==========
Deferred tax assets result primarily from net operating loss carryforwards and
the difference between the allowance method for recording bad debt expense for
financial reporting purposes and the direct write-off method for tax purposes.
Deferred tax liabilities result from using accelerated depreciation methods for
tax purposes.
Note G - Related Party Transactions
The Company 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.
The Company has sales to and purchases from any entity related through common
ownership. Sales to this company were approximately $210,000, $451,000 and
$328,000 in 1994, 1995 and 1996, respectively. The Company purchased
approximately $620,000, $0 and $233,000 in 1994, 1995 and 1996, respectively.
During 1996, the Company paid management fees of $83,333 to Noble International,
Ltd., a 45% shareholder of the Company. (Note K)
F-39
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note G - Related Party Transactions (Continued)
Notes payable - related parties at December 31, consists of the following:
1995 1996
---------- --------
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
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
=========== ========
Note H - Significant Customer
The Company 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.
Note I - Commitments and Contingencies
The Company 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 collaterized, in part, by The Company's common stock,
property and equipment.
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, the
Company remains liable as a co-maker.
Note J - Profit Sharing Plan
The Company maintains a profit-sharing plan for substantially all employees
established pursuant to Internal Revenue Code Section 401(k). The Company 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 the Company during
the years ended December 31, 1996, 1995 and 1994, respectively.
F-40
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note K - Change in Ownership
On July 1, 1996, Noble International, Ltd. (Noble) acquired 1,343 common shares
of the Company, 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 - The Company 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 the Company's option in a lump sum or in
five annual installments is based on the change in book value per share (as
defined) of the Company subsequent to January 1, 1997.
o Purchase Option - Noble has an option, through July, 2001, to acquire from
the selling stockholders of the Company, and additional 14.1% of the
Company'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 the
Company.
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 the Company and an affiliated company controlled by the
selling shareholders of the Company (see debt forgiveness discussion
below)
2) the payment by the Company of at least $100,000 principal amount
pursuant to a certain promissory note to a company controlled by the
selling shareholder of the Company.
In the event the option is exercised, Noble must simultaneously acquire a 59.1%
interest in a partnership controlled by the selling shareholders of the Company.
The partnership owns the facilities out of which the Company operates.
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.
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.
F-41
<PAGE>
DCT Component Systems, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note K - Change in Ownership (Continued)
o Debt Forgiveness - The selling stockholders and the Company agreed to
write-off all existing intercompany and stockholder debt except for a
promissory note for $960,000. The intercompany debt 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
===========
o Executive Bonus Pool - The Company 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 the Company 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 the Company; 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 the selling shareholder
against 59.1% of any liabilities arising from claims which maybe brought
against the indemnities arising from their guarantees of certain
indebtedness of the Company.
Note L - Redeemable Preferred Stock
On December 31, 1996 the Company authorized 10,000 shares of $100 par value
preferred stock and issued them in full payment of $1,000,000 promissory note
owed to a 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, the Company and the holder entered into a put agreement whereby the
holder can put 37,500 shares at par to the Company quarterly through October,
2001, and can put 250,000 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 the Company into the equivalent number of Noble preferred
shares.
F-42
<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 years in the three year 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 years in the three year period ended December 31, 1996 in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Detroit, Michigan
May 12, 1997
F-43
<PAGE>
Utilase, Inc.
Balance Sheets
December 31,
<TABLE>
<CAPTION>
==========================================================================================
ASSETS 1995 1996
--------- ---------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 900 $ 405,972
Accounts receivable, net of allowance for
doubtful accounts of $2,000 in 1995
and $24,000 in 1996 1,525,313 1,638,747
Inventories 192,470 233,605
Prepaid expenses 21,436 20,389
--------- ---------
Total Current Assets 1,740,119 2,298,713
--------- ---------
Property and Equipment, net 3,362,422 4,928,930
Other Assets 61,739 61,104
Note Receivable - Related Parties, net 3,565,753 -
--------- ---------
$8,730,033 $7,288,747
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Note payable to bank $1,545,302 $ -
Accounts payable
Bank overdraft 119,596 -
Trade 473,782 635,225
Related parties 96,355 239,201
Accrued liabilities 71,925 291,619
Deferred taxes 140,000 70,000
Federal income tax payable - 351,953
Current maturities of long-term debt 429,996 789,999
--------- ---------
Total Current Liabilities 2,876,956 2,377,997
Note Payable - Related Parties - Net 3,228,783 945,266
Long-Term Debt, net of current maturities 1,009,171 1,536,503
Deferred Taxes 129,000 177,000
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
Additional contributed capital 1,588,314 1,703,414
Retained earnings (accumulated deficit) (103,191) 547,567
--------- ---------
Total Shareholder's Equity 1,486,123 2,251,981
--------- ---------
$8,730,033 $7,288,747
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE>
Utilase, Inc.
Statements of Operations
Years ended December 31,
<TABLE>
<CAPTION>
==========================================================================================
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales $5,725,098 $6,115,760 $9,305,436
Cost of sales 3,976,792 4,718,559 5,804,356
--------- --------- ---------
Gross profit 1,748,306 1,397,201 3,501,080
Selling and administrative expenses 1,302,439 1,790,567 2,059,630
--------- --------- ---------
Operating profit 445,867 (393,366) 1,441,450
Other (income) expense
Gain on sale of equipment - (1,135,478) -
Miscellaneous income, net (88,793) (36,694) (132,374)
Interest income (129,823) (397,169) (38,633)
Interest expense 299,509 555,355 631,746
--------- --------- ---------
80,893 (1,013,986) 460,739
--------- --------- ---------
Earnings before income taxes 364,974 620,620 980,711
Income tax expense (benefit) 369,700 (94,616) 329,953
--------- --------- ---------
Net earnings (loss) $ (4,726) $ 715,236 $ 650,758
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-45
<PAGE>
Utilase, Inc.
Statements of Shareholders' Equity
Years Ended December 31, 1995 and 1996
<TABLE>
<CAPTION>
==========================================================================================
Retained
Additional Earnings
Common Contributed (Accumulated
Stock Capital Deficit) Total
-------- --------- ------------ ---------
<S> <C> <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 - - 715,236 715,236
------ --------- -------- ---------
Balance at December 31, 1995 1,000 1,588,314 (103,191) 1,486,123
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 $ 547,567 $2,251,981
======= =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-46
<PAGE>
Utilase, Inc.
Statements of Cash Flows
Years Ended December 31,
<TABLE>
<CAPTION>
==================================================================================================
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings (loss) $ (4,726) $ 715,236 $ 650,758
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities
Depreciation and amortization 540,064 519,908 558,185
Gain on sale of equipment - (1,135,478)
Rent absorbed by affiliated company - - 115,100
Deferred income taxes (benefit) 280,900 (38,600) (22,000)
Changes in assets and liabilities
Accounts payable and accrued liabilities 249,382 72,887 165,186
Accounts receivable 530,718 (602,652) (113,434)
Prepaid expenses 23,486 16,191 1,682
Inventories (43,031) (9,895) (41,135)
Income taxes payable - - 351,953
--------- --------- ---------
Net cash provided by (used in) operating
activities 1,576,793 (462,403) 1,666,295
Cash Flows Used In Investing Activities
Additions to property and equipment (795,460) (1,738,588) (2,124,693)
Issuance of notes receivable - related party,
net of collections (1,322,187) (388,148) 1,184,467
Proceeds from disposal of equipment - 1,240,000 -
--------- --------- ---------
Net cash used in investing activities (2,117,647) (886,736) (940,226)
Cash Flows From Financing Activities
Proceeds from long-term debt 500,000 - 1,692,283
Repayment of long-term debt (388,333) (322,500) 649,165
Net borrowings under notes payable to bank 620,181 (780,381) (1,545,302)
Net (borrowings) repayment of notes payable -
related party (150,285) 2,412,211 3,565,753
--------- --------- ---------
Net cash provided by (used) financing
activities 581,563 1,309,330 320,997
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 40,709 (39,809) 405,072
Cash and cash equivalents beginning of year - 40,709 900
--------- --------- ---------
Cash and cash equivalents end of year $ 40,709 $ 900 $ 405,972
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-47
<PAGE>
Utilase, Inc.
Notes to Financial Statements
December 31, 1994, 1995 and 1996
================================================================================
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
Companies, Inc. (Note L). The Company is comprised of two divisions, Blank
Welding Technologies and Production Services. 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.
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.
Inventories
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.
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.
Note B - Inventories
The major components of inventories at December 31 are as follows:
1995 1996
-------- --------
Raw materials $ 13,880 $ 33,015
Finished goods 122,984 195,790
Spare parts 55,606 4,800
-------- --------
$192,470 $233,605
========= =========
F-48
<PAGE>
Utilase, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note C - Property and Equipment
Property and equipment at December 31 is as follows:
1995 1996
--------- ---------
Machinery and equipment $3,716,990 $4,519,645
Leasehold and improvements 646,053 646,053
Office and computer equipment 493,601 496,667
Construction-in-process 723,436 2,042,408
--------- ---------
5,580,080 7,704,773
Less - Accumulated depreciation (2,217,658) (2,775,843)
--------- ---------
$3,362,422 $4,928,930
========== ===========
Note D - Related Party Transactions
Purchases and Accounts Payable
The Company purchases stamping services from parties that are related through
common ownership. These purchases totaled $280,905 $319,170 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.
Employee Lease Expense
Effective May 1, 1994, the Company began leasing salaried employees from DCT,
Inc. with DCT, Inc. remaining responsible for all payroll and related payroll
taxes and fringe benefits for the leased employees. Employee lease expense
included in the accompanying statement of operations for the years ended
December 31, 1994, 1995 1996 was $328,392, $641,838 and $777,522, respectively.
Effective January 1, 1995, the Company 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 statement of operations.
Note Receivable
At December 31, 1995, the Company had a note receivable from a related
entity totaling $3,565,753. Total interest income related to this note was
$145,823 and $397,169 in 1994, 1995, respectively.
F-49
<PAGE>
Utilase, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note D - Related Party Transactions (Continued)
Notes Payable
At December 31, 1996, the Company had notes payable to DCT, Inc.
totaling $3,228,783 and $945,266, respectively. Total interest expense related
to these notes was $38,196, $171,492 and $247,605 in 1994, 1995 and 1996,
respectively.
Facilities Rental
During 1995 and 1996, the Company rented 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 has been reflected as expense and additional paid
in capital.
Fair Value of Financial Instruments
The Company'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 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). The interest rate on the
Company's line-of-credit is prime plus 2% (10.25% at December 31, 1996) and is
collateralized by eligible accounts receivable and inventory, as defined in the
agreement.
Note F - Long-Term Debt
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <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), 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). - 1,389,000
</TABLE>
F-50
<PAGE>
Utilase, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
========================================================================================================
Note F - Long-Term Debt (Continued)
<S> <C> <C>
Notes payable to related parties, due January 1, 2000, interest at
10% at December 31, 1995. 3,228,783 -
--------- ---------
4,667,950 2,326,502
Less current maturities (429,996) (789,999)
--------- ---------
$4,237,954 $1,536,503
========== ==========
</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
===========
Note G - Income Taxes
Prior to May 1, 1994, the Company was a Subchapter S corporation under the
provisions of the Internal Revenue Code. As such, taxable income of the Company
was included in the individual tax returns of the Company's shareholders for
federal income tax purposes. As of May 1, 1994, the Company 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.
The Company 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 for the years ended
December 31, 1994, 1995 and 1996, consists of the following:
1994 1995 1996
-------- -------- --------
Currently payable $ 88,800 $(56,016) $351,953
Deferred 280,900 (38,600) (22,000)
-------- -------- --------
Total provision (credit) $369,700 $(94,616) $329,953
======== ======== ========
F-51
<PAGE>
Utilase, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note G - Income Taxes (Continued)
In 1995, the provision for income taxes, when compared to income before
provision for income taxes, resulted in an effective tax rate which differs from
the Federal statutory tax rate due primarily to the assumed use of estimated net
operating loss carryforwards attributed to the Company and non-deductibility of
certain expenses for tax reporting purposes. In 1994, the effective tax rate
differed from the Federal statutory rate of 34% due primarily to the initial
recording of deferred tax liabilities upon change to a Subchapter C corporation
in 1994 and non-deductibility of certain expenses for tax reporting purposes.
The significant cumulative temporary differences giving rise to deferred tax
liabilities at December 31, 1995 and 1996 resulted primarily from temporary
differences in the recognition of depreciation for income tax and financial
reporting purposes.
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 $105,000, $110,000 and $145,658, respectively.
Minimum future rental payments under this non-cancelable operating lease are:
1997 $148,167
1998 148,167
1999 12,347
Note I - Significant Customers
Substantially all of the Utilase's revenues resulted from sales to major
automotive original equipment manufacturers in North America. During 1994, two
customers accounted for 48%, and during 1995 and 1996 three customers accounted
for 56% and 51% of revenues, respectively.
Note J - Health Insurance
The Company is self-insured for a portion of the health insurance provided to
employees. The Company 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, the Company has recorded an accrual which management
believes is adequate to cover the costs of claims incurred under this program.
Note K - Commitments and Contingencies
The Company 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 the Company's financial
position or results of operations.
F-52
<PAGE>
Utilase, Inc.
Notes to Financial Statements - Continued
December 31, 1994, 1995 and 1996
================================================================================
Note K - Commitments and Contingencies - Continued
The Company and its parent 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 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 the Company'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 liable as a co-maker.
Note L - Subsequent Event
Effective March 1, 1997 the Company sold the operating assets of its Production
Services Division to a subsidiary of Noble International, Ltd. (Noble) in
exchange for a $850,000 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.
On April 7, 1997, the shareholders of the Company entered into an agreement to
sell all of the issued and outstanding shares of the Company 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-53
<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................................................................ 7
Use of Proceeds............................................................. 12
Dividend Policy............................................................. 13
Dilution.................................................................... 13
Capitalization.............................................................. 14
Pro Forma Financial Data.................................................... 15
Selected Financial Data..................................................... 19
Management's Discussion and Analysis of
Financial Condition and Results of Operations............................. 20
Business.................................................................... 23
Management.................................................................. 33
Certain Transactions........................................................ 38
Principal Shareholders...................................................... 42
Description of Capital Stock................................................ 43
Underwriting................................................................ 46
Legal Matters............................................................... 47
Experts..................................................................... 47
Additional Information ..................................................... 48
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>
================================================================================
Shares
[LOGO] NOBLE
INTERNATIONAL, LTD
Common Stock
-----------------------------
PROSPECTUS
-----------------------------
BlueStone CAPITAL PARTNERS, L.P.
_____________, 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....................$8,891
National Association of Securities Dealers, Inc. Filing Fee............ 3,434
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 X 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>
"Section 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.
"Section 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.
"Section 3. Determination of Indemnification. Any indemnification under
Section 1 or 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 1 or 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 1 or 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.
"Section 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 1 and 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 4 shall be made in the manner described in Section
3(1)-(5).
"Section 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 1 or Section 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 1
or 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.
"Section 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 1
through 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.
"Section 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.
"Section 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.
"Section 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 1 and 2.
"Section 10. Severability. The invalidity or unenforceability of any
provision of this Article X shall not effect the validity or enforceability
of the remaining provisions of this Article X."
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>
Robert J. Skandalaris 1/1/96 Issued as an antidilution
adjustment in anticipation of
additional issuances.
Mark A. Davis 1/1/96 Issued for services valued at
$32,000.
Prestolock shareholders 1/1/96 Issued pursuant to a Stock
Exchange Agreement between Noble
and Prestolock.
Richard G. Skandalaris 10/15/96 Issued in consideration of
cancellation of $61,042.82 of
indebtedness.
Richard G. Skandalaris 1/1/97 Issued pursuant to a Stock
Exchange Agreement between
Noble and Skandy.
Utilase, Inc. 4/7/97 Issued and held in escrow
pursuant to a Stock Purchase
Agreement between Noble and
Utilase.
</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(1) Form of Underwriting Agreement
2.1 Stock Purchase Agreement dated April 7, 1997 among the Company,
Utilase, Inc., the Shareholders of Utilase, Inc.
3.1(1) Amended and Restated Articles of Incorporation of the Company
3.2(1) Amended and Restated Bylaws of the Company
4.1(1) Form of Representative's Warrant Agreement, including form of
Warrant
4.2 Forms of Series A Subordinated Promissory Notes
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<PAGE>
4.3 Forms of Series B Subordinated Promissory Notes
4.4 Forms of Series C Subordinated Promissory Notes
4.5 Forms of Series D Subordinated Promissory Notes
5.1(1) Opinion of Bruck & Perry, A Professional Corporation as to the
legality of the securities being registered
10.1(1) Bill of Sale dated February 25, 1994 pertaining to the assets acquired
by Prestolock International, Ltd. from Midlantic National Bank
10.2(1) Trademark Agreement entered into February 25, 1994 between Prestolock
International, Ltd. and Presto Lock, Inc.
10.3(1) 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(1) Non-Competition Agreement dated as of July 21, 1994 between Prestolock
International, Ltd. and the Eastern Company
10.5(1) Trademark License Agreement dated July 21, 1994 between Prestolock
International, Ltd. and the Eastern Company
10.6(1) Sales Service Consulting Agreement dated July 21, 1994 between
Prestolock International, Ltd. and the Eastern Company
10.7(1) 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 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(1) Consulting Agreement dated January 31, 1996 between Cass River
Coatings, Inc. and Eugene Oldford
10.10(1) Consulting Agreement dated January 31, 1996 between Cass River
Coatings, Inc. and Kevin Redding
10.11(1) Consulting Agreement dated January 31, 1996 between Cass River
Coatings, Inc. and Chris Frampton
10.12(1) Consulting Agreement dated January 31, 1996 between Cass River
Coatings, Inc. and Jan Wojeichowski
10.13(1) Consulting Agreement dated January 31, 1996 between Cass River
Coatings, Inc. and Pat Patterson
10.14(1) Consulting Agreement dated January 31, 1996 between Cass River
Coatings, Inc. and Jim Lamb
10.15 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(1) 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(1) Land Contract dated October 26, 1994 between Cass River Investment
Company and Cass River Coatings, Inc.
10.18 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 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 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 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 Land Contract dated April 30, 1996 between Richard J. Reason Agreement
of Trust dated April 9, 1979 and Monroe Engineering Products, Inc.
10.23 Guaranty of Robert Skandalaris dated April 30, 1996 of Monroe
Engineering Products, Inc.'s obligations under Land Contract
10.24 Employment and Deferred Compensation Agreement dated January 1, 1996
between Monroe Engineering Products, Inc. and Richard Reason, as
amended December 30, 1996
10.25(1) Loan Agreement dated April 30, 1996 among Comerica Bank and the
Registrant, Monroe Engineering Products, Inc., Prestolock
International, Ltd. and Cass River Coatings, Inc.
10.26 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 Stock Redemption Agreement dated July 1, 1996 between Peter Raab and
DCT Components Systems, Inc.
10.28 Management Agreement dated July 1, 1996 between DCT Component Systems,
Inc. and the Company
10.29 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 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 Executive Bonus Pool for DCT Components Systems, Inc.
10.32 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(1) Employment Agreement between DCT Component Systems, Inc. and Peter
Raab dated July 18, 1994, as amended June 30, 1996
II-10
<PAGE>
10.34(1) Loan and Security Agreement dated June 27, 1996 between DCT Component
Systems, Inc. and the CIT Group/Credit Finance, Inc.
10.35(1) Loan Agreement between DCT Component Systems, Inc. and Deutsche
Financial Services Holding Company
10.36 Line of Credit Promissory Note ($960,000) made by DCT Component
Systems, Inc. in favor of DCT Companies, Inc.
10.37 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 Conversion Agreement dated December 31, 1996 among DCT Component
Systems, Inc., the Company and Holder
10.39(1) 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(1) Stock Exchange Agreement dated as of January 1, 1997 among the
Company, Richard G. Skandalaris and Skandy Corp.
10.41 Asset Purchase Agreement dated February 28, 1997 and effective March
1, 1997 between Utilase Production Process, Inc. and Utilase, Inc.
10.42 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 Security Agreement dated February 28, 1997 among the Company and
Utilase Production Process, Inc. and Utilase, Inc.
10.44 Escrow Agreement dated April 7, 1997 among the Company, Utilase, Inc.,
and Jaffe, Raitt, Heuer & Weiss
10.45 Form of Non-Compete Agreement between Utilase, Inc. and James Bronce
Henderson III
10.46 Form of Non-Compete Agreement between the Company and Jeffrey A. Moss
10.47 Form of Non-Compete Agreement between Utilase, Inc. and DCT, Inc.
10.48 Employment Agreement dated April 7, 1997 between Utilase, Inc. and
John K. Baysore
10.49 Registration Rights Agreement dated April 7, 1997 among the Company,
Utilase, Inc., James Bronce Henderson, III and Jeffrey A. Moss
10.50 Shareholders' Agreement dated April 7, 1997 among the Company,
Utilase, Inc., Robert J. Skandalaris and James Bronce Henderson, III
10.51(1) Shareholder Agreement
10.52(1) Voting Agreement and Power of Attorney
10.53(1) 1997 Incentive Stock Option Plan of Registrant
10.54(1) $300,000 Promissory Note dated January 15, 1996 in favor of James D.
Skandalaris
10.55(1) $90,000 Promissory Note dated March 1, 1994 in favor of James D.
Skandalaris
10.56(1) $1,000,000 Promissory Note dated April 30, 1996 in favor of Robert J.
Skandalaris
21.1 Subsidiaries of the Registrant
23.1 Consent of Grant Thornton LLP
II-11
<PAGE>
23.2(1) Consent of Bruck & Perry, A Professional Corporation (included in its
opinion to be filed as Exhibit 5.1 to the Registration Statement)
24.1 Power of Attorney (contained on Page II-14, the signature page)
27.1 Financial Data Schedule
99.1 Consent of James Bronce Henderson III to identification as director
nominee
99.2 Consent of David C. Stone to identification as director nominee
99.3 Consent of Peter Sugar to identification as director nominee
99.4 Consent of Troy D. Wiseman to identification as director nominee
99.5 Consent of Anthony R. Tersigni to identification as director nominee
99.6(1) Consent of to identification as director nominee
99.7(1) Letter Agreement dated March 15, 1997 among DCT Companies, Inc., James
Bronce Henderson III, David C. Stone and the Company
99.8(1) Commitment Letter from Comerica Bank to Utilase, Inc. and Robert J.
Skandalaris dated March 26, 1997.
</TABLE>
- --------------------------------
(1) To be filed by Amendment
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 registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bloomfield Hills, State
of Michigan, on May 14, 1997.
NOBLE INTERNATIONAL, LTD.
By: /s/ Robert J. Skandalaris
-------------------------------------
Robert J. Skandalaris
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below, constitutes and appoints Robert J. Skandalaris and Michael C. Azar, or
either of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this Registration Statement,
including post effective amendments, and any related Registration Statement
filed pursuant to Rule 462(b) of the rules adopted by the Securities and
Exchange Commission under the Securities Act of 1933, as amended, and to file
the same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto such
attorneys-in-fact and agents, or any one of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and conforming all that such
attorneys-in-fact and agents or any one of them, or their or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
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>
/s/ Robert J. Skandalaris
- ------------------------------- President, Chief Executive Officer May 14, 1997
Robert J. Skandalaris and Director (Principal Executive
Officer)
/s/ Richard V. Balgenorth
- ------------------------------ Treasurer, Chief Executive Officer May 14, 1997
Richard V. Balgenorth and Director (Principal Financial
and Accounting Officer)
/s/ Michael C. Azar
- ------------------------------ Director May 14, 1997
Michael C. Azar
</TABLE>
II-14
================================================================================
STOCK PURCHASE AGREEMENT
DATED AS OF THE 7TH DAY OF APRIL, 1997
BY AND AMONG
NOBLE INTERNATIONAL, LTD.,
UTILASE, INC.
AND
THE SHAREHOLDERS OF UTILASE, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. SALE AND PURCHASE OF SHARES.......................................2
SECTION 1.1 Sale and Purchase of the Shares.............................2
SECTION 1.2 Purchase Price............................................. 2
SECTION 1.3 Allocation of Purchase Price................................2
SECTION 1.4 Method of Payment...........................................2
SECTION 1.5 Delivery of the Shares......................................3
SECTION 1.6. Escrow of Noble Shares......................................3
SECTION 1.7. Restrictions Applicable to Escrow Shares....................3
ARTICLE II. CONDUCT PRIOR TO CLOSING.........................................3
SECTION 2.1. Conduct of the Company's Business Prior to the Closing Date.3
SECTION 2.2. Forbearance by the Company..................................4
SECTION 2.3. Conduct of Noble's Business Prior to the Closing Date.......5
SECTION 2.4. Cooperation of Noble and the Company........................5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................6
SECTION 3.1. Recitals True...............................................6
SECTION 3.2. Capital Stock...............................................6
SECTION 3.3. Due Organization............................................6
SECTION 3.4. Authority...................................................6
SECTION 3.5. Subsidiaries; Significant Investments.......................6
SECTION 3.6. Approvals...................................................6
SECTION 3.7. No Violations...............................................7
SECTION 3.8. Consents and Approvals......................................7
SECTION 3.9. Financial Information.......................................7
SECTION 3.10. Absence of Undisclosed Liabilities and Certain
Changes or Events..........................................7
SECTION 3.11. Taxes.......................................................8
SECTION 3.12. Absence of Claims...........................................8
SECTION 3.13. Agreements..................................................8
SECTION 3.14. Labor Matters...............................................9
SECTION 3.15. Employee Benefit Plans......................................9
SECTION 3.16. Properties.................................................10
SECTION 3.17. Compliance with Laws.......................................10
SECTION 3.18. Fees.......................................................10
SECTION 3.19. Environmental Matters......................................10
SECTION 3.20. Material Interests of Certain Persons......................12
SECTION 3.21. Insurance..................................................12
(i)
<PAGE>
SECTION 3.22. Corporate Documents........................................12
SECTION 3.23. Company Action.............................................12
SECTION 3.24. Manufacturing Processes and Trade Secrets..................12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF NOBLE.........................13
SECTION 4.1. Recitals True..............................................13
SECTION 4.2. Capital Stock..............................................13
SECTION 4.3. Due Organization...........................................13
SECTION 4.4. Authority..................................................13
SECTION 4.5. Subsidiaries; Significant Investment.......................13
SECTION 4.6. Approvals..................................................13
SECTION 4.7. No Violations..............................................13
SECTION 4.8. Consents and Approvals.....................................14
SECTION 4.9. Financial Information......................................14
SECTION 4.10. Absence of Undisclosed Liabilities and Certain
Changes or Events.........................................14
SECTION 4.11. Taxes......................................................14
SECTION 4.12. Absence of Claims..........................................15
SECTION 4.13. Agreements.................................................15
SECTION 4.14. Labor Matters..............................................16
SECTION 4.15. Employee Benefit Agreements................................16
SECTION 4.16. Properties.................................................16
SECTION 4.17. Compliance with Laws.......................................17
SECTION 4.18. Fees.......................................................17
SECTION 4.19. Environmental Matters......................................17
SECTION 4.20. Insurance..................................................18
SECTION 4.21. Corporate Documents........................................18
ARTICLE V. ADDITIONAL AGREEMENTS............................................18
SECTION 5.1. Interim Financing..........................................18
SECTION 5.2. Access and Information.....................................19
SECTION 5.3. Certain Filings, Consents and Arrangements.................19
SECTION 5.4. Additional Agreements......................................19
SECTION 5.5. Regulatory Matters.........................................20
SECTION 5.6. Benefit Agreements and Certain Contracts...................20
SECTION 5.7. Certain Claims.............................................20
SECTION 5.8. DCT Release................................................21
SECTION 5.9. Financial Statements.......................................21
SECTION 5.10 Code Section 338(h)(10) Election...........................21
ARTICLE VI. CONDITIONS TO CONSUMMATION......................................22
(ii)
<PAGE>
SECTION 6.1. Conditions to All Parties' Obligations.....................22
SECTION 6.2. Conditions to the Obligations of Noble.....................23
SECTION 6.3. Conditions to the Obligations of the Company
and the Shareholders.......................................23
ARTICLE VII. INDEMNIFICATION.................................................24
SECTION 7.1. Survival of Representations and Warranties.................24
SECTION 7.2. Indemnity of the Shareholders..............................24
SECTION 7.3. Noble's Indemnity..........................................25
SECTION 7.4. Claims for Indemnification.................................26
SECTION 7.5. Notice of Claim for Indemnification........................27
SECTION 7.6. Undertakings...............................................27
ARTICLE VIII. TERMINATION.....................................................27
SECTION 8.1. Termination................................................27
SECTION 8.2. Effect of Termination......................................28
ARTICLE IX. CLOSING..........................................................29
SECTION 9.1. Closing....................................................29
ARTICLE X. OTHER MATTERS....................................................29
SECTION 10.1. Certain Definitions; Interpretation........................29
SECTION 10.2. Survival...................................................30
SECTION 10.3. Waiver.....................................................30
SECTION 10.4. Counterparts...............................................30
SECTION 10.5. Governing Law..............................................30
SECTION 10.6. Expenses...................................................30
SECTION 10.7. Notices....................................................30
SECTION 10.8. Entire Agreement; Etc......................................31
SECTION 10.9. Arbitration................................................31
SECTION 10.10. Rules Governing the Issuance and Holding of Notes and
Escrow Shares..............................................32
SECTION 10.11. Assignment.................................................33
(iii)
<PAGE>
EXHIBITS
--------
EXHIBIT A -- Form of Notes
EXHIBIT B -- Purchase Price Allocation
EXHIBIT C -- Escrow Agreement
EXHIBIT D -- Non-Compete Agreement
EXHIBIT E -- Non-Compete Agreement
EXHIBIT F -- Non-Compete Agreement
EXHIBIT G -- Employment Agreement
(iv)
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of the 7th day of April, 1997 (this
"Agreement"), by and among Noble International, Ltd. ("Noble"), Utilase, Inc.
(the "Company"), DCT, Inc. ("DCT") and John K. Baysore ("Baysore," and together
with DCT, the "Shareholders").
RECITALS:
A. Noble. Noble is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Michigan, with its principal
executive offices located in Bloomfield Hills, Michigan. As of the date hereof,
Noble has 60,000 authorized shares of common stock, without par value, of which
11,550 shares were outstanding as of the date hereof, and 150,000 authorized
shares of preferred stock, without par value. There are no shares of preferred
stock outstanding as of the date hereof, and Noble has no other class of capital
stock authorized. The number of shares of Noble outstanding is subject to change
prior to the Closing Date (as hereinafter defined) as described in subparagraph
D of these Recitals.
B. The Company. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Michigan, with its
principal executive offices located in Detroit, Michigan. As of the date hereof,
the Company has 50,000 authorized shares of common stock, without par value
("Company Common Stock"), of which 1,053 shares were outstanding as of the date
hereof, 1,000 of which were held by DCT and 53 of which were held by Baysore.
The Company has no other class of capital stock authorized or issued.
C. Options, Etc. Neither the Company nor any of its subsidiaries has any
shares of its capital stock held in treasury or reserved for issuance, any
outstanding option, call or commitment relating to shares of its capital stock
or any outstanding securities, obligations or agreements convertible into or
exchangeable for, or giving any person any right (including, without limitation,
preemptive rights) to subscribe for or acquire from it, any shares of its
capital stock nor any obligations, contingent or otherwise to repurchase, redeem
or otherwise acquire any of its equity securities nor to provide funds to make
any investment in, or provide any guarantee with respect to the obligations of,
any person, except as set forth in the Company Disclosure Letter (as defined in
Article III).
D. Noble Options, Etc. Neither Noble nor any of its subsidiaries has any
shares of its capital stock reserved for issuance, any outstanding option, call
or commitment relating to shares of its capital stock or any outstanding
securities, obligations or agreements convertible into or exchangeable for, or
giving any person any right (including, without limitation, preemptive rights)
1
<PAGE>
to subscribe for or acquire from it, any shares of its capital stock except as
set forth in the Noble Disclosure Letter (as defined in Article IV).
E. Board Approvals. The respective Boards of Directors of DCT, Noble and
the Company have duly approved this Agreement and have duly authorized its
execution and delivery.
F. Employment Agreement. The Company and Baysore have entered into the
Employment Agreement attached hereto as Exhibit G (the "Employment Agreement").
In consideration of their mutual promises and obligations hereunder, the
parties hereto adopt and make this Agreement and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
ARTICLE I. SALE AND PURCHASE OF SHARES
SECTION 1.1 Sale and Purchase of the Shares. Subject to the conditions
set forth in this Agreement and on the basis of and reliance upon the
representations, warranties and agreements set forth in this Agreement, on the
Closing Date (as defined in Section 9.1) the Shareholders shall sell their
shares of Company Common Stock (the "Shares") to Noble free and clear of all
liens and encumbrances of any nature whatsoever and Noble shall purchase the
Shares from the Shareholders.
SECTION 1.2 Purchase Price. At the Closing (as defined in Section 9.1),
Noble shall deliver the following to the Shareholders as consideration for the
Shares ("the Purchase Price"):
(a) an amount equal to (i) $8,200,000; and
(b) the Series A Subordinated Promissory Notes (the "Series A Notes"),
the Series B Subordinated Promissory Notes (the Series B Notes"), the Series C
Subordinated Promissory Notes (the "Series C Notes"), and the Series D
Subordinated Promissory Notes (the "Series D Notes" and, together with the
Series A Notes, Series B Notes and Series C Notes, the "Notes"), in
substantially the form of Exhibit A hereto with an aggregate principal amount
equal to $10,134,554.
SECTION 1.3 Allocation of Purchase Price. The Purchase Price shall be
allocated between the Shareholders as set forth in Exhibit B.
SECTION 1.4 Method of Payment. The payment by Noble to the Shareholders
pursuant to Section 1.2(a) shall be made by wire transfer of immediately
available funds to the Shareholders' designated account (or accounts) according
to irrevocable written instructions which the Shareholders shall provide to
Noble no later than five days prior to the Closing Date.
2
<PAGE>
SECTION 1.5 Delivery of the Shares. On the Closing Date, the
Shareholders shall deliver to Noble certificates representing the shares, each
of which certificates shall be endorsed in blank or accompanied by stock powers
duly executed in blank to permit transfer of the shares to Noble.
SECTION 1.6. Escrow of Noble Shares. Upon the execution of this
Agreement, a certificate representing 506 shares of Noble Common Stock (the
"Escrow Shares"), which Escrow Shares shall be equitably adjusted to reflect
fully the effect of any reclassification, stock split, reverse split, stock
dividend or other reorganization or other like change with respect to Noble
Common Stock, occurring after the date hereof and prior to the date such Escrow
Shares are released from escrow, as described below, shall be delivered by Noble
to Jaffe, Raitt, Heuer & Weiss, as escrow agent (the "Escrow Agent") under an
Escrow Agreement in the form attached hereto as Exhibit C (the "Escrow
Agreement"). The Escrow Shares shall be held in escrow under the Escrow
Agreement and shall be distributed to the Company if this Agreement is
terminated as described in Section 8.2(iv) and as of the date hereof, Noble and
the Company shall execute a Registration Rights Agreement and a Shareholders'
Agreement relating to such Escrow Shares. If this Agreement is not terminated
and the Purchase is consummated, the Escrow Shares shall be returned to Noble at
the Closing Date.
SECTION 1.7. Restrictions Applicable to Escrow Shares. The Company and
the Shareholders acknowledge that the Escrow Shares and the Notes issued and
delivered by Noble pursuant to this Agreement have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and even if so
registered, may be subject to restrictions on resale under federal and state
securities laws or under this Agreement generally. As used in this Agreement,
the term "Unregistered Securities" shall mean all Escrow Shares and Notes issued
hereunder which have not been registered for resale under the Securities Act.
ARTICLE II. CONDUCT PRIOR TO CLOSING
SECTION 2.1. Conduct of the Company's Business Prior to the Closing
Date. Except as expressly provided in this Agreement, during the period from the
date of this Agreement to the Closing Date, the Company shall, and shall cause
each of its subsidiaries to, (i) conduct its business in the usual, regular and
ordinary course of business consistent with past practice, (ii) use its best
efforts to maintain and preserve intact its business organization, properties,
leases, employees and advantageous business relationships and retain the
services of its officers and key employees, (iii) take no action which would
adversely affect or delay the ability of the Company, Noble or any subsidiary
thereof to obtain any necessary approvals, consents or waivers of any
governmental authority required for the transactions contemplated hereby or to
perform its covenants and agreements on a timely basis under this Agreement and
(iv) take no action that is reasonably likely to have a Material Adverse Effect
(as defined in Section 9.1 hereof) on the Company.
3
<PAGE>
SECTION 2.2. Forbearance by the Company. Except as contemplated by the
Interim Financing Transaction (defined in Section 5.1), during the period from
the date of this Agreement to the Closing Date, the Company shall not, and shall
not permit any of its subsidiaries, without the prior written consent of Noble,
to:
(a) other than as consistent with past practice, make any loan or
advance or incur any indebtedness for borrowed money, assume, guarantee, endorse
or otherwise as an accommodation become responsible for the obligations of any
other person;
(b) other than as contemplated hereby, adjust, split, combine or
reclassify any capital stock; make, declare or pay any dividend or make any
other distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any shares of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital stock, or grant
any stock appreciation rights or grant, sell or issue to any individual,
corporation or other person any right or option to acquire, or securities
evidencing a right to convert into or acquire, any shares of its capital stock,
except as consistent with past practice;
(c) other than in the ordinary course of business, sell, transfer,
mortgage, encumber or otherwise dispose of any of its properties, leases or
assets to any person, or cancel, release or assign any indebtedness of any such
person, except pursuant to contracts or agreements in force as of the date of
this Agreement;
(d) make any capital expenditures, other than capital expenditures made
in the ordinary course of business;
(e) increase in any material manner the compensation or fringe benefits
of any of its employees or directors, or create or institute, or make any
payments pursuant to, any severance plan or package, or pay any pension or
retirement allowance not required by any existing plan or agreement to any such
employees or directors, or become a party to, amend or commit itself to or fund
or otherwise establish any trust or account related to any Employee Agreement
(as defined in Section 3.15), with or for the benefit of any employee, other
than general increases in compensation in the ordinary course of business or any
amendment required by applicable law, or voluntarily accelerate the vesting of
any compensation or benefit;
(f) other than in the ordinary course of business, make any investment
either by contributions to capital, property transfers, or purchase of any
property or assets of any person;
(g) other than with respect to the acceptance of purchase orders, enter
into or terminate any contract or agreement, or make any change in any of its
leases or contracts, other than with respect to those involving aggregate
payments of less than, or the provision of goods or services with a market value
of less than, $25,000;
4
<PAGE>
(h) settle any claim, action or proceeding involving any liability of
the Company or any of its subsidiaries for money damages in excess of $200,000,
in excess of amounts covered by insurance, if any, or material restrictions upon
the operations of the Company or any of its subsidiaries, provided however, that
the Company and/or DCT has the right to settle claims of the Company with
respect to USX Corporation, Olympic Steel, Inc., Mark Williamson or TWB, Inc.,
subject to the provisions of Section 5.7 hereof;
(i) enter into any new material activities or lines of business, or
cease to conduct any material activities or lines of business that it conducts
on the date hereof, or conduct any material business activity not consistent
with past practice;
(j) agree to, or make any commitment to, take any of the actions
prohibited by this Section 2.2 or any action which would make any of the
representations or warranties of the Company contained in this Agreement
incorrect or prevent the Company from performing or cause the Company not to
perform its covenants hereunder;
(k) pay management and other fees, charges and expenses to DCT in excess
of $40,000 per month, which includes all services provided to the Company by DCT
and its affiliates, other than those provided pursuant to separate purchase
orders.
SECTION 2.3. Conduct of Noble's Business Prior to the Closing Date.
Except as expressly provided in this Agreement, during the period from the date
of this Agreement to the Closing Date, Noble shall, and shall cause each of its
subsidiaries to, (i) conduct its business in the usual, regular and ordinary
course of business consistent with past practice, (ii) take no action outside of
the ordinary course of business which would adversely affect or delay the
ability of the Company, Noble or any subsidiary thereof to obtain any necessary
approvals, consents or waivers of any governmental authority required for the
transactions contemplated hereby or to perform its covenants and agreements on a
timely basis under this Agreement and (iii) take no action that is reasonably
likely to have a Material Adverse Effect on Noble.
SECTION 2.4. Cooperation of Noble and the Company. Noble and the
Company shall, and shall cause each of their subsidiaries to, cooperate with the
other party in completing the transactions contemplated hereby and shall not
take, cause to be taken or agree to make any commitment to take any action (i)
that is reasonably likely to have a Material Adverse Effect on Noble or the
Company, as applicable, or (ii) that is inconsistent with or prohibited by
Sections 2.2 or 2.3, as applicable.
5
<PAGE>
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and each of the Shareholders, jointly and severally,
represent and warrant to Noble that, except as specifically disclosed in a
letter (the "Company Disclosure Letter") of the Company delivered to Noble upon
the execution of this Agreement (and making specific reference to the Section of
this Agreement for which an exception is taken or for which information is
required):
SECTION 3.1. Recitals True. The facts set forth in the Recitals of this
Agreement with respect to the Company are true and correct.
SECTION 3.2. Capital Stock. All outstanding shares of capital stock of
the Company and its subsidiaries have been duly authorized and validly issued,
are fully paid and non-assessable and are not subject to any preemptive rights
and are owned free and clear of all security interests, liens, claims, pledges,
agreements, limitations on voting rights, charges or other encumbrances.
SECTION 3.3. Due Organization. Each subsidiary of the Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the state of its incorporation.
SECTION 3.4. Authority. Each of the Company and its subsidiaries has
the power and authority, and is duly qualified in all jurisdictions (except for
such qualifications the absence of which, in the aggregate, would not have a
Material Adverse Effect on Company) where such qualification is required, to
carry on its business as it is now being conducted and to own all its properties
and assets, and it has all federal, state, local, and foreign governmental
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as it is now being conducted.
SECTION 3.5. Subsidiaries; Significant Investments. The only
subsidiaries of the Company are set forth in the Company Disclosure Letter. All
of the shares of capital stock of each subsidiary of the Company are owned
directly and of record by the Company or a wholly-owned subsidiary of the
Company, in each such case free and clear of all liens, claims, encumbrances and
restrictions on transfer ("Liens") and there are no options with respect to any
such capital stock. None of the Company or any of such subsidiaries owns any
equity securities, any security convertible or exchangeable into an equity
security or any rights to acquire any equity security except those of its
subsidiaries as listed in the Company Disclosure Letter.
SECTION 3.6. Approvals. This Agreement and the transactions
contemplated herein have been duly authorized by all necessary corporate action
of the Company. Subject to receipt of the required approvals, consents or
waivers of governmental authorities referred to in Section 6.1(a), this
Agreement is a valid and binding agreement of the Company enforceable against it
in accordance with its terms, subject as to enforcement to bankruptcy,
insolvency, fraudulent transfer,
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reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors, rights and to general equity principles.
SECTION 3.7. No Violations. The execution, delivery and performance of
this Agreement by the Company do not, and the consummation of the transactions
contemplated hereby by the Company and each of its subsidiaries will not,
constitute (a) a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of the Company or any subsidiary of the
Company or to which the Company or any of its subsidiaries (or any of their
respective properties) is subject, or enable any person to enjoin the
transactions contemplated hereby, (b) a breach or violation of, or a default
under, the articles of incorporation or by-laws or similar organizational
documents of the Company or any subsidiary of the Company or (c) a breach or
violation of, or a default under (or an event which with due notice or lapse of
time or both would constitute a default under), or result in the termination of,
accelerate the performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any of the
properties or assets of the Company or any subsidiary of the Company under, any
of the terms, conditions or provisions of any note, bond, indenture, deed of
trust, loan agreement or other agreement, instrument or obligation to which the
Company or any subsidiary of the Company is a party, or to which any of their
respective properties or assets may be bound or affected, which in the case of
(a), (b) or (c) above, would have a Material Adverse Effect on the Company.
SECTION 3.8. Consents and Approvals. Except for any filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), if required, and the consent of the General Retirement System of the City
of Detroit (the "GRS"), no consents or approvals of or filings or registrations
with any court, administrative agency or commission or other governmental
authority or instrumentality or with any third party are necessary in connection
with (i) the execution and delivery by the Company of this Agreement and (ii)
the consummation by the Company of the transactions contemplated hereby, the
absence of which would have Material Adverse Effect on the Company.
SECTION 3.9. Financial Information. The information provided by the
Company to Noble and its auditors in connection with the preparation of the 1995
and 1996 financial statements of the Company is complete, true and accurate.
SECTION 3.10. Absence of Undisclosed Liabilities and Certain Changes or
Events. Since December 31, 1996, the Company and its subsidiaries have
conducted their business only in the ordinary course of business consistent with
past practice and have not incurred any material liability, except in the
ordinary course of their business consistent with past practice. Since December
31, 1996, there has not been any change in the condition (financial or other),
properties, business, results of operations or prospects of the Company or its
subsidiaries which, individually or in the aggregate, has had, or is reasonably
likely to have, a Material Adverse Effect on the Company.
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SECTION 3.11. Taxes. All federal, state, local, and foreign tax returns
required to be filed by or on behalf of the Company or any of its subsidiaries
have been timely filed or requests for extensions have been timely filed and any
such extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all respects. All taxes shown on such
returns have been paid in full or adequate provision has been made for any such
taxes on the Company's balance sheet (in accordance with generally accepted
accounting principles). There is no audit examination, deficiency, or refund
litigation with respect to any taxes of the Company or any of its subsidiaries
that could result in a determination. All taxes, interest, additions, and
penalties due with respect to completed and settled examinations or concluded
litigation relating to it have been paid in full or adequate provision has been
made for any such taxes on the Company's 1995 balance sheet (in accordance with
generally accepted accounting principles). The Company has not executed an
extension or waiver of any statute of limitations on the assessment or
collection of any material tax due that is currently in effect.
SECTION 3.12. Absence of Claims. Except as set forth in the Company
Disclosure Letter, as of the date hereof, no material litigation, proceeding or
controversy before any court or governmental agency is pending, and there is no
pending material claim, action or proceeding against the Company or any of its
subsidiaries, and, to the Company's actual knowledge, without inquiry, no such
litigation, proceeding, controversy, claim or action has been threatened or is
contemplated.
SECTION 3.13. Agreements.
(a) Except as set forth in the Company Disclosure Letter, neither the
Company nor any of its subsidiaries is a party to an oral or written (i)
consulting agreement involving the payment of more than $100,000 per annum, (ii)
agreement with any executive officer or other key employee of the Company or any
of its subsidiaries the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving the
Company or any of its subsidiaries of the nature contemplated by this Agreement
and which provides for the payment of in excess of $100,000, (iii) agreement
with respect to any executive officer of the Company or any of its subsidiaries
providing any term of employment or compensation guarantee extending for a
period longer than one year and for the payment of in excess of $100,000 per
annum, (iv) agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement, (v) material agreement containing covenants that limit the ability of
the Company or any of its subsidiaries to compete in any line of business or
with any person, or that involve any restriction on the geographic area in
which, or method by which, the Company (including any successor thereof) or any
of its subsidiaries may carry on its business (other than as may be required by
law or any regulatory agency) or (vi) agreement containing provisions under
which the Company or any of its subsidiaries is obligated to pay in excess of
$100,000 per annum.
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(b) Neither the Company nor any of its subsidiaries is in default under
any provision of any note, bond, indenture, mortgage, deed of trust, loan
agreement or other agreement to which it is a party or by which it is bound or
to which any of its respective properties or assets is subject, which would have
a Material Adverse Effect on the Company.
SECTION 3.14. Labor Matters. Neither the Company nor any of its
subsidiaries is a party to, or is bound by, any collective bargaining agreement,
contract, or other agreement or understanding with a labor union or labor
organization, nor is the Company or any of its subsidiaries the subject of any
proceeding asserting that it has committed an unfair labor practice or seeking
to compel it or any such subsidiary to bargain with any labor organization as to
wages and conditions of employment, nor is there any strike, other labor dispute
or organizational effort involving the Company or any of its subsidiaries
pending or threatened.
SECTION 3.15. Employee Benefit Plans.
(a) All of the Company's pension, retirement, stock option, stock
purchase, stock ownership, savings, stock appreciation right, profit sharing,
deferred compensation, consulting, bonus, group insurance, severance and other
benefit plans, contracts, agreements, arrangements, including, but not limited
to, "employee benefit plans", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), incentive and
welfare policies, contracts, plans and arrangements and all trust agreements
related thereto in respect to any directors, officers, or other employees of the
Company or any of its subsidiaries (hereinafter referred to collectively as the
"Employee Plans") comply in all material respects with all applicable
requirements of ERISA, the Code and other applicable laws. All of the Employee
Plans which are intended to meet the requirements of Section 401(a) of the Code
have been determined by the Internal Revenue Service to be "qualified" within
the meaning of the Code, and there are no facts known to the Company which would
adversely affect the qualified status of any of the Employee Plans.
(b) There is no accumulated funding deficiency, within the meaning of
ERISA or the Code, in connection with the Employee Plans and no reportable
event, as defined in ERISA, has occurred in connection with the Employee Plans.
The Employee Plans have not, nor has any trustee or administrator of the
Employee Plans, engaged in any prohibited transaction as defined in ERISA or the
Code. The Company is not contributing to, and has not contributed to, any
multi-employer plan, as defined in ERISA.
(c) The Company Disclosure Letter describes any past Employee Plans that
have been terminated within the past 12 months and the status of such plans, the
distribution or retention of monies with respect to said plans, and any further
obligations of such plans or the Company in connection therewith. Any past
Employee Plans that have been terminated were terminated in compliance with
ERISA, the Code and other applicable laws, and there is no basis for further
liability or obligation of the Company pursuant to any past Employee Plans.
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SECTION 3.16. Properties. Except as disclosed in the Company Disclosure
Letter, the Company and its subsidiaries (a) have good, clear and marketable
title to all the properties and assets which are material to the Company's
business on a consolidated basis, free and clear of all Liens except (i)
statutory Liens securing payments not yet due, (ii) Liens on assets of
subsidiaries of the Company incurred in the ordinary course of their business
and (iii) such imperfections or irregularities of title or Liens as do not
affect the use of the properties or assets subject thereto or affected thereby
or otherwise materially impair business operations at such properties, in either
case in such a manner as to have a Material Adverse Effect on the Company, and
(b) are collectively the lessee of all leasehold estates which are material to
the Company's business on a consolidated basis and is in possession of the
properties purported to be leased thereunder.
SECTION 3.17. Compliance with Laws. The Company and each of its
subsidiaries has all permits, licenses, certificates of authority, orders and
approvals of, and has made all filings, applications and registrations with,
federal, state, local and foreign governmental or regulatory bodies that are
required in order to permit it to carry on its business as it is presently
conducted, the absence of which would have a Material Adverse Effect; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect, and, to the Company's actual knowledge, without inquiry, no
suspension or cancellation of any of them is threatened.
SECTION 3.18. Fees. Neither the Company nor any of its subsidiaries has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or indirectly for the Company or any subsidiary of the
Company, in connection with the Agreement or the transactions contemplated
hereby.
SECTION 3.19. Environmental Matters.
(a) Except as set forth in the Company Disclosure Letter, with respect
to the Company and each of its subsidiaries:
(i) To the Company's actual knowledge, without inquiry, each
of the Company and its subsidiaries are in substantial
compliance with all Environmental Laws (as defined
below);
(ii) There is no material suit, claim, action, demand,
executive or administrative order, directive,
investigation or proceeding pending or, to the Company's
actual knowledge, without inquiry, threatened, before
any court, governmental agency or board or other forum
against it or any of its subsidiaries (A) for alleged
noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (B) relating
to the presence of or release into the environment of
any Hazardous Material (as defined below) or oil,
whether or not occurring at or on a site owned, leased
or operated by it or any of its subsidiaries;
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(iii) To the Company's actual knowledge, without inquiry, the
properties currently owned by the Company or any of its
subsidiaries (including, without limitation, soil,
groundwater or surface water on, under or adjacent to
the properties, and buildings thereon) do not contain
any Hazardous Material (as defined below) other than as
permitted under applicable Environmental Law;
(iv) Neither the Company nor any of its subsidiaries has
received any notice, demand letter, executive or
administrative order, directive or request for
information from any Federal, state, local or foreign
governmental entity or any third party indicating that
it may be in material violation of, or liable under, any
Environmental Law;
(v) To the Company's actual knowledge, without inquiry,
there are no underground storage tanks on, in or under
any properties and the Company has not removed any
underground storage tanks from any properties which are
leased by the Company or any of its subsidiaries; and
(vi) To the Company's actual knowledge, without inquiry,
during the period of its or any of its subsidiaries,
ownership or operation of any of their respective
current properties, there has been no material
contamination by or release of Hazardous Material or oil
in, on, under or affecting such properties.
(b) The following definitions apply for purposes of this Section: (i)
"Environmental Law" means (A) any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, legal doctrine, order, directive, executive or administrative order,
judgment, decree, injunction, requirement or agreement with any governmental
entity, (x) relating to the protection, preservation or restoration of the
environment (which includes, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, structures, soil, surface land,
subsurface land, plant and animal life or any other natural resource), or to
human health or safety, or (y) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of, Hazardous Materials, in each case as amended
and as now in effect, including all current Environmental Laws. The term
Environmental Law includes, without limitation, the federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act, the federal Water Pollution Control Act of
1972, the federal Clean Air Act, the federal Clean Water Act, the federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the federal Solid Waste Disposal and the
federal Toxic Substances Control Act, the Federal insecticide, Fungicide and
Rodenticide Act, the Federal Occupational Safety and Health Act of 1970, the
Federal Hazardous Materials Transportation Act, or any so called "Superfund" or
"Superlien" law, each as amended and as now in effect; and (ii) "Hazardous
Material" means any substance in any concentration which is or could be
detrimental to human health or safety or to the environment, currently listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, under any Environmental Law,
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whether by type or by quantity, including any substance containing any such
substance as a component. Hazardous Material includes, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance ,
hazardous waste, special waste, industrial substance, oil or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos-containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
SECTION 3.20. Material Interests of Certain Persons. Except as
disclosed in the Company's Disclosure Letter, no officer, director or affiliate
(as that term is defined in the Securities Exchange Act of 1934, as amended) of
the Company has any material interest in any material contract or property (real
or personal), tangible or intangible, used in or pertaining to the business of
the Company or any of its subsidiaries.
SECTION 3.21. Insurance. The Company and its subsidiaries are presently
insured, and since December 31, 1995, have been insured, for reasonable amounts
with financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. All of the insurance policies and bonds
maintained by the Company and its subsidiaries are in full force and effect, the
Company and its subsidiaries are not in material default thereunder and, to the
knowledge of the Company, all material claims thereunder have been filed in due
and timely fashion. In the judgment of the Company's management, such insurance
coverage is adequate and will be available in the future under terms and
conditions substantially similar to those in effect on the date hereof.
SECTION 3.22. Corporate Documents. The Company has delivered to Noble
true and complete copies of (i) its articles of incorporation and by-laws and
(ii) the charter and by-laws of each subsidiary of the Company. Neither the
Company nor any of its subsidiaries are in violation of any provision of its
articles of incorporation or bylaws.
SECTION 3.23. Company Action. The Board of Directors of the Company and
DCT have adopted resolutions approving this Agreement and recommending that this
Agreement be approved by the shareholders of the Company.
SECTION 3.24. Manufacturing Processes and Trade Secrets. Subject to the
Patlex license previously disclosed to Noble, to the actual knowledge of the
Company, without inquiry, the Company owns and has the legal right to use all of
the manufacturing processes, trade secrets and knowhow used by it in connection
with its business as presently conducted, free and clear of all liens, security
interests, licenses, royalties or claims, including any claims for infringement
of proprietary rights of others, except insofar as any failure of the foregoing
representations and warranties, taken as a whole, do not have a Material Adverse
Effect on the Company.
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF NOBLE
Noble represents and warrants to the Company that, except as
specifically disclosed in a letter (the "Noble Disclosure Letter") of Noble
delivered to the Company upon the execution of this Agreement (and making
specific references to the section of this Agreement for which an exception is
taken):
SECTION 4.1. Recitals True. The facts set forth in the Recitals of this
Agreement with respect to Noble are true and correct.
SECTION 4.2. Capital Stock. All outstanding shares of capital stock of
Noble and its subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable.
SECTION 4.3. Due Organization. Each subsidiary of Noble is a
corporation or banking organization duly incorporated, validly existing and in
good standing under the laws of the state of its incorporation.
SECTION 4.4. Authority. Each of Noble and its subsidiaries has the
power and authority, and is duly qualified in all jurisdictions (except for such
qualifications the absence of which, in the aggregate, would not have a Material
Adverse Effect on Noble) where such qualification is required, to carry on its
business as it is now being conducted and to own all its properties and assets,
and it has all federal, state, local, and foreign governmental authorizations
necessary for it to own or lease its properties and assets and to carry on its
business as it is now being conducted.
SECTION 4.5. Subsidiaries; Significant Investments. The only
subsidiaries of Noble are set forth in the Disclosure Letter. All of the shares
of capital stock of each subsidiary of Noble are owned directly and of record by
Noble or a wholly-owned subsidiary of Noble, in each such case free and clear of
all Liens and there are no options or similar rights with respect to any such
capital stock. None of Noble or any of such subsidiaries owns any equity
securities, any security convertible or exchangeable into an equity security or
any rights to acquire any equity security except those of its subsidiaries as
listed in the Noble Disclosure Letter.
SECTION 4.6. Approvals. This Agreement and the transactions
contemplated herein have been duly authorized by all necessary corporate action
of Noble. Subject to receipt of the required approvals, consents or waivers of
governmental authorities referred to in Section 6.1(a), this Agreement is a
valid and binding agreement of Noble enforceable against Noble in accordance
with its terms, subject as to enforcement to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors, rights and to general equity principles.
SECTION 4.7. No Violations. The execution, delivery and performance of
this Agreement by Noble does not, and the consummation of the transactions
contemplated hereby by
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Noble and each of its subsidiaries will not, constitute (a) a breach or
violation of, or a default under, any law, rule or regulation or any judgment,
decree, order, governmental permit or license, or agreement, indenture or
instrument of Noble or any subsidiary of Noble or to which Noble or any of its
subsidiaries (or any of their respective properties) is subject, or enable any
person to enjoin the transactions contemplated hereby, (b) a breach or violation
of, or a default under, the articles of incorporation or by-laws or similar
organizational documents of Noble or any subsidiary of Noble or (c) a breach or
violation of, or a default under (or an event which with due notice or lapse of
time or both would constitute a default under), or result in the termination of,
accelerate the performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any of the
properties or assets of Noble or any subsidiary of Noble under, any of the
terms, conditions or provisions of any note, bond, indenture, deed of trust,
loan agreement or other agreement, instrument or obligation to which Noble or
any subsidiary of Noble is a party, or to which any of their respective
properties or assets may be bound or affected, which in the case of (a), (b) or
(c) above, would have a Material Adverse Effect on Noble.
SECTION 4.8. Consents and Approvals. Except for filings under the HSR
Act, if required, no consents or approvals of or filings or registrations with
any regulatory agencies or with any third party are necessary in connection with
(i) the execution and delivery by Noble of this Agreement and (ii) the
consummation by Noble of the transactions contemplated hereby, the absence of
which would have a Material Adverse Effect on Noble.
SECTION 4.9. Financial Information. The consolidated balance sheets of
Noble and its subsidiaries at December 31, 1995 and 1996 and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the years then ended, and the notes thereto, copies of which have been
furnished to the Company, (i) are correct and complete in all material respects,
(ii) have been prepared in accordance with generally accepted accounting
principles, subject to consistency and materiality provisions, consistently
applied and (iii) present fairly, in all material respects, the consolidated
financial position of Noble and its subsidiaries at those dates and the
consolidated results of its operations and cash flows for the years then ended.
SECTION 4.10. Absence of Undisclosed Liabilities and Certain Changes or
Events. Since December 31, 1996, Noble and its subsidiaries have conducted
their business only in the ordinary course of business consistent with past
practice and have not incurred any material liability, except in the ordinary
course of their business consistent with past practice. Since December 31, 1996,
there has not been any change in the condition (financial or other), properties,
business, results of operations or prospects of Noble or its subsidiaries which,
individually or in the aggregate, has had, or is reasonably likely to have, a
Material Adverse Effect on Noble.
SECTION 4.11. Taxes. All federal, state, local, and foreign tax returns
required to be filed by or on behalf of Noble or any of its subsidiaries have
been timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all respects. All taxes shown on such
returns have been paid in full or adequate provision has been made for any such
taxes on Noble's 1995 balance
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sheet (in accordance with generally accepted accounting principles). There is no
audit examination, deficiency, or refund litigation with respect to any taxes of
Noble or any of its subsidiaries that could result in a determination. All
taxes, interest, additions, and penalties due with respect to completed and
settled examinations or concluded litigation relating to it have been paid in
full or adequate provision has been made for any such taxes on Noble's balance
sheet (in accordance with generally accepted accounting principles). Noble has
not executed an extension or waiver of any statute of limitations on the
assessment or collection of any material tax due that is currently in effect.
SECTION 4.12. Absence of Claims. As of the date hereof, no material
litigation, proceeding or controversy before any court or governmental agency is
pending, and there is no pending material claim, action or proceeding against
Noble or any of its subsidiaries, and, to Noble's actual knowledge, without
inquiry, no such litigation, proceeding, controversy, claim or action has been
threatened or is contemplated, which in any case is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on Noble or
to hinder or delay consummation of the transactions contemplated hereby.
SECTION 4.13. Agreements.
(a) Except as set forth in the Noble Disclosure Letter, neither the
Noble nor any of its subsidiaries is a party to an oral or written (i)
consulting agreement (other than data processing, software programming and
licensing contracts entered into in the ordinary course of business) involving
the payment of more than $100,000 per annum, (ii) agreement with any executive
officer or other key employee of Noble or any of its subsidiaries the benefits
of which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Noble or any of its subsidiaries of the
nature contemplated by this Agreement and which provides for the payment of in
excess of $100,000, (iii) agreement with respect to any executive officer of
Noble or any of its subsidiaries providing any term of employment or
compensation guarantee extending for a period longer than one year and for the
payment of in excess of $100,000 per annum, (iv) agreement or plan, including
any stock option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement, (v) material agreement containing covenants that
limit the ability of Noble or any of its subsidiaries to compete in any line of
business or with any person, or that involve any restriction on the geographic
area in which, or method by which, Noble (including any successor thereof) or
any of its subsidiaries may carry on its business (other than as may be required
by law or any regulatory agency) or (vi) agreement containing provisions under
which Noble or any of its subsidiaries is obligated to pay in excess of $100,000
per annum.
(b) Neither Noble nor any of its subsidiaries is in default under or in
violation of any provision of any note, bond, indenture, mortgage, deed of
trust, loan agreement or other agreement to which it is a party or by which it
is bound or to which any of its respective properties or assets is subject,
which would have a Material Adverse Effect on Noble.
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SECTION 4.14. Labor Matters. Neither Noble or any of its subsidiaries
is a party to, or is bound by, any collective bargaining agreement, contract, or
other agreement or understanding with a labor union or labor organization, nor
is Noble or any of its subsidiaries the subject of any proceeding asserting that
it has committed an unfair labor practice or seeking to compel it or any such
subsidiary to bargain with any labor organization as to wages and conditions of
employment, nor is there any strike, other labor dispute or organizational
effort involving Noble or any of its subsidiaries pending or threatened.
SECTION 4.15. Employee Benefit Agreements.
(a) All of Noble's pension, retirement, stock option, stock purchase,
stock ownership, savings, stock appreciation right, profit sharing, deferred
compensation, consulting, bonus, group insurance, severance and other benefit
plans, contracts, agreements, arrangements, including, but not limited to,
"employee benefit plans", as defined under ERISA, incentive and welfare
policies, contracts, plans and arrangements and all trust agreements related
thereto in respect to any present directors, officers, or other employees of
Noble or any of its subsidiaries (hereinafter referred to collectively as the
"Noble Employee Plans") comply in all material respects with all applicable
requirements of ERISA, the Code and other applicable laws. All of the Noble
Employee Plans which are intended to meet the requirements of Section 401(a) of
the Code have been determined by the Internal Revenue Service to be "qualified"
within the meaning of the Code, and there are no facts known to Noble which
would adversely affect the qualified status of any of the Noble Employee Plans.
(b) There is no accumulated funding deficiency, within the meaning of
ERISA or the Code, in connection with the Noble Employee Plans and no reportable
event, as defined in ERISA, has occurred in connection with the Noble Employee
Plans. The Noble Employee Plans have not, nor has any trustee or administrator
of the Noble Employee Plans, engaged in any prohibited transaction as defined in
ERISA or the Code. Noble is not contributing to, and has not contributed to, any
multi-employer plan, as defined in ERISA.
(c) Noble Disclosure Letter describes any past Noble Employee Plans that
have been terminated within the past 12 months and the status of such plans, the
distribution or retention of monies with respect to said plans, and any further
obligations of such plans or Noble in connection therewith. Any past Noble
Employee Plans that have been terminated were terminated in compliance with
ERISA, the Code and other applicable laws, and there is no basis for further
liability or obligation of Noble pursuant to any past Noble Employee Plans.
SECTION 4.16. Properties. Except as disclosed in the Noble Disclosure
Letter, Noble and its subsidiaries (a) have good, clear and marketable title to
all the properties and assets which are material to Noble's business on a
consolidated basis, free and clear of all Liens except (i) statutory Liens
securing payments not yet due, (ii) Liens on assets of subsidiaries of Noble
incurred in the ordinary course of their business and (iii) such imperfections
or irregularities of title or Liens as do not affect the use of the properties
or assets subject thereto or affected thereby or otherwise
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materially impair business operations at such properties, in either case in such
a manner as to have a Material Adverse Effect on Noble, and (b) are collectively
the lessee of all leasehold estates which are material to Noble's business on a
consolidated basis and is in possession of the properties purported to be leased
thereunder.
SECTION 4.17. Compliance with Laws. Noble and each of its subsidiaries
has all permits, licenses, certificates of authority, orders and approvals of,
and has made all filings, applications and registrations with, federal, state,
local and foreign governmental or regulatory bodies that are required in order
to permit it to carry on its business as it is presently conducted, the absence
of which would have a Material Adverse Effect; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect,
and, to Noble's actual knowledge, without inquiry, no suspension or cancellation
of any of them is threatened.
SECTION 4.18. Fees. Neither Noble nor any of its subsidiaries has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or indirectly for Noble or any subsidiary of Noble, in
connection with the Agreement or the transactions contemplated hereby.
SECTION 4.19. Environmental Matters.
(a) With respect to Noble and each of its subsidiaries:
(i) To Noble's actual knowledge, without inquiry, each of
Noble and its subsidiaries, are in substantial compliance
with all Environmental Laws (as defined below);
(ii) There is no material suit, claim, action, demand,
executive or administrative order, directive,
investigation or proceeding pending or to Noble's actual
knowledge, without inquiry, threatened, before any court,
governmental agency or board or other forum against it or
any of its subsidiaries (A) for alleged noncompliance
(including by any predecessor) with, or liability under,
any Environmental Law or (B) relating to the presence of
or release into the environment of any Hazardous Material
(as defined below) or oil, whether or not occurring at or
on a site owned, leased or operated by it or any of its
subsidiaries;
(iii) To Noble's actual knowledge, without inquiry, the
properties currently owned by Noble or any of its
subsidiaries (including, without limitation, soil,
groundwater or surface water on, under or adjacent to the
properties, and buildings thereon) do not contain any
Hazardous Material (as defined below) other than as
permitted under applicable Environmental Law;
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(iv) Neither Noble nor any of its subsidiaries has received
any notice, demand letter, executive or administrative
order, directive or request for information from any
Federal, state, local or foreign governmental entity or
any third party indicating that it may be in material
violation of, or liable under, any Environmental Law;
(v) To Noble's actual knowledge, without inquiry, there are
no underground storage tanks on, in or under any
properties and Noble has not removed any underground
storage tanks from any properties which are owned or
leased by Noble or any of its subsidiaries; and
(vi) To Noble's actual knowledge, without inquiry, during the
period of its or any of its subsidiaries, ownership or
operation of any of their respective current properties
there has been no material contamination by or release of
Hazardous Material or oil in, on, under or affecting such
properties.
(b) The following definitions apply for purposes of this Section: (iii)
"Environmental Law" has the meaning set forth in Section 3.19(b); and (iv)
"Hazardous Material" has the meaning set forth in Section 3.19(b).
SECTION 4.20. Insurance. Noble and its subsidiaries are presently
insured, and since December 31, 1995, have been insured, for reasonable amounts
with financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. All of the insurance policies and bonds
maintained by Noble and its subsidiaries are in full force and effect, Noble and
its subsidiaries are not in material default thereunder and, to the knowledge of
Noble, all material claims thereunder have been filed in due and timely fashion.
In the judgment of Noble's management, such insurance coverage is adequate and
will be available in the future under terms and conditions substantially similar
to those in effect on the date hereof.
SECTION 4.21. Corporate Documents. Noble has delivered to the Company
true and complete copies of (i) its articles of incorporation and by-laws and
(ii) the charter and by-laws of each subsidiary of Noble. Neither Noble nor any
of its subsidiaries are in violation of any provision of its articles of
incorporation or bylaws.
ARTICLE V. ADDITIONAL AGREEMENTS
SECTION 5.1. Interim Financing. The Company shall use its best efforts
to complete the financing transaction (the "Interim Financing Transaction")
described in the commitment letter addressed to the Company and Mr. Robert J.
Skandalaris dated March 26, 1997, from Comerica Bank, and if the Company
proceeds with the Interim Financing Transaction, Robert J. Skandalaris
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and Noble shall take all action required of each of them as specified in the
terms of such commitment letter, to complete such Interim Financing Transaction.
SECTION 5.2. Access and Information. Upon reasonable notice, each of
the Company and Noble shall (and shall cause its subsidiaries to) afford to the
other party and its representatives (including, without limitation, directors,
officers and employees of the other party and its affiliates, and counsel,
accountants and other advisors retained by the other party and its affiliates)
such access during normal business hours throughout the period prior to the
Closing Date, to the books, records, properties, personnel and to such other
information as such party may reasonably request; provided, however, that no
investigation pursuant to this Section 5.2 shall affect or be deemed to modify
any representation or warranty made herein. The Company and Noble will not, and
each will cause its representatives not to, use any information obtained
pursuant to this Section 5.2 for any purpose unrelated to the consummation of
the transactions contemplated by this Agreement. Subject to the requirements of
law, the Company and Noble will keep confidential, and will cause its
representatives to keep confidential, all information and documents obtained
pursuant to this Section 5.2 unless such information (i) was already known to
the Company or Noble, as the case may be, or an affiliate of the Company or
Noble, (ii) becomes available to the Company or Noble, as the case may be, or an
affiliate of the Company or Noble, as the case may be, from other sources not
known by such party to be bound by a confidentiality agreement, (iii) is
disclosed with the prior written approval of the Company or Noble, as the case
may be, or (iv) is or becomes readily ascertainable from published information
or trade sources. In the event that this Agreement is terminated or the
transactions contemplated by this Agreement shall otherwise fail to be
consummated, each party shall promptly cause all copies of documents or extracts
thereof containing information and data as to another party hereto (or an
affiliate of any party hereto) to be returned to the party which furnished the
same.
SECTION 5.3. Certain Filings, Consents and Arrangements. Noble and the
Company shall, and Noble and the Company shall cause their respective
subsidiaries to, (a) as soon as practicable make any filings and applications
required to be filed in order to obtain all approvals, consents and waivers of
governmental authorities necessary or appropriate for the consummation of the
transactions contemplated hereby including, if applicable, any filings under the
HSR Act, (b) cooperate with one another (i) in promptly determining what filings
are required to be made or approvals, consents or waivers are required to be
obtained under any relevant federal, state or foreign law or regulation and (ii)
in promptly making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such approvals, consents
or waivers and (c) deliver to the other copies of the publicly available
portions of all such filings and applications promptly after they are filed.
SECTION 5.4. Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its reasonable efforts
to take promptly, or cause to be taken promptly, all actions and to do promptly,
or cause to be done promptly, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
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transactions contemplated by this Agreement as soon as practicable, including
using efforts to obtain all necessary actions or non-actions, extensions,
waivers, consents and approvals from all applicable governmental entities,
effecting all necessary registrations, applications and filings (including,
without limitation, filings under any applicable state securities laws) and
obtaining any required contractual consents and regulatory approvals.
SECTION 5.5. Regulatory Matters. To the extent that any notices to,
filings with or authorizations, consents or approvals from any governmental
entities are necessary or advisable in connection with such transactions, Noble
and the Company shall give any such notices, make any such filings and use their
respective best efforts to obtain any such authorizations, consents and
approvals. If the HSR Act is applicable to such transactions, Noble and the
Company shall make all filings and provide all documents and information to
governmental entities which are required by said Act and use their respective
best efforts to obtain an early termination of the applicable waiting period
under said Act.
SECTION 5.6. Benefit Agreements and Certain Contracts.
(a) Noble hereby agrees that after the Closing Date, the Company will
continue to pay, in accordance with their terms as in effect on the date hereof,
without offset, deduction, counterclaim, interruption or deferment (other than
as required by applicable law) all amounts due and payable under the terms of
all written employment contracts, agreements, plans, policies and commitments of
the Company and its subsidiaries with or with respect to its current or former
employees, officers and directors to the extent such amounts are vested on or
prior to the date of this Agreement or will become vested as a result of the
transactions contemplated hereby. Noble shall cause the Company to provide its
employees with employee benefit plans providing welfare benefits substantially
comparable in the aggregate to those provided to employees generally by the
Company as of the date of this Agreement. Such welfare benefit plans shall (i)
recognize expenses and claims that were incurred by the Company's employees in
the year in which the Closing Date occurs and recognized for purposes of
computing deductible amounts and copayments under the Company's plans as of the
Closing Date and (ii) provide coverage for pre-existing health conditions to the
extent covered under the applicable plans or programs of the Company as of the
Closing Date. In addition, employees of the Company shall continue to receive
credit for their prior service with the Company and its Subsidiaries for
eligibility and vesting purposes and for vacation accrual purposes.
SECTION 5.7. Certain Claims. Noble and the Company acknowledge that the
Company is the plaintiff and/or has certain claims against USX Corporation,
Olympic Steel, Inc. TWB, Inc. and Mark Williamson, in which the Company is
seeking or may seek recovery of damages (the "Claims"). Noble agrees that DCT,
may proceed with such Claims on behalf of the Company, with the right to control
all aspects of such Claims, except that Noble shall have the right to consent to
any settlement, which consent shall not be unreasonably withheld, of such
Claims, and that any recovery of cash and/or property attributable to the
settlement or judicial resolution of said Claims will be divided equally between
Noble and DCT, after the reimbursement of all legal and other out-of-pocket
expenses incurred by DCT in connection with the Claims and the settlement or
other
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resolution thereof. Noble agrees that any cash recovery by Noble hereunder
shall be placed in a sinking fund or other similar account acceptable to DCT, to
be applied towards the payment of the Notes. Noble expressly acknowledges and
agrees that DCT has no obligation to pursue said Claims following the Closing
Date and DCT may elect not to pursue such Claims at any time and for any reason
or no reason. If DCT elects to abandon such Claims, at Noble's election, DCT
shall assign the Claims to Noble and Noble shall reimburse DCT for any costs and
expenses incurred by DCT prior to such assignment from any proceeds recovered by
Noble from the Claims, net of Noble's costs and expenses. If Noble does not
consent to a settlement of the Claims proposed by DCT, Noble shall then proceed
with such Claims, with the right to control all aspects of such Claims and any
recovery of cash and/or property attributable to the settlement or judicial
resolution of such Claims will be divided equally between Noble and DCT, after
the reimbursement of DCT's and Noble's expenses incurred in connection with the
resolution of such Claims, and Noble shall use it best efforts to pursue such
Claims.
Notwithstanding the foregoing, any commitment for future business
arising out of the settlement or other resolution of the Claims shall inure to
the benefit of Noble only.
SECTION 5.8. DCT Release. Noble agrees to take all reasonable actions
necessary to obtain the release of DCT with respect to any and all guarantees or
other similar credit enhancements which DCT has provided in connection with any
existing financing arrangements involving the Company, and Noble shall provide
evidence of such releases to DCT.
SECTION 5.9. Financial Statements. The Company shall prepare and
deliver to Noble combined and combining interim (i) quarterly financial
statements (including a Balance Sheet, Income Statement, Statement of Cash Flow
and Statement of Equity) as at and for the periods ended March 31, 1997, and
(ii) monthly financial statements as at and for the monthly periods ending more
than thirty (30) days prior to the Closing Date. Such interim Company financial
statements shall be prepared in accordance with GAAP, applied on a consistent
basis for the periods involved, and shall present fairly, in all material
respects, the combined and combining financial positions of the Company and its
subsidiaries as of the dates indicated therein, and the combined and combining
results of operations and cash flows of the Company and its subsidiaries for the
periods then ended; provided, however, such interim Company financial statements
are subject to normal year-end adjustments and may lack footnotes and other
presentation items.
SECTION 5.10. Code Section 338(h)(10) Election. If requested by Noble
to do so, the Shareholders shall join with Noble in making an election under
Internal Revenue Code Section 338(h)(10) to treat the purchase and sale of the
Shares for federal and state income tax purposes as a deemed sale of the
Company's assets. Noble represents that it is qualified to make the election
under Section 338(h)(10) of the Code. The Shareholders and Noble shall, as soon
as practicable after the Closing Date, exchange completed and executed copies of
Internal Revenue Service Form 8023, required Schedules thereto, and any similar
state forms. The sale of Company assets shall be deemed to be for consideration
equal to: (i) the Purchase Price plus (ii) all liabilities of the Company (the
"Asset Purchase Price"), followed by a deemed liquidation of the Company. In
connection with the
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deemed sale of assets by the Company, the parties agree to the following
allocation of the Asset Purchase Price and covenant to use such allocation for
all purposes relating hereto:
Cash and Cash Equivalents face value
Tangible Personal Property tax basis for federal income tax purposes
Intangible Personal Property tax basis for federal income tax purposes
Goodwill remainder
ARTICLE VI. CONDITIONS TO CONSUMMATION
SECTION 6.1. Conditions to All Parties' Obligations. The respective
obligations of Noble, the Company and the Shareholders to effect the
transactions contemplated hereby shall be subject to the satisfaction or waiver
prior to the Closing Date of the following conditions:
(a) Noble, the Company and each of their respective subsidiaries shall
have procured, if necessary or advisable, any necessary approvals, consents or
waivers with respect to the Agreement and the transactions contemplated hereby,
including approvals, consents or waivers from any federal, state, county, city,
municipal, regional or local governmental authority within the United States,
and all applicable statutory waiting periods under the HSR Act, if applicable,
shall have expired or otherwise been terminated; and the parties shall have
procured all other regulatory approvals, consents or waivers of governmental
authorities or other persons that are necessary or appropriate for the
consummation of the transactions contemplated by the Agreement including,
without limitation the consent of the GRS; provided, however, that, absent the
written consent thereto by Noble, no approval, consent or waiver referred to in
this Section 6.1(a) shall be deemed to have been received if it shall include
any condition or requirement that, individually or in the aggregate, (i) would
result in a Material Adverse Effect on Noble, or (ii) imposes any requirement
upon Noble, the Company or their respective subsidiaries to (x) dispose of any
asset which is material to Noble or the Company, or (y) materially restrict or
curtail the current business operations or activities of Noble or the Company.
(b) All other requirements prescribed by law which are necessary to the
consummation of the transactions contemplated by this Agreement shall have been
satisfied.
(c) No party hereto shall be subject to any order, decree or injunction
of a court or agency of competent jurisdiction which enjoins or prohibits the
consummation of the transactions contemplated by this Agreement, and no
litigation or proceeding shall be pending against Noble or the Company or any of
their subsidiaries brought by any governmental agency seeking to prevent
consummation of the transactions contemplated hereby.
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(d) No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated, interpreted, applied or enforced by any
governmental authority which prohibits, restricts or makes illegal consummation
of any transaction contemplated by this Agreement.
SECTION 6.2. Conditions to the Obligations of Noble. The obligations of
Noble to effect the transactions contemplated by this Agreement shall be subject
to the satisfaction or waiver prior to the Closing Date of the following
additional conditions:
(a) Each of the representations and warranties of the Company and the
Shareholders contained in this Agreement shall have been true on the date hereof
and shall be true in all material respects on the Closing Date as if made on
such date (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date); the Company shall have
performed, in all material respects, each of its covenants and agreements
contained in this Agreement; and Noble shall have received a certificate signed
by the Chief Executive Officer or President of the Company, dated the Closing
Date, to the foregoing effect.
(b) The Company shall not have experienced any event, change or
occurrence that has had a material adverse effect upon the financial condition
of the Company and its subsidiaries taken as a whole.
(c) Each of James Bronce Henderson, III, Jeffrey A. Moss and DCT shall
have entered into the Non-Compete Agreements attached hereto as Exhibits D, E
and F, respectively.
(d) The GRS shall have discharged any and all liens on the Company's
common stock and assets and shall have consented to the transactions
contemplated by this Agreement.
(e) The Company and Baysore shall have entered into the Employment
Agreement.
SECTION 6.3. Conditions to the Obligations of the Company and the
Shareholders. The obligation of the Company and the Shareholders to effect the
transactions contemplated by this Agreement shall be subject to the satisfaction
or waiver prior to the Closing Date of the following additional conditions:
(a) Each of the representations and warranties of Noble contained in
this Agreement shall have been true on the date hereof and shall be true in all
material respects on the Closing Date as if made on such date (or on the date
when made in the case of any representation or warranty which specifically
relates to an earlier date); Noble and, as applicable, Robert J. Skandalaris,
shall have performed, in all material respects, each of their respective
covenants and agreements contained in this Agreement; and the Company shall have
received certificates signed by the Chief Executive Officer of Noble, dated the
Closing Date, to the foregoing effect.
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(b) Noble shall not have experienced any event, change or occurrence
that has had a material adverse effect upon the financial condition of Noble and
its subsidiaries taken as a whole.
(c) Noble shall have, prior to the Closing Date, completed its firm
commitment underwritten initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Noble's common stock at an aggregate offering price to the
public of not less than $10,000,000, with Prime Charter, Ltd., (the "IPO") and
shall have received the proceeds from such IPO.
(d) The Non-Compete Agreements, in the forms attached hereto as Exhibits
D, E and F shall have been executed by Noble and each of the other parties
thereto.
ARTICLE VII. INDEMNIFICATION
SECTION 7.1. Survival of Representations and Warranties. The
representations and warranties made by the Company and the Shareholders and the
representations and warranties made by Noble in this Agreement shall be deemed
to be continuing and shall survive for a period of one year from the Closing
Date, unless a specific claim in writing with respect to any such representation
or warranty shall have been made, or an action at law or in equity shall have
been commenced or filed, prior to such expiration date; provided, however, that
the representations and warranties of the Company and the Shareholders and the
representations and warranties of Noble, respectively, set forth in:
(a) Sections 3.2 and 3.16(a) and 4.2 and 4.16(a) shall survive
indefinitely;
(b) Sections 3.11 and 4.11 shall survive for the applicable statute of
limitations under which claims may be asserted; and
(c) Section 3.24 shall survive for a period of two years from the
Closing Date.
Nothing in this Section 7.1 shall terminate or affect the obligations
and indemnities of the parties with respect to covenants and agreements
contained or referenced in this Agreement that are to be performed by their
specific terms, in whole or in part, after the Closing Date or the above
referenced expiration dates.
SECTION 7.2. Indemnity of the Shareholders.
(a) Subject to the limitations as to threshold and dollar amount
provided in this Section 7.2, the Shareholders shall jointly and severally
indemnify, defend, save, and hold harmless Noble and its successors and assigns,
and Noble's employees, representatives, officers, directors and agents from and
against any and all costs, losses, liabilities, claims and expenses, including
reasonable legal fees and costs of investigation ("Indemnified Damages"),
arising out of or resulting from any breach
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of or inaccuracy in any representation or warranty made by the Company or the
Shareholders in this Agreement.
(b) If the aggregated value of the claims by Noble against the
Shareholders (the "Noble's Aggregated Value") does not exceed $1,000,000, Noble
shall not be entitled to any reimbursement for such claims. If the Noble's
Aggregated Value shall exceed $1,000,000, Noble shall be entitled to receive an
amount (the "Indemnity Payments") equal to the difference between the Noble's
Aggregated Value and $1,000,000. Any liability of the Shareholders pursuant to
this Article VII shall be satisfied by such parties solely by means of a
set-off, first from Noble's obligation under each of the outstanding Series A
Notes pro rata on a dollar-for-dollar basis, then, with respect to the Series B
Notes and in descending order thereafter through the Series D Notes until the
Indemnity Payments are fully satisfied. Under no circumstances will the
Shareholders be required under this Article VII to provide any indemnification
in any form other than as described above.
(c) Notwithstanding the foregoing, the Shareholders shall not be liable
for any Indemnified Damages in excess of the aggregate principal amount of the
Notes outstanding at the time of the claim.
(d) No damages shall be asserted by Noble which arise out of facts,
circumstances or conditions which are disclosed in this Agreement or any Exhibit
or Schedule to this Agreement or of which Noble had actual knowledge on or
before the Closing Date.
SECTION 7.3. Noble's Indemnity.
(a) Notwithstanding the provisions of Section 10.10, Noble shall
indemnify, defend, save and hold harmless the Shareholders and their successors
and assigns, and, as applicable, their employees, representatives, officers,
directors, and agents, from and against any and all Indemnified Damages arising
out of or resulting from (i) any breach of or inaccuracy in any representation
or warranty made by the Noble in this Agreement, and (ii) activities or actions
with respect to the operation of the Company's business, which activities or
actions occur on a date after the Closing Date.
(b) If the aggregated value of the claims by the Shareholders against
Noble ("Shareholders' Aggregated Value") does not exceed $1,000,000, the
Shareholders shall not be entitled to any reimbursement for such claims. If the
Shareholders' Aggregated Value shall exceed $1,000,000, the Shareholders shall
be entitled to receive Indemnity Payments equal to the difference between the
Shareholders' Aggregated Value and $1,000,000. Noble shall pay any amounts owed
to the Shareholders pursuant to this Article VII in immediately available funds.
(c) Notwithstanding the foregoing, Noble shall not be liable for any
Indemnified Damages in excess of the aggregate principal amount of the Notes
outstanding at the time of the claim.
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(d) No damages shall be asserted by the Shareholders which arise out of
facts, circumstances or conditions which are disclosed in this Agreement or any
Exhibit or Schedule to this Agreement or of which the Shareholders had actual
knowledge on or before the Closing Date.
SECTION 7.4. Claims for Indemnification.
(a) Whenever any claim for indemnification shall arise under this
Article VII, the party asserting such claim (the "Indemnified Party") shall
notify the other party or parties (collectively, the "Indemnifying Party") of
the claim and, when known, the facts constituting the basis for such claim. In
the event of any claim for indemnification under this Agreement resulting from
or in connection with legal proceedings by a third party, such notice shall also
specify, if known, the amount or an estimate of the amount of the liability
arising from such proceedings.
(b) If any lawsuit is filed or instituted against the Indemnified Party
asserting any claim for which the Indemnifying Party may be responsible under
this Agreement, written notice of such lawsuit shall be given to the
Indemnifying Party as promptly as practicable and if the Indemnifying Party
shall acknowledge in writing that the Indemnifying Party shall be responsible
and liable for payment of all costs, losses, liabilities, claims and expenses in
connection with such lawsuit, then the Indemnifying Party shall be entitled, if
the Indemnifying Party so elects (subject to the Indemnified Party's written
consent which may be withheld by the Indemnified Party to the extent that the
Indemnified Party's rights under any other contested matter may be prejudiced by
the Indemnified Party's lack of control over such lawsuit), to take control of
the defense and investigation of such lawsuit and to employ and engage attorneys
of their own choice to handle and defend the same, at the Indemnifying Party's
cost, risk, and expense. The Indemnified Party shall cooperate in all reasonable
respects, at the Indemnifying Party's cost, risk, and expense, with the
Indemnifying Party and such attorneys in the investigation, trial, and defense
of such lawsuit and any appeal arising therefrom; provided, however, that the
Indemnified Party may, at its own cost, participate in any such investigation,
trial, and defense of any such lawsuit and any appeal arising from such lawsuit.
(c) The Indemnifying Party shall not, without the prior written consent
of the Indemnified Party, consent to a settlement of, or the entry of any
judgment arising from, any such claim or legal proceeding. If the Indemnifying
Party does not assume the defense of any such claim or litigation resulting from
such claim in accordance with the terms of this Section 7.4, the Indemnified
Party may defend against such claim or litigation in such manner as it may deem
appropriate, including settling such claim or litigation, after giving notice of
the same to the Indemnifying Party, on such terms as the Indemnified Party may
deem appropriate. If the Indemnifying Party seeks to question the manner in
which the Indemnified Party defended such claim or litigation or the amount of
or nature of any such settlement, the Indemnifying Party shall have the burden
to prove by a preponderance of the evidence that the Indemnified Party did not
defend such claim in a reasonably prudent manner.
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(d) In the event that the Indemnifying Party shall be obligated to
indemnify the Indemnified Party pursuant to this Section 7.4, the Indemnifying
Party shall, upon payment of such indemnity in full, be subrogated to all rights
of the Indemnified Party with respect to the Indemnified Damages to which such
indemnification relates.
(e) All indemnification or reimbursement payments required pursuant to
this Agreement shall be made net of all tax and insurance benefits actually
received by the party to be indemnified or reimbursed. In the event that any
claim for indemnification asserted under this Article VII is, or may be, the
subject of any insurance coverage or other right to indemnification or
contribution from any third person, the Indemnified Parties expressly agree that
they shall promptly notify the applicable insurance carrier of any such claim or
loss and tender defense thereof to such carrier, and shall also promptly notify
any potential third party indemnitor or contributor which may be liable for any
portion of such losses or claims. The Indemnified Parties agree to pursue, at
the cost and expense of the Indemnifying Party, such claims diligently and to
reasonably cooperate, at the cost and expense of the Indemnifying Party, with
each applicable insurance carrier and third party indemnitor or contributor.
SECTION 7.5. Notice of Claim for Indemnification. No claim for
indemnification under this Article VII shall be valid unless notice of such
claim is delivered to the Indemnifying Party within the period during which the
representation or warranty upon which such claim is based survives pursuant to
Section 7.1. Any such notice shall set forth in reasonable detail, to the extent
known by the person giving such notice, the facts on which such claim is based
and the estimated amount of the claim resulting therefrom.
SECTION 7.6. Undertakings. Prior to the assertion of any claims for
indemnification under this Article VII, the Indemnified Party shall utilize all
reasonable efforts, consistent with normal practices and policies and good
commercial practice, to mitigate such Indemnified Damages.
ARTICLE VIII. TERMINATION
SECTION 8.1. Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual consent of each of the Boards of Directors of Noble and
the Company and the Shareholders; or
(b) (i) by Noble if on the Closing Date any of the conditions specified
in Section 6.1 or Section 6.2 have not been satisfied or waived by Noble, but
only if Noble has used its best efforts and acted in good faith in attempting to
satisfy all such conditions and Noble is not then in breach or default in any
material respect of this Agreement; or (ii) by the Company and the Shareholders
if on the Closing Date any of the conditions specified in Section 6.1 or Section
6.3 have not been
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satisfied or waived by the Company and the Shareholders, but only if they have
used their its best efforts and acted in good faith in attempting to satisfy all
such conditions and if the Company and the Shareholders are not then in breach
or default in any material respect of this Agreement; or
(c) by the Board of Directors of Noble if (i) there has been a material
breach or default by the Company and the Shareholders of any representation or
warranty or in the observance of their convenants and agreements contained in
this Agreement of which notice has been given in writing by Noble and which has
not been cured within thirty (30) business days of receipt of such notice; or
(ii) the Closing Date has not occurred prior to December 31, 1997, or such other
date as shall be mutually acceptable to Noble, the Company and the Shareholders,
without fault on the part of Noble; or
(d) by the Board of Directors of the Company and the Shareholders if (i)
there has been a material breach or default by Noble of any representation or
warranty or in the observance of its covenants and agreements contained in this
Agreement of which notice has been given in writing by the Company and the
Shareholders and which has not been cured within thirty (30) business days of
receipt of such notice; or (ii) the Closing Date has not occurred prior to
December 31, 1997, or such other date as shall be mutually acceptable to Noble,
the Company and the Shareholders without fault on the part of the Company; or
(e) by the Board of Directors of either Noble or the Company or by the
Shareholders if any regulatory agency has denied approval for the transactions
contemplated hereby and, if such denial is appealable, neither Noble, the
Company nor the Shareholders have filed a petition seeking review of such order
of denial or taken other similar action under applicable law, within thirty (30)
days after the issuance or entry by the governmental agency of such order of
denial.
SECTION 8.2. Effect of Termination. In the event of the termination of
this Agreement as provided in Section 8.1, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall forthwith
become null and void, and there shall be no liability on the part of Noble, the
Company and the Shareholders, or any of the officers or directors of Noble or
the Company except (i) for fraud or willful and material breach of this
Agreement, (ii) that the Escrow Shares shall be delivered to the Company, unless
this Agreement is terminated as a result of (A) (x) a material breach or default
by the Company and the Shareholders of any representations and warranties of the
Company and the Shareholders contained herein or in the observance of their
covenants contained herein, which has not been cured within the period provided
for cure, or (y) the failure to satisfy Section 6.2 (c) or (d), if Noble was
without fault in connection therewith, or (B) the Company having experienced any
event, change or occurrence that has had a material adverse effect upon the
financial condition of the Company and its subsidiaries taken as a whole; and if
this Agreement is terminated as a result of either (A) or (B) above, the Escrow
Shares shall be returned to Noble and the Company shall reimburse Noble for fees
paid by Noble to Grant Thornton solely with respect to the audit of the
Company's 1995 and 1996 financial statements, (iii) that the Company shall use
its best effort
28
<PAGE>
to refinance the Interim Financing Transaction and obtain releases for Noble and
Mr. Skandalaris, and (iv) that Sections 5.2, 8.2, 10.2 and 10.6 hereof shall
survive any termination of this Agreement.
ARTICLE IX. CLOSING
SECTION 9.1. Closing. On the closing date of Noble's IPO, subject to
the fulfillment of the conditions precedent specified herein, the transactions
contemplated by this Agreement shall be consummated at the offices of Dykema
Gossett PLLC, 1577 North Woodward Avenue, Suite 300, Bloomfield Hills, Michigan
48304-2820, at 10:00 a.m. (the "Closing Date" or the "Closing"), or such other
date or dates or such other place as is mutually agreed to in writing by the
parties to this Agreement.
ARTICLE X. OTHER MATTERS
SECTION 10.1. Certain Definitions; Interpretation. As used in this
Agreement, the following terms shall have the meanings indicated:
"material" means material with respect to the entity in question and its
respective subsidiaries, taken as a whole.
"Material Adverse Effect", with respect to a person, means any
condition, event, change or occurrence that is reasonably likely to have
a material adverse effect upon (A) the condition (financial or other),
properties, assets, business, results of operations or prospects of such
person and its subsidiaries, taken as a whole, or (B) the ability of
such person to perform its obligations under, and to consummate the
transactions contemplated by, this Agreement.
"person" includes an individual, corporation, partnership, association,
trust or unincorporated organization.
"subsidiary", with respect to a person, means any other person
controlled by such person.
When a reference is made in this Agreement to Sections or Exhibits, such
reference shall be to a Section of, or Exhibit to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for ease of reference only and shall not affect the meaning or
interpretation of this Agreement. Whenever the words "include", "includes", or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation". Any
29
<PAGE>
singular term in this Agreement shall be deemed to include the plural, and any
plural term the singular.
SECTION 10.2. Survival. Only those agreements and covenants of the
parties that are by their terms applicable in whole or in part after the Closing
Date shall survive the Closing Date. All other representations, warranties,
agreements and covenants shall be deemed to be conditions of the Agreement and
shall not survive the Closing Date.
SECTION 10.3. Waiver. Prior to the Closing Date, any provision of this
Agreement may be: (i) waived by the party benefitted by the provision; or (ii)
amended or modified at any time (including the structure of the transaction) by
an agreement in writing between the parties hereto.
SECTION 10.4. Counterparts. This Agreement may be executed and
delivered in counterparts each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the same
instrument.
SECTION 10.5. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Michigan.
SECTION 10.6. Expenses. Noble shall pay all HSR Act filing fees related
to the filings by each party to this Agreement or the "ultimate parent entity"
of each such party (as that term is defined under the HSR Act). Except as
otherwise provided in this Agreement, each of the parties shall bear its own
expenses and the fees and expenses of its counsel (provided that fees of counsel
to the Company and counsel to DCT relating to this Agreement shall be paid by
DCT) and other agents in connection with the transactions contemplated by this
Agreement, regardless of whether or not the transactions contemplated by this
Agreement are consummated.
SECTION 10.7. Notices. All notices, requests, acknowledgments and other
communications hereunder to a party shall be in writing and shall be deemed to
have been duly given when delivered by hand, telecopy, telegram, telex or
facsimile (confirmed in writing) to such party at its address set forth below or
such other address as such party may specify by notice to the other party
hereto.
30
<PAGE>
If to the Company, to:
Utilase, Inc.
20101 Hoover
Detroit, Michigan 48205
Attention: Mr. James Bronce Henderson, III
with copies to:
Dykema Gossett PLLC
1577 North Woodward Avenue, Suite 300
Bloomfield Hills, Michigan 48304-2820
Attention: Gerald T. Lievois, Esq.
If to Noble, to:
Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
Attention: Mr. Michael C. Azar
with copies to:
Jaffe, Raitt, Heuer & Weiss
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
Attention: Peter Sugar, Esq.
SECTION 10.8. Entire Agreement; Etc. This Agreement represents the
entire understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
heretofore made. All terms and provisions of the Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Except as to Section 5.6 and Article VII (which may only
be enforced by any person who is not a party to this Agreement after the Closing
Date), nothing in this Agreement is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 10.9. Arbitration. In the event that Noble, the Company and the
Shareholders cannot agree as to any disputes arising under this Agreement, the
unresolved matter shall be resolved by arbitration if a request for arbitration,
as provided herein, is given. Arbitration shall be initiated by either party
making a written demand on the other party and simultaneously filing copies of
the demand, together with the required fees, with the Detroit Regional Office of
the American Arbitration Association ("AAA"). Within fifteen (15) days after
receipt of such demand, each party
31
<PAGE>
shall designate one arbitrator. These two arbitrators shall, within fifteen (15)
days after their appointment, select a third arbitrator, who shall be
experienced in the subject matter of the claim for which indemnification is
being sought. In the event that the first two arbitrators are unable to agree
upon the third arbitrator, then the arbitrators, shall apply to the AAA to
designate and appoint a person who meets these criteria as the third arbitrator.
In the event the party upon whom the original arbitration demand was served
shall fail to designate its arbitrator, the arbitrator designated by the party
requesting arbitration shall act as the sole arbitrator and shall be deemed to
be the single, mutually approved arbitrator to resolve the matter. Final
arbitration of the dispute shall occur within six (6) months of the giving of
the notice of arbitration. The place of arbitration shall be Troy, Michigan.
Arbitration shall be conducted under the auspices of the AAA, and the AAA Rules
shall govern all proceedings unless otherwise provided herein. In the case of
conflict between the AAA Rules and this Agreement, the provisions of this
Agreement shall govern. The arbitrators' sole power shall be to interpret the
provisions of this Agreement, and they shall have no power to change or modify
any provision of this Agreement. The parties shall have the right to discovery
in accordance with the Federal Rules of Civil Procedure except that discovery
may commence immediately upon the service of the demand for arbitration and
except that discovery shall be limited to document requests and depositions of
not more than two (2) people per party, and must occur within three (3) months
of the date of such service of notice of the complaining party. A party's
unreasonable refusal to cooperate in discovery shall be deemed to be a refusal
to proceed with arbitration, and, until the arbitration panel is complete, the
parties may enforce their rights (including the right of discovery) in the
circuit courts of the State of Michigan. Such enforcement in the courts shall
not constitute a waiver of a party's right to arbitration. Upon the completion
of the appointment of the arbitration panel, the arbitrators shall have the
power to enforce the parties discovery rights. It is expressly agreed that
material subject to discovery shall include written documents that must be
created from information that currently exists only in machine-readable form.
The parties expressly covenant and agree to be bound by the decision of
the arbitration panel and accept any such decision as the final determination of
the matter in dispute. A judgment of any Michigan Circuit Court may be rendered
upon any award made pursuant to this Agreement.
SECTION 10.10. Rules Governing the Issuance and Holding of Notes and
Escrow Shares. The Unregistered Securities are being issued by Noble to the
Company hereunder in reliance upon the following representations, warranties and
agreements of the Company.
(a) The Company acknowledges that the Unregistered Securities issuable
pursuant to this Agreement will not have been registered under the Securities
Act or under applicable state securities laws.
(b) All Unregistered Securities deliverable pursuant to this Agreement
are being acquired solely for investment purposes, and not as a nominee or agent
for others or with a view to or for sale in connection with any distribution,
and neither the Company nor any Shareholder has any present
32
<PAGE>
intention of selling, granting a participation in or otherwise distributing such
shares or any portion thereof.
(c) The Company and the Shareholders agree that they shall not make a
disposition of any Unregistered Securities issued pursuant to this Agreement
unless such securities have been registered, or are sold in accordance with an
exemption from registration under Rule 145, 144 or 144A under the Securities
Act, or unless an exemption from the registration requirements of the Securities
Act and applicable state securities laws (other than under Rule 145,144 or 144A)
is available and until Noble shall have received an opinion of counsel
reasonably satisfactory to Noble to the effect that such exemption from the
registration requirements of the Securities Act is valid and available.
(d) The Company and the Shareholders acknowledge that their investment
in Unregistered Securities is a speculative investment with limited liquidity
and subject to the risk of loss. The Company and the Shareholders represent and
warrant to Noble that they are able to fend for themselves in the transactions
contemplated by this Agreement, have such knowledge and expertise in financial
and business matters as to be capable of evaluating the merits and risks of
their investment and have the ability to bear the economic risks (including the
risk of loss) of its investment.
(e) The Company and the Shareholders represent and warrant they have had
the opportunity to ask questions of Noble concerning its business and to obtain
any information which it considered necessary to verify the accuracy of or to
amplify upon Noble's disclosures, and have had all questions which have been
asked by it answered by Noble.
SECTION 10.11. Assignment. This Agreement may not be assigned by any
party hereto without the written consent of the other parties, except that Noble
may assign all or any of its rights hereunder to any wholly-owned subsidiary of
Noble provided that no such assignment shall relieve the assigning party of its
obligations hereunder, including its obligations with respect to the payment of
the Purchase Price and the Notes.
[This space intentionally left blank.]
33
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NOBLE INTERNATIONAL, LTD.
By: /s/ Robert J. Skandalaris
_______________________________
Name: Robert J. Skandalaris
Title: Chief Executive Officer
UNDERTAKING
The undersigned, Robert J. Skandalaris, does hereby expressly join in
and agree to be bound by Section 5.1 of the Agreement and further agrees that
any notice to the undersigned may be effected by delivery of same to Noble as
provided in the Agreement.
/s/ Robert J. Skandalaris
_____________________________________
ROBERT J. SKANDALARIS
34
<PAGE>
UTILASE, INC.
By: /s/ James Bronce Henderson III
____________________________________
Name: James Bronce Henderson III
Title: President
DCT, INC.
By: /s/ James Bronce Henderson III
____________________________________
Name: James Bronce Henderson III
Title: Chief Executive Officer
/s/ John K. Baysore
_______________________________________
John K. Baysore
35
SUBORDINATED PROMISSORY NOTE -- SERIES A (Baysore)
$106,918 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 John K. Baysore ("Lender"), at 465
Moran, Grosse Pointe Shores, Michigan 48236, or at such other place as Lender
may designate in writing, the principal sum of ONE HUNDRED SIX THOUSAND NINE
HUNDRED EIGHTEEN AND NO/100 DOLLARS ($106,918.00), 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 Agreement") 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], 1998, or until the date
paid if principal and accrued interest are paid in full prior to [month/day of
Closing Date], 1998. If not paid in full on or before [month/day of Closing
Date], 1998, 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], 1998,
and remains unpaid after that date which is 180 days after [month/day of Closing
Date], 1998. 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 evidenced by all of the then issued and outstanding notes of this
series, Borrower shall pay to Lender
<PAGE>
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,] the entire principal amount of this Note
remaining at the time unpaid, together with accrued interest
-2-
<PAGE>
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-
<PAGE>
SUBORDINATED PROMISSORY NOTE -- SERIES A (DCT, Inc.)
$1,779,874 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
SEVEN HUNDRED SEVENTY-NINE THOUSAND EIGHT HUNDRED SEVENTY-FOUR AND NO/100
DOLLARS ($1,779,874.00), 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 Agreement") 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], 1998, or until the date
paid if principal and accrued interest are paid in full prior to [month/day of
Closing Date], 1998. If not paid in full on or before [month/day of Closing
Date], 1998, 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], 1998,
and remains unpaid after that date which is 180 days after [month/day of Closing
Date], 1998. 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.
-3-
<PAGE>
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 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-
SUBORDINATED PROMISSORY NOTE -- SERIES B (Baysore)
$100,866 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 John K. Baysore ("Lender"), at 465
Moran, Grosse Pointe Shores, Michigan 48236, or at such other place as Lender
may designate in writing, the principal sum of ONE HUNDRED THOUSAND EIGHT
HUNDRED SIXTY-SIX AND NO/100 DOLLARS ($100,866.00), 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 Agreement") 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 evidenced by all of the then issued and outstanding notes of this
series, Borrower shall pay to Lender
<PAGE>
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,] the entire principal amount of this Note
remaining at the time unpaid, together with accrued interest
-2-
<PAGE>
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
SUBORDINATED PROMISSORY NOTE -- SERIES C (Baysore)
$190,314 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 John K. Baysore ("Lender"), at 465
Moran, Grosse Pointe Shores, Michigan 48236, or at such other place as Lender
may designate in writing, the principal sum of ONE HUNDRED NINETY THOUSAND THREE
HUNDRED FOURTEEN AND NO/100 DOLLARS ($190,314.00), 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 Agreement") 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], 2000, or until the date
paid if principal and accrued interest are paid in full prior to [month/day of
Closing Date], 2000. If not paid in full on or before [month/day of Closing
Date], 2000, 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], 2000,
and remains unpaid after that date which is 90 days after [month/day of Closing
Date], 2000. 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 evidenced by all of the then issued and outstanding notes of this
series, Borrower shall pay to Lender
<PAGE>
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,] the entire principal amount of this Note
remaining at the time unpaid, together with accrued interest
-2-
<PAGE>
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
<PAGE>
SUBORDINATED PROMISSORY NOTE -- SERIES C (DCT, Inc.)
$3,168,163 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 THREE
MILLION ONE HUNDRED SIXTY-EIGHT THOUSAND ONE HUNDRED SIXTY-THREE AND NO/100
DOLLARS ($3,168,163.00), 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 Agreement") 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], 2000, or until the date
paid if principal and accrued interest are paid in full prior to [month/day of
Closing Date], 2000. If not paid in full on or before [month/day of Closing
Date], 2000, 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], 2000,
and remains unpaid after that date which is 90 days after [month/day of Closing
Date], 2000. 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 evidenced by all of the then issued and outstanding notes of this
series, Borrower shall pay to Lender
<PAGE>
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,] the entire principal amount of this Note
remaining at the time unpaid, together with accrued interest
-2-
<PAGE>
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
SUBORDINATED PROMISSORY NOTE -- SERIES D (Baysore)
$176,193 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 John K. Baysore ("Lender"), at 465
Moran, Grosse Pointe Shores, Michigan 48236, or at such other place as Lender
may designate in writing, the principal sum of ONE HUNDRED SEVENTY-SIX THOUSAND
ONE HUNDRED NINETY-THREE AND NO/100 DOLLARS ($176,193.00), 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 Agreement") 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 and one-half percent (6.5%) per
annum (the "Effective Rate") until the Due Date, or until the date paid if
principal and accrued interest are paid in full prior to the Due Date. If not
paid in full on or before the Due Date, 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 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 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
<PAGE>
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,] 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
-2-
<PAGE>
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 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.
-3-
<PAGE>
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-
<PAGE>
SUBORDINATED PROMISSORY NOTE -- SERIES D (DCT, Inc.)
$2,933,099 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 TWO MILLION
NINE HUNDRED THIRTY-THREE THOUSAND NINETY-NINE AND NO/100 DOLLARS
($2,933,099.00), 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 Agreement") 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 and one-half percent (6.5%) per
annum (the "Effective Rate") until the Due Date, or until the date paid if
principal and accrued interest are paid in full prior to the Due Date. If not
paid in full on or before the Due Date, 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 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 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
<PAGE>
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,] 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
-2-
<PAGE>
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 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.
-3-
<PAGE>
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-
STOCK PURCHASE AGREEMENT
between
NOBLE INTERNATIONAL, LTD.,
CASS RIVER COATINGS, INC.,
GENE OLDFORD, KEVIN REDDING,
CHRIS FRAMPTON, JAN WOJEICHOWSKI
PAT PATTERSON AND JIM LAMB
January ____, 1996
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1 Sale and Purchase..................................................1
SECTION 2 Related Agreements.................................................2
SECTION 3 Closing............................................................2
SECTION 4 Representations and Warranties of Sellers..........................3
SECTION 5 Representations and Warranties of Buyer...........................15
SECTION 6 Covenants.........................................................16
SECTION 7 Indemnification...................................................18
SECTION 8 Conditions Precedent to Obligations of Buyer......................20
SECTION 9 Conditions Precedent to Obligations of Sellers....................22
SECTION 10 Termination.......................................................23
SECTION 11 Fees and Expenses.................................................24
SECTION 12 Post Closing Undertakings.........................................24
SECTION 13 Miscellaneous.....................................................24
LIST OF EXHIBITS..............................................................29
INDEX TO DISCLOSURE SCHEDULE..................................................30
1
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered into as of the
_____ day of January, 1996 by and between NOBLE INTERNATIONAL, LTD., a Michigan
corporation ("Buyer"); CASS RIVER COATINGS, INC., a Michigan corporation
("CRC"); GENE OLDFORD ("Oldford"); KEVIN REDDING ("Redding"); CHRIS FRAMPTON
("Frampton"); JAN WOJEICHOWSKI ("Wojeichowski"); PAT PATTERSON ("Patterson");
and JIM LAMB ("Lamb") (Oldford, Redding, Frampton, Wojeichowski, Patterson and
Lamb are hereinafter collectively referred to as "Sellers" and individually as
"Seller"). Buyer, CRC and Sellers are collectively referred to herein as the
"Parties".
WHEREAS, Sellers are the sole owners of all of the issued and
outstanding shares of capital stock, being Thirty Thousand (30,000) shares of
common stock, of CRC (the "Shares"); and
WHEREAS, Buyer desires to purchase from Sellers and Sellers desire to
sell to Buyer the Shares upon the terms and conditions set forth herein; and
WHEREAS, Buyer and Sellers executed a letter of intent dated September
20, 1995 (the "Letter of Intent") with respect to the sale of the Shares; and
WHEREAS, as a condition to Buyer's willingness to purchase the Shares
from Sellers, Sellers have agreed to provide certain consulting services to
Buyer and have further agreed not to compete with CRC in the conduct of CRC's
business.
NOW, THEREFORE, in consideration of the mutual covenants and subject to
the terms and conditions herein contained, the Parties hereby agree as follows:
Section 1. Sale and Purchase
1.1 Sale of Shares. Sellers will sell and deliver to Buyer and Buyer
will purchase and receive from Sellers on the Closing Date (as hereinafter
defined), the Shares for a total purchase price (the "Purchase Price") of Two
Hundred Thousand Dollars
($200,000.00 U.S.) (the "Purchase Price").
1.2 Payment. The Purchase Price shall be paid to Sellers (proportionate
to their respective share holdings) as follows:
1
<PAGE>
(a) The sum of $15,000.00 in immediately available funds upon
execution hereof (the "Deposit"); and
(b) The sum of $185,000.00 in immediately available funds at
the Closing.
The Deposit shall be refunded to Buyer if the transactions contemplated
herein are not consumated as a result of any of the conditions to Closing set
forth in Section 8 not being fulfilled or satisfied in the time and manner
specified.
Section 2. Related Agreements
2.1 Consulting. At the Closing, the Sellers shall each execute and
deliver to CRC a separate Consulting Agreement ("Consulting Agreement")
substantially in the form of Exhibit A attached hereto.
2.2 Option. At the Closing, and as additional consideration for the
sale of Shares, Buyer, and Sellers will enter into an Option Agreement ("Option
Agreement") substantially in the form of Exhibit B attached hereto which shall
provide Sellers the right to purchase twenty-five (25%) percent of the Shares
for one dollar ($1.00) pursuant to the terms of the Option Agreement.
Section 3. Closing
3.1 Place and Time of Closing. Unless otherwise agreed to by the
Parties, the closing of the purchase and sale provided for in this Agreement
(the "Closing") shall take place at the offices of Strobl & Borda, P.C., 300
East Long Lake Road, Suite 200, Bloomfield Hills, Michigan, commencing at 10:00
a.m., Eastern Standard Time, on February 1, 1996 (the "Closing Date").
3.2 Deliveries by Sellers. At the Closing, Sellers shall deliver to
Buyer the following:
a. Certificates representing the Shares in negotiable form,
free and clear of all Encumbrances (hereinafter defined) duly endorsed for
transfer to Buyer;
b. Certificates of each Seller certifying to the accuracy on
the Closing Date of the representations and warranties of Sellers set forth in
Section 4 below;
2
<PAGE>
c. Resignations effective as of the Closing Date of each of
the officers and directors of CRC whose resignation has been requested by Buyer
prior to the Closing Date;
d. The Minute Book, Stock Transfer Book (containing canceled
stock certificates reflecting all transfers of capital stock prior to the
Closing Date) and Corporate Seal, if any, of CRC;
e. The Consulting Agreements duly executed by each Seller;
f. Such certificates, instruments, documents and other items
as are referred to elsewhere in this Agreement or as Buyer shall reasonably
request.
3.3 Deliveries by Buyer. On the Closing Date, Buyer shall pay or
deliver to Seller the following:
a. The Purchase Price, by cashier's check or wire transfer;
b. A certificate of Buyer certifying to the accuracy on the
Closing Date of the representations and warranties of Buyer set forth in Section
5 below;
c. The Option Agreement duly executed; and
d. Such other items as Sellers shall reasonably request.
Section 4. Representations and Warranties of Sellers
The representations and warranties made by Sellers herein or in any
instrument or document furnished by Sellers to Buyer in connection herewith are
made jointly and severally and shall survive the Closing, and any investigation
made at any time with respect thereto, for a period of five (5) years after
Closing. All such representations and warranties are deemed material and Buyer
is entering into this Agreement relying on such representations and warranties.
Sellers represent and warrant to Buyer that the statements contained in this
Section are true, correct and complete in all respects and do not omit to state
any fact necessary to make them not misleading in any respect and that true,
complete and correct copies of all documents and instruments identified in the
Disclosure Schedule attached to this Agreement have been provided to Buyer. Each
of the representations and warranties made by Sellers hereunder shall be deemed
to have been
3
<PAGE>
made again on and as of the Closing Date.
4.1 Due Incorporation; Good Standing; Qualification; Assumed Names. CRC
is duly organized, validly existing and in good standing under the laws of the
State of Michigan, has all requisite power and authority to own, operate and
lease its properties and to carry on its business as now being conducted and is
duly qualified as a foreign corporation and in good standing in every
jurisdiction in which the failure to so qualify would have a material adverse
affect on its assets, business or condition, financial or otherwise. Schedule
4.1 lists every corporate and assumed name under which CRC has ever transacted
business.
4.2 No Violation to Result. Neither the execution of this Agreement nor
the consummation of the transactions contemplated hereby will (i) violate or
result in a breach of or constitute a default under any provision of the
Articles of Incorporation or By-Laws of CRC; (ii) violate any order, arbitration
award, judgment, decree, law, ordinance, regulation or any other restriction of
any kind or character to which CRC is a party or by which CRC is bound or with
respect to which any property of CRC is subject or is bound; (iii) violate or
result in a breach of or constitute a default (or would result in or constitute
such a breach or default with notice or lapse of time or both) under any
provision of any agreement, permit, instrument, indenture, mortgage, lease or
license to which CRC is a party; or (iv) require the consent of any other person
or the consent of any governmental body, agency or authority.
4.3 Ownership of Shares, Due Execution by Sellers.
a. Sellers are the lawful record owners of the Shares, and the
same are and shall be delivered to Buyer on the Closing Date 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 and indefeasible title thereto to Buyer. Sellers, and each of them,
have not entered into any contract or agreement, other than this Agreement, to
sell or otherwise transfer any Shares or grant any rights or interests therein
to CRC or any other person. All legal and other steps necessary for Sellers to
transfer and deliver the Shares to Buyer and perform their obligations hereunder
have been taken.
b. Sellers and CRC have duly executed and delivered this
Agreement, and this Agreement constitutes a legal, valid and binding agreement
enforceable against Sellers and CRC in accordance with its terms.
4
<PAGE>
4.4 Authorized and Outstanding Capital Stock. The authorized capital
stock of CRC consists of Thirty Thousand (30,000) shares of common stock. The
Shares shown on Exhibit C are all of the issued and outstanding shares of the
capital stock of CRC on the date of this Agreement. The Shares have been validly
issued and are fully paid and non-assessable.
4.5 No Commitment to Issue Capital Stock or Rights to Acquire Capital
Stock. CRC has not entered into any agreement or made any commitment to sell or
otherwise transfer or issue any shares of capital stock after the date of this
Agreement, nor are there any outstanding options, subscriptions, warrants,
conversion rights or similar rights of any kind convertible into any shares of
the capital stock of CRC.
4.6 Financial Statements. The balance sheets of CRC as of December 31,
1992, December 31, 1993 and December 31, 1994 and the related statements of
income, changes in stockholders' equity and cash flows for the twelve (12) month
periods then ended, together with the notes thereto, and the reviewed financial
statement of CRC for the period ending December 31, 1995 (collectively, the
"Financial Statements") are attached to Schedule 4.6. To Sellers' knowledge, the
Financial Statements are in accordance with the books and records of CRC,
present fairly the financial position and the results of the operations, changes
in stockholders' equity and cash flow of CRC for the periods then ended, and
have been prepared in conformity with generally accepted accounting principles
("GAAP") consistently applied with prior periods except as may otherwise be
indicated in the notes thereto.
4.7 Unreported and Contingent Liabilities. Except as expressly set
forth in the Financial Statements, and except as otherwise incurred by CRC in
the ordinary course of its business during the period from October 31, 1995 to
the date of Closing, CRC has no liabilities or obligations, 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 of contract, breach of warranty, tort, infringement or any
violation of law, including, but not limited to, health, safety and
Environmental Laws (as defined below). CRC 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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4.8 Absence of Certain Changes; Prospects.
a. Since October 31, 1995 the business of CRC has been
conducted only in the ordinary course, consistent with past practice, and there
has not been (i) any material change in the condition (financial or otherwise),
assets, liabilities, earnings, business or operations of CRC, other than changes
in the ordinary course of business, none of which either singly or in the
aggregate has been materially adverse to CRC; (ii) any damage, destruction,
casualty or other similar occurrence or event (whether or not insured against),
which either singly or in the aggregate materially adversely affects the assets,
liabilities, earnings, business or operations of CRC; (iii) any mortgage or
pledge of or encumbrance attached to any of the properties or assets of CRC;
(iv) any incurring or creation by CRC of any liability, commitment or obligation
except unsecured current liabilities incurred in the ordinary course of
business; (v) any sale, transfer or other disposition by CRC of any of its
assets except inventory sold in the ordinary course of business and except for
machinery and equipment disposed of in the ordinary course of business and
replaced by new or used machinery or equipment of comparable or better value;
(vi) any declaration or payment by CRC of any dividends or other distribution on
or in respect of its capital stock; (vii) any purchase, redemption or other
acquisition by CRC of any shares of its capital stock; (viii) except for Five
Hundred Thousand Dollars ($500,000.00) in actual or accrued year end bonuses and
commissions, any increase in compensation (including, without limitation,
salaries, commissions, bonuses or other forms of non-qualified profit sharing
distributions) paid or payable to any of the shareholders, directors, officers
or key management employees of CRC; (ix) any event, condition or state of facts
that could be reasonably likely to have a material adverse effect on CRC.
b. Sellers know of no reason to anticipate that the volume of
business that CRC presently enjoys as reflected on the Financial Statements
should not continue or of any reason that the projections made in the business
plans heretofore provided by Sellers to Buyer are not obtainable.
4.9 Corporate Books and Records. All corporate action which has been
taken by the Board of Directors or shareholders of CRC has been fully and
accurately recorded in its minute books and its books and records are true,
correct and complete in all material respects as of the date of this Agreement.
4.10 Contracts.
a. Schedule 4.10a. contains a true, complete and
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correct list of all contracts to which CRC is a party or by which CRC or any of
its properties are bound, whether written or oral (the "Contracts"). Each of the
Contracts is valid, binding and in full force and effect and the continued
validity, effectiveness and enforceability thereof will not be materially
affected by the transactions contemplated by this Agreement. There is no
material default (or any event which, with notice or lapse of time, would
constitute a material default) by CRC or by any other party existing with
respect to the Contracts. CRC is not restricted by any contract or agreement
from carrying on any line of business in any part of the world, including, but
not limited to, the business in which it is now engaged. Sellers and CRC have no
reason to believe that CRC will not be able to fulfill, when due, all of CRC's
obligations under the Contracts.
b. As used in this Agreement, Contracts shall mean and include
the following instruments or arrangements to which CRC is a party or by which
its assets are bound: (i) agreements for the purchase of any machinery or
equipment; (ii) purchase orders, including, but not limited to, blanket purchase
orders; (iii) agreements or orders, including, but not limited to, blanket
purchase orders, for the future sale of products or services; (iv) any agreement
which by its terms does not terminate or is not terminable without penalty to
CRC within one year after the Closing Date; (v) loan agreements, indentures,
promissory notes, installment purchase agreements, conditional sales agreements,
security or pledge agreements, guaranty or other similar type of agreements;
(vi) broker, agency, distributor, sales representative, franchise or other
similar agreements; (vii) consulting contracts; (viii) personal property and
real property leases; (ix) contracts relating to the operation, maintenance or
management of any property; (x) contracts with any government or with any
agency, department or instrumentality of any government; (xi) patent, copyright,
trade secret or trademark license agreements; (xii) Employee Plans as defined
below; or (xiii) contracts with any present or former officer or director of CRC
or with any person related to any present or former officer or director of CRC.
c. Schedule 4.10c. is a true, complete and correct listing of
all licenses used in the operation of CRC, including but not limited to all
licenses pertaining to the Intellectual Property as defined below. CRC holds all
licenses which are or will be necessary to conduct the business of CRC as now
conducted and as reflected in the business plans of CRC heretofore provided to
Buyer. All such licenses are renewable by their terms or in the ordinary course
of business without the need to comply with any special qualification procedures
or to pay any amounts not disclosed to Buyer. No present or former owner,
director, officer
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or employee of CRC owns or has any proprietary, financial or other interest of
any kind, direct or indirect, in any such license.
4.11 Government Licenses and Permits. CRC possesses all material
federal, state and local licenses or permits, if any, necessary to the conduct
of its business as now operated, and all such licenses and permits are
identified on Schedule 4.11. Such licenses and permits are valid and in full
force and effect and there exists no conflict with the federal, state or local
licenses or permits of others. The consummation of the transactions provided for
in this Agreement will not require the consent of any governmental agency or
authority from whom such federal, state or local licenses or permits were
obtained nor cause any of such licenses or permits to be terminated or become in
default and no action or claim is pending or threatened, to revoke or terminate
any thereof or declare any of them invalid in any respect.
4.12 Employee Matters; Employee Benefit Plans; Employment Agreement and
Similar Arrangements.
a. Schedule 4.12a. contains a true, complete and correct list
of all employee benefit plans and labor and employment agreements or other
similar arrangements to which CRC is or ever has been a party or by which it is
bound (collectively, "Employee Plans" and individually, "Employee Plan"),
including, without limitation, (i) executive compensation, profit-sharing,
deferred compensation, bonus (payable in cash or property), stock option, stock
purchase, pension, retiree health, retiree life, consulting, retirement,
severance, welfare, incentive, or other benefit plan, agreement or arrangement;
(ii) any plan, agreement or arrangement providing for "fringe benefits" or
perquisites to employees, officers, directors or agents, including, but not
limited to, benefits relating to company automobiles, clubs, vacation leave,
child care leave, parenting leave, sabbatical leave, educational, disability,
sickness or personal leave, and medical, dental, hospitalization, life, accident
or disability insurance and other types of insurance and severance; (iii)
employment or consulting agreement, commitment or understanding of any kind; and
(iv) any other "employee benefit plan" (within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")).
b. None of the Employee Plans is a defined benefit plan within
the meaning of Section 3(35) of ERISA, a qualified "pension plan," within the
meaning of Section 3(2) of ERISA or a multi-employer plan within the meaning of
Section 3(37) of ERISA.
c. With respect to each of the Employee Plans, CRC is in
substantial compliance with the requirements provided by any
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and all statutes, orders or governmental rules or regulations currently in
effect, including, but not limited to, ERISA and the Internal Revenue Code of
1986, as amended (the "Code") applicable to such Employee Plans. CRC has
performed all obligations required to be performed by it under any of the
Employee Plans. CRC is not in default under any Employee Plan nor is any other
party to an Employee Plan in default thereunder. There are no actions, suits or
claims pending or threatened against such Employee Plans or their assets, or
arising out of such Employee Plans.
d. CRC has paid in full, subject only to normal retrospective
adjustments in the ordinary course, all required insurance premiums with regard
to such Employee Plans for policy years or other applicable policy periods
ending on or before the date of this Agreement. CRC is not aware of the
existence of any governmental audit or examination of any Employee Plan or of
any facts or circumstances which would lead them to believe that any such audit
or examination is pending or threatened.
e. CRC has delivered to each participant or other person
entitled to receive such material all plan descriptions, returns, reports,
schedules, notices and similar materials relating to its Employee Plans required
to be provided by law, has filed on a timely basis all returns, reports,
notices, declarations and other documents relating to the Employee Plans
required to be filed with any government agency and has provided copies thereof
to Buyer.
f. CRC has substantially complied with, and is not in material
violation of, applicable federal, state and local equal employment opportunity
laws and other employment or labor statutes, laws and regulations with respect
to its employees, including, without limitation, those involving health, safety,
wage and hour, unemployment, social security and workers' compensation matters.
g. Except as disclosed in Schedule 4.12g, CRC is not a party
to any collective bargaining agreement; no such agreement determines the terms
and conditions of employment of any employee of CRC; no collective bargaining
agent has been certified as a representative of any of the employees of CRC; no
election and no representation campaign is now in progress with respect to any
of the employees of CRC. There is no dispute, grievance, arbitration, unfair
labor practice charge, strike, request for union representation or labor
activity pending or, within the last three (3) years, threatened or filed
against CRC or Sellers nor does CRC know of the occurrence of any event which
would give rise to any such labor activity, dispute, grievance, arbitration,
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unfair labor practice charge, strike or request for representation.
h. No amounts have been paid or accrued and no amounts are or
will be owing to any employees under any bonus policy of CRC.
4.13 Litigation. Except as disclosed in Schedule 4.13, CRC does not
have, and has not for the past five (5) years had, pending or involving it, or
threatened against it, any claim, action, suit, arbitration proceeding,
governmental proceeding or investigation or other proceeding of any character.
4.14 Assets.
a. Schedule 4.14a. sets forth a true, complete and correct
description or, as applicable, summary description, of all of the assets of CRC.
The assets listed in Schedule 4.14a. constitute all of the assets used in or
necessary to the conduct of CRC's business as it is now being conducted or as it
is planned to be conducted.
b. Except as set forth in the Schedule 4.14b., all of the
assets of CRC are owned by it free and clear of all liens, security interests
and encumbrances. There are no options or rights of any other person to acquire
any such asset. All taxes payable by CRC in connection with the acquisition of
any such assets, including without limitation, property, sales and use taxes,
have been paid in full.
c. To Sellers' knowledge, the machinery and equipment of CRC
are in good working order, ordinary wear and tear exceptedand are usable in the
ordinary course of business of CRC consistent with past practice. Sellers have
not been made aware of any instances where the machinery and equipment do not
conform to applicable laws relating to their construction, use and operation.
d. All personal property in the possession of CRC which is
owned by or in which an interest is claimed by any other person or entity
(whether a customer, supplier or other person or entity), including, but not
limited to, customer owned and/or consigned tooling, equipment, software,
specifications, manuals and other intellectual property, is listed on Schedule
4.14e.
e. Schedule 4.14f. describes all personal property that is
currently being leased by CRC under a capitalized lease arrangement or a true
lease arrangement, the monthly rental payment therefor, the expiration date
thereof and any renewal or purchase options relating thereto. All such leased
personal
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property is in good working order, ordinary wear and tear excepted. All such
leased property is situated at CRC's business premises and is used or useable by
CRC in the operation of its business.
f. All accounts receivable of CRC have arisen only in the
ordinary course of business consistent with past practice for goods sold or
delivered or services rendered and are collectible in full at the recorded
amounts thereof in the ordinary course of business.
4.15 Real Property.
a. Schedule 4.15a. sets forth by legal description and address
and general description all office, plant and other facilities owned and leased
by CRC (the "Real Property").
b. Except as disclosed on Schedule 4.15b Sellers are not aware
of any instance where the ownership and use of the Real Property by CRC, the
conduct thereon of the business of CRC and the operation and maintenance
thereof, to the extent operated and maintained by CRC, contravene any law, rule,
regulation, ordinance or statute, including those relating to zoning, building,
land use, environmental, health and safety, fire, air, sanitation and noise
control.
c. To Sellers' knowledge the Real Property is in good repair
and condition, normal wear and tear excepted and, to the knowledge of Sellers
and CRC, contains no latent defects, except as may be provided for in paragraph
4.16 below. No pending or threatened condemnation or similar proceeding exists
with respect to the Real Property.
4.16 Environmental Matters.
a. This paragraph 4.16 contains the entire agreement of the
parties regarding environmental matters and shall supersede and control any
other agreement, written or oral, or any other provision of this Agreement which
may conflict with the terms of this paragraph 4.16.
b. As used in this Agreement, the terms "Environmental Law" or
"Environmental Laws" mean any federal, state, or local statute, law, ordinance,
rule or regulation which governs the protection of human health and/or the
environment, including, but not limited to the following: Comprehensive
Environmental Response, Compensation and Liability Act, (42 U.S.C. 9601, et
seq.); the Resource Conservation and Recovery Act (42 U.S.C. 6901, et seq.); the
Hazardous Materials Transportation Act
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(49 U.S.C. 801, et seq.); the Toxic Substances Control Act (15 U.S.C. 2601, et
seq.); the Clean Water Act (33 U.S.C. 1251, et seq.); the Clean Air Act (42
U.S.C. 7401, et seq.); or the Michigan Natural Resources and Environmental
Protection Act (M.C.L. 324.101 et seq.).
c. As used in this Agreement, "Hazardous Substance" means any
substance, including but not limited to a gas, liquid or solid, which is
regulated by any Environmental Law or which may be injurious to human health or
the environment.
d. No underground storage tanks or above ground storage tanks
have been installed, used or present on or at the Real Property during Seller's
or CRC's occupancy of the Real Property. Seller and CRC are not aware of any
underground or above ground storage tanks on or at the Real Property.
e. Seller and CRC have no knowledge of any violation,
enforcement action, information request, litigation or other legal or
administrative action concerning the off site treatment, storage, disposal,
handling or recycling of any Hazardous Substance. Seller and CRC warrant that
the operations of CRC with respect to off site treatment, storage, disposal,
handling or recycling have complied with all applicable laws, rules and
regulations. Seller and CRC are not aware of any fact or circumstance which
would give rise to a liability of CRC for damage, loss, judgment, claim, cause
of action, cost, penalty, fine or expense associated with off site treatment,
storage, disposal, handling or recycling of any Hazardous Substance.
f. As a condition precedent to closing, Buyer shall have
access to all information, data, reports, or documentation generated by or on
behalf of, or in possession of Seller or CRC concerning the environmental
condition of the Real Property. As a further condition precedent to closing,
Buyer, and its Lender, shall, in the sole discretion of each, be satisfied with
the environmental condition of the Real Property.
g. It is the intent of the parties that any environmental
conditions of the Sherman Street property shall be and remain the sole
responsibility of Sellers and that Buyer and CRC shall have no responsibility or
liability for those conditions, except that Buyer and CRC shall be responsible
for any environmental condition caused solely and directly by Buyer or CRC after
the date of closing. It shall be encumbent upon Sellers to establish that any
environmental condition discovered after the date of closing was caused solely
and directly by Buyer or CRC. To that end, Buyer and Sellers agree as follows:
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(i) As a condition precedent to closing, Seller shall have
received a written certification of closure of the Sherman Street facility from
the Michigan Department of Environmental Quality ("MDEQ"), or, shall have
entered into an Administrative Order by Consent with the State which provides
for and requires Sellers to obtain a closure of the Sherman Street facility from
the MDEQ; and
(ii) Sellers shall jointly and severally indemnify Buyer and
CRC from and against any damage, claims, causes of action, loss, penalties,
fines (both civil and criminal), judgments, costs or expenses (including actual
attorneys' consultant fees), brought by any party whatsoever, arising at any
time, which result from the environmental condition of the Sherman Street
facility, except that Sellers shall not be required to indemnify Buyer or CRC
from any claim arising from an environmental condition caused solely and
directly by Buyer or CRC after the date of closing. It shall be encumbent upon
Sellers to establish that any environmental condition discovered after the date
of closing was caused solely and directly by Buyer or CRC. This provision shall
survive closing.
4.17 Tax Returns, Etc. CRC has filed all tax returns and reports
required to be filed by it with the United States federal government, with any
state and with any other jurisdiction within the time period required by law,
including but without limitation, returns of federal, state, local and foreign
income taxes. All such returns and reports are true and correct and all taxes,
interest, penalties, assessments or deficiencies shown to be due or claimed to
be due on such tax returns and reports or which is otherwise owing or may become
owing (as determined by a subsequent tax audit) in connection with the conduct
by CRC of its business have been paid in full or are properly accrued for on the
books and records of CRC. True and complete copies of all federal, state, local
and foreign income tax returns for the past three (3) years (together with
copies of any examination reports of federal, state, local and foreign tax
authorities relating thereto) have been furnished to Buyer. No agreements have
been made by or on behalf of CRC for any waiver or for the extension of any
statute of limitations governing the time of assessment or collection of any
taxes. CRC and Sellers have received no notice of any pending or threatened
audit by the IRS, or any state or local agency, related to CRC's tax returns or
tax liability for any period, and no claim for assessment or collection of taxes
has been asserted against CRC. There are no federal, state or local tax liens
outstanding against any of CRC's assets, properties or business.
4.18 Compliance with Laws Generally. CRC has substantially complied
with all laws, rules, regulations and ordinances
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affecting its business. There are no existing or, to the knowledge of Sellers
and CRC, proposed laws, rules, regulations or ordinances of such a nature as
could be expected to materially adversely affect the continued conduct of CRC's
business in the manner presently carried on and conducted.
4.19 Intellectual Property.
a. Schedule 4.19a. contains a true, complete and correct list
(by specific name, registration or general description, as appropriate) of all
patents, patent applications, unregistered copyrights, copyright registrations
and applications, trade and service names and marks and registrations and
similar applications and registrations of intellectual property and all computer
software (including without limitation all operating systems, applications
programs, source and object code and all documentation thereof and manuals
relating thereto), trade secrets, know-how, show-how, inventions,
specifications, information systems, designs, processes, data, records and other
intellectual property owned by CRC or as to which CRC is a licensee or licensor
(the "Intellectual Property"). Except as disclosed on Schedule 4.19 a., CRC does
not have any obligation to compensate any person for the use of any Intellectual
Property rights and has not granted to any person any license, option or other
rights to use in any manner any of the Intellectual Property.
b. No employee of CRC is in default under any agreement
relating to the right of such employee to be employed by CRC relating to the
intellectual property of others. The Intellectual Property that is not leased or
purchased from third persons was developed entirely by the employees of CRC
during and in the course of their employment by CRC and does not include any
intellectual property made prior to their employment by CRC or that of any
previous employer.
c. The consummation of this Agreement will not affect the
continuation, validity or effectiveness of CRC's right, title and interest in
the Intellectual Property. No party has ever filed a claim against CRC or
Sellers alleging that it or any of them has violated, infringed on or otherwise
improperly used the intellectual property rights of such party. CRC has not to
Sellers' knowledge violated or infringed any trademark, trade name, service
mark, service name, patent, copyright or trade secret or other intellectual
property right held by others.
4.20 Insurance. Schedule 4.20 lists all policies of property, liability
and workers' compensation insurance and similar insurance covering CRC and its
properties. All such
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policies are in full force and effect on the date of this Agreement.
4.21 Broker. Neither CRC nor Sellers have engaged any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
4.22 Updating of Disclosure Schedules and Exhibits. If after the date
of this Agreement there shall be any material change in the matters disclosed in
any disclosure schedule or any material inaccuracy in any part of any disclosure
schedule shall come to the attention of Sellers or CRC, Sellers will promptly
inform Buyer thereof.
Section 5. Representations and Warranties of Buyer.
The representations and warranties made by Buyer herein shall survive
the Closing for a period of five (5) years after the Closing. The
representations and warranties in this Section are deemed material and Sellers
are entering into this Agreement relying on such representations and warranties.
Buyer represents and warrants to Sellers that the statements contained in this
Section are true, correct and complete. Each of the representations and
warranties made by Buyer hereunder shall be deemed to have been made again on
and as of the Closing Date.
5.1 Due Incorporation and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan.
5.2 Authorization and Approval of Agreement. Buyer has all requisite
corporate power and authority to enter into this Agreement and to perform the
obligations required to be performed by its hereunder. All corporate proceedings
required of Buyer for the execution and delivery of this Agreement and for the
consummation of the transactions provided for herein have been duly taken.
5.3 Ability to Carry Out Agreement. The execution and delivery of this
Agreement by Buyer and the performance by Buyer of its obligations hereunder
will not conflict with, violate or result in any breach of or constitute a
material default under any provisions of the governing charter of Buyer or of
any of the provisions of any indenture, mortgage, lease, agreement, license,
permit, instrument, order, arbitration award, judgment, decree,
law, ordinance, regulation or any other restriction of any kind or character to
which Buyer is a party.
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5.4 No Broker Involved. Buyer has not expressly or impliedly engaged
any broker, finder or agent with respect to the transactions contemplated by
this Agreement.
5.5 Investment Representation. Buyer is acquiring the Shares for
investment purposes and not with a view to, or for resale in connection with,
any distribution of the Shares.
Section 6. Covenants.
6.1 Covenants of Sellers. Unless otherwise first consented to in
writing by Buyer, Sellers covenant and agree that from the date of this
Agreement to the Closing Date, they will (i) not sell, transfer or otherwise
dispose of any Shares or any right or interests therein, (ii) take all steps
necessary to deliver the Shares free and clear of liens and encumbrances and
(iii) not take any action that will cause any of the representations and
warranties made herein to be inaccurate on the Closing Date.
6.2 Affirmative Covenants of Sellers. From the date of this Agreement
to the Closing Date, Sellers will cause CRC to:
a. Carry on its business in a good and diligent manner
consistent with prior practice and only in the usual and ordinary course and use
reasonable efforts to preserve its business organization intact and conserve the
good will and relationships of its customers, suppliers and others having
business relations with it;
b. Maintain its corporate existence and good standing in its
jurisdiction of incorporation and in each other jurisdiction in which it is
required to be qualified to do business as a foreign corporation;
c. Duly and timely file or cause to be filed all reports and
returns required to be filed with any governmental body, agency or authority and
promptly pay or cause to be paid when due all taxes, assessments and
governmental charges including interest and penalties levied or assessed, unless
diligently contested in good faith by appropriate proceedings;
d. Maintain and keep in good order and repair, consistent with
past practice, all buildings, offices, shops and other structures, and all
machinery, tools, equipment, fixtures and other tangible personal property; and
e. Maintain in full force and effect all existing policies of
insurance except for replacements or renewals in the
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ordinary course of business.
6.3 Covenants of CRC and Sellers. Unless otherwise first consented to
in writing by Buyer, Sellers from the date of this Agreement to the Closing Date
will not cause or permit CRC to:
a. Amend its Articles of Incorporation or By-Laws;
b. Authorize for issuance, issue or deliver any additional
shares of its capital stock or securities convertible into or exchangeable for
shares of its capital stock, or issue or grant any right, option or other
commitment for the issuance of shares of its capital stock or of such
securities, or split, combine or reclassify any shares of its capital stock;
c. Except as provided in paragraph 4.8 a.(viii),
Declaredeclare or pay any dividend or authorize or make any distribution on or
in respect of, or directly or indirectly purchase, retire or redeem or otherwise
acquire any shares of its capital stock;
d. Except as provided in paragraph 4.8 a.(viii), Incurincur
any liability, commitment or obligation, except unsecured current liabilities
incurred in the ordinary course of business;
e. Borrow, or agree to borrow, any funds other than under and
pursuant to its existing loan agreements;
f. Sell, transfer or otherwise dispose of assets except for
the sale or disposition of obsolete or damaged tangible personal property and
except for the sale of inventory in the ordinary course of business;
g. Except for amounts committed for emergency repairs, make
any material capital commitments;
h. Mortgage, pledge or encumber any of its assets or guaranty
the obligations of any person;
i. Make any adjustments in the salary rate of, or authorize
any bonus payments to or consulting arrangements with, any officer or management
employee except for increases in salary or wage rates and the payment of bonuses
consistent with past practices;
j. Terminate or reduce any insurance coverage;
k. Commit a default under or breach of any material contract;
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l. Amend, modify or cancel any material contract or waive any
material right under any material contract;
m. Enter into any contracts or agreements of the kind that
would have constituted a material contract if such contract or agreement had
been in existence on the date of this Agreement;
n. Take any action that will cause any of the representations
and warranties made herein to be inaccurate on the Closing Date.
Section 7. Indemnification.
7.1 Indemnification by Sellers. Sellers, jointly and severally, shall
indemnify and hold Buyer and its directors, officers, employees and agents
harmless from and against all losses, damages, deficiencies, liabilities, costs
and expenses (including interest, penalties and reasonable attorneys' fees and
expenses) ("Loss" or "Losses") suffered by any of them to the extent resulting,
directly or indirectly, from (i) any misrepresentation or breach of warranty
with respect to the representations and warranties made in Section 4 above; (ii)
any breach, nonfulfillment or default by Sellers or CRC in the performance of
any of the covenants and agreements made by Sellers or CRC herein or in any
schedule, certificate, instrument or agreement delivered pursuant hereto; (iii)
any liability or obligation of Sellers; (iv) any liability or obligation of CRC
arising or accruing prior to the Closing Date and not disclosed to Buyer herein;
or (v) the actions or omissions of CRC or any of its officers, shareholders,
employees or agents prior to the Closing Date, including without limitation, any
claim which is based upon negligence, strict liability or any implied or express
representation, warranty or agreement made or alleged to have been made by any
of them or imposed by operation of law in connection with any service performed
or action taken prior to the Closing Date, irrespective of when any claim is
instituted. For purposes of this Section, a loss suffered by CRC shall be deemed
a loss suffered by Buyer.
7.2 Indemnification by Buyer. Buyer shall indemnify and hold Sellers
harmless from and against any Losses suffered by Sellers to the extent
resulting, directly or indirectly, from (i) any misrepresentation or breach of
warranty with respect to the representations and warranties made in Section 5
above, and (ii) any breach, nonfulfillment or default by Buyer in the
performance of any of the covenants and agreements made by Buyer herein or in
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any certificate, instrument or agreement delivered pursuant hereto.
7.3 Notice and Defense.
a. If Buyer or Sellers, or any of them, (the "Claimant")
desire to make a claim against the other (the "Indemnitor") under this Section
7, the Claimant shall promptly notify Indemnitor in writing of any claim or
demand as to which Claimant is entitled to claim indemnification, the section
under which such claim is being made and, to the extent known, the amount and
circumstances surrounding such claim.
b. In the event that any claim is asserted by any third person
against a Claimant, Indemnitor shall promptly advise Claimant whether it
disputes its liability and, in that case, whether it desires to employ counsel
of its choice to defend such claim. If so, (i) the Claimant shall be kept fully
informed of all developments and furnished copies of all relevant papers; (ii)
the Indemnitor shall diligently prosecute the defense; and (iii) Claimant shall
have the right to participate, at his or its own expense and through counsel
selected by him or it, in the defense of any such claim. If the conditions of
the foregoing provision are not met, or if the Indemnitor chooses not to control
the defense, the Claimant shall have the right, but shall have no obligation, to
assume and control the defense of such claim or suit at the expense of the
Indemnitor. The Indemnitor, or if the conditions to the foregoing provision are
not met, the Claimant, shall have the right to pay, compromise or settle any
such claim with the consent of the Claimant or the Indemnitor, as the case may
be, which consent shall not be unreasonably withheld or delayed. Notwithstanding
the foregoing, if Buyer determines in good faith that the claim involves issues
or matters that could have a materially adverse effect on the business,
operations, assets or prospects of CRC or Buyer or any affiliate of Buyer, Buyer
shall have the right to control the defense or prosecution of such claim and its
expenses and costs therefor shall be included as part of the indemnification
obligations of the Seller hereunder. Claimant and Indemnitor shall cooperate
with each other and make available to each other and their representatives all
available records or other materials required by them for their use in
contesting any such liability or claim.
c. In the event that a claim for indemnification not involving
a third person claim is asserted against the Claimant, the Indemnitor shall
notify the Claimant within thirty (30) days whether or not it disputes the
claim. If the Indemnitor fails to dispute the claim within that period, the
claim shall be deemed conclusively as a liability of the Indemnitor hereunder.
19
<PAGE>
7.4 Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants set forth in this Agreement shall
survive the Closing for a period of five (5) years, except as otherwise
specifically provided. Any claim made by Buyer or Sellers, or any of them, for
indemnification under this Section 7 must be made, if at all, by written notice
delivered to Sellers or Buyer, as the case may be, prior to the expiration of
five (5) years following the Closing Date. A claim hereunder shall be considered
to be timely made if notice is delivered within the aforesaid five (5) year
period, even if such claim is not finally resolved or determined until a
subsequent time.
7.5 Recovery Limits. Any recovery by Buyer for indemnification shall be
limited as follows: (i) Buyer shall not be entitled to recover any amount for
indemnification claims under this Section 7 unless and until the aggregate
amount which Buyer is entitled to recover in respect of such claims exceeds Ten
Thousand ($10,000.00) Dollars (the "Deductible"), in which event the entire
amount which Buyer is entitled to recover in respect of all such claims, less
the Deductible, shall be payable; and (ii) the maximum amount recoverable by
Buyer for indemnification claims under this paragraph 7 shall in the aggregate
be equal to Two Million ($2,000,000.00), Dollars less the Deductible.
Section 8. Conditions Precedent to Obligations of Buyer
Buyer's duties to perform its obligations under this Agreement are
subject to the fulfillment on or before the Closing Date of each of the
following conditions:
8.1 Representations, Warranties and Covenants. The representations and
warranties of Sellers set forth herein shall be accurate in all material
respects on the Closing Date to the same extent as if made on and as of such
date, and Sellers and CRC, as the case may require, shall have complied with or
performed all agreements, covenants and conditions on their or its part to be
performed or complied with on or prior to the Closing Date.
8.2 Legal Actions. No suit, action or other proceeding by any third
party shall be threatened or pending before any court or governmental agency
seeking to restrain or prohibit, or to obtain damages or other relief in
connection with, this Agreement or the consummation of the transactions
contemplated hereby or which is likely to materially adversely affect the value
of the assets and businesses of CRC.
20
<PAGE>
8.3 Consulting Agreement. CRC and each Seller shall have entered into
the Consulting Agreement and Buyer shall have received assurance satisfactory to
it in its reasonable discretion that all key management and other key employees
of CRC identified by Buyer shall continue their employment with CRC following
the Closing on terms and conditions substantially the same as their current
employment terms.
8.4 Option Agreement. Buyer, CRC and Seller shall have entered into the
Option Agreement
8.5 Comfort Letter. Buyer shall have received a comfort letter from, or
limited purpose audit by, independent public accountants regarding the financial
condition of CRC as of December 31, 1995 which comfort letter shall be to the
sole satisfaction of Buyer.
8.6 Approval. This Agreement and the transaction contemplated hereby
shall have been duly approved by the Board of Directors and shareholders of CRC
and Buyer.
8.7 Manufacturing Representative Agreement. CRC shall enter into a
manufacturers representative agreement with Oldford & Associates ("Oldford").
The agreement will provide for a seven year term through December 31, 2002,
commission rates equal to the current percentage rates, right of first refusal
to cover selected accounts and a six month termination clause. Upon termination,
the Company will be paid one-half (1/2) commissions for a period of two years on
all purchase orders and outstanding purchase quotations through the date of
termination. There shall be a meeting with Oldford to identify specific
customers to be represented by Oldford. Any customers not specifically
identified as customers to be covered by Oldford will be then offered to Skandy
Corporation for coverage by it.
8.8 Certificate of Good Standing. Sellers shall have delivered to Buyer
a Certificate of Good Standing from the Michigan Corporation and Securities
Bureau certifying that as of a date reasonably close to the Closing, CRC is a
Michigan corporation in good standing and authorized to transact business in
Michigan.
8.9 Lien Search. Buyer shall have received UCC lien searches in form
and content satisfactory to Buyer.
8.10 Title Policy. Sellers shall have delivered to Buyer an ALTA
Owner's commitment for title insurance in the amount of Two Hundred Fifty
Thousand Dollars ($250,000.00) and issued by
21
<PAGE>
Metropolitan Title Company for the property commonly known as 50 Enterprise
Drive Vassar, Michigan showing marketable and clear title free and clear of all
liens and encumbrances except as acceptable by Buyer.
8.11 Opinion of Counsel. Buyer shall have received an opinion of
counsel to Sellers dated as of the Closing Date in form and substance reasonably
satisfactory to Buyer.
8.12 No Material Adverse Change. From November 1, 1995 to the Closing
Date, there shall have been no material adverse change in the financial
condition, assets, business or prospects of CRC.
8.13 Waiver. Buyer shall have the right to waive the foregoing
conditions, or any of them, wholly or in part; provided, however, that no such
waiver shall be deemed to have occurred unless the same is set out in writing
and executed by Buyer.
8.14 Environmental. Seller shall have performed the obligations
required by paragraph 4.16.
Section 9. Conditions Precedent to Obligations of Sellers
The duty of Sellers and CRC to perform the obligations which this
Agreement imposes upon them is subject to the fulfillment, on or before the
Closing Date, of each of the following conditions:
9.1 Representations, Warranties and Covenants. All representations and
warranties made by Buyer herein shall be accurate in all material respects on
and as of the Closing Date and Buyer shall have performed and complied with all
agreements, covenants and conditions on its part to be performed or complied
with on or prior to the Closing Date.
9.2 Legal Actions. No suit, action or other proceeding by any third
party shall be threatened or pending before any court or governmental agency
seeking to restrain or prohibit, or to obtain damages or other relief in
connection with, this Agreement or the consummation of the transactions
contemplated hereby.
9.3 Consulting. Each Seller and CRC shall have entered into a
Consulting Agreement.
9.4 Waiver. Sellers shall have the right to waive the foregoing
conditions, or any of them, wholly or in part; provided, however, that no such
waiver shall be deemed to have occurred unless the same is set out in writing
and executed by Seller.
22
<PAGE>
9.5 Certificate of Good Standing. Buyer shall have delivered to Sellers
a Certificate of Good Standing from the Michigan Corporation and Securities
Bureau certifying that as of a date reasonably close to the Closing, Buyer is a
Michigan corporation in good standing and authorized to transact business in
Michigan.
9.6 Opinion of Counsel. Sellers shall have received an opinion of
counsel to Buyer dated as of the Closing Date in form and substance reasonable
satisfactory to Sellers.
Section 10. Termination
10.1 Termination. This Agreement and the transactions contemplated
herein may be terminated and abandoned at any time prior to the Closing Date
under the following circumstances:
a. By mutual consent of Buyer and Sellers.
b. By Buyer and Sellers, if the Closing shall not have taken
place on or prior to March 31, 1996, provided that the party so terminating this
Agreement is not then in default hereunder.
c. By the party or parties adversely affected in the event any
of the conditions set forth in Sections 8 and 9 have not been fulfilled by the
Closing Date and the performance or fulfillment thereof has not been waived by
such party or parties.
10.2 Procedure on Termination; Exclusive Remedy. Upon the termination
of this Agreement under the provisions of Section 10.1 above, no party hereto
shall have any liability or further obligation to any other party to this
Agreement, except that if either Buyer or Sellers (in this case a "Defaulting
Party") fails or refuses to tender full performance of its obligations under
this Agreement within the time period specified in Section 10.1(b) above for any
reason other than a failure of the other party to fulfill a condition set forth
in Section 8 or 9, as applicable, and as a result thereof the other party (the
"Terminating Party") terminates this Agreement in the manner herein
contemplated, the Defaulting Party shall pay to the Terminating Party, as the
Terminating Party's sole remedy for the Defaulting Party's failure or refusal to
close the transaction contemplated by this Agreement, the actual costs incurred
by the Terminating Party in anticipation of the consummation of the transaction
and in negotiating the transaction with the Defaulting Party.
23
<PAGE>
Section 11. Fees and Expenses
11.1 CRC's Accounting and Legal Fees and Expenses. All legal and
accounting fees and expenses incurred by Sellers and CRC for services rendered
in connection with the transactions contemplated by this Agreement shall be paid
by CRC up to an amount not to exceed $15,000. Any fees and expenses incurred by
Sellers or CRC exceeding the initial $15,000 shall be the sole responsibility of
Sellers.
11.2 Other Fees and Expenses. All other fees and expenses incurred by
any party to this Agreement shall be the sole responsibility of and paid by the
party who incurred such fees and expenses.
Section 12. Post Closing Undertakings
12.1 Release of Personal Guaranty. Following the Closing, CRC shall
promptly obtain releases for Sellers' personal guaranties on any bank debt,
lease finance debt and any other debt of CRC which is specifically set forth in
Exhibit D.
12.2 Related Party Liability. After the Closing, any related party
liabilities currently owed by CRC to the Sellers or their related entities will
be carried and maintained in its current form. Related party liabilities shall
specifically include, without limitation, any mortgage debt owed on the Real
Property. Additionally, Sellers shall subordinate any mortgage debt to any bank
or finance company providing mortgage lending in connection with expansion of
the Enterprise Street facility.
12.3 Corporate Governance. After the Closing, and until such time as
the Consulting Agreements terminate or expire, the Board of Directors of CRC
shall be comprised of the following: (i) the President of CRC by virtue of his
position; and (ii) two (2) members selected by Sellers; and (iii) two (2)
members selected by Buyers.
Section 13. Miscellaneous
13.1 Cooperation Following the Closing. Following the Closing Date,
Sellers and Buyer shall deliver to the other such further information and
documents and execute and deliver such further instruments and agreements as the
other shall reasonably request in order to consummate or confirm the
transactions provided for herein, to accomplish the purpose of this Agreement or
to assure the other the benefits of this Agreement.
24
<PAGE>
13.2 Benefits and Burdens. This Agreement shall inure to the benefit of
and shall be binding upon CRC, Sellers and Buyer and the successors and
permitted assigns of Buyer, and the respective heirs and representatives of
Sellers. Buyer may assign its rights and obligations hereunder to an entity to
be formed.
13.3 Amendment. This Agreement may be amended only by an instrument in
writing signed by Sellers, CRC and Buyer.
13.4 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing
(including telecommunications) and shall be deemed to have been duly given if
personally delivered (in the case of personal delivery to CRC or Buyer, such
delivery shall be made to an officer of the party to whom directed) or sent by
(i) telex, telecopy or other wire transmission with request for assurance of
receipt; or (ii) Federal Express or other overnight air express and receipted
for by the recipient or an agent of the recipient; or (iii) registered or
certified United States mail, postage prepaid and return receipt requested. All
notices delivered to a party to this Agreement or to legal counsel for such
party other than by personal delivery, telex, telecopy or other wire
transmission shall be sent to the following addresses:
If to CRC: With a copy to:
Cass River Coatings, Inc. ________________________________
Attn: ________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
If to Sellers: With a copy to:
Gene Oldford ________________________________
______________________________ ________________________________
________________________________
________________________________
25
<PAGE>
With a copy to:
Kevin Redding ________________________________
______________________________ ________________________________
________________________________
________________________________
________________________________
Chris Frampton With a copy to:
______________________________ ________________________________
________________________________
________________________________
________________________________
Jan Wojeichowski With a copy to:
______________________________ ________________________________
________________________________
________________________________
________________________________
With a copy to:
Pat Patterson ________________________________
______________________________ ________________________________
________________________________
________________________________
Jim Lamb With a copy to:
______________________________ ________________________________
________________________________
________________________________
________________________________
If to Buyer:
Noble International Ltd.
Attn: Mark Davis
33 Bloomfield Hills Parkway
Suite 155
Bloomfield Hills, MI 48304
or to such other address or to such other person or persons designated in
writing by such party or counsel, as the case may be. Notices delivered
personally or pursuant to subsection (i) above shall be deemed to have been
received on the day delivered or sent, or, if delivered on a national holiday in
the United States or Canada, on the day following the holiday. Notices delivered
pursuant to subsections (ii) or (iii) above shall be deemed to have been
received on the second business day (that is not a national holiday in the
United states or Canada) following the day sent whether or not such notice was
actually received on
26
<PAGE>
such day.
13.5 Entire Agreement; Attachments.
a. This Agreement and all exhibits and schedules referred to
herein and all agreements and instruments to be delivered by the parties
pursuant hereto represent the entire understanding and agreement between the
parties with respect to the subject matter hereof and supersede all prior oral
and written and all contemporaneous oral negotiations, commitments and
understandings between the parties (including, without limitation, the Letter of
Intent) except as expressly provided herein.
b. If the provisions of the disclosure schedules or any
Exhibit to this Agreement are inconsistent with the provisions of this
Agreement, the provisions of this Agreement shall prevail. The disclosure
schedules and Exhibits attached hereto or to be attached hereafter are hereby
incorporated as integral parts of this Agreement.
13.6 Headings. The section headings in this Agreement are intended
solely for the convenience of the parties and in no way alter, modify, amend,
limit or restrict the contractual obligations of the parties.
13.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument, and, when signed by all
of the parties hereto, shall become legally binding on such parties effective as
of the date set forth at the beginning of this Agreement.
13.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Michigan, without reference
to choice of laws rules or principles.
13.9 Severability. The invalidity and enforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year first above written.
NOBLE INTERNATIONAL, LTD.
By: ________________________
Its: ________________________
27
<PAGE>
CASS RIVER COATINGS, INC.
By: ________________________
Its: ________________________
_____________________________
GENE OLDFORD, Shareholder
_____________________________
KEVIN REDDING, Shareholder
_____________________________
CHRIS FRAMPTON, Shareholder
_____________________________
JAN WOJEICHOWSKI, Shareholder
_____________________________
PAT PATTERSON, Shareholder
_____________________________
JIM LAMB, Shareholder
20/95001001/pur.agr
28
<PAGE>
LIST OF EXHIBITS
Exhibit A Consulting Agreement
Exhibit B Option Agreement
Exhibit C List of Shares
Exhibit D List of Debts
20/95001001/pur.agr
29
<PAGE>
INDEX TO DISCLOSURE SCHEDULE
4.1 Assumed Names
4.10a. Contracts
4.10c. Licenses
4.11 Government Licenses
4.12a. Employee Benefit Plans and Employment Agreements
4.14a. Assets
4.14b. Encumbered Assets
4.14e. Customer Owned Equipment
4.14f. Leased Personal Property
4.15a. Real Property
4.19a. Intellectual Property
4.20 Insurance
20/95001001/pur.agr
30
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is entered into as of the 31st
day of January, 1996, between NOBLE INTERNATIONAL, LTD., a Michigan corporation
("Noble"), and GENE OLDFORD, KEVIN REDDING, CHRIS FRAMPTON, JAN WOJCIECHOWSKI,
PAT PATTERSON and JIM LAMB (the "Option Holders").
R E C I T A L S
WHEREAS, the Board of Directors ("Board of Directors") of Noble has
approved this Agreement for the granting to the Option Holders of an option to
purchase certain shares of the capital stock of Cass River Coatings, Inc. (the
"Company"); and
WHEREAS, the Board of Directors has determined that it is to the advantage
and best interest of the Company and its shareholder to grant a stock option to
the Option Holders covering 7,500 shares of the Company common stock
(representing twenty-five (25%) percent of the Company's common shares owned by
Noble) as an inducement to remain in the service of the Company as consultants
pursuant to those certain Consulting Agreements of even date herewith and as an
incentive for increased effort during such service, and has approved the
execution of this Agreement between Noble and the Option Holders.
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. Grant. Noble grants to the Option Holders the right and option to
purchase on the terms and conditions hereinafter set forth an aggregate of 7,500
shares of the common stock of the Company allocated in accordance with Exhibit
A, at the aggregate purchase price of One Dollar ($1.00) (which price is not
represented to approximate the fair market value of such stock at the date
hereof) exercisable in accordance with the provisions of this Agreement during a
period expiring on the "Expiration Date" as defined in Section 2 hereof, below.
2. Term. Except as may otherwise be provided in this Agreement, this Option
may be exercised at any time with respect to 6,000 shares covered hereby and at
any time after January 31, 2000 through the Expiration Date with respect to the
remaining 1,500 shares; provided, however, should Noble enter into an agreement
to sell substantially all of the Company (regardless of the form which that
transaction may take) prior to January 31, 2000, then the Option Holders may
exercise this Option with respect to all of the shares covered hereby prior to
the closing of said sale. The date upon which all obligations of the Company to
the Option Holders under the Consulting Agreements are discharged is the
"Expiration Date" for purposes of this Agreement; provided, however, should the
Consulting Agreements be discharged prior to January 31, 2000, then the Option
Holders shall have thirty (30) days from the date of discharge to exercise the
Option granted hereunder.
3. Exercise. The exercise of this Option shall be by written notice of
exercise delivered to the President of Noble, and accompanied by payment to
Noble of the full purchase price. The notice of exercise shall be signed by all
Option Holders and state the number of shares allocated to each of the Option
Holders; Noble shall deliver separate certificates to each of the Option Holders
in the number of shares specified. The purchase price upon exercise of this
Option shall be payable in cash, cashiers check or bank draft. No shares of
common stock shall be transferred upon the exercise of this Option until full
payment therefor has been made.
4. Shareholder Agreement. The Option Holders shall, prior to acquiring
their respective shares as set forth in Section 3, execute and deliver to the
Company a Shareholder Agreement in the form and substance acceptable by the
Company.
5. Securities Laws. This Option may not be exercised if the transfer of the
shares upon such exercise would constitute a violation of any applicable federal
or state securities laws or other laws or regulations. Without limiting the
foregoing, the Option Holders hereby agree that if the shares of stock covered
by this Option have not been registered with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, they will purchase all
such shares of stock for investment and not for resale or for distribution and
that upon exercise of this Option the person entitled to exercise the same
shall, upon the request of the Company, furnish evidence satisfactory to the
Company (including a written and signed representation) to that effect in form
and substance satisfactory to the Company, including an indemnification of the
Company in the event of any violation of the Securities Act of 1933 by such
person. Furthermore, the Company may, if it deems appropriate, affix a legend to
certificates representing shares of stock purchased upon exercise of this Option
indicating that such shares have not been registered with the Securities and
Exchange Commission and may so notify its Transfer Agent, and may take such
other action as it deems necessary or advisable to comply with any other
regulatory or governmental requirements.
6. Assignment. This Option and the rights and privileges granted hereby
shall not be transferred, assigned, pledged or hypothecated in any way, whether
by operation of law or otherwise, except by will or the laws of descent and
distribution. Upon any attempt to so transfer, assign, pledge, hypothecate or
otherwise dispose of this Option or any right or privileges contained herein
shall immediately become null and void and of no further force or effect.
Notwithstanding the aforementioned restrictions on transfer, Gene Oldford may
assign his Option and the rights and privileges granted herein to Stephen
Oldford.
7. Shareholder Rights. Neither the Option Holders nor any other person
legally entitled to exercise this Option shall be entitled to any of the rights
or privileges of a shareholder of the Company in respect of any shares issuable
upon any exercise of this Option unless and until a certificate or certificates
representing such shares shall have been actually issued and delivered to him or
them.
8. Miscellaneous. The Option Holders acknowledge receipt of a copy of this
Agreement, and represent that they have read and are familiar with the terms and
provisions thereof, which represent the entire agreement of Noble and the Option
Holders with respect to the subject matter hereof. No amendment of this Option
Agreement shall be binding unless in writing and signed by all the parties
hereto.
IN WITNESS WHEREOF, this Option Agreement has been granted the day and year
first written above at Bloomfield Hills, Michigan, and the interpretation,
performance and enforcement of this Agreement shall be governed by the laws of
the state of Michigan.
Noble International, Ltd., The Option Holders:
a Michigan corporation
-------------------------
- ------------------------ GENE OLDFORD
BY: Mark A. Davis
ITS: President
-------------------------
KEVIN REDDING
-------------------------
CHRIS FRAMPTON
-------------------------
JAN WOJCIECHOWSKI
-------------------------
PAT PATTERSON
-------------------------
JIM LAMB
<PAGE>
EXHIBIT "A"
STOCK OPTION AGREEMENT
Option Holder No. of Shares
- ------------- -------------
Gene Oldford 3,750
Kevin Redding 750
Chris Frampton 750
Jan Wojciechowski 750
Pat Patterson 750
Jim Lamb 750
STOCK PURCHASE AGREEMENT
By and Among
NOBLE INTERNATIONAL, LTD.,
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
and
MONROE ENGINEERING PRODUCTS, INC.
and
ROBERT J. SKANDALARIS
-------------------------
Dated January 1, 1996
-------------------------
<PAGE>
TABLE OF CONTENTS
Page
Recitals......................................................................1
1. SALE OF SHARES AND REAL ESTATE.......................................... 1
1.1 Terms of the Sale of Shares.................................... 1
1.2 Terms of Sale of Real Estate................................... 6
1.3 Distribution to Sellers........................................ 7
2. CLOSING AND CLOSING DATE................................................ 8
3. INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF SELLERS.................... 8
3.1 Authority...................................................... 8
3.2 Title.......................................................... 9
3.3 Shareholder Meeting............................................ 9
3.4 Employment and Deferred Compensation Agreement................. 9
4. JOINT REPRESENTATIONS AND WARRANTIES OF MONROE
AND REASON.............................................................. 9
4.1 Organization and Standing...................................... 10
4.2 Authorized Capital............................................. 10
4.3 Corporate Action............................................... 11
4.4 Financial Statement; Liabilities............................... 11
4.5 Title to Monroe Assets......................................... 12
4.6 Condition of Assets............................................ 13
4.7 Inventories.................................................... 13
4.8 Accounts Receivable............................................ 13
4.9 Accounts Payable............................................... 14
4.10 Products....................................................... 14
4.11 Litigation and Investigations.................................. 15
4.12 Taxes.......................................................... 16
4.13 Labor Relation................................................. 16
4.14 Insurance Coverage............................................. 17
4.15 Leases, Contracts and Other Commitments........................ 17
4.16 Business Restrictions.......................................... 18
4.17 No Material Adverse Change..................................... 19
4.18 Fees and Commission............................................ 20
4.19 Environmental Matters.......................................... 20
4.20 ............................................................... 23
4.21 No Misstatement or Omission.................................... 23
4.22 Disclosure Schedules........................................... 23
4.23 Intangible Personal Property................................... 24
4.24 Employee Benefit Plans......................................... 25
5. REPRESENTATIONS AND WARRANTIES OF NOBLE................................. 26
5.1 Organization and Standing...................................... 26
5.2 Corporate Action............................................... 26
5.3 Fees and Commissions........................................... 27
5.4 No Misstatement or Omission.................................... 27
5.5 Authority of Skandalaris....................................... 27
i
<PAGE>
6. CERTAIN UNDERSTANDINGS AND AGREEMENTS.................................. 28
6.1 Conduct of Monroe's Business.................................. 28
6.2 Advice of Adverse Change...................................... 31
6.3 Access........................................................ 31
6.4 Capital Stock................................................. 33
6.5 Monroe Board Activity......................................... 33
6.6 Effective Notice.............................................. 33
6.7 Stock Rights.................................................. 33
6.8 Mutual Purpose................................................ 33
6.9 Covenants Regarding Continuing Operations
of Monroe..................................................... 34
7. CONDITIONS TO SELLERS' OBLIGATIONS..................................... 38
7.1 Performance by Noble.......................................... 38
7.2 Absence of Litigation......................................... 39
7.3 Other Documents............................................... 39
7.4 Opinion of Counsel............................................ 39
8. CONDITIONS TO NOBLE'S OBLIGATIONS...................................... 40
8.1 Performance by Monroe and Sellers............................. 40
8.2 Resignations.................................................. 40
8.3 Opinion of Counsel............................................ 41
8.4 Absence of Litigation......................................... 41
8.5 Casualty Loss................................................. 41
8.6 Due Diligence................................................. 42
8.7 Employment and Deferred Compensation
Agreement..................................................... 42
8.8 Other Documents............................................... 42
8.9 338(h)(10) Election........................................... 43
8.10 Consents...................................................... 43
9. INDEMNITIES............................................................ 44
9.1 By Sellers.................................................... 44
9.2 By Noble...................................................... 45
9.3 Survival...................................................... 45
9.4 Claims Procedure.............................................. 46
10. TERMINATION............................................................ 50
11. ASSIGNMENT............................................................. 50
12. MISCELLANEOUS.......................................................... 50
12.1 Amendment..................................................... 50
12.2 Notices....................................................... 51
12.3 Counterparts.................................................. 52
12.4 Construction.................................................. 52
12.5 Disclosure Schedules.......................................... 53
12.6 Announcements................................................. 53
DOCUMENT EXHIBITS:
A1- Irrevocable Trust Promissory Note
A2- Reason Promissory Note
ii
<PAGE>
A3- Guaranty of Robert J. Skandalaris
B1- Offer to Purchase Real Estate
B2- Land Contract
B3- Guaranty of Land Contract
C - Seller List
D - Employment and Deferred Compensation Agreement
E - Pledge Agreement
DISCLOSURE SCHEDULES
4.3 Articles and Bylaws of Monroe
4.4 Financial Statements
4.11 Litigation and Investigations
4.13 Employee Census
4.14 Insurance Coverage
4.15 Leases, Contracts and other Commitments
4.19 Environmental Matters
4.23 Intangible Personal Property
4.24 Employee Benefit Plans
iii
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made
effective as of this 1st day of January, 1996, by and among NOBLE INTERNATIONAL,
LTD., a Michigan corporation ("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 (collectively referred to herein as the "Sellers"), who
own all of the issued and outstanding stock of Monroe Engineering Products,
Inc., and MONROE ENGINEERING PRODUCTS, INC., a Michigan corporation ("Monroe"),
and ROBERT J. SKANDALARIS ("Skandalaris").
Noble desires to acquire and the Sellers desire to sell all of
the issued and outstanding shares in Monroe pursuant to the terms and conditions
of this Agreement (the "Sale") subject to the representations, warranties,
covenants and conditions contained herein.
1. SALE OF SHARES AND REAL ESTATE.
1.1 Terms of the Sale of Shares. Subject to the terms
and conditions of this Agreement, Noble shall purchase and the Sellers shall
sell all of the shares of Monroe owned by Sellers, pursuant to the following
terms:
(a) At the Closing as hereinafter defined the Trustee
of the Richard J. Reason Irrevocable Trust for the Benefit of
Victoria Aldrich and Peter Reason dated October 12, 1992 (the
"Irrevocable Trust") shall endorse and deliver Certificate
Number 11 representing 592 shares
<PAGE>
of Series A Non-Voting Stock in Monroe to Noble. The
consideration for the sale of the Irrevocable Trust's shares
(the "Trust Consideration") shall be Two Million Two Hundred
Thirty-One Thousand and 00/100 Dollars ($2,231,000.00)
payable, subject to the terms and conditions of this
Agreement, as follows:
(i) (A) On or before April 30, 1996, Noble
shall pay to the Irrevocable Trust the sum of Five
Hundred Seventy-Seven Thousand and 00/100 Dollars
($577,000.00), payable in cash in the form of a
cashier's check or wire transfer;
(B) On or before June 15, 1996,
Noble shall pay to the Irrevocable Trust the sum of
Five Hundred Seventy-Seven Thousand and 00/100
Dollars ($577,000.00) ("June 15 Irrevocable Trust
Payment"), payable in cash in the form of a
cashier's check or wire transfer;
(C) On or before December 23, 1996,
Noble shall pay to the Irrevocable Trust the sum of
Fie Hundred Seventy-Seven Thousand and 00/100 Dollars
($577,000.00) ("December 23 Irrevocable Trust
Payment"), payable in cash in the form of a cashier's
check or wire transfer;
(D) On or before April 30, 1997,
Noble shall pay to the Irrevocable Trust the sum of
Five Hundred Thousand and 00/100 Dollars
($500,000.00)
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<PAGE>
("1997 Payment"), payable in the form of a
cashier's check or wire transfer;
(ii) The payments to be made to the Irrevocable
Trust pursuant to Section 1.1(a)(i) above shall be
made pursuant to a Promissory Note ("Irrevocable
Trust Note"), substantially in the form of Exhibit
A-1 attached hereto, in the face amount of Two
Million Two Hundred Thirty-One Thousand and 00/100
Dollars ($2,231,000.00);
(iii) The Irrevocable Trust Note shall be without
interest, provided however, in the event of default,
which is not cured within the applicable cure period,
the Irrevocable Trust Note shall bear interest at two
percent (2%) above the prime rate of interest of
Comerica Bank then in effect;
(iv) The Irrevocable Trust Note shall be secured
as follows:
(A) The June 15 Irrevocable Trust
Payment shall be secured by the pledge of shares
being acquired by Noble in Monroe;
(B) The December 23 Irrevocable
Trust Payment shall be secured by a letter of credit
from Comerica Bank (drawn under the Uniform Customs
and Practices Act), in form and substance acceptable
to the Irrevocable Trust;
(C) The 1997 Payment shall be
secured by
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<PAGE>
the Personal Guaranty of Robert J. Skandalaris, in
substantially the form of Exhibit A-3, attached
hereto.
(b) At the Closing, as hereinafter defined, Richard
J. Reason, Individually and as Trustee of the Richard J.
Reason Revocable Living Trust dated April 9, 1979, ("Reason")
shall endorse and deliver Certificate Number 10 representing
944 shares of Series B Voting stock and Certificate Number 12
representing 314 shares of Series A Non-Voting stock in Monroe
to Noble. The consideration for the sale of Reason's shares
(the "Sale Consideration") shall be Four Million One Hundred
Nineteen Thousand and 00/100 Dollars ($4,119,000.00), payable
subject to the terms and conditions of this Agreement, as
follows:
(i) (A) On or before April 30, 1996, Noble
shall pay to Reason the sum of One Million Nine
Hundred Twenty-Three Thousand and 00/100 Dollars
($1,923,000.00), payable in cash in the form of a
cashier's check or wire transfer;
(B) On or before June 15, 1996, Noble
shall pay to Reason the sum of One Million Nine
Hundred Twenty-Three Thousand and 00/100 Dollars
($1,923,000.00) ("June 15 Reason Payment"), payable
in cash in the form of a cashier's check or wire
transfer;
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<PAGE>
(C) On or before December 23, 1996,
Noble shall pay to Reason the sum of Two Hundred
Seventy-Three Thousand and 00/100 Dollars
($273,000.00) ("December 23 Reason Payment"), payable
in cash in the form of a cashier's check or wire
transfer;
(ii) The payments to be made to Reason pursuant
to Section 1.1(b)(i) above shall be made pursuant to
a promissory note (the "Reason Note"), substantially
in the form of Exhibit A-2, attached hereto, in the
face amount of Four Million One Hundred Nineteen
Thousand and 00/100 Dollars ($4,119,000.00);
(iii) The Reason Note shall be without interest,
provided, however, in the event of a default, which
is not cured within the cure period, the Reason Note
shall bear interest at two (2%) percent above the
prime rate of interest of Comerica Bank then in
effect; and
(iv) The Reason Note shall be secured as follows:
(A) The June 15 Reason Payment shall
be secured by the pledge of shares being acquired by
Noble in Monroe;
(B) The December 23 Reason Payment
shall be secured by the letter of credit from
Comerica
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<PAGE>
Bank (drawn under the Uniform Customs and Practices
Act) ("Letter of Credit"), in form and substance
acceptable to Reason, as described in Section
1.1(b)(iv)(B) above.
(c) (i) The pledge of shares shall automatically
terminate upon the Irrevocable Trust's receipt of the June 15
Irrevocable Trust Payment and Reason's receipt of the June 15
Reason payment.
(ii) The aforementioned Letter of Credit shall
also secure the payment of a certain Bonus to Reason
pursuant to the Employment and Deferred Compensation
Agreement which is described in Section 3.4 of this
Agreement.
(d) For purposes of this Agreement, the Irrevocable
Trust Note and the Reason Note are sometimes collectively
referred to as "Notes."
1.2 Terms of Sale of Real Estate. In addition to the purchase
of shares of Monroe by Noble, Monroe shall acquire the real property owned by
Reason and presently utilized by Monroe, commonly known as 8643 M-119, and
located in the Township of Little Traverse, County of Emmet, State of Michigan
(the "Property") pursuant to an Offer to Purchase Real Estate in substantially
the form of the Offer to Purchase Real Estate attached hereto as Exhibit B-1 and
containing the following terms:
(a) Monroe is purchasing the Property from Reason "as
is";
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<PAGE>
(b) On or before April 30, 1996 ("Land Contract
Closing Date"), Reason, as the Land Contract Vendor, and
Monroe, as the Land Contract Vendee, shall execute a Land
Contract in the amount of Five Hundred Thousand and 00/100
($500,000.00) Dollars, for a two (2) year term, substantially
in the form of the Land Contract attached hereto as Exhibit
B-2 (the "Land Contract");
(c) All prorations shall be on a "due date" basis
made on the Land Contract Closing Date and Reason shall
provide an Owners Policy of title insurance from Northern
Title Company in the face amount of Two Hundred Thousand and
00/100 ($200,000.00) Dollars, the title policy may contain
only the standard exceptions and be on the standard form];
(d) At the Land Contract Closing Date, Reason shall
execute a Warranty Deed for the property to be held in escrow
by Stone, Biber & O'Toole, P.C. pursuant to the terms of the
Land Contract.
(e) At the Land Contract Closing Date, Robert J.
Skandalaris ("Skandalaris"), a shareholder, director and the
Treasurer of Noble, shall execute a Guaranty of the Land
Contract in substantially the form of the Guaranty of Land
Contract attached hereto as Exhibit B-3.
1.3 Distribution to Sellers. Monroe and/or Noble acknowledge
that there will be a distribution to Sellers, in the amount of One Million One
Hundred Twenty-Four Thousand One Hundred
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<PAGE>
Six and 70/100 Dollars ($1,124,106.70) ("Sum"), subsequent to the date of this
Agreement. This Sum represents the total accrued Subchapter "S" Distribution to
which Sellers were entitled from 1995.
2. 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,
1996 ("Closing Date") at the offices of Stone, Biber & O'Toole, P.C., 2701 Troy
Center Drive, Suite 400, Troy, Michigan 48084, or at such other time, place and
date as shall be mutually agreed on by Noble and the Sellers. At the Closing,
the parties shall deliver to each other the certificates, opinions, undertakings
and other documents required by this Agreement.
3. INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF SELLERS. Each
Seller represents and warrants to Noble as follows:
3.1 Authority. He or it has full power and authority to
execute this Agreement and consummate the transactions contemplated hereby, and
this Agreement is binding upon such Seller and is enforceable in accordance with
its terms. The execution and delivery of this Agreement, consummation of the
transactions contemplated hereby and compliance with the terms of this Agreement
do not and will not conflict with the terms of any agreement or other instrument
to which such Seller is a party or by which such Seller or any of his or its
property is bound, and to such Seller's knowledge, do not and will not conflict
with any existing applicable law, rule, regulation, judgment, order or decree of
any
8
<PAGE>
government, governmental instrumentality or court, domestic or foreign, having
jurisdiction over such Seller, or any of his or its property.
3.2 Title. Each Seller has good and marketable title to all of
the shares of Monroe Common Stock ("Monroe Common Stock") listed on Exhibit C as
owned by such Seller, free and clear of all liens (including tax liens),
forfeitures, pledges, penalties, charges, encumbrances, buy-sell agreements,
rights of first refusal, equities or claims or rights of others whatsoever.
Collectively, the Monroe Common Stock owned by such Sellers is all of the
outstanding capital stock of Monroe and has been validly issued, is fully paid
and is nonassessable.
3.3 Shareholder Meeting. Each of the Sellers will use his or
its best efforts to complete the transactions contemplated by this Agreement and
will cause all of the shares of Monroe capital stock controlled by such Sellers
to be voted in favor of the transactions contemplated by this Agreement at any
meeting of the shareholders of Monroe in which such matter is presented or
execute a consent resolution to the extent such matter is presented to the
shareholders of Monroe in such manner.
3.4 Employment and Deferred Compensation Agreement. Reason
will enter into an employment and deferred compensation agreement with Monroe
substantially in the form of Exhibit D attached hereto.
4. JOINT REPRESENTATIONS AND WARRANTIES OF MONROE AND REASON.
Monroe and Reason, jointly and severally, represent,
9
<PAGE>
warrant, and covenant to Noble that, except to the extent as may be set forth in
a written disclosure schedule attached hereto ("Disclosure Schedule"), each of
the following statements is true and correct as of the date of this Agreement
and as of the Closing Date:
4.1 Organization and Standing. Monroe is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Michigan. Monroe has all requisite corporate power and authority and all
licenses, franchises, permits and authorizations to own and lease its properties
and assets and to carry on its business as and where presently conducted.
4.2 Authorized Capital. The authorized capital stock of Monroe
consists entirely of 2,400 shares of Series A Non-Voting Common and 2,600 shares
of Series B Voting Common, of which 906 shares of Series A Non-Voting Common and
944 shares of Series B Voting Common have been issued and are outstanding, and
no shares of either series are held in Monroe's treasury. All of the outstanding
shares of Monroe capital stock have been validly issued, are fully paid and
nonassessable. There are no outstanding subscriptions, options, convertible
securities or other agreements or commitments relating to the capital stock of
Monroe. Set forth on Exhibit C is a complete and accurate list of the Monroe
Common Stock owned by each Seller and their respective stock certificate numbers
related thereto (the "Seller List"). Sellers shall cause Monroe to provide Noble
with an amended Seller List whenever there
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<PAGE>
are any additions, deletions or other changes prior to the Closing Date to the
original list set forth on Exhibit C.
4.3 Corporate Action. Disclosure Schedule 4.3 attached hereto
consists of copies of Monroe's Articles of Incorporation as amended and Monroe's
Bylaws. Neither the execution and delivery of this Agreement by Sellers, nor
compliance with its terms, will result in the breach or violation of the
Articles of Incorporation or Bylaws of Monroe, or of any agreement, indenture,
mortgage, lease or other obligation or instrument, or any judgment, order or
decree or result in the acceleration of or requirement to prepay any
indebtedness of Monroe for borrowed money or otherwise pursuant to undertakings
to which Monroe is a party or to which Monroe or any of the Monroe Assets, as
defined below, may otherwise be bound. To the best of Reason and Monroe's actual
knowledge without inquiry, the Corporation has been operated by Reason legally
and in compliance with all conditions and requirements of all applicable zoning
laws, federal, state and local statutes, ordinances, rules, regulations,
permits, policies guidelines, orders, franchises, authorizations and consents.
4.4 Financial Statement; Liabilities. Disclosure Schedule 4.4
attached hereto consists of copies of Monroe's audited Financial Statements as
at and for the year ended December 31, 1995, with the report thereon of Janz and
Knight, certified public accountants (the "Financial Statements"). The Financial
Statements (i) have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with preceding
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<PAGE>
years, (ii) fairly present the financial position of Monroe, and the results of
operations as at and for the periods then ended, and (iii) disclose all
liabilities and obligations of Monroe as of the date of the balance sheet
contained therein, as required by generally accepted accounting principles.
Sellers shall provide copies of any other financial reports or statements
whether audited or unaudited for periods subsequent to those set forth in the
Financial Statements when and as such reports or statements are prepared. Such
additional statements and reports shall be considered a part of the Financial
Statements.
The December 31, 1995 balance sheet of Monroe reflects all of
the assets and properties, real and personal, used by Monroe in its business or
otherwise held by Monroe, except for (i) assets acquired or disposed of in the
ordinary course of business since December 31, 1995; and (ii) assets not
required under generally accepted accounting principles to be reflected thereon
(collectively, the "Monroe Assets").
4.5 Title to Monroe Assets. Except as specifically set forth
in the Financial Statements, Monroe owns, free and clear of all liens and
encumbrances, the Monroe Assets, including, without limitation, licenses,
equipment, trade fixtures, lease rights, leasehold improvements and inventory,
free and clear of any mortgage, pledge, lien, conditional sale agreement,
encumbrance, restriction or charge of any kind. Reason owns free and clear of
all liens and encumbrances the Property subject to the Offer to Purchase
attached hereto as Exhibit D, including, without
12
<PAGE>
limitation, licenses, equipment, trade fixtures, lease rights, and leasehold
improvements, free and clear of any mortgage, pledge, lien, conditional sale
agreement, encumbrance, restriction or charge of any kind.
4.6 Condition of Assets. All buildings, equipment, machinery,
vehicles, furniture, fixtures and leasehold improvements, including those in
which Monroe has a leasehold interest, owned or used by Monroe in its business
and which are material to the operation thereof are now and on the Closing Date
will be (a) in Monroe or Reason's, as the case may be, possession and (b) in
good, useable condition and repair, ordinary wear and tear excepted.
4.7 Inventories. The inventories of Monroe (whether finished,
work in process or raw materials) shown on the Financial Statements or
thereafter acquired are all items of a quality usable or saleable in the
ordinary and usual course of Monroe's business, and are merchantable and fit for
the particular purpose for which they are intended; except for inventory items
which are obsolete or not usable or saleable in the ordinary course of business
which have been written down or adequate reserves or allowances therefor have
been provided as shown in the Financial Statements. The values at which
inventories are carried reflect the inventory valuation policy of Monroe which
is consistent with generally accepted accounting principles applied on a
consistent basis.
4.8 Accounts Receivable. All of the accounts receivable of
Monroe shown on its Financial Statements or thereafter acquired
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<PAGE>
arose and are collectible in the ordinary and usual course of business of
Monroe, except that accounts receivable, the collection of which are doubtful or
which are subject to a defense or set-off, have been written down to an amount
not in excess of realizable market value or adequate reserves or allowances
thereof have been provided. The values at which accounts receivable are carried
reflect the accounts receivable policy of Monroe, which is consistent with
Monroe's past practices and is in accordance with generally accepted accounting
principles applied on a consistent basis.
4.9 Accounts Payable. The accounts and notes payable and
accrued expenses reflected in the balance sheets constituting a part of the
Financial Statements, and the accounts and notes payable and accrued expenses
incurred by Monroe subsequent to the date thereof, are, in their entirety, valid
claims that arose in the ordinary course of business. Since December 31, 1995
the accounts and notes payable and accrued expenses of Monroe have been
maintained on a current basis, and Monroe will pay its accounts and notes
payable on a current basis through the date of the Closing.
4.10 Products. All products heretofore sold by Monroe and all
inventories of Monroe were manufactured or developed in good and workmanlike
fashion. There have been no warranty or product liability claims made against
Monroe, and Monroe has not incurred warranty costs, which individually exceed
One Thousand Dollars ($1,000.00), whether or not covered by insurance, and, to
the best knowledge of Sellers, there are no facts which give rise
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<PAGE>
to any such claims. As used herein, "Warranty Costs" shall mean the costs and
expenses of servicing, repairing and/or replacing, or allowances for service,
repair or replacement, of defective or allegedly defective or improperly
selected or worn products or parts or components thereof manufactured or sold by
Monroe, together with such legal liability, if any, as may exist in connection
with sales of products, whether such costs and expenses relate to or arise out
of claims or causes of action which assert causes sounding in tort, contract or
warranty, or any combination of the foregoing. To the knowledge of Reason and
Monroe, there are no defects in the design or construction or manufacture of the
products currently sold by Monroe in the conduct of its business which would
adversely affect the performance and quality of such products.
4.11 Litigation and Investigations. Except as disclosed in
Disclosure Schedule 4.11 attached hereto, there are no actions, suits,
proceedings or investigations pending (or, if filed, then served) or, to the
knowledge of Reason and Monroe threatened against Monroe or with respect to any
current or former assets, business or properties of Monroe, nor are there any
judgments, decrees, orders, rulings, writs or injunctions specifically referring
to Monroe (either by reason of adherence or default) may have, individually or
in the aggregate, a material adverse affect on the business, properties, assets
or financial condition of Monroe, taken as a whole, or relate in any respect to
the transactions contemplated by this Agreement. Neither Reason or
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<PAGE>
Monroe has actual knowledge of any other facts or circumstances which may result
in any future civil, administrative or criminal proceedings against Monroe.
4.12 Taxes. All tax returns including without limitation,
income, sales, single business, payroll, withholding and personal property tax
returns required to be filed by Monroe on or prior to the Closing Date with the
United States or any state or any other governmental agency or authority have
been duly prepared and filed and were true, correct and complete. All such taxes
due by reason of the operations conducted by Monroe or the Sellers prior to the
Closing Date have been paid by Monroe or Sellers. Except as otherwise disclosed
on Disclosure Schedule 4.11, Reason has no knowledge of any pending examination
or proceeding by any authority or agency relating to the assessment or
collection of any such taxes, interest or penalties thereon, nor does Reason
know of any basis for any such assessment.
4.13 Labor Relation. Monroe is not a party to any collective
bargaining agreement or other contract or understanding with any labor or
employees' union, and there are no disputes, claims or grievances involving
employees of Monroe or by others concerning employment with Monroe threatened,
pending against or otherwise affecting Monroe. Monroe is not a party to any
pending unfair labor practice charge nor does there exist any facts which would
provide a basis for the filing of such a charge. Disclosure Schedule 4.13
attached hereto contains a list of all of the employees of Monroe, together with
a statement of the current
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<PAGE>
annual or weekly compensation thereof and any bonus or other benefits payable
thereto.
4.14 Insurance Coverage. Monroe presently maintains liability,
casualty, property loss and other insurance coverage upon its properties and
with respect to the conduct of its business. Disclosure Schedule 4.14 attached
hereto sets forth a complete and correct list of: (i) all insurance policies
maintained by Monroe, identifying the insurance company, type of coverage and
annual premium for each, along with true and complete copies of the actual
policy or policies, and (ii) three years of loss experience history. Such
policies are in full force and effect, and all premiums due thereon prior to or
on the Closing Date have been paid or accrued. Monroe has complied in all
respects with the provisions of such policies.
4.15 Leases, Contracts and Other Commitments. Disclosure
Schedule 4.15 attached hereto lists and contains true and complete copies of the
following contracts and commitments of Monroe that are in effect as of the date
this Agreement is executed and that will remain in effect on the Closing Date:
(a) all lease agreements, as amended, pertaining to
the business of Monroe including the execution date and all of the parties with
respect to each lease and the location of the property relating to each lease;
(b) all material contracts or commitments for the
performance or receipt of services or for the purchase, sale, lease, license,
use or acquisition of real or personal property of
17
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any kind or character, except for (i) purchase orders for inventory which are in
the ordinary course of Monroe's business as customarily conducted, (ii) other
purchase orders for furniture, fixtures or equipment which, in the aggregate,
involve less than $25,000 and (iii) contracts terminable at will by Monroe upon
thirty (30) days notice;
(c) all written employment contracts and consulting
agreements;
(d) all written agreements with sales agents,
purchasing agents, distributors, dealers and representatives;
(e) all other leases and subleases of any property,
real or personal, with respect to which Monroe is either lessor or lessee;
(f) all loan or credit agreements and any agreements
of guarantee, indemnity or suretyship; and
(g) any other agreement which is material to the
operation of Monroe's business. Monroe is not in material default under any and
all contracts and other commitments to which it is a party or by which it is
bound, which would have a material adverse effect upon the financial condition
of Monroe.
4.16 Business Restrictions. Monroe is not restricted from
conducting its business in any location by agreement or court decree. Monroe
does not have any problem in obtaining in a timely manner and at market prices
any and all materials, supplies and equipment used in its business, and Sellers
have no reason to believe that Monroe's business may, as a result of the
transactions
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<PAGE>
contemplated by this Agreement or otherwise, have problems with respect to the
availability of such materials, supplies and equipment. Monroe does not have any
obligation outside of the ordinary course of business to accept any returns from
or make allowances to any customers with respect to its business. Monroe has not
granted any power of attorney (revocable or irrevocable) with respect to its
business to any person, firm or corporation for any purpose whatsoever.
4.17 No Material Adverse Change. Since December 31, 1995,
there has been no material adverse change in the business, operations,
prospects, properties or financial condition of Monroe, or any circumstance
which, by reason of passage of time or otherwise, may reasonably be expected to
result in any such material adverse change. Since December 31, 1995, Monroe has
not:
(a) sold, transferred or canceled any lease, license,
patent, trademark, trade name or other intangible asset, or canceled any
receivables, debts or claims, which has resulted in a material adverse change to
Monroe;
(b) loaned or borrowed any money or mortgaged,
pledged or subjected to any lien, charge or other encumbrance in favor of any
other party any of its assets, tangible or intangible;
(c) incurred or agreed to incur any liabilities or
obligations under leases or other commitments that have had or will have a
material adverse effect on Monroe's business, assets or financial condition;
(d) except to the extent disclosed on the Financial
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Statements and as allowed under Section 1.3, paid any bonuses to, or increased
or provided for any increase in the compensation (contingent or otherwise) of
any officer, director or key employee, or in the pension, profit sharing,
deferred compensation, insurance, medical or similar benefits paid or payable to
or for any such officer or employee;
(e) suffered any labor trouble or any damage,
destruction or loss (whether or not covered by insurance) which in either case
may hereafter have a material adverse effect on its business, assets, financial
condition or earnings; or
(f) except to the extent disclosed on the Financial
Statements and as allowed under Section 1.3, paid any dividend or made any
distribution as such to Sellers.
4.18 Fees and Commission. Neither Monroe nor any Seller has
agreed to pay or become liable to pay any broker's, finder's or originator's
fees or commission by reason of services alleged to have been rendered for or at
the instance of any Seller in connection with this Agreement and the
transactions contemplated hereby.
4.19 Environmental Matters. Except as disclosed in Disclosure
Schedule 4.19 attached hereto:
(a) To the best of the knowledge and without inquiry
of Reason and Monroe, their properties are currently in compliance with all
federal or state hazardous waste laws;
(b) All underground storage tanks or containers of
any nature located on the properties of Monroe or Reason or located
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on such properties and subsequently removed or filled are shown on Disclosure
Schedule 4.19;
(c) To the best of the knowledge without inquiry of
Reason and Monroe, there are no polychlorinated biphenyls (PCBs) located upon or
in the properties of Monroe or Reason, including but not limited to any
electrical transformers, flares and light fixtures with bomb blasts, cooling
oils, or any other similar equipment or device of any nature;
(d) To the best of the knowledge without inquiry of
Reason and Monroe, there are no conditions likely to exist in the foreseeable
future which would require or are likely to require clean up, removal, remedial
action, or other responsive action pursuant to any federal, state or local
environmental laws by Sellers or Monroe, or which would subject Noble or Monroe
to damages, penalties, injunctive relief or clean up costs under any such
environmental laws;
(e) To the best of the knowledge without inquiry of
Reason and Monroe, no permits, licenses or approvals are required under any
federal, state or local environmental laws relative to the properties of Monroe
or Reason;
(f) The properties of Monroe and Reason are not
subject to any judgment, decrees, order or citation which relates to or arises
out of a violation of any federal, state or local environmental laws, or that
requires Monroe or Reason to clean up, remove or take remedial action or other
responsive action pursuant to any federal, state or local environmental laws;
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(g) Neither Monroe nor Reason are currently a party
to any litigation or administrative proceeding by a private party, governmental
body or agency, which asserts that Monroe has violated or is violating any
federal, state or local environmental law, or which asserts that Monroe or
Reason is required to clean up, remove, take remedial action or other responsive
action pursuant to any federal, state or local environmental law;
(h) Reason has no actual knowledge of any litigation
or administrative proceedings threatened against Monroe or Reason, by any
private party, governmental body or agency which asserts that any of them have
violated or is violating any federal, state, or local environmental law, or
which asserts that any of them is required to clean up, remove, take remedial
action or other responsive action pursuant to any federal, state or local
environmental law;
(i) There are not now, nor, to the best of the actual
knowledge of Reason and Monroe, has there ever been any substances classified as
hazardous, or toxic under any federal, state or local environmental law, stored,
deposited, treated, recycled or disposed of on, under, or at the properties of
Monroe and Reason; and
(j) For the purpose of this Agreement and all related
documentation, the term "federal or state hazardous waste laws" shall mean all
federal and state laws including statutes, regulations, rules and other
governmental restrictions and requirements, relating to environmental pollution,
contamination or
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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, chemical, 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 Responsibility Cleanup and Liability Act of 1980,
regulations of the Environmental Protection Agency, regulations of 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.
4.20 [Reserved]
4.21 No Misstatement or Omission. No representation or
warranty by any Seller or by Sellers jointly and severally in this Agreement,
and no Exhibit, Disclosure Schedule or certificate furnished or to be furnished
by Sellers pursuant hereto contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading. Any fact disclosed to Noble on any Disclosure Schedule hereto shall
be deemed to be disclosed for purposes of all other Disclosure Schedules hereto.
4.22 Disclosure Schedules. Sellers will supplement each
Disclosure Schedule as required to reflect changes or additions to
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the information contained therein and required to be disclosed to Noble
hereunder immediately upon the occurrence of such changes or additions. Further,
the parties hereto agree that Sellers shall have until March 30, 1996 in order
to finalize all of the Disclosure Schedules.
4.23 Intangible Personal Property. Disclosure Schedule 4.23
attached hereto lists a description of the material items of intangible personal
property owned by, or used in the business of, Monroe, including, but not
limited to: (i) all patents, patent applications, registered tradenames,
registered trademarks, registered service marks, copyright registrations, all
applications for any of the foregoing, and any other tradenames, trademarks, or
service marks currently used in the business of Monroe; and (ii) a true and
correct list of all licenses or similar agreements to which Monroe is a party
either as a licensee or licensor of any such intangible personal property (the
intangible personal property described in (i) and (ii) being referred to herein,
collectively, as the "Patent and Trademark Rights"). Except as disclosed in
Disclosure Schedule 4.23:
(a) Monroe is the owner of all right, title and
interest in and to each such registered Patent and Trademark Rights, free and
clear of all Encumbrances;
(b) No officer, director or stockholder, or, to
Reason's or Monroe's knowledge, stockholder or employee of Monroe, nor, to
Reason's or Monroe's knowledge, any spouse, child or other
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relative or affiliate thereof, owns directly or indirectly, in whole or in part,
any of the Patent and Trademark Rights;
(c) No actions or other judicial or adversary
proceedings nor any adverse claims concerning any of the Patent and Trademark
Rights have been initiated or made or, to Reason's or Monroe's knowledge,
threatened;
(d) Monroe has the right and authority to use the
Patent and Trademark Rights in connection with the conduct of its business in
the manner presently conducted;
(e) There are no outstanding, nor, to Reason's actual
knowledge, any threatened, disputes or other disagreements with respect to any
licenses or similar agreements or arrangements described in Disclosure Schedule
4.23; and
(f) Monroe has not received notice that the conduct
of the business of Monroe as now conducted conflicts with any patents,
trademarks, tradenames or service marks or copyrights of others in any way
which, individually or in the aggregate, would have a material adverse effect.
4.24 Employee Benefit Plans.
(a) Disclosure Schedule 4.24 contains a list of all
employee benefit plans as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA") and other retirement, profit-sharing,
deferred compensation, severance, bonus, stock option, stock purchase and
employee benefit plans and arrangements (individually, a "Plan," and,
collectively, the "Plans") which Monroe or any other trade or business under
common
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control with Monroe [within the meaning of Section 414(b), (c), (m) or (o) of
the Internal Revenue Code of 1986, as amended (the "Code")] sponsors, maintains
or contributes to, setting forth the names and addresses of the Plans'
administrators, their trustees and related trust agreements and insurance
contracts (including all amendments and supplements thereto).
(b) Except as described in Disclosure Schedule 4.24
neither Monroe nor any other trade or business under common control with Monroe
[within the meaning of Sections 414(b), (c), (m) or (o) of the Code] sponsors,
maintains or contributes to an Plan that provides retiree medical or retiree
life insurance coverage to former employees of Monroe.
5. REPRESENTATIONS AND WARRANTIES OF NOBLE. Noble represents,
warrants and covenants to Monroe and Sellers as follows and Skandalaris
represents, warrants and covenants to Monroe and Sellers as it relates to
Section 5.5 as follows:
5.1 Organization and Standing. Noble is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan.
5.2 Corporate Action. Noble has full corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby, and all corporate proceedings required to be taken by or on
its part to authorize the execution, delivery and performance of this Agreement
have been duly and properly taken. The execution and delivery of this Agreement
by Noble and compliance by it with its terms, will not result in any
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breach or violation of its Articles of Incorporation or Bylaws, or of any
agreement, instrument, judgment or decree to which Noble is a party or may
otherwise be subject.
5.3 Fees and Commissions. Except for a fee which may be due to
River Capital, Inc. which Noble agrees to pay, Noble has not agreed to pay or
become liable to pay any broker's, finder's or originator's fees or commission
by reason of services alleged to have been rendered in connection with this
Agreement and the transactions contemplated hereby.
5.4 No Misstatement or Omission. No representation or warranty
by Noble in this Agreement, and no Exhibit, Disclosure Schedule or certificate
furnished or to be furnished by Noble pursuant hereto contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading.
5.5 Authority of Skandalaris. Skandalaris has full power and
authority to execute this Agreement and consummate the transactions contemplated
hereby applicable to Skandalaris, and this Agreement is binding upon Skandalaris
and as it relates to Skandalaris, is enforceable in accordance with its terms.
The execution and delivery of this Agreement, consummation of the transactions
contemplated hereby and compliance with the terms of this Agreement applicable
to Skandalaris do not and will not conflict with the terms of any agreement or
other instrument to which Skandalaris is a party or by which Skandalaris or any
of his
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property is bound, and to Skandalaris's knowledge, do not and will not conflict
with any existing applicable law, rule, regulation, judgment, order or decree of
any government, governmental instrumentality or court, domestic or foreign,
having jurisdiction over Skandalaris, or any of his property.
6. CERTAIN UNDERSTANDINGS AND AGREEMENTS.
6.1 Conduct of Monroe's Business. From and after the date
hereof and until the Closing Date, Sellers shall cause Monroe to use all
reasonable efforts to conduct its business in substantially the same manner as
heretofore conducted and maintain its business organizations intact, retain its
present employees and preserve the confidence of its suppliers, representatives
and customers. From and after the date hereof, Sellers shall cause Monroe to
not, without the prior written consent of Noble:
(i) enter into any contract of employment
with any person providing for annual compensation in
excess of $20,000.00 (other than employees paid on an
hourly basis), or grant any increase in the rate of
pay, salaries, or other compensation of any of its
officers, directors or employees, or grant any
increase in the other benefits to which such officers
and employees are presently entitled, or grant or pay
any bonus to any of such officers or employees except
for salary increases or bonuses to employees other
than directors or officers not in
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excess of 5% of their present base level of
compensation;
(ii) amend or modify any employee benefit plan in
any manner whatsoever, including any change that
would affect the assets, liabilities or benefits
under the plans;
(iii) except as provided in Section 1.3, declare,
set aside or pay any dividend or make any
distribution, in respect of its common stock, or
authorize, effect, recommend or propose to the
shareholders of Monroe, any merger, consolidation,
acquisition of assets, disposition of assets, change
in capitalization or any comparable event (other than
the transactions contemplated in this Agreement) or
any amendment to the Articles of Incorporation or
Bylaws of Monroe as in effect on the date hereof;
(iv) incur any capital expenditures in excess of
$10,000.00 in the aggregate or enter into any
contracts or commitments for such capital
expenditures; or execute any lease for realty or
personalty, except for renewal of current leases;
(v) increase the percentage or rate of
commissions or other payments made to sales agents,
distributors, dealers and representatives; (vi)
borrow any money from any party or make
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any loans to or borrowings from the shareholders of
Monroe;
(vii) sell, mortgage, encumber or lease (as
lessor or lessee) any properties or assets, except
for sales of inventory in the ordinary course and
renewals of current leases;
(viii) fail to maintain such liability, casualty,
property loss and other such insurance coverage upon
its properties and with respect to the conduct of its
business, in such amounts, with such insurance
carriers and to such extent and covering such risks
as are maintained on the date hereof;
(ix) fail to maintain insurance covering all its
assets and properties which are material to its
business, fail to collect all insurance proceeds
related to a casualty loss, or fail to maintain its
books of account and records in the usual and regular
manner and in accordance with principles and
practices consistent with prior years;
(x) fail to pay and perform in its ordinary
course any and all liabilities and obligations as the
same mature and become due, or cause or permit any
default by Monroe to exist or occur or any penalties
to be imposed as a consequence thereof under any of
its material contracts or commitments;
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(xi) suffer or permit any default by Monroe or
any event which, with the passage of time or the
giving of notice, or both, may become a default by
Monroe under any material contract, agreement or
understanding; or
(xii) take any action or omit to take any action
which will affect the accuracy, on and as of the
Closing Date, of the representations and warranties
contained herein.
6.2 Advice of Adverse Change. From and after the execution of
this Agreement until the Closing Date, Sellers will promptly notify Noble in
writing of any event which is likely to result in any adverse change in the
business, prospects, assets or financial condition or any adverse change in the
earnings of Monroe, and any other event that would, with the passage of time or
otherwise, impair or otherwise affect the accuracy of any of the representations
and warranties contained herein on and as of the Closing Date.
6.3 Access.
(a) From and after the date hereof, Monroe will
permit Noble's authorized officers, employees, attorneys, accountants and other
representatives to have reasonable access to the property, records and documents
of Monroe, including, but not limited to, the corporate financial records,
papers, tax returns, properties and facilities of Monroe, and discuss the
business and financial affairs and prospects of Monroe with such third persons,
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including, but not limited to the directors, officers, employees, attorneys and
accountants of Monroe, as Noble considers necessary or appropriate for all
relevant purposes of investigation, analysis, and legal or regulatory approvals
as deemed necessary by Noble or its advisors.
(b) Upon termination of this Agreement, the rights of
access provided in the immediately preceding paragraph will terminate and Noble
agrees that, upon request by Monroe, it will return or destroy all copies of all
documentary information received from Monroe and all documents prepared by them
(or their representatives) which disclose such information.
(c) It is expected that, in connection with the
proposed transaction, Monroe will furnish Noble with confidential information
concerning the business and financial condition of Monroe. Noble and its
affiliates will use its best efforts to keep confidential all such information.
Upon termination of this Agreement, Noble will maintain and will cause its
officers, employees, attorneys, accountants and other representatives to
maintain the confidentiality of such information for three (3) years from the
date of such termination and will not use such information for any purpose;
provided, that nothing herein will prevent the disclosure or use of any
information that (i) is required to be disclosed pursuant to the order of a
court of competent jurisdiction, or in the defense of Noble in any litigation to
which it may be a party; (ii) was already in Noble's possession prior to its
disclosure by Monroe; (iii) was generally
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known to the public; (iv) became known to the public through no fault of Noble;
or (v) was disclosed to the party receiving the information by a third party not
bound by an obligation of confidentiality.
6.4 Capital Stock. Monroe shall not, without Noble's prior
written consent, amend its Articles of Incorporation or Bylaws; make any change
in its authorized, issued or outstanding capital stock or other equity security;
or enter into any agreement, call or commitment which would obligate Monroe to
issue, sell, pledge, purchase or acquire any of its capital stock or change the
number of outstanding shares thereof.
6.5 Monroe Board Activity. The Board of Directors of Monroe
have approved the execution of this Agreement by Monroe.
6.6 Effective Notice. The availability and actual delivery of
information about Monroe or Noble shall not affect the representations,
warranties or covenants set forth in this Agreement, unless specifically
provided for herein.
6.7 Stock Rights. Monroe has not granted any stock options,
stock appreciation rights, stock split or stock dividend agreements to any party
and will not make any such agreements prior to the Closing Date.
6.8 Mutual Purpose. No party hereto shall do anything which
would impair, impede or be detrimental to the consummation of the transaction
contemplated in this Agreement, except to the extent required by law or by the
fiduciary duties of the Monroe or Noble Board of Directors to their
shareholders. The officers or
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directors of Monroe following execution hereof, shall not solicit, encourage or
authorize any person to solicit, directly or indirectly, inquiries, discussions
or proposals for, or enter into any discussions or agreements with any other
person relating to, a merger, consolidation, tender offer, acquisition or
similar transaction concerning the assets or securities of Monroe, or furnish or
cause to be furnished to any person, other than the other party, any non-public
information to be used by such person or any other person for the purpose of
evaluating or determining whether to make or pursue any such inquiries,
discussions or proposals, except to the extent required by law or by fiduciary
obligations. Monroe will notify Noble immediately of the details of any interest
from any person with respect to the foregoing of which they become aware.
6.9 Covenants Regarding Continuing Operations of Monroe. After
the Closing, and so long as any portion of the principal or default interest of
the Notes remains unpaid, Monroe, shall comply with the following, unless
otherwise consented to in writing by Reason:
(a) Financial Statements required to be given to Comerica
Bank, as senior lender, or any substitute senior lender, shall be given to
Reason within five (5) days after they are received or available to Monroe.
(b) Monroe shall not declare and/or issue any dividends, nor
distribute cash (other than as required under Section 1.3) or any other property
in respect of any of its stock.
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(c) Monroe shall not establish any new employee benefit plans,
including but not limited to, any pension, profit sharing, stock ownership or
deferred compensation plan which requires Monroe to fund the same; nor shall it
amend any such existing plan or arrangement if it causes Monroe's funding
obligations with respect thereto to increase, unless such amendment shall be
required to comply with any law governing the administration and/or
qualification of such plan or arrangement or to terminate same.
(d) Monroe shall use its best efforts to preserve and keep in
full force and effect all licenses and permits necessary to the proper conduct
of its business.
(e) Monroe shall maintain insurance coverage by financially
sound and reputable insurers in such forms and amounts and against such risks as
are customary for corporations engaged in the same or similar business and
owning and operating similar properties.
(f) Monroe and/or Noble shall promptly pay and discharge all
taxes, assessments and other charges or levies imposed upon Monroe or the
Property or upon or in respect of all or any part of the properties or business
of Monroe or the Property, provided, however, that Monroe and/or Noble may in
good faith contest any such taxes, assessments and other charges and levies and,
in the event of any such contest, may permit such taxes, assessments, charges
and levies to remain unpaid during the period of such contest and any appeal
therefrom.
(g) Monroe shall promptly comply with all laws,
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ordinances or governmental rules and regulations to which it is subject, the
violation of which would materially and adversely affect the properties and
business prospects, profits or financial condition of Monroe or which would
result in any lien or charge upon any property of Monroe, except for those which
the Company is not in compliance with prior to the Closing Date but as to which
it will use its best efforts to comply with.
(h) Monroe and/or Noble shall maintain, preserve and keep its
properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order subject
to reasonable wear and tear and from time to time will make all reasonably
necessary repairs, replacements, renewals and additions consistent with Monroe's
business plan.
(i) Except for purchase money security interests and the
interest of Comerica Bank, as senior lender, or any substitute senior lender,
Monroe and/or Noble shall not create or incur or suffer to be incurred or to
exist any mortgage, pledge, security interest, encumbrance, lien or charge of
any kind on its property or assets whether now owned or hereafter acquired, or
upon any income, profits or other proceeds therefrom which would have a material
adverse effect upon the properties and business prospects, profits or financial
condition of Monroe.
(j) Monroe shall not enter into or be a party to any
transaction with any affiliate of Noble except in the ordinary course of and
pursuant to the reasonable requirements of its
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business and upon fair and reasonable terms that are no less favorable to Monroe
than would obtain in a comparable arm's length transaction with a person not an
affiliate of Noble. "Affiliate" means a shareholder or a director of Monroe or
Noble, or a member of a shareholder in Noble's immediate family, a company
controlled by Monroe or Noble, a company that controls Monroe or Noble or a
company under common control with Monroe or Noble.
(k) Monroe shall keep proper books of records and accounts, in
which full and correct entries will be made of all dealings or transactions of
or in relation to the business and affairs of Monroe, in accordance with
generally accepted accounting principles consistently maintained and applied.
Monroe shall provide Reason with any data or information relating to Monroe and
its business with reasonable promptness, if such data or other information is
related to the full and timely payment required under the Notes, and Monroe
shall permit Reason to visit and inspect, under Monroe's guidance and at
reasonable hours, any of the properties of Monroe, to examine all of its books
of account, records, reports and other papers, and to make copies and extracts
therefrom and to discuss its respective affairs, finances and accounts with
Monroe's officers, employees and accountants. By this provision, Monroe and
Noble authorize their officers, employees and accountants to discuss the
finances and affairs of Monroe with Reason.
In the event that Monroe and/or Noble fail to comply with any
of the foregoing provisions of this Section 6.9 and such
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failure continues for a period of five (5) days after receipt of a written
notice from Reason of such failure, such failure shall constitute a default, and
one of Reason's remedies shall be the right to immediately seek an injunction to
enforce such provisions, in addition to all other rights Reason may have at law
or equity. The parties recognize that a default by Monroe and/or Noble will
cause Reason irreparable damage for which money damages are not adequate.
7. CONDITIONS TO SELLERS' OBLIGATIONS. The obligation of the
Sellers to complete on the Closing Date the consummation of the sale as
contemplated herein is subject to the satisfaction of each of the conditions
identified in this Section 7.
7.1 Performance by Noble. On and as of the Closing Date, all
of the representations and warranties of Noble and Skandalaris set forth in
Section 5 hereof shall be true and correct in all material respects, except for
changes that have occurred in the ordinary course of Noble's business and
consistent with past practices or which are expressly permitted or contemplated
by this Agreement (for this purpose substituting the Closing Date for the date
of this Agreement wherever a representation or warranty shall have been made
with reference to the date of this Agreement), and Noble shall have performed
all of the agreements and covenants required by this Agreement to be performed
by it prior to or at the Closing Date. Noble shall have delivered to Sellers a
certificate dated the Closing Date and in form and substance reasonably
satisfactory to Sellers and their counsel, reaffirming such
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representations and warranties as of the Closing Date and certifying to the
fulfillment of such agreements and covenants.
7.2 Absence of Litigation. No action, suit or proceeding shall
have been instituted or threatened seeking to enjoin or restrain or which would
materially adversely affect the transactions contemplated hereby.
7.3 Other Documents. On the Closing Date, there shall have
been executed and delivered to Reason (i) a Pledge Agreement, in substantially
the form of Exhibit E attached hereto, with respect to all of the stock
certificates of Monroe, which stock certificates will be reissued at Closing in
the name of Noble, along with an Assignment of Stock in Blank signed by Noble;
(ii) the Irrevocable Trust Note and the Reason Note, in substantially the form
of Exhibits A-1 and A-2, respectively, attached hereto; (iii) the Guaranty of
the 1997 Payment in substantially the form of Exhibit A-3 attached hereto; (iv)
a Land Contract for the purchase of the Property by Monroe in substantially the
form of Exhibit B1 attached hereto; (v) a Guaranty of Land Contract in
substantially the form of Exhibit B2 attached hereto; (vi) a Letter of Credit
from Comerica Bank securing the payment of the December 23 Irrevocable Trust
Payment, the December 23 Reason Payment, and the payment of the Bonus pursuant
to the Employment and Deferred Compensation Agreement; and (vii) an Employment
and Deferred Compensation Agreement in substantially the form of Exhibit D
attached hereto.
7.4 Opinion of Counsel. On the Closing Date, Noble
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shall have delivered to Sellers the written opinion of Mark A. Davis, Esq.,
counsel for Noble dated as of the Closing Date, that is, in form and substance,
reasonably satisfactory to Sellers and their legal counsel.
8. CONDITIONS TO NOBLE'S OBLIGATIONS. The obligation of Noble
to complete on the Closing Date the consummation of the purchase and sale
transactions contemplated herein is subject to the satisfaction of each of the
conditions identified in this Section 8.
8.1 Performance by Monroe and Sellers. On and as of the
Closing Date, all of the representations and warranties of Monroe and Sellers
set forth in Sections 3 and 4 hereof shall be true and correct in all material
respects, except for changes which are expressly permitted by this Agreement
(for this purpose substituting the Closing Date for the date of this Agreement
wherever a representation or warranty shall have been made with reference to the
date of this Agreement), and each of the Sellers shall have performed all of the
agreements and covenants required by this Agreement to be performed by all of
them prior to or at the Closing Date. Each of Monroe and Sellers shall have
delivered to Noble a certificate dated as of the Closing Date and in form and
substance reasonably satisfactory to Noble and its counsel, reaffirming such
representations and warranties as of the Closing Date and certifying to the
fulfillment of such agreements and covenants.
8.2 Resignations. Reason and David C. Stone shall have
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tendered their resignations as officers and directors along with an appropriate
release, effective as of the Closing Date.
8.3 Opinion of Counsel. On the Closing Date, Sellers shall
have delivered to Noble the written opinion of Stone, Biber & O'Toole, P.C.,
counsel for Monroe and Sellers, dated the Closing Date, that is, in form and
substance, reasonably satisfactory to Noble and its legal counsel.
8.4 Absence of Litigation. No action, suit or proceeding shall
have been instituted which has resulted in temporary or preliminary injunctive
relief of a continuing nature preventing the consummation of the transactions
contemplated hereby, or which, in the opinion of Noble's counsel, is not fully
covered by insurance maintained by Monroe, the result of which will have an
adverse effect on the business, operations, prospects, assets or financial
condition of Monroe or the transactions contemplated hereby. No labor dispute
shall have occurred, and no unfair labor practice charge shall have been filed
which would adversely affect the business, operations, prospects, assets or
financial condition of Monroe or the transactions contemplated hereby.
8.5 Casualty Loss. No casualty losses shall have occurred to
the Assets of Monroe or the Property which would have a material adverse affect
on the ability of Monroe to operate its business as presently conducted or would
otherwise deprive Noble of the benefits of the transactions contemplated hereby.
Noble may waive this condition and require Sellers to cause that any
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insurance proceeds payable by reason of such occurrence be assigned to Noble and
received by it.
8.6 Due Diligence. (i) Noble, in its sole discretion, shall
not have become aware of any event, occurrence, fact, matter or information
which Noble determines has or may have an adverse effect on the business,
operations, prospects, assets or financial condition of Monroe or the
transactions contemplated by this Agreement, (ii) Noble shall have determined
that the information disclosed on, in or pursuant to any Disclosure Schedule or
supplement thereto is acceptable to Noble in all respects (provided such
information shall be deemed acceptable to Noble unless it notifies Monroe to the
contrary within three (3) days after a Disclosure Schedule or supplement thereto
is delivered to it but in no event later than the Closing Date) and (iii) no
material adverse change in the business, operations, prospects, assets or
financial condition of Monroe shall have occurred since December 31, 1995.
8.7 Employment and Deferred Compensation Agreement. As of the
Closing Date, there shall have been executed and delivered to Noble an
Employment and Deferred Compensation Agreement between Monroe and Richard J.
Reason substantially in the form of Exhibit D attached hereto.
8.8 Other Documents. On the Closing Date, there shall have
been executed and delivered to Reason (i) a Pledge Agreement, in substantially
the form of Exhibit E attached hereto, with respect to all of the stock
certificates of Monroe, which stock certificates will be reissued at Closing in
the name of Noble,
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along with an Assignment of Stock in Blank signed by Noble; (ii) the Irrevocable
Trust Note and the Reason Note, in substantially the form of Exhibits A-1 and
A-2, respectively, attached hereto; (iii) the Guaranty of the 1997 Payment in
substantially the form of Exhibit A-3 attached hereto; (iv) a Land Contract for
the purchase of the Property by Monroe in substantially the form of Exhibit B1
attached hereto; (v) a Guaranty of Land Contract in substantially the form of
Exhibit B2 attached hereto; (vi) a Letter of Credit from Comerica Bank securing
the payment of the December 23 Irrevocable Trust Payment, the December 23 Reason
Payment and the payment of the Bonus pursuant to the Employment and Deferred
Compensation Agreement; and (vii) an Employment and Deferred Compensation
Agreement in substantially the form of Exhibit D attached hereto.
8.9 338(h)(10) Election. Sellers and Noble shall execute an
election under Internal Revenue Code Section 338(h)(10) and the regulations
thereunder to have the acquisition of the Monroe Common Stock treated for
purposes of federal income taxation as an asset acquisition, and agree to
execute any Internal Revenue Service forms required for such election. The
parties agree to work together in good faith to establish a reasonable
allocation of the purchase price for the Monroe Common Stock to Monroe's assets.
Each of the parties will report the purchase and sale in accordance with the
allocations agreed to by the parties for all federal, state and local tax
purposes.
8.10 Consents. To the extent that this Agreement or any
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transactions hereunder violate any documents or agreements described in Section
4.3 or require the consent of any governmental agency or other person, such
consents shall have been obtained by Sellers.
9. INDEMNITIES.
9.1 By Sellers. (a) Sellers agree to indemnify and hold Noble
and Monroe harmless from and against any and all liabilities, losses, damages,
costs and expenses, (including reasonable counsel fees) incurred or sustained by
them because of any inaccuracy in, or breach or violation of, the
representations and warranties made by Sellers and the covenants undertaken by
them.
(b) For purposes of this Section 9.1, any liabilities incurred
by Noble or Monroe for which the Sellers have indemnified them under this
Section 9.1 shall first reduce the remaining unpaid amounts of the Notes pro
rata as to the Sellers' respective Stock ownership of the Monroe Common Stock
prior to Closing and then shall be payable by the Sellers pro rata directly to
Noble or Monroe.
(c) Sellers shall not be liable under this Section 9.1 unless
the losses, liabilities, damages, costs and expenses identified in this
Subsection 9.1 exceed, in the aggregate, $100,000 (the "Threshold Amount"), in
which event Noble and/or Monroe shall be entitled to recovery of all such
losses, liabilities, damages, costs and expenses up to an aggregate amount
("Cap") not exceeding the outstanding amount of the Notes. Such Cap shall be
reduced as the Notes are paid. Notwithstanding the
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preceding sentence, any losses, liabilities, damages, costs or expenses
sustained as a result of a breach of (i) Section 4.8 or 4.10 shall not be
subject to the Threshold Amount or (ii) Sections 3.2, 4.5 and 4.12 shall not be
subject to the Cap.
9.2 By Noble. Noble agrees to indemnify and hold Sellers
harmless from and against any and all liabilities, losses, damages, costs and
expenses (including reasonable counsel fees) incurred or sustained by Sellers
because of any material inaccuracy in, or breach or violation of, the
representations, warranties and covenants made by Noble.
9.3 Survival. Each and every representation, warranty and
covenant of the parties shall survive until December 23, 1996, after which they
shall terminate and be of no further force and effect, and any suit, proceeding,
claim for indemnity or other action by any party against another based on an
alleged breach of any representation, warranty or covenant contained herein must
be filed, brought or made in writing prior to December 23, 1996. Notwithstanding
the foregoing, the representations, warranties and covenants contained in
Sections 3.1, 3.2, 4.1, 4.2, 4.3 and 4.5 shall not be limited by the preceding
sentence and shall survive the Closing and the warranties and covenants
contained in Sections 4.12 and 6.9 shall survive the Closing for any applicable
statute of limitations period, except as otherwise specifically provided in such
Sections. Further, the terms of the Land Contract, Guaranty of Land Contract,
the Irrevocable Trust Note, Guaranty of 1997 Payment, and the Employment and
Deferred Compensation Agreement
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which continue beyond December 23, 1996 shall survive in accordance with the
respective agreements' terms.
9.4 Claims Procedure. If any action, claim or demand shall be
brought or asserted against any party in respect of which indemnity may be
sought pursuant to this Section, the party seeking indemnification
("Indemnitee") shall promptly notify the parties from whom indemnification is to
be sought (collectively, the "Indemnitor"), stating the amount claimed to be due
and payable, the basis of the claim as alleged by any claimant and the provision
or provisions of this Agreement under which such claim for indemnity is
asserted. Prior to sending such notice, if such claim has been made by a third
party but has not resulted in an action, suit, proceeding or investigation
before a court or other governmental body, the Indemnitee may resolve the third
party's claim in a reasonable manner, and, in turn, seek indemnification from
the Indemnitor. Any notice hereunder shall be accompanied by copies of any
documents relied on by any claimant and furnished to the Indemnitee. Within
thirty (30) calendar days after receipt of such notice, the Indemnitor shall by
written notice either (i) concede liability in whole as to the amount claimed in
such notice; (ii) deny liability in whole as to such amount; or (iii) concede
liability in part and deny liability as to the remainder.
In the case of claims by third parties resulting in an action,
suit, proceeding or investigation before a court or other governmental body, the
Indemnitor, in the written notice, shall also indicate whether it shall assume
the defense thereof with
46
<PAGE>
counsel reasonably acceptable to the Indemnitee. Provided that the notice
required hereunder is properly given, failure by the Indemnitor to concede
liability for a third party claim for which a party is entitled to indemnity
under this Agreement shall cause the indemnity obligations of the Indemnitor to
extend to whatever outcome results from such third party claim. Any settlement
or compromise of a claim shall be agreed upon by all parties. If the Indemnitee
declines to accept a bona fide offer of settlement which is recommended by the
Indemnitor, the maximum liability of the Indemnitor shall not exceed that amount
which it would have been liable for had such settlement been accepted. If the
Indemnitor declines to accept a bona fide offer of settlement recommended by the
Indemnitee, the Indemnitor shall be liable for whatever outcome results from
such third party claim.
In the case of non-third party claims (or claims that were
originally third party claims but resolved as described in the first paragraph
of this Section 9.4 and for which a party, in turn, seek indemnification), if
the Indemnitor fails to deny liability within the thirty (30) calendar day
period, the Indemnitee may offset the claim from any obligations owing by such
party to the Indemnitor ("Obligations").
If the Indemnitor and the Indemnitee cannot agree as to the
disposition of the claim, the unresolved matter shall be resolved by arbitration
if a request for arbitration, as provided herein, is given. Arbitration shall be
initiated by one party's making a written demand on the other party and
simultaneously
47
<PAGE>
filing copies of the demand, together with the required fees, with the Detroit
Regional Office of the American Arbitration Association ("AAA"). Within fifteen
(15) days after receipt of such demand, each party shall designate one
arbitrator. These two arbitrators shall, within fifteen (15) days after their
appointment, select a third arbitrator, who shall be experienced in the subject
areas of corporate law and mergers and acquisitions. In the event that the first
two arbitrators are unable to agree upon the third arbitrator, then the
arbitrators shall apply to the AAA to designate and appoint a person who meets
these criteria as the third arbitrator. In the event the party upon whom the
original arbitration demand was served shall fail to designate its arbitrator,
the arbitrator designated by the party requesting arbitration shall act as the
sole arbitrator and shall be deemed to be the single, mutually approved
arbitrator to resolve the matter. Final arbitration of the dispute shall occur
within six (6) months of the giving of notice of arbitration.
The place of arbitration shall be Southfield, Michigan.
Arbitration shall be conducted under the auspices of the AAA, and the AAA Rules
shall govern all proceedings unless otherwise provided herein. In case of
conflict between the AAA Rules and this Agreement, the provisions of this
Agreement shall govern. The arbitrators sole power shall be to interpret the
provisions of this Agreement and they shall have no power to change or modify
any provision of this Agreement.
48
<PAGE>
The parties shall have the right to discovery in accordance
with the Federal Rules of Civil Procedure except that discovery may commence
immediately upon the service of the demand for arbitration and except that
discovery shall be limited to document requests and depositions of not more than
two (2) people per party, and must occur within three (3) months of the date of
service of notice of the complaining party. A party's unreasonable refusal to
cooperate in discovery shall be deemed to be refusal to proceed with
arbitration, and, until the arbitration panel is complete, the parties may
enforce their rights (including the right of discovery) in the circuit courts of
the State of Michigan. Such enforcement in the courts shall not constitute a
waiver of a party's right to arbitration. Upon appointment of the arbitration
panel, the arbitrators shall have the power to enforce the parties' discovery
rights. It is expressly agreed that material subject to discovery shall include
written documents that must be created from information that currently exists
only in machine-readable form.
The parties expressly covenant and agree to be bound by the
decision of the arbitration panel and accept any such decision as the final
determination of the matter in dispute. A judgment of any Michigan Circuit Court
may be rendered upon any award made pursuant to this Agreement.
The non-prevailing party in the arbitration, i.e., the one who
receives less than 80% of the amount it claims it is entitled to, shall pay the
pro rata amount of the prevailing party's costs, fees, and expenses, including
attorney's fees, with
49
<PAGE>
reference to the actual award to the prevailing party and the total claim of the
prevailing party.
The provisions of this Agreement shall be construed in favor
of arbitration.
10. TERMINATION. This Agreement may be terminated without
liability to any party hereto (a) at any time by mutual written agreement of
Sellers and Noble, (b) by Noble if any of the conditions set forth in Section 8
shall not be fulfilled for reasons beyond the reasonable control of Sellers and
are not waived by Noble, (c) by Sellers if any of the conditions set forth in
Section 7 shall not be fulfilled for reasons beyond the reasonable control of
Noble and are not waived by Sellers, or (d) by either party after April 30, 1996
if the Closing has not occurred by that date through no fault of the terminating
party. If Sellers or Noble waive in writing compliance with any such condition
to their respective obligations, the right to terminate provided herein shall no
longer exist with respect to that particular condition.
11. ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of, and be enforceable by, the parties hereto and their
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.
12. MISCELLANEOUS.
12.1 Amendment. This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to
50
<PAGE>
the subject matter hereof. No representation, inducement, agreement, promise or
understanding altering, modifying, taking from or adding to the terms and
conditions hereof shall have any force and effect unless the same is in writing
and validly executed by the parties hereto.
12.2 Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if sent by nationally recognized courier service, facsimile with a hard
copy by registered or certified mail, postage prepaid and return receipt
requested, addressed as follows:
(a) If to Noble, to:
33 Bloomfield Hills Parkway
Suite 155
Bloomfield Hills, Michigan 48304
Attention: Robert J. Skandalaris
If to Skandalaris, to:
Robert J. Skandalaris
c/o Noble International, Ltd.
33 Bloomfield Hills Parkway
Suite 155
Bloomfield Hills, Michigan 48304
In either case, with a copy to:
Mark Davis, Esq.
33 Bloomfield Hills Parkway
Suite 155
Bloomfield Hills, Michigan 48304
51
<PAGE>
(b) If to Sellers, to:
Richard J. Reason, as Trustee of the
Richard J. Reason Agreement of Trust
dated April 9, 1979
4605 South Ocean Blvd., Apt. A-2
Highland Beach, Florida 33487
And
The Richard J. Reason Irrevocable Trust
2701 Troy Center Dr., Suite 400
Troy, Michigan 48084
Attention: David C. Stone
with a copy to:
David C. Stone, Esq.
Stone, Biber & O'Toole, P.C.
2701 Troy Center Drive, Suite 400
Troy, Michigan 48084
The addresses so indicated for any party may be changed by similar written
notice.
12.3 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be treated as an original but all of
which, collectively, shall constitute a single instrument.
12.4 Construction. This Agreement shall be construed in
accordance with the laws of the State of Michigan without regard to its rules
regarding choice of law. The titles of the Sections have been inserted as a
matter of convenience and reference only and shall not control or affect the
meaning or construction of this Agreement. Wherever any words are used in this
Agreement in the masculine gender, they shall be construed as though they also
were used in the feminine gender in all cases where they would so apply.
52
<PAGE>
12.5 Disclosure Schedules. The Disclosure Schedules required
to be submitted under this Agreement to Noble shall (i) be identified as
Disclosure Schedules, (ii) refer to the Section or Sections of this Agreement
pursuant to which the Disclosure Schedule is responsive, and (iii) be dated and
signed by both an officer of Monroe and a Seller.
12.6 Announcements. Each of the parties shall consult with the
other parties with respect to issuing any press release or otherwise making
public statements with respect to any of the transactions contemplated by this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written
NOBLE INTERNATIONAL, LTD.
WITNESS:
/s/ Lynette Batcheler By: /s/ Mark A. Davis
- --------------------------- ---------------------------
Its: President
MONROE ENGINEERING PRODUCTS,
INC.
/s/ Lynette Batcheler By: /s/ Richard J. Reason
- --------------------------- ----------------------------
Its: President
/s/ Lynette Batcheler /s/ Richard J. Reason
- --------------------------- --------------------------------
Richard J. Reason, Individually
and as Trustee of the Richard
J. Reason Trust Agreement dated
April 9, 1979
[signatures continued on next page]
53
<PAGE>
/s/ David C. Stone
- -------------------------- ------------------------------
Lynette Batcheler David C. Stone, as Trustee of
the Richard J. Reason
Irrevocable Trust for the
Benefit of Victoria Aldrich
and Peter Reason dated
October 12, 1992
/s/ Robert J. Skandalaris
- -------------------------- ------------------------------
Lynette Batcheler Robert J. Skandalaris
54
PROMISSORY NOTE
$2,231,000.00 Troy, Michigan
January 1, 1996
FOR VALUE RECEIVED, on or before April 30, 1997, Noble
International, Ltd. (the "Company") promises to pay to the order of The Richard
J. Reason Irrevocable Trust for the Benefit of Victoria Aldrich and Peter Reason
dated October 12, 1992 (the "Promisee"), the principal sum of Two Million Two
Hundred Thirty-One Thousand and 00/100 ($2,231,000.00) Dollars without interest
thereon, except as provided below.
Principal of this Promissory Note ("Note") shall be payable as
follows:
(i) Five Hundred Seventy-Seven Thousand and
00/100 Dollars ($577,000.00) shall be
payable on or before April 30, 1996
("Initial Payment");
(ii) Five Hundred Seventy-Seven Thousand and
00/100 ($577,000.00) Dollars shall be
payable on or before June 15, 1996 ("June 15
Payment");
(iii) Five Hundred Seventy-Seven Thousand and
00/100 ($577,000.00) Dollars shall be
payable on the earlier of December 23, 1996
or within five (5) business days of the
completion of a successful public offering
of the Company ("December 23 Payment"); and
(iv) Five Hundred Thousand and 00/100 Dollars
($500,000.00) shall be payable on or before
April 30, 1997 ("1997 Payment").
Payments shall be applied first against default interest accrued on the unpaid
principal amount of this Note, if any, and then against the unpaid principal
amount of this Note.
This Note is issued pursuant and subject to the terms and
conditions of that certain Stock Purchase Agreement, dated as of January 1,
1996, by and among the Company, Promisee, Richard J. Reason, as Trustee of his
Revocable Living Trust dated April 9, 1979, Monroe Engineering Products, Inc.
("Monroe"), and Robert J. Skandalaris ("Skandalaris"), ("Stock Purchase
Agreement"), and shall be subordinate and junior at all times to the Company's
indebtedness to Comerica Bank (or any substitute senior lender) ("Senior
Lender"), and Promisee agrees, by acceptance of this Note
<PAGE>
to execute such subordination agreement(s) evidencing such subordination as the
Company may reasonably request.
The June 15 Payment is secured pursuant to the terms of a
certain Pledge Agreement of even date herewith ("Pledge Agreement"). The
December 23 Payment is secured pursuant to a letter of credit issued by Comerica
Bank ("Letter of Credit"). The 1997 Payment is secured pursuant to the Guaranty
of Skandalaris ("Guaranty").
The entire unpaid principal balance hereunder and all accrued
default interest shall become immediately due and payable at the election of
Promisee, without notice and without demand or presentation, five (5) calendar
days following delivery of written notice to the Company of the happening of one
or more of the following events which have not been cured within such five (5)
calendar period ("Events of Default"):
(a) Upon a failure to pay any installment of principal when
due.
(b) Upon a default and acceleration of all indebtedness owing
by the Company to Comerica Bank as senior lender (or successor thereof).
(c) Upon a default under the Employment and Deferred
Compensation Agreement (as defined in the Stock Purchase Agreement).
(d) The Company reorganizes, recapitalizes or sells, exchanges
or leases all or substantially all of its assets or merges, consolidates or
effects a reorganization with any other corporation, unless it is the surviving
corporation.
(e) Monroe reorganizes, recapitalizes or sells, exchanges or
leases all or substantially all of its assets or merges, consolidates or effects
a reorganization with any other corporation, unless it is the surviving
corporation.
(f) Upon a default under the Pledge Agreement.
(g) Upon the termination of the Letter of Credit prior to the
full payment of the Initial Payment, the June 15 Payment and the December 23
Payment.
(h) Upon the termination and/or default of the Guaranty of
Skandalaris prior to the full payment of the 1997 Payment.
(i) Upon the default of a certain Land Contract by and between
Richard J. Reason, as Trustee of the Revocable Living Trust dated April 9, 1979
and Monroe and/or the related Guaranty of Land Contract executed by Skandalaris.
-2-
<PAGE>
(j) Upon the default of a certain Promissory Note dated as of
January 1, 1996 in the principal amount of Four Million One Hundred Nineteen
Thousand and 00/100 Dollars ($4,119,000.00) with the Company, as maker, and
Richard J. Reason, Trustee of his Revocable Living Trust dated April 9, 1979, as
payee.
(k) The Company and/or Monroe shall fail to keep in force and
effect their corporate existence.
In the event of a default which is not cured as provided
herein, the unpaid principal amount shall bear interest at the rate of two (2%)
percent above the prime rate of interest then in effect of Comerica Bank, based
on a year of three hundred sixty (360) days.
Any notice to be given hereunder shall be addressed to the
address first given, unless notice of a different address has been given. All
notices or other communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given when sent by nationally
recognized courier service, facsimile with a confirming hard copy, registered or
certified mail, postage prepaid and return receipt requested, addressed to the
Promisee as indicated above.
Full repayment of the loan may be made at any time without
penalty. Any prepayments hereunder shall be applied first towards payment of
default interest, if any, and then to a reduction of principal.
This Note shall be governed and construed by the laws of the
State of Michigan.
Nothing herein shall limit any right granted the Company or
the Promisee by other instrument or law.
NOBLE INTERNATIONAL, LTD.
By: /s/ Robert Skandalaris
--------------------------
Robert Skandalaris
-3-
PROMISSORY NOTE
$4,119,000.00 Troy, Michigan
January 1, 1996
FOR VALUE RECEIVED, on or before December 23, 1996, Noble
International, Ltd. (the "Company") promises to pay to the order of Richard J.
Reason, Trustee of his Revocable Living Trust dated April 9, 1979, (the
"Promisee"), the principal sum of Four Million One Hundred Nineteen Thousand and
00/100 ($4,119,000.00) Dollars without interest thereon, except as provided
below.
Principal of this Promissory Note ("Note") shall be payable as
follows:
(i) One Million Nine Hundred Twenty-Three
Thousand and 00/100 Dollars ($1,923,000.00)
shall be payable on or before
April 30, 1996;
(ii) One Million Nine Hundred Twenty-Three
Thousand and 00/100 ($1,923,000.00) Dollars
shall be payable on or before June 15, 1996
("June 15 Payment"); and
(iii) Two Hundred Seventy-Three Thousand and
00/100 ($273,000.00) Dollars shall be
payable on the earlier of December 23, 1996
or within five (5) business days of the
completion of a successful public offering
of the Company ("December 23 Payment").
Payments shall be applied first against default interest accrued on the unpaid
principal amount of this Note, if any, and then against the unpaid principal
amount of this Note.
This Note is issued pursuant and subject to the terms and conditions of
that certain Stock Purchase Agreement, dated as of January 1, 1996, by and among
the Company, Promisee, the Richard J. Reason Irrevocable Trust Agreement for the
Benefit of Victoria Aldrich and Peter Reason dated October 12, 1992, Monroe
Engineering Products, Inc. ("Monroe), and Robert J. Skandalaris ("Skandalaris"),
("Stock Purchase Agreement"), and shall be subordinate and junior at all times
to the Company's indebtedness to Comerica Bank (or any substitute senior lender)
("Senior Lender"), and Promisee agrees, by acceptance of this Note to execute
such subordination agreement(s) evidencing such subordination as the Company may
reasonably request.
<PAGE>
The June 15 Payment is secured pursuant to the terms of a
certain Pledge Agreement of even date herewith ("Pledge Agreement"). The
December 23 Payment is secured pursuant to a letter of credit issued by Comerica
Bank ("Letter of Credit").
The entire unpaid principal balance hereunder and all accrued
default interest shall become immediately due and payable at the election of
Promisee, without notice and without demand or presentation, five (5) calendar
days following delivery of written notice to the Company of the happening of one
or more of the following events which have not been cured within such five (5)
calendar period ("Events of Default"):
(a) Upon a failure to pay any installment of principal when
due.
(b) Upon a default and acceleration of all indebtedness owing
by the Company to Comerica Bank as senior lender (or successor thereof).
(c) Upon a default under the Employment and Deferred
Compensation Agreement (as defined in the Stock Purchase Agreement).
(d) The Company reorganizes, recapitalizes or sells, exchanges
or leases all or substantially all of its assets or merges, consolidates or
effects a reorganization with any other corporation, unless it is the surviving
corporation.
(e) Monroe reorganizes, recapitalizes or sells, exchanges or
leases all or substantially all of its assets or merges, consolidates or effects
a reorganization with any other corporation, unless it is the surviving
corporation.
(f) Upon a default under the Pledge Agreement.
(g) Upon the termination of the Letter of Credit prior to the
full payment of all sums required hereunder.
(h) Upon the default of a certain Land Contract by and between
Promisee and Monroe and the related Guaranty of Land Contract executed by
Skandalaris.
(i) Upon the default of a certain Promissory Note dated as of
January 1, 1996 in the principal amount of Two Million Two Hundred Thirty-One
Thousand and 00/100 Dollars ($2,231,000.00), with the Company, as maker, and The
Richard J. Reason Irrevocable Trust for the Benefit of Victoria Aldrich and
Peter Reason dated October 12, 1992, as payee.
(j) The Company and/or Monroe shall fail to keep in force and
effect their respective corporate existence.
-2-
<PAGE>
In the event of a default which is not cured as provided
herein, the unpaid principal amount shall bear interest at the rate of two (2%)
percent above the prime rate of interest then in effect of Comerica Bank, based
on a year of three hundred sixty (360) days.
Any notice to be given hereunder shall be addressed to the
address first given, unless notice of a different address has been given. All
notices or other communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given when sent by nationally
recognized courier service, facsimile with a confirming hard copy, registered or
certified mail, postage prepaid and return receipt requested, addressed to the
Promisee as indicated above.
Full repayment of the loan may be made at any time without
penalty. Any prepayments hereunder shall be applied first towards payment of
default interest, if any, and then to a reduction of principal.
This Note shall be governed and construed by the laws of the
State of Michigan.
Nothing herein shall limit any right granted the Company or
the Promisee by other instrument or law.
NOBLE INTERNATIONAL, LTD.
By: /s/ Robert Skandalaris
___________________________
Robert Skandalaris
-3-
GUARANTY
GUARANTY dated as of the 1st day of January, 1996 by ROBERT J.
SKANDALARIS ("Guarantor") for the benefit of THE RICHARD J. REASON IRREVOCABLE
TRUST FOR THE BENEFIT OF VICTORIA ALDRICH AND PETER REASON DATED OCTOBER 12,
1992 ("Promisee").
R E C I T A L S:
A. Noble International, Ltd. (the "Company"), Promisee,
Richard J. Reason, individually and as Trustee of his Revocable
Living Trust dated April 9, 1979, Monroe Engineering Products, Inc.
("Monroe"), and Guarantor have entered into that certain Stock
Purchase Agreement dated as of January 1, 1996 (the "Agreement").
B. In order to induce Promisee to consummate the transactions
contemplated by the Agreement, Guarantor has agreed to guaranty the full and
prompt payment of the April 30, 1997 payment in the amount of Five Hundred
Thousand and 00/100 Dollars ($500,000.00) (the "1997 Payment"), under a certain
promissory note issued to Promisee by the Company pursuant to the Agreement in
the principal amount of Two Million Two Hundred Thirty-One Thousand and 00/100
Dollars ($2,231,000.00) (the "Note").
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, Guarantor hereby agrees as
follows:
1. Guaranty of Payment. Guarantor hereby unconditionally and
irrevocably guaranties to Promisee the full and prompt payment when due, whether
by acceleration or otherwise, of the 1997 Payment, as such term is defined under
the Note, and any default interest accruing thereon, if any, under the Note.
Guarantor agrees that this Guaranty is a present and continuing guaranty of
payment and not of collectibility, and, except as provided below, that Promisee
shall not be required to prosecute collection, enforcement or other remedies
against the Company before calling on Guarantor for payment. Guarantor agrees
that if, for any reason, the Company shall fail or be unable to pay, punctually
and fully, the 1997 Payment, Guarantor shall pay such obligations to Promisee in
full five (5) days after receiving written demand therefor from Promisee.
Guarantor agrees that one or more successive actions may be brought against him,
as often as Promisee deems advisable, until all of the 1997 Payment is paid in
full.
2. Continuing Guaranty. Guarantor agrees that the obligations of
Guarantor pursuant to Paragraph 1 above shall be a primary obligation of
Guarantor, shall not be subject to any counterclaim, set-off, abatement,
deferment or defense based upon any claim that Guarantor may have against
Promisee, the Company, Monroe or any other person or entity, and shall remain in
full force and effect without regard to, and shall not be released, discharged
or affected in any way by any circumstance or condition
<PAGE>
(whether or not Guarantor shall have any knowledge thereof),
including without limitation:
(a) any lack of validity of enforceability of the Note or the
Agreement;
(b) any termination, amendment, modification or other change
in the Note or the Agreement;
(c) any failure, omission or delay on the part of Company,
Guarantor or Promisee to conform or comply with any term of the Note or the
Agreement or any failure of Promisee to give notice of any default thereunder;
(d) any waiver, compromise, release, settlement or extension
of time of payment or performance or observance of any of the obligations or
agreements contained in the Note or the Agreement;
(e) any action or inaction by Promisee under or in respect of
the Note or the Agreement, any failure, lack of diligence, omission or delay on
the part of Promisee to enforce, assert or exercise any right, power or remedy
conferred on it in the Note or the Agreement, or any other action or inaction on
the part of Promisee;
(f) any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition, receivership, liquidation, marshalling of assets and
liabilities or similar events or proceedings with respect to the Company, or any
of its property or creditors, or any action taken by any trustee or receiver or
by any court in such proceeding;
(g) any merger or consolidation of the Company, or any sale,
lease or transfer of any of the assets of the Company;
(h) any change in the ownership of the capital stock of the
Company or any change in the relationship between the Company and Guarantor, or
any termination of any such relationship;
(i) to the extent permitted by law, any release or discharge
by operation of law of the Company from any obligation or agreement contained in
the Note or the Agreement; or
(j) to the extent permitted by law, any other occurrence,
circumstance, happening or event, whether similar or dissimilar to the foregoing
and whether foreseen or unforeseen, which otherwise might constitute a legal or
equitable defense or discharge of the liabilities of a
2
<PAGE>
guarantor or surety or which otherwise might limit recourse against the Company
or Guarantor.
3. Waivers. Guarantor unconditionally waives, to the extent permitted
by law, (i) notice of any of the matters referred to in Paragraph 2 above, (ii)
all notices which may be required by statute, rule of law or otherwise, now or
hereafter in effect, to preserve intact any rights against Guarantor, including,
without limitation, any demand, presentment and protest, proof of notice of
non-payment under the Note or the Agreement and notice of any default or any
failure on the part of Guarantor or the Company to perform or comply with any
covenant, agreement, term or condition of the Note or the Agreement, (iii) any
right to the enforcement, assertion or exercise against Guarantor or the Company
of any right or remedy conferred under the Note or the Agreement, (iv) any
requirement of diligence, and (v) any requirement to exhaust any remedies or to
mitigate the damages resulting from any default under the Note or the Agreement
(subject to the limitations set forth in Paragraph 1 above).
4. Subordination. Guarantor agrees that any and all present and future
debts and obligations of the Company to Guarantor are hereby subordinated to the
claims of Promisee and are hereby assigned by Guarantor to Promisee as security
for the payment of the 1997 Payment under the Note.
5. Subrogation. Guarantor agrees that notwithstanding any payment or
performance by Guarantor pursuant to this Guaranty, for so long as the 1997
Payment remains unpaid, the Guarantor shall not be entitled to enforce any right
to be subrogated to any rights of Promisee and Guarantor waives and releases all
rights and claims to indemnification, reimbursement and contribution Guarantor
now has or at any time hereafter may have against the Company until the Note is
performed and paid in full.
6. Reinstatement. The obligations of Guarantor pursuant to this
Guaranty shall continue to be effective or automatically be reinstated, as the
case may be, if at any time payment of the 1997 Payment is rescinded or
otherwise must be restored or returned as a result of Company's insolvency,
bankruptcy, dissolution, or liquidation or reorganization of the Guarantor or
the Company or for any other reason, all as though such payment had not been
made.
7. Successors and Assigns. This Guaranty shall inure to the benefit of
Promisee, and its successors and assigns. This Guaranty shall be binding on
Guarantor, his heirs, successors and assigns, and shall continue in full force
and effect until the Note is paid and performed in full.
8. No Waiver of Rights. Neither any delay in exercising, nor any
failure on the part of Promisee to exercise any right, power or privilege under
this Guaranty or the Note or Agreement
3
<PAGE>
shall operate as a waiver thereof, and no single or partial exercise of any
right, power or privilege shall preclude any other or further exercise thereof
or the exercise of any other power or right, or be deemed to establish a custom
or course of dealing or performance between the parties hereto. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies provided by law. No notice to or demand on Guarantor in any case shall
entitle such Guarantor to any other or further notice or demand in the same,
similar or other circumstance.
9. Modification. The terms of this Guaranty may be waived, discharged
or terminated only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. No
amendment, modification, waiver or other change of any of the terms of this
Guaranty shall be effective without the prior written consent of Promisee.
10. Costs and Expenses. Guarantor agrees to pay on demand all costs and
expenses incurred by or on behalf of Promisee (including, without limitation,
reasonable attorneys' fees and expenses) in enforcing the obligations of
Guarantor under this Guaranty.
11. Notices. All notices required hereunder shall be proper if made in
compliance with Section 12.2 of the Agreement.
12. Applicable Law. This Guaranty shall be governed as to validity,
interpretation, effect and in all other respects by laws and decisions of the
State of Michigan.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date
first above written.
WITNESSES: GUARANTOR:
/s/ Lynette Batcheler /s/ Robert J. Skandalaris
- ------------------------ -------------------------------
Robert J. Skandalaris
4
Memorandum of Land Contract
THIS MEMORANDUM OF LAND CONTRACT entered into this 30th day of April
1996, and between:
Richard J. Reason, Trustee of the Richard J. Reason Agreement of Trust dated
April 9, 1979, whose address is 4605 S. Ocean Blvd., Apt. A-2, Highland Beach,
Florida 33487, hereinafter referred to as "Seller", and Monroe Engineering
Products, Inc., a Michigan corporation, whose address is 33 Bloomfield Hills
Parkway, Suite 155, Bloomfield Hills, Michigan, 48304, hereinafter referred to
as "Purchaser".
WITNESSETH:
The Purchaser and Seller have entered into a Land Contract of even date
herewith and they desire to enter into this Memorandum of Land Contract to give
record notice of the existence of the said Land Contract.
In consideration of the premises and other good and valuable
consideration, the Seller acknowledges and agrees that the property described
below was sold to the Purchaser on Land Contract of even date:
Commencing on the North and South 1/4 line, 813 feet South of the
Northwest corner of the Northwest 1/4 of the Southeast 1/4 of Section
15, Township 35 North, Range 5 West; thence South along the North and
South 1/4 line, 120 feet; thence East, parallel with the East and West
1/4 line, 258 feet; thence North, parallel with said North and South
1/4 line, 120 feet; thence West, parallel with the East and West 1/4
line, 258 feet to the point of commencing; EXCEPTING THEREFROM Highway
M-131 off the West side thereof, as now surveyed and travelled.
Said property being located in the Township of Little
Traverse, Emmet County, Michigan
The purpose of this Memorandum of Land Contract is to give record
notice of the existence of the aforesaid land contract.
IN WITNESS WHEREOF, the parties have executed this Memorandum of Land
Contract and have caused their hands and seals to be affixed hereto the day and
year first above written.
Signed, Sealed and Delivered
in Presence of: "Seller"
/s/ Richard J. Reason
-------------------------------
Richard J. Reason as Trustee of
the Richard J. Reason Agreement
of Trust dated April 9, 1979
Signatures continued on next page.
<PAGE>
/s/ Lynette J. Batcheler
- ------------------------------ "Purchaser"
Monroe Engineering Products,
Inc.
/s/ Sarah A. Clarkson
- ------------------------------ By: /s/ Robert J. Skandalaris
---------------------------
Its: Chairman
STATE OF MICHIGAN
}
COUNTY OF OAKLAND
The foregoing instrument was acknowledged before me on this 30th day of April
1996 by Richard J. Reason, Trustee of the Richard J. Reason Agreement of Trust
dated April 9, 1979
Lynette J. Batcheler
------------------------
Notary Public
County, Michigan
My Commission expires August 12, 1998
STATE OF MICHIGAN
}
COUNTY OF OAKLAND
The foregoing instrument was acknowledged before me on this 30th day of April
1996 by __________________________, ___________________of Monroe Engineering
Products, Inc., a Michigan corporation, on behalf of the corporation.
Lynette J. Batcheler
------------------------
Notary Public
County, Michigan
My commission expires August 12, 1998
Drafted by and when recorded Tax I.D. No. 24-16-15-400-008
Return to:
Recording Fee $___________
Roger J. O'Toole, Esq.
Stone, Biber & O'Toole, P.C.
2701 Troy Center Drive
Suite 400
Troy, MI 48084
-2-
GUARANTY
GUARANTY dated as of April 30, 1996 by Robert J. Skandalaris
("Guarantor") for the benefit of The Richard J. Reason Agreement of
Trust dated April 9, 1979 ("Seller").
R E C I T A L S:
A. Seller, has entered into certain agreements for the sale and
purchase of certain real estate and the stock of Monroe Engineering Products,
Inc. ("Monroe"), all of even date herewith (the "Agreements").
B. In order to induce Seller to consummate the transactions
contemplated by the Agreements, the Guarantor has agreed to guaranty the payment
of indebtedness secured by a Land Contract of even date, herewith a copy of
which is attached (the "Land Contract").
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, Guarantor hereby agrees as
follows:
1. Guaranty of Payment. Guarantor hereby unconditionally and
irrevocably guaranties to Seller the punctual payment and performance when due,
whether at stated maturity or by acceleration or otherwise, of the Land Contract
and any and all sums due thereunder together with interest thereon (all of the
foregoing guaranteed amounts are referred to hereafter as the "Guaranteed
Obligations"). Guarantor agrees that this Guaranty is a present and continuing
guaranty of payment and not of collectibility, and that Seller shall not be
required to prosecute collection, enforcement or other remedies against Monroe
before calling on such Guarantor for payment. Guarantor agrees that if, for any
reason, Monroe shall fail or be unable to pay, punctually and fully, the amounts
owing on the Guaranteed Obligation, such Guarantor shall pay such Guaranteed
Obligations to Seller in full within five (5) days after receiving written
demand therefor from Seller. Guarantor agrees that one or more successive
actions may be brought against Guarantor, as often as Seller deems advisable,
until all of the Guaranteed Obligations are paid and performed in full.
2. Continuing Guaranty. Guarantor agrees that the obligations of such
Guarantor pursuant to Paragraph 1 above shall be a primary obligation of such
Guarantor, shall not be subject to any counterclaim, set-off, abatement,
deferment or defense based upon any claim that such Guarantor may have against
Seller, Monroe or any other person or entity, and shall remain in full force and
effect without regard to, and shall not be released, discharged or affected in
any way by any circumstance or condition (whether or not such Guarantor shall
have any knowledge thereof), including
<PAGE>
without limitation:
(a) any lack of validity of enforceability of the Land
Contract or the Agreements;
(b) any termination, amendment, modification or other change
in the Land Contract or any of the Agreements;
(c) any failure, omission or delay on the part of Monroe, the
Guarantor or Seller to conform or comply with any of the terms of the
Land Contract or the Agreements, or any failure of the Seller to give
notice of any default thereunder;
(d) any waiver, compromise, release, settlement or extension
of time of payment or performance or observance of any of the
obligations or agreements contained in the Land Contract or the
Agreements;
(e) any action or inaction by Seller under or in respect of
the Land Contract or the Agreements, any failure, lack of diligence,
omission or delay on the part of Seller to enforce, assert or exercise
any right, power or remedy conferred on them in the Land Contract or
the Agreements, or any other action or inaction on the part of Seller;
(f) any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit
of creditors, composition, receivership, liquidation, marshalling of
assets and liabilities or similar events or proceedings with respect to
Monroe or of the Guarantor, as applicable, or any of their respective
property or creditors, or any action taken by any trustee or receiver
or by any court in such proceeding;
(g) any merger or consolidation of Monroe, or any sale, lease
or transfer of any of the assets of Monroe or of the Guarantor;
(h) any change in the ownership of the capital stock of Monroe
or any change in the relationship between Monroe and the Guarantor, or
any termination of any such relationship;
(i) to the extent permitted by law, any release or discharge
by operation of law of Monroe or the Guarantor from any obligation or
agreement contained in the Land Contract or the Agreements; or
(j) to the extent permitted by law, any other occurrence,
circumstance, happening or event, whether similar or dissimilar to the
foregoing and whether foreseen or
2
<PAGE>
unforeseen, which otherwise might constitute a legal or equitable
defense or discharge of the liabilities or a guarantor or surety or
which otherwise might limit recourse against Monroe or the Guarantor.
3. Waivers. Guarantor unconditionally waives, to the extent permitted
by law, (i) notice of any of the matters referred to in Paragraph 2 above, (ii)
all notices which may be required by statute, rule of law or otherwise, now or
hereafter in effect, to preserve intact any rights against such Guarantor,
including, without limitation, any demand, presentment and protest, proof of
notice of non-payment under the Land Contract or the Agreements and notice of
any default or any failure on the part of such Guarantor or Monroe to perform or
comply with any covenant, agreement, term or condition of the Land Contract or
the Agreements, (iii) any right to the enforcement, assertion or exercise
against such Guarantor or Monroe of any right or remedy conferred under the Land
Contract or the Agreements, (iv) any requirement of diligence, and (v) any
requirement to exhaust any remedies or to mitigate the damages resulting from
any default under the Land Contract or the Agreements.
4. Subordination. Guarantor agrees that any and all present and future
debts and obligations of Monroe to such Guarantor are hereby subordinated to the
claims of Seller and are hereby assigned by such Guarantor to Seller as security
for the repayment and performance of the Land Contract.
5. Subrogation. Guarantor agrees that notwithstanding any payment or
performance by such Guarantor pursuant to this Guaranty, for so long as any of
the Guaranteed Obligations remain unperformed or unpaid, the Guarantor shall not
be entitled to enforce any right to be subrogated to any rights of Seller and
Guarantor waives and releases all rights and claims to indemnification,
reimbursement and contribution such Guarantor now has or at any time hereafter
may have against Monroe until the Land Contract and Agreements are performed and
paid in full.
6. Reinstatement. The obligations of Guarantor pursuant to this
Guaranty shall continue to be effective or automatically be reinstated, as the
case may be, if at any time payment of any of the Guaranteed Obligations is
rescinded or otherwise must be restored or returned by Monroe's insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Guarantor or
Monroe or for any other reason, all as though such payment had not been made.
7. Successors and assigns. This Guaranty shall inure to the benefit of
Seller, and his successors and assigns. This Guaranty shall be binding on
Guarantor, and his respective successors and assigns, and shall continue in full
force and effect until the Land
3
<PAGE>
Contract is paid and performed in full.
8. No Waiver of Rights. es or a nor any failure on the part of Seller
to exercise any right, power or privilege under this Guaranty or the Land
Contract or Agreements shall operate as a waiver thereof, and no single or
partial exercise of any right, power or privilege shall preclude any other or
further exercise thereof or the exercise of any other power or right, or be
deemed to establish a custom or course of dealing or performance between the
parties hereto. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies provided by law. No notice to or demand on
the Guarantor in any case shall entitle such Guarantor to any other or further
notice or demand in the same, similar or other circumstance.
9. Modification. The terms of this Guaranty may be waived, discharged
or terminated only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. No
amendment, modification, waiver or other change of any of the terms of this
Guaranty shall be effective without the prior written consent of Seller.
10. Costs and Expenses. Guarantor agrees to pay on demand all costs and
expenses incurred by or on behalf of Seller (including, without limitation,
reasonable attorneys' fees and expenses) in enforcing the obligations of the
Guarantor under this Guaranty.
11. Notices. All notices required hereunder shall be proper if made in
compliance with Section 12.2 of the Agreement.
12. Applicable Law. This Guaranty shall be governed as to validity,
interpretation, effect and in all other respects by laws and decisions of the
State of Michigan.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date
first above written.
WITNESSES: GUARANTOR:
/s/ Robert J. Skandalaris
-------------------------------
Robert J. Skandalaris
4
January 1, 1996
Mr. Richard J. Reason
4605 South Ocean Blvd., Apt. A-2
Highland Beach, FL 33487
EMPLOYMENT AND DEFERRED COMPENSATION AGREEMENT
Dear Mr. Reason:
This letter contains the terms and conditions upon which Monroe
Engineering Products, Inc. ("Corporation") will continue to employ you.
1. Title and Duties.
You shall render services in an executive capacity on behalf of the
Corporation. Your duties shall be consistent with the general duties of
supervision and management usually vested as an executive of a corporation. You
shall also assume such additional duties as may be reasonably assigned to you by
the Board of Directors of the Corporation.
Your office will be in the principal business office of the Corporation
in Bloomfield Hills, 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 an executive.
You shall devote your full business time and effort to the performance
of your duties for the Corporation, in a manner consistent with your efforts
prior to the sale of your shares. Your services to the Corporation shall be
rendered to the best of
<PAGE>
Mr. Richard J. Reason
January 1, 1996
Page 2
your ability and with loyalty to the Corporation.
2. Term.
The term of this Agreement shall be for twenty-eight (28) months
beginning on January 1, 1996, and terminating on April 30, 1998, except as to
certain provisions of this Agreement that shall continue to survive. Thereafter
this Agreement may be renewed by mutual agreement of Reason and the Corporation
upon such terms and conditions as they shall agree, except that the provisions
of Sections 3(b), 3(f) and 4 below shall continue as provided below.
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
$200,004.00, payable in monthly installments of $16,667.00 (less applicable
withholding and payroll taxes) on the 15th day of each month during the term of
this Agreement. Provided, however, your salary shall be $25,000.00 (less
applicable withholding and payroll taxes) per month until the later of May 1,
1996 or the date upon which a Chief Executive Officer shall be appointed by the
Corporation.
(b) Health Benefits. During the term of this Agreement and in
any case until April 30, 2001, you and your spouse will be
<PAGE>
Mr. Richard J. Reason
January 1, 1996
Page 3
entitled to participate in all health care benefit programs of the Corporation,
as each or all may be modified from time to time by the board of directors, upon
the same terms and at the same level as provided to management of the
Corporation, provided that in no event shall the level of benefits provided to
you under this Section 3(b) be reduced below that provided to you immediately
before the date of this Agreement. Notwithstanding anything to the contrary
contained herein, if this Agreement is terminated as a result of your death or
disability, your surviving spouse shall continue to receive the benefits under
this Section 3(b) until the earlier of your surviving spouse's death and April
30, 2001.
(c) Vacation.
As long as you are working on a full-time basis for the
Corporation, you shall be eligible to take sixty (60) business days of paid
vacation during each year of employment. No more than fifteen (15) consecutive
business days shall be taken as vacation time without the prior approval of the
Corporation's board of directors, which shall not be unreasonably withheld.
(d) Automobile.
The Corporation shall provide for your use the Cadillac
DeVille that was used by you immediately prior to the date of this Agreement and
shall pay the reasonable operating and maintenance expenses for such vehicle,
including insurance. Following the termination of this Agreement you shall have
the right to purchase
<PAGE>
Mr. Richard J. Reason
January 1, 1996
Page 4
the Cadillac DeVille for its then net book value, the purchase price to be paid
in cash.
(e) Bonus
The Corporation shall pay a bonus to you in the amount of
$960,000.00 ("Bonus"), which Bonus shall be paid to you in immediately available
funds on or before December 23, 1996. The obligation to pay the Bonus shall be
secured by a Letter of Credit from Comerica Bank.
(f) Deferred Compensation
Commencing on May 1, 1998, the Corporation shall pay to you
(whether employed by the Corporation or not) monthly deferred compensation
payments in the amount of $2,000.00, payable on the first day of each month
through and including the first day of April, 2001, and until you have received
thirty-six (36) payments. This Section 3(f) is subject, however, to the
following conditions:
(i) Death with Surviving Spouse. If you shall die
before April 1, 2001, the Corporation shall continue to make such monthly
deferred compensation payments to your surviving spouse, if she shall survive
you, until the total monthly deferred compensation payments made to you and your
surviving spouse equals thirty-six (36) payments. If your surviving spouse
survives you but dies before thirty-six (36) payments are paid by the
Corporation, the Corporation shall not be obligated to continue
<PAGE>
Mr. Richard J. Reason
January 1, 1996
Page 5
payments beyond the day of death of your surviving spouse.
(ii) Death without Surviving Spouse. If you die on or
before April 1, 2001, and your spouse does not survive you, the Corporation
shall not be obligated to continue payments beyond the day of your death.
(iii) Coordination with Terms of Employment. The
deferred compensation payments provided for in this Section 3(f) are in addition
to any compensation and/or benefits provided for herein and/or to which you
become entitled as a result of the renewal of this Agreement.
4. Consulting Services - WINCO Litigation.
(a) You agree to provide consulting services to the
Corporation relating to the lawsuit entitled Monroe Engineering Products, Inc. v
WINCO ("WINCO Litigation") upon reasonable notice and at reasonable times. In
exchange for your agreement to provide consulting services relating to the WINCO
Litigation, the Corporation will pay to you twenty-five percent (25%) of any
judgment and/or settlement to which the Corporation becomes entitled as a result
of the WINCO Litigation, whether such judgment and/or settlement is in the form
of a lump sum payment or stream of payments.
(b) In the event of a lump sum payment, the Corporation will
pay to you twenty-five percent (25%) of the lump sum payment
<PAGE>
Mr. Richard J. Reason
January 1, 1996
Page 6
so received within thirty (30) days of receipt of such payment by the
Corporation.
(c) In the event that the judgment award and/or settlement is
in the form of a stream of payments (i.e. royalty), the Corporation shall pay to
you twenty-five percent (25%) of the payments received by the Corporation at
least quarterly and will provide to you access to the Corporation's records as
necessary to verify the amount of such payments. The obligation of the
Corporation to make such payments shall continue for the life of United States
Patent No. 4,598,614 which is the subject of the WINCO Litigation.
5. Business Expenses
The Corporation shall pay or reimburse you promptly upon
presentation of appropriate vouchers for all travel, business, and entertainment
expenses reasonably incurred by you in connection with the Corporation's
business provided that such expenses are of a type normally deductible by the
Corporation for federal income tax purposes and shall have been sufficiently
documented to support such deduction. For such purpose, you shall submit to the
Corporation periodic reports of such expenses and other disbursements. The
Corporation shall reimburse you for your airline tickets consistent with prior
Corporate practice. In addition, the Corporation shall pay on your behalf the
monthly membership dues for the Birmingham Country Club during the term of
<PAGE>
Mr. Richard J. Reason
January 1, 1996
Page 7
this Agreement.
6. Termination.
This Agreement shall terminate upon your death or disability,
except that (i) in the event of such termination prior to the payment to you of
the full Bonus as provided in Section 3(e) above, the unpaid portion of the
Bonus shall be paid to your heirs, executors and assigns, but otherwise as
provided above, and (ii) in the event of termination as a result of your death
or disability prior to the payment to you of all thirty-six (36) deferred
compensation payments pursuant to Section 3(f), the deferred compensation
payments shall be continued to be paid to you and/or your surviving spouse as
more fully described in Section 3(f). 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) a period of six (6) consecutive months, or (b) any twelve (12)
months within any twenty-four (24) month period. Except as specifically provided
herein, such disability shall constitute a termination of this Agreement.
7. 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
<PAGE>
Mr. Richard J. Reason
January 1, 1996
Page 8
(ii) Use or furnish to anyone (except as 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 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. Richard J. Reason
January 1, 1996
Page 9
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.
8. Covenant Not to Compete and Confidentiality.
(a) For so long as you are employed in any capacity by the
Corporation and for a period of one (1) year following termination of your
employment, you will not, without the prior written consent of the Corporation,
directly or indirectly engage, participate or invest (as an owner, partner,
shareholder, director, officer, employee, joint venturer, agent, representative
or independent contractor, or in any other capacity calling for the
<PAGE>
Mr. Richard J. Reason
January 1, 1996
Page 10
making of any investment or the rendition of any personal services or any acts
of management, operation or control, other than as an owner of not more than
five percent (5%) of the securities of any company whose common stock is listed
on a national securities exchange or registered under the Securities Exchange
Act of 1934) in any business which is competitive with the Corporation's
business in any geographic area in which the Corporation is conducting its
business.
(b) Except as may be required in the ordinary course of your
employment or upon the written consent of the Corporation, you, shall not,
directly or indirectly, use or, except as may be required by law, disclose or
furnish to any person, company or other entity (other than with the consent of
the Corporation) at any time, both before or after expiration or termination of
this Agreement, any trade secret or other confidential information not known or
readily available to the public which is proprietary to the Corporation relating
to the business, customers, marketing strategies, pricing, financial statements,
conditions or operations of the Corporation or any of its affiliates.
(c) You acknowledge that your compliance with the provisions
of this Section 8 is necessary to protect the goodwill and other proprietary
rights of the Corporation; that you have been an officer and director of the
Corporation and are conversant with the affairs, operations, trade secrets,
customers and other
<PAGE>
Mr. Richard J. Reason
January 1, 1996
Page 11
proprietary information and data of the Corporation; and that your failure to
comply with the provisions of this Section 8 will result in immediate,
irreparable and continuing damage to the business of the Corporation for which
there would be no adequate remedy at law. In recognition of the foregoing, the
parties agree that if you shall fail to comply with the provisions of this
Section 8, the Corporation and its successors and assigns shall be entitled to
injunctive relief, damages, and to such other and further relief as may be
deemed proper and necessary by any court of competent jurisdiction (including
without limitation courts located within the jurisdiction in which you are then
employed or engaged in any such activity) in order to ensure your compliance
with the provisions of this Section 8.
9. 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 may have
to receive payments, may not be assigned or pledged by you, except as
specifically provided in Section 6 of this Agreement regarding the payment of
the Bonus and deferred compensation.
10. Other.
Any dispute or claim involving this Agreement shall be
<PAGE>
Mr. Richard J. Reason
January 1, 1996
Page 12
settled by an arbitration in Southfield, Michigan under the 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 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 registered or certified mail, postage prepaid and return
receipt requested, addressed to the appropriate party: if to the Corporation at
1100 Woodward, Suite 241, Bloomfield Hills, MI 48304 and if to you, at the
address indicated above, unless notice of a different address has been given.
This Agreement contains our entire agreement regarding its
subject matter and supersedes all prior oral or written understandings and
agreements regarding its subject matter. We can modify this Agreement only by a
writing signed by both you and the Corporation. This Agreement is governed by
Michigan law.
A default under this Agreement by Monroe shall also be
deemed a default under (i) a certain Promissory Note dated as of
<PAGE>
Mr. Richard J. Reason
January 1, 1996
Page 13
January 1, 1996 by Noble International, Ltd. payable to Richard Reason, as
Trustee of his Revocable Trust dated April 9, 1979, (ii) a certain Promissory
Note dated as of January 1, 1996 by Noble International, Ltd. payable to The
Richard J. Reason Irrevocable Trust for the Benefit of Victoria Aldrich and
Peter Reason dated October 12, 1992; and (iii) all other documents executed in
conjunction with a certain Stock Purchase Agreement dated as of January 1, 1996
by and among Richard J. Reason, Trustee of the Richard J. Reason Revocable
Living Trust dated April 9, 1979, the Richard J. Reason Irrevocable Trust for
the Benefit of Victoria Aldrich and Peter Reason dated October 12, 1992, Noble
International, Ltd., Monroe Engineering Products, Inc. and Robert J.
Skandalaris.
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.
MONROE ENGINEERING PRODUCTS, INC.
By: /s/ Robert J. Skandalaris
-------------------------------
Its: Chairman
Accepted and Agreed:
/s/ Richard J. Reason
- -------------------------------
Richard J. Reason
<PAGE>
Mr. Richard J. Reason
January 1, 1996
Page 14
Accepted and Agreed:
NOBLE INTERNATIONAL, LTD.
/s/ Mark A. Davis
- -------------------------------
By: Mark A. Davis
Its: President
<PAGE>
AMENDMENT OF
EMPLOYMENT AND DEFERRED COMPENSATION AGREEMENT
This Amendment of Employment and Deferred Compensation Agreement
(hereinafter "Amendment") is made and entered into this 30th day of December,
1996 by and between Monroe Engineering Products, Inc. ("Monroe") and Richard J.
Reason ("Reason").
RECITALS:
WHEREAS, on or about January 1, 1996 Reason sold all of the
issued and outstanding shares of Monroe to Noble International, Ltd.
(the "Sale") and in connection with the Sale Monroe agreed to employ
Reason under certain terms and conditions, which were outlined in the
Employment and Deferred Compensation Agreement dated January 1, 1996
(the "Employment Agreement").
WHEREAS, in connection with the Sale Reason made certain
representations and warranties regarding the profitability and sales of
Monroe which were integral to the compensation and bonus outlined in
the Employment Agreement.
WHEREAS, Monroe has failed to achieve the sales and
profitability level anticipated in connection with the Sale.
WHEREAS, in consideration of Monroe's performance Reason has
agreed to amend the Employment Agreement to eliminate certain
provisions of the Employment Agreement and to modify certain provisions
regarding bonuses to be provided by Monroe.
NOW THEREFORE, 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 paragraph 3(e) of the
Employment Agreement is amended to provide for a bonus of $25,000.00.
Section 2. Security. The parties hereby agree that there shall be no
security for the payment of the bonus, and that any previously existing security
in the way of a Letter of Credit from Comerica Bank shall, to the extent of the
security provided for payment of the bonus, be terminated.
Section 3. Continuation. Except as provided above, the Employment
Agreement shall continue in full force and effect.
1
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the day first above written.
WITNESSES "REASON"
/s/ Richard J. Reason
__________________________ _________________________________
Richard J. Reason
__________________________
"MONROE"
MONROE ENGINEERING PRODUCTS, INC.
/s/ Robert J. Skandalaris
__________________________ _______________________________
By: Robert J. Skandalaris
Its: Chairman
_________________________
2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (hereinafter referred to as "Agreement")
is made and entered into this 1st day of July, 1996, by and among, DCT COMPONENT
SYSTEMS, INC., a Michigan corporation (hereinafter referred to as "Company"),
JAMES BRONCE HENDERSON III (hereinafter referred to as "Henderson"), DAVID C.
STONE (hereinafter referred to as "Stone") (Henderson and Stone hereinafter
sometimes individually referred to as "Shareholder" and collectively referred to
as "Shareholders"), NOBLE INTERNATIONAL, LTD., a Michigan corporation
(hereinafter referred to as "Noble"), and PETER RAAB (hereinafter referred to as
"Raab") (Noble and Raab hereinafter sometimes individually referred to as
"Purchaser" and collectively referred to as "Purchasers").
W I T N E S S E T H:
WHEREAS, Henderson and Stone are the only shareholders of the Company;
and
WHEREAS, Henderson owns Nine Hundred Eighty-Five (985) shares of the
common stock of the Company; and
WHEREAS, Stone owns Nine Hundred Eighty-Five (985) shares of the common
stock of the Company; and
WHEREAS, the Company desires to issue, sell, transfer and deliver to
Noble and Noble desires to purchase and receive from Company One Thousand Three
Hundred Forty-Three (1,343) shares of the common stock of the Company for the
consideration and upon the terms and conditions hereinafter set forth;
WHEREAS, the Company desires to issue, sell, transfer and deliver to
Raab and Raab desires to purchase and receive from Company Two Hundred
Sixty-Nine (269) shares of the common stock of the Company for the consideration
and upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the promises and of the
mutual agreements hereinafter set forth, the parties hereto agree as follows:
Section 1. Sale and Purchase.
(a) Sale and Purchase of Noble Stock. Upon and subject to the
terms and conditions set forth in this Agreement, Company hereby agrees to
issue, sell, transfer and deliver to Noble, free and clear of all liens, pledges
and encumbrances of every kind, character, and description whatsoever, and Noble
agrees to purchase from the Company on the Closing Date, as defined below, One
Thousand Three Hundred Forty-Three (1,343) shares of One Dollar ($1.00) par
value common stock of the Company, evidenced by one or
<PAGE>
more certificates of the Company, duly registered in the name of Noble
(hereinafter referred to as "Noble Stock").
(b) Sale and Purchase of Raab Stock. Upon and subject to the
terms and conditions set forth in this Agreement, Company hereby agrees to
issue, sell, transfer and deliver to Raab, free and clear of all liens, pledges
and encumbrances of every kind, character, and description whatsoever, and Raab
agrees to purchase from Company on the Closing Date, Two Hundred Sixty-Nine
(269) shares of common stock of the Company evidenced by one or more
certificates of the Company, duly registered in the name of Raab (hereinafter
referred to as "Raab Stock"). Provided, however, the sale and issuance of shares
to Raab is conditioned upon his entering into a Stock Redemption Agreement with
the Company, in form and substance acceptable to the Company.
Section 2. Purchase Price.
(a) The consideration to be paid by Noble to Company for the
Noble Stock shall be One and 00/100 Dollar ($1.00) payable in cash at Closing.
(b) The consideration to be paid by Raab to Company for the
Raab Stock shall be One and 00/100 Dollar ($1.00) payable in cash at Closing.
Section 3. Additional Agreements. The parties shall execute the
following at Closing:
(a) Stock Redemption Agreement by and between the Company and
Raab.
(b) Management Agreement by and between the Company and Noble.
(c) Voting Agreement by and among the Company, Shareholders
and Noble, and the related Irrevocable Proxy.
(d) Executive Bonus Pool Plan for the Company.
(e) Amendment of Raab Employment Agreement between the Company
and Raab.
(f) License Agreement by and among Henderson, the Company and
John Fox regarding a Push-In Sheet Metal Fastening System.
(g) Warranty Bill of Sale for Gary Stade Stock.
(h) Indemnification Agreement by DCT Companies, Inc. and DCT
Fasteners, Inc. regarding DCT Fasteners, Inc. debt.
2
<PAGE>
(i) Indemnification Agreement by David C. Stone regarding
Henderson debt/guaranty.
(j) Indemnification Agreement by Noble regarding personal
guaranties.
(k) Assignment and Assumption Agreements regarding GM claim
and TRW claim.
(l) Line of credit Promissory Note by Company to DCT
Companies, Inc.
(m) Company, Shareholders and Purchasers shall execute any
additional documents reasonably required to consummate the transaction
contemplate herein.
(The Agreements referred to in Section 3 shall hereinafter be
collectively referred to as "Closing Documents.")
Section 4. The Closing. The sale and purchase provided in this
Agreement shall be consummated at a closing to be held at the offices of Stone,
Biber & O'Toole, P.C. in the City of Troy, Michigan, at 10:00 a.m. on the 1st
day of July, 1996, or at such other place, time and date as the parties hereto
shall mutually agree upon. The date and event of the sale and purchase are,
respectively, hereinafter referred to as the "Closing Date" and the "Closing."
Section 5. Access to Properties and Records. From and after the date of
this Agreement, the Company and the Shareholders shall afford to the officers,
attorneys, accountants and other authorized representatives of Purchasers free
and full access to the plants, properties, books and records of the Company in
order that Purchasers may have full opportunity to make whatever investigation
they shall desire of the affairs of the Company, provided that the investigation
shall not unreasonably interfere with the operations of the Company. All
information provided by the Company and/or the Shareholders shall be treated
confidentially by Purchasers.
Purchasers shall not make any use of such information so provided by the Company
and/or the Shareholders, except for purposes of the transactions contemplated
hereunder.
Section 6. Representations and Warranties of the Company and the
Shareholders. The Company and the Shareholders represent and warrant unto the
Purchasers as follows:
(a) Company is, and at the Closing Date will be, authorized to
issue, sell, transfer and deliver the Noble Stock and the Raab Stock to Noble
and Raab, respectively.
3
<PAGE>
(b) Company has full power, in accordance with the law, to
execute and perform this Agreement, and such execution and performance does not
conflict with any contract to which Company is a party or to which Company is
subject. The execution and delivery of this Agreement and the completion of the
transactions contemplated hereby, to the extent applicable to Company, have been
duly authorized by all necessary actions on the part of the Company. This
Agreement is a valid and binding obligation of Company, enforceable against it
in accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors' rights generally from
time to time in effect and to general principles of equity.
(c) Shareholders have full power, in accordance with the law,
to execute and perform this Agreement, and such execution and performance does
not conflict with any contract to which either or both Shareholders are a party
or to which either or both are subject. The execution and delivery of this
Agreement and the completion of the transactions contemplated hereby, to the
extent applicable to each Shareholder, have been duly authorized by all
necessary actions on the part of each Shareholder. This Agreement is a valid and
binding obligation of Shareholders, enforceable against them in accordance with
its terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting creditors' rights generally from time to
time in effect and to general principles of equity.
(d) Except as described on the draft Financial Statements of
the Company dated December 31, 1995 and the interim management statements of the
Company through April 31, 1996, the only material liabilities of the Company are
as disclosed on Exhibit A attached hereto and thereby made a part hereof.
Section 7. Representations and Warranties of Purchasers. Purchasers
represent and warrant unto the Company and the Shareholders that:
(a) Purchasers have full power, in accordance with the law, to
execute and perform this Agreement, and such execution and performance does not
conflict with any contract to which either or both Purchasers are a party or to
which either or both are subject. The execution and delivery of this Agreement
and the completion of the transactions contemplated hereby, to the extent
applicable to each Purchaser, have been duly authorized by all necessary actions
on the part of each Purchaser. This Agreement is a valid and binding obligation
of Purchasers, enforceable against them in accordance with its terms, subject to
applicable bankruptcy, reorganization, insolvency, moratorium and other laws
affecting creditors' rights generally from time to time in effect and to general
principles of equity.
4
<PAGE>
(b) Noble is purchasing the shares for its own account for
investment purposes and not for resale, and agrees not to sell, assign or
otherwise transfer the shares unless they are registered under the Securities
Act of 1933 and/or the securities laws of the State of Michigan or the sale is
exempt from registration in the opinion of legal counsel for the Company. Noble
is financially able to suffer a complete loss of the purchase price and is aware
that the investment contemplated by this Agreement is speculative and neither
Company nor Shareholders make any assurance that it will be profitable or that
Noble's investment will enhance in value over time.
(c) Raab is, and at the Closing Date will be, a resident of
the State of Michigan and is purchasing the shares for his own account for
investment purposes and not for resale, and agrees not to sell, assign or
otherwise transfer the shares unless they are registered under the Securities
Act of 1933 and/or the securities laws of the State of Michigan or the sale is
exempt from registration in the opinion of legal counsel for the Company. Raab
is financially able to suffer a complete loss of the purchase price and is aware
that the investment contemplated by this Agreement is speculative and neither
Company nor Shareholders make any assurance that it will be profitable or that
Raab's investment will enhance in value over time.
Section 8. Intercompany Debt, Shareholder Payables and Receivables. The
parties acknowledge and expressly agree that all liabilities owing to DCT
Companies, Inc. and its subsidiaries and affiliates (but excepting the Company),
and all Shareholder payables and receivables of the Company and all interest
which has accrued thereon ("Debt") are worthless and as a condition precedent to
the purchase of the Stock by the Purchasers, this Debt must be written off the
books of the Company, if not already done so, on or before December 31, 1997.
Provided, however, the Line of Credit Promissory Note in the face amount of Nine
Hundred Sixty Thousand and no/100 Dollars ($960,000.00) of even date herewith
shall not be written off and shall be a legally enforceable obligation of the
Company.
Section 9. Miscellaneous.
(a) Company, at any time and from time to time after the
Closing Date, upon reasonable request of Purchasers, will do, execute,
acknowledge, and deliver all such further acts, deeds, assignments, transfers,
conveyances, powers of attorney, and assurances as may be reasonably required to
convey, transfer to, and vest in the respective Purchasers, and protect the
right, title, interest in, and enjoyment of, the Noble Stock and Raab Stock
intended to be assigned, transferred, and conveyed pursuant to this Agreement,
subject to approval by Company's counsel, which approval shall not be
unreasonably withheld.
5
<PAGE>
(b) Subject to the terms and conditions hereof, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors and assigns.
(c) Any notice, request, instruction, or other document to be
given hereunder to any party shall be in writing and deemed given on the date it
is delivered personally, by facsimile transmission with originals mailed by
first class, mail sent by registered or certified mail, postage prepaid,
telegram, or delivered by a nationally recognized courier service, as follows:
If to Company:
DCT Component Systems, Inc.
34660 Centaur
Clinton Township, Michigan 48035
Attn: Peter Raab
If to Shareholders:
"Henderson"
James Bronce Henderson III
DCT Companies, Inc.
20101 Hoover Road
Detroit, Michigan 48205
"Stone"
David C. Stone
c/o DCT Companies, Inc.
20101 Hoover Road
Detroit, Michigan 48205
In either case, with a copy to:
Stone, Biber & O'Toole, P.C.
2701 Troy Center Dr., Suite 400
Troy, MI 48084
Attn: Roger J. O'Toole
If to the Purchasers:
"Noble"
Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
"Raab"
Peter Raab
c/o DCT Component Systems, Inc.
34460 Centaur
Clinton Township, Michigan 48035
6
<PAGE>
!!!!!
In either case, with a copy to:
Mark A. Davis, Esq.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
Any party may change his or its address for purposes of this Section by giving
notice of such change of address to the other party in the manner herein
provided for giving notice.
(d) All exhibits hereto are incorporated herein. This
Agreement and the Closing Documents referenced herein constitute the entire
Agreement of the parties related to its subject matter and supersede all prior
agreements, whether written or oral, between the parties related to its subject
matter.
(e) This Agreement is declared to have been made under the
laws of the State of Michigan.
(f) If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future laws effective during the term
of this Agreement, such provision shall be fully severable; this Agreement shall
be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part of this Agreement; and the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid, or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of each such illegal,
invalid, or unenforceable provision, there shall be added automatically as part
of this Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
(g) The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
(h) As the context of any provision may require, nouns and
pronouns of every gender and number shall be construed in any other gender and
number.
(i) This Agreement may be amended in any manner by an
agreement, in writing, signed by all the parties hereto or by their respective
successors and assigns, heirs, executors, administrators
7
<PAGE>
and personal representatives.
(j) Any party's failure to insist on compliance or enforcement
of any provision of this Agreement shall not affect its validity or
enforceability or constitute a waiver of future enforcement of that provision or
of any other provision of this Agreement.
(k) Strict compliance shall be required with each and every
provision of this Agreement. The parties hereto acknowledge that their interests
are unique, that failure to perform the obligations provided by this Agreement
shall result in irreparable harm and damage and that specific performance of
their obligations may be obtained by a court in equity.
(l) This Agreement may be executed in a number of
counterparts, and all counterparts executed by Purchasers, Company and
Shareholders shall constitute one and the same agreement, and it shall not be
necessary for Purchasers, Company and the Shareholders to execute the same
counterpart hereof.
(m) The Company is authorized to enter into this Agreement by
virtue of a Resolution unanimously adopted by the Board of Directors on July 1,
1996.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
WITNESSETH: COMPANY:
DCT COMPONENT SYSTEMS, INC.,
a Michigan corporation
________________________ By: ___________________________
________________________ Its: ___________________________
SHAREHOLDERS:
/s/ A. Kathleen Murphy /s/ James Bronce Henderson III
- ------------------------ --------------------------------
/s/ Jan Chinurt James Bronce Henderson III
- ------------------------
/s/ A. Kathleen Murphy /s/ David C. Stone
- ------------------------ -------------------------------
/s/ Jan Chinurt David C. Stone
- ------------------------
________________________
[signatures continued on next page]
8
<PAGE>
PURCHASERS:
NOBLE INTERNATIONAL, LTD.,
a Michigan corporation
/s/ David C. Stone
- ------------------------ By: /s/ Mark A. Davis
/s/ Lisa Abbott --------------------------
- ------------------------ Its: President
/s/ Mark A. Davis /s/ Peter Raab
- ------------------------ --------------------------
/s/ David C. Stone Peter Raab
- ------------------------
9
<PAGE>
LIST OF EXHIBITS
A. Undisclosed Liabilities
10
STOCK REDEMPTION AGREEMENT
THIS STOCK REDEMPTION AGREEMENT (hereinafter referred to as
"Agreement") is entered into this 1st day of July, 1996 by and between PETER
RAAB (hereinafter referred to as "Shareholder"), and DCT COMPONENT SYSTEMS,
INC., a Michigan corporation (hereinafter referred to as the "Corporation"), who
agree to the following:
Section 1. Stock Purchase. The Corporation may purchase all of the
Shareholder's stock at any time by giving written notice to the Shareholder.
Upon the Shareholder's: (i) death, or (ii) termination for any reason as an
employee of the Corporation ("Termination"), the Corporation shall promptly
purchase all of the shares of its stock held by the Shareholder.
Section 2. Purchase Price. (a) The purchase price shall be net book
value per share at the end of the month preceding the date of Termination or
receipt of written notice by the Shareholder of the Corporation's intent to
purchase, as applicable, minus the net book value per share as of January 1,
1997. 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.
(b) In measuring net book value of the Corporation to
determine the net book value per share, the net book value of the Corporation as
of January 1, 1997 and at the end of the month preceding date of the Termination
or receipt of written notice by the Shareholder of the Corporation's intent to
purchase, as applicable, shall be increased by the sum of any related party
debt, including but not limited to debt owing to the Corporation's shareholders
and/or DCT Companies, Inc. (including affiliates and subsidiaries), by the
Corporation and recorded on the books of the Corporation on the respective dates
used for purposes of determining the net book value of the Corporation and the
resulting net book value per share.
Section 3. Payment. The Corporation may pay the purchase price in one
lump sum or in five (5) equal annual installments. The lump sum or the first
installment shall be paid at the time of the delivery of the endorsed stock
certificates to the Corporation. Any remaining installments shall be evidenced
by an unsecured promissory note bearing interest at a fixed annual rate equal to
eight percent (8%). 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 and/or interest.
Section 4. Stock Transfer Restriction. (a) The Shareholder may not
transfer any shares of the Corporation's stock without the
<PAGE>
prior written consent of the Corporation. This applies to any disposition or
encumbrance, whether voluntary, involuntary or by operation by law. Any transfer
in violation of this Agreement is void and will not be reflected on the
Corporation's books. Shares transferred with the consent of the Corporation
shall be held by the transferee subject to the provisions of this Agreement or
such other Agreement as the Corporation deems appropriate.
(b) Notwithstanding Section 4(a), the Shareholder may transfer
all or part of his shares of stock of the Corporation to a revocable trust of
which the Shareholder is the grantor for the benefit of the Shareholder or his
immediate family. The trustee of the revocable trust shall receive and hold such
shares of the stock subject to the terms of this Agreement and the obligations
hereunder of the Shareholder. Shares of the stock transferred pursuant to this
Section 4(b) shall be treated for purposes of this Agreement as if they were
still owned by the Shareholder.
Section 5. Termination. Paragraphs 1, 2 and 3 of this Agreement shall
terminate three (3) years from the date hereof or upon the mutual written
consent of the Shareholder and the Corporation.
Section 6. Other. This Agreement shall apply to all stock of the
Corporation now owned and/or later acquired by the Shareholder; may be signed in
counterpart; contains the entire agreement between the parties relating to its
subject matter; 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, successors and assigns; can be specifically enforced;
and shall be governed by Michigan law. Each stock certificate shall bear a
legend acceptable to the Corporation which refers to this Agreement.
"CORPORATION"
DCT COMPONENT SYSTEMS, INC.,
a Michigan corporation
/s/ Robert J. Skandalaris
-------------------------------
By: Robert J. Skandalaris
-------------------------------
Its: Chairman
"SHAREHOLDER"
/s/ Peter Raab
-------------------------------
Peter Raab
2
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (hereinafter referred to as the "Agreement")
is made and entered into this 1st day of July, 1996, by and between DCT
COMPONENT SYSTEMS, INC., a Michigan corporation, (hereinafter referred to as the
"Corporation"), and NOBLE INTERNATIONAL, LTD., a Michigan corporation
(hereinafter referred to as the "Manager").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the manufacturing of automotive
components and metal stampings ("Business"); and
WHEREAS, the Manager has extensive experience in the Business; and
WHEREAS, the Corporation desires to retain management services from the
Manager and the Manager desires to provide such management services to the
Corporation;
NOW, THEREFORE, for and in consideration of the promises and the mutual
agreements herewith set forth, the parties hereto agree as follows:
Section 1. Engagement of Manager. The Corporation does hereby engage
the Manager as an independent contractor to provide exclusive executive and
managerial services for the Corporation, and the Manager accepts such engagement
and agrees to faithfully perform such services for the Corporation, upon the
terms and conditions hereinafter set forth.
Section 2. Responsibilities of Manager. The Manager, in accordance with
directives from the Corporation's Board of Directors, shall act in the best
interest of the Corporation, and in all respects diligently and to the best of
its ability operate the Corporation including, but not limited, to the
following:
(a) Perform executive and general supervision over the
business activities of the Corporation with the objective of maximizing profits
and operating and maintaining the Corporation's Business in a proper, efficient
and business-like manner;
(b) Supervise and coordinate the management, administration,
staff and operation of the Corporation's Business;
(c) Provide the Corporation with advice and consultation in
connection with the acquisition and disposition of capital equipment, land and
buildings;
<PAGE>
(d) Provide the Corporation with advice and guidance in
connection with personnel, recruitment and industrial relations;
(e) Provide the Corporation with information as to the
internal audit services and control procedures as may be required by the
Corporation;
(f) Provide the Corporation with such purchasing, training,
management, and contracting advice and guidance as may be required by the
Corporation;
(g) Provide assistance in the marketing and promotion of the
Corporation's Business; and
(h) Facilitate financing and/or refinancing of the
Corporation's capital needs.
Section 3. Limitation of Authority of Manager. It is understood and
agreed that the Manager shall not, without the prior approval of the majority of
the Corporation's Board of Directors, which majority must include David C. Stone
for purposes of this Section 3, undertake any action regarding any of the
following matters:
(i) The merger, liquidation or sale (stock or assets) of
substantially all of the Corporation;
(ii) The acquisition of a business entity for greater than
$250,000 in cash; or
(iii) Any single capital expenditure in excess of $250,000.
Section 4. Payment.
(a) For the services rendered pursuant to this Agreement, the
Corporation shall pay to Manager an annual fee of One Hundred Thousand and
no/100 Dollars ($100,000.00), payable in monthly installments of Eight Thousand
Three Hundred Thirty-three and 33/100 Dollars ($8,333.33). The monthly
installments shall be paid on the first (1st) day of each month for the term
hereof, retroactive to the 1st day of March, 1996.
(b) Manager shall not be entitled to any additional
compensation for facilitating a refinancing of the Corporation's capital needs
and/or the sale or acquisition of any assets or entity by the Corporation,
whether such activities are performed by Manager, or any officer, director
and/or shareholder of the Corporation or the Manager.
2
<PAGE>
Section 5. Resources. It is understood and agreed that the Manager
shall be entitled to allocate its resources as the Manager, in its sole
discretion, determines, but in all ways shall be obligated to retain, maintain
and/or add any resources to its staff or otherwise as required to fully and
properly perform its obligations under this Agreement.
Section 6. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in force and effect for so long as the Manager remains
a Shareholder of the Corporation, and so long as Manager is controlled by Robert
Skandalaris.
Section 7. Indemnification. The Corporation shall, to the fullest
extent permitted by law, indemnify, defend and hold harmless Manager from and
against any and all liabilities, losses, damages, costs and expenses incurred in
connection with services provided hereunder.
Section 8. Miscellaneous.
(a) This Management Agreement shall not be assignable by
either party hereto without the prior written consent of the other party.
(b) Any notice, request, instruction, or other document to be
given hereunder to any party shall be in writing and deemed given on the date it
is delivered personally by facsimile transmission with originals mailed by first
class mail sent by registered or certified mail, postage prepaid, telegram, or
delivered by nationally recognized courier service, as follows:
If to the Corporation:
DCT Component Systems, Inc.
34660 Centaur
Clinton Township, Michigan 48035
Attn: Peter Raab
With a copy to:
Stone, Biber & O'Toole, P.C.
2701 Troy Center Dr., Suite 400
Troy, Michigan 48084
Attn: Roger J. O'Toole
If to the Manager:
Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
3
<PAGE>
With a copy to:
Mark A. Davis, Esq
c/o Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
Any party may change his or its address for purposes of this Section by giving
notice of such change of address to the other party in the manner herein
provided for giving notice.
(c) This Management Agreement constitutes the entire agreement
between the parties as related to its subject matter and supersedes any prior
agreements, whether written or oral, between the parties related to its subject
matter.
(d) This Agreement is declared to have been made under the
laws of the State of Michigan.
(e) If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future laws effective during the term
of this Agreement, such provision shall be fully severable; this Agreement shall
be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part of this Agreement; and the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid, or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of each such illegal,
invalid, or unenforceable provision, there shall be added automatically as part
of this Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
(f) The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
(g) This Agreement may be executed in a number of
counterparts, and all counterparts executed by the Corporation and the Manager
shall constitute one and the same agreement, and it shall not be necessary for
Corporation and the Manager to execute the same counterpart hereof.
(h) This Agreement may be amended only by an agreement, in
writing, signed by all of the parties hereto, or by their successors and
assigns.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
WITNESSETH: CORPORATION:
DCT COMPONENT SYSTEMS, INC.,
a Michigan corporation
/S/ Mark A. Davis By: /s/ Peter Raab
- ------------------------ ---------------------------------
/s/ David C. Stone Its: President
- ------------------------ ----------------------------------
MANAGER:
NOBLE INTERNATIONAL, LTD.,
a Michigan corporation
/s/ David C. Stone By: /s/ Mark A. Davis
- ------------------------ ------------------------
/s/ Elizabeth Miranda Mark A. Davis
________________________ Its: President
5
VOTING AGREEMENT
THIS VOTING AGREEMENT (hereinafter referred to as the "Agreement") is
made and entered into this 1st date of July, 1996, by and among DCT COMPONENT
SYSTEMS, INC., a Michigan corporation (hereinafter referred to as the
"Company"), JAMES BRONCE HENDERSON, III and DAVID C. STONE (hereinafter
collectively referred to as the "Shareholders" and individually as a
"Shareholder"), and ROBERT SKANDALARIS, as the representative of NOBLE
INTERNATIONAL, LTD., a Michigan corporation ("Noble"):
Section 1. Voting Agreement.
(a) 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 Noble, except as otherwise provided in Section 1(d) below.
(b) Proxies. Each Shareholder shall execute and deliver to
Noble, simultaneously with the execution and delivery of this Agreement, an
irrevocable proxy (hereinafter referred to as the "Proxy") to secure the voting
agreements contained in Section 1(a) of this Agreement. Each Shareholder intends
that each Proxy and all other proxies executed and delivered by such Shareholder
from time to time under this Agreement shall have the effect of an "irrevocable
proxy" under Section 422 of the Michigan Business Corporation Act, as amended
(hereinafter referred to as the "MBCA") and that this Agreement shall be a
voting agreement among shareholders under Section 461 of the MBCA. Each
Shareholder further agrees that each Proxy and all other proxies executed and
delivered by such Shareholder under this Agreement shall be effective as to said
Shareholder and his or her heirs, 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 shall be terminated in accordance with Section 3(a)
hereof. During the term of this Agreement, 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.
(c) Definition of Voting Securities and Other Terms. For the
purposes of this Agreement, the term "Voting Securities" shall mean and include
the capital 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.
<PAGE>
(d) Excluded Matters. The voting agreement contained in
Section 1(a) and Power of Attorney contained in Section 2 below shall not apply
to a vote of the shareholders of the Company regarding any of the following
matters:
(i) The merger, liquidation or sale (stock or assets) of
substantially all of the Company;
(ii) The acquisition of a business entity for greater than
$250,000 in cash; or
(iii) Any single capital expenditure in excess of $250,000.
The parties expressly agree that this Agreement and the
corresponding Proxy or Proxies shall not apply to any matter described in this
subsection (d) ("Excluded Matters"), and each Shareholder shall have the power
to vote and decide upon any such Excluded Matter, as if this Agreement and the
related Proxy were of no force and effect. Further, this Agreement and the
corresponding Proxy or Proxies shall not apply to any matter put to the vote of
the directors and/or officers of the Company.
Section 2. Power of Attorney.
(a) Power of Attorney. Each Shareholder hereby appoints Robert
J. Skandalaris, as the representative of Noble, his attorney-in-fact
(hereinafter referred to as 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 capacity as a record owner of
Voting Securities 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
reasonably determine to be advisable, except as otherwise provided in Section
1(d) above.
(b) Irrevocable Nature of Appointment. This Agreement 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 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 shall be as valid as if such death or
incapacity had not occurred, regardless of whether or not the Attorney shall
have received notice of such death or incapacity, or other event or events.
(c) Ratification; Further Actions. Each Shareholder ratifies
all that the Attorney shall do under the authority of this Agreement, except for
acts or omissions which constitute negligence, willful misconduct, malfeasance,
nonfeasance, fraud
2
<PAGE>
and/or an illegal act of the Attorney (referred to herein as "Attorney
Misconduct"). During the term of this Agreement, each Shareholder shall take
such action as may be necessary or appropriate to effectuate any action proposed
by the Attorney pursuant to the terms of this Agreement, except for Attorney
Misconduct. Noble shall indemnify, defend, and hold each Shareholder harmless
from any and all liabilities, claims, costs and/or expenses resulting to each
Shareholder or both Shareholders, including but not limited to attorneys fees,
as a result of such Attorney Misconduct.
(d) The Attorney hereby accepts such appointment in accordance
with the terms and conditions stated herein.
Section 3. Miscellaneous.
(a) Termination. This Agreement 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.
(b) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that as to Noble only, Noble cannot assign this
Agreement without the prior written consent of the Shareholders.
(c) Amendment and Waivers. This Agreement may be amended only
by a written instrument duly executed by the Company, the Shareholders and
Noble.
(d) 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, a copy of which is on file with
the Secretary of the Company.
(e) Entire Agreement. This Agreement, including all
attachments and other writings referenced herein, delivered pursuant hereto,
which form a part 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.
(f) Applicable Law. This Agreement shall be governed by
Michigan law.
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(g) 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 prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(h) Remedies. The Company, Noble and the Shareholders
acknowledge and agree that a violation of any of the terms of this Agreement
will cause the Company, Noble and the Shareholders immediate, irreparable injury
for which an adequate remedy at law is not available. Therefore, the Company,
Noble and the Shareholders agree that each Shareholder, Noble and Company 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.
(i) Limitation of 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 the
Proxies. 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 the Proxies,
provided that such action or inaction does not constitute Attorney Misconduct.
In the event of any conflict with that certain Indemnification Agreement by
Noble and Peter Raab for the benefit of James Bronce Henderson, III, Joann
Henderson, David C. Stone, Norma M. Stone, and DCT Companies, Inc., together
with its affiliates and subsidiaries (hereinafter referred to as
"Indemnification Agreement"), the terms of the Indemnification Agreement will
control.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the day and year first written above.
"COMPANY"
DCT COMPONENT SYSTEMS, INC.
By: /s/ Peter Raab
--------------------------
Peter Raab
Its: President
[signatures continued on next page]
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"SHAREHOLDERS"
/s/ James Bronce Henderson III
-------------------------------
James Bronce Henderson III
/s/ David C. Stone
-------------------------------
David C. Stone
"NOBLE"
NOBLE INTERNATIONAL, LTD., a
Michigan corporation
By: /s/ Mark A. Davis
--------------------------
Its: President
"ATTORNEY"
/s/ Robert J. Skandalaris
-------------------------------
Robert J. Skandalaris
5
Exhibit 10.30
SHAREHOLDER AGREEMENT
among
NOBLE INTERNATIONAL, LTD.,
a Michigan corporation,
and
JAMES BRONCE HENDERSON, III
and
DAVID C. STONE
and
PETER RAAB
as
"SHAREHOLDERS"
and
DCT COMPONENT SYSTEMS, INC.,
a Michigan corporation,
as
"CORPORATION"
Dated as of: July 1, 1996
Prepared by:
STONE, BIBER & O'TOOLE, P.C.
2701 Troy Center Drive
Suite 400
Troy, Michigan 48084
(810) 362-2030
<PAGE>
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT (hereinafter referred to as "Agreement") is
made and entered into as of this 1st day of July, 1996, by and among NOBLE
INTERNATIONAL, LTD., a Michigan corporation (hereinafter referred to as
"Noble"), JAMES BRONCE HENDERSON, III (hereinafter referred to as "Henderson"),
DAVID C. STONE (hereinafter referred to as "Stone") and PETER RAAB (hereinafter
referred to as "Raab") (hereinafter referred to individually as "Shareholder"
and collectively as "Shareholders") and DCT COMPONENT SYSTEMS, INC., a Michigan
corporation (hereinafter referred to as "Corporation").
W I T N E S S E T H:
WHEREAS, the Corporation has issued and outstanding Three Thousand Five
Hundred Eighty-Two (3,582) shares of common stock (which common stock is
hereinafter referred to as "Stock"); and
WHEREAS, the Shareholders own all of the Stock of the Corporation; and
WHEREAS, the Shareholders agree that this Agreement will act to control
the relationship between the Shareholders and certain operations of the
Corporation; and
WHEREAS, Henderson and Stone desire to grant to Noble an option to
purchase additional shares of Stock from Henderson and Stone under certain terms
and conditions, and Noble desires to receive such an option from Henderson and
Stone; and
WHEREAS, the parties desire to enter into a put and call agreement
whereby Henderson, Stone, or their assignees have the right to put their
respective shares of Stock to Noble under certain terms and conditions and Noble
has the right to call the shares of Stock owned by Henderson and Stone, or their
assignees, under certain terms and conditions.
NOW, THEREFORE, in consideration of the foregoing, and in further
consideration of the mutual covenants, promises and agreements contained herein,
IT IS AGREED AS FOLLOWS:
ARTICLE I
DEFINITIONS
Section 1.1 General. Except as otherwise defined in this Agreement, the
following words and phrases, whenever capitalized, shall mean the Officers,
Directors, Board of Directors, and Articles of Incorporation of the Corporation.
<PAGE>
Section 1.2 Specific.
(a) "Additional Shares" shall mean capital stock of the
Corporation in excess of the Stock.
(b) "Adjusted EBITDA" shall mean the sum of the earnings of
the Corporation, calculated in accordance with G.A.A.P. by the independent
certified public accountant(s) who last audited the Corporation's financial
statements, 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 the Corporation 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 and/or bonus by the Corporation to Raab in
excess of his base salary for the twelve (12) month period ended on the last day
of the month immediately preceding the Valuation Date. For purposes of
determining Adjusted EBITDA, the interest paid during the aforementioned twelve
(12) month look-back period on the balance of any debt on the books of the
Corporation on July 1, 1996, due and owing to Richard J. Reason, RJR Investments
and/or Richard Luyckx shall be subtracted from earnings for the calculation of
Adjusted EBITDA.
(c) "Call" shall mean the right of Noble, pursuant to Section
6.2 of this Agreement, to require Henderson and Stone, or their assignees, as
applicable, to sell all the shares of capital stock in the Corporation owned by
Henderson and Stone, and their assignees, as applicable, to Noble (and any
derivative of the term "Call").
(d) "Call Value" shall mean four (4) times Adjusted EBITDA,
the product of which shall be reduced by (i) the outstanding principal and
accrued interest owing by the Corporation to The CIT Group/Credit Finance Inc.
or the Corporation's 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 the Corporation approved by the Board of Directors.
(e) "DCT" shall mean DCT Companies, Inc., a Michigan
corporation, and all subsidiaries and affiliates thereof, but excepting
therefrom the Corporation.
(f) "Future Debt" shall mean any liability, absolute or
contingent, liquidated or unliquidated, incurred by the Corporation subsequent
to July __, 1996.
(g) "G.A.A.P." shall mean generally accepted accounting
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<PAGE>
principals.
(h) "July 1996 Promissory Note" shall mean that certain
Promissory Note of even date herewith in the original principal amount of Nine
Hundred Sixty Thousand Dollars ($960,000.00), from
the Corporation to DCT.
(i) "Keepwell Agreement" shall mean that certain Keepwell
Agreement by and between DCT Welding and Assembly, Inc., and The CIT
Group/Credit Finance Inc.
(j) "Put" shall mean the right of Henderson and Stone, and
their assignees, as applicable, pursuant to Section 6.1 of this Agreement, to
require Noble to purchase all the shares of capital stock in the Corporation
owned by Henderson and Stone, and their assignees, as applicable.
(k) "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 the Corporation to The CIT Group/Credit Finance Inc.
or the Corporation's 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 the Corporation approved by the Board of Directors.
(l) "Valuation Date" shall mean the date on which the Put/Call
option is exercised by Henderson, Stone and/or Noble, as applicable, which date
shall be the date that the respective party or parties subject to the Put/Call
receives written notice of a party's intent to exercise the Put/Call pursuant to
Section 6 of this Agreement.
ARTICLE II
DIRECTORS AND OFFICERS
Section 2.1 Directors. The Shareholders agree that the Corporation
shall have three (3) Directors. Any additional Directors or any increase in the
number of Directors must be approved by the unanimous consent of the three (3)
Directors. The Shareholders further agree, as long as Henderson and/or Stone
(and/or DCT if Stock is transferred by Henderson and/or Stone to DCT) are
shareholders of the Corporation, to support for election the following Board of
Directors for the Corporation: David C. Stone, Robert Skandalaris and Peter
Raab. No member of the Board of Directors shall be entitled to fees for personal
services as a Director. The quorum for all meetings of the Board of Directors
shall be three (3).
Section 2.2 Officers. The Shareholders agree that as long as
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<PAGE>
Henderson and/or Stone (and/or DCT if Stock is transferred by Henderson and/or
Stone to DCT) are shareholders of the Corporation, the sole officers of the
Corporation shall be David C. Stone, Robert Skandalaris, Mark A. Davis and Peter
Raab. The Shareholders further agree that these Officers shall be elected to the
following offices, respectively, and to support the nomination by the Board of
Directors of such persons to such offices of the Corporation:
Robert Skandalaris - Chairman and Chief
Executive Officer
Peter Raab - President and Chief
Operating Officer
David C. Stone - Secretary and Treasurer
Mark A. Davis - Assistant Secretary
Section 2.3 Indemnification. The Shareholders and the Corporation agree
that they shall, to the fullest extent permitted by law, indemnify, defend and
hold harmless the Officers and Directors from and against any and all liability,
losses, damages, costs and expenses incurred in connection with services
provided as Officers and Directors.
ARTICLE III
SHAREHOLDER AND BOARD OF DIRECTOR CONSENTS
Section 3.1 Voting Agreement. Except as otherwise specifically provided
for in this Agreement, Stone and Henderson hereby agree that all voting rights
in respect of shares of capital stock of the Corporation owned by such persons
shall be exercised, and all such other action shall be taken by such
Shareholders, in conformance with a certain Voting Agreement of even date
herewith by and among the Corporation, Noble, Stone, Henderson and Robert T.
Skandalaris ("Voting Agreement"), the terms of which Voting Agreement are
incorporated herein by reference. In the event of a conflict between the terms
of this Agreement and the terms of the Voting Agreement, the terms of this
Agreement shall control.
Section 3.2 Pledge of Corporation's Assets. The Shareholders agree that
the Corporation shall not permit there to be any lien or encumbrance on the
assets of the Corporation without the approval of the majority of the Board of
Directors, which majority must include David C. Stone for purposes of this
Section 3.2.
Section 3.3 Guaranty by Corporation. The Shareholders agree that the
Corporation shall not agree to the guaranty of any debt or obligations of any
third party, whether related or otherwise,
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<PAGE>
without the approval of the majority of the Board of Directors, which majority
must include David C. Stone for purposes of this Section 3.3.
ARTICLE IV
RELATIONSHIP BETWEEN THE PARTIES
Section 4.1 Arm's Length. The parties agree that any agreements,
contracts and/or understandings entered into between the Corporation and any
Shareholder, or a party related to a Shareholder, shall be presented to the
Board of Directors for approval, and will reflect commercially reasonable "arms
length" terms.
Section 4.2 Refinancing. The Shareholders will use their best efforts
to refinance the Bank of Bloomfield mortgage debt of Competitive Technology
Investment Company, a Michigan co- partnership ("Partnership"), and the Deutsche
Credit equipment debt of the Corporation.
Section 4.3 Forgiveness of Debt. The parties acknowledge and expressly
agree that all intercompany debt and/or intercompany promissory notes between
DCT on the one hand and the Corporation on the other hand, and all Shareholder
payables and receivables of the Corporation ("Debt") are worthless and this Debt
must be written off the books of the Corporation on or before December 31, 1997.
No interest on such Debt shall accrue or be due from January 1, 1996 forward.
Provided, however, the July 1996 Promissory Note shall not be written off and
shall be a legally enforceable obligation of the Corporation in accordance with
its terms.
Section 4.4 Future Debt. The parties agree that neither Henderson,
Stone nor DCT shall have any obligation for any Future Debt of the Corporation,
whether pursuant to any existing guaranty or guaranties of Henderson, Stone
and/or DCT or as a result of their relationship to the Corporation as current
and former Shareholders, Officers and Directors, as applicable.
Section 4.5 Preemptive Rights. The Shareholders agree that, promptly
after execution of this Agreement, the Articles of Incorporation shall be
amended to provide that the Corporation elects to have "preemptive rights," as
such term is defined in Section 343 of the Michigan Business Corporation Act.
Section 4.6 Brokerage Fees. Noble, River Capital, Inc. and Robert
Skandalaris acknowledge and agree that neither Noble, River Capital, Inc.,
Robert Skandalaris nor any related or affiliated parties or entities shall be
entitled to or have any claim for
5
<PAGE>
brokerage fees, finders fees, or any remuneration similar to a brokerage or
finders fee for any future transactions and/or acquisitions involving the
Corporation, except as to River Capital, Inc., if such brokerage and/or finders
fee is approved by the majority of the Board of Directors, which majority must
include David C. Stone for purposes of this Section 4.6.
Section 4.7 Pro Rata Distributions. The Shareholders and the
Corporation agree that, other than (i) One Hundred Thousand Dollars
($100,000.00) per year in management fees to be paid to Noble pursuant to the
terms of a certain Management Agreement with the Corporation of even date
herewith (hereinafter referred to as "Management Agreement"), (ii) payments to
be made pursuant to the terms of that certain Executive Bonus Pool Plan adopted
contemporaneously with this Shareholder Agreement, and (iii) payments to Raab in
accordance with the existing terms of his Employment Agreement with the
Corporation (collectively referred to as "Exceptional Payments"), all
distributions to the Shareholders, whether in the form of a dividend, bonus,
loan, salary, or otherwise (including but not limited to management fees under
the Management Agreement in excess of One Hundred Thousand Dollars ($100,000.00)
per year), shall be made on a pro rata basis to the Shareholders, determined by
dividing the number of shares of Stock owned by each Shareholder by the total
number of issued and outstanding shares of Stock in the Corporation. Other than
Exceptional Payments, any distribution to a Shareholder must be authorized by
the consent of the majority of the Board of Directors, which majority must
include David C. Stone for purposes of this Section 4.7, and must be in
conformance with this Section 4.7.
Section 4.8 Payments to Noble. The Shareholders and the Corporation
agree that the management fee to be paid to Noble by the Corporation pursuant to
the Management Agreement shall not be increased, nor shall any other
distribution, whether in the form of dividends, bonus, loans, or otherwise
(other than the existing management fee under the Management Agreement), be made
by the Corporation to Noble, until such time as the principal due to DCT by the
Corporation under the July 1996 Promissory Note is reduced by at least One
Hundred Thousand Dollars ($100,000.00) and the July 1996 Promissory Note is
renegotiated and converted to a term promissory note in accordance with Section
5.2(b) of this Agreement and amortization of such term promissory note has
begun.
Section 4.9 Bonus Pool. (a) The Shareholders and the Corporation agree
that in regard to that certain Executive Bonus Pool Plan adopted by the
Corporation contemporaneously herewith, one-half (1/2) of the Bonus Pool Amount,
as defined in the Executive Bonus Pool Plan, for the period from January 1, 1997
to December 31, 1999, shall be paid by the Corporation to DCT, in consideration
of the forgiveness of Debt as provided in Section 4.3 above.
6
<PAGE>
(b) The Executive Bonus Pool Plan cannot be modified, amended
and/or terminated without the consent of the majority of the Board of Directors,
which majority must include David C. Stone for purposes of this Section 4.9.
Section 4.10 Stamping-Related Acquisitions. The Shareholders, Robert
Skandalaris and the Corporation agree that all stamping-related acquisitions
presented to any of the foregoing parties shall be accomplished through the
Corporation, unless otherwise mutually agreed. For purposes of this Agreement,
"stamping-related acquisitions" shall mean the acquisition of any assets,
business, or corporation which is primarily in the business of metal stamping.
Section 4.11 Keepwell Indemnity. Noble and Raab, jointly and severally,
agree that they will be liable for and will indemnify the Corporation, DCT, and
DCT Welding and Assembly, Inc., for any payments made in excess of Three Hundred
Thousand Dollars ($300,000.00) in the aggregate pursuant to the Keepwell
Agreement, from the date of this Agreement until such time as the Keepwell
Agreement is terminated or satisfied in accordance with its terms. This Keepwell
Indemnity is in addition to the Indemnification provided by Noble and Raab under
the Indemnification Agreement of even date herewith.
ARTICLE V
OPTION TO PURCHASE
Section 5.1 Option to Purchase. From the date of this Agreement until
July __, 2001, unless otherwise prohibited by Section 5.2 below, Noble shall
have the option to purchase (hereinafter referred to as "Option") from Henderson
and Stone, or their assignees, as applicable, in the aggregate Fourteen and One-
Tenth percent (14.1%) of the Stock of the Corporation, with Noble purchasing
Seven and Five-Hundredths percent (7.05%) from each of Henderson and Stone, or
their assignees, as applicable, for One Dollar ($1.00), upon the giving of
written notice by Noble to Henderson and Stone, or their assignees, as
applicable, of its intent to exercise this Option. After the exercise of such
Option, Noble and Raab would have Fifty-Nine and One-Tenth percent (59.1%) of
the Stock, and Henderson and Stone, or their assignees, as applicable, would
have Forty and Nine-Tenths percent (40.9%) of the Stock of the Corporation, in
the aggregate.
Section 5.2 Limitation on Exercise of Option. (a) The Option provided
in Section 5.1 above cannot be exercised by Noble
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<PAGE>
until the later of the following to occur:
(i) January 1 of the year following the write off of the
Debt by DCT;
(ii) the payment by the Corporation to DCT of at least One
Hundred Thousand Dollars ($100,000.00) of the principal owing by the Corporation
to DCT pursuant to the July 1996 Promissory Note and the renegotiation of the
July 1996 Promissory Note by DCT and the Corporation pursuant to Section 5.2(b)
below; and
(iii) the beginning of the amortization of the
renegotiated term promissory note.
(b) In order to satisfy the requirements of Section 5.2(a)(ii)
above, the Corporation and DCT must renegotiate the July 1996 Promissory Note
(after the Corporation has paid down at least One Hundred Thousand Dollars
($100,000.00) of principal) to provide that the principal balance and any
accrued interest owing at the time of such renegotiation be paid to DCT on a
term not greater than eighty-four (84) months and an interest rate not less than
Ten percent (10%), and otherwise on terms consistent with that contained in the
Promissory Notes attached hereto as Exhibits A and C.
(c) (i) In the event Noble exercises the Option as provided
above, Noble must also acquire simultaneously a Fifty-Nine and One-Tenth percent
(59.1%) interest in the Partnership, owned equally by Henderson and Stone, pro
rata from Henderson and Stone for One Dollar ($1.00).
(ii) Noble agrees to use its best efforts when exercising
its Option relating to the Partnership in such a manner and to structure the
transaction in such a way as to minimize the tax consequences to both parties.
(d) In the event that Section 5.2(a)(i), (ii) and (iii) are
not accomplished by July __, 2001, the Option provided in Section 5.1 shall
automatically terminate and no longer be of any further force or effect.
ARTICLE VI
PUT/CALL
Section 6.1 Put. (a) In consideration for the Call right provided in
Section 6.2 below, Henderson and Stone and/or their assignees, should either or
both Henderson and Stone transfer or assign their shares of capital stock in the
Corporation prior to the expiration of the Put period (as defined below), shall
have the right to Put all, but not less than all, of the shares of capital stock
of the Corporation owned by them to Noble in accordance with this Section 6.1.
(b) The purchase price for which each share of capital stock
can be Put shall be equal to the Put Value, divided by the total number of
issued and outstanding shares of capital stock of the Corporation (hereinafter
referred to as "Put Purchase Price").
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<PAGE>
(c) The Put Purchase Price shall be paid to Henderson and
Stone (or their assignees, as applicable), pro rata, in accordance with the
following:
(i) Twenty percent (20%) of the Put Purchase Price
shall be paid in immediately available funds at closing on the Put, which
closing will take place within sixty (60) days of the Valuation Date.
(ii) The balance of the Put Purchase Price shall be
paid to Henderson and Stone (or their assignees, as applicable) pursuant to a
Promissory Note to each in substantially the form of the Promissory Note
attached hereto as Exhibit A.
(d) That part of the Put Purchase Price to be paid pursuant to
the Promissory Note described in Section 6.1(c)(ii) shall be secured pursuant to
a Pledge Agreement in substantially the form of the Pledge Agreement attached
hereto as Exhibit B.
(e) The Put shall be effective from July 1, 1998 to June 30,
2000 (hereinafter referred to as "Put Period").
Section 6.2 Call. (a) In consideration of the Put right provided in
Section 6.1 above, Noble shall have the right to Call all, but not less than
all, of the shares of capital stock of the Corporation owned by Henderson and
Stone and/or their assignees, should either or both Henderson and Stone transfer
or assign their shares of capital stock in the Corporation prior to the exercise
of the Call by Noble, in accordance with this Section 6.2.
(b) The purchase price for which each share of capital stock
owned by Henderson and Stone and/or their permitted assignees can be Called
shall be equal to the Call Value, divided by the total number of issued and
outstanding shares of capital stock of the Corporation (hereinafter referred to
as "Call Purchase Price").
(c) The Call Purchase Price shall be paid to Henderson and
Stone (or their assignees, as applicable), pro rata, in accordance with the
following:
(i) Twenty-five percent (25%) of the Call Purchase
Price shall be paid in immediately available funds at closing on the Call, which
closing shall take place within sixty (60) days of the Valuation Date.
(ii) The balance of the Call Purchase Price shall be
paid to Henderson and Stone (or their assignees, as applicable), pursuant to a
Promissory Note to each in substantially the form of the Promissory Note
attached hereto as Exhibit C.
(d) That part of the Call Purchase Price to be paid
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pursuant to the Promissory Note described in Section 6.2(c)(ii) above shall be
secured pursuant to a Pledge Agreement in substantially the form of the Pledge
Agreement attached hereto as Exhibit B.
(e) The Call shall be effective from July 1, 2000 to June 30,
2002 (hereinafter referred to as "Call Period").
Section 6.3 Partnership Purchase. (a) Simultaneously with the exercise
of the Put by Henderson and Stone, or their assignees, as applicable, or the
exercise of the Call by Noble, as applicable, Noble agrees to purchase from
Henderson and Stone, and Henderson and Stone agree to sell to Noble, their
remaining partnership interests in the Partnership for the fair market value of
the assets of the Partnership, which fair market value shall be determined by an
M.A.I. Appraiser licensed in the State of Michigan, and on commercially
reasonable terms and conditions to be mutually agreed upon by Noble, Henderson
and Stone.
(b) Noble agrees to use its best efforts to structure the
transaction described in Section 6.3(a) above in such a manner so as to minimize
the tax consequences to the parties.
Section 6.4 July 1996 Promissory Note. The Put Purchase Price and/or
Call Purchase Price, as applicable, to be paid pursuant to Sections 6.1 and 6.2
above, respectively, shall be in addition to the outstanding principal and
accrued interest owing under the July 1996 Promissory Note (or renegotiated
promissory note as provided in Section 5.2(b)) on the Valuation Date, which July
1996 Promissory Note shall be paid in accordance with its terms.
Section 6.5 Representations and Warranties. Henderson and Stone agree
that in the event the Put or Call is exercised, in conjunction with the Closing
of the Put or Call, as applicable, Henderson and Stone will represent and
warrant good title to their respective capital stock to be sold, free and clear
of any liens and encumbrances, and the parties acknowledge that these
representations and warranties shall be the only representations and warranties
of Henderson and Stone to be made in conjunction with the exercise of such Put
or Call, as applicable.
ARTICLE VII
NOTICE
Any notice, request, instruction, or other document to be given
hereunder to any party shall be in writing and deemed given on the date it is
delivered personally, by facsimile transmission with originals mailed by first
class, mail sent by registered or certified mail, postage prepaid, telegram, or
delivered by a
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nationally recognized courier service, as follows:
If to Corporation:
DCT Component Systems, Inc.
34660 Centaur
Clinton Township, Michigan 48035
Attn: Peter Raab
If to Shareholders:
"Henderson"
James Bronce Henderson III
DCT Companies, Inc.
20101 Hoover Road
Detroit, Michigan 48205
"Stone"
David C. Stone
c/o DCT Companies, Inc.
20101 Hoover Road
Detroit, Michigan 48205
In either case, with a copy to:
Stone, Biber & O'Toole, P.C.
2701 Troy Center Dr., Suite 400
Troy, MI 48084
Attn: Roger J. O'Toole
"Raab"
Peter Raab
c/o DCT Component Systems, Inc.
34460 Centaur
Clinton Township, Michigan 48035
"Noble"
Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
In either case, with a copy to:
Mark A. Davis, Esq.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
11
<PAGE>
Any party may change his or its address for purposes of this Section by giving
notice of such change of address to the other party in the manner herein
provided for giving notice.
ARTICLE VIII
CORPORATE RECORDS
The Shareholders agree that the Corporation's accountant acts for both
the Corporation and the Shareholders and that each of them will have free access
to the Corporation's books and records. The Corporation's accountant may assert
no privilege against either party and shall report to the parties all
information reported to the Corporation and all matters of concern to them that
comes to the accountant's attention in the course of his, her or its services
for the Corporation.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Subject to the terms and conditions hereof, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors and assigns.
Section 9.2 All exhibits hereto are incorporated herein. This Agreement
and the agreements referenced herein constitute the entire Agreement of the
parties related to its subject matter and supersede all prior agreements,
whether written or oral, between the parties related to its subject matter.
Section 9.3 This Agreement is declared to have been made under the laws
of the State of Michigan.
Section 9.4 If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future laws effective during the term
of this Agreement, such provision shall be fully severable; this Agreement shall
be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part of this Agreement; and the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid, or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of each such illegal,
invalid, or unenforceable provision, there shall be added automatically as part
of this Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
Section 9.5 The headings contained in this Agreement are for
12
<PAGE>
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 9.6 As the context of any provision may require, nouns and
pronouns of every gender and number shall be construed in any other gender and
number.
Section 9.7 This Agreement may be amended in any manner by an
agreement, in writing, signed by all the parties hereto or by their respective
successors and assigns, heirs, executors, administrators and personal
representatives.
Section 9.8 Any party's failure to insist on compliance or enforcement
of any provision of this Agreement shall not affect its validity or
enforceability or constitute a waiver of future enforcement of that provision or
of any other provision of this Agreement.
Section 9.9 Strict compliance shall be required with each and every
provision of this Agreement. The parties hereto acknowledge that their interests
are unique, that failure to perform the obligations provided by this Agreement
and/or the threat to refuse to perform shall result in irreparable harm and
damage and that specific performance of their obligations may be obtained by a
court in equity, notwithstanding the provisions of Section 9.12 below regarding
arbitration.
Section 9.10 This Agreement may be executed in a number of
counterparts, and all counterparts executed by the Corporation and the
Shareholders shall constitute one and the same agreement, and it shall not be
necessary for the Corporation and the Shareholders to execute the same
counterpart hereof.
Section 9.11 Each of the Shareholders agrees that it will vote and act
at all times as a Shareholder of the Corporation and in all other respects use
its best efforts to take all such steps as may be reasonably within its powers
so as to cause the Corporation to act in the manner contemplated by the
provisions of this Agreement and so as to effectuate to the fullest possible
extent the provisions of this Agreement.
Section 9.12 Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
Southfield, Michigan, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrator(s) may be entered into any court having jurisdiction thereof. All
costs and expenses of the prevailing party, including, but not limited to,
reasonable attorneys' fees and expenses, shall be paid by the other party.
13
<PAGE>
Section 9.13 The Corporation is authorized to enter into this Agreement
by virtue of a Consent Resolution adopted by the Shareholders and the Board of
Directors dated July __, 1996.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WITNESSES: "SHAREHOLDERS"
"Noble"
NOBLE INTERNATIONAL, LTD., a
Michigan corporation
/s/ David C. Stone /s/ Mark A. Davis
- ------------------------ -------------------------------
/s/ Lisa Abbott By: Mark A. Davis
________________________ Its: President
"Henderson"
/s/ A. Kathleen Murphy /s/ James Bronce Henderson III
- ------------------------ -------------------------------
/s/ Jan Chirnut James Bronce Henderson III
- ------------------------
"Stone"
/s/ A. Kathleen Murphy /s/ David C. Stone
- ------------------------ -------------------------------
/s/ Jan Chirnut David C. Stone
- ------------------------
"Raab"
/s/ Mark A. Davis /s/ Peter Raab
- ------------------------ -------------------------------
/s/ David C. Stone Peter Raab
- ------------------------
"CORPORATION"
DCT COMPONENT SYSTEMS, INC.,
a Michigan corporation
/s/ Mark A. Davis /s/ Peter Raab
- ------------------------ -------------------------------
/s/ David C. Stone By: Peter Raab
________________________ Its: President
To the extent applicable, the undersigned agree to the terms
14
<PAGE>
and conditions of the foregoing Shareholder Agreement, as of this 1st day of
July, 1996.
/s/ Robert Skandalaris
-------------------------------
Robert Skandalaris
DCT COMPANIES, INC., a Michigan
corporation
/s/ James Bronce Henderson, III
------------------------------
By: James Bronce Henderson, III
Its: Chairman
15
DCT COMPONENT SYSTEMS, INC.
EXECUTIVE BONUS POOL
Section 1. Purposes. The purposes of this Executive Bonus
Pool (hereinafter referred to as the "Plan") are:
(a) to provide additional incentives for senior management of
DCT Component Systems, Inc., a Michigan corporation (hereinafter referred to as
the "Company") to increase the earnings of the Company on a long term basis;
(b) to attract and retain for the management of the Company
persons of outstanding competence; and
(c) to further the identity of interest of senior management
with those of the Company's shareholders.
Section 2. Administration of Plan. This Plan shall be administered by
the Company's Board of Directors. The Board of Directors is authorized to
interpret the Plan and may from time to time adopt such rules and regulations
for carrying out the Plan as it may deem appropriate. Decisions of the Board of
Directors shall be final, conclusive and binding upon all parties, including the
Company, its shareholders and the Participants.
Section 3. Participants and Basis of Participation.
(a) Participation in this Plan shall be limited to those
Management employees of the Company who because of their position and
responsibilities comprise, in the sole opinion of the Board of Directors, senior
management.
(b) Employee Directors of the Company shall be eligible to
participate.
(c) Noble International, Ltd. ("Noble") or any permitted
successors or assigns under a certain Management Agreement by and between Noble
and the Company ("Management Agreement") shall also be eligible to participate,
but only as long as the Management Agreement remains in effect.
(d) The term "Participant" as used herein shall mean those who
are eligible to participate in this Plan.
Section 4. Bonus Pool. As soon as practical after the determination of
the Company's net pre-tax earnings for each calendar year, which shall be
calculated after payment and/or accrual of interest but before payment and/or
accrual of taxes, and in accordance with generally accepted accounting
principals and certified to the Board of Directors by the certified public
<PAGE>
accountant regularly retained by the Company (hereinafter referred to as "EBT"),
the Board of Directors shall, subject to the provisions of Section 5 below,
award to one or more of the Participants a share of the bonus pool. The bonus
pool shall be Twenty Percent (20%) of EBT ("such sum being referred to as "Bonus
Pool Amount"). All such awards to Participants from the Bonus Pool Amount shall
be determined in the sole and absolute discretion of the Board of Directors,
which determination shall be made only by a majority of the Board of Directors,
which majority must include David C. Stone for purposes of this Section 4.
Section 5. DCT Companies, Inc. In consideration of the forgiveness of
certain indebtedness of the Company owing to DCT Companies, Inc., a Michigan
corporation, the Company shall pay to DCT Companies, Inc. one-half of the Bonus
Pool Amount determined in accordance with Section 4 above, for the period
commencing on January 1, 1997 and ending December 31, 1999. Such payment shall
be made to DCT Companies, Inc. in accordance with this Executive Bonus Pool
Plan.
Section 6. Board of Directors Control. The Board of Directors shall be
entitled to establish terms and conditions from time to time as it deems
necessary or desirable relating to the payment of such cash bonuses, provided,
however, no action shall be taken by the Board of Directors that will affect in
any way the bonus payment due DCT Companies, Inc.
Section 7. Withholding. Nothing provided in this Plan shall change or
effect the requirements of the Company to withhold and/or pay taxes as
proscribed by the laws of any Federal, state or local government. Accordingly,
the Board of Directors shall have the absolute right to withhold such taxes and
may require a Participant to pay to the Company such taxes as the Company may be
required to pay.
Section 8. Method and Time of Payment of Awards. After the
determination of EBT for each such calendar year of the Company, the bonus shall
be paid to the Participants as determined by the Board of Directors and to DCT
Companies, Inc., as provided in Section 5 above, subject to terms and
conditions, if any, established by the Board of Directors from time to time.
Section 9. Death of a Participant. In the case of the death of a
Participant, any award to which he or she is entitled shall be paid to the
beneficiary or beneficiaries so designated by such Participant or, if no
beneficiary has been designated or survives such Participant, shall be paid to,
or in accordance with the directions of, the Personal Representative of such
Participant's estate.
2
<PAGE>
Section 10. Death or Disability of Participant. If a Participant leaves
the employment of the Company because of his death or permanent disability, that
Participant shall be entitled to pro-rata benefits under the Plan for the
calendar year of such departure.
Section 11. Involuntary Termination. If a Participant's employment with
the Company is terminated by the Company other than for adequate cause, that
Participant shall be entitled to pro-rata benefits under the Plan for the
calendar year of such termination.
Section 12. Voluntary Termination and/or Adequate Cause Termination. If
a Participant leaves the employment of the Company voluntarily or his/her
employment is terminated by the Company for adequate cause, that Participant
forfeits all of his/her rights under the Plan for the calendar year of such
departure.
Section 13. Time of Granting Awards. The granting of an award pursuant
to the Plan shall take place only when authorized by the majority of the Board
of Directors, which majority must include David C. Stone for purposes of this
Section 13. No award and no rights hereunder shall be transferable by a
Participant, other than pursuant to Section 9 above.
Section 14. Termination and Modification. No award shall be granted
under the Plan after any date as of which the Plan shall have been terminated.
The Board of Directors of the Company may at any time terminate or from time to
time modify or suspend the Plan and, if suspended, may reinstate any or all of
the provisions of this Plan, except that no modification of this Plan may,
without the consent of the Participant or designated Beneficiary, alter or
impair any award previously granted under this Plan.
Section 15. Effective Date. This Plan shall become effective
as of January 1, 1996.
The undersigned, as President of the Company, hereby acknowledges and
agrees to the adoption of this Executive Bonus Pool Plan by the Company.
/s/ Peter Raab
-------------------------------
Peter Raab
3
LICENSE AGREEMENT
THIS LICENSE AGREEMENT is made and entered into this 1st day of July,
1996, by and between James Bronce Henderson, III (hereinafter referred to as
"Henderson") and Jon Fox (hereinafter referred to as "Fox") ("Henderson" and
"Fox" sometimes individually and collectively referred to as "Licensor") and DCT
COMPONENT SYSTEMS, INC., a Michigan corporation whose address is 34660 Centaur,
Clinton Township, Michigan 40835 ("Licensee"):
W I T N E S S E T H:
WHEREAS, Licensor has been engaged in basic research regarding a
Push-In Sheet Metal Fastening System;
WHEREAS, Licensor has prepared, and is contemporaneously submitting to
the United States Patent and Trademark Office, a patent application for the
Subject Technology, as such term is defined below (hereinafter referred to as
"Patent Application");
WHEREAS, Licensor owns the full right, title and interest in the
Subject Technology disclosed in the above-mentioned Patent Application;
WHEREAS, Licensee is desirous of receiving an exclusive license to
make, use and sell the Subject Technology;
WHEREAS, Licensor is desirous of granting an exclusive license for such
Subject Technology to Licensee;
NOW, THEREFORE, for and in consideration of the promises and the mutual
agreements hereinafter set forth, the parties agree as follows:
Section 1. Definitions
(a) "Subject Technology" means devices or techniques relating
to a Push-In Sheet Metal Fastening System, as more fully described in the draft
of the Patent Application which is attached hereto as Exhibit A and any patents
that are issued as a result of the Patent Application and Improvements on such
Subject Technology.
(b) "Improvements" means any product or method, whether or not
patentable, which (i) incorporates any feature of the Push- In Sheet Metal
Fastening System, as more fully described in the attached Patent Application, or
(ii) is originated by or for Licensee and is derived from the Subject
Technology. A product or method is derived, for purposes of this Agreement, if
it follows reasonably from the Subject Technology. A product or
<PAGE>
method is derived, for purposes of this Agreement, if it follows reasonably from
the Subject Technology.
(c) "Licensed Product" means any product or device which
consists of, incorporates, is made by, or uses Subject Technology.
(d) "Deductible Expenses" means the following items of expense
incurred in connection with sales of Licensed Products to the extent paid or
allowed by Licensee and included in accordance with recognized principles of
accounting in the gross sales price billed: (i) sales, use or turnover taxes;
(ii) excise taxes, custom duties or consular fees; (iii) trade or quantity
discounts to the extent actually granted; (iv) agent fees or commission and (v)
rebates, refunds, and credits for any returned Licensed Products.
(e) "Licensed Patents" mean patents that issue from the Patent
Application and/or relating to the Subject Technology.
Section 2. Grant of License.
(a) Licensor hereby grants to Licensee an exclusive license to
make, have made, and sell Licensed Products throughout the world. This license
is not transferrable by Licensee, but Licensee shall have the right to grant
written sublicenses hereunder, provided that:
(i) Licensee shall include all sales of Licensed
Products by its sublicensees in Licensee reports to Licensor, as provided in
Section 6 hereof, and Licensee shall pay royalties thereon to Licensor as though
all such sales were by Licensee hereunder;
(ii) Any such sublicense shall not be on any terms
less favorable to Licensor than the terms of this Agreement, and any such
sublicense shall be terminable, at Licensor's option, with termination of this
Agreement; and
(iii) Licensee shall furnish Licensor within thirty
(30) days of the execution thereof, a true and complete copy of each sublicense
and any changes or additions thereto, and shall assume full responsibility for
the payment of all royalties due Licensor on Licensed Products sold by any such
sublicensee; and
(iv) Licensor and Licensee each agree to bear one-
half (1/2) of the cost of any sublicense fees required pursuant to, or as a
condition precedent of, any such sublicense and will reimburse the party
responsible for payment of such sublicense fee for one-half (1/2) of such fees.
All such sublicenses must be in form and substance acceptable to the Licensor.
2
<PAGE>
(b) The exclusive license shall continue until the later of
(i) the expiration of any Patent that issues from the Patent Application, (ii)
the expiration of any Patent that issues on an Improvement, and (iii) twenty
(20) years from the date of this Agreement.
(c) In the event that the Licensor shall develop an
Improvement during the term of this Agreement, such Improvement shall be owned
by Licensor and shall be deemed to be "Subject Technology" under this License
Agreement. Licensee agrees to execute any document reasonably requested by
Licensor to reflect and/or confirm Licensor's ownership of such Improvement.
(d) In the event that the Licensee shall develop an
Improvement during the term of this Agreement, such Improvement shall be owned
by Licensee, but shall otherwise be deemed to be "Subject Technology" under this
License Agreement. Licensor agrees to execute any document reasonably requested
by Licensee to reflect and/or confirm Licensee's ownership of such Improvement.
Section 3. Patent Expenses.
(a) Licensee shall advise Licensor no later than nine (9)
months after a United States patent issues if Licensee wants to file
corresponding foreign applications and shall at that time designate countries.
Licensee shall reimburse Licensor for all reasonable patent expenses associated
with foreign filings including attorney fees, Patent Office fees and maintenance
fees. Licensee shall have the right to select counsel, subject to Licensor
concurrence.
(b) In the event Licensor does not elect to retain title to an
invention relating to the Subject Technology, then title to such invention shall
be offered by Licensor to Licensee.
Section 4. Royalty Payments.
(a) Starting from the date of this Agreement and for the full
term of the exclusive patent license granted under Section 2, unless otherwise
mutually agreed, Licensee shall pay to Licensor patent royalty payments on the
basis of (i) three percent (3%) of the gross receipts after deductible expenses
for all Licensed Products sold by Licensee, its agents, its distributors,
sublicenses or related companies, in the event that no Patent issues from the
Patent Application, and (ii) five percent (5%) of the gross receipts after
deductible expenses for all Licensed Products sold by Licensee, its agents, its
distributors, sublicenses or related companies, if a Patent does issue from the
Patent Application and/or on any Improvement.
(b) Licensor shall receive one-half of any sublicensing fees
Licensee shall receive for the granting of a sublicense for such Subject
Technology.
3
<PAGE>
Section 5. Unlicensed Manufacture, Use or Sale by Infringers.
(a) In the event either Licensee or Licensor discovers any
unlicensed manufacture, use or sale of Licensed Products, the other party shall
be promptly notified of such infringement. Licensee may, at its own option and
at its own expense, through attorneys of its own election, take appropriate
action to terminate or prevent the infringement provided, however, that Licensee
may not bring an action nor enter into any settlement agreement with an accused
infringer without prior written approval of Licensee, which approval will not be
unreasonably withheld. Licensor agrees to be joined as a party plaintiff to any
such action. If Licensee takes no action within ninety (90) days of the
discovery of the infringement, then Licensor, at its option, may take such
action as it deems appropriate.
(b) Licensor shall not be obligated to bring suit for
infringement, nor have any responsibility for taking or defending any action
whatsoever, against or by infringers or alleged infringers; provided, however,
that Licensor shall have the right and option upon giving of written notice to
Licensee, to participate in any such action, to contribute funds to the
prosecution of such action, and to be represented by counsel. Furthermore,
Licensor shall not be obligated to defend the Licensed Patents or any claim
thereof against challenge or attack by any third party in the United States
Patent and Trademark Office or the courts or elsewhere.
(c) If Licensor engages in litigation or otherwise incurs
expense in order to terminate infringement and receives any money by way of
damages, license or otherwise as a result of such action, all monies recovered
shall belong to Licensor. If Licensor and Licensee jointly engage in litigation
or otherwise incur expense in order to terminate infringement and receive any
money by way of damages, license or otherwise as a result of such action, then
to the extent that such money exceeds the expense involved of each party, the
excess shall be shared pro-rata based on actual expenses of the parties. In the
event the monies received does not exceed the respective parties expenses
incurred, the monies shall be shared pro-rata based on actual expenses of the
parties. If Licensee engages in litigation or otherwise incurs expense in order
to terminate infringement and receives any money by way of damages, license or
otherwise as a result of such action, Licensee shall be entitled to the entire
amount of monies received by Licensee and Licensor shall not be entitled to any
of the monies so received.
Section 6. Records, Reports and Payments
(a) Licensee shall keep records and books of account in
respect of all Licensed Products made and sold by Licensee under this Agreement,
including records showing the receipts and collections for such sales, and
Licensee shall require the same in
4
<PAGE>
respect to sales by its distributors agents, and related companies. Licensor
shall have the right, during business hours, to examine, or to have its
designated auditors examine, such records and books of account, and Licensee
shall keep the same for at least three years after it pays Licensor the
royalties due for such Licensed Products and require related companies to do the
same.
(b) On or before the twentieth day of each January, April,
July and October after the effective date of this Agreement, Licensee shall
render to Licensor a report in writing, setting forth the number of units of
Licensed Products manufactured and the number of units sold during the preceding
calendar quarter by Licensee and its distributors, agents and related companies,
and also setting forth all information necessary to determine the royalties
payable hereunder, such report to be accompanied by payment of the royalties
shown by said report and monies received by Licensee during the preceding
calendar quarter and due Licensor. The report is to be certified as true and
accurate by an officer of Licensee.
Section 7. Termination.
(a) (i) If the Licensor or the Licensee breach any of their
obligations hereunder, the other party shall have the right to terminate this
Agreement and the license granted hereunder by giving the breaching party sixty
(60) days written notice thereof, provided, however, that if the breaching party
cures the breach within such sixty (60) day period, this Agreement shall
continue in full force and effect. After any termination under this Section,
Licensee agrees not to make, have made, use, or sell anything which would, if
this license had not been terminated, be subject to royalty under Section 4
hereof, until the expiration of the last to expire patent of Subject Technology
and shall impose a similar requirement on its sublicensees hereunder.
(ii) In addition, the non-breaching party shall have all
rights and remedies available in law or equity, including injunctive relief, and
the breaching party shall be liable for all costs and expenses, including
reasonable legal fees, incurred as a result of a material breach of this
Agreement. And provided further, nothing contained herein shall be interpreted
to prevent Licensee from utilizing non-infringing alternatives to the Subject
Technology following any termination under this Section.
(b) No termination of this Agreement shall relieve Licensee of
the liability for payment of any royalty due for Licensed Products made prior to
the effective date of such termination.
5
<PAGE>
Section 8. Negotiation of Warranties, Implied Licenses and Agency.
(a) Nothing in this Agreement shall be construed as:
(i) a warranty or representation by Licensor as to
the validity or scope of Subject Technology or any claim thereof; or
(ii) a warranty or representation that anything made,
used, sold, or otherwise disposed or hereunder is or will be free from
infringement of rights of third parties provided, however, to the extent that it
is determined that the Subject Technology as incorporated into the Licensed
Products infringes the rights of third parties, any monies paid as a result of
the infringement as to third parties, as well as all costs and expenses,
including actual attorneys fees, shall be offset against royalties due
hereunder; or
(iii) an obligation to bring or prosecute actions or
suits against third parties for infringement; or
(iv) conferring by implication, estoppel or
otherwise, any license or rights under any patents of Licensor other than the
Subject Technology, regardless of whether such other patents are dominant or
subordinate to Subject Technology.
(b) LICENSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
(c) Licensor and Licensee are independent parties in this
Agreement. Accordingly, there is no agency relationship between Licensor and
Licensee under this Agreement with respect to any products made or sold, or any
methods used, by Licensee under this Agreement.
Section 9. Miscellaneous.
(a) Licensee agrees that it will not use the name of Henderson
and/or Fox in any advertising or publicity material, or make any form of
representation or statement which would constitute an express or implied
endorsement by Henderson and/or Fox of any commercial product or services, and
that it will not authorize others to do so, without first having obtained
written approval from Licensor.
(b) Licensee agrees to mark the appropriate U.S. patent number
or numbers on all Licensed Products made under this Agreement and to require its
sublicensees to do the same.
(c) Licensee agrees that Licensor shall have no liability to
Licensee or to any purchasers or users of Licensed
6
<PAGE>
Products made or sold by Licensee for any claims, demands, losses, costs, or
damages suffered by Licensee, or purchasers or users of Licensed Products, or
any other party, which may arise out of the manufacture, use, or sale of such
Licensed Products, and Licensee agrees to defend, indemnify, and hold harmless
Licensor, its respective trustees, officers, agents, and employees from any such
claims, demands, losses, costs, or damages.
(d) This Agreement includes all the agreements of the parties
in respect to the subject matter hereof. No claimed oral agreement in respect
thereto shall be considered as any part hereof. No waiver of or change in any of
the terms hereof subsequent to the execution hereof claimed to have been made by
any representative of either party shall have any force or effect unless in
writing, signed by duly authorized representatives of the parties.
(e) This agreement shall be binding upon and inure to the
benefit of any successor or assignee of Licensor. This Agreement is not
assignable by Licensee or by operation of law without the prior written consent
of Licensor except that Licensee may assign the Agreement to any successor of
its business, or purchaser of substantially all of the assets of its business,
to which this Agreement pertains. Should Licensee be declared bankrupt following
the filing of a petition in bankruptcy, be declared insolvent or execute an
assignment for the benefit of creditors, or should a receiver or trustee by
appointed by any court or government agency to administer the affairs and assets
of Licensee, then, in that event, this Agreement shall become terminated, unless
the receiver, or trustee, or other assignee, at the time of the assumption of
this Agreement: (i) cures defaults, if any, or gives reasonable assurance that
any such defaults will be timely cured; and (ii) provides adequate assurance of
future performance under this agreement.
(f) This Agreement shall be deemed to have been entered into
in the State of Michigan and shall be construed and enforced in accordance with
Michigan law.
(g) As to any royalty payments to be paid to Licensor
hereunder, such payments shall be paid to Fox and Henderson as follows:
(i) In the event no Patent issues, the first one
percent (1%) Royalty shall be paid to Fox with the balance of two percent (2%)
Royalty to Henderson;
(ii) In the event that a Patent issues, the first one
and one-half percent (1 1/2%) Royalty shall be paid to Fox with the balance of
three and one-half percent (3 1/2%) Royalty to Henderson.
7
<PAGE>
(h) Any notice or communication required or permitted to be
given or made under this agreement shall be addressed as follows:
LICENSOR: "Henderson"
James Bronce Henderson, III
DCT Companies, Inc.
20101 Hoover road
Detroit, Michigan 48205
"Fox"
Jon Fox
-------------------------------
LICENSEE: DCT COMPONENT SYSTEMS, INC.
34660 Centaur
Clinton Township, Michigan 40835
Attn: Peter Raab
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
WITNESSES: "Henderson"
/s/ A. Kathleen Murphy /s/ James Bronce Henderson, III
- ------------------------ -------------------------------
/s/ Jan C. Chinurt James Bronce Henderson, III
- ------------------------
"Fox"
- ------------------------ -------------------------------
/s/ David C. Stone Jon Fox
- ------------------------
"Licensee"
DCT COMPONENT SYSTEMS, INC.,
a Michigan corporation
/s/ Peter Allen Raab
- ------------------------ -------------------------------
/s/ David C. Stone By: Peter Allen Raab
- ------------------------ Its: President
8
LINE OF CREDIT PROMISSORY NOTE
AMOUNT: $960,000.00 DETROIT, MICHIGAN
DUE DATE: June 30, 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 DCT COMPANIES, INC., a Michigan corporation (hereinafter
"Payee"), at its office set forth below, or at such other place as Payee may
designate in writing, the principal sum of Nine Hundred Sixty Thousand and
no/100 Dollars ($960,000.00) or such greater sum as shall have been advanced by
Payee to Borrower under the Loan Account hereinafter provided, 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.
Interest only on all amounts disbursed hereunder shall be due and
payable on the first (1st) day of each calendar quarter, commencing on the first
(1st) day of October, 1996. Principal plus any accrued but unpaid interest on
all amounts disbursed and outstanding hereunder shall be due and payable no
later than the Due Date. The unpaid principal and interest remaining at the Due
Date will be payable in full on the Due Date, unless extended by Payee.
Advances of money or other credit, repayments and readvances may be
made under this Note from time to time; provided, however, Payee may, in its
sole discretion, refuse to make advances or readvances hereunder at any time.
Payee may renew this Note at its sole discretion. If prior to the Due Date,
Borrower repays all indebtedness hereunder, a readvance shall automatically
reinstate this Note. Prepayments, at the option of Payee, shall first be applied
against accrued interest and the balance against principal. This Note may be
prepaid in full or in part at any time without payment of any prepayment fee or
penalty. All loans or advances made hereunder shall be charged to a "Loan
Account" in Borrower's name on Payee's books. Payee shall debit to such account
the amount of each loan advance made and credit to such account the amount of
prepayment hereunder. Payee shall render Borrower, from time to time, a
statement of account setting forth the Borrower's loan balance in said Loan
Account which shall be deemed to be correct and accepted by and binding upon
Borrower, unless Payee receives a written statement of exceptions within
fourteen (14) days after such statement has been rendered to Borrower.
<PAGE>
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 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 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 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 Payee, a late charge of not more than Five Cents
($.05) for each dollar of the installment so overdue may be charged. Payee may
2
<PAGE>
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 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.
WITNESSES: BORROWER:
DCT COMPONENT SYSTEMS, INC.,
a Michigan corporation
/s/ Peter Raab
- ------------------------ ------------------------------
By: Peter Raab
________________________ Its: President
ADDRESSES:
BORROWER:
DCT COMPONENT SYSTEMS, INC.
34660 Centaur
Clinton Township, Michigan 40835
Attn: Peter Raab
PAYEE:
DCT COMPANIES, INC.
20101 Hoover Road
Detroit, Michigan 48205
Attn: Richard Coletta
3
PUT AGREEMENT
DCT COMPONENT SYSTEMS, INC.
(a Michigan corporation)
For value received, DCT COMPONENT SYSTEMS, INC., a Michigan corporation
(the "Corporation") hereby grants to RICHARD J. REASON, as Trustee of the
RICHARD J. REASON REVOCABLE LIVING TRUST DATED APRIL 9, 1979 (hereinafter
referred to as the "Holder"), the right to require the Corporation to purchase
an aggregate of Ten Thousand (10,000) or such lesser number of shares of One
Hundred Dollars ($100) par value per share preferred stock (the "Preferred
Stock") of the Corporation held in the name of the Holder, as the Holder shall
determine, subject to the terms and conditions hereinafter set forth
(hereinafter referred to as the "Put").
1. Term and Exercise.
(a) (i) This Put may be exercised by the Holder for all, or
less than all, of the Preferred Stock subject to this Put at any time prior to
the expiration of this Put, which expiration shall occur on January 1, 2002 (the
"Term").
(ii) Upon the expiration of this Put, as aforesaid, this
Put shall be and become null and void; provided however, that should the
Corporation fail to satisfy its obligations hereunder prior to January 1, 2002,
the date of expiration shall be extended as necessary to allow the Corporation
to satisfy its obligations hereunder, although such extension shall not be
deemed a waiver by the Holder of the Corporation's breach, nor shall it affect
or reduce any remedies available to the Holder, in law or equity.
(b) The Put must be exercised in accordance with the following
schedule, except as otherwise provided herein:
<TABLE>
<CAPTION>
Stock Certificate/Number of Shares Put Period During Which Put
of Preferred Stock Price May Be Exercised
------------------ ----- ----------------
<S> <C> <C>
Stock Certificate No. 100 for 375 Shares $37,500 January 1, 1997-January 10, 1997
Stock Certificate No. 101 for 375 Shares $37,500 April 1, 1997-April 10, 1997
Stock Certificate No. 102 for 375 Shares $37,500 July 1, 1997-July 10, 1997
Stock Certificate No. 103 for 375 Shares $37,500 October 1, 1997-October 10, 1997
Stock Certificate No. 104 for 375 Shares $37,500 January 1, 1998-January 10, 1998
Stock Certificate No. 105 for 375 Shares $37,500 April 1, 1998-April 10, 1998
Stock Certificate No. 106 for 375 Shares $37,500 July 1, 1998-July 10, 1998
Stock Certificate No. 107 for 375 Shares $37,500 October 1, 1998-October 10, 1998
Stock Certificate No. 108 for 375 Shares $37,500 January 1, 1999-January 10, 1999
Stock Certificate No. 109 for 375 Shares $37,500 April 1, 1999-April 10, 1999
Stock Certificate No. 110 for 375 Shares $37,500 July 1, 1999-July 10, 1999
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Stock Certificate No. 111 for 375 Shares $37,500 October 1, 1999-October 10, 1999
Stock Certificate No. 112 for 375 Shares $37,500 January 1, 2000-January 10, 2000
Stock Certificate No. 113 for 375 Shares $37,500 April 1, 2000-April 10, 2000
Stock Certificate No. 114 for 375 Shares $37,500 July 1, 2000-July 10, 2000
Stock Certificate No. 115 for 375 Shares $37,500 October 1, 2000-October 10, 2000
Stock Certificate No. 116 for 375 Shares $37,500 January 1, 2001-January 10, 2001
Stock Certificate No. 117 for 375 Shares $37,500 April 1, 2001-April 10, 2001
Stock Certificate No. 118 for 375 Shares $37,500 July 1, 2001-July 10, 2001
Stock Certificate No. 119 for 375 Shares $37,500 October 1, 2001-October 10, 2001
Stock Certificate No. 120 for 2500 Shares $250,000 December 21, 2001-December 31,
2001
</TABLE>
(c) The Holder shall exercise this Put or any part thereof by
delivery to the Corporation of a Notice of Intent to Put, in the form attached
hereto as Exhibit A, with a copy of the relevant Stock Certificates for the
Preferred Stock for which the Put is being exercised attached to such Notice.
The Put shall be deemed exercised for each particular Stock Certificate by the
delivery of such Notice of Intent to Put during the period for the exercise of
the Put for each such Stock Certificate as indicated above; provided, however,
that the Holder shall have the right to Put any shares of Preferred Stock at any
time during the Term of this Agreement for which the time periods described in
Subsection 1(b) has passed, but for which the Holder did not exercise the Put
during such time periods, but otherwise on the terms and conditions contained
herein.
(d) To the extent that the Holder elects to exercise the Put
for any particular Stock Certificate in an amount of shares less than the total
number of shares of the subject Stock Certificate, the applicable Put Price
shall be reduced pro rata as the number of shares of Preferred Stock of the
subject Stock Certificate for which such Put was not exercised bears to the
total number of shares of the subject Stock Certificate.
(e) Within ten (10) business days of the delivery to the
Corporation of the Notice of Intent to Put, the Corporation shall pay to the
order of the Holder certified or otherwise immediately available funds in the
amount specified in Subsection 1(b) above, or as otherwise reduced in accordance
with Subsection 1(d) above, in exchange for surrender of the Stock Certificates
specified in Subsection 1(b) above, indorsed in blank for transfer by the
Holder. In addition, the Corporation shall pay to the Holder certified or
otherwise immediately available funds in an amount equal to the accumulated
dividends applicable to the shares of the Preferred Stock for which the Put is
being exercised and for all of the shares of Preferred Stock which are then
issued to and held by the Holder.
2
<PAGE>
(f) In the event the Holder elects to exercise the Put for any
particular Stock Certificate, but for less than the total number of shares of
Preferred Stock of such Stock Certificate as provided in Subsection 1(d) above,
the Holder shall so note the total number of shares to be transferred on the
indorsement, and the Corporation shall reissue a new Stock Certificate to the
Holder for the number of shares for the subject Stock Certificate for which the
Put was not so exercised.
2. Put Price. The Put Price at which the Shares of the Preferred Stock
shall be purchased upon the exercise of this Put shall be the values specified
in Subsection 1(b) above, or such lesser amount as provided in Subsection 1(d)
above, as applicable.
3. Acceleration of Put. In the event of the liquidation, bankruptcy,
insolvency, merger or other change in corporate form of the Corporation or if
there is a sale or disposition of substantially all of the assets of the
Corporation or if the Corporation fails to honor any Notice of Intent to Put
delivered to the Corporation in accordance with the terms and conditions
contained herein, the Holder shall have the right to exercise the Put for all of
the shares of Preferred Stock held in the name of the Holder, or any one of
them, at the Put Prices and terms provided above by delivery of the Notice of
Intent to Put to the Corporation as to all of the shares of Preferred Stock held
in the name of the Holder, or any one of them, regardless of the time periods
provided for such Put as described in Subsection 1(b) above.
4. Conversion Agreement. The Preferred Stock is subject to a Conversion
Agreement of even date herewith ("Conversion Agreement"), pursuant to which the
Holder has a right to convert the Preferred Stock into the preferred stock of
Noble International, Ltd., a Michigan corporation ("Noble"), in the event Noble
completes an initial public offering of its stock. In the event Holder so
converts the Preferred Stock, the preferred stock of Noble which he receives as
a result of such conversion shall be subject to the terms of this Agreement as
if it were "Preferred Stock" hereunder. In such event, Noble shall be deemed to
be the "Corporation" for purposes of the preferred stock of Noble received by
Holder as a result of such conversion.
5. Notices. All notices and other communication given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered or mailed if delivered personally, by facsimile
transmission with originals mailed by first class mail, mailed by registered
mail (postage prepaid, return receipt requested) or delivered by a nationally
recognized courier service to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice, except that
notices of changes of address shall be effective upon receipt):
3
<PAGE>
If to the Corporation:
DCT Component Systems, Inc.
34660 Centaur
Clinton Township, Michigan 48035
With a copy to:
Michael Azar, Esq.
c/o Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
If to the Holder:
Richard J. Reason, as Trustee
4605 South Ocean Blvd., Apt. A-2
Highland Beach, Florida 33487
With a copy to:
David C. Stone, Esq.
Stone, Biber & O'Toole, P.C.
2701 Troy Center Dr., Suite 400
Troy, Michigan 48084
6. Governing Law. This Put shall be governed by and construed and
enforced in accordance with the laws of the State of Michigan.
7. Successors and Assigns. All of the provisions of this Put shall be
binding upon the Corporation and its successors and assigns and Holder, its
heirs, personal representatives, guardians, and assigns. Holder may assign its
rights hereunder in conjunction with the assignment of any or all of the
Preferred Stock, which rights relate to the Preferred Stock so transferred.
8. Breach of Agreement. In the event the Corporation fails or refuses
to honor its obligations hereunder, the Holder shall have the right to demand
specific performance of the Corporation's obligations hereunder and to bring
suit in any court of competent jurisdiction to enforce such right. The right to
specific performance shall be in addition to any other remedies available to the
Holder.
9. No Waiver.
(a) No failure or delay by Holder to insist upon the strict
performance of any term of this Agreement or to exercise any right, power, or
remedy consequent upon a default hereunder shall constitute a waiver of any such
term or of any such breach, or preclude Holder from exercising any right, power,
or remedy at any later time or times.
4
<PAGE>
(b) The failure of Holder to give notice of any failure or
breach of the Corporation under this Agreement shall not constitute a waiver of
any right or remedy in respect of such continuing failure or breach or any
subsequent failure or breach.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the 1st day of January, 1997.
DCT COMPONENT SYSTEMS, INC.,
a Michigan corporation
/s/ Peter Raab
-------------------------------
By: Peter Raab
Its: President
ACCEPTED:
/s/ Richard J. Reason
-------------------------------
Richard J. Reason, as Trustee
of the Richard J. Reason
Revocable Living Trust dated
April 9, 1979
To the extent applicable, Noble International, Ltd., a Michigan
corporation, agrees to the terms and conditions of this Put Agreement and agrees
to be bound thereby.
Dated: ________________ NOBLE INTERNATIONAL, LTD.,
a Michigan corporation
/s/ Robert J. Skandalaris
-------------------------------
By: Robert J. Skandalaris
Its: President
5
<PAGE>
Exhibit A
NOTICE OF INTENT TO PUT
To: DCT Component Systems, Inc. Dated: _______
c/o Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
Attn: Robert J. Skandalaris
The undersigned hereby irrevocably elects to exercise his put option to
the extent of _________________________ (______) shares of the Preferred Stock
of DCT Component Systems, Inc. (or Noble International, Ltd., as applicable),
represented by Stock Certificate No. ______, in accordance with the provisions
of that certain Put Agreement dated as of December 31, 1996, by and between DCT
Component Systems, Inc. and the undersigned, for the put price of
___________________ Dollars ($_______).
-------------------------------
Richard J. Reason, as Trustee
of the Richard J. Reason
Revocable Living Trust dated
April 9, 1979
6
THE SECURITIES REPRESENTED BY THIS CONVERSION
AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS"),
AND SHALL NOT BE SOLD OR TRANSFERRED (WHETHER OR NOT
FOR CONSIDERATION) BY THE HOLDER EXCEPT UPON THE
ISSUANCE TO THE CORPORATION OF A FAVORABLE OPINION
OF ITS COUNSEL AND/OR SUBMISSION TO THE CORPORATION
OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO
COUNSEL FOR THE CORPORATION, TO THE EFFECT THAT ANY
SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT
AND THE STATE ACTS.
CONVERSION AGREEMENT
This Conversion Agreement (the "Agreement") is entered into effective
as of the thirty-first (31st) day of December, 1996, by and among DCT COMPONENT
SYSTEMS, INC., a Michigan corporation, whose address is 34660 Centaur, Clinton
Township, Michigan 40835 (the "Corporation"), NOBLE INTERNATIONAL, LTD., a
Michigan corporation, whose address is 33 Bloomfield Hills Parkway, Suite 155,
Bloomfield Hills, Michigan 48304 ("Noble"), and RICHARD J. REASON, as Trustee of
the RICHARD J. REASON REVOCABLE LIVING TRUST DATED APRIL 9, 1979, whose address
is 4605 South Ocean Blvd., Apt. A-2, Highland Beach, Florida 33487 ("Reason").
W I T N E S S E T H:
WHEREAS, Reason is currently the holder of Ten Thousand (10,000) Shares
of Preferred Stock of the Corporation ("Corporation Stock"); and
WHEREAS, Reason received such Corporation Stock in consideration of (i)
the satisfaction of certain debt owed by the Corporation to RJR Investment, an
assumed name of Reason, pursuant to a Promissory Note dated February 11, 1993,
as amended; (ii) the agreement of the Corporation to grant Reason a right to put
the Corporation Stock to the Corporation pursuant to a Put Agreement; and (iii)
the agreement of the Corporation to provide for the conversion of the
Corporation Stock into preferred stock of Noble upon the completion of an
initial public offering by Noble; and
WHEREAS, Noble intends to have, and is currently preparing for, an
initial public offering of Noble capital stock on or about June 30, 1997; and
WHEREAS, the parties desire to memorialize their agreement regarding
the right of Reason to convert the Corporation Stock to preferred stock of Noble
upon the satisfaction of certain terms and conditions.
<PAGE>
NOW, THEREFORE, the parties hereto covenant and agree as follows:
Section 1. Conversion.
(a) Reason shall have the right, at any time after the
completion of an initial public offering by Noble, to convert all, but not less
than all, of the Corporation Stock then owned by Reason to the same number of
fully paid and nonassessable shares of Noble Preferred Stock having One Hundred
Dollars ($100.00) par value (the "Noble Stock") as provided herein.
(b) An "initial public offering" by Noble shall mean an
initial public offering whereby Noble files a registration statement on Form
S-1, S-2 or S-3 under the Securities Act of 1933, as amended (the "Act"), or a
similar document pursuant to any other statute then in effect corresponding to
said Act, relating to an underwritten public offering of Noble common stock,
warrants, convertible securities or any other similar equity securities of
Noble, and such initial public offering becomes effective pursuant to an order
issued by the Securities and Exchange Commission (hereinafter referred to as
"IPO").
(c) Reason may exercise the conversion right provided in this
Section 1 by giving written notice (the "Conversion Notice") to the Corporation
and Noble of the exercise of such right and stating the name or names in which
the stock certificate or stock certificates for the shares of Noble Stock are to
be issued and the address to which such certificates shall be delivered. The
Conversion Notice shall be accompanied by the actual Stock Certificates for the
Corporation Stock which is to be converted into Noble Stock. The number of
shares of Noble Stock that shall be issuable upon conversion shall equal the
number of shares of Corporation Stock then owned by Reason.
(d) The conversion shall be deemed to have been effected on
the date the Conversion Notice is given (the "Conversion Date"). Within ten (10)
business days after receipt of the Conversion Notice, the Corporation shall
cancel the Corporation Stock and shall issue a check or cash in payment to
Reason of all dividends accrued and unpaid on the Corporation Stock up to and
including the Conversion Date. Simultaneously, Noble shall issue and deliver by
hand against a signed receipt therefor or by United States registered mail,
return receipt requested, to the address designated by Reason in the Conversion
Notice, a stock certificate or stock certificates of Noble representing the
number of shares of Noble Stock to which Reason is entitled.
(e) Noble agrees to notify Reason in writing of the completion
of the IPO within ten (10) days of such completion.
Section 2. Corporation Disposition.
2
<PAGE>
(a) (i) In case of any capital reorganization, any
reclassification of the stock of the Corporation (other than a change in par
value or from par value to no par value or from no par value to par value or as
a result of a stock dividend or subdivision, split up or combination of shares),
or the consolidation or merger of the Corporation with or into another person or
entity (other than a consolidation or merger in which the Corporation is the
continuing corporation and which does not result in any change in the
Corporation Stock) or of the sale, exchange, lease, transfer, or other
disposition of all or substantially all of the properties and assets of the
Corporation as an entirety or the participation by the Corporation in share
exchange as the corporation the stock of which is to be acquired, the
Corporation Stock then owned by Reason shall (effective on the opening of the
business on the date after the effective date of such reorganization,
reclassification, consolidation, merger, sale, or exchange, lease, transfer or
other disposition or share exchange) be convertible into the kind and number of
shares of stock or other securities or property of the Corporation or of the
corporation resulting from such consolidation or surviving such merger or to
which such properties and assets shall have been sold, exchanged, leased,
transferred, or otherwise disposed or which was the corporation whose securities
were exchanged for those of the Corporation to which Reason (at the close of
business on the date immediately preceding the effective date of such
reorganization, reclassification, consolidation, merger, sale, exchange, lease,
transfer, or other disposition or share exchange) upon conversion of the
Corporation Stock would have been entitled upon such reorganization,
reclassification, consolidation, merger, sale, exchange, lease, transfer, or
other disposition or share exchange. The shares of capital stock so received
shall be deemed to be Corporation Stock for purposes of this Agreement.
(ii) The Corporation will use its best efforts to insure
that the capital stock so received has the same relative rights, preferences and
limitations as the Corporation Stock.
(iii) The provisions of this Section 2(a) shall similarly
apply to successive reorganizations, reclassifications, consolidations, mergers,
sales, exchanges, leases, transfers, or other dispositions or other share
exchanges.
(b) Notice of Adjustment Events. In the event the Corporation
shall propose to take any action of the types described in Section 2(a)(i)
hereof, the Corporation shall give notice to Reason, which notice shall specify
the record date, if any, with respect to any such action and the date on which
such action is to take place. Such notice shall be given on or prior to the
earlier of thirty (30) days prior to the record date or the date on which such
action shall be taken. Failure to give notice in accordance with this Section
2(b) shall not render such action ultra vires, illegal, or invalid.
3
<PAGE>
Section 3. Taxes. Noble shall pay all documentary, stamp or
other transactional taxes and charges attributable to the issuance
or delivery of shares of Noble Stock upon conversion.
Section 4. Reservation of Shares.
(a) Noble shall at all times reserve and keep available, free
from preemptive rights, unissued Noble Stock sufficient to effect the conversion
of the Corporation Stock to Noble Stock.
(b) Noble agrees that as long as Reason owns Corporation
Stock, Noble will not amend its Articles of Incorporation to change the rights
and privileges associated with the preferred stock of Noble or create any
preferences or other classes of Stock, if the result of which would reduce or
eliminate the rights and privileges now associated with the preferred stock of
Noble, which rights and privileges the parties acknowledge and agree are, and
will remain during the term of this Agreement, the same as those applicable to
the Corporation Stock.
(c) Noble covenants that all shares of Noble Stock that are
issued upon the exercise of the conversion right will be fully paid,
nonassessable, and free from all taxes, liens, and charges in respect of the
issue thereof.
(d) Noble shall not be required to issue any fraction of a
share but shall make adjustment thereof in cash on the basis of the par value of
the Noble Stock.
Section 5. Notices. All notices and other communication given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally, by facsimile
transmission with originals mailed by first class mail, mailed by registered
mail (postage prepaid, return receipt requested) or delivered by a nationally
recognized courier service to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice, except that
notices of changes of address shall be effective upon receipt):
If to the Corporation:
DCT Component Systems, Inc.
34660 Centaur
Clinton Township, Michigan 48035
If to Noble:
Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
4
<PAGE>
In either case, with a copy to:
Michael Azar, Esq.
c/o Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
If to the Reason:
Richard J. Reason, as Trustee
4605 South Ocean Blvd., Apt. A-2
Highland Beach, Florida 33487
With a copy to:
David C. Stone, Esq.
Stone, Biber & O'Toole, P.C.
2701 Troy Center Dr., Suite 400
Troy, Michigan 48084
Section 6. Governing Law. This Conversion Agreement shall be
governed by and construed and enforced in accordance with the laws
of the State of Michigan.
Section 7. Successors and Assigns. All of the provisions of this
Conversion Agreement shall be binding upon the Corporation and Noble and their
successors and assigns and Reason, his heirs, personal representatives,
guardians, and assigns.
Section 8. Breach of Agreement. In the event the Corporation and/or
Noble fails or refuses to honor its obligations hereunder, Reason shall have the
right to demand specific performance of the Corporation's and/or Noble's
obligations hereunder and to bring suit in any court of competent jurisdiction
to enforce such right. The right to specific performance shall be in addition to
any other remedies available to the Reason.
Section 9. No Waiver.
(a) No failure or delay by Reason to insist upon the strict
performance of any term of this Agreement or to exercise any right, power, or
remedy upon a default hereunder shall constitute a waiver of any such term or of
any such breach, or preclude Reason from exercising any right, power, or remedy
at any later time or times.
(b) The failure of Reason to give notice of any failure or
breach of the Corporation and/or Noble under this Agreement shall not constitute
a waiver of any right or remedy in respect of such continuing failure or breach
or any subsequent failure or breach.
5
<PAGE>
Section 10. Reorganizations. Noble covenants and agrees that it will
not merge or consolidate with or into or sell or otherwise transfer all or
substantially all of its assets to any other corporation or entity unless at the
time of or prior to such transaction such other corporation or other entity
shall expressly assume all of the liabilities and obligations of Noble under
this Conversion Agreement and (without limiting the generality of the foregoing)
shall expressly agree that Reason shall thereafter have the right to receive
upon the exercise of this Conversion Agreement, the number and kind of shares of
preferred stock and other securities and property receivable upon such
transaction by a holder of the number and kind of shares which would have been
receivable upon the exercise of this Conversion Agreement immediately prior to
such transaction.
Section 11. Acknowledgement of Reason. Reason agrees that in the event
he exercises his conversion rights hereunder, simultaneously with such exercise,
Reason will provide to Noble an acknowledgement to the effect that he is
converting the Corporation Stock to Noble Stock for investment purposes and not
for resale and he agrees that he will not sell the Noble Stock unless the Noble
Stock is registered under the Act or State Acts or the sale is exempt from
registration in the reasonable opinion of legal counsel for Noble.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
WITNESSES: "CORPORATION"
DCT COMPONENT SYSTEMS, INC.,
a Michigan corporation
/s/ Peter Allen Raab
- ------------------------ -------------------------------
By: Peter Allen Raab
________________________ Its: President
"NOBLE"
NOBLE INTERNATIONAL, LTD., a
Michigan corporation
/s/ Robert J. Skandalaris
- ------------------------ -------------------------------
By: Robert J. Skandalaris
________________________ Its: President
6
<PAGE>
"REASON"
/s/ Richard J. Reason
- ------------------------ -------------------------------
Richard J. Reason, as Trustee
________________________ of the Richard J. Reason
Revocable Living Trust dated
April 9, 1979
7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (hereinafter referred to as "Agreement")
is made and entered into this 28th day of February, 1997, but effective March 1,
1997, by and between UTILASE PRODUCTION PROCESS, INC., a Michigan corporation,
whose address is 33 Bloomfield Hills Parkway, Suite 155, Bloomfield Hills,
Michigan 48205 (hereinafter referred to as "Buyer"), a wholly owned subsidiary
of Noble International, Ltd., a Michigan corporation (hereinafter referred to as
"Noble"), and UTILASE, INC., a Michigan corporation, whose address is 20530
Hoover, Detroit, Michigan 48205 (hereinafter referred to as "Seller"), a wholly
owned subsidiary of DCT, Inc., a Michigan corporation, and as consented to by
Noble.
W I T N E S S E T H:
WHEREAS, Seller is currently engaged in the business of laser welding,
cutting and heat treating metal products for use in the automotive industry,
which is also referred to as the Utilase Production division of Seller
(hereinafter referred to as the "Relevant Business"); and
WHEREAS, Seller desires to sell to Buyer certain of its assets used in
the Relevant Business, and Buyer desires to purchase and acquire from Seller
certain of the assets of Seller used in the Relevant Business, upon the terms
and subject to the conditions hereinafter set forth, and in consideration of
certain payments by Buyer and the assumption by Buyer of certain of the
liabilities and obligations of Seller specifically disclosed in this Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants hereinafter contained, Buyer and Seller hereby agree as follows:
Section 1. Sale of Subject Property. Seller shall sell and Buyer shall
purchase the following assets on the terms and conditions and for the price set
forth herein:
(a) Machinery, Equipment and Furniture. All machinery,
equipment and furniture identified in Disclosure Statement 1, attached hereto
and thereby made a part hereof (all such assets hereinafter referred to as
"Assets").
(b) Inventory. All inventory and work-in-process of Seller
produced or used in the operation of the Relevant Business and as identified in
Disclosure Statement 2, attached hereto and thereby made a part hereof (all such
inventory hereinafter referred to as "Inventory").
(c) Business Records. All customer lists, catalogs, and
marketing materials used by Seller in the Relevant Business, and any and all
pertinent files, books, records, manuals and other
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business documents or copies thereof, used in or necessary to the ownership and
operation of the Assets, Inventory and Relevant Business (all such items
hereinafter referred to as "Business Record").
(d) Trade Names. The right to use the name "Utilase " and/or
any derivation of the name "Utilase" for a period ending on the earlier of (i)
one (1) year from the Closing Date, as defined below, or (ii) the completion of
the initial public offering of Utilase Welding, Inc.
(All such assets identified in Sections (a), (b), (c) and (d) above hereinafter
referred to as "Subject Property.")
(e) Excluded Assets. The Subject Property does not include
cash or cash equivalents, or the accounts receivable of Seller.
Section 2. Assumption of Liabilities.
(a) Assumed Liabilities. On the terms and subject to the
conditions set forth in this Agreement, and in addition to the Purchase Price,
Buyer hereby agrees to assume as of the Closing Date and shall thereafter pay,
perform and discharge as and when due (i) the accrued liabilities and
obligations of Seller for holiday, sick and vacation pay for those employees of
Seller hired by Buyer, pursuant to Section 10(b) below; (ii) the obligations of
Seller for goods ordered by Seller in the ordinary course of business for use in
the Relevant Business, but not received by Seller on or before the Closing Date,
and (iii) the obligations of Seller under that certain Bailment and Use
Agreement dated June 2, 1993 which is described below (collectively referred to
as the "Assumed Liabilities").
(b) Retained Liabilities. Except as provided in Section 2(a)
above, Seller hereby agrees to retain and be responsible for the payment and
satisfaction of, and Buyer shall not assume, or be responsible or liable with
respect to, any liabilities and obligations of Seller, whether or not relating
to the Relevant Business, whether fixed, contingent or otherwise, and whether
known or unknown (collectively referred to as the "Retained Liabilities"),
including without limitation, the following:
(i) Pre-Closing Date. All liabilities and obligations
relating to, based on events or conditions occurring or existing in
connection with, or arising out of, the Relevant Business as operated
by Seller prior to the Closing Date, or the ownership, possession, use
or sale of the Subject Property prior to the Closing Date;
(ii) Liabilities Relating to the Sale of Subject
Property. Any liability or obligation of Seller relating to
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the sale of the Subject Property, including without limitation transfer
fees and taxes, and any liability or obligation of Seller, its
directors, officers, shareholders or agents, arising out of, or
relating to, this Agreement or the transactions contemplated hereby,
whether incurred prior to, at, or subsequent to the Closing Date,
including, without limitation, all finder's or broker's fees and
expenses, and any and all fees and expenses of any attorneys and
accountants of Seller;
(iii) Litigation. Any liability, claim or obligation
relating to any litigation or legal proceeding pending on the date
hereof, or instituted hereafter, to the extent such litigation is based
on events or conditions occurring or existing in connection with, or
arising out of, the Relevant Business as operated by Seller prior to
the Closing Date, or the ownership, possession, use or sale of the
Subject Property prior to the Closing Date; and
(iv) Taxes. Any liability or obligation of Seller for any
federal, state or local taxes due and payable prior to or after the
Closing Date, including, without limitation, all income, franchise and
property taxes, employee withholding tax obligations, and Michigan
Single Business Tax, resulting from the Relevant Business as operated
by Seller prior to the Closing Date.
Section 3. Method of Payment, Security and Allocation.
(a) Purchase Price. The consideration to be paid by Buyer to
Seller shall be Eight Hundred Fifty Thousand and 00/100 Dollars ($850,000.00)
(hereinafter referred to as the "Purchase Price"), which Purchase Price shall be
paid to Seller pursuant to a Promissory Note executed and delivered by Buyer and
Noble, jointly and severally, in the principal amount of Eight Hundred Fifty
Thousand and 00/100 Dollars ($850,000.00), in the form of the Promissory Note
which is attached hereto as Exhibit A.
(b) Security Agreement. The Promissory Note shall be secured
by a Security Agreement in the form of the Security Agreement which is attached
hereto as Exhibit B, which Security Agreement grants a continuing security
interest to Seller in the Subject Property.
(c) Binding Effect of Allocations. The parties hereto agree
that the allocations of the Purchase Price, as set forth in Exhibit C attached
hereto, are based upon and reflect the fair market value of such Subject
Property. Neither Buyer nor Seller will do anything, or fail to take any action,
which by reason of such doing or such failure would be considered as
inconsistent with any of the allocations set forth in Exhibit C.
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Section 4. Instruments of Transfer and Additional Agreements.
(a) Transfer of Assets. Seller agrees that the sale and
transfer of the Subject Property shall be made by such bills of sale,
assignments or other instruments of transfer as shall be sufficient to transfer
to Buyer good and marketable title to the Subject Property, except as to a
certain prima six-axis laser trimmer, brass tag number 304300 (hereinafter
referred to as "Trimmer"), which is used in the Relevant Business pursuant to a
Bailment and Use Agreement with the Chrysler Corporation dated June 2, 1993,
which Trimmer is not owned by Seller, but for which Seller will transfer to
Buyer any and all rights which Seller may have in and to such Trimmer, and all
right, title and interest of Seller in the Subject Property, pursuant to the
terms of this Agreement. Such transfer of the Subject Property will be subject
to the Permitted Liens, as defined below.
(b) Documents of Transfer. Without limiting the generality of
Section 4(a) above, the following instruments of transfer are being delivered to
Buyer, and/or executed and delivered by both Buyer and Seller concurrently
herewith:
(i) Bill of Sale executed by Seller for all Assets
and Inventory, in the form of the Bill of Sale which is attached hereto
as Exhibit D.
(ii) An Assignment by Seller to Buyer of all Business
Records, in the form of the Assignment of Business Records which is
attached hereto as Exhibit E.
(iii) An Assignment by Seller to Buyer of the limited
right to use the trade name "Utilase" for one (1) year after Closing or
as otherwise provided in the Assignment of Trade Name, in the form of
the Assignment of Trade Name which is attached hereto as Exhibit F.
(iv) An Assignment and Discharge Agreement as to the
Assumed Liabilities in the form of the Assignment and Discharge
Agreement which is attached hereto as Exhibit G.
(v) Such other deeds, bills of sale, endorsements,
assignments, affidavits, and other good and sufficient instruments of
sale, assignment, conveyance and transfer, in form and substance
satisfactory to Buyer and Seller, and as are required to effectively
vest in Buyer all of Seller's right, title and interest in and to all
of the Subject Property.
(c) Additional Agreements and Documents. In addition
to the foregoing agreements, the parties shall execute and/or deliver
the following agreements and/or documents concurrently herewith:
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(i) Secretary's Certificate of the Seller, including
copies of the Articles of Incorporation of Seller, Bylaws of Seller,
and the resolutions of the directors and sole shareholder of Seller,
authorizing and approving this Agreement and all other transactions and
agreements contemplated hereby.
(ii) Secretary's Certificate of the Buyer, including
copies of the Articles of Incorporation of Buyer, Bylaws of Buyer, and
the resolutions of the directors and sole shareholder of Buyer,
authorizing and approving this Agreement and all other transactions and
agreements contemplated hereby.
(iii) Secretary's Certificate of Noble, including
copies of the Articles of Incorporation of Noble, Bylaws of Noble, and
the Resolutions of the directors of Noble, authorizing and approving
this Agreement and all other transactions and agreements contemplated
hereby to which Noble is or will be a party.
(iv) A Lease Agreement executed by Buyer and Ruthven
Industries, Inc., a Michigan corporation, for the premises currently
leased by Seller and where the Relevant Business is currently operated,
in the form of the Lease which is attached hereto as Exhibit H.
(v) A Maintenance Agreement executed by Buyer and
Utilase Systems, Inc., a Michigan corporation, for the maintenance of
certain lasers being purchased by Buyer pursuant to this Agreement, in
the form of the Maintenance Agreement which is attached hereto as
Exhibit I.
Section 5. Closing. The closing shall take place at the offices of
Stone, Biber & O'Toole, P.C. in Troy, Michigan, at 2:00 p.m. on February 28,
1997, or at another time, date, and place upon which the parties may agree (the
event of such closing being referred to herein as "Closing" and the date of such
closing being referred to herein as the "Closing Date").
Section 6. Representations and Warranties of Seller. Seller represents
and warrants to Buyer the following:
(a) Due Organization. Seller is a corporation that is duly
organized, validly existing, and in good standing under the laws of the State of
Michigan.
(b) Authorization of Agreement. The execution and delivery of
this Agreement and the consummation of the transaction contemplated by this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of Seller, and this Agreement constitutes a valid and legally
binding obligation of Seller, enforceable according to its terms. The
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execution and delivery of this Agreement or any documents executed concurrently
herewith, the consummation of the transactions contemplated by this Agreement,
and the compliance by Seller with all the provisions of this Agreement will not
(i) conflict with, or result in a breach of, any provision of Seller's Articles
of Incorporation or Bylaws or default under any of the terms, conditions, or
provisions of, result in the breach of or accelerate or permit the acceleration
of the performance required by, any note, bond, mortgage, indenture, license,
agreement, or other instrument or obligation of any nature whatsoever to which
Seller is a party or by which Seller is otherwise bound, except that this
representation shall not apply to the agreements pursuant to which the Permitted
Liens were granted and/or created; (ii) to the best of its knowledge, violate
any provision of the terms of any applicable law, rule, or regulation of any
governmental body having jurisdiction over Seller; or (iii) to the best of its
knowledge, violate any order, writ, injunction, decree, statute, rule, or
regulation applicable to Seller or the Subject Property.
(c) Payment of Taxes. All required federal, state and local
tax returns and reports of Seller have been duly and timely filed. All taxes,
penalties and interest required to be paid with respect to the periods or
transactions covered by such returns and reports have been duly and timely paid,
except for taxes which have not yet accrued or become due.
(d) Title to Subject Property.
(i) Seller has good and marketable title to all
Subject Property, free and clear of all mortgages, liens, pledges,
charges, or encumbrances of any nature, except for the following:
(A) Lien of Comerica Bank on the Subject
Property; and
(B) Lien of the General Retirement System of
the City of Detroit on the Subject Property.
(the foregoing liens being referred to herein as "Permitted Liens").
(ii) As to the Trimmer, Seller does not have good and
marketable title, as it is owned by the Chrysler Corporation and
provided to Seller pursuant to the aforementioned Bailment and Use
Agreement.
Section 7. Representations and Warranties of Buyer and Noble. Buyer
(and Noble, where indicated) represents and warrants to Seller the following:
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(a) Corporate Organization.
(i) Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Michigan.
(ii) Noble is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Michigan.
(b) Authorization of Agreement.
(i) The execution and delivery of this Agreement and
the consummation of the transactions contemplated in this Agreement
have been duly and validly authorized by all necessary corporate action
on the part of Buyer, and this Agreement constitutes a valid and
legally binding obligation of Buyer enforceable according to its terms.
The execution and delivery of this Agreement or any documents executed
concurrently herewith, the consummation of the transactions
contemplated by this Agreement, and the compliance by Buyer with all
the provisions of this Agreement will not (A) conflict with, or result
in a breach of, any provision of Buyer's Articles of Incorporation or
Bylaws or default under any of the terms, conditions, or provisions of,
result in the breach of or accelerate or permit the acceleration of the
performance required by, any note, bond, mortgage, indenture, license,
agreement, or other instrument or obligation of any nature whatsoever
to which Buyer is a party or by which Buyer is otherwise bound; (B) to
the best of its knowledge, violate any provision of the terms of any
applicable law, rule, or regulation of any governmental body having
jurisdiction over Buyer; or (C) to the best of its knowledge, violate
any order, writ, injunction, decree, statute, rule, or regulation
applicable to Buyer or the Subject Property.
(ii) The execution and delivery of this Agreement by Noble
and the consummation of the Promissory Note and Security Agreement have
been duly and validly authorized by all necessary corporate action on
the part of Noble, and this Agreement, to the extent applicable to
Noble, constitutes a valid and legally binding obligation of Noble
enforceable in accordance with its terms. The execution and delivery of
this Agreement or any documents executed concurrently herewith, the
consummation of the transactions contemplated by this Agreement, and
the compliance by Noble with all the provisions of this Agreement will
not (A) conflict with, or result in a breach of, any provision of
Noble's Articles of Incorporation or Bylaws or default under any of the
terms, conditions, or provisions of, result in the breach of or
accelerate or permit the acceleration of the performance required by,
any note, bond, mortgage, indenture, license, agreement, or other
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instrument or obligation of any nature whatsoever to which Noble is a
party or by which Noble is otherwise bound; (B) to the best of its
knowledge, violate any provision of the terms of any applicable law,
rule, or regulation of any governmental body having jurisdiction over
Noble; or (C) to the best of its knowledge, violate any order, writ,
injunction, decree, statute, rule, or regulation applicable to Noble.
(c) No Adverse Conditions. No legal action, whether civil,
criminal, or administrative, is pending or threatened against Buyer and/or Noble
that would adversely affect either or both of their ability to consummate the
transactions contemplated by this Agreement.
Section 8. Bulk Sales Law Waiver. Buyer and Seller each agree to waive
compliance by the other with the provisions of the bulk sales law or comparable
law of any jurisdiction to the extent that the same may be applicable to the
transactions contemplated by this Agreement. Seller agrees to indemnify and hold
harmless Buyer from and against any and all claims that may be asserted against
Buyer by the creditors of Seller or other third parties under the bulk sales law
of Michigan or any other state, except as to the Liabilities Assumed pursuant to
Section 2(a) of this Agreement for which Seller is not indemnifying Buyer.
Section 9. Business Records After Closing. At all reasonable times
after the Closing Date, Seller shall make available without cost for inspection
or copying by Buyer any of Seller's books and records relating to the business
of Seller which are not to be transferred to Buyer pursuant to this Agreement
but which relate to the Relevant Business, provided, however, that in lieu of
making such books and records available for inspection or copying, Seller may at
its option deliver same to Buyer, in which event Buyer shall store such books
and records and shall, at all reasonable times thereafter, make them available
without cost for inspection or copying by Seller. At all reasonable times after
the Closing Date, Buyer shall make available without cost for inspection or
copying by Seller any of Seller's Business Records delivered to Buyer pursuant
hereto. Neither Buyer nor Seller shall dispose of any books and records relating
to Seller without first giving notice to the other party and permitting the
other party to retain such books and records as it may elect.
Section 10. Post-Closing Covenants.
(a) Seller's Accounts Receivable. Seller is retaining its
accounts receivable. From and after the Closing Date, payments of Seller's
accounts receivable will be received by Seller in care of DCT, Inc. at 20101
Hoover, Detroit, Michigan 48205. All checks received by Buyer with respect to
Seller's accounts receivable shall be immediately remitted by Buyer to Seller at
the address set forth above. All checks from Seller's account debtors which
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contain payment of both an account receivable due Seller and Buyer shall be
deposited in Buyer's account, and Buyer shall pay Seller the amount due Seller
by check drawn on Buyer's account. Further, each of Seller and Buyer will make
their respective books and records available to the other party at reasonable
times and with reasonable notice for a period of one (1) year after Closing to
insure compliance with the foregoing and to insure a proper disposition of the
accounts receivable relating to the Relevant Business subsequent to Closing.
(b) Labor Matters. Except as provided in Section 2(a) above,
Seller will be responsible for any unpaid salaries, wages, bonuses or other
compensation due Seller's officers and employees at the Closing. Seller shall
advise all of its employees at Closing who are employed in the Relevant Business
that their employment is terminated at the close of business on the Closing
Date, and will advise that Buyer intends to make positions available to them in
its business. Buyer shall be obligated to offer employment after the Closing
Date to all employees of Seller employed as of the Closing Date.
Section 11. Indemnification of Buyer. Seller shall, from and after the
Closing, indemnify and hold Buyer harmless from and against any and all costs,
liability, or expense (including reasonable attorneys' fees) arising out of (i)
any breach of warranty, covenant, agreement, or representation made by Seller in
this Agreement; (ii) any nonfulfillment of any agreement of Seller under this
Agreement or any misrepresentation in this Agreement or from any certificates or
other instrument furnished or to be furnished to Buyer pursuant to this
Agreement; (iii) any liability, mortgage, liens, encumbrances or obligations of
any kind whatsoever owed or incurred by Seller which is not an Assumed Liability
hereunder; and (iv) all actions, suits, proceedings, demands, assessments,
judgments, costs, and expenses incident to any of the foregoing. Seller agrees
that if Buyer receives any claim from, or is named in any suit by, a creditor of
Seller, Seller will contact the creditor in writing, advising the creditor that
Buyer has not assumed any liabilities or obligations of Seller or will file an
answer in the lawsuit on behalf of Buyer. Buyer shall give written notice as
soon as practicable to Seller of the occurrence or nonoccurrence of any event,
or the discovery by Buyer of any circumstance against, which Seller may be
called upon to indemnify Buyer under this Agreement.
Section 12. Indemnification of Seller. Buyer shall, from and after the
Closing, indemnify and hold Seller harmless from and against any and all costs,
liability, or expense (including reasonable attorneys' fees) arising out of (i)
any breach of warranty, covenant, agreement, or representation made by Buyer in
this Agreement; (ii) any nonfulfillment of any agreement of Buyer under this
Agreement or any misrepresentation in this Agreement or from any certificates or
other instrument furnished or to be
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furnished to Seller pursuant to this Agreement; (iii) any liability, mortgage,
liens, encumbrances or obligations of any kind whatsoever owed or incurred by
Buyer; (iv) any Assumed Liability; and (v) all actions, suits, proceedings,
demands, assessments, judgments, costs, and expenses incident to any of the
foregoing. Buyer agrees that if Seller receives any claim from, or is named in
any suit by, a creditor of Buyer, Buyer will contact the creditor in writing,
advising the creditor that Seller has not assumed any liabilities or obligations
of Buyer or will file an answer in the lawsuit on behalf of Seller. Seller shall
give written notice as soon as practicable to Buyer of the occurrence or
nonoccurrence of any event, or the discovery by Seller of any circumstance
against, which Buyer may be called upon to indemnify Seller under this
Agreement.
Section 13. Miscellaneous.
(a) Additional Documents. Each party agrees to execute any
additional documents reasonably requested by the other to carry out the intent
of this Agreement.
(b) Survival of Representations and Warranties. The
representations and warranties as set forth in this Agreement shall be
continuing and shall survive as follows:
(i) For an unlimited period of time as to the
representations and warranties contained in Sections 6(a), 6(b), 6(d),
7(a), and 7(b);
(ii) For the applicable statute of limitations as to the
representations and warranties contained in Section 6(c); and
(iii) For one (1) year subsequent to the Closing Date as to
the remaining representations and warranties contained herein.
(c) Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of Michigan.
(d) Notices. All notices and demands relating hereto shall be
in writing and mailed, postage prepaid, by certified or registered mail, or by a
nationally recognized courier service, or by facsimile with the original by
mail, to Buyer, Noble or Seller at their respective addresses or at any other
address designated by notice sent in accordance herewith. All notices shall be
deemed received when properly mailed.
Buyer: Utilase Production Process, Inc.
c/o Noble International, Ltd.
33 Bloomfield Hills Pkwy., Suite 155
Bloomfield Hills, MI 48304
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Noble: Noble International, Ltd.
33 Bloomfield Hills Pkwy., Suite 155
Bloomfield Hills, MI 48304
In either case,
with a Copy to: Michael C. Azar, Esq.
General Counsel
Noble International, Ltd.
33 Bloomfield Hills Pkwy., Suite 155
Bloomfield Hills, MI 48304
Seller: Utilase, Inc.
c/o DCT, Inc.
20101 Hoover
Detroit, MI 48205
With a Copy to: David C. Stone, Esq.
Stone, Biber & O'Toole, P.C.
2701 Troy Center Dr., Suite 400
Troy, MI 48084
or any other address that shall be furnished in writing by any party, and that
notice or communication shall be deemed to have been given as of the date
mailed.
(e) Headings. The headings of this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
(f) Number and Gender. As the context of any provision may
require, nouns and pronouns of every gender and number shall be construed in any
other gender and number.
(g) Binding Agreement. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties to this Agreement and their
respective heirs, executors, successors, and assigns.
(h) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
counterparts shall constitute collectively one instrument representing the
Agreement among the parties.
(i) Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein 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 or any other such instrument.
(j) Entire Agreement. This Agreement and all exhibits or
schedules expressly incorporated herein constitute the complete,
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entire, and final statement of the terms of the agreement of the parties
relating to their interests, obligations, and rights in connection with the
subject matter of this Agreement. There are no covenants, promises, agreements,
conditions, representations or understandings, either oral or written, between
the parties hereto other than those set forth herein and/or under the documents
executed pursuant hereto.
(k) Cooperation. The parties hereto agree to cooperate with
each other in every reasonable way in carrying out the transactions contemplated
hereby, in obtaining and delivering all required closing documents, and
obtaining required governmental approvals, if any, and agree to use their best
efforts to expeditiously accomplish same.
(l) Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in Southfield, Michigan, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrator(s) may be entered into any court having
jurisdiction thereof. All costs and expenses of the prevailing party, including,
but not limited to, reasonable attorneys' fees and expenses, shall be paid by
the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
WITNESSES: "BUYER"
UTILASE PRODUCTION PROCESS,
INC., a Michigan corporation
/s/ Sarah A. Clarkson /s/ Michael C. Azar
- ------------------------ -------------------------------
/s/ A. Kathleen Murphy By: Michael C. Azar
- ------------------------ Its: Secretary
"SELLER"
UTILASE, INC., a Michigan
corporation
/s/ Sarah A. Clarkson /s/ David C. Stone
- ------------------------ -------------------------------
/s/ A. Kathleen Murphy By: David C. Stone
- ------------------------ Its: Assistant Secretary
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The foregoing Agreement is accepted and agreed to by Noble to the
extent that the terms and conditions of the Agreement relate to Noble.
NOBLE INTERNATIONAL, LTD., a
Michigan corporation
/s/ Sarah A. Clarkson /s/ Michael C. Azar
- ------------------------ -------------------------------
/s/ A. Kathleen Murphy By: Michael C. Azar
- ------------------------ Its: Secretary
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EXHIBITS SCHEDULE
A. Promissory Note
B. Security Agreement
C. Allocation of Purchase Price
D. Bill of Sale
E. Assignment of Business Records
F. Assignment of Trade Name
G. Assignment and Discharge Agreement
H. Lease
I. Maintenance Agreement
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DISCLOSURE STATEMENTS
1. Machinery, Equipment and Furniture
2. Inventory
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PROMISSORY NOTE
AMOUNT: $850,000.00 TROY, MICHIGAN
DUE DATE: February 1, 1999 DATED: February 28, 1997
FOR VALUE RECEIVED, the undersigned, UTILASE PRODUCTION PROCESS, INC.,
a Michigan corporation, and NOBLE INTERNATIONAL, LTD., a Michigan corporation
(hereinafter referred to as "Maker"), jointly and severally, promise to pay to
the order of UTILASE, INC., a Michigan corporation (hereinafter referred to as
"Payee"), at its office or at such other place as Payee may designate in
writing, the principal sum of Eight Hundred Fifty Thousand and 00/100 Dollars
($850,000.00), as hereinafter provided, in lawful money of the United States of
America.
The principal outstanding under this Note shall not bear any interest.
The principal outstanding hereunder shall be payable in installments as
follows: (i) Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00) shall
be due and payable on the earlier to occur of July 31, 1997 or upon completion
of the initial public offering of Utilase Welding, Inc., a Michigan corporation
(hereinafter referred to as "Welding"); (ii) Fifty Thousand and 00/100 Dollars
($50,000.00) shall be due and payable on February 1, 1998; and (iii) Fifty
Thousand and 00/100 Dollars ($50,000.00) shall be due and payable on February 1,
1999, and in any case, all amounts due hereunder shall be paid on or before the
Due Date.
The "completion of the initial public offering" of Welding shall mean
an initial public offering by Welding whereby Welding files a Registration
Statement on Form S-1, S-2 or S-3 under the Securities Act of 1933, as amended
(hereinafter referred to as the "Act"), or a similar document pursuant to any
other statute then in effect corresponding to the Act, relating to an
underwritten public offering of common stock of Welding, and/or warrants,
convertible securities or other similar equity securities of Welding, and such
initial public offering becomes effective pursuant to an order issued by the
Securities and Exchange Commission.
This Note is secured by a Security Agreement of even date herewith
(hereinafter referred to as the "Security Agreement") whereby Payee retains a
lien against the Collateral (as such term is defined in the Security Agreement).
Upon failure to pay any installment of 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
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agreement executed in connection herewith, or between Maker and Payee, or upon
dissolution or termination of the existence of Maker, or upon the insolvency or
business failure of Maker, or upon the appointment of a receiver for any of the
property of Maker, or if Maker is generally not paying its debts as such debts
become due, or if a custodian is appointed or takes possession of the property
of Maker, or upon commencement of any proceedings under the bankruptcy or
insolvency laws by or against Maker, or if any other indebtedness of Maker to
Payee or to 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 Maker, or
if Utilase Production Process, Inc. does not negotiate, execute and deliver a
mutually acceptable Lease Agreement with Ruthven Industries, Inc. as such Lease
is described in the Agreement, which is defined below, by March 15, 1997, 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, if any, together with all other
indebtedness of Maker 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 Maker shall be obligated to Payee and shall pay Payee, default
interest at the rate of ten percent (10%) 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 such accrued default interest which
is then due has been paid in full. Payee may hold and apply at any time its own
indebtedness or liability to Maker in payment of any indebtedness hereunder.
The election of any remedy by Payee shall be in addition to, and not in
lieu of, any and all other remedies available to Payee pursuant to this Note,
the Security Agreement and/or applicable law, whether now or hereafter in
effect.
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.
Maker 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 to payment or 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 Maker shall be absolute and
unconditional, without regard to the liability of any other party hereto. For
purposes of this Note, references to "Maker" shall be deemed to apply to each
and both of Utilase Production Process, Inc. and Noble International, Ltd.
2
<PAGE>
This Note may be prepaid in full or in part at any time without the
prior written consent of Payee.
Maker acknowledges that in the event that Payee is liquidated, Payee
shall have the right to assign its rights under this Note to the shareholder or
shareholders of Payee.
This Note shall be governed by, and construed in accordance with, the
laws of the State of Michigan.
This Note is given pursuant to a certain Asset Purchase Agreement dated
February 28, 1997, but effective March 1, 1997, between Payee and Utilase
Production Process, Inc., a Michigan corporation, which is the wholly owned
subsidiary of Noble International, Ltd. (hereinafter referred to as the
"Agreement"). Payee and Maker, as it relates to Utilase Production Process,
Inc., shall have all the rights and powers set forth in the Agreement as though
the same were set forth in this Note.
WITNESSES: MAKER:
UTILASE PRODUCTION PROCESS,
INC., a Michigan corporation
/s/ A. Kathleen Murphy /s/ Michael C. Azar
- ------------------------ -------------------------------
By: Michael C. Azar
Its: Secretary
NOBLE INTERNATIONAL, LTD.,
a Michigan corporation
/s/ A. Kathleen Murphy /s/ Michael C. Azar
- ------------------------- -------------------------------
By: Michael C. Azar
Its: Secretary
ADDRESSES:
MAKER: PAYEE:
UTILASE PRODUCTION PROCESS, INC. (and) UTILASE, INC.
NOBLE INTERNATIONAL, LTD. c/o DCT, Inc.
33 Bloomfield Hills Pkwy., Suite 155 20101 Hoover
Bloomfield Hills, MI 48304 Detroit, MI 48205
3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (hereinafter referred to as "Agreement") is
made this 28th day of February, 1997, but effective March 1, 1997, by and among
UTILASE PRODUCTION PROCESS, INC., a Michigan corporation (hereinafter referred
to as "UPP"), whose address is 33 Bloomfield Hills Parkway, Suite 155,
Bloomfield Hills, Michigan 48304, NOBLE INTERNATIONAL, LTD., a Michigan
corporation (hereinafter referred to as "Noble"), whose address is 33 Bloomfield
Hills Parkway, Suite 155, Bloomfield Hills, Michigan 48304 (UPP and Noble
hereinafter referred to collectively as "Debtor"), and UTILASE, INC., a Michigan
corporation (hereinafter referred to as "Secured Party"), whose address is 20530
Hoover, Detroit, Michigan 48205.
W I T N E S S E T H:
WHEREAS, UPP has purchased certain assets of Secured Party, pursuant to
an Asset Purchase Agreement dated February 28, 1997, but effective March 1, 1997
(hereinafter referred to as the "Asset Purchase Agreement"); and
WHEREAS, Secured Party is the payee of a certain Promissory Note dated
February 28, 1997 (hereinafter referred to as the "Note"), wherein Debtor is
obligated to pay to Secured Party certain principal pursuant to the terms of the
Note; and
WHEREAS, Secured Party and Debtor desire to secure the payment of the
Note by granting Secured Party a security interest in certain assets of UPP; and
WHEREAS, all capitalized terms used herein but not otherwise defined
shall be as defined in the Asset Purchase Agreement.
NOW THEREFORE, in consideration of the promises and the mutual
covenants hereinafter contained, the parties hereby agree as follows:
Section 1. Grant of Security. As security for the obligations of Debtor
under the Note, UPP hereby grants to Secured Party a continuing security
interest and lien in certain assets of UPP which are described in Exhibit A
which is attached hereto and thereby made a part hereof (hereinafter referred to
as the "Collateral"), including all substitutions thereto and proceeds
therefrom, and all necessary and incidental items related thereto. Collateral
shall not include property acquired after the date hereof to the extent it is
secured by a purchase money security interest.
<PAGE>
Section 2. Priority of Lien.
(a) (i) The parties acknowledge and understand that the
security interest evidenced by this Security Agreement is a lien upon
the Collateral which is subordinate to the lien of Comerica Bank and
the lien of the General Retirement Fund of the City of Detroit in such
Collateral (which liens are hereinafter referred to as "Permitted
Liens").
(ii) Upon the payment by Debtor to Secured Party of the
Seven Hundred Fifty Thousand and 00/100 Dollar ($750,000.00)
installment under the Note, Secured Party shall deliver to Debtor
within seven (7) days of such payment a release of such Permitted Liens
in the Collateral, including but not limited to any and all necessary
Uniform Commercial Code Termination Statements (collectively "Release
of Liens").
(b) Upon the satisfaction of the terms of Section 2(a)(ii)
above and as long as any indebtedness under the Note remains unpaid, Debtor
acknowledges that, and shall take whatever action is necessary to perfect a
first and prior security interest in the Collateral for the benefit of Secured
Party. Thereafter, in the event Debtor shall obtain financing on an "arms
length" basis from an institutional lender, which lender shall be acceptable to
Secured Party exercising reasonable judgment (the "Third Party Lender"), then at
Debtor's written request, Secured Party shall subordinate its first and prior
perfected security interest in the Collateral to the security interest of the
Third Party Lender, in an amount not to exceed seventy-five percent (75%) of the
aggregate forced sale value of the Collateral (the "Forced Sale Value").
Notwithstanding the foregoing, Secured Party shall not be required to
subordinate its first and prior perfected security interest unless the proceeds
of the loan from the Third Party Lender shall be used by Debtor to first pay the
Seven Hundred Fifty Thousand and 00/100 Dollar ($750,000.00) installment payment
due Secured Party under the Note (if such installment has not already been paid
in full), and the balance, if any, of such loan proceeds are used to fund the
capital requirements of Debtor in the Relevant Business. Secured Party shall not
be required to subordinate its first and prior perfected security interest in
the Collateral to the lien of the Third Party Lender unless the terms and
conditions of a Subordination Agreement are reasonably satisfactory to Secured
Party (paying due regard to Debtor's then existing financial condition, as well
as the terms and conditions of the loan obtained from the Third Party Lender).
In no event, however, shall Secured Party be required to subordinate the right
to any payments from Debtor.
(c) For purposes of this Agreement, the Forced Sale Value of
the Collateral shall be determined on a liquidation basis by an appraiser to be
mutually selected by Secured Party and Debtor. Further, the Forced Sale Value of
the Collateral shall be
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<PAGE>
determined at the time Debtor shall have requested Secured Party to subordinate
its first and prior perfected security interest in the Collateral.
Section 3. Covenants and Warranties of Debtor.
(a) Upon reasonable request of Secured Party, Debtor shall
execute and deliver to Secured Party all financing statements, security
agreements, certificates of title or other instruments and documents which
Secured Party may reasonably request, in a form satisfactory to Secured Party.
(b) Debtor shall pay promptly when due all taxes, assessments,
fees, licenses and charges upon or necessary for the use or operation of the
Collateral.
(c) Secured Party may at any reasonable time inspect the
Collateral and all records of Debtor relating to the Collateral, and take any
other actions reasonably necessary or convenient to ascertain the existence,
condition and value of the Collateral.
(d) Debtor will not sell or otherwise dispose of the
Collateral or any portion thereof, except for inventory now owned or hereafter
acquired, which is sold in the ordinary course of Debtor's business, and except
for tooling and/or machinery and equipment which is sold in the ordinary course
of business and which (i) is promptly replaced by tooling and/or machinery and
equipment, as applicable, of substantially the same value as the tooling and/or
machinery and equipment, as applicable, which is sold; (ii) is consented to in
advance by Secured Party; (iii) the net proceeds of which are provided to Debtor
in reduction of the obligations under the Note; and/or (iv) the value of which
is less than One Thousand and 00/100 Dollars ($1,000.00).
(e) Debtor will keep the Collateral insured against loss or
damage by fire and casualty for the full, replacement value thereof and which
insurance shall name Secured Party as additional loss payee, and will keep the
Collateral in good repair and operating condition, normal wear and tear
excepted, and will pay, as and when the same become due and before penalties
accrue, all taxes of every nature, special or otherwise, levied or assessed upon
the Collateral or any part thereof, or levied or assessed against Debtor in
respect thereof, and will not permit or suffer any lien of mechanics or
materialmen or any other lien or security interest of any kind to attach to any
of the Collateral.
(f) Debtor will not remove any portion of the Collateral from
its operational location without the written consent of Secured Party.
(g) In case of any failure of Debtor to keep the Collateral
free from liens, except as provided herein, or taxes on
3
<PAGE>
or in respect thereof, or other adverse claims materially affecting the
Collateral, or to fully and punctually keep and perform any other covenant
hereof, then in any such case, Secured Party may (but shall not be required to
do so) pay or contest or settle such taxes, liens, security interest,
encumbrances, or adverse claims, or any judgments based thereon, or otherwise
make good any other aforesaid failure of Debtor. Debtor shall reimburse Secured
Party promptly for all reasonable sums paid or advanced for any such purpose,
including reasonable attorney fees, and any and all other sums for which Debtor
is obligated to reimburse Secured Party, together with costs, expenses, and
reasonable attorney fees paid or incurred by Secured Party in the premises, and
together with interest on all such sums from the date of advancement until
repaid to Secured Party with interest at the rate of ten percent (10%) per
annum, simple interest until repaid to Secured Party, and it must be repaid
within ten (10) days. All such sums, with interest thereon, shall be and become
additional indebtedness secured by this Security Agreement as part of the
indebtedness.
Section 4. An Event of Default. An Event of Default under
this Agreement shall exist upon occurrence of any of the following:
(a) Upon failure by Debtor to pay any installment due under
the Note within seven (7) days of the installment becoming due;
(b) Upon failure by Debtor to pay any installment due to a
Third Party Lender within seven (7) days of the installment becoming due under
such Third Party Lender debt instrument for which Secured Party has agreed to
subordinate its security interest pursuant to Section 2(b) above; and
(c) Upon default of any of the other terms and conditions of
this Security Agreement and/or the Note by Debtor.
Section 5. Rights Upon an Event of Default. After the occurrence of an
Event of Default as provided in Section 4(a) and/or Section 4(b) above, and in
the case of an Event of Default under Section 4(c) above, the passage of (i)
thirty (30) days from the date of written notice to Debtor that such Event of
Default has occurred; or (ii) the passage of such longer period of time as is
reasonable if that Event of Default is of a type that cannot be cured in a
commercially reasonable manner in such thirty (30) day period, Secured Party,
without prejudice to any other legal or equitable enforcement rights that may be
available to it, shall have the right to declare a default hereunder and elect
from the following remedies:
(a) declare all outstanding principal due under the Note to be
immediately due and payable; and/or
4
<PAGE>
(b) exercise all rights to take immediate possession of the
Collateral, or any portion thereof, for liquidation in accordance with the
Michigan Uniform Commercial Code.
Interest shall accrue on the amount so accelerated at the rate of 10 percent
(10%) per annum until paid or until such time as the default is otherwise cured.
Upon the request of Secured Party, Debtor shall assemble the Collateral at its
facility located at 20530 Hoover, Detroit, Michigan. Secured Party shall pay to
Debtor any surplus resulting from a sale of the Collateral and Debtor shall
promptly pay to Secured Party and deficiency balance that remains due after such
a sale. In addition, Secured Party may elect to retain the Collateral as
permitted by MCLA ss.440.9505.
Section 6. Release of Liens. The parties agree that the continuing
security interest and lien in the Collateral which is granted hereunder shall be
released as to the Collateral if Debtor is not in default under the Note and the
Note has been paid in full according to its terms.
Section 7. Attorney-in-Fact. Debtor authorizes and appoints Secured
Party as Debtor's attorney-in-fact to do any act which Debtor is obligated to do
under this Agreement and to exercise rights under this Agreement which Debtor is
entitled to exercise and to use the Collateral in the names in which Debtor may
use it. In addition, Debtor authorizes Secured Party to collect proceeds from
the sale of Collateral in the same manner that Debtor may collect proceeds. The
parties understand and agree that this authorization and appointment of Secured
Party as Debtor's attorney-in-fact is given to Secured Party to enable it to
protect and preserve its rights under this Security Agreement. Debtor agrees to
reimburse Secured Party for expenses which it incurs while acting as Debtor's
attorney-in-fact. Prior to any such action by Secured Party and as long as it
will not be detrimental to Secured Party to do so, Secured Party will provide
Debtor with notice and the reasonable opportunity to take such action on its own
behalf.
Section 8. Benefit and Assignment. This Security Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors, assigns, heirs, and legal representatives.
Section 9. Notice. All notices and demands relating hereto shall be in
writing and mailed, postage prepaid, by certified or registered mail, or by a
nationally recognized courier service, or by facsimile with the original by
mail, to Lessor or Lessee at their respective addresses or at any other address
designated by notice sent in accordance herewith. All notices shall be deemed
received when properly mailed.
5
<PAGE>
If to Debtor: Utilase Production Process, Inc.
Noble International, Ltd.
33 Bloomfield Hills Pkwy., Suite 155
Bloomfield Hills, MI 48304
With a copy to: Michael C. Azar, Esq.
General Counsel
Noble International, Ltd.
33 Bloomfield Hills Pkwy., Suite 155
Bloomfield Hills, MI 48304
If to Secured Party: Utilase, Inc.
c/o DCT, Inc.
20101 Hoover
Detroit, MI 48205
With a copy to: David C. Stone, Esq.
Stone, Biber & O'Toole, P.C.
2701 Troy Center Dr., Suite 400
Troy, MI 48084
or to such other address as the addressee may have specified in a notice given
to the sender as provided herein.
Section 10. Waiver. The failure of either party at any time to require
performance by the other party of any provision of this Security Agreement shall
not be deemed a continuing waiver of that provision or a waiver of any other
provision of this Security Agreement and shall in no way affect the full right
to require such performance from the other party at any time thereafter. No
right or remedy herein or otherwise conferred upon Secured Party is intended to
be exclusive of any right or remedy, but each and every such right and remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder and now or hereafter provided by law, and may be exercised from time
to time or as often as deemed expedient, separately or concurrently.
Section 11. Miscellaneous. This Security Agreement shall not be deemed
to be in lieu or substitution of any other security agreement or other
Collateral now or hereafter held by Secured Party but shall be supplemental
thereto. No right or remedy herein or otherwise conferred upon Secured Party is
intended to be exclusive of any right or remedy, but each and every such right
and remedy shall be cumulative and shall be in addition to every other remedy
given hereunder and now or hereafter provided by law, and may be exercised from
time to time or as often as deemed expedient, separately or concurrently. The
failure or delay of Secured Party to insist in any one or more instances upon
the performance of any of the terms, covenants, or conditions of this Security
Agreement, or to exercise any right, remedy, or privilege herein conferred,
shall not impair or be construed as thereafter waiving any such covenants,
remedies, conditions, or provisions, but every such
6
<PAGE>
term, condition, and covenant shall continue and remain in full force and
effect. The giving, taking or enforcement of any other or additional security,
collateral or guaranty for the payment of the indebtedness hereby secured shall
not operate to prejudice, waive or affect the security of this Security
Agreement or of any rights, powers, or remedies hereunder; nor shall Secured
Party be required to first look to, enforce, or exhaust such other additional
security, collateral, or guaranties. The obligations of Debtor hereunder shall
be joint and several.
Section 12. Interpretation. The background and paragraph headings
included in this Security Agreement are used for reference and reference only,
and shall not be interpreted to limit in any way the content of this Security
Agreement. This Security Agreement shall be construed in accordance with the
laws of the State of Michigan, including the Michigan Uniform Commercial Code
(hereinafter referred to as the "Code"), and such laws shall govern the
interpretation, construction and enforcement hereof. Wherever possible each
provision of this Security Agreement shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provisions of this
Security Agreement shall be prohibited by or invalid under such 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 Security Agreement.
IN WITNESS WHEREOF, the parties have caused this Security Agreement to
be duly executed on the day and year first above written.
WITNESSES: "Debtor"
"UPP"
UTILASE PRODUCTION PROCESS,
INC., a Michigan corporation
/s/ Sarah A. Clarkson /s/ Michael C. Azar
- ------------------------ -------------------------------
/s/ A. Kathleen Murphy By: Michael C. Azar
- ------------------------ Its: Secretary
"NOBLE"
NOBLE INTERNATIONAL, LTD.,
a Michigan corporation
/s/ Sarah A. Clarkson /s/ Michael C. Azar
- ------------------------ -------------------------------
/s/ A. Kathleen Murphy By: Michael C. Azar
- ------------------------ Its: Secretary
7
<PAGE>
"Secured Party"
UTILASE, INC., a Michigan
corporation
/s/ David C. Stone
- ------------------------ -------------------------------
By: David C. Stone
________________________ Its: Assistant Secretary
8
<PAGE>
Exhibit A
Description of Collateral
A. [Disclosure Schedule 1 information]
B. [Disclosure Schedule 2 information]
C. Any and all general intangibles, as such term is defined in
Section 9-106 of the Code, now or hereafter owned by UPP and,
in any event, shall mean and include, but not be limited to,
all customer lists, employment and personnel records,
trademarks, patents, computer programs and software or
interest therein or rights thereto which are issued for the
purpose of supporting UPP together with the media in which
such software and programs are stored, rights in intellectual
property, rights to trade names, licenses, telephone numbers,
permits and copyrights now or hereafter owned by UPP.
And all additions, substitutions, replacements, proceeds and products of any of
the foregoing.
ESCROW AGREEMENT
This Escrow Agreement (this "Escrow Agreement") dated as of April 7,
1997, by and among Noble International, Ltd., a Michigan corporation ("Noble"),
Utilase, Inc., a Michigan corporation ("Utilase"), and Jaffe, Raitt, Heuer &
Weiss, Professional Corporation (the "Escrow Agent").
Background
A. Pursuant to a Stock Purchase Agreement dated as of April 7, 1997, to
which Noble, Utilase, a subsidiary of DCT, Inc., a Michigan corporation
("DCT"), and the shareholders of Utilase are parties (the "Purchase
Agreement"), Noble is to acquire all of the outstanding shares of
common stock of Utilase.
B. The parties desire to place in escrow with the Escrow Agent the Escrow
Shares (as defined in the Purchase Agreement).
NOW, THEREFORE, the parties to this Agreement agree as follows.
Agreement
1. Noble hereby deposits with the Escrow Agent Certificate No. 42
evidencing 506 shares of Noble Common Stock (the "Escrow Shares"). The Escrow
Agent hereby acknowledges receipt of the Escrow Shares and agrees to hold and
disburse the Escrow Shares in accordance with the terms contained in this Escrow
Agreement. The certificates evidencing the Escrow Shares shall be registered in
the name of Utilase, Inc. The Escrow Agent shall hold the Escrow Shares in
escrow for Noble and Utilase pursuant to this Agreement as their interests may
appear.
2. (a) If the transactions contemplated by the Purchase Agreement are
consummated, the Escrow Agent shall return the Escrow Shares to Noble on the
Closing Date (as defined in the Purchase Agreement).
(b) If the Purchase Agreement is terminated, then in accordance with
Section 8.2(ii) of the Purchase Agreement, the Escrow Agent shall deliver the
Escrow Shares to Utilase or to Noble upon such termination, as provided in
Section 8.2(ii) of the Purchase Agreement.
3. Notwithstanding paragraph 2, the Escrow Agent shall not deliver the
Escrow Shares to Noble or Utilase unless (a) a written demand (the "Release
Demand") for the Escrow Shares has been received by the Escrow Agent from Noble
or Utilase, as the case may be (the "Demanding Party"), and (b) either no
objection to such demand has been received by the Escrow Agent as
1
<PAGE>
provided below, or such objection has been withdrawn as so provided, or the
Escrow Agent has received a certified copy of the decision of the arbitrator
referred to in paragraph 4 directing such delivery. Any Release Demand shall be
in writing and shall specify in reasonable detail the basis for the demand. Upon
receipt of a Release Demand, the Escrow Agent shall transmit a copy thereof to
the other party in the manner provided in paragraph 8 hereof within 5 business
days. Utilase or Noble, as the case may be (the "Objecting Party"), may object
to such Release Demand by giving a written objection (an "Objection"),
specifying the basis therefor, to the Escrow Agent. Upon its receipt of such an
Objection, the Escrow Agent shall transmit a copy thereof to the Demanding Party
in the manner provided in paragraph 8 hereof within 5 business days. A Release
Demand or Objection may be withdrawn at any time by written notice to the Escrow
Agent from the Demanding Party or the Objecting Party, as the case may be. The
Escrow Agent shall comply with a Release Demand as promptly as practicable if no
such Objection is given to the Escrow Agent within the period ending 15 days
after the copy of the Release Demand is given to the Objecting Party as provided
above, or if such objection is withdrawn. Compliance with this paragraph 3 shall
completely discharge the duties of the Escrow Agent with respect to delivery of
the Escrow Shares in response to a Release Demand.
4. Any dispute arising out of or relating to this Agreement or the
breach, termination or validity hereof or thereof, shall be finally settled by
arbitration conducted expeditiously in accordance with the Center for Public
Resources Rules for Non-Administered Arbitration of Business Disputes by an
independent and impartial arbitrator selected by the agreement of Noble and
Utilase. The arbitration shall be governed by the United States Arbitration Act,
9 U.S.C. ss.ss.1-16, and judgment on the award rendered by the arbitrator may be
entered by any court having jurisdiction thereof. The place of arbitration shall
be Oakland County, Michigan, or such other place as the parties may agree. The
arbitrator is not empowered to award damages in excess of compensatory damages
and each party hereby irrevocably waives any damages in excess of compensatory
damages. One-half of the fees and expenses of such arbitrator shall be borne by
Noble and one-half shall be borne by Utilase.
5. Any cash dividends paid upon the Escrow Shares shall be paid to the
Escrow Agent to be held in the name of Utilase, Inc in an interest bearing trust
account. Utilase shall not be entitled to vote Escrow Shares upon any matters
submitted to the holders of Noble Common Stock for its vote, unless the Escrow
Shares are delivered to Utilase pursuant to Section 3. All non-cash
distributions upon the Escrow Shares shall be held by the Escrow Agent as part
of the Escrow Shares and any cash dividends and interest earned thereon shall be
deemed to be part of the Escrow Shares and shall be delivered by the Escrow
Agent with delivery of the Escrow Shares pursuant to Paragraph 2 hereof.
6. The Escrow Agent shall not be liable for any action taken by it in
good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Agreement, and may rely upon any
certificate, request or document believed by it to be genuine and to have been
signed and delivered by the proper party or parties. Noble and Utilase hereby
expressly acknowledge and agree that Escrow agent is acting as counsel to Noble
in all matters relating to the
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<PAGE>
Purchase Agreement. In such capacity, Escrow Agent has an undivided duty of
loyalty to Noble. In recognition of this duty, Noble and Utilase each hereby
waives any claim or defense against Escrow Agent based on a breach of any duty
of Escrow Agent, whether as fiduciary or for alleged conflict of interest, other
than a breach based on Escrow Agent's willful breach, bad faith or gross
negligence, excluding in all such cases, an alleged conflict of interest.
7. For its services hereunder the Escrow Agent shall be entitled to
receive reimbursement for its reasonable costs and expenses incurred in
connection with such services and shall be indemnified and held harmless against
any loss, liability or expense incurred without gross negligence or bad faith on
its part and arising out of or in connection with its services hereunder,
including the costs and expenses of defending itself against any claim of
liability hereunder. Noble and Utilase shall be jointly and severally liable for
such compensation and costs.
8. All notices, demands, claims, requests, undertakings, consents,
opinions and other communications which may or are required to be given
hereunder or with respect hereto shall be in writing, shall be given either by
personal delivery or by mail, facsimile transmission, telegraph, telex or
similar means of communication, and except for demands and objections pursuant
to paragraph 3, which shall be effective when received by the Escrow Agent,
shall be deemed to have been given or made when personally delivered, when
delivered to the telegraph or telephone company, charges prepaid, and otherwise
when received, addressed to the respective parties as follows:
(a) If to Noble:
Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, Michigan 48304
Attention: Mr. Michael C. Azar
with a copy to:
Jaffe, Raitt, Heuer & Weiss, Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
Attention: Peter Sugar, Esq.
or to such other address as Noble may from time to time designate by notice to
Utilase and the Escrow Agent with respect to future notices, demands and other
communications to Noble;
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<PAGE>
(b) If to Utilase:
Utilase, Inc.
20101 Hoover
Detroit, Michigan 48205
Attention: Mr. James Bronce Henderson, III
with a copy to:
Stone, Biber & O'Toole, P.C.
2701 Troy Center Drive, Suite 400
Troy, Michigan 48084
Attention: David C. Stone, Esq.
or to such other address as Utilase may from time to time designate by notice to
Noble and the Escrow Agent with respect to future notices, demands and other
communications to Utilase; and
(c) If to the Escrow Agent:
Jaffe, Raitt, Heuer & Weiss, Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
Attention: Peter Sugar, Esq.
or to such other address as the Escrow Agent may from time to time designate by
notice to Noble and Utilase with respect to future notices, demands and other
communications to the Escrow Agent.
9. If there is any stock split, stock dividend, reclassification,
merger or other change with respect to the Noble Common Stock, the Escrow Shares
shall be equitably adjusted to reflect such event. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs and successors, but may not be assigned by any party hereto.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart. This
Agreement shall be governed by the laws of the State of Michigan.
10. The Escrow Agent may resign as Escrow Agent following thirty (30)
days written notice to Noble and Utilase. The Escrow Agent may be removed and
replaced following thirty (30) days prior written notice to the Escrow Agent by
Noble and Utilase. In either event, the duties of the Escrow Agent shall
terminate thirty (30) days after the date of such written notice (or as of such
earlier date as may be mutually agreed) and the Escrow Agent shall deliver the
balance of the Escrow Shares then in its possession to a successor escrow agent
as shall be appointed by Noble and Utilase,
4
<PAGE>
or failing such appointment, the Escrow Agent may petition any court of
competent jurisdiction for the appointment of a successor escrow agent or other
appropriate relief, and such resulting appointment shall be binding upon Noble
and Utilase and the Escrow Agent. Upon acknowledgment by any successor escrow
agent of the receipt of the remaining balance of the Escrow Shares, the Escrow
Agent shall be fully released and relieved of all duties, responsibilities and
obligations under this Agreement, except for any liability with respect to any
previous acts, steps or omissions resulting from its own gross negligence or bad
faith as set forth in paragraph 6 and 7 of this Agreement.
11. This Agreement constitutes the entire understanding among Noble,
Utilase and Escrow Agent as to the subject matter of this Agreement and no
waiver or modification of the terms of this Agreement shall be valid unless in
writing and signed by Noble, Utilase and Escrow Agent and only to the extent
therein set forth.
5
<PAGE>
The parties have duly executed this Escrow Agreement as of April 7,
1997.
NOBLE INTERNATIONAL, LTD.
By:/s/ Robert J. Skandalaris
-------------------------
Robert J. Skandalaris
-------------------------
(Printed Name)
President & CEO
-------------------------
(Title)
UTILASE, INC.
By: /s/ David C. Stone
-------------------------
David C. Stone
-------------------------
(Printed Name)
Assistant Secretary
-------------------------
(Title)
JAFFE, RAITT, HEUER & WEISS,
Professional Corporation
By: /s/ Peter Sugar
------------------------
Peter Sugar
------------------------
(Printed Name)
6
NON-COMPETE AGREEMENT
This Non-Compete Agreement (this "Agreement") is made this____ day
of_______ , 1997, by and between Utilase, Inc., a Michigan corporation
("Utilase"), and James Bronce Henderson III ("Henderson").
Background
A. DCT, Inc., a Michigan corporation ("DCT"), was the majority
shareholder of Utilase.
B. Henderson is the chief executive officer of DCT and its
majority shareholder.
C. This Agreement is executed and delivered in connection with
the consummation of the transactions contemplated by that
certain Stock Purchase Agreement among Noble International,
Ltd., a Michigan corporation ("Noble"), Utilase, and the
shareholders of Utilase (the "Shareholders"), dated April 7,
1997 (the "Purchase Agreement").
NOW, THEREFORE, in consideration of the mutual agreements herein made
the parties to this Agreement agree as follows.
Agreement
1. Covenant Not to Compete.
(a) Henderson shall not, during the period of this Agreement,
directly or indirectly, enter into any arrangement or understanding, be employed
by, engage in, be connected with, or have any interest in, as owner, partner,
shareholder, director, manager, supervisor, or any other kind of employee,
agent, consultant, independent contractor or advisor, of any entity which is
engaged in the Utilase Business, as defined below, in any geographic area in
which the products or services of Utilase are now, have been or, during the term
of this Agreement, will be produced, sold, distributed or provided. Excluded
from this Section is Henderson's ownership of not more than five percent of the
outstanding stock of any corporation whose stock is held of record by more than
500 shareholders and is publicly traded.
(b) "Utilase Business" shall mean the design or manufacture of
"tailor blank welding systems" for use or resale, the design and assembly of
systems to manufacture "tailor welded blanks" and the manufacturing or
processing of materials into "tailor welded blanks."
(c) Notwithstanding anything to the contrary in this
Agreement, (i) Henderson shall not be prohibited from soliciting customers or
suppliers of Utilase for purposes unrelated to the Utilase Business, and (ii)
neither Utilase Systems, Inc. ("Systems") nor Henderson, on behalf of
<PAGE>
Systems, shall be prohibited from conducting any activities, or from using the
name "Utilase Systems, Inc.," so long as Systems does not engage in the Utilase
Business.
2. Term of Agreement. This Agreement shall commence on the date hereof
and shall terminate on the later of seven years from the date hereof or two
years after Henderson ceases to be a director of Noble, provided, however, that
this Agreement shall terminate on the 60th day following an Event of Default (as
defined in the Notes Delivered to the Shareholders pursuant to the Purchase
Agreement), unless such Event of Default is cured prior to such date.
3. Confidential Information. (a) "Confidential Information" means:
(i) the identity of, or any other material information
concerning, any client or prospective client of Utilase;
(ii) the terms and conditions of any business transaction that
Utilase has performed or has offered to perform with any client or
prospective client of Utilase;
(iii) proprietary manufacturing systems, processes,
engineering, die edge preparation, nesting, trade secrets, and
methods of operation of Utilase;
(iv) any forms, business plans, manuals, procedures and
policies of Utilase;
(v) any other facts or data that are treated as confidential
and proprietary by Utilase; and
(vi) any documents, electronic or print, that relate to, refer
to, are involved with, summarize, embody or constitute the
Confidential Information defined in this paragraph (a).
(b) Henderson understands and agrees that the Confidential
Information used in the Utilase Business is a valuable, special and unique asset
of Utilase and shall be and remain the sole and exclusive property of Utilase.
Accordingly, Henderson agrees that, except in his capacity as a director of
Noble, he will not take from Utilase's premises, or, directly or indirectly,
reproduce in any form, use, disclose or reveal any Confidential Information to
any person, firm, corporation, association or other entity for any reason or
purpose whatsoever, except as required by law or under court order or as
authorized in advance in writing by Utilase.
Notwithstanding the foregoing, Confidential Information shall only
include information relating solely to the Utilase Business and shall not
include information or material that (i) is publicly available or becomes
publicly available through no action or fault of Henderson, (ii) was already in
Henderson's possession or known to Henderson prior to being disclosed or
provided to Henderson by or on behalf of Utilase, or (iii) was or is obtained by
Henderson from a third party, provided that,
2
<PAGE>
such third party was not bound by a contractual, legal or fiduciary obligation
of confidentiality to Utilase or any other party with respect to such
information or material.
4. Business Relationships. Henderson understands and agrees that
establishing business relationships with representatives of the organizations
served in the Utilase Business is a demanding and difficult procedure requiring
a great deal of time, effort and money, and requires the building of confidence
and goodwill, and that Utilase should have the right to hold such established
business relationships as its own.
Henderson therefore agrees that during the period of this Agreement, he
will not, directly or indirectly, without the consent of Noble, (i) request or
advise any customer or prospective customer of Utilase to withhold, curtail or
cancel their business with Utilase, or (ii) call on or solicit any client or
prospective client of Utilase for any purpose related to the Utilase Business.
5. Compensation. In consideration for Henderson's obligations herein,
Utilase shall pay Henderson $200,000 on the date hereof.
6. Remedies. In the event of a breach or threatened breach by Henderson
of the provisions of this Agreement, Utilase shall be entitled, upon the posting
of any applicable bond, to an injunction and restraining order to prevent such
breach or continued breach by Henderson without having to prove damages, it
being agreed that any such violation will cause Utilase irreparable damages for
which Utilase shall have no adequate remedy other than by injunction and
restraining order. Nothing in this Agreement shall be construed as prohibiting
Utilase from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages from Henderson. If the
scope of any restriction of this Agreement is too broad to permit enforcement of
such restriction to its full extent, then such restriction shall be enforced to
the maximum extent permitted by law, and Henderson hereby consents and agrees
that such scope may be judicially modified accordingly in any proceeding brought
to enforce such restriction.
7. Amendments and Waivers. No change or modification of any part of
this Agreement, including this Section, shall be valid unless such change or
modification is made in writing and signed by both the President of Utilase and
Henderson. No waiver of any provision of this Agreement shall be valid unless in
writing and signed by the party alleged to have waived its right under the
Agreement.
8. Notice. Any notice given pursuant to this Agreement shall be deemed
given when sent by registered or certified mail, postage prepaid and return
receipt requests, addressed to the appropriate party:
3
<PAGE>
if to Utilase, to be sent to:
Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, MI 48304
Attention: Michael C. Azar
with a copy to:
Jaffe, Raitt, Heuer & Weiss, Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
Attention: Peter Sugar
or to such other person or at such other place as Utilase shall furnish to
Henderson in writing; and
if to Henderson, to be sent to:
James Bronce Henderson III
DCT, Inc.
20101 Hoover
Detroit, Michigan, 48205
with a copy to:
Dykema Gossett PLLC
1577 North Woodward Avenue, Suite 300
Bloomfield Hills, Michigan 48304
Attention: Gerald T. Lievois
9. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter of this Agreement, and
supersedes all prior and contemporaneous negotiations, commitments, writings or
other agreements, either oral or written, between Henderson and Utilase with
respect to the subject matter of this Agreement.
10. Assignment. Neither this Agreement nor Henderson's rights under
this Agreement may be assigned by Henderson. Utilase may assign this Agreement
upon receiving the prior consent of Henderson.
11. Governing Law. This agreement shall be governed by the laws of the
State of Michigan, without regard to conflict of laws provisions.
4
<PAGE>
12. Severability; Survival In the event any provision or portion of
this Agreement is determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall nevertheless
be binding upon the parties with the same effect as though the invalid or
unenforceable part had been severed and deleted.
13. Arbitration. Subject to the provision of Section 6 hereof, in the
event that Utilase and Henderson cannot agree as to any disputes arising out of
this Agreement, the unresolved matter shall be resolved by arbitration if a
request for arbitration, as provided herein, is given. Arbitration shall be
initiated by either party making a written demand on the other party and
simultaneously filing copies of the demand, together with the required fees,
with the Detroit Regional Office of the American Arbitration Association
("AAA"). Within fifteen (15) days after receipt of such demand, each party shall
designate one arbitrator. These two arbitrators shall, within fifteen (15) days
after their appointment, select a third arbitrator, who shall be experienced in
the subject matter of the claim for which indemnification is being sought. In
the event that the first two arbitrators are unable to agree upon the third
arbitrator, then the arbitrators shall apply to the AAA to designate and appoint
a person who meets these criteria as the third arbitrator. In the event the
party upon whom the original arbitration demand was served shall fail to
designate its arbitrator, the arbitrator designated by the party requesting
arbitration shall act as the sole arbitrator and shall be deemed to be the
single, mutually approved arbitrator to resolve the matter. Final arbitration of
the dispute shall occur within six (6) months of the giving of the notice of
arbitration. The place of arbitration shall be Troy, Michigan. Arbitration shall
be conducted under the auspices of the AAA, and the AAA Rules shall govern all
proceedings unless otherwise provided herein. In the case of conflict between
the AAA Rules and this Agreement, the provisions of this Agreement shall govern.
The arbitrators' sole power shall be to interpret the provisions of this
Agreement, and they shall have no power to change or modify any provision of
this Agreement. The parties shall have the right to discovery in accordance with
the Federal Rules of Civil Procedure except that discovery may commence
immediately upon the service of the demand for arbitration and except that
discovery shall be limited to document requests and depositions of not more than
two (2) people per party, and must occur within three (3) months of the date of
such service of notice of the complaining party. A party's unreasonable refusal
to cooperate in discovery shall be deemed to be a refusal to proceed with
arbitration, and, until the arbitration panel is complete, the parties may
enforce their rights (including the right of discovery) in the circuit courts of
the State of Michigan. Such enforcement in the courts shall not constitute a
waiver of a party's right to arbitration. Upon the completion of the appointment
of the arbitration panel, the arbitrators shall have the power to enforce the
parties' discovery rights. It is expressly agreed that material subject to
discovery shall include written documents that must be created from information
that currently exists only in machine-readable form.
The parties expressly covenant and agree to be bound by the decision of
the arbitration panel and accept any such decision as the final determination of
the matter in dispute. A judgment of any Michigan Circuit Court may be rendered
upon any award made pursuant to this Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
UTILASE, INC.
By:____________________________
Its:___________________________
JAMES B. HENDERSON
_______________________________
6
NON-COMPETE AGREEMENT
This Non-Compete Agreement (this "Agreement") is made this___ day
of______ , 1997, by and between Noble International, Ltd., a Michigan
corporation ("Noble"), Utilase, Inc., a Michigan corporation ("Utilase"), and
Jeffrey A. Moss ("Moss").
Background
A. DCT, Inc., a Michigan corporation ("DCT"), was the majority
shareholder of Utilase.
B. Moss is the president of DCT, was the founder of Utilase, and
assisted in the development of the blank welding technology.
C. This Agreement is executed and delivered in connection with
the consummation of the transactions contemplated by that
certain Stock Purchase Agreement among Noble, Utilase, and the
shareholders of Utilase (the "Shareholders"), dated April 7,
1997 (the "Purchase Agreement").
NOW, THEREFORE, in consideration of the mutual agreements
herein made the parties to this Agreement agree as follows.
Agreement
1. Covenant Not to Compete.
(a) Moss shall not, during the period of this Agreement,
directly or indirectly, enter into any arrangement or understanding, be employed
by, engage in, be connected with, or have any interest in, as owner, partner,
shareholder, director, manager, supervisor, or any other kind of employee,
agent, consultant, independent contractor or advisor, of any entity which is
engaged in the Utilase Business, as defined below, in any geographic area in
which the products or services of Utilase are now, have been or, during the term
of this Agreement, will be produced, sold, distributed or provided. Excluded
from this Section is Moss's ownership of not more than five percent of the
outstanding stock of any corporation whose stock is held of record by more than
500 shareholders and is publicly traded.
(b) "Utilase Business" shall mean the design or manufacture of
"tailor blank welding systems" for use or resale, the design and assembly of
systems to manufacture "tailor welded blanks" and the manufacturing or
processing of materials into "tailor welded blanks."
(c) Notwithstanding anything to the contrary in this
Agreement, (i) Moss shall not be prohibited from soliciting customers or
suppliers of Utilase for purposes unrelated to the Utilase Business, and (ii)
neither Utilase Systems, Inc. ("Systems") nor Moss, on behalf of Systems,
<PAGE>
shall be prohibited from conducting any activities, or from using the name
"Utilase Systems, Inc.," so long as Systems does not engage in the Utilase
Business.
2. Term of Agreement. This Agreement shall commence on the date hereof
and shall terminate on the later of seven years from the date hereof or two
years after Moss ceases to be a director of Utilase, provided, however, that
this Agreement shall terminate on the 60th day following an Event of Default (as
defined in the Notes delivered to the Shareholders pursuant to the Purchase
Agreement), unless such Event of Default is cured prior to such date.
3. Confidential Information. (a) "Confidential Information" means:
(i) the identity of, or any other material information
concerning, any client or prospective client of Utilase;
(ii) the terms and conditions of any business transaction that
Utilase has performed or has offered to perform with any client or
prospective client of Utilase;
(iii) proprietary manufacturing systems, processes,
engineering, die edge preparation, nesting, trade secrets, and
methods of operation of Utilase;
(iv) any forms, business plans, manuals, procedures and
policies of Utilase;
(v) any other facts or data that are treated as confidential
and proprietary by Utilase; and
(vi) any documents, electronic or print, that relate to, refer
to, are involved with, summarize, embody or constitute the
Confidential Information defined in this paragraph (a).
(b) Moss understands and agrees that the Confidential
Information used in the Utilase Business is a valuable, special and unique asset
of Utilase and shall be and remain the sole and exclusive property of Utilase.
Accordingly, Moss agrees that, except in his capacity as a director of Utilase,
he will not take from Utilase's premises, or, directly or indirectly, reproduce
in any form, use, disclose or reveal any Confidential Information to any person,
firm, corporation, association or other entity for any reason or purpose
whatsoever, except as required by law or under court order or as authorized in
advance in writing by Utilase.
Notwithstanding the foregoing, Confidential Information shall only
include information relating solely to the Utilase Business and shall not
include information or material that (i) is publicly available or becomes
publicly available through no action or fault of Moss, (ii) was already in Moss'
possession or known to Moss prior to being disclosed or provided to Moss by or
on behalf of Utilase, or (iii) was or is obtained by Moss from a third party,
provided, that, such third party was not bound
2
<PAGE>
by a contractual, legal or fiduciary obligation of confidentiality to Utilase,
Utilase or any other party with respect to such information or material.
4. Business Relationships. Moss understands and agrees that
establishing business relationships with representatives of the organizations
served in the Utilase Business is a demanding and difficult procedure requiring
a great deal of time, effort and money, and requires the building of confidence
and goodwill, and that Utilase should have the right to hold such established
business relationships as its own.
Moss therefore agrees that during the period of this Agreement, he will
not, directly or indirectly, without the consent of Noble, (i) request or advise
any customer or prospective customer of Utilase to withhold, curtail or cancel
their business with Utilase, or (ii) call on or solicit any client or
prospective client of Utilase for any purpose related to the Utilase Business.
5. Compensation. In consideration for Moss' obligations herein, (i)
Utilase shall pay Moss $1,000,000 on the date hereof and (ii) Noble shall,
commencing on [month/day of Closing Date], 1999 and thereafter each _______
until ______, 2003, issue ______ shares [the equivalent of 35
pre-split/pre-offering shares] of fully paid and non-assessable shares of Noble
common stock (the "Noble Shares") to Moss, upon the receipt by Noble of
reasonable investment representations with respect to the issuance of
unregistered shares. Such Noble Shares shall be equitably adjusted to reflect
fully the effect of any reclassification, stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Noble Shares), reorganization or other like change with respect to Noble Shares,
occurring after the date hereof and prior to the termination of this Agreement.
6. Remedies. In the event of a breach or threatened breach by Moss of
the provisions of this Agreement, Utilase shall be entitled, upon the posting of
any applicable bond, to an injunction and restraining order to prevent such
breach or continued breach by Moss without having to prove damages, it being
agreed that any such violation will cause Utilase irreparable damages for which
Utilase shall have no adequate remedy other than by injunction and restraining
order. Nothing in this Agreement shall be construed as prohibiting Utilase from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of damages from Moss. If the scope of any
restriction of this Agreement is too broad to permit enforcement of such
restriction to its full extent, then such restriction shall be enforced to the
maximum extent permitted by law, and Moss hereby consents and agrees that such
scope may be judicially modified accordingly in any proceeding brought to
enforce such restriction.
7. Amendments and Waivers. No change or modification of any part of
this Agreement, including this Section, shall be valid unless such change or
modification is made in writing and signed by the President of Utilase and Noble
and Moss. No waiver of any provision of this Agreement shall be valid unless in
writing and signed by the party alleged to have waived its right under the
Agreement.
3
<PAGE>
8. Notice. Any notice given pursuant to this Agreement shall be deemed
given when sent by registered or certified mail, postage prepaid and return
receipt requests, addressed to the appropriate party:
if to Noble or to Utilase, to be sent to:
Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, MI 48304
Attention: Michael C. Azar
with a copy to:
Jaffe, Raitt, Heuer & Weiss, Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
Attention: Peter Sugar
or to such other person or at such other place as Utilase shall furnish to Moss
in writing; and
if to Moss, to be sent to:
Jeffrey A. Moss
DCT, Inc.
20101 Hoover
Detroit, Michigan 48205
with a copy to:
Dykema Gossett PLLC
1577 North Woodward Avenue, Suite 300
Bloomfield Hills, Michigan 48304
Attention: Gerald T. Lievois
9. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter of this Agreement, and
supersedes all prior and contemporaneous negotiations, commitments, writings or
other agreements, either oral or written, between Moss, Noble and Utilase with
respect to the subject matter of this Agreement.
10. Assignment. Neither this Agreement nor Moss's rights under this
Agreement may be assigned by Moss. Utilase and Noble may assign this Agreement
upon receiving the prior consent of Moss.
4
<PAGE>
11. Governing Law. This agreement shall be governed by the laws of the
State of Michigan, without regard to conflict of laws provisions.
12. Severability; Survival In the event any provision or portion of
this Agreement is determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall nevertheless
be binding upon the parties with the same effect as though the invalid or
unenforceable part had been severed and deleted.
13. Arbitration. Subject to the provision of Section 6 hereof, in the
event that Utilase and Noble, on the one hand, and Moss, on the other, cannot
agree as to any disputes arising out of this Agreement, the unresolved matter
shall be resolved by arbitration if a request for arbitration, as provided
herein, is given. Arbitration shall be initiated by either party making a
written demand on the other party and simultaneously filing copies of the
demand, together with the required fees, with the Detroit Regional Office of the
American Arbitration Association ("AAA"). Within fifteen (15) days after receipt
of such demand, each party shall designate one arbitrator. These two arbitrators
shall, within fifteen (15) days after their appointment, select a third
arbitrator, who shall be experienced in the subject matter of the claim for
which indemnification is being sought. In the event that the first two
arbitrators are unable to agree upon the third arbitrator, then the arbitrators
shall apply to the AAA to designate and appoint a person who meets these
criteria as the third arbitrator. In the event the party upon whom the original
arbitration demand was served shall fail to designate its arbitrator, the
arbitrator designated by the party requesting arbitration shall act as the sole
arbitrator and shall be deemed to be the single, mutually approved arbitrator to
resolve the matter. Final arbitration of the dispute shall occur within six (6)
months of the giving of the notice of arbitration. The place of arbitration
shall be Troy, Michigan. Arbitration shall be conducted under the auspices of
the AAA, and the AAA Rules shall govern all proceedings unless otherwise
provided herein. In the case of conflict between the AAA Rules and this
Agreement, the provisions of this Agreement shall govern. The arbitrators' sole
power shall be to interpret the provisions of this Agreement, and they shall
have no power to change or modify any provision of this Agreement. The parties
shall have the right to discovery in accordance with the Federal Rules of Civil
Procedure except that discovery may commence immediately upon the service of the
demand for arbitration and except that discovery shall be limited to document
requests and depositions of not more than two (2) people per party, and must
occur within three (3) months of the date of such service of notice of the
complaining party. A party's unreasonable refusal to cooperate in discovery
shall be deemed to be a refusal to proceed with arbitration, and, until the
arbitration panel is complete, the parties may enforce their rights (including
the right of discovery) in the circuit courts of the State of Michigan. Such
enforcement in the courts shall not constitute a waiver of a party's right to
arbitration. Upon the completion of the appointment of the arbitration panel,
the arbitrators shall have the power to enforce the parties' discovery rights.
It is expressly agreed that material subject to discovery shall include written
documents that must be created from information that currently exists only in
machine-readable form.
5
<PAGE>
The parties expressly covenant and agree to be bound by the decision of
the arbitration panel and accept any such decision as the final determination of
the matter in dispute. A judgment of any Michigan Circuit Court may be rendered
upon any award made pursuant to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
UTILASE, INC.
By:_____________________________
Its:____________________________
NOBLE INTERNATIONAL, LTD.
By:_____________________________
Its:____________________________
JEFFREY A. MOSS
________________________________
6
NON-COMPETE AGREEMENT
This Non-Compete Agreement (this "Agreement") is made this day of ,
1997, by and between Utilase, Inc., a Michigan corporation ("Utilase"), and DCT,
Inc., a Michigan corporation ("DCT").
Background
A. DCT was the majority shareholder of Utilase.
B. This Agreement is executed and delivered in connection with
the consummation of the transactions contemplated by that
certain Stock Purchase Agreement among Noble International,
Ltd., a Michigan corporation ("Noble"), Utilase, and the
shareholders of Utilase (the "Shareholders"), dated April 7,
1997 (the "Purchase Agreement").
NOW, THEREFORE, in consideration of the transactions contemplated by
the Purchase Agreement and the mutual covenants set forth in this Agreement,
receipt of which is hereby acknowledged, the parties to this Agreement agree as
follows.
Agreement
1. Covenant Not to Compete.
(a) DCT shall not, during the period of this Agreement,
directly or indirectly, enter into any arrangement or understanding, engage in,
be connected with, or have any interest in, as owner, partner, shareholder or
advisor, of any entity which is engaged in the Utilase Business, as defined
below, in any geographic area in which the products or services of Utilase are
now, have been or, during the term of this Agreement, will be produced, sold,
distributed or provided. Excluded from this Section is DCT's ownership of not
more than five percent of the outstanding stock of any corporation whose stock
is held of record by more than 500 shareholders and is publicly traded.
(b) "Utilase Business" shall mean the design or manufacture of
"tailor blank welding systems" for use or resale, the design and assembly of
systems to manufacture "tailor welded blanks" and the manufacturing or
processing of materials into "tailor welded blanks."
(c) Notwithstanding anything to the contrary in this
Agreement, (i) DCT shall not be prohibited from soliciting customers or
suppliers of Utilase for purposes unrelated to the Utilase Business, and (ii)
neither Utilase Systems, Inc. ("Systems") nor DCT, on behalf of Systems, shall
be prohibited from conducting any activities, or from using the name "Utilase
Systems, Inc.," so long as Systems does not engage in the Utilase Business.
<PAGE>
2. Term of Agreement. This Agreement shall commence on the date hereof,
and shall terminate on the earlier of seven years from the date hereof,
provided, however, that this Agreement shall terminate on the 60th day following
an Event of Default (as defined in the Notes delivered to the Shareholders
pursuant to the Purchase Agreement), unless such Event of Default is cured prior
to such date.
3. Confidential Information. (a) "Confidential Information" means:
(i) the identity of, or any material information concerning,
any client or prospective client of Utilase;
(ii) the terms and conditions of any business transaction that
Utilase has performed or has offered to perform with any client or
prospective client of Utilase;
(iii) proprietary manufacturing systems, processes,
engineering, die edge preparation, nesting, trade secrets, and
methods of operation of Utilase;
(iv) any forms, business plans, manuals, procedures and
policies of Utilase;
(v) any other facts or data that are treated as confidential
and proprietary by Utilase; and
(vi) any documents, electronic or print, that relate to, refer
to, are involved with, summarize, embody or constitute the
Confidential Information defined in this paragraph (a).
(b) DCT understands and agrees that the Confidential
Information used in the Utilase Business is a valuable, special and unique asset
of Utilase and shall be and remain the sole and exclusive property of Utilase
Accordingly, DCT agrees that it will not take from Utilase's premises, or,
directly or indirectly, reproduce in any form, use, disclose or reveal any
Confidential Information to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever, except as required by law or under
court order or as authorized in advance in writing by Utilase.
Notwithstanding the foregoing, Confidential Information shall
only include information relating solely to the Utilase Business and shall not
include information or material that (i) is publicly available or becomes
publicly available through no action or fault of DCT, (ii) was already in DCT's
possession or known to DCT prior to being disclosed or provided to DCT by or on
behalf of Utilase, or (iii) was or is obtained by DCT from a third party,
provided, that, such third party was not bound by a contractual, legal or
fiduciary obligation of confidentiality to Utilase, Utilase or any other party
with respect to such information or material.
2
<PAGE>
4. Business Relationships. DCT understands and agrees that establishing
business relationships with representatives of the organizations served in the
Utilase Business is a demanding and difficult procedure requiring a great deal
of time, effort and money, and requires the building of confidence and goodwill,
and that Utilase should have the right to hold such established business
relationships as its own.
DCT therefore agrees that during the period of this Agreement, it will
not, directly or indirectly, without the consent of Noble, (i) request or advise
any customer or prospective customer of Utilase to withhold, curtail or cancel
their business with Utilase, or (ii) call on or solicit any client or
prospective client of Utilase for any purpose related to the Utilase Business.
5. Remedies. In the event of a breach or threatened breach by DCT of
the provisions of this Agreement, Utilase shall be entitled, upon the posting of
any applicable bond, to an injunction and restraining order to prevent such
breach or continued breach by DCT without having to prove damages, it being
agreed that any such violation will cause Utilase irreparable damages for which
Utilase shall have no adequate remedy other than by injunction and restraining
order. Nothing in this Agreement shall be construed as prohibiting Utilase from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of damages from DCT. If the scope of any
restriction of this Agreement is too broad to permit enforcement of such
restriction to its full extent, then such restriction shall be enforced to the
maximum extent permitted by law, and DCT hereby consents and agrees that such
scope may be judicially modified accordingly in any proceeding brought to
enforce such restriction.
6. Amendments and Waivers. No change or modification of any part of
this Agreement, including this Section, shall be valid unless such change or
modification is made in writing and signed by both the President of Utilase and
the President of DCT. No waiver of any provision of this Agreement shall be
valid unless in writing and signed by the party alleged to have waived its right
under the Agreement.
7. Notice. Any notice given pursuant to this Agreement shall be deemed
given when sent by registered or certified mail, postage prepaid and return
receipt requests, addressed to the appropriate party:
if to Utilase, to be sent to:
Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, MI 48304
Attention: Michael C. Azar
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with a copy to:
Jaffe, Raitt, Heuer & Weiss, Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
Attention: Peter Sugar
or to such other person or at such other place as Utilase shall furnish to DCT
in writing; and
if to DCT to:
DCT, Inc.
2010 Hoover
Detroit, Michigan 48205
Attention: James Bronce Henderson III
with a copy to:
Dykema Gossett PLLC
1577 North Woodward Avenue, Suite 300
Bloomfield Hills, Michigan 48304
Attention: Gerald T. Lievois
8. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter of this Agreement, and
supersedes all prior and contemporaneous negotiations, commitments, writings or
other agreements, either oral or written, between DCT and Utilase with respect
to the subject matter of this Agreement.
9. Assignment. Neither this Agreement nor DCT's rights under this
Agreement may be assigned by DCT. Utilase may assign this Agreement upon
receiving the prior consent of DCT.
11. Governing Law. This Agreement shall be governed by the laws of the
State of Michigan, without regard to conflict of laws provisions.
12. Severability; Survival In the event any provision or portion of
this Agreement is determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall nevertheless
be binding upon the parties with the same effect as though the invalid or
unenforceable part had been severed and deleted.
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13. Arbitration. Subject to the provision of Section 5 hereof, in the
event that Utilase and DCT cannot agree as to any disputes arising out of this
Agreement, the unresolved matter shall be resolved by arbitration if a request
for arbitration, as provided herein, is given. Arbitration shall be initiated by
either party making a written demand on the other party and simultaneously
filing copies of the demand, together with the required fees, with the Detroit
Regional Office of the American Arbitration Association ("AAA"). Within fifteen
(15) days after receipt of such demand, each party shall designate one
arbitrator. These two arbitrators shall, within fifteen (15) days after their
appointment, select a third arbitrator, who shall be experienced in the subject
matter of the claim for which indemnification is being sought. In the event that
the first two arbitrators are unable to agree upon the third arbitrator, then
the arbitrators shall apply to the AAA to designate and appoint a person who
meets these criteria as the third arbitrator. In the event the party upon whom
the original arbitration demand was served shall fail to designate its
arbitrator, the arbitrator designated by the party requesting arbitration shall
act as the sole arbitrator and shall be deemed to be the single, mutually
approved arbitrator to resolve the matter. Final arbitration of the dispute
shall occur within six (6) months of the giving of the notice of arbitration.
The place of arbitration shall be Troy, Michigan. Arbitration shall be conducted
under the auspices of the AAA, and the AAA Rules shall govern all proceedings
unless otherwise provided herein. In the case of conflict between the AAA Rules
and this Agreement, the provisions of this Agreement shall govern. The
arbitrators' sole power shall be to interpret the provisions of this Agreement,
and they shall have no power to change or modify any provision of this
Agreement. The parties shall have the right to discovery in accordance with the
Federal Rules of Civil Procedure except that discovery may commence immediately
upon the service of the demand for arbitration and except that discovery shall
be limited to document requests and depositions of not more than two (2) people
per party, and must occur within three (3) months of the date of such service of
notice of the complaining party. A party's unreasonable refusal to cooperate in
discovery shall be deemed to be a refusal to proceed with arbitration, and,
until the arbitration panel is complete, the parties may enforce their rights
(including the right of discovery) in the circuit courts of the State of
Michigan. Such enforcement in the courts shall not constitute a waiver of a
party's right to arbitration. Upon the completion of the appointment of the
arbitration panel, the arbitrators shall have the power to enforce the parties'
discovery rights. It is expressly agreed that material subject to discovery
shall include written documents that must be created from information that
currently exists only in machine-readable form.
The parties expressly covenant and agree to be bound by the decision of
the arbitration panel and accept any such decision as the final determination of
the matter in dispute. A judgment of any Michigan Circuit Court may be rendered
upon any award made pursuant to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
UTILASE, INC.
By:_________________________________
Its:________________________________
DCT, INC.
By:_________________________________
James Bronce Henderson III, Chairman
6
EMPLOYMENT AGREEMENT
This is an EMPLOYMENT AGREEMENT ("Agreement"), dated April 7, 1997,
between Utilase, Inc., a Michigan corporation (the "Company"), and John K.
Baysore (the "Employee").
BACKGROUND
On the date hereof, DCT, Inc., a Michigan corporation ("DCT"), the
Company, a wholly-owned subsidiary of DCT, and Noble International, Ltd., a
Michigan corporation ("Noble") have entered into a Stock Purchase Agreement
("Purchase Agreement") whereby Noble will acquire all of the outstanding common
stock of the Company. Employee is currently an employee of the Company. The
parties desire that this Employment Agreement be executed and delivered, in
order to secure the services of Employee for the benefit of the Company and,
indirectly for Noble, such services to be rendered by Employee on the terms and
conditions and for the period hereinafter set forth.
NOW, THEREFORE, intending to be legally bound, and in consideration of
the mutual promises and representations set forth in this Agreement, the Company
and Employee agree as follows:
ARTICLE I - EMPLOYMENT AND TERM
1.1 Employment and Employment Term. The Company agrees to employ
Employee, and Employee accepts employment with the Company, to serve as
President of the Company and as an officer or other capacity of any subsidiary
formed by the Company as determined by the Board of Directors of such
subsidiary, for a term commencing on the date hereof and continuing for a period
of three years from the date hereof, unless earlier terminated pursuant to
Article IV of this Agreement ("Employment Term"). During the Employment Term,
Employee will render such services to the Company and its subsidiaries as are
customary for the position (or positions) held by Employee. During the
Employment Term, Employee shall devote his full time, ability and attention, and
his best efforts, to the business of the Company and its subsidiaries. The
Employee shall not directly or indirectly render any services of a business,
commercial, or professional nature to any other person, organization or other
entity, whether for compensation or otherwise, directly or indirectly, without
the prior written consent of a majority of the members of the Board of Directors
of the Company.
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ARTICLE II - COMPENSATION
2.1 Base Salary. Subject to Article IV of this Agreement, as
compensation for services hereunder during the Employment Term the Employee
shall be paid an annual base salary of $175,000. On the first anniversary of the
date of this Agreement and on each subsequent anniversary of the date of this
Agreement for the duration of the Employment Term, the base salary shall be
increased by a percentage that shall be determined by the Board of Directors of
the Company.
2.2 Non-Competition. In consideration for the protective covenants set
forth in Article III of this Agreement, if the transactions contemplated by the
Purchase Agreement are consummated in accordance with the terms of the Purchase
Agreement, on the Closing Date, as defined in the Purchase Agreement, Employee
shall be paid $200,000 by the Company, and if not by the Company, then by Noble.
2.3 Bonus Awards. Subject to Article IV of this Agreement, during the
Employment Term the Employee shall be eligible to receive annual bonus awards as
set forth on Exhibit 1 hereto.
2.4 Employee Benefits. Employee shall receive retirement and welfare
benefits that, in the aggregate, are comparable to those the Company provides to
its other senior executives. Employee shall also receive certain additional
benefits, such as an automobile allowance and country club dues, as listed in
Exhibit 2 hereto.
2.5 Reimbursement of Expenses. During the Employment Term, the Company
shall pay or reimburse Employee for all reasonable travel and other expenses
incurred or paid by him in connection with the performance of duties under this
Agreement, in accordance with the Company's reimbursement policies and upon
submission of satisfactory evidence thereof.
ARTICLE III - PROTECTIVE COVENANTS
3.1 Non-Competition. For the period commencing on the date that
Employee's employment with the Company terminates, either voluntarily or
involuntarily, and ending on the third anniversary thereof (unless the Employee
is terminated by the Company other than for Cause (as defined in Article IV), in
which case for the period commencing on the date the Company terminates the
Employee and ending on the first anniversary thereof). Employee shall not (i)
own, manage, operate, control, or participate in the ownership, management,
operation or control of, or be connected, directly or indirectly, as proprietor,
partner, shareholder (other than ownership of not more than 5% of any class of
securities of a publicly traded entity which engages in a Competing Activity, as
defined herein, provided that Employee does not participate in the management,
operation or control of such entity), director, officer, executive, employee,
agent, creditor, consultant, joint venturer, investor or in any other capacity
or manner whatsoever, with any entity which
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engages in any business which directly or indirectly competes with the business
of the Company, including without limitation, the business of selling, applying,
marketing, licensing or distributing any blank welding technology or system or
process anywhere in the world, ("Competing Activity"), (ii) directly or
indirectly as proprietor, partner, shareholder, director, officer, executive,
employee, agent, creditor, consultant, joint venturer, investor or in any other
capacity or manner whatsoever, solicit or hire (in connection with or to be
involved in any Competing Activity) any person employed in the Company's
business on or after the date hereof, or (iii) solicit, interfere with or
attempt to entice away from the Company any person or entity which was or is a
client or customer or an affiliate of a client or customer of the Company or
Utilase, or an entity or affiliate of an entity with which the Company or
Utilase was engaged in sales or promotional efforts during the term of
Employee's employment with the Company or Utilase.
3.2 Trade Secrets. Employee agrees not to divulge, communicate, use to
the detriment of the Company, for Employee's benefit or the benefit of any other
person, firm, corporation, association or other entity, or misuse in any way, in
whole or in part, any proprietary or confidential information or trade secrets
related to the Company as they may exist from time to time, including, without
limitation, the Company's trade secrets, trademarks or other intellectual
property rights, personnel information, secret processes, know-how, customer
lists, or other technical, confidential or proprietary data. Employee
acknowledges that the list of its customers as it may exist from time to time,
and the Company's proprietary or confidential information, and trade secrets,
are valuable, special and unique assets of the Company. Employee acknowledges
and agrees that any information or data he has acquired on any of these matters
or items was received in confidence. Employee agrees to hold, as the property of
the Company, all memoranda, books, papers, letters and other data and all copies
thereof or therefrom, made by it or him or otherwise coming into its or his
possession, and at any time to deliver the same to the Company upon its demand.
3.3 Reasonable Limitations. Employee acknowledges that given the nature
of the Company's business the covenants contained in this Article III contain
reasonable limitations as to time, geographical area and scope of activity to be
restrained, and do not impose a greater restraint than is necessary to protect
the legitimate business interests of the Company. If, however, this Article III
is determined by any court of competent jurisdiction to be unenforceable by
reason of its extending for too long a period of time or over too large a
geographic area or by reason of its being too extensive in any other respect or
for any other reason it will be interpreted to extend only over the longest
period of time for which it may be enforceable and/or over the largest
geographical area as to which it may be enforceable and/or to the maximum extent
in all other aspects as to which it may be enforceable, all as determined by
such court and in such action.
3.4 Breach of Covenants. Violation of any of the protective covenants
contained herein shall constitute a breach of trust and is grounds for immediate
dismissal with cause and for appropriate legal action by the Company for damages
including reasonable attorney fees and costs, enforcement and/or injunctive
relief.
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3.5 Extension of Limitation Period. The parties acknowledge that if
Employee violates any of the protective covenants in this Article III and the
Company brings legal action for injunctive, damages or other relief hereunder,
the Company shall, as a result of the time involved in obtaining the relief, be
deprived of the benefit of the full Limitation Period of these protective
covenants. Accordingly, the Limitation Period shall be deemed to have the full
duration of the period stated therein, computed from the date relief is granted,
but reduced by the time between the period when the restriction began to run and
the date of the first violation of the covenant by Employee.
3.6 Survival of Protective Covenants. Each covenant on the part of
Employee contained in this Article III shall be construed as an agreement
independent of any other provision of this Agreement, and shall survive the
termination of Employee's employment under this Agreement, and the existence of
any claim or cause of action of Employee against the Company, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of such covenant.
3.7 Remedies for Breach. Employee acknowledges that the legal remedies
for breach of the protective covenants hereunder are inadequate and therefore
agrees that, in addition to all of the remedies available to the Company in the
event of a breach or a threatened breach of any covenant contained in this
Article III, the Company may obtain temporary, preliminary, and permanent
injunctions and any other appropriate equitable relief against any and all such
actions, and may recover from Employee monetary damages to the Company arising
from such breach or threatened breach and all costs and expenses (including
reasonable attorneys' fees) incurred by the Company in the enforcement of such
protective covenants.
3.8 Affiliates of the Company. The protective covenants in this Article
III shall also benefit the business and trade secrets of the Company's
Affiliates (as hereinafter defined) and these covenants shall be enforceable
against Employee by each of such Affiliates as third party beneficiaries. An
"Affiliate" is any person or entity that, directly or indirectly, controls or is
controlled by, or is under common control with, the Company.
ARTICLE IV - TERMINATION OF EMPLOYMENT
4.1 Termination for Cause. The Company may terminate Employee's
employment hereunder for Cause or other than for Cause. The term "Cause" means
Employee, (i) after repeated notices and warnings, fails to perform his
reasonably assigned duties as reasonably determined by the Company, (ii)
materially breaches any of the terms or conditions of Articles I or III of this
Agreement, or (iii) commits or engages in a felony or any intentional dishonest,
unethical or fraudulent act which materially damages the Company's reputation.
If the Company terminates Employee for Cause, or the Employee terminates his
employment voluntarily, no payments or benefits under this Agreement shall
accrue after the date of Employee's termination.
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4.2 Termination Other Than for Cause. If the Company terminates
Employee for any reason other than for Cause, the Company shall owe Employee
severance in an amount equal to one (1) times Employee's annual base salary at
the time of termination (such amount, the "Severance Payment"). At the Company's
option, the Severance Payment shall be paid either (a) in equal monthly
installments over the twelve months following the termination date, or (b) in
one lump sum payable within 30 days following the termination date. The Company
shall withhold all applicable income and employment taxes from the Severance
Payment. It is agreed that the Severance Payment shall constitute all amounts
owed by the Company to Employee for the termination of his employment without
Cause, and that no other payments or benefits shall be owed by the Company to
Employee under any Company severance or benefit plan other than any benefits
under a retirement plan that is qualified under Section 401(a) of the Internal
Revenue Code in which Employee is fully vested. No Severance Payment shall be
made by the Company unless Employee executes a waiver in a form satisfactory to
the Company releasing the Company from any claims Employee may assert against
the Company relating to his employment with the Company.
ARTICLE V - MISCELLANEOUS
5.1 Modification Of This Agreement. Employee acknowledges and agrees
that no one employed by or representing the Company has any authority to make
oral statements which modify, waive or discharge, in any manner, any provision
of this Agreement. Employee further acknowledges and agrees that no provision of
this Agreement may be modified, waived or discharged unless agreed to in
writing, and signed and executed by Employee and a majority of the members of
the Board of Directors of the Company. Employee acknowledges and agrees that in
executing this Agreement he has not relied upon any representation or statement
made by the Company or its representatives, other than those stated in this
Agreement.
5.2 Notices. All notices required or permitted hereunder shall be made
in writing by hand-delivery, certified or registered first-class mail, facsimile
transmission or air courier guaranteeing overnight delivery to the other party
at the following addresses:
To Company:
Utilase, Inc.
20101 Hoover Road
Detroit, Michigan 48205
Attention: James Bronce Henderson III
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with a copy to:
Stone, Biber & O'Toole, P.C.
2701 Troy Center Drive, Suite 400
Troy, MI 48084
Attention: David C. Stone
To Employee:
John K. Baysore
465 Moran
Grosse Pointe Farms, Michigan 48236
with a copy to:
Raymond & Prokop, P.C.
2000 Town Center, Suite 2400
Southfield, Michigan 48075
Attention: Paul L.B. McKenney, Esq.
or to such other address as either of such parties may designate in a written
notice served upon the other party in the manner provided herein. All notices
required or permitted hereunder shall be deemed duly given and received when
delivered by hand, if personally delivered; on the fifth (5th) day next
succeeding the date of mailing if sent by certified or registered first-class
mail, when received if sent by facsimile transmission, and on the next business
day, if timely delivered to an air courier guaranteeing overnight delivery.
5.3 Waiver of Breach. The waiver by the Company or Employee of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any other or subsequent breach by the other party of
such or any other provision. No delay or omission by the Company or Employee in
exercising any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof, and any such right, remedy or power may
be exercised by the Company or Employee from time to time and as often as may be
deemed expedient or necessary by the Company or Employee in its or his sole
discretion.
5.4 Severability. It is the intention of the parties that the
provisions contained herein shall be enforceable to the fullest extent
permissible under applicable law, but that the unenforceability (or modification
to conform to such law) of any provision or provisions hereof shall not render
unenforceable, or impair, the remainder hereof. If any term or provision of this
Agreement or the application thereof to any person or circumstance shall, either
in whole or in part, be held invalid or unenforceable by a court of competent
jurisdiction, this Agreement shall be deemed amended to delete or modify, as
necessary, the offending provision or provisions and to alter the bounds thereof
in order to render it valid and enforceable; but in such event the affected
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provisions of this Agreement shall be curtailed and restricted only to the
extent necessary to bring them within the applicable legal requirements, and the
remainder of this Agreement shall not be affected.
5.5 Applicable Law: Jurisdiction. Each party irrevocably submits to the
exclusive jurisdiction of the federal and state courts for the State of Michigan
for purposes of any action, suit or other proceeding arising out of this
Agreement or any transaction contemplated hereby. The parties have agreed that
this Agreement shall be governed by, construed and enforced in accordance with
the laws of the State of Michigan without giving effect to conflict of law
principles.
5.6 Settlement of Disputes. Any claims, controversies, demands,
disputes, or differences between the parties hereto arising out of, or by virtue
of, or in connection with, or relating to this Agreement, Employee's employment
relationship with the Company or termination of such employment relationship
shall be submitted to and settled by arbitration in Southfield, Michigan before
a single arbitrator who shall be knowledgeable in the field of business law and
employment relations and such arbitration shall be in accordance with the rules
of the American Arbitration Association then in force. The parties agree to bear
joint and equal responsibility for all fees of the arbitrator, abide by any
decision rendered as final and binding, and waive the right to submit the
dispute to a public tribunal for a jury or non-jury trial.
5.7 Headings. The headings used throughout this Agreement have been
used for convenience only and do not constitute matter to be considered in
interpreting this Agreement.
5.8 Acknowledgment. Employee acknowledges receipt of a copy of this
Agreement, and agrees that his obligations hereunder shall be binding upon his
heirs, assigns and legal representatives. Employee acknowledges and agrees that
this Agreement contains the entire agreement and understanding concerning the
subject matter covered by this Agreement, and that this Agreement supersedes and
replaces any other existing agreement, whether written or oral, entered into
between Employee, the Company, DCT and Utilase, or among any of them, relating
generally to the subject matter covered by this Agreement, including
specifically any agreement that provides for the payment of severance benefits
to Employee.
EMPLOYEE HAS READ THE ABOVE DOCUMENT, AND BEEN GIVEN ADEQUATE TIME TO
CONSULT WITH AN ATTORNEY OR OTHER ADVISOR OF HIS CHOICE. EMPLOYEE
UNDERSTANDS THE DOCUMENT FULLY, AND AGREES TO ALL OF ITS TERMS.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
day and year first above written.
UTILASE, INC.
By: /s/ David C. Stone
-----------------------------
Name: David C. Stone
Title: Assistant Secretary
/s/ John K. Baysore
---------------------------------
John K. Baysore
8
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of the
7th day of April, 1997, by and among Noble International, Ltd., a Michigan
corporation (the "Company"), Utilase, Inc., a Michigan corporation ("Utilase"),
James Bronce Henderson, III, and Jeffrey A. Moss. Utilase, Mr. Henderson, and
Mr. Moss are referred to collectively in this Agreement as the "Shareholders."
Background
A. Mr. Henderson currently holds shares of the Company's Common
Stock.
B. Mr. Moss has the right to receive shares of the Company's
Common Stock pursuant to the terms of a Non-Compete Agreement
to be entered into upon the consummation of the transactions
contemplated by the Stock Purchase Agreement among the
Company, Utilase, Inc., a Michigan corporation ("Utilase") and
the shareholders of Utilase, dated as of April 7, 1997 (the
"Purchase Agreement").
C. Utilase may receive shares of the Company's Common Stock
pursuant to the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Agreement, the parties to this Agreement agree as follows:
Agreement
Article I
Registration Rights.
1.1 Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Commission" shall mean the Securities and Exchange
Commission.
(c) "Common Stock" shall mean the Company's common stock.
(d) "1934 Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, all as the same shall be
in effect from time to time.
(e) The terms "register," "registered" and "registration"
shall refer to a registration effected by preparing and filing a registration
statement in compliance with the 1933 Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
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(f) "Registration Expenses" shall mean all expenses incurred
in effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company and any
underwriter, blue sky fees and expenses, and expenses of any regular or special
audits incident to or required by any such registration, but shall not include
Selling Expenses (as defined in Section 1.4) and fees and disbursements of
counsel for the Shareholders (but excluding the compensation of regular
employees of the Company, which shall be paid in any event by the Company).
(g) "Rule 144" shall mean Rule 144 as promulgated by the
Commission under the 1933 Act, as such Rule may be amended from time to time.
(h) "1933 Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder, all as the same shall be in
effect from time to time.
(i) "Shareholders' Shares" shall mean any Common Stock now
owned or hereafter acquired by the Shareholders; provided, however, that the
Shareholders' Shares shall not include any Common Stock which previously have
been registered or which have been sold to the public either pursuant to a
registration statement or Rule 144.
1.2 Requested Registration.
(a) Request for Registration. If the Company shall receive
from the Shareholders a joint written request, not earlier than six months after
the effective date of the first registration statement filed by the Company
covering any underwritten offering of any of its securities to the general
public, that the Company register at least 50% of the Shareholders' Shares
pursuant to this Section 1.2(a) ("Registration Request"), then the Company shall
use its best efforts to effect, as soon as practicable and in any event within
120 days of receipt of the Registration Request, registration (including,
without limitation, filing post-effective amendments, appropriate registration
or qualifications under applicable blue sky or other state securities laws, and
appropriate compliance with the 1933 Act) as would permit the sale and
distribution of the number of the Shareholders' Shares that are specified in the
Registration Request. The registration statement filed pursuant to a
Registration Request may include securities of the Company being sold for the
account of the Company, but only to the extent that such inclusion will not have
an adverse effect on the Shareholders' ability to sell or distribute the full
amount of Shareholders' Shares that are included in such registration statement.
(b) Limitations. Notwithstanding Section 1.2(a), the Company
shall not be obligated to effect a registration pursuant to this Article I (i)
during the period starting with the date of the Company's filing of, and ending
on a date 90 days following the effective date of, any registration statement
pertaining to an underwritten public offering of securities for the account of
the Company; provided, however, that the Company must be actively employing in
good faith its best efforts to cause such registration statement to become
effective, (ii) if the Shareholders do not
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request that such offering be underwritten pursuant to a firm commitment by
underwriters selected by the Shareholders (subject to the consent of the
Company, which consent shall not be unreasonably withheld), or (iii) if the
Company furnishes to the Shareholders a certificate signed by the President of
the Company stating that in the good faith judgment of a majority of the
independent members of the Board, it would be seriously detrimental to the
Company for such registration statement to be filed in the near future and that
it is, therefore, advisable to defer the filing of such registration statement,
then the Company shall have the right to defer such filing for a period of not
more than 60 days after receipt of the Registration Request.
(c) Procedures. If the Company shall request inclusion in any
registration pursuant to Section 1.2 of securities being sold for its own
account, the Shareholders shall offer to include such securities in the
underwriting and may condition such offer on its acceptance of the further
applicable provisions of this Article I. The Company shall, together with the
Shareholders, enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such underwriting
by the Shareholders, which underwriters are reasonably acceptable to the
Company. If the representative of the underwriters advises the Shareholders in
writing that marketing factors require a limitation on the number of shares to
be underwritten, the Company shall not limit the number of Shareholders' Shares
to be included in such registration in order to include shares held by holders
of the Common Stock other than the Shareholder or shares registered for the
Company's own account.
(d) Number of Requests. If all of the Shareholders' Shares
specified in the Registration Request to be registered are so registered, the
Shareholders shall not be entitled to make another Registration Request. If,
however, the requested registration is not consummated for any reason, or if not
all of the Shareholders' Shares specified in the Registration Request are not
registered, the Shareholders shall be entitled to make another Registration
Request pursuant to this Section 1.2.
1.3 Company Registration
(a) Registration. If the Company proposes to register any of
its securities either for its own account or the account of holders of Common
Stock other than the Shareholders, other than a registration relating solely to
employee benefit plans or a registration relating to a corporate reorganization
or a registration on any registration form that does not permit secondary sales,
the Company will promptly give to each Shareholder written notice thereof. Upon
the written request of the Shareholders given to the Company within 30 days
after the receipt of such notice by the Shareholders, the Company shall use its
best efforts to include in such registration (and any related registration or
qualification under blue sky laws or other compliance), except as set forth in
Section 1.3(b) below, and in any underwriting involved therein, all the
Shareholders' Shares specified in such request. The Shareholders may specify all
or any number of the Shareholders' Shares in such request. Any request by the
Shareholders under this Section 1.3(a) shall not be considered to be a request
for purposes of Section 1.2.
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(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise each Shareholder as a part of the written notice given
pursuant to Section l.3(a). In such event, the right of the Shareholders to
registration pursuant to this Section 1.3 shall be conditioned upon the
Shareholders' participation in such underwriting and the inclusion of the
Shareholders' Shares in the underwriting to the extent provided in this
Agreement. If the Shareholders propose to distribute Shareholders' Shares
through such underwriting, the Shareholders shall (together with the Company and
the other holders of securities of the Company with registration rights to
participate in such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected by the Company.
Notwithstanding any other provision of this Section 1.3, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten or a
limitation on the number of shares that can be sold in a secondary offering, the
Company (i) shall not reduce the number of Shareholders' Shares to be included
in such registration in order to include any shares held by holders of the
Common Stock other than the Shareholders, and (ii) shall, if necessary, reduce
the number of Shareholders' Shares to be included in such registration by an
amount equal to the product of (A) the difference between the total number of
shares sought to be underwritten or sold by the Company and the Shareholders and
the number of shares allowed by the underwriters, and (B) the percentage of the
total number of shares sought to be underwritten or sold that are Shareholders'
Shares.
1.4 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.2, 1.3 and 1.5 of this Agreement and, in addition, reasonable fees of
one counsel for the Shareholders in the case of registrations pursuant to
Section 1.2 shall be borne by the Company. If, however, the Company bears the
Registration Expenses for any registration proceeding begun pursuant to a
Registration Request and subsequently withdrawn by the Shareholders, such
registration proceeding shall be counted as a Registration Request, unless (a)
such withdrawal is based upon material adverse information relating to the
Company that is different from the information publicly available to the
Shareholders or provided to the Shareholders by the Company at or prior to the
time of its Registration Request, or (b) the Shareholders bear the Registration
Expenses for such a registration proceeding. If the Shareholders so bear the
Registration Expenses, such registration shall not be treated as a Registration
Request for purposes of Section 1.2. All underwriting discounts and selling
commissions for the Shareholders incurred in connection with registrations
("Selling Expenses") relating to securities registered pursuant to this
Agreement shall be borne by the Shareholders pro rata on the basis of the number
of shares of securities so registered on their behalf.
1.5 Registration on Form S-3.
(a) The Company shall use its best efforts to qualify for
registration on Form S-3 or any comparable or successor form or forms. After the
Company has qualified for the use of Form S-3, if ever, in addition to the
rights contained in the foregoing provisions of this Article I, the
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Shareholders shall have the right to request registrations on Form S-3 of at
least 50% of the Shareholders' Shares (such requests shall be in writing and
shall state the number of shares of Shareholders' Shares to be disposed of and
the intended methods of disposition of such shares by the Shareholders).
(b) If a request complying with the requirements of Section
1.5(a) of this Agreement is delivered to the Company, the provisions of Section
l.2 of this Agreement shall apply to such registration.
1.6 Registration Procedures. In the case of each registration effected
by the Company pursuant to this Article I, the Company will keep the
Shareholders advised in writing as to the initiation of each registration and as
to the completion thereof. At its expense, the Company will use its best efforts
to take the actions set forth in this Section 1.6.
(a) The Company shall (i) prepare and file with the Commission
a registration statement and such amendments and supplements to such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement covering the Shareholders' Shares, and (ii) use its best
efforts to cause such registration statement to become and remain effective for
as long as shall be necessary to complete the distribution of the Shareholders'
Shares as requested; provided, however, that before filing a registration
statement or prospectus or any amendments or supplements thereto, the Company
shall furnish to each Shareholder copies of all such documents proposed to be
filed, which documents shall be subject to the review of the Shareholders.
(b) The Company shall furnish to each Shareholder such number
of registration statements, prospectuses, and other documents incident thereto,
including any amendment of or supplement to the prospectus, in conformity with
the requirements of the 1933 Act, as each Shareholder from time to time may
reasonably request.
(c) The Company shall use its best efforts to register and
qualify the Shareholders' Shares covered by the Registration Request under such
other securities or Blue Sky laws of such jurisdictions as the Shareholders may
reasonably request and as shall be reasonably appropriate for the distribution
of the Shareholders' Shares covered by the registration statement.
(d) The Company shall (i) notify each Shareholder of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in light
of the circumstances then existing, and (ii) at the request of the Shareholders,
prepare and furnish to each Shareholder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be
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stated therein or necessary to make the statements therein not misleading or
incomplete in light of the circumstances then existing.
(e) The Company shall cause all Shareholders' Shares
registered pursuant to this Agreement to be listed either on the NASDAQ Stock
Market or, as applicable, on each securities exchange on which similar
securities issued by the Company are then listed.
(f) The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission.
(g) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.2 of this Agreement, the
Company will enter into an underwriting agreement reasonably necessary to effect
the offer and sale of Common Stock, provided, however, that such underwriting
agreement contains customary underwriting provisions and provided further that,
if the underwriter so requests, the underwriting agreement will contain
customary contribution provisions.
1.7 Indemnification.
(a) To the fullest extent permitted by law, the Company will
indemnify and hold harmless the Shareholders, any underwriter (as defined in the
1933 Act) ("Underwriter"), and, as applicable, each of the Shareholders' legal
counsel, accountants, and other professional advisors, against all expenses,
claims, losses, damages, and liabilities (or actions, proceedings, or
settlements in respect thereof) (collectively, "Claims") arising out of or based
on (i) any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any such
registration, qualification, or compliance, (ii) any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any violation
by the Company of the 1933 Act or any rule or regulation thereunder applicable
to the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance. The Company
will reimburse the Shareholders, and, as applicable, each of the Shareholders'
legal counsel, accountants, and other professional advisors for any legal and
any other expenses reasonably incurred in connection with investigating and
defending or settling any such Claim; provided, however, that the Company will
not be liable in any such case to a Shareholder to the extent that any such
Claim arises solely out of or is based solely upon any untrue statement or
omission included in or omitted from written information furnished to the
Company by the Shareholder or Underwriter and stated to be specifically for use
therein. The Company and the Shareholders agree that the indemnity agreement
contained in this Section 1.7(a) shall not apply to amounts paid in settlement
of any such Claim if such settlement is effected without the consent of the
Company (which consent has not been unreasonably withheld).
(b) Each Shareholder will, if Shareholders' Shares are
included in the securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company,
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any Underwriter, and, as applicable, each of the Company's directors, officers,
legal counsel, and accountants and each person who controls the Company within
the meaning of Section 15 of the 1933 Act, against all Claims, insofar as such
Claims arise solely out of or are based solely upon (i) any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular, or other document and provided by the
Shareholder, or (ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading. Each Shareholder will reimburse the Company, any
Underwriter, and, as applicable, the Company's directors, officers, legal
counsel, and accountants, persons, or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such Claim, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular, or other
document in reliance upon and in conformity with written information furnished
to the Company by such Shareholder and stated to be specifically for use
therein; provided, however, that the obligations of each Shareholder under this
Agreement shall not apply to amounts paid in settlement of any such Claims if
such settlement is effected without the written consent of the Shareholder
(which consent shall not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section
1.7 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any Claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such Claim or any
litigation resulting therefrom; provided, however, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided in this
Agreement shall not relieve the Indemnifying Party of its obligations under this
Article I, to the extent such failure is not prejudicial. No Indemnifying Party,
in the defense of any such Claim, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such Claim. Each Indemnified Party shall furnish such information
regarding itself or the Claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such Claim resulting therefrom.
(d) If the indemnification provided for in this Section 1.7 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any Claim referred to therein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party under this Agreement,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such Claim in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the Indemnified
Party on the other in connection with the statements or omissions that resulted
in such Claim as well as any other relevant equitable considerations. The
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relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) The obligation of the Company and the Shareholders under
this Section 1.7 shall survive the completion of any offering of Shareholders'
Shares in a registration statement under this Article I, and otherwise.
1.8 Information by Shareholders. The Shareholders shall furnish to the
Company such information regarding the Shareholders and the distribution
proposed by the Shareholders as the Company may reasonably request in writing
and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Article I.
1.9 Limitations on Other Registration Rights. From and after the date
of this Agreement, the Company shall not, without the prior written consent of
the Shareholders, enter into any agreement with any holder or prospective holder
of any securities of the Company giving such holder or prospective holder any
registration rights the terms of which are more favorable than the registration
rights granted to the Shareholders under this Agreement.
1.10 1934 Act Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission that may permit the sale of
the Shareholders' Shares to the public without registration, the Company agrees
to use its best efforts to:
(a) Make and keep public information regarding the Company
available as those terms are understood and defined in Rule 144 under the 1933
Act, at all times from and after the effective date of the first registration
under the 1933 Act filed by the Company for an offering of its securities to the
general public;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the 1933 Act and the 1934 Act
at any time after it has become subject to such reporting requirements; and
(c) So long as the Shareholders own any Shareholders' Shares,
furnish to each Shareholder upon written request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, and of
the 1933 Act and the 1934 Act, a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed as the
Shareholders may reasonably request in availing itself of any rule or regulation
of the Commission allowing the Shareholders to sell any such securities without
registration.
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Article II
Covenants of the Company.
The Company hereby covenants as follows:
2.1 Financial Information. The Company shall deliver to each
Shareholder copies of its annual reports on Form 10-K and its quarterly reports
on Form 10-Q, respectively, and other reports filed with the Commission within
ten days after the filing of such reports with the Commission.
2.2 Additional Information and Rights. The Company shall permit the
Shareholders to visit and inspect any of the properties of the Company,
including its books of account and other records (and make copies thereof and
take extracts therefrom), and to discuss its affairs, finances and accounts with
the Company's officers and its independent public accountants, all at such
reasonable times and as often as any such person may reasonably request.
Article III
Termination of Registration Rights
Except as set forth below, the right of the Shareholders to request
registration or inclusion in any registration pursuant to Section 1.2, 1.3 or
1.5 shall terminate on such date after the closing of the first
Company-initiated registered public offering of Common Stock as all
Shareholders' Shares held by a Shareholder may immediately be sold under Rule
144 during any 90-day period. The provisions set forth above shall not apply to
any Shareholder who owns more than 1% of the Company's outstanding stock until
the earlier of (i) such time as such holder owns less than 1% of the outstanding
stock of the company, or (ii) the expiration of five years after the closing of
the first registered public offering of Common Stock of the Company.
Article IV
Miscellaneous
4.1 Arbitration. In the event that the Company and the Shareholders
cannot agree as to the disposition of any claim raised under this Agreement, the
unresolved matter shall be resolved by arbitration if a request for arbitration,
as provided in this Section 4.1, is given. Arbitration shall be initiated by
either party making a written demand on the other party and simultaneously
filing copies of the demand, together with the required fees, with the Detroit
Regional Office of the American Arbitration Association ("AAA"). Within 15 days
after receipt of such demand, each party shall designate one arbitrator. These
two arbitrators shall, within 15 days after their appointment, select a third
arbitrator, who shall be experienced in the subject matter of the claim for
which resolution is sought. In the event that the first two arbitrators are
unable to agree upon a third arbitrator, then the arbitrators shall apply to the
AAA to designate and appoint a person who meets these criteria as
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the third arbitrator. In the event the party upon whom the original arbitration
demand was served shall fail to designate its arbitrator, the arbitrator
designated by the party requesting arbitration shall act as the sole arbitrator
and shall be deemed to be single, mutually approved arbitrator to resolve the
matter. Final arbitration of the dispute shall occur within six months of the
giving of the notice of arbitration. The place of arbitration shall be Troy,
Michigan. Arbitration shall be conducted under the auspices of the AAA and the
AAA Rules shall govern all proceedings unless otherwise provided in this Section
4.1. In the case of conflict between the AAA Rules and this Agreement, the
provisions of this Agreement shall govern. The arbitrators' sole power shall be
to interpret the provisions of this Agreement and they shall have no power to
change or modify any provision of this Agreement. The parties shall have the
right to discovery in accordance with the Federal Rules of Civil Procedure
except that discovery may commence immediately upon the service of the demand
for arbitration and except that discovery shall be limited to document requests
and depositions of not more than two people per party, and must occur within
three months of the date of such service of notice of the complaining party. A
party's unreasonable refusal to cooperate in discovery shall be deemed to be a
refusal to proceed with arbitration and, until the arbitration panel is
complete, the parties may enforce their rights (including the right of
discovery) in the circuit courts of the State of Michigan. Such enforcement in
the courts shall not constitute a waiver of a party's right to arbitration. Upon
the completion of the appointment of the arbitration panel, the arbitrators
shall have the power to enforce the parties' discovery rights. It is expressly
agreed that material subject to discovery shall include written documents that
must be created from information that currently exists only in machine-readable
form.
The parties expressly covenant and agree to be bound by the decision of
the arbitration panel and accept any such decision as the final determination of
the matter in dispute. A judgment of any Michigan Circuit Court may be rendered
upon any award made pursuant to this Agreement.
4.2 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Michigan, without regard to the conflict of laws
principals of that state.
4.3 Successors and Assigns. Except as otherwise expressly provided in
this Agreement, the provisions of this Agreement shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement.
4.4 Entire Agreement; Amendment; Waiver. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subjects of this Agreement. Neither this Agreement nor any term of this
Agreement may be amended, waived, discharged or terminated, except by a written
instrument signed by the Company and each Shareholder.
4.5 Notices, etc. All notices and other communications required or
permitted under this Agreement shall be in writing and shall be mailed by United
States first-class mail, postage prepaid, or delivered personally by hand or
nationally recognized courier or telecopied, addressed as follows.
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If to Noble to:
Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, MI 48304
Attention: Mr. Michael Azar
with a copy to:
Jaffe, Raitt, Huer & Weiss
One Woodward Avenue, Suite 2400
Detroit, MI 48226
Attention: Mr. Peter Sugar
If to Skandalaris to:
Robert Skandalaris
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, MI 48304
with a copy to:
Jaffe, Raitt, Huer & Weiss
One Woodward Avenue, Suite 2400
Detroit, MI 48226
Attention: Mr. Peter Sugar
If to the Shareholders to:
Utilase, Inc.
20101 Hoover Road
Detroit, MI 48205
Attention: Mr. James Bronce Henderson, III
and to:
James Bronce Henderson, III
20101 Hoover Road
Detroit, MI 48205
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and to:
Jeffrey A. Moss
20101 Hoover Road
Detroit, MI 48205
with a copy to:
Dykema Gossett PLLC
1577 North Woodward Avenue, Suite 300
Bloomfield Hills, MI 48304
Attention: Gerald T. Lievois
4.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to the Shareholders, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of the
Shareholders nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default therefore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of the Shareholders of any breach or default under this Agreement or
any waiver on the part of the Shareholders of any provisions or conditions of
this Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to the Shareholders, shall be
cumulative and not alternative.
4.7 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained in this Agreement.
4.8 Information Confidential. The Shareholders acknowledge that the
information received by it pursuant to this Agreement may be confidential and
for its use only, and it will not use such confidential information in violation
of the 1934 Act or reproduce, disclose or disseminate such information to any
other person (other than its employees or agents having a need to know the
contents of such information, and its attorneys), except in connection with the
exercise of rights under this Agreement, unless the Company has made such
information available to the public generally or the Shareholders are required
to disclose such information by a governmental body.
4.9 Titles and Subtitles. The titles of the paragraphs and
sub-paragraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
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4.10 Counterparts. This Agreement may be executed in two or more,
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[this space intentionally left blank]
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IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement effective as of the date first above written.
NOBLE INTERNATIONAL, LTD.
By: /s/ Robert J. Skandalaris
------------------------------
Name: Robert J. Skandalaris
Title: President & CEO
UTILASE, INC.
By: /s/ James Bronce Henderson III
------------------------------
James Bronce Henderson III,
Chief Executive Officer
/s/ Jeffrey A. Moss
------------------------------
Jeffrey A. Moss
/s/ James Bronce Henderson III
-------------------------------
James Bronce Henderson III
14
Shareholders' Agreement
This Shareholders' Agreement (the "Agreement") is made as of this 7th
day of April, 1997, by and among Noble International, Ltd., a Michigan
corporation ("Noble"), Utilase, Inc., a Michigan corporation ("Utilase"), Robert
J. Skandalaris ("Skandalaris"), and James Bronce Henderson, III ("Henderson").
Utilase and Henderson are referred to in this Agreement individually as a
"Shareholder" and collectively as the "Shareholders."
Background
A. Noble, Utilase, Inc., a Michigan corporation ("Utilase") and
the shareholders of Utilase, have entered into that certain
Stock Purchase Agreement dated as of April 7, 1997, pursuant
to which Noble will acquire all of the outstanding stock of
Utilase (the "Purchase Agreement").
B. Skandalaris is the owner of approximately 60% of the issued
and outstanding Noble Common Shares, as that term is defined
below.
In consideration of the mutual covenants set forth in this Agreement,
the parties agree as follows:
Agreement
1. Definitions.
(a) "Noble Shares" shall mean shares of the common stock of
Noble.
(b) "Skandalaris Shares" shall mean Noble Shares now owned or
subsequently acquired, directly or indirectly, by Skandalaris.
(c) "Shareholders' Shares" shall mean Noble Shares now owned
or subsequently acquired by the Shareholders including the Escrow Shares (as
that term is defined in the Purchase Agreement) acquired by Utilase pursuant to
the terms of the Purchase Agreement.
2. Sales by Skandalaris.
(a) If Skandalaris proposes to sell, transfer or dispose of in
any way any Skandalaris Shares, including any redemption of such shares by Noble
("Skandalaris Share Transfer"), then Skandalaris shall promptly give written
notice (the "Skandalaris Notice") to the Shareholders at least 30 days prior to
the closing of a Skandalaris Share Transfer. The Skandalaris Notice shall
describe in reasonable detail the proposed Skandalaris Share Transfer,
including, without limitation, the number of Skandalaris Shares to be sold or
transferred, the nature of such sale
<PAGE>
or transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee. In the event that the proposed Skandalaris
Share Transfer is being made pursuant to the provisions of Sections 4(a) or 4(b)
of this Agreement, the Skandalaris Notice shall state under which section the
sale or transfer is being made.
(b) Each Shareholder shall have the pro rata right, based upon
the aggregate number of Noble Shares then held by each Shareholder, exercisable
upon written notice to Skandalaris within 15 days after receipt of the
Skandalaris Notice, to participate in such Skandalaris Share Transfer on the
same terms and conditions (the "Sale Option"). To the extent the Shareholders
exercise the Sale Option in accordance with the terms and conditions set forth
in Section 2(c) below (i) the number of Skandalaris Shares that Skandalaris may
sell shall be correspondingly reduced, and (ii) each Shareholder shall receive
its corresponding pro rata share of the aggregate consideration paid, directly
or indirectly, to Skandalaris by such purchasers or transferees.
(c) The Shareholders may sell all or any part of the
Shareholders' Shares equal to the product of (i) the aggregate number of
Skandalaris Shares covered by the Skandalaris Notice multiplied by (ii) a
fraction, the numerator of which is the number of Noble Shares owned by the
Shareholders at the time of the sale or transfer and the denominator of which is
the total number of Noble Shares owned by Skandalaris and the Shareholders at
the time of transfer.
(d) Each Shareholder shall effect its participation in the
sale by promptly delivering to Skandalaris for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent the type and number of Shareholders' Shares that the Shareholder
elects to sell.
(e) The stock certificate or certificates that the
Shareholders deliver to Skandalaris pursuant to Section 2(d) shall be
transferred to the prospective purchaser upon consummation of the Skandalaris
Share Transfer pursuant to the terms and conditions specified in the Skandalaris
Notice, and Skandalaris shall concurrently therewith remit to the Shareholders
that portion of the sale proceeds to which the Shareholders are entitled by
reason of their participation in such sale. To the extent that any prospective
purchaser or purchasers prohibit such assignment or otherwise refuse to purchase
Shareholders' Shares from the Shareholders, Skandalaris shall not sell to such
prospective purchaser or purchasers any Skandalaris Shares unless and until
Skandalaris has purchased from the Shareholders the number of Shareholders'
Shares that the Shareholders are entitled to sell under this Agreement on the
terms and subject to the conditions in the Skandalaris Notice.
(f) The exercise or non-exercise of the Shareholders' rights
under this Agreement to participate in one or more sales of Skandalaris Shares
shall not adversely affect their rights to exercise their Sale Option in
subsequent Skandalaris Share Transfers.
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3. Sales by the Shareholders.
(a) If the Shareholders propose to sell, transfer or dispose
of in any way any Shareholders' Shares ("Shareholders Share Transfer"), then the
Shareholders shall promptly give written notice (the "Shareholders Notice") to
Skandalaris at least 30 days prior to the closing of a Shareholders Share
Transfer. The Shareholders Notice shall describe in reasonable detail the
proposed Shareholders Share Transfer, including, without limitation, the number
of Shareholders' Shares to be sold or transferred, the nature of such sale or
transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee. In the event that the proposed Shareholders
Share Transfer is being made pursuant to the provisions of Sections 4(a) or 4(b)
of this Agreement, the Shareholders Notice shall state under which section the
sale or transfer is being made.
(b) Skandalaris shall have the right, but not the obligation,
exercisable upon written notice to the Shareholders within 15 days after receipt
of the Shareholders Notice, to purchase not less than all of the Shareholders'
Shares subject to the proposed transfer at the price of the proposed transfer
and on the terms of the proposed transfer.
4. Exempt Transfers.
(a) The provisions of Section 2 shall not apply to (i) any
pledge of Skandalaris Shares made pursuant to a bona fide loan transaction that
creates a mere security interest, or (ii) any transfer to the ancestors,
descendants or spouse of Skandalaris or to trusts for the benefit of such
persons; provided that (A) Skandalaris shall inform the Shareholders of such
pledge or transfer prior to effecting it and (B) the pledgee or transferee shall
furnish the Shareholders with a written agreement to be bound by and that
complies with all provisions of Section 2 of this Agreement. The provisions of
Section 3 shall not apply to (i) any pledge of Shareholders' Shares made
pursuant to a bona fide loan transaction that creates a mere security interest,
or (ii) any transfer to a successor, parent, subsidiary, assignee, ancestor,
descendant or spouse of the Shareholders or to trusts for the benefit of such
persons; provided that (A) the Shareholders shall inform Skandalaris of such
pledge or transfer prior to effecting it and (B) the pledgee or transferee shall
furnish Skandalaris with a written agreement to be bound by and that complies
with all provisions of Section 3 of this Agreement. Such transferred Noble
Shares shall remain "Skandalaris Shares" or "Shareholders' Shares," as
applicable, under this Agreement, and such pledgee or transferee shall be
treated as "Skandalaris" or a "Shareholder," as applicable, for purposes of this
Agreement.
(b) The provisions of Sections 2 and 3 shall not apply to the
sale of any Skandalaris Shares or Shareholders' Shares to the public pursuant to
a registration statement filed with, and declared effective by, the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the "1933
Act").
3
<PAGE>
5. Prohibited Transfers.
(a) In the event Skandalaris should sell any Noble Shares in
contravention of the rights of the Shareholders under this Agreement (a
"Prohibited Transfer"), the Shareholders, in addition to such other remedies as
may be available at law, in equity or under this Agreement, shall have the put
option provided below, and Skandalaris shall be bound by the applicable
provisions of such option.
(b) In the event of a Prohibited Transfer, the Shareholders
shall have the right to sell to Skandalaris the number of Noble Shares equal to
the number of shares each such Shareholder would have been entitled to transfer
to the purchaser had the Prohibited Transfer been effected pursuant to and in
compliance with the terms of this Agreement. Such sale shall be made on the
following terms and conditions:
(i) The price per share at which the Shareholders'
Shares are to be sold to Skandalaris shall be equal to the price per
share paid by the purchaser to Skandalaris in the Prohibited Transfer.
(ii) Within 60 days after the date on which the
Shareholders became aware of the Prohibited Transfer, the Shareholders
shall, if exercising the option created hereby, deliver to Skandalaris
the certificate or certificates representing Noble Shares to be sold,
each certificate to be properly endorsed for transfer.
(iii) Skandalaris shall, upon receipt of the
certificate or certificates for the shares to be sold by the
Shareholders, pursuant to this Section 5(b), pay the aggregate purchase
price therefor as specified in Section 5(b)(i), in immediately
available funds or by other means acceptable to the Shareholders.
(iv) Notwithstanding the foregoing, any attempt by
Skandalaris to transfer Noble Shares in violation of Section 2 of this
Agreement shall be void and Noble agrees it will not effect such a
transfer nor will it treat any alleged transferee as the holder of such
shares without the written consent of the Shareholders.
6. Legend.
(a) Each certificate representing Skandalaris Shares or
Shareholders' Shares issued to any person in connection with a transfer pursuant
to Section 4(a) of this Agreement shall be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS
OF A CERTAIN SHAREHOLDERS' AGREEMENT BY AND AMONG THE CORPORATION,
ROBERT J. SKANDALARIS, AND CERTAIN HOLDERS OF
4
<PAGE>
STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION."
(b) Skandalaris agrees that Noble may instruct its transfer
agent, if applicable, to impose transfer restrictions on the shares represented
by certificates bearing the legend referred to in Section 6(a) to enforce the
provisions of this Agreement and Noble agrees to promptly do so. The legend and
any stop transfer notations shall be removed upon termination of this Agreement.
7. Restricted Transfers.
(a) If Noble closes the initial public offering described in
the Purchase Agreement (the "IPO"), Skandalaris shall not, without the prior
joint written consent of the Shareholders, sell, transfer or dispose of in any
way any Skandalaris Shares on or before the second anniversary of the closing of
the IPO. Except as otherwise set forth in this Agreement, after the second
anniversary of the IPO, Skandalaris shall not, without the prior joint written
consent of the Shareholders, engage in such a transfer involving more than 20%
in the aggregate of the Skandalaris Shares so long as any Series A Preferred
Stock (as that term is defined in the Purchase Agreement) remains outstanding;
provided, however, that Skandalaris shall not engage in such a transfer if there
exists an Event of Default (as that term is defined in the designation (the
"Designation") of the Series A Preferred Stock contained in the Noble Articles
of Incorporation).
(b) If Skandalaris proposes such a transfer pursuant to
Section 7(a), then he shall promptly give written notice (the "Restricted
Transfer Notice") to each Shareholder at least 30 days prior to the closing of
such a transfer. The Restricted Transfer Notice shall describe in reasonable
detail the proposed transfer, including, without limitation, the number of
Skandalaris Shares to be sold or transferred, the nature of such sale or
transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee. In the event that the proposed transfer is
being made pursuant to the provisions of Section 7(c) of this Agreement, the
Restricted Transfer Notice shall state under which section the sale or transfer
is being made.
(c) Notwithstanding the foregoing, the provisions of this
Section 7 shall not apply to (i) any pledge of Skandalaris Shares made pursuant
to a bona fide loan transaction that creates a mere security interest, or (ii)
any transfer to the ancestors, descendants or spouse of Skandalaris or to trusts
for the benefit of such persons; provided, however, that (A) Skandalaris shall
inform each Shareholder of such pledge or transfer prior to effecting it and (B)
the pledgee or transferee shall furnish the Shareholders with a written
agreement to be bound by and that complies with all provisions of this
Agreement. Such transferred Skandalaris Shares shall remain "Skandalaris Shares"
under this Agreement, and such pledgee or transferee shall be treated as
"Skandalaris" for purposes of this Agreement.
5
<PAGE>
8. Miscellaneous.
(a) Arbitration. In the event that the Company and the
Shareholders cannot agree as to the disposition of any claim raised under this
Agreement, the unresolved matter shall be resolved by arbitration if a request
for arbitration, as provided in this Section 8(a), is given. Arbitration shall
be initiated by either party making a written demand on the other party and
simultaneously filing copies of the demand, together with the required fees,
with the Detroit Regional Office of the American Arbitration Association
("AAA"). Within 15 days after receipt of such demand, each party shall designate
one arbitrator. These two arbitrators shall, within 15 days after their
appointment, select a third arbitrator, who shall be experienced in the subject
matter of the claim for which resolution is sought. In the event that the first
two arbitrators are unable to agree upon a third arbitrator, then the
arbitrators shall apply to the AAA to designate and appoint a person who meets
these criteria as the third arbitrator. In the event the party upon whom the
original arbitration demand was served shall fail to designate its arbitrator,
the arbitrator designated by the party requesting arbitration shall act as the
sole arbitrator and shall be deemed to be single, mutually approved arbitrator
to resolve the matter. Final arbitration of the dispute shall occur within six
months of the giving of the notice of arbitration. The place of arbitration
shall be Troy, Michigan. Arbitration shall be conducted under the auspices of
the AAA and the AAA Rules shall govern all proceedings unless otherwise provided
in this Section 8(a). In the case of conflict between the AAA Rules and this
Agreement, the provisions of this Agreement shall govern. The arbitrators' sole
power shall be to interpret the provisions of this Agreement and they shall have
no power to change or modify any provision of this Agreement. The parties shall
have the right to discovery in accordance with the Federal Rules of Civil
Procedure except that discovery may commence immediately upon the service of the
demand for arbitration and except that discovery shall be limited to document
requests and depositions of not more than two people per party, and must occur
within three months of the date of such service of notice of the complaining
party. A party's unreasonable refusal to cooperate in discovery shall be deemed
to be a refusal to proceed with arbitration and, until the arbitration panel is
complete, the parties may enforce their rights (including the right of
discovery) in the circuit courts of the State of Michigan. Such enforcement in
the courts shall not constitute a waiver of a party's right to arbitration. Upon
the completion of the appointment of the arbitration panel, the arbitrators
shall have the power to enforce the parties' discovery rights. It is expressly
agreed that material subject to discovery shall include written documents that
must be created from information that currently exists only in machine-readable
form.
The parties expressly covenant and agree to be bound by the decision of
the arbitration panel and accept any such decision as the final determination of
the matter in dispute. A judgment of any Michigan Circuit Court may be rendered
upon any award made pursuant to this Agreement.
(b) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Michigan, without regard to the
conflict of laws principals of that state.
(c) Amendment. Any provision may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only
6
<PAGE>
by the written consent of (i) as to Noble, only by Noble, (ii) as to Utilase, by
Henderson, (iii) as to Henderson, by Henderson, and (iv) as to Skandalaris, by
Skandalaris. Any amendment or waiver effected in accordance with clauses (i),
(ii) and (iii) of this Section 8(c) shall be binding upon Noble, Skandalaris,
and the Shareholders and their respective successors, assigns, and legal
representatives.
(d) Assignment of Rights. This Agreement and the rights and
obligations of the parties under this Agreement shall inure to the benefit of,
and be binding upon, their respective successors, assigns and legal
representatives. The rights of Utilase under this Agreement are assignable to an
affiliate of Utilase or to a successor in interest to Utilase.
(e) Term. This Agreement shall terminate in its entirety upon
the earlier of (i) the final redemption by Noble of any outstanding Series A
Preferred Stock and (ii) the closing of Noble's sale of all or substantially all
of its assets or the acquisition of Noble by another entity by means of merger
or consolidation resulting in the exchange of the outstanding Noble Shares for
securities or consideration issued, or caused to be issued, by the acquiring
entity or its subsidiary, so long as the holders of Noble Shares receive, pro
rata, substantially all of the consideration paid, directly or indirectly, by
the acquiring entity in connection with such transaction. Sections 2, 3, 4 and 5
of this Agreement shall terminate and the legends referred to in Section 6 shall
be removed from the applicable certificates on the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the 1933 Act, covering the offer and sale of all or a portion of Noble
Shares at an aggregate offering price to the public of not less than
$10,000,000.
(f) Capitalization. Noble represents and warrants that (i)
there are 60,000 authorized and 11,550 issued and outstanding Noble Shares, (ii)
there are no other issued and outstanding Noble Shares, and (iii) Noble is under
no obligation to issue any Noble Shares except as contemplated by the Purchase
Agreement and the proposed IPO referred to in the Purchase Agreement and stock
option plans for Noble management and directors.
(g) Ownership. Skandalaris represents and warrants that (i) he
is the sole legal and beneficial owner of approximately 60% of the issued and
outstanding Noble Shares.
(h) Notices. All notices or other communications required or
permitted under this Agreement shall be in writing and shall be given by
certified mail, recognized commercial overnight courier or facsimile addressed
as follows.
If to Noble to:
Noble International, Ltd.
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, MI 48304
Attention: Mr. Michael Azar
7
<PAGE>
with a copy to:
Jaffe, Raitt, Huer & Weiss, Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, MI 48226
Attention: Mr. Peter Sugar
If to Skandalaris to:
Robert J. Skandalaris
33 Bloomfield Hills Parkway, Suite 155
Bloomfield Hills, MI 48304
with a copy to:
Jaffe, Raitt, Huer & Weiss, Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, MI 48226
Attention: Mr. Peter Sugar
If to Utilase to:
Utilase, Inc.
20101 Hoover Road
Detroit, MI 48205
Attention: Mr. James Bronce Henderson, III
with a copy to:
Dykema Gossett PLLC
1577 N. Woodward, Suite 300
Bloomfield Hills, MI 48304
Attention: Gerald T. Lievois
(i) Severability. In the event one or more of the provisions
of this Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained in this Agreement.
8
<PAGE>
(j) Counterparts. This Agreement may be executed in two or
more, counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[this space intentionally left blank]
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement effective as of the date first set above.
NOBLE INTERNATIONAL, LTD.
By: _________________________________
Name: _________________________________
Title: _________________________________
UTILASE, INC.
By: _________________________________
James Bronce Henderson, III,
Chief Executive Officer
_________________________________
Robert J. Skandalaris
_________________________________
James Bronce Henderson, III
10
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
State of
Name Incorporation Assumed Names
- --------------------------------- ------------- ---------------------
Prestolock International, Ltd. Michigan
Monroe Engineering Products, Inc. Michigan
Cass River Coating, Inc. Michigan Vassar Industries
DCT Component Systems, Inc.* Michigan
Utilase Production Process, Inc. Michigan
Utilase, Inc. * Michigan Utilase Blank Welding
Technologies
- ----------
* Acquisition pending
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 such 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
May 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001034258
<NAME> Noble International, Ltd.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1.000
<CASH> 471
<SECURITIES> 0
<RECEIVABLES> 1,567
<ALLOWANCES> 10
<INVENTORY> 2,285
<CURRENT-ASSETS> 4,560
<PP&E> 1,849
<DEPRECIATION> 379
<TOTAL-ASSETS> 11,654
<CURRENT-LIABILITIES> 5,407
<BONDS> 0
0
0
<COMMON> 523
<OTHER-SE> 349
<TOTAL-LIABILITY-AND-EQUITY> 11,654
<SALES> 16,187
<TOTAL-REVENUES> 16,187
<CGS> 10,587
<TOTAL-COSTS> 10,587
<OTHER-EXPENSES> 415
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 439
<INCOME-PRETAX> 91
<INCOME-TAX> 25
<INCOME-CONTINUING> 66
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66
<EPS-PRIMARY> 6.02
<EPS-DILUTED> 6.02
</TABLE>
Exhibit 99.1
CONSENT TO IDENTIFICATION AS DIRECTOR NOMINEE
The undersigned hereby consents to his identification as a director nominee
of Noble International, Ltd. in the within Registration Statement on Form S-1.
________________________________________
JAMES BRONCE HENDERSON, III
Exhibit 99.2
CONSENT TO IDENTIFICATION AS DIRECTOR NOMINEE
The undersigned hereby consents to his identification as a director nominee
of Noble International, Ltd. in the within Registration Statement on Form S-1.
________________________________________
DAVID C. STONE
Exhibit 99.3
CONSENT TO IDENTIFICATION AS DIRECTOR NOMINEE
The undersigned hereby consents to his identification as a director nominee
of Noble International, Ltd. in the within Registration Statement on Form S-1.
________________________________________
PETER SUGAR
Exhibit 99.4
CONSENT TO IDENTIFICATION AS DIRECTOR NOMINEE
The undersigned hereby consents to his identification as a director nominee
of Noble International, Ltd. in the within Registration Statement on Form S-1.
________________________________________
TROY D. WISEMAN
Exhibit 99.5
CONSENT TO IDENTIFICATION AS DIRECTOR NOMINEE
The undersigned hereby consents to his identification as a director nominee
of Noble International, Ltd. in the within Registration Statement on Form S-1.
_________________________________________
ANTHONY R. TERSIGNI
Exhibit 99.6
CONSENT TO IDENTIFICATION AS DIRECTOR NOMINEE
The undersigned hereby consents to his identification as a director nominee
of Noble International, Ltd. in the within Registration Statement on Form S-1.
________________________________________
