<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1998
REGISTRATION NO. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NEWCOR, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
3714
(Primary Standard Industrial
Classification Code Number)
38-0865770
(I.R.S. Employer
Identification Number)
AND THE FOLLOWING ADDITIONAL REGISTRANTS, EACH A SUBSIDIARY GUARANTOR:
<TABLE>
<S> <C> <C>
MICHIGAN ROCHESTER GEAR, INC. 38-2379349
WISCONSIN PLASTRONICS PLUS, INC. 39-1513019
MICHIGAN GRAND MACHINING COMPANY 38-1447019
MICHIGAN DECO TECHNOLOGIES, INC. 38-3111177
MICHIGAN DECO INTERNATIONAL, INC. 38-3188128
MICHIGAN TURN-MATIC, INC. 38-1876306
(State or other jurisdiction of (Exact name of Guarantor (IRS Employer
incorporation or organization) as specified in its charter) Identification Number)
</TABLE>
1825 SOUTH WOODWARD AVENUE, SUITE 240, BLOOMFIELD HILLS, MICHIGAN 48302, (248)
253-2400
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------
For Each Registrant:
W. JOHN WEINHARDT
1825 SOUTH WOODWARD AVENUE, SUITE 240
BLOOMFIELD HILLS, MICHIGAN 48302
(248) 253-2400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
with copies to:
Kent E. Shafer, Esq.
Miller, Canfield, Paddock and Stone, P.L.C.
150 West Jefferson Avenue
Detroit, Michigan 48226
(313) 963-6420
------------------------
Approximate date of commencement of proposed sale to the public: Upon
consummation of the Exchange Offer referred to herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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 pursuant to Rule 462(d) 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. [ ]
- ------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE(1) OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
9 7/8% Series B Senior Subordinated
Notes due 2008..................... $125,000,000 100.875% $126,093,750 $37,198
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Guarantees of the Subsidiary
Guarantors......................... $0 0% $0 (2)
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(1) based on the average of the bid and asked prices for the
Notes on April 28, 1998.
(2) Pursuant to Rule 457(n), no separate fee is payable for the Guarantees.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED APRIL 30, 1998
OFFER TO EXCHANGE
ALL OUTSTANDING 9 7/8% SENIOR SUBORDINATED NOTES DUE 2008
($125,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR 9 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
($125,000,000 PRINCIPAL AMOUNT)
OF NEWCOR, INC.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
Newcor, Inc., a Delaware corporation (the "Issuer"), hereby offers (the
"Exchange Offer"), upon the terms and subject to the conditions set forth in
this Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange up to an aggregate principal amount of $125,000,000
of its 9 7/8% Series B Senior Subordinated Notes due 2008 (the "Exchange Notes")
for an equal principal amount of its outstanding 9 7/8% Senior Subordinated
Notes due 2008 (the "Notes"), in integral multiples of $1,000. The Exchange
Notes will be substantially identical (including principal amount, interest
rate, maturity and redemption rights) to the notes for which they may be
exchanged pursuant to the Exchange Offer, except that (i) the offer and sale of
the Exchange Notes will have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), and (ii) holders of Exchange Notes will not
be entitled to certain rights of holders of the Notes under the A/B Exchange
Registration Rights Agreement of the Issuer and certain of its subsidiaries that
have guaranteed the Notes and will guarantee the Exchange Notes (the "Subsidiary
Guarantors") dated as of March 4, 1998 (the "Registration Rights Agreement").
The Notes have been, and the Exchange Notes will be, issued under an indenture
(the "Indenture") dated as of March 4, 1998 among the Issuer, the Subsidiary
Guarantors and U.S. Bank Trust National Association (formerly known as First
Trust National Association), as trustee (the "Trustee"). See "Description of
Exchange Notes." There will be no proceeds to the Issuer from this offering;
however, pursuant to the Registration Rights Agreement, the Issuer will bear
certain offering expenses.
The Issuer will accept for exchange any and all validly tendered Notes on
or prior to 5:00 p.m., New York City time, on , 1998 (the
"Expiration Date"), unless the Exchange Offer is extended. Tenders of Notes may
be withdrawn at any time prior to 5:00 p.m. on the Expiration Date; otherwise,
such tenders are irrevocable. U.S. Bank Trust National Association will act as
exchange agent (in such capacity, the "Exchange Agent") in connection with the
Exchange Offer. The Exchange Offer is not conditioned on any minimum principal
amount of Notes being tendered for exchange but is subject to certain other
customary conditions.
The Notes were sold by the Issuer on March 4, 1998 (the "Offering") in
transactions not registered under the Securities Act in reliance upon the
exemption provided in Section 4(2) of the Securities Act. The Notes were
subsequently resold to qualified institutional buyers in reliance upon Rule 144A
under the Securities Act. Accordingly, the Notes may not be reoffered, resold or
otherwise transferred in the United States unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The Exchange Notes are being
offered in order to satisfy certain obligations of the Issuer under the
Registration Rights Agreement. See "The Exchange Offer."
A portion of the net proceeds of the Offering was used to finance the
acquisitions by the Issuer of each of Grand Machining Company, Deco
Technologies, Inc. and Deco International Inc. and of Turn-Matic, Inc. and to
refinance indebtedness of the Issuer incurred in connection with its acquisition
of Machine Tool & Gear, Inc. (collectively, the "Acquisitions"). See "The
Acquisitions."
(continued on inside front cover)
------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE ISSUERS OR SUBSIDIARY GUARANTORS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE EXCHANGE NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE EXCHANGE NOTES
TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE EXCHANGE
NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1998.
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 SUCH STATE.
<PAGE> 3
(continued from cover)
Interest on the Exchange Notes will be payable semi-annually on March 1 and
September 1 of each year, commencing September 1, 1998. The Exchange Notes will
mature on March 1, 2008. The Exchange Notes will be redeemable, in whole or in
part, at the option of the Issuer, on or after March 1, 2003 at the redemption
prices set forth herein, plus accrued and unpaid interest and Liquidated Damages
(as defined herein), if any, to the date of redemption. In addition, at any time
prior to March 1, 2001 the Issuer may, at its option, on any one or more
occasions, redeem up to $43,750,000 principal amount of Notes and Exchange Notes
at a redemption price equal to 109.875% of the aggregate principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date, with the net cash proceeds of one or more public
common stock offerings; provided that at least $81,250,000 aggregate principal
amount of the Notes and Exchange Notes will remain outstanding immediately
following each such redemption. Upon a Change of Control (as defined herein),
each holder of the Exchange Notes will have the right to require the Issuer to
repurchase such holder's Exchange Notes at 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
to the date of repurchase. See "Description of Exchange Notes."
The Exchange Notes will be general unsecured obligations of the Issuer and
will rank subordinate in right of payment to all Senior Debt (as defined herein)
of the Issuer and senior or equal in right of payment to all other existing and
future subordinated indebtedness of the Issuer. The Notes are, and the Exchange
Notes will be, unconditionally guaranteed (the "Subsidiary Guarantees") on a
senior subordinated basis by the Subsidiary Guarantors (as defined herein). The
Subsidiary Guarantees will be general unsecured obligations of the Subsidiary
Guarantors and will rank subordinate in right of payment to all Senior Debt of
the Subsidiary Guarantors and senior or equal in right of payment to all other
existing and future subordinated indebtedness of the Subsidiary Guarantors. The
Exchange Notes and the Notes will rank equally with one another, and each
Subsidiary Guarantor's guarantee of the Exchange Notes will rank equally with
its guarantee of the Notes. As of January 31, 1998, on a pro forma basis after
giving effect to the Acquisitions, the Offering and the application of the
proceeds of the Offering, the Notes would have been subordinate to $10.3 million
of Senior Debt of the Issuer (excluding guarantees by the Issuer of Senior Debt
of its subsidiaries), and the Subsidiary Guarantees would have been subordinate
to $6.1 million of Senior Debt of the Subsidiary Guarantors (excluding
guarantees by the Subsidiary Guarantors of Senior Debt of the Issuer). See
"Description of Exchange Notes."
The Exchange Offer is being made in reliance on certain no-action positions
that have been published by the staff of the Securities and Exchange Commission
(the "Commission") which require each tendering noteholder to represent that it
is acquiring the Exchange Notes in the ordinary course of its business and that
such holder does not intend to participate and has no arrangement or
understanding with any person to participate in a distribution of the Exchange
Notes. In some cases, certain broker-dealers may be required to deliver a
prospectus in connection with the resale of Exchange Notes that they receive in
the Exchange Offer. See "The Exchange Offer" and "Plan of Distribution."
There has not previously been any public market for the Exchange Notes. The
Issuer does not intend to list the Exchange Notes on any securities exchange or
to seek approval for quotation through any automated quotation system. There can
be no assurance that an active market for the Exchange Notes will develop. To
the extent that an active market for the Exchange Notes does develop, the market
value of the Exchange Notes will depend on market conditions (such as yields on
alternative investments), general economic conditions, the Issuer's financial
condition and other factors. Such conditions might cause the Exchange Notes, to
the extent that they are actively traded, to trade at a significant discount
from face value. See "Risk Factors -- Lack of Public Market for Exchange Notes."
ANY NOTES NOT TENDERED AND ACCEPTED IN THE EXCHANGE OFFER WILL REMAIN
OUTSTANDING. TO THE EXTENT ANY NOTES ARE TENDERED AND ACCEPTED IN THE EXCHANGE
OFFER, A HOLDER'S ABILITY TO SELL UNTENDERED NOTES COULD BE ADVERSELY AFFECTED.
FOLLOWING CONSUMMATION OF THE EXCHANGE OFFER, THE HOLDERS OF NOTES WILL CONTINUE
TO BE SUBJECT TO THE EXISTING RESTRICTIONS ON TRANSFER THEREOF. HOLDERS WHO DO
NOT TENDER THEIR NOTES GENERALLY WILL NOT HAVE ANY FURTHER REGISTRATION RIGHTS
UNDER THE REGISTRATION RIGHTS AGREEMENT OR OTHERWISE. SEE "THE EXCHANGE OFFER --
CONSEQUENCES OF FAILURE TO EXCHANGE."
The Exchange Notes generally will be issued in registered, global form
without interest coupons (the "Global Exchange Notes"), which will be deposited
with, or on behalf of, The Depository Trust Company ("DTC") and registered in
its name or in the name of Cede & Co., its nominee. Beneficial interests in the
Global Exchange Notes representing the Exchange Notes will be shown on, and
transfers thereof will be effected through, records maintained by DTC and its
participants. After the initial issuance of the Global Exchange Notes, Exchange
Notes in certificated form will be issued in exchange for the Global Exchange
Notes only on the terms set forth in the Indenture. See "Description of Exchange
Notes -- Book Entry, Delivery and Form."
<PAGE> 4
ADDITIONAL INFORMATION
The Issuer is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Issuer can be inspected and copied at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and the regional
offices of the Commission located at 7 World Trade Center, New York, New York
10048 and 500 West Madison Street, 14th Floor, Chicago, Illinois 60661. Copies
of such materials may be obtained from the Public Reference Section of the
Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at its public reference facilities in New York, New York and Chicago, Illinois
at prescribed rates. The Issuer makes its filings with the Commission
electronically. The Commission maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically, which information can be accessed at http://www.sec.gov.
The Subsidiary Guarantors' financial and other disclosure obligations under
the informational requirements of the Exchange Act will be fulfilled by
including information regarding the Subsidiary Guarantors in the Issuer's
periodic reports.
The Issuer has agreed in the Indenture that, whether or not required by the
rules of the Commission, so long as any Notes or Exchange Notes are outstanding,
it will furnish to the holders of Notes and Exchange Notes (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Issuer were required to file
such forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial condition and
results of operations of the Issuer and its consolidated subsidiaries and, with
respect to the annual information only, a report thereon by the Issuer's
independent accountants and (ii) all current reports that would be required to
be filed with the Commission if the Issuer were required to file such reports.
For all reporting periods ending on or prior to January 31, 1999, the Issuer has
agreed to include in each Form 10-Q and 10-K a presentation, which need not be
audited, of certain financial information for such period and the twelve months
ended on the last day of such period on a pro forma basis. The Issuer has also
agreed that, following consummation of the Exchange Offer, whether or not
required by the rules of the Commission, it will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules (unless the Commission will not
accept such a filing) and make such information available to securities analysts
and prospective investors upon request.
In addition, the Issuer and the Subsidiary Guarantors have agreed that, for
so long as any Notes or Exchange Notes remain outstanding, they will furnish to
the holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
The Issuer has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act for the registration of the Exchange Notes offered
hereby (the "Registration Statement"). This Prospectus, which constitutes a part
of the Registration Statement, does not contain all the information set forth in
the Registration Statement, certain items of which are contained in exhibits and
schedules to the Registration Statement as permitted by the rules and
regulations of the Commission. For further information about the Issuer and the
Exchange Notes offered hereby, reference is made to the Registration Statement,
including the exhibits (some of which are incorporated by reference to other
Company filings with the Commission) and financial statement schedules thereto,
which may be inspected without charge at the public reference facility
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies of which may be obtained from the Commission at prescribed rates or
from the Web site described above. Statements made in this Prospectus concerning
the contents of any documents referred to herein are not necessarily complete.
With respect to each such document filed or incorporated by reference as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
i
<PAGE> 5
FORWARD-LOOKING STATEMENTS
This Prospectus, including the "Summary," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business"
sections, contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, which can be identified by the
use of forward-looking terminology, such as "may," "intend," "will," "expect,"
"anticipate," "plan," "management believes," "estimate," "continue," or
"position" or the negative thereof or other variations thereon or comparable
terminology. In particular, any statements, express or implied, concerning
future operating results or the ability to generate revenues, income or cash
flow to service the Notes and Exchange Notes are forward-looking statements.
Investors in the Exchange Notes offered hereby are cautioned that reliance on
any forward-looking statements involves risks and uncertainties and that,
although the Issuer believes that the assumptions on which the forward-looking
statements contained herein are based are reasonable, any of those assumptions
could prove to be inaccurate. As a result, the forward-looking statements based
on those assumptions also could be incorrect, and actual results may differ
materially from any results indicated or suggested thereby. The uncertainties in
this regard include, but are not limited to, those identified herein under "Risk
Factors" and under "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Cautionary Statements Under the 'Safe Harbor'
Provisions of the Private Securities Litigation Reform Act of 1995." In light of
these and other uncertainties, the inclusion of a forward-looking statement
herein should not be regarded as a representation by the Company that the
Company's plans and objectives will be achieved. All forward-looking statements
are expressly qualified by such cautionary statements, and the Company expressly
disclaims any duty to update such forward-looking statements.
ii
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the notes thereto, appearing elsewhere in this Prospectus. Newcor, Inc. (the
"Issuer") acquired substantially all of the assets of Machine Tool & Gear, Inc.
("MT&G") on December 23, 1997 and acquired the stock of each of Grand Machining
Company, Deco Technologies, Inc. and Deco International, Inc. (collectively,
"Deco"), and of Turn-Matic, Inc. ("Turn-Matic") on March 4, 1998. MT&G, Deco and
Turn-Matic are collectively referred to herein as the "Acquired Companies" and
their respective acquisitions are referred to herein as the "MT&G Acquisition,"
the "Deco Acquisition" and the "Turn-Matic Acquisition" and, collectively, as
the "Acquisitions." See "The Acquisitions." Unless the context requires
otherwise, "Newcor" or the "Company" refers to Newcor, Inc. and its
subsidiaries. "Pro forma" information relates to the Company on a pro forma
basis after giving effect to the Acquisitions, the Offering and the application
of the proceeds of the Offering. Unless otherwise indicated, each reference to a
fiscal year is to the Company's fiscal year, which ends on October 31 of the
year specified. Pro forma information as of and for the fiscal year ended
October 31, 1997 includes results for the Acquired Companies as of and for the
twelve months ended September 30, 1997, and pro forma information as of and for
the quarter ended January 31, 1998 includes results for the Acquired Companies
as of and for the three months ended December 31, 1997.
THE COMPANY
GENERAL
The Company is a leading manufacturer of precision machined components and
assemblies for the automotive, medium and heavy duty truck and agricultural
vehicle industries and is a manufacturer of custom rubber and plastic products
primarily for the automotive industry. The Company is also a supplier of
standard and custom machines and systems primarily for the automotive and
appliance industries. The Company's largest customers include leading vehicle
original equipment manufacturers ("OEMs") such as Chrysler Corporation
("Chrysler"), Ford Motor Company ("Ford"), General Motors Corporation ("General
Motors" or "GM") and Deere & Company ("Deere"), and direct suppliers to the OEMs
("Tier 1 suppliers") such as American Axle & Manufacturing, Inc. ("American
Axle") and Detroit Diesel Corporation ("Detroit Diesel"). The Company's products
are typically supplied to customers on a sole-source basis. Sole-source sales
represented approximately 89% of fiscal 1997 pro forma sales. The Company's
management has extensive experience in the automotive supply industry and has
integrated five acquired businesses (excluding the Acquired Companies) into
existing operations over the past 48 months.
Through internal growth and acquisitions, the Company's sales from
continuing operations increased at a compound annual rate of 18.9%, from $65.4
million in fiscal 1993 to $130.8 million in fiscal 1997, and EBITDA (as defined
herein) increased from $1.9 million in fiscal 1993 to $12.6 million in fiscal
1997. The Acquired Companies had aggregate sales of $111.8 million and aggregate
pro forma EBITDA of $19.5 million for the twelve months ended September 30,
1997. On a pro forma basis, the Company had sales and EBITDA of $242.6 million
and $32.1 million, respectively, for fiscal 1997.
The Company's products are used in more than 25 passenger car models and
nearly all light truck and sport utility models manufactured in the United
States, including such leading vehicles as the Ford Taurus, Lincoln Continental,
Chrysler Concorde, Dodge Intrepid, Pontiac Grand Prix, Buick Park Avenue, Ford F
series of light trucks, General Motors C/K series of light trucks and sport
utility vehicles, Jeep sport utility vehicles and Dodge Ram series of light
trucks and sport utility vehicles. In addition, the Company is the leading
independent supplier of precision machined components to Deere's tractor
operations and to Detroit Diesel, the largest producer of engines for class 8
heavy duty trucks in North America.
The Company is organized into three business groups: the Precision Machined
Products Group, the Rubber and Plastic Group and the Special Machines Group.
Certain key products manufactured by each of these groups, and certain key
processes used to manufacture those products, are described in the "Glossary"
section of this Prospectus. Pro forma fiscal 1997 EBITDA amounts presented below
for these groups do not reflect $1.2 million of certain unallocated corporate
expenses.
1
<PAGE> 7
The Precision Machined Products Group produces transmission, powertrain and
engine components and assemblies, primarily for the automotive, medium and heavy
duty truck and agricultural vehicle industries. Automotive products include
gears, gear blanks and shafts for transmissions; bearing caps, oil filter
adapters and manifolds for engines; thrust and pressure plates for power
steering systems; and axles. Products for the medium and heavy duty truck
industry include rocker arm components and assemblies, accessory drive
assemblies and other engine components. Products for the agricultural vehicle
industry include transfer cases, differential cases, transmission housings and
brake pedals. The Precision Machined Products Group generated $172.2 million, or
71.0%, of the Company's pro forma sales and $27.0 million, or 81.0%, of the
Company's pro forma EBITDA in fiscal 1997.
The Rubber and Plastic Group produces cosmetic and functional seals and
boots and functional engine compartment products supplied primarily to the
automotive industry. The group's seals and boots include interior and exterior
floor gear shift lever boots, steering column seals, door lock actuator boots
and a variety of other products that insulate the passenger compartment from the
external environment. The group's functional engine compartment products include
custom designed vacuum reservoirs essential for the operation of air
conditioning, cruise control and other vehicle systems. The Rubber and Plastic
Group generated $48.5 million, or 20.0%, of the Company's pro forma sales and
$3.7 million, or 11.1%, of the Company's pro forma EBITDA in fiscal 1997.
The Special Machines Group designs and manufactures standard and custom
welding, assembly, forming, heat treating and testing machines and systems for
the automotive, appliance and other industries. The Special Machines Group
generated $21.9 million, or 9.0%, of the Company's pro forma sales and $2.6
million, or 7.9%, of the Company's pro forma EBITDA in fiscal 1997.
COMPETITIVE STRENGTHS
Full-Service Supplier with Broad Manufacturing Capabilities. The Company's
diverse range of manufacturing capabilities enables it to tailor manufacturing
processes to meet each customer's specific requirements and reduces the need for
customers to rely on multiple suppliers. The Company specializes in the high
volume production of components and assemblies involving extremely close
tolerances, complex processes and in some cases difficult materials. The
Company's manufacturing operations utilize advanced equipment such as modern
Computer Numerical Control ("CNC") machines, synchronous and non-synchronous
transfer lines, and proprietary custom molding machines. Precision machining
operations include milling, drilling, turning, heat-treating, honing, broaching
and electronic gauging, as well as more demanding processes such as gun
drilling, spline rolling, ultra precision grinding, super-finishing, lapping and
laser welding. Rubber and plastic molding operations include conventional
injection molding, as well as dip molding, slush casting, rotational molding,
injection molding of multiple-durometer products, sonic welding and other
processes. The Company designs and builds much of its own automation and custom
tooling and most of its non-standard machines. Increasingly, the Company also
provides its customers with value-added capabilities such as design and
development, engineering, assembly and testing, and program management from
concept development through production and assembly. Management believes that
the Acquisitions will further enhance the scope of the Company's engineering,
design and assembly capabilities and provide a competitive advantage as OEMs and
their Tier 1 suppliers increasingly rely on and award new business to
established and well-known suppliers.
Efficient, High Quality Operations. The Company's manufacturing expertise
allows it to focus primarily on higher value added, more complex components and
assemblies with very exacting dimensional, finish and cosmetic requirements. The
Company also proactively works with its customers to improve the design and
manufacturing processes used in its products. These initiatives often lead to
improved quality and product performance, improved efficiency and reduced
manufacturing costs. The Company uses the cost savings and other benefits
derived from these efforts to reinforce its customer relationships. In addition,
ISO 9000 and QS 9000 quality certifications are integral to the Company's
operating methodology and commitment to quality. Currently, 11 of the Company's
15 manufacturing facilities are ISO 9000 or QS 9000 certified, with the
remaining four expected to be certified by the end of 1998. Management believes
that the Company's
2
<PAGE> 8
manufacturing expertise and commitment to quality are among the primary reasons
for the Company's strong historical growth and customer loyalty.
Strong Relationships with Customers. Approximately 78% of the Company's pro
forma fiscal 1997 sales were generated by the Company's six largest customers,
each of which the Company has served for over 25 years, and the Company is the
sole-source outside supplier on nearly all of the products it manufactures for
its major customers. The Company has developed collaborative relationships with
its customers by providing them with integrated product development and
manufacturing capabilities, high quality products, timely delivery and excellent
customer service. The Acquired Companies have products and customer bases which
complement the Company's other operations, and the combination of these
businesses makes the Company a larger supplier to several of its key customers
and creates cross-selling opportunities. Management intends to leverage the
Company's selling resources and established customer relationships to introduce
its customers to the full range of products and process capabilities of each of
its operations. For example, the Company plans to introduce its broad precision
machining capabilities to existing Deco customers such as Detroit Diesel.
Product, Vehicle, Customer and Industry Diversification. The Company offers
in excess of 50 different major products, many of which are sole-sourced, for
use on more than 60 different vehicle platforms. These products are sold to
customers who are diversified across the automotive, medium and heavy duty truck
and agricultural vehicle industries, with no single customer accounting for more
than approximately 20% of pro forma 1997 sales. Management believes that this
product, vehicle, customer and industry diversification can help reduce the
Company's dependence on any single source of revenue.
OPERATING STRATEGY
Strengthen Positions in Established Product Niches. The Company's goal is
to continue to develop expertise and expand market presence centered around its
two key operating platforms, which are (i) precision machined transmission,
powertrain and engine components and assemblies for the automotive, medium and
heavy duty truck and agricultural vehicle industries through the Precision
Machined Products Group, and (ii) manufacturing of rubber and plastic cosmetic,
functional sealing and underhood components for the automotive industry through
the Rubber and Plastic Group. Management believes that these two platforms
provide opportunities for profitable growth due to the existence of relatively
few competitors with comparable manufacturing and program management
capabilities.
Capitalize on Increased Outsourcing. Component and assembly outsourcing is
a well established trend in the automotive industry and is becoming increasingly
prevalent in the medium and heavy duty truck and agricultural vehicle
industries. The Company's status as an incumbent supplier positions it to
participate in the growth in outsourcing by capturing incremental business from
existing customers and marketing its experience and capabilities to new
customers with outsourcing needs. Management plans to continue to develop and
market the Company's design, engineering and assembly capabilities and believes
that its diverse process capabilities and full-service supplier status give the
Company the opportunity to compete more effectively for complex, higher
value-added and more profitable assembly work.
Pursue Continuous Operating Improvement. The Company's operating philosophy
is based on the rigorous implementation of lean production systems supported by
world-class quality management and excellence in customer service, as measured
by quality, on-time delivery, timely product launches and low manufacturing
cost. The Company has developed and is implementing a comprehensive company-wide
management system (the "Newcor Operating System") which emphasizes continuous
improvement and integrates a quality operating system, cellular manufacturing,
one-piece flow, working capital management, supply chain management, value
engineering, kaizen, team-oriented problem solving and leadership skills into an
overall culture and system of management. Implementation of the Newcor Operating
System has led to significant improvements in scrap rates, labor productivity,
working capital turnover and other measureables in certain of the Company's
businesses. Management believes that similar improvements can be achieved in
each of the Company's businesses, over time, as training is increased and the
Newcor Operating System is extended to all locations.
3
<PAGE> 9
Selectively Pursue Strategic Acquisitions. Strategic acquisitions have
been, and will continue to be, an integral part of the Company's growth
strategy. The market niches in which the Company operates have a high degree of
fragmentation among competitors, often presenting significant opportunities for
consolidation. Management believes that the Company's reputation and market
leadership make it an attractive strategic acquiror for smaller competitors that
may be unable to meet the necessary investment requirements and increasingly
stringent criteria being imposed by OEMs and their Tier 1 suppliers. Management
plans to continue to pursue acquisition opportunities that are complementary to
the Company's existing niche platforms, particularly those that expand
technological capabilities, product offerings, customer base or geographical
scope. Other key factors management considers when reviewing acquisition
opportunities include the potential for cost savings and cross-selling, and the
opportunity to enhance engineering, assembly and other value-added operating and
program management capabilities.
The Company's and Subsidiary Guarantors' principal executive offices are
located at 1825 S. Woodward Ave., Suite 240, Bloomfield Hills, Michigan 48302.
The telephone number for each of them is (248) 253-2400.
THE ACQUISITIONS
MT&G. On December 23, 1997, the Company purchased substantially all of the
assets of MT&G, a Corunna, Michigan based manufacturer of high volume, precision
machined components. MT&G's products include differential pinion and side gears,
output shafts and rear axle shafts for the automotive industry. MT&G's sales and
pro forma EBITDA for the twelve months ended September 30, 1997 were $21.8
million and $3.4 million, respectively. Newcor acquired MT&G for $27.3 million,
consisting of approximately $5.6 million in cash and $21.7 million in the form
of a promissory note (bearing interest at 8% per annum and payable in full on
the closing date of the Offering), plus the assumption of approximately $5.8
million of debt. A key strategic consideration in management's decision to
acquire MT&G was that American Axle has recently awarded MT&G long-term
contracts to machine near net shape gears for the General Motors C/K series of
light trucks and sport utility vehicles. MT&G has commenced production of the
gears and is scheduled to reach full production levels early in the third
quarter of fiscal 1998. MT&G's historical results do not reflect this new
business from American Axle.
Deco. On March 4, 1998, the Company acquired the stock of the three
companies comprising Deco, a Royal Oak, Michigan based manufacturer of high
volume, precision machined components and assemblies. Deco's products include
rocker arm components and assemblies, transmission shafts, axle shafts, thrust
and pressure plates and other products for the medium and heavy duty truck and
automotive industries. Deco's sales and pro forma EBITDA for the twelve months
ended September 30, 1997 were $74.2 million and $11.1 million, respectively.
Sales and pro forma EBITDA for the year ended December 31, 1997 were $75.5
million and $10.7 million, respectively. Newcor acquired Deco for $54.9 million
in cash, subject to certain net book value adjustments.
Turn-Matic. On March 4, 1998, the Company acquired the stock of Turn-Matic,
a Clinton Township, Michigan based manufacturer of high volume, precision
machined components and assemblies. Turn-Matic manufactures engine components
including oil filter adapters, main bearing caps and intake and exhaust
manifolds for the automotive industry. Turn-Matic's sales and pro forma EBITDA
for the twelve months ended September 30, 1997 were $15.8 million and $5.0
million, respectively. Newcor acquired Turn-Matic for $17.0 million in cash,
subject to certain net book value adjustments, plus contingent future payments
(not to exceed $3.5 million in total) based on profitability of the Turn-Matic
business over a five-year period following the closing.
RISK FACTORS
Prospective investors in the Exchange Notes should carefully consider the
information set forth under the caption "Risk Factors," and all other
information set forth in this Prospectus, prior to tendering their Notes in the
Exchange Offer.
4
<PAGE> 10
THE NOTES OFFERING
The Notes..................... The Notes were sold by the Issuer in the
Offering on March 4, 1998 and were subsequently
resold to qualified institutional buyers
pursuant to Rule 144A under the Securities Act.
Registration Rights
Agreement..................... In connection with the Offering, the Issuer and
the Subsidiary Guarantors entered into the
Registration Rights Agreement, which grants
owners of the Notes certain exchange and
registration rights. The Exchange Offer is
intended to satisfy such exchange and
registration rights, which generally terminate
upon the consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered............ $125,000,000 aggregate principal amount of
9 7/8% Series B Senior Subordinated Notes due
2008.
The Exchange Offer............ $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of
Notes. As of the date hereof, $125,000,000
aggregate principal amount of Notes are
outstanding. The Issuer will issue the Exchange
Notes on or promptly after the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters
issued to third parties, the Issuer believes
that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Notes may be
offered for resale, resold and otherwise
transferred by any owner thereof (other than
any such owner which is an "affiliate" of the
Issuer within the meaning of Rule 405 under the
Securities Act) without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary
course of such owner's business and that such
owner does not intend to participate and has no
arrangement or understanding with any person to
participate in the distribution of such
Exchange Notes.
Each broker-dealer that receives Exchange Notes
for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a
prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by
delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may
be used by a broker-dealer in connection with
resales of Exchange Notes received in exchange
for Notes where such Notes were acquired by
such broker-dealer as a result of market-making
activities or other trading activities. The
Issuer has agreed that for a period of one year
after the Exchange Offer is consummated it will
make this Prospectus available to any
broker-dealer for use in connection with any
such resale.
Any owner of Notes who tenders in the Exchange
Offer with the intention to participate, or for
the purpose of participating, in a distribution
of the Exchange Notes could not rely on the
position of
5
<PAGE> 11
the staff of the Commission enunciated in Exxon
Capital Corporation (April 13, 1988) and Morgan
Stanley & Co., Incorporated (June 5, 1991) or
similar no-action letters and, in the absence
of an exemption therefrom, must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with the resale of the Exchange
Notes. Failure to comply with such requirements
in such instance may result in liability under
the Securities Act for which the seller of the
Exchange Notes is not indemnified by the Issuer
or any Subsidiary Guarantor.
In any state where the Exchange Offer does not
fall under a statutory exemption to such
state's blue sky laws, the Issuer has filed the
appropriate registrations and notices and has
made the appropriate requests to permit the
Exchange Offer to be made in such state.
Expiration Date............... 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange
Offer is extended.
Interest on the Exchange Notes
and the Notes................. The Exchange Notes will bear interest from
March 4, 1998, the date of issuance of the
Notes that are tendered in exchange for the
Exchange Notes (or the most recent interest
payment date to which interest on such Notes
has been paid). Accordingly, holders of Notes
that are accepted for exchange will not receive
interest on the Notes that is accrued but
unpaid at the time of tender, but such interest
will be payable on the first interest payment
date after the Expiration Date.
Conditions to the Exchange
Offer......................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Issuer. See "The Exchange Offer --
Conditions." No federal or state regulatory
requirements (other than securities laws) must
be complied with and no approvals must be
obtained in connection with the Exchange Offer.
Procedures for Tendering
Notes......................... Each holder of Notes (or, in the case of
interests in the Global Notes held by DTC, each
DTC participant listed in an official DTC
proxy) wishing to accept the Exchange Offer
must complete, sign and date the accompanying
Letter of Transmittal, or a facsimile thereof,
in accordance with the instructions contained
herein and therein, and mail or otherwise
deliver the Letter of Transmittal, or such
facsimile, together with the Notes and any
other required documentation, to the Exchange
Agent at the address set forth in the Letter of
Transmittal. By executing the Letter of
Transmittal, such holder or DTC participant
will represent to the Issuer and Subsidiary
Guarantors that, among other things, the holder
or DTC participant or the person receiving the
Exchange Notes, whether or not such person is
the holder of the Notes or DTC participant, is
acquiring the Exchange Notes in the ordinary
course of business and neither the holder or
DTC participant nor any such other person has
any arrangement or understanding with any
person to participate in the distribution of
such Exchange Notes. In lieu of physical
delivery of the certificates
6
<PAGE> 12
representing Notes, tendering DTC participants
may transfer Notes pursuant to the procedure
for book-entry transfer as set forth under "The
Exchange Offer -- Book Entry Transfer; ATOP."
Special Procedures for
Beneficial Owners............. Any beneficial owner whose Notes are registered
in the name of a broker, dealer, commercial
bank, trust company or other nominee and who
wishes to tender should contact such nominee
promptly and instruct such nominee to tender on
such beneficial owner's behalf. Such
instructions should be given in sufficient time
to ensure that the nominee will be able to take
the necessary steps to tender such Notes before
the Expiration Date.
Guaranteed Delivery
Procedures.................... Holders of Notes who wish to tender their Notes
and whose Notes are not immediately available
or who cannot deliver their Notes, the Letter
of Transmittal or any other documents required
by the Letter of Transmittal to the Exchange
Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration
Date must tender their Notes according to the
guaranteed delivery procedures set forth in
"The Exchange Offer -- Guaranteed Delivery
Procedures."
Withdrawal Rights............. Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date pursuant to the procedures
described under "The Exchange Offer --
Withdrawals of Tenders."
Acceptance of Notes and
Delivery of Exchange Notes.... The Issuer will accept for exchange any and all
Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. However, the
Issuer reserves the right to make any
determination, in its sole discretion, as to
whether or not Notes have been properly
tendered. The Exchange Notes issued pursuant to
the Exchange Offer will be delivered promptly
following the Expiration Date. See "The
Exchange Offer -- Terms of the Exchange Offer."
Federal Income Tax
Consequences.................. The issuance of the Exchange Notes to holders
of the Notes pursuant to the terms set forth in
this Prospectus will not constitute an exchange
for federal income tax purposes. Consequently,
no gain or loss would be recognized by holders
of the Notes upon receipt of the Exchange
Notes. See "Certain Federal Income Tax
Consequences of the Exchange Offer."
Effect on Holders of Notes.... As a result of the making of the Exchange
Offer, the Issuer and the Subsidiary Guarantors
will have fulfilled certain of their
obligations under the Registration Rights
Agreement, and holders of Notes who do not
tender their Notes will generally not have any
further registration rights under the
Registration Rights Agreement or otherwise.
Such holders will continue to hold the
untendered Notes and will be entitled to all
the rights and subject to all the limitations
applicable thereto under the Indenture, except
to the extent such rights or limitations by
their terms terminate or cease to have further
effectiveness as a result of the Exchange
Offer. All untendered Notes will continue to be
subject to certain restrictions on transfer.
Accordingly, if any Notes are tendered and
accepted in
7
<PAGE> 13
the Exchange Offer, the trading market for the
untendered Notes could be adversely affected.
Exchange Agent................ U.S. Bank Trust National Association
8
<PAGE> 14
SUMMARY OF TERMS OF EXCHANGE NOTES
The form and terms of the Exchange Notes are the same as the form and terms
of the Notes (which they replace) except that (i) the Exchange Notes have been
registered under the Securities Act and therefore will not bear legends
restricting the transfer thereof, and (ii) the holders of Exchange Notes
generally will not be entitled to further registration rights under the
Registration Rights Agreement, which rights generally will be satisfied when the
Exchange Offer is consummated. The Exchange Notes will evidence the same debt as
the Notes and will be entitled to the benefits of the Indenture. See
"Description of Exchange Notes."
Securities Offered............ Up to $125.0 million aggregate principal amount
of 9 7/8% Series B Senior Subordinated Notes
due 2008.
Maturity Date................. March 1, 2008.
Interest Payment Dates........ Interest on the Exchange Notes will accrue from
March 4, 1998, the date of issuance of the
Notes (the "Issue Date"), at the rate of 9 7/8%
per annum, payable semi-annually in cash in
arrears on March 1 and September 1 of each
year, commencing September 1, 1998.
Optional Redemption........... On or after March 1, 2003, the Issuer may
redeem the Exchange Notes, at the redemption
prices set forth herein, plus accrued and
unpaid interest and Liquidated Damages, if any,
to the date of redemption. Notwithstanding the
foregoing, at any time prior to March 1, 2001,
the Issuer may redeem up to $43,750,000
principal amount of Notes and Exchange Notes
with the net proceeds of one or more public
offerings of common stock of the Issuer at a
redemption price equal to 109.875% of the
principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any,
to the date of redemption; provided that at
least $81,250,000 principal amount of the Notes
and Exchange Notes remains outstanding after
each such redemption (excluding Notes and
Exchange Notes held by the Issuer and its
Subsidiaries) and that any such redemption
occurs within 45 days of the closing of such
public offering. See "Description of Exchange
Notes -- Optional Redemption."
Ranking....................... The Exchange Notes will be subordinated in
right of payment to all existing and future
Senior Debt of the Issuer, including all
obligations under the Senior Credit Facility
(as defined herein), and equal or senior in
right of payment to all other existing and
future subordinated indebtedness of the Issuer.
The Exchange Notes and the Notes will rank
equally with one another. At January 31, 1998,
on a pro forma basis, the aggregate principal
amount of Senior Debt of the Issuer outstanding
would have been $10.3 million (excluding Senior
Debt of the Issuer's subsidiaries that is
guaranteed by the Issuer).
Subsidiary Guarantees......... The Notes are, and the Exchange Notes will be,
unconditionally guaranteed on a senior
subordinated basis by all of the Issuer's
domestic Restricted Subsidiaries, including the
Acquired Companies (the "Subsidiary
Guarantors"). The Subsidiary Guarantees will be
subordinated in right of payment to all Senior
Debt of the Subsidiary Guarantors to the same
extent that the Exchange Notes are subordinated
to Senior Debt of the Issuer, and equal or
senior in right of payment to all other
existing or future subordinated
9
<PAGE> 15
indebtedness of the Subsidiary Guarantors. Each
Subsidiary Guarantor's guarantee of the
Exchange Notes will rank equally with its
guarantee of the Notes. At January 31, 1998, on
a pro forma basis, the aggregate principal
amount of Senior Debt of the Subsidiary
Guarantors outstanding (excluding guarantees of
Senior Debt of the Issuer) would have been $6.1
million.
Change of Control............. Upon a Change of Control, each holder of
Exchange Notes will have the right to require
the Issuer to make an offer to purchase all of
such holder's Exchange Notes at a price equal
to 101% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated
Damages, if any, to the date of repurchase. See
"Description of Exchange Notes -- Repurchase at
the Option of Holders -- Change of Control."
Certain Covenants............. The Indenture contains certain covenants which,
among other things, limit the ability of the
Issuer and its Restricted Subsidiaries to: (i)
pay dividends or make certain other
distributions; (ii) repurchase equity
interests; (iii) prepay subordinated
Indebtedness; (iv) incur additional
Indebtedness and issue preferred stock; (v)
incur liens; (vi) merge or consolidate with any
other person or sell, assign, transfer, lease,
convey or otherwise dispose of all or
substantially all of the assets of the Company;
(vii) consummate certain asset sales; (viii)
enter into certain transactions with
affiliates; or (ix) enter into sale and
leaseback transactions. In addition, under
certain circumstances, the Issuer will be
required to make an offer to purchase the
Exchange Notes at a price equal to the
principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any,
to the date of purchase, with the proceeds of
certain asset sales. See "Description of
Exchange Notes."
Exchange Offer;
Registration Rights......... If: (i) the Exchange Offer is not permitted by
applicable law or (ii) any holder of Transfer
Restricted Securities (as defined) notifies the
Issuer within the prescribed time (A) that it
is or was prohibited by law or Commission
policy from participating in the Exchange
Offer, (B) that it may not resell the Exchange
Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and
the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or
available for such resales or (C) that it is a
broker-dealer and holds Notes acquired directly
from the Issuer or an affiliate of the Issuer,
the Registration Rights Agreement will require
the Issuer to provide a shelf registration
statement (the "Shelf Registration Statement")
to cover resales by such holders. If the Issuer
fails to satisfy these registration
obligations, it will be required to pay
Liquidated Damages to certain holders of Notes
and/or Exchange Notes under certain
circumstances. See "Description of Exchange
Notes -- Registration Rights; Liquidated
Damages."
10
<PAGE> 16
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
The following table sets forth (i) summary historical financial data of the
Company for the three fiscal years ended October 31, 1997 and the three months
ended January 31, 1997 and 1998 and (ii) summary pro forma financial data for
the fiscal year ended October 31, 1997 and the three months ended January 31,
1998. The summary historical statement of income and balance sheet data for the
Company for the fiscal years ended October 31, 1995, 1996 and 1997 are derived
from the audited consolidated financial statements of the Company included
elsewhere in this Prospectus. The summary historical financial data as of
January 31, 1998 and for the three months ended January 31, 1997 and 1998 are
derived from unaudited consolidated financial statements of the Company included
elsewhere in this Prospectus which, in the opinion of management, include all
adjustments, consisting of only normal, recurring adjustments, necessary for a
fair presentation of the financial condition and results of operations of the
Company for such periods. The results of operations for interim periods are not
necessarily indicative of a full year's operations. The summary pro forma
statements of income data and other financial data for the fiscal year ended
October 31, 1997 and the three months ended January 31, 1998 were prepared to
illustrate the effect of the Offering and the Acquisitions as if each had
occurred on November 1, 1996, and the results for the Acquired Companies had
been included for the twelve months ended September 30, 1997 and the three
months ended December 31, 1997. The summary pro forma balance sheet at January
31, 1998 was prepared to illustrate the effect of the Offering and the
Acquisitions as if each had occurred on January 31, 1998. The pro forma data is
presented for informational purposes only and may not be indicative of the
results of operations or the financial position of the Company that would have
been obtained if the Acquisitions and Offering had in fact been completed as of
such dates, and is not intended to project the results of operations or the
financial position of the Company for any future date or period. The following
table should be read in conjunction with the "Selected Consolidated Historical
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Unaudited Pro Forma Condensed Consolidated
Financial Data," and the consolidated financial statements of the Company and
the financial statements of Acquired Companies and the related notes and other
financial information presented elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,(1) THREE MONTHS ENDED JANUARY 31,
---------------------------------------- --------------------------------
PRO PRO
FORMA FORMA
1995 1996 1997 1997 1997 1998 1998
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales................................. $90,173 $111,744 $130,848 $242,609 $27,975 $ 30,134 $ 56,575
Gross margin.......................... 16,618 22,657 23,765 49,782 5,330 3,711 9,392
Operating income (loss) from
continuing operations............... 5,354 6,781 8,303 21,385 922 (778) 1,926
Interest expense...................... 1,504 1,787 2,070 13,877 432 825 3,451
Income (loss) from continuing
operations.......................... 2,391 3,558 3,890 4,558 366 (1,032) (1,027)
OTHER FINANCIAL DATA:
EBITDA(2)............................. $ 8,204 $ 10,403 $ 12,583 $ 32,136 $ 1,925 $ 499 $ 4,677
EBITDA margin(3)...................... 9.1% 9.3% 9.6% 13.2% 6.9% 1.7% 8.3%
Gross margin percentage............... 18.4 20.3 18.2 20.5 19.1 12.3 16.6
Operating margin percentage........... 5.9 6.1 6.3 8.8 3.3 (2.6) 3.4
Depreciation and amortization from
continuing operations............... $ 2,850 $ 3,622 $ 4,280 $ 10,751 $ 1,003 $ 1,277 $ 2,751
Capital expenditures for continuing
operations.......................... 4,580 2,946 3,539 7,991 620 1,749 2,419
Ratio of earnings to fixed
charges(4).......................... 3.2x 3.5x 3.4x 1.5x 2.1x -- --
Ratio of EBITDA to interest
expense(5).......................... 5.5 5.8 6.1 2.4 4.5 0.6 1.4
Ratio of debt to EBITDA(6)............ 3.2 2.4 2.6 4.4 19.0 139.2 30.2
Adjusted working capital turns(7)..... 4.7 5.3 7.5 NA NA NA NA
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31, AS OF JANUARY 31,
----------------------------- -----------------------------
PRO
FORMA
1995 1996 1997 1997 1998 1998
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital................................ $26,575 $ 14,951 $ 17,938 $18,017 $ 16,899 $ 21,789
Total assets................................... 77,553 77,499 90,883 89,357 124,449 204,578
Total debt..................................... 26,200 25,400 33,100 36,500 69,450 141,400
Shareholders' equity........................... 25,909 24,441 27,415 24,572 26,137 26,137
</TABLE>
11
<PAGE> 17
- -------------------------
(1) Fiscal years 1995 and 1996 statement of income data excludes discontinued
operations which resulted from the sale of the Company's Wilson Automation
division on May 6, 1996.
(2) "EBITDA" is operating income (loss) from continuing operations plus
depreciation and amortization. EBITDA does not represent and should not be
considered as an alternative to net income or cash flow from operations, as
determined by generally accepted accounting principles ("GAAP"). The
Company's presentation may not be comparable to similar measures reported by
other companies. Newcor believes EBITDA and related ratios provide useful
information regarding a company's ability to service and/or incur
indebtedness. EBITDA does not take into account the Company's working
capital requirements, debt service requirements, capital expenditure
requirements and other commitments. Thus, it is not necessarily indicative
of amounts that may be available for discretionary use.
(3) EBITDA margin is calculated by dividing EBITDA by sales for each of the
applicable periods.
(4) Calculated by dividing earnings by total fixed charges. Earnings consist of
earnings before income taxes and fixed charges. Fixed charges consist of
interest expense, amortization of deferred financing costs and the portion
of rental expense (one-third) that the Company believes to be representative
of interest. The Company's earnings were insufficient to cover fixed charges
by $1.6 million for the three months ended January 31, 1998. On a pro forma
basis, earnings were insufficient to cover fixed charges by $1.5 million for
the three months ended January 31, 1998.
(5) Calculated by dividing EBITDA by cash interest expense, which excludes
amortization of deferred financing costs.
(6) Calculated by dividing year-end total debt by EBITDA.
(7) Calculated by dividing sales by average adjusted working capital. Average
adjusted working capital is defined as the monthly average of accounts
receivable and inventory for each fiscal year less the monthly average of
accounts payable for each fiscal year. Accounts receivable, inventory and
accounts payable balances associated with the Company's discontinued Wilson
Automation operation have been removed from this calculation.
12
<PAGE> 18
RISK FACTORS
Prospective investors in the Exchange Notes should carefully consider the
Risk Factors set forth below prior to tendering their Notes in the Exchange
Offer. This Prospectus, including the "Summary," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business"
sections, includes forward-looking statements. See "Forward-Looking Statements,"
above. Although the Company believes that its plans, intentions and expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such plans, intentions or expectations will be achieved.
Important factors that could cause actual results to differ materially from
those included in or suggested by any forward-looking statements are set forth
below and elsewhere in this Prospectus. All forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Risk Factors set forth below.
LEVERAGE
The Company is highly leveraged. On January 31, 1998, on a pro forma basis,
the Company would have had total indebtedness of approximately $141.4 million
(of which $125.0 million would have consisted of the Notes and the balance would
have consisted of $6.1 million of industrial revenue bonds and $300,000 of
revolving credit loans and a $10.0 million term loan under the Senior Credit
Facility) and shareholders' equity of approximately $26.1 million. Tangible
shareholders' equity would have been a deficit of $70.4 million. The Company is
permitted to incur additional indebtedness in the future subject to certain
limitations. See "Pro Forma Capitalization," "Selected Consolidated Historical
Financial Data" and "Description of Exchange Notes."
The Company's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Exchange Notes) or to fund planned capital
expenditures will depend on its future performance, which, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond its control. Based upon the current level of
operations of the Company and future business which has been awarded, management
believes that cash flow from operations and available cash, together with
available borrowings under the Senior Credit Facility, will be adequate to meet
the Company's future liquidity needs until the scheduled expiration of the
Senior Credit Facility, at which time the Company would expect to replace the
Senior Credit Facility. There can be no assurance that the Company's business
will generate sufficient cash flow from operations, that anticipated growth
opportunities and operating improvements will be realized or that future
borrowings will be available under the Senior Credit Facility in an amount
sufficient to enable the Company to service its indebtedness, including the
Exchange Notes, or to fund its other liquidity needs. The Senior Credit
Facility, a term loan thereunder and a $6.1 million industrial revenue bond
issue mature prior to the maturity of the Exchange Notes, and there can be no
assurance that the Company will be able to replace the Senior Credit Facility,
or refinance any other Indebtedness, on commercially reasonable terms or at all.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
The degree to which the Company is leveraged could have important
consequences to holders of the Exchange Notes, including, but not limited to:
(i) making it more difficult for the Company to satisfy its obligations with
respect to the Exchange Notes, (ii) increasing the Company's vulnerability to
general adverse economic and industry conditions, (iii) limiting the Company's
ability to obtain additional financing to fund future working capital, capital
expenditures and other general corporate requirements, or to fund acquisitions,
(iv) requiring the dedication of a substantial portion of the Company's cash
flow from operations to the payment of principal of, and interest on, its
indebtedness, thereby reducing the availability of such cash flow to fund
working capital, capital expenditures, research and development or other general
corporate purposes, (v) limiting the Company's flexibility in planning for, or
reacting to, changes in its business and the industries it serves, and (vi)
placing the Company at a competitive disadvantage compared to less leveraged
competitors. In addition, the Indenture and the Senior Credit Facility contain
financial and other restrictive covenants that limit the ability of the Company
to, among other things, borrow additional funds. Failure by the Company to
comply with such covenants could result in an event of default which, if not
cured or waived, could have a
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material adverse effect on the Company's financial condition, results of
operations and debt service capability. See "Description of Exchange Notes" and
"Description of Other Debt -- Senior Credit Facility."
RANKING
The Exchange Notes will be subordinated in right of payment to all current
and future Senior Debt of the Issuer, and the Subsidiary Guarantees of the
Exchange Notes will be subordinated in right of payment to all current and
future Senior Debt of the Subsidiary Guarantors. Upon any distribution to
creditors of the Issuer or any Subsidiary Guarantor in a liquidation or
dissolution of the Issuer or any Subsidiary Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Issuer or such Subsidiary Guarantor or its property, the holders of Senior Debt
of the Issuer or such Subsidiary Guarantor, respectively, will be entitled to be
paid in full before any payment may be made with respect to the Exchange Notes
or the related Subsidiary Guarantee. In addition, the subordination provisions
of the Indenture provide that payments with respect to the Exchange Notes and
the Subsidiary Guarantees will be blocked in the event of a payment default on
Designated Senior Debt (as defined) and may be blocked for up to 179 days each
year in the event of certain non-payment defaults on Designated Senior Debt. In
the event of a bankruptcy, liquidation or reorganization of the Issuer, holders
of the Exchange Notes will participate ratably with all holders of subordinated
indebtedness of the Issuer that is deemed to be of the same class as the
Exchange Notes (including the Notes), and potentially with all general creditors
of the Issuer other than holders of Senior Debt, based upon the respective
amounts owed to each holder or creditor, in the remaining assets of the Issuer.
In any of the foregoing events, there can be no assurance that there would be
sufficient assets in the Issuer or the Subsidiary Guarantors to pay amounts due
on the Exchange Notes. As a result, holders of Exchange Notes may receive less,
ratably, than the holders of other debt of the Issuer or of a Subsidiary
Guarantor, including Senior Debt.
As of January 31, 1998, on a pro forma basis, the aggregate Senior Debt of
the Company (including $300,000 of revolving credit borrowings and a $10.0
million term loan under the Senior Credit Facility and $6.1 million of
industrial revenue bonds) would have been approximately $16.4 million, and
approximately $49.0 million would have been available for additional borrowing
under the Senior Credit Facility. The Indenture permits the incurrence of
additional indebtedness, including Senior Debt, by the Issuer and its
subsidiaries in the future, subject to certain limitations. See "Description of
Exchange Notes -- Incurrence of Indebtedness and Issuance of Preferred Stock"
and "Description of Other Debt -- Senior Credit Facility."
CYCLICAL NATURE OF INDUSTRIES SERVED
The markets served by the Company are highly cyclical and, in large part,
impacted by the strength of the economy generally, by prevailing interest rates
and by other factors which may have an effect on the level of sales of
automotive and other vehicles. The markets for medium and heavy duty trucks and
for automotive and agricultural vehicles, for which the Company supplies
components, have all experienced strength in recent years, but have experienced
significant downturns in the past. Such downturns have materially adversely
affected the revenues, profitability and cash flow of suppliers to these
industries, including the Company, and there can be no assurance that one or all
such industries will not experience similar downturns in the future. An economic
recession may impact substantially leveraged companies, such as the Company,
more than similarly situated companies with less leverage. A cyclical decline in
overall demand in any of the markets served by the Company could have a material
adverse effect on the Company's financial condition, results of operations and
debt service capability.
RELIANCE ON PRINCIPAL CUSTOMERS
In fiscal 1997, the Company derived 78.0% of its pro forma revenues from
its six largest customers, including 20.1% from Detroit Diesel, 19.4% from Ford,
15.9% from Deere, 8.7% from General Motors, 7.4% from Chrysler and 6.5% from
American Axle. Although the Company presently has ongoing supply relationships
with each of these customers, there can be no assurance that sales to these
customers will continue at the same levels or at all. Each of these customers
has, and regularly exercises, substantial negotiating leverage over its
suppliers, including the Company, including requests for price reductions and
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other concessions. From time to time, suppliers to these large customers,
including the Company, enter into agreements mandating periodic price
reductions, which thereby effectively require such suppliers to improve their
efficiency and reduce costs in order to maintain profit margins, and the Company
is presently a party to several such contracts. Continuation of these key
customer relationships is dependent upon the customers' satisfaction with the
price, quality and delivery of the Company's products and the Company's
engineering capabilities and customer services. While management believes its
relationships with its customers are mutually satisfactory, if any of these
customers were to reduce substantially or discontinue its purchases from the
Company, the financial condition, results of operations and debt service
capability of the Company could be materially adversely affected. See
"Business."
ACHIEVING ACQUISITION PERFORMANCE GOALS
The Acquisitions are expected to nearly double the Company's sales, and the
success of the Acquired Companies is critical to the Company's future operating
performance and cash flow, including its ability to service the Exchange Notes.
There can be no assurance that the Acquired Companies will meet the Company's
expectations, or that they will perform consistent with their historical
operating performance. Because the Acquired Companies constitute a significant
part of the Company, failure of the Acquired Companies to maintain their
historical performance levels could have a material adverse impact on the
Company's financial condition, results of operations and debt service
capability. In addition, start up of a significant new program launch at MT&G
will require substantial attention from management. The dilution of management's
attention could also have an adverse impact on the operating results of the
Company. There can be no assurance that MT&G's new program will meet
management's expectations or be successful.
COMPETITION
The Company operates in an industry which is highly competitive though
fragmented. If any customer becomes dissatisfied with the Company's prices,
quality or timeliness of delivery, it could award future business or, in an
extreme case, move existing business to a competitor. There can be no assurance
that the Company's products will continue to compete successfully with the
products of competitors, including OEMs themselves, many of which are
significantly larger and have greater financial and other resources than the
Company. See "Business -- Competition."
LABOR RELATIONS AND LABOR MARKET CONDITIONS
Approximately 26% of the Company's employees at December 31, 1997 were
represented by the United Steel Workers or United Auto Workers. Collective
bargaining agreements with these unions will expire at various times in 1998 and
beyond. In addition, most of the Company's customers employ workforces
represented by the United Auto Workers and other unions, and many of these
customers have experienced work stoppages at various times in the past. A
dispute between the Company and its employees, or between any of its major
customers and such customers' employees, could have a material adverse effect on
the Company's financial condition, results of operations and debt service
capability. In addition, sustained economic growth in the United States has
resulted in lower unemployment and higher demand for labor in many locations,
including certain locations in the Company's Rubber and Plastic Group. Such
market conditions have adversely impacted the Company's operations at certain
locations in recent periods. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Recent Developments." There can
be no assurance that labor market conditions will not materially adversely
affect one or more of the Company's businesses or continue to adversely affect
the Rubber and Plastic business in the future.
POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES
The Company's operations are subject to various foreign, federal, state and
local environmental laws, ordinances and regulations, including those governing
discharges into the air and water, the storage, handling and disposal of solid
and hazardous wastes, the remediation of soil and groundwater contaminated by
petroleum products or hazardous substances or wastes and the health and safety
of employees ("Environmental
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Laws"). The nature of the Company's current and former operations and the
history of industrial uses at some of its facilities expose the Company to the
risk of liabilities or claims with respect to environmental and related worker
health and safety matters. Compliance with Environmental Laws, stricter
interpretations of or amendments to such laws or more vigorous enforcement
policies by regulatory agencies may require material expenditures by the
Company.
In addition, under certain Environmental Laws a current or previous owner
or operator of property may be liable for the costs of removal or remediation of
certain hazardous substances or petroleum products on, under or in such
property, without regard to whether the owner or operator knew of, or caused,
the presence of the contaminants, and regardless of whether the practices that
resulted in the contamination were legal at the time they occurred. The presence
of, or failure to remediate properly, such substances may adversely affect the
ability to sell or rent such property or to borrow using such property as
collateral. Most of the Company's facilities have been in operation for many
years, and several of such facilities have undergone little or no invasive
testing to determine the presence or absence of environmental contamination.
Persons who generate, arrange for the disposal or treatment of, or dispose of
hazardous substances may be liable for the costs of investigation, remediation
or removal of such hazardous substances at or from the disposal or treatment
facility, regardless of whether the facility is owned or operated by such
person. Finally, the owner of a site may be subject to common law claims by
third parties based on damages and costs resulting from environmental
contamination emanating from a site. For example, the Company is aware that
contamination exists at both properties that Newcor recently acquired from MT&G.
Management believes that the Company's risk of liability for damages resulting
from this contamination is limited by the structure of the MT&G Acquisition,
certain indemnification rights the Company has against the seller of the MT&G
assets and a 1995 Michigan statute that limits the responsibility of purchasers
of commercial property for cleanup costs. There can be no assurance, however,
that the Company will not be subject to future claims with respect to such
contamination, including possible claims by third parties for alleged damages or
injuries resulting from the contamination at these sites.
The Company cannot predict what Environmental Laws will be enacted in the
future, how existing or future Environmental Laws will be administered or
interpreted or what environmental conditions may be found to exist on its
properties. Compliance with more stringent Environmental Laws, as well as more
vigorous enforcement policies of the regulatory agencies or stricter
interpretation of those Laws, and discovery of new conditions may require
additional expenditures by the Company. There can be no assurance that one or
more of the foregoing will not have a material adverse effect on the Company's
financial condition, results of operations or debt service capability.
OTHER CONTINGENT LIABILITIES
The Company could potentially be liable to indemnify customers with respect
to certain equipment sold by a divested division which equipment is currently
the subject of patent infringement litigation being defended by one of its
customers. It also has indemnification obligations relating to businesses it
sold during the past two years. See "Business -- Legal Proceedings and
Contingencies" and Note O of the notes to the Company's consolidated financial
statements. There can be no assurance that liability for such indemnification
obligations will not have a material adverse effect on the Company's financial
condition, results of operations or debt service capability.
RESTRICTIVE DEBT COVENANTS
The Indenture and the Senior Credit Facility contain a number of
significant covenants. Either or both of such agreements, among other things,
restrict the ability of the Issuer and its subsidiaries to (i) declare dividends
or redeem or repurchase capital stock, (ii) prepay, redeem or purchase debt,
including the Exchange Notes, (iii) incur liens and engage in sale-leaseback
transactions, (iv) make loans and investments, (v) incur additional
indebtedness, (vi) amend or otherwise alter debt and other material agreements,
(vii) make capital expenditures, (viii) engage in mergers, acquisitions and
asset sales, (ix) enter into transactions with affiliates and (x) alter the
business it conducts. There can be no assurance that those restrictive covenants
will not adversely affect the Company's future ability to operate its business.
In addition,
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the Senior Credit Facility contains restrictive covenants and requires the
Company to maintain specified financial ratios and satisfy certain financial
tests, including a debt service coverage ratio test, a net worth test, a funded
debt (net of excess cash) to total liabilities (net of excess cash) plus net
worth test and a funded debt (net of excess cash) to EBITDA test. See
"Description of Other Debt -- Senior Credit Facility." Although the Company is
presently in compliance with these covenants, if the Company in the future
becomes unable to meet these tests or otherwise becomes unable to borrow under
the Senior Credit Facility due to a default, the Company's liquidity could be
materially adversely affected.
FRAUDULENT CONVEYANCE
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer or conveyance law, if, among other
things, the Issuer or any Subsidiary Guarantor, at the time it incurred the
indebtedness evidenced by the Notes and Exchange Notes, the Indenture, or its
Subsidiary Guarantee, (i) (a) was or is insolvent or rendered insolvent by
reason of such occurrence or (b) was, is, or was about to be, engaged in a
business or transaction for which the assets remaining with the Issuer or such
Subsidiary Guarantor constituted unreasonably small capital or (c) intended or
intends to incur, or believed or believes that it would incur, debts beyond its
ability to pay such debts as they mature, and (ii) the Issuer, or such
Subsidiary Guarantor, received or receives less than reasonably equivalent value
or fair consideration for the incurrence of such indebtedness, then the Notes
and Exchange Notes, the Indenture (to the extent applicable to such Subsidiary
Guarantor) and the Subsidiary Guarantees, and any pledge or other security
interest securing such indebtedness, could be voided or avoided, or claims in
respect of the Notes and Exchange Notes, the Indenture (to the extent applicable
to such Subsidiary Guarantor) or the Subsidiary Guarantees could be subordinated
to all other debts of the Issuer or such Subsidiary Guarantor, as the case may
be. In addition, the payment of interest and principal by the Issuer pursuant to
the Notes and Exchange Notes or the payment of amounts by a Subsidiary Guarantor
pursuant to a Subsidiary Guarantee could be voided or avoided and required to be
returned to the person making such payment, or to a fund for the benefit of the
creditors of the Issuer or such Subsidiary Guarantor, as the case may be.
The measures which a court would apply for purposes of determining the
foregoing considerations will vary depending upon the law applied in any
proceeding with respect to the foregoing. Generally, however, the Issuer or a
Subsidiary Guarantor would be considered insolvent if (i) the sum of its debts,
including contingent liabilities, unliquidating liabilities, and unmatured
liabilities, were greater than the saleable value of all of its assets at a fair
valuation or if the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and mature or
(ii) it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, the Issuer and each Subsidiary Guarantor believes that, after
giving effect to the indebtedness incurred in connection with the Offering, the
Acquisitions and the establishment of the Senior Credit Facility, it was not
insolvent, did not have unreasonably small capital for the business in which it
was engaged and did not incur debts beyond its ability to pay such debts as they
mature. There can be no assurance, however, as to what standard a court would
apply in making such determinations or that a court would agree with the
Issuer's or the Subsidiary Guarantors' conclusions in this regard. In addition,
the liability of each Subsidiary Guarantor under the Indenture is limited to the
amount that will result in its Subsidiary Guarantee not constituting a
fraudulent conveyance or improper corporate distribution, and there can be no
assurance as to what standard a court would apply in making a determination as
to what would be the maximum liability of each Subsidiary Guarantor. See
"Description of Exchange Notes -- Subsidiary Guarantees."
INABILITY TO PURCHASE NOTES AND EXCHANGE NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, the Issuer will be required to offer to
repurchase all outstanding Notes and Exchange Notes at 101% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
to the date of repurchase. The occurrence of a Change of Control constitutes an
event of default under the Senior Credit Facility, which could result in
acceleration of the indebtedness thereunder. There can be no assurance that
sufficient funds will be available at the time of any Change of Control to make
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any required repurchases of Notes and Exchange Notes or that prohibitions in the
Senior Credit Facility would be waived to allow the Issuer to make such required
repurchases. In addition, the Issuer could enter into certain transactions,
including certain recapitalizations, that would not constitute a Change of
Control but would increase the amount of debt outstanding at such time. See
"Description of Exchange Notes -- Repurchase at the Option of Holders."
ABSENCE OF A PUBLIC MARKET
The Notes currently are owned by a relatively small number of beneficial
owners. The Notes have not been registered under the Securities Act.
Accordingly, the Notes may only be offered or sold pursuant to an exemption from
the registration requirements of the Securities Act or pursuant to an effective
registration statement.
The Exchange Notes will constitute a new class of securities with no
established trading market. Although the Exchange Notes will generally be
permitted to be resold or otherwise transferred by nonaffiliates of the Issuer
without compliance with the registration requirements of the Securities Act,
there can be no assurance as to the liquidity of any markets that may develop
for the Exchange Notes, the ability of holders of the Exchange Notes to sell
their Exchange Notes or the prices at which holders would be able to sell their
Exchange Notes. Future trading prices of the Exchange Notes will depend on many
factors, including, among other things, prevailing interest rates, the Company's
operating results and the market for similar securities. Donaldson, Lufkin &
Jenrette Securities Corporation, McDonald & Company Securities, Inc. and ING
Baring (U.S.) Securities, Inc. (collectively, the "Initial Purchasers") have
advised the Issuer that they currently intend to make a market in the Exchange
Notes offered hereby. However, they are not obligated to do so, and any market
making may be discontinued at any time without notice. The Issuer does not
intend to apply for listing of the Exchange Notes on any securities exchange.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Exchange Agent of
such Notes, a properly completed and duly executed Letter of Transmittal and all
other required documents. Therefore, owners of the Notes desiring to tender such
Notes in exchange for Exchange Notes should allow sufficient time to ensure
timely delivery. The Issuer is under no duty to give notification of defects or
irregularities with respect to the tenders of Notes for exchange. Notes that are
not tendered or are tendered but not accepted will, following the consummation
of the Exchange Offer, continue to be subject to the existing restrictions on
transfer thereof, and on consummation of the Exchange Offer, the registration
rights under the Registration Rights Agreement generally will terminate. In
addition, any owner of Notes who tenders in the Exchange Offer for the purpose
of participating in a distribution of the Exchange Notes, in the absence of an
exemption therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the Exchange
Notes. Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. To the extent that Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Notes could be
adversely affected. See "The Exchange Offer."
RESTRICTIONS ON TRANSFER
The Notes were offered and sold by the Issuer in a private offering exempt
from registration under the Securities Act and have been resold pursuant to Rule
144A under the Securities Act. As a result, the Notes may not be reoffered or
resold by purchasers except pursuant to an effective registration statement
under the Securities Act or pursuant to an applicable exemption from the
requirement for such registration, and the Notes bear legends reflecting those
restrictions. Each owner of Notes (other than any owner who is an affiliate of
the Issuer) who duly exchanges Notes for Exchange Notes in the Exchange Offer
generally will receive Exchange Notes that are freely transferable under the
Securities Act. Owners of Notes who participate in the Exchange Offer should be
aware, however, that if they accept the Exchange Offer for the purpose of
engaging
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in a distribution, the Exchange Notes may not be publicly reoffered or resold
without complying with the registration and prospectus delivery requirements of
the Securities Act. As a result, each owner of Notes accepting the Exchange
Offer will be deemed to have represented, by its acceptance of the Exchange
Offer, that it acquired the Exchange Notes in the ordinary course of business
and that it is not engaged in, and does not intend to engage in, a distribution
of the Exchange Notes.
The Notes currently may be sold pursuant to the restrictions set forth in
Rule 144A under the Securities Act or pursuant to another available exemption
under the Securities Act without registration under the Securities Act. To the
extent that Notes are tendered and accepted in the Exchange Offer, the trading
market for the untendered and tendered but unaccepted Notes could be adversely
affected.
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THE EXCHANGE OFFER
The following discussion sets forth or summarizes what the Company believes
to be the material terms of the Exchange Offer, including those set forth in the
Letter of Transmittal distributed with this Prospectus. This summary is
qualified in its entirety by reference to the full text of the documents
underlying the Exchange Offer, copies of which are filed or incorporated by
reference as exhibits to the Registration Statement of which this Prospectus is
a part and are incorporated herein by reference. The term "Holder" with respect
to the Exchange Offer means any person in whose name the Notes are registered on
the books of the Issuer or any other person who has obtained a properly
completed bond power from the registered holder.
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Notes were sold by the Issuer on the Issue Date and were subsequently
resold to qualified institutional buyers pursuant to Rule 144A under the
Securities Act. In connection with the Offering, the Issuer and the Subsidiary
Guarantors entered into the Registration Rights Agreement, which requires, among
other things, that the Issuer and the Subsidiary Guarantors (i) file with the
Commission a registration statement under the Securities Act with respect to the
Exchange Notes (which obligation has been satisfied by the filing of the
Registration Statement), (ii) use their best efforts to cause such registration
statement to become effective under the Securities Act at the earliest possible
time and in any event within 135 days after the Issue Date and (iii) upon the
effectiveness of that registration statement, commence and consummate the
Exchange Offer. A copy of the Registration Rights Agreement has been filed with
the Commission and is incorporated by reference as an exhibit to the
Registration Statement.
Any Notes tendered and exchanged in the Exchange Offer will reduce the
principal amount of Notes outstanding. Following the consummation of the
Exchange Offer, Holders of the Notes who did not tender their Notes generally
will not have any further registration rights under the Registration Rights
Agreement, and such Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for such Notes could be
adversely affected. The Notes are currently eligible for sale pursuant to Rule
144A through the PORTAL System of the National Association of Securities
Dealers, Inc. Because the Issuer anticipates that most Holders will elect to
exchange their Notes for Exchange Notes due to the absence of restrictions on
the resale of Exchange Notes under the Securities Act, the Issuer anticipates
that the liquidity of the market for any Notes remaining after the consummation
of the Exchange Offer may be substantially limited.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuer will accept any and all Notes
validly tendered and not withdrawn prior to 5:00 p.m. New York City time on the
Expiration Date. The Issuer will issue $1,000 principal amount of Exchange Notes
in exchange for each $1,000 principal amount of outstanding Notes accepted in
the Exchange Offer. Holders may tender some or all of their Notes pursuant to
the Exchange Offer. However, Notes may be tendered only in integral multiples of
$1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Notes except that (i) the Exchange Notes have been registered under the
Securities Act and hence will not bear legends restricting the transfer thereof
and (ii) the holders of the Exchange Notes generally will not be entitled to
certain rights under the Registration Rights Agreement, which rights generally
will terminate upon consummation of the Exchange Offer. The Exchange Notes will
evidence the same debt as the Notes and will be entitled to the benefits of the
Indenture.
Holders of Notes do not have any appraisal or dissenters' rights under the
Delaware General Corporation Law or the Indenture in connection with the
Exchange Offer. The Issuer intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder, including Rule 14e-1 thereunder.
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The Issuer will be deemed to have accepted validly tendered Notes when, as
and if the Issuer has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering Holders for the
purpose of receiving the Exchange Notes from the Issuer.
If any tendered Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted Notes will be returned, without
expense, to the tendering Holder thereof as promptly as practicable after the
Expiration Date.
Holders who tender Notes in the Exchange Offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Notes pursuant to
the Exchange Offer. The Issuer will pay all charges and expenses, other than
transfer taxes in certain circumstances, in connection with the Exchange Offer.
See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on the
expiration date for the Exchange Offer set forth on the cover page of this
Prospectus unless the Issuer, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" will mean the latest date and
time to which the Exchange Offer is extended.
To extend the Exchange Offer, the Issuer will notify the Exchange Agent of
any extension by oral or written notice, followed by a public announcement
thereof no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
The Issuer reserves the right, in its reasonable judgment, (i) to delay
accepting any Notes, to extend the Exchange Offer or to terminate the Exchange
Offer if any of the conditions set forth below under "-- Conditions" shall not
have been satisfied, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by a public announcement
thereof. If the Exchange Offer is amended in a manner determined by the Issuer
to constitute a material change, the Issuer will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered Holders, and depending upon the significance of the amendment and the
manner of disclosure to the registered Holders, the Issuer will extend the
Exchange Offer for a period of five to ten business days if the Exchange Offer
would otherwise expire during such five to ten business-day period.
If the Issuer does not consummate the Exchange Offer or, in lieu thereof,
the Issuer does not file and cause to become effective a resale shelf
registration for the Notes within the time periods set forth herein, liquidated
damages will accrue and be payable to Holders of affected Notes in the amounts
specified in the Registration Rights Agreement ("Liquidated Damages"). See
"Registration Rights; Liquidated Damages."
Without limiting the manner in which the Issuer may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Issuer shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON EXCHANGE NOTES
The Exchange Notes will bear interest from the Issue Date (or the most
recent interest payment date to which interest on the Notes has been paid).
Accordingly, holders of Notes that are accepted for exchange will not receive
interest that is accrued but unpaid on the Notes at the time of tender, but such
interest will be payable on the first interest payment date after the Expiration
Date. Interest on the Exchange Notes will be payable semiannually on each March
1 and September 1, commencing on September 1, 1998.
21
<PAGE> 27
PROCEDURES FOR TENDERING
Only a Holder of Notes (or, in the case of Global Notes held by DTC, a DTC
participant listed in an official DTC proxy) may tender such Notes in the
Exchange Offer. To tender in the Exchange Offer, a Holder or DTC participant
must complete, sign and date the Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter of Transmittal
and mail or otherwise deliver such Letter of Transmittal or such facsimile,
together with the Notes and any other required documents, to the Exchange Agent
so as to be received by the Exchange Agent at the address set forth below prior
to 5:00 p.m., New York City time, on the Expiration Date. Delivery of the Notes
may be made by book-entry transfer in accordance with the procedures described
below. Confirmation of such book-entry transfer must be received by the Exchange
Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each Holder or DTC participant will
make to the Issuer and Subsidiary Guarantors the representation set forth below
in the second paragraph under the heading "-- Resale of Exchange Notes."
The tender by a Holder or DTC participant and the acceptance thereof by the
Issuer will constitute an agreement between such Holder or DTC participant and
the Issuer in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER OR DTC PARTICIPANT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT
HOLDERS AND DTC PARTICIPANTS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE
SENT TO THE ISSUER. BENEFICIAL OWNERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR SUCH BENEFICIAL OWNERS.
Any beneficial owner whose Notes are held through a broker, dealer,
commercial bank, trust company or other nominee and who wishes to tender should
contact such nominee promptly and instruct such nominee to tender on such
beneficial owner's behalf. Such instructions should be given in sufficient time
to ensure that the nominee will be able to take the necessary steps to tender
such Notes before the Expiration Date.
Signatures on the Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined later in
this paragraph) unless the Notes tendered pursuant thereto are tendered (i) by a
registered Holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and unless waived by the Issuer, evidence satisfactory to
the Issuer of their authority to so act must be submitted with the Letter of
Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Issuer in its sole discretion, which determination will be
final and binding. The Issuer reserves the absolute right to reject any and all
Notes not properly tendered or any Notes the Issuer's acceptance of which would,
in the opinion of counsel for the Issuer, be unlawful. The Issuer also reserves
the right to waive any defects, irregularities or conditions of tender as to
particular Notes. The Issuer's interpretation of the terms and conditions of the
Exchange Offer (including the
22
<PAGE> 28
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Notes must be cured within such time as the Issuer determines. Although the
Issuer intends to notify Holders of defects or irregularities with respect to
tenders of Notes, none of the Issuer, any Subsidiary Guarantor, the Exchange
Agent or any other person will incur any liability for failure to give such
notification. Tenders of Notes will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
BOOK-ENTRY TRANSFER; ATOP
The Issuer understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish an account with respect to the
Notes at DTC for the purpose of facilitating the Exchange Offer, and subject to
the establishment thereof, any financial institution that is a participant in
DTC may make book-entry delivery of the Notes by causing DTC to transfer such
Notes into the Exchange Agent's account with respect to the Notes in accordance
with DTC's procedures for such transfer.
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for the Book-Entry Facility Automated Tender Offer Program ("ATOP").
Accordingly, DTC participants listed on an official DTC proxy may electronically
transmit their acceptance of the Exchange Offer by causing DTC to transfer Notes
to the Exchange Agent in accordance with DTC's ATOP procedures for transfer. DTC
will then send an Agent's Message to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC, received by
the Exchange Agent and forming part of the confirmation of a book-entry
transfer, which states that DTC has received an express acknowledgement from the
participant in DTC tendering Notes which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Issuer and Subsidiary Guarantors
may enforce such agreement against the participant. In the case of an Agent's
Message relating to guaranteed delivery, the term means a message transmitted by
DTC and received by the Exchange Agent which states that DTC has received an
express acknowledgement from the participant in DTC tendering Notes that such
participant has received and agrees to be bound by the Notice of Guaranteed
Delivery.
Each DTC participant transmitting an acceptance of the Exchange Offer
through the ATOP procedures will be deemed to have agreed to be bound by the
terms of the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available, (ii) who cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Notes and the principal amount of Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three New York
Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof), together with the certificate(s)
representing the Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account at DTC) and any other documents
required by the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
23
<PAGE> 29
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Notes in proper form for transfer (or a confirmation of book-entry transfer
of such Notes into the Exchange Agent's account at DTC) and all other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWALS OF TENDERS
Except as otherwise provided herein, tenders of Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at the
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Notes to be withdrawn (the "Depositor"), (ii)
identify the Notes to be withdrawn (including the certificate number(s) and
principal amount of such Notes or, in the case of Notes transferred by
book-entry transfer, the name and number of the account at DTC to be credited),
(iii) be signed by the Holder or DTC participant in the same manner as the
original signature on the Letter of Transmittal by which such Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee register the transfer of
such Notes into the name of the person withdrawing the tender and (iv) specify
the name in which any such Notes are to be registered, if different from that of
the Depositor. All questions as to the validity, form and eligibility (including
time or receipt) of such notices will be determined by the Issuer, whose
determination will be final and binding on all parties. Any Notes so withdrawn
will be deemed not to have been validly tendered for purposes of the Exchange
Offer, and no Exchange Notes will be issued with respect thereto unless the
Notes so withdrawn are validly retendered. Any Notes which have been tendered
but which are not accepted for exchange will be returned to the Holder thereof
without cost to such Holder as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuer will not
be required to accept for exchange, or to exchange Exchange Notes for, any
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Notes, if:
(a) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted which, in the reasonable
judgment of the Issuer, might materially impair the ability of the Issuer
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Issuer; or
(b) any governmental approval has not been obtained, which approval
the Issuer, in its reasonable judgment, deems necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Issuer determines in its reasonable judgment that any of the
conditions are not satisfied, the Issuer may (i) refuse to accept any Notes and
return all tendered Notes to the tendering Holders, (ii) extend the Exchange
Offer and retain all Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of Holders to withdraw such Notes (see
"-- Withdrawals of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Notes which have
not been withdrawn. If such waiver constitutes a material change to the Exchange
Offer, the Issuer will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered Holders, and depending
upon the significance of the waiver and the manner of disclosure to the
registered
24
<PAGE> 30
Holders, the Issuer will extend the Exchange Offer for a period of five to ten
business days if the Exchange Offer would otherwise expire during such five to
ten business-day period.
EXCHANGE AGENT
U.S. Bank Trust National Association will act as Exchange Agent for the
Exchange Offer with respect to the Notes.
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal for the Notes and requests for
copies of Notice of Guaranteed Delivery should be directed to the Exchange
Agent, addressed as follows:
By registered or certified mail, overnight mail or courier service or
in person by hand:
<TABLE>
<CAPTION>
By Registered, Certified, or
Overnight Mail or Courier: By Hand: By First Class Mail:
- ---------------------------- -------- --------------------
<S> <C> <C>
U.S. Bank Trust N.A. U.S. Bank Trust N.A. U.S. Bank Trust N.A.
Attn: Specialized Finance 4th Floor Bond Drop Window P.O. Box 64485
SPFT0414 180 East Fifth Street St. Paul, MN 55164-9549
180 East Fifth Street St. Paul, MN 55101
St. Paul, MN 55101
</TABLE>
By facsimile:
612-244-1537
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuer. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telephone, facsimile or in person by employees of the Issuer and
its affiliates.
The Issuer has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers or other persons
soliciting acceptances of the Exchange Offer. However, the Issuer will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith and pay
other registration expenses, including fees and expenses of the Trustee, filing
fees, blue sky fees and printing and distribution expenses.
The Issuer will pay all transfer taxes, if any, applicable to the exchange
of the Notes pursuant to the Exchange Offer. If, however, Exchange Notes or the
Notes for principal amounts not tendered or accepted for exchange are to be
delivered to, or are to be issued in the name of, any person other than the
registered Holder of the Notes tendered, or if tendered Notes are registered in
the name of any person other than the person signing the Letter of Transmittal,
or if a transfer tax is imposed for any reason other than the exchange of the
Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or any other person) will be payable
by the tendering Holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Notes, which is the aggregate principal amount of the Notes, as reflected in the
Company's accounting records on the date of exchange. Accordingly, no gain or
loss for accounting purposes will be recognized in connection with the Exchange
Offer. The expenses of the Exchange Offer will be amortized over the term of the
Exchange Notes.
RESALE OF EXCHANGE NOTES
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Issuer believes that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Notes may be offered
for resale, resold and otherwise transferred by any owner of such Exchange Notes
(other than any such owner which is an "affiliate" of the Issuer within the
meaning of Rule 405 under the Securities Act)
25
<PAGE> 31
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of such owner's business and such owner does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of such Exchange Notes. Any owner of Notes who
tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the Exchange Notes may not rely
on the position of the staff of the Commission enunciated in Exxon Capital
Holdings Corporation (April 13, 1988) and Morgan Stanley & Co., Incorporated
(June 5, 1991) or similar no-action letters but rather must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. In addition, any such resale transaction
should be covered by an effective registration statement containing the selling
security holders information required by Item 507 of Regulation S-K under the
Securities Act. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Notes, where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, may be a statutory underwriter and must acknowledge that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes.
By tendering in the Exchange Offer, each Holder (or DTC participant, in the
case of tenders of interests in the Global Notes held by DTC) will represent to
the Issuer and Subsidiary Guarantors that, among other things, (i) the Exchange
Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the registered Holder or DTC participant, (ii) neither the Holder
or DTC participant nor any such other person has an arrangement or understanding
with any person to participate in the distribution of such Exchange Notes and
(iii) the Holder or DTC participant and such other person acknowledge that if
they participate in the Exchange Offer for the purpose of distributing the
Exchange Notes (a) they must, in the absence of an exemption therefrom, comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale of the Exchange Notes and cannot rely on the
no-action letters referenced above and (b) failure to comply with such
requirements in such instance could result in such Holder or DTC participant or
such other person incurring liability under the Securities Act for which such
Holder or DTC participant or such other person is not indemnified by the Issuer
or any Subsidiary Guarantor. Further, by tendering in the Exchange Offer, each
Holder or DTC participant and such other person that may be deemed an
"affiliate" (as defined under Rule 405 of the Securities Act) of the Issuer will
represent to the Issuer and Subsidiary Guarantors that such Holder or DTC
participant and such other person understand and acknowledge that the Exchange
Notes may not be offered for resale, resold or otherwise transferred by that
Holder or DTC participant or such other person without registration under the
Securities Act or an exemption therefrom.
CONSEQUENCES OF FAILURE TO EXCHANGE
As a result of the making of this Exchange Offer, the Issuer and Subsidiary
Guarantors will have fulfilled one of their obligations under the Registration
Rights Agreement, and Holders of Notes who do not tender their Notes generally
will not have any further registration rights under the Registration Rights
Agreement or otherwise. Accordingly, any Holder of Notes that does not exchange
that Holder's Notes for Exchange Notes will continue to hold the untendered
Notes and will be entitled to all the rights and limitations applicable thereto
under the Indenture, except to the extent that such rights or limitations, by
their terms, terminate or cease to have further effectiveness as a result of the
Exchange Offer.
The Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Notes may be
reoffered, resold, pledged or otherwise transferred only (i) to a person whom
the Holder reasonably believes is a qualified institutional buyer in a
transaction meeting the requirements of Rule 144A, (ii) in an offshore
transaction complying with Rule 903 or 904 of Regulation S, (iii) pursuant to an
exemption from registration under the Securities Act provided by Rule 144
thereunder (if available), (iv) to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or(7) of Regulation D under the Securities
Act) that, prior to such transfer, furnishes the Trustee with a signed letter
containing certain representations and agreements relating to such transfer and
an opinion of
26
<PAGE> 32
counsel acceptable to the Issuer that such transfer is in compliance with the
Securities Act, (v) in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
acceptable to the Issuer), (vi) to the Issuer or any of its subsidiaries, (vii)
pursuant to an effective registration statement under the Securities Act, and,
in each case, in accordance with all applicable securities laws of the states of
the United States. See "Risk Factors -- Restrictions on Transfer."
OTHER
Participation in the Exchange Offer is voluntary, and Holders should
carefully consider whether to accept. Holders of the Notes are urged to consult
their financial and tax advisers in making their own decisions on what action to
take.
The Issuer may in the future seek to acquire untendered Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. The Issuer has no present plans to acquire any Notes that are not
tendered in the Exchange Offer or to file a registration statement to permit
resales of any untendered Notes.
In any state where the Exchange Offer does not fall under a statutory
exemption to the blue sky rules, the Issuer by the date the Exchange Offer
commences will have filed the appropriate registrations and notices and will
have made the appropriate requests to permit the Exchange Offer to be made in
such state.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF THE EXCHANGE OFFER
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "IRS") will not take a contrary view, and
no ruling from the IRS has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conditions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to Holders. Certain Holders of the Notes (including insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign corporations and persons who are not citizens or residents of the United
States) may be subject to special rules not discussed below. Each Holder of a
Note should consult its own tax adviser as to the particular tax consequences of
exchanging such Holder's Notes for Exchange Notes, including the applicability
and effect of any state, local or foreign tax laws.
The issuance of the Exchange Notes to Holders of the Notes pursuant to the
terms set forth in this Prospectus will not constitute an exchange for United
States federal income tax purposes. Consequently, no gain or loss would be
recognized by Holders of the Notes upon receipt of the Exchange Notes, and
ownership of the Exchange Notes will be considered a continuation of ownership
of the Notes. For purposes of determining gain or loss on the subsequent sale or
exchange of the Exchange Notes, a Holder's basis in the Exchange Notes should be
the same as such Holder's basis in the Notes exchanged therefor. A Holder's
holding period for the Exchange Notes should include the Holder's holding period
for the Notes exchanged therefor. The issue price, original issue discount
inclusion and other tax characteristics of the Exchange Notes should be
identical to the issue price, original issue discount inclusion and other tax
characteristics of the Notes exchanged therefor.
27
<PAGE> 33
THE ACQUISITIONS
MT&G ACQUISITION
On December 23, 1997, the Company purchased substantially all of the assets
of MT&G, a Corunna, Michigan based manufacturer of high volume, precision
machined components. MT&G's products include differential pinion and side gears,
output shafts and rear axle shafts for the automotive industry. A key strategic
consideration in management's decision to acquire MT&G was that American Axle &
Manufacturing, Inc. has recently awarded MT&G long-term contracts to machine
near net shape gears for the new General Motors 800 C/K series of light trucks
and sport utility vehicles. MT&G has commenced production of the gears and is
scheduled to reach full production levels during the second quarter of 1998.
MT&G's historical results do not reflect this new business from American Axle.
MT&G's sales and pro forma EBITDA for the twelve months ended September 30,
1997 were $21.8 million and $3.4 million, respectively. Newcor acquired MT&G for
$27.3 million, consisting of approximately $5.6 million in cash (including
$50,000 paid to each of MT&G's five principal shareholders for five-year
noncompetition agreements) and $21.7 million in the form of a promissory note
(bearing interest at 8.0% per annum and payable in full on the closing date of
the Offering), plus the assumption of approximately $5.8 million of debt.
The agreement provides that MT&G and its five principal shareholders will
indemnify the Company for losses in connection with any breach of
representations, warranties or covenants and certain other specified items. With
certain exceptions, this indemnification is subject to a $50,000 deductible and
a 24-month survival period.
DECO ACQUISITION
On the Issue Date, the Company acquired the stock of the three companies
comprising Deco, a Royal Oak, Michigan based manufacturer of high volume,
precision machined components and assemblies. Deco's products include rocker arm
components and assemblies, transmission shafts, axle shafts, thrust plates and
other products for the medium and heavy duty truck and automotive industries.
Deco's sales and pro forma EBITDA for the twelve months ended September 30, 1997
were $74.2 million and $11.1 million, respectively. Sales and pro forma EBITDA
for the year ended December 31, 1997 were $75.5 million and $10.7 million,
respectively. Newcor acquired Deco for $54.9 million in cash (including $50,000
payable to the selling shareholder under a five-year noncompetition agreement),
subject to certain net book value adjustments.
The agreement provides that the selling shareholder will indemnify the
Company for losses in connection with any breach of his representations,
warranties or covenants and certain other specified items. With certain
exceptions, the indemnification by the selling shareholder is subject to a
$500,000 deductible, a $10.0 million cap and a 24-month survival period.
The selling shareholder is obligated to indemnify for environmental
investigation, clean-up or other response activities only if required by law or
under an existing contract of Deco. Indemnification for environmental response
activities is limited to those incurred to meet the least stringent applicable
standards, and the selling shareholder will not have any indemnification
obligations if the Company becomes aware of the presence of hazardous materials
through any voluntary environmental monitoring, sampling or testing.
Environmental claims are subject to a three-year survival period and to the
$10.0 million cap.
The Company agreed to indemnify the selling shareholder for breaches of the
Company's representations, warranties and covenants (subject to a comparable
$500,000 deductible, $10.0 million cap and 24-month survival period). It also
agreed to indemnify him for certain losses in connection with: (1) any
determination that payment of the purchase price violated or can be set aside
under applicable bankruptcy, fraudulent conveyance or transfer law, the Michigan
Business Corporation Act or similar law; or (2) any liability he may have (other
than to Deco, the Company or certain persons related to him) on account of
information he provided pursuant to provisions of the agreement requiring
cooperation in connection with the Company's financing of the Deco Acquisition
and its reporting obligations under the Exchange Act. Deco is required to
28
<PAGE> 34
indemnify the selling shareholder for certain liabilities for business decisions
as a director or officer of Deco, and the Company has guaranteed Deco's
indemnification obligations.
TURN-MATIC ACQUISITION
On the Issue Date, the Company acquired the stock of Turn-Matic, a Clinton
Township, Michigan based manufacturer of high volume, precision machined
components and assemblies. Turn-Matic manufactures engine components including
oil filter adapters, main bearing caps and intake and exhaust manifolds for the
automotive industry. Turn-Matic's sales and pro forma EBITDA for the twelve
months ended September 30, 1997 were $15.8 million and $5.0 million,
respectively. Newcor acquired Turn-Matic for $17.0 million in cash (including an
aggregate of $200,000 paid to certain selling shareholders for five-year
noncompetition agreements), subject to certain net book value adjustments, plus
contingent future payments (not to exceed $3.5 million in total) based on
profitability of the Turn-Matic business over a five-year period following the
closing.
The agreement provides that the selling shareholders will indemnify the
Company for losses in connection with any breach of representations, warranties
or covenants and certain other specified items. With certain exceptions, this
indemnification is subject to a $75,000 deductible, a $1.7 million cap and a
24-month survival period.
29
<PAGE> 35
PRO FORMA CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company on an actual basis and on a pro forma basis as adjusted to give effect
to the Acquisitions and the Offering as if they had occurred on January 31,
1998. This table should be read in conjunction with "Selected Consolidated
Historical Financial Data," "Unaudited Pro Forma Condensed Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's, MT&G's, Deco's and Turn-Matic's
financial statements and the notes thereto, included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF JANUARY 31, 1998
-----------------------
ACTUAL PRO FORMA
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash.................................................... $ 86 $ 109
======= ========
Debt:
The Notes............................................. $ -- $125,000
MT&G Note............................................. 21,650 --
Revolving credit facility(1).......................... 31,700 300
Term note (including current portion)................. 10,000 10,000
Limited obligation revenue bonds...................... 6,100 6,100
------- --------
Total debt......................................... 69,450 141,400
Shareholders' equity.................................... 26,137 26,137
------- --------
Total capitalization............................... $95,587 $167,537
======= ========
</TABLE>
- -------------------------
(1) The $31.7 million of borrowings outstanding under the revolving credit
facility in the actual column above consists of $5.6 million of borrowings
to finance the cash portion of the MT&G Acquisition, $5.8 million of debt
assumed by Newcor as part of the MT&G Acquisition that was subsequently
repaid, $5.0 million of borrowings to finance a down payment for the Deco
Acquisition, and $15.3 million of working capital borrowings. The $0.3
million of borrowings outstanding under the revolving credit facility in the
pro forma column consist of working capital borrowings. The revolving credit
facility in effect at January 31, 1998 has since been amended and restated
to constitute the Senior Credit Facility. See "Description of Other Debt --
Senior Credit Facility."
30
<PAGE> 36
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The Unaudited Pro Forma Consolidated Statements of Income of the Company
for the fiscal year ended October 31, 1997 and the quarter ended January 31,
1998 (the "Pro Forma Statements of Income") and the Unaudited Pro Forma
Condensed Consolidated Balance Sheet of the Company as of January 31, 1998 (the
"Pro Forma Balance Sheet" and, together with the Pro Forma Statements of Income,
the "Pro Forma Financial Statements") have been prepared to illustrate the
estimated effect of the Offering and the Acquisitions. The Pro Forma Statements
of Income gives pro forma effect to the Acquisitions as if they had occurred on
November 1, 1996, and the results for the Acquired Companies have been included
for the twelve months ended September 30, 1997 and the three months ended
December 31, 1997. The Pro Forma Balance Sheet gives pro forma effect to the
Offering and the Acquisitions as if they had occurred on January 31, 1998. The
Pro Forma Financial Statements do not purport to be indicative of the results of
operations or financial position of the Company that would have actually been
obtained had such transactions been completed as of the assumed dates and for
the periods presented, or which may be obtained in the future. The pro forma
adjustments are described in the accompanying notes and are based upon available
information and certain assumptions that the Company believes are reasonable.
The Pro Forma Financial Statements should be read in conjunction with the
separate historical financial statements of the Company and each of the Acquired
Companies and the notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
Each of the Acquisitions will be accounted for by the purchase method of
accounting. Under purchase accounting, the total purchase price will be
allocated to the tangible and intangible assets and liabilities of each of the
Acquired Companies based upon their respective fair values as of the effective
time of their respective acquisitions. The pro forma adjustments represent
management's preliminary determination of purchase accounting adjustments and
are based upon available information and certain assumptions that the Company
believes to be reasonable. Consequently, the amounts reflected in the Pro Forma
Financial Statements are subject to change, and the final amounts may differ
substantially. Therefore, the resulting effect on income from operations may
differ from the pro forma amounts included herein.
31
<PAGE> 37
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
QUARTER ENDED JANUARY 31, 1998
<TABLE>
<CAPTION>
PRO FORMA
NEWCOR MT&G DECO TURN-MATIC CONSOLIDATED
QUARTER OCTOBER 1, 1997 OCTOBER 1, 1997 OCTOBER 1, 1997 QUARTER
ENDED THROUGH THROUGH THROUGH ENDED
JANUARY 31, NOVEMBER 30, DECEMBER 31, DECEMBER 31, OFFERING JANUARY 31,
1998 1997 1997 1997 ADJUSTMENTS 1998
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Sales...................... $30,134 $4,109 $18,827 $3,505 $ -- $56,575
Cost of sales.............. 26,423 3,763(1) 14,687(1) 2,310(1) -- 47,183
------- ------ ------- ------ ------- -------
Gross profit............... 3,711 346 4,140 1,195 -- 9,392
Selling, general and
administrative expense... 4,164 245(2) 1,704(2) 204(2) -- 6,317
Amortization expense....... 325 187(3) 504(3) 133(3) -- 1,149
------- ------ ------- ------ ------- -------
Operating income (loss).... (778) (86) 1,932 858 -- 1,926
Interest expense........... (825) --(4) -- --(4) (2,626)(4) (3,451)
Other income (expense)..... (11) --(5) --(5) --(5) -- (11)
------- ------ ------- ------ ------- -------
Income (loss) before income
taxes.................... (1,614) (86) 1,932 858 (2,626) (1,536)
Provision (benefit) for
income taxes............. (582) (29)(6) 657(6) 337(6) (892)(6) (509)
------- ------ ------- ------ ------- -------
Income (loss) from
continuing operations.... (1,032) (57) 1,275 521 (1,734) (1,027)
FINANCIAL RATIOS AND OTHER
DATA:
EBITDA(7).................. $ 499 $ 213 $ 2,789 $1,176 -- $ 4,677
Depreciation and
amortization............. 1,277 299 857 318 -- 2,751
Capital expenditures....... 1,749 -- 530 140 -- 2,419
Ratio of earnings to fixed
charges(8)............... -- -- -- -- -- --
Ratio of EBITDA to interest
expense(9)............... 0.6 -- -- -- -- 1.4
Ratio of debt to
EBITDA(10)............... 139.2 -- -- -- -- 30.2
</TABLE>
32
<PAGE> 38
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
MT&G DECO TURN-MATIC PRO FORMA
NEWCOR OCTOBER 1, 1996 OCTOBER 1, 1996 OCTOBER 1, 1996 CONSOLIDATED
YEAR ENDED THROUGH THROUGH THROUGH YEAR ENDED
OCTOBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, OFFERING OCTOBER 31,
1997 1997 1997 1997 ADJUSTMENTS 1997
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Sales...................... $130,848 $21,787 $74,177 $15,797 $ $242,609
Cost of sales.............. 107,083 16,414(1) 58,407(1) 10,923(1) -- 192,827
-------- ------- ------- ------- -------- --------
Gross profit............... 23,765 5,373 15,770 4,874 -- 49,782
Selling, general and
administrative expense... 14,880 2,621(2) 6,101(2) 567(2) -- 24,169
Amortization expense....... 879 1,120(3) 2,018(3) 508(3) -- 4,525
Nonrecurring income........ (297) -- -- -- -- (297)
-------- ------- ------- ------- -------- --------
Operating income........... 8,303 1,632 7,651 3,799 -- 21,385
Interest expense........... (2,070) --(4) -- --(4) (11,807)(4) (13,877)
Other income (expense)..... (224) --(5) --(5) --(5) -- (224)
-------- ------- ------- ------- -------- --------
Income before income
taxes.................... 6,009 1,632 7,651 3,799 (11,807) 7,284
Provision (benefit) for
income taxes............. 2,119 555(6) 2,601(6) 1,464(6) (4,013)(6) 2,726
-------- ------- ------- ------- -------- --------
Income from continuing
operations............... 3,890 1,077 5,050 2,335 (7,794) 4,558
FINANCIAL RATIOS AND OTHER
DATA:
EBITDA(7).................. $ 12,583 $ 3,427 $11,081 $ 5,045 -- $ 32,136
Depreciation and
amortization............. 4,280 1,795 3,430 1,246 -- 10,751
Capital expenditures....... 3,539 1,980 1,296 1,176 -- 7,991
Ratio of earnings to fixed
charges(8)............... 3.4x -- -- -- -- 1.5x
Ratio of EBITDA to interest
expense(9)............... 6.1 -- -- -- -- 2.4
Ratio of debt to
EBITDA(10)............... 2.6 -- -- -- -- 4.4
</TABLE>
33
<PAGE> 39
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
For purposes of the Unaudited Pro Forma Consolidated Statement of Income,
it has been assumed that the results of operations of MT&G, Deco and Turn-Matic
for the twelve months ended October 31, 1997 and the three months ended January
31, 1998 would be comparable to their results of operations for the twelve
months ended September 30, 1997 and the three months ended December 31, 1997,
respectively. The Unaudited Pro Forma Statements of Income data for the twelve
months ended September 30, 1997 was derived from internal financial information
for MT&G and Deco and from audited financial statements for Turn-Matic. For the
three months ended December 31, 1997, the unaudited Pro Forma Statements of
Income data was derived from internal financial information.
(1) Represents pro forma cost of sales arrived at as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1997 QUARTER ENDED JANUARY 31, 1998
-------------------------------- -------------------------------
MT&G DECO TURN-MATIC MT&G DECO TURN-MATIC
<S> <C> <C> <C> <C> <C> <C>
Historical cost of sales....... $17,445 $59,754 $11,292 $3,970 $15,031 $2,389
Depreciation(a)................ (6) (1,347) (263) 1 (344) (73)
Capitalizable costs(b)......... (975) -- -- (200) -- --
Rental(c)...................... (50) -- (106) (8) -- (6)
------- ------- ------- ------ ------- ------
Pro forma cost of sales........ $16,414 $58,407 $10,923 $3,763 $14,687 $2,310
======= ======= ======= ====== ======= ======
</TABLE>
(a) Decreased depreciation expense due to extended estimated useful lives,
primarily for machinery and equipment net of additional depreciation
on fair value adjustments to property, plant and equipment.
(b) For the year ended October 31, 1997, represents adjustments for
tooling of $425 and for machinery and equipment and plant construction
costs of $300, all of which were made to conform the accounting to the
Company's accounting practices, and $250 of costs associated with
closing a facility and moving machinery and equipment to remaining
operating facilities. This facility was closed in early calendar 1997.
For the quarter ended January 31, 1998, represents adjustments for
tooling of $150 and for machinery and equipment and plant construction
costs of $50, all of which were made to conform the accounting to the
Company's accounting practices.
(c) For MT&G, reflects elimination of rental expense for a facility leased
by MT&G which the Company acquired as part of the acquisition offset
in part by incremental rental expense for a facility MT&G owned which
the Company did not acquire and has agreed to lease following the
acquisition. For Turn-Matic, reflects elimination of rental expense
for a facility Turn-Matic owned but was not used in operations and
which the Company did not acquire or lease in the Turn-Matic
acquisition.
(2) Represents pro forma selling, general and administrative expenses arrived
at as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1997 QUARTER ENDED JANUARY 31, 1998
------------------------------- ------------------------------
MT&G DECO TURN-MATIC MT&G DECO TURN-MATIC
<S> <C> <C> <C> <C> <C> <C>
Historical selling, general and
administrative expense......... $3,224 $13,214 $ 1,947 $ 395 $3,398 $ 361
Elimination of selling
shareholders' salaries and
benefits....................... (495) (6,713) (1,289) (110) (1,594) (146)
Elimination of nonrecurring
consulting fees................ (108) (400) (91) (40) (100) (11)
------ ------- ------- ------ ------ -----
Pro forma selling, general and
administrative expense......... $2,621 $ 6,101 $ 567 $ 245 $1,704 $ 204
====== ======= ======= ====== ====== =====
</TABLE>
(3) Represents pro forma amortization of goodwill arising from the Acquisitions
which will be amortized on a straight-line basis over twenty years.
34
<PAGE> 40
(4) For the year ended October 31, 1997, represents the net increase in
interest expense to reflect: (i) $12,344 resulting from the Notes at
9.875%; (ii) the annual amortization of financing costs of $450 over the
term of the Notes; and (iii) the elimination of $987 of interest on
existing Company debt repaid from the proceeds from the Notes. For the
quarter ended January 31, 1998, represents the net increase in interest
expense to reflect: (i) $3,086 resulting from the Notes at 9.875%; (ii) the
amortization of financing costs of $112 over the term of the Notes; and
(iii) the elimination of $572 of interest on existing Company debt repaid
from the proceeds from the Notes. Net interest expense at MT&G and
Turn-Matic has been eliminated because MT&G's debt is assumed repaid with
the proceeds of the Offering and Turn-Matic's debt is assumed repaid out of
Turn-Matic's available cash and proceeds of the Offering.
(5) Other income (expense) has been adjusted from historical results for the
following: (i) charitable contributions at MT&G have been eliminated in
order to conform with the Company's charitable giving practice; (ii)
investment earnings at Deco have been eliminated to reflect that
investments at Deco were not acquired; and (iii) a nonrecurring gain on the
sale of machinery and equipment at Turn-Matic has been eliminated to
conform with purchase accounting adjustments.
(6) Calculated as income before income taxes multiplied by the Company's
incremental tax rate of 34.0% for MT&G, Deco and the net increase in
interest expense. For Turn-Matic, income before income taxes was adjusted
for the addition of non-deductible goodwill amortization of $508 for the
year ended October 31, 1997 and for $133 for the quarter ended January 31,
1998. The adjusted amounts were multiplied by the incremental tax rate of
34.0%.
(7) "EBITDA" is operating income (loss) plus depreciation and amortization.
EBITDA does not represent and should not be considered as an alternative to
net income or cash flow from operations, as determined by GAAP. The
Company's presentation may not be comparable to similar measures reported
by other companies. The Company believes EBITDA and related ratios provide
useful information regarding a company's ability to service and/or incur
indebtedness. EBITDA does not take into account the Company's working
capital requirements, debt service requirements, capital expenditure
requirements and other commitments. Thus, it is not necessarily indicative
of amounts that may be available for discretionary use.
(8) Calculated by dividing earnings by total fixed charges. Earnings consist of
earnings before income taxes and fixed charges. Fixed charges consist of
interest expense, amortization of deferred financing costs and the portion
of rental expense (one-third) that the Company believes to be
representative of interest. The Company's earnings were insufficient to
cover fixed charges by $1.6 million for the three months ended January 31,
1998. On a pro forma basis, earnings were insufficient to cover fixed
charges by $1.5 million for the three months ended January 31, 1998.
(9) Calculated by dividing EBITDA by cash interest expense, which excludes
amortization of deferred financing costs.
(10) Calculated by dividing year-end total debt by EBITDA.
35
<PAGE> 41
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
NEWCOR DECO(1) TURN-MATIC(1)
JANUARY 31, DECEMBER 31, DECEMBER 31, PRO FORMA PRO FORMA
1998 1997 1997 ADJUSTMENTS CONSOLIDATED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and investments.................... $ 86 $13,382 $ 2,927 $ (458)(2) $ 109
(13,382)(3)
(2,446)(4)
Receivables............................. 21,138 6,377 2,006 -- 29,521
Inventories............................. 7,927 2,047 884 600(3) 11,458
Prepaid expenses and other.............. 7,998 172 831 (767)(3) 8,234
-------- ------- ------- -------- --------
Total current assets.................. 37,149 21,978 6,648 (16,453) 49,322
Property, plant and equipment, net........ 37,116 7,744 5,136 4,620(3) 54,616
Goodwill.................................. 40,202 -- -- 50,956(3) 91,158
Other long-term assets.................... 9,982 -- 306 (5,000)(2) 9,482
4,500(2)
(306)(3)
-------- ------- ------- -------- --------
Total assets.......................... $124,449 $29,722 $12,090 $ 38,317 $204,578
======== ======= ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable........................... $ -- $ -- $ 541 $ (541)(4) $ --
Current portion of long-term debt....... 1,333 -- -- -- 1,333
Accounts payable........................ 14,319 3,066 542 -- 17,927
Accrued expenses and other.............. 4,598 2,628 442 605(3) 8,273
-------- ------- ------- -------- --------
Total current liabilities............. 20,250 5,694 1,525 64 27,533
Long-term debt............................ 68,117 1,905 125,000(5) 140,067
(54,955)(4)
Postretirement benefits................... 6,338 -- -- -- 6,338
Pension liability and other............... 3,607 -- 602 294(3) 4,503
-------- ------- ------- -------- --------
Total liabilities..................... 98,312 5,694 4,032 70,403 178,441
Total shareholders' equity............ 26,137 24,028 8,058 (32,086)(3) 26,137
-------- ------- ------- -------- --------
Total liabilities and shareholders'
equity........................... $124,449 $29,722 $12,090 $ 38,317 $204,578
======== ======= ======= ======== ========
</TABLE>
36
<PAGE> 42
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(1) For purposes of the Unaudited Pro Forma Condensed Consolidated Balance
Sheet, the financial condition of Deco and Turn-Matic as of December 31,
1997 has been assumed to be comparable to January 31, 1998. The December 31,
1997 balance sheet was derived from internal financial information for
Turn-Matic and from audited financial statements for Deco.
(2) Reflects the uses of funds for the Offering and Acquisitions as if the
Acquisitions had occurred on January 31, 1998:
<TABLE>
<CAPTION>
NEWCOR DECO TURN-MATIC TOTAL
<S> <C> <C> <C> <C>
Use of Funds:
Acquisition................................... $ -- $54,850(b) $18,058(c) $ 72,908
Retirement of existing bank credit facilities
and other debt.............................. 53,050(a) -- -- 53,050
Application of Deco down payment.............. (5,000) -- -- (5,000)
Fees and expenses of the Offering............. 4,500 -- -- 4,500
------- ------- ------- --------
$52,550 $54,850 $18,058 $125,458
======= ======= ======= ========
</TABLE>
(a) Includes repayment of $31,400 of Company revolving credit borrowings
and repayment of the $21,650 MT&G Note.
(b) Includes repayment of $5,000 of Company revolving credit borrowings
incurred to finance the down payment made in connection with the Deco
Acquisition. Payment was made in December 1997 and recorded in other
long-term assets.
(c) The purchase price shown for Turn-Matic reflects a $1,058 purchase
price adjustment based on the value of Turn-Matic's net assets at
December 31, 1997. Such purchase price adjustment is funded by a
combination of a reduction in cash acquired of $458 and proceeds from
the Offering of $600.
(3) The Acquisitions will be accounted for by the purchase method of accounting,
pursuant to which the purchase price is allocated among the acquired
tangible and intangible assets and assumed liabilities in accordance with
their estimated fair values on the date of acquisition. The purchase price
and preliminary adjustments to historical book value as a result of the
respective acquisitions are as follows:
<TABLE>
<CAPTION>
DECO TURN-MATIC TOTAL
<S> <C> <C> <C>
Elimination of cash and equity investments not
acquired.............................................. $(13,382) $ -- $(13,382)
Elimination of receivable from former shareholder....... -- (767) (767)
Increase in inventory................................... 600 -- 600
Increase in property, plant and equipment to estimated
fair value............................................ 3,756 864 4,620
Estimated goodwill...................................... 40,353 10,603 50,956
Elimination of other long-term assets not acquired...... -- (306) (306)
-------- ------- --------
$ 31,327 $10,394 $ 41,721
======== ======= ========
Increase in accrued liabilities......................... $ 505 $ 100 $ 605
Cost of acquisitions.................................... 54,850 18,058 72,908
Increase in deferred tax liability for fair value
write-up of property and equipment.................... -- 294 294
Elimination of historical shareholders' equity as a
result of purchase accounting......................... (24,028) (8,058) (32,086)
-------- ------- --------
$ 31,327 $10,394 $ 41,721
======== ======= ========
</TABLE>
37
<PAGE> 43
(4) Pro forma debt is derived from the following:
<TABLE>
<CAPTION>
NEWCOR DECO TURN-MATIC TOTAL
<S> <C> <C> <C> <C>
Retirement of existing debt
Current.......................................... $ -- $-- $ 541(a) $ 541
Long-term........................................ 53,050 -- 1,905(a) 54,955
------- -- ------ -------
$53,050 $-- $2,446(a) $55,496
======= == ====== =======
</TABLE>
- -------------------------
(a) Assumed repaid from available Turn-Matic cash.
(5) Reflects the issuance of the Notes in the Offering.
38
<PAGE> 44
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following table sets forth the selected consolidated historical
financial data of the Company for the five fiscal years ended October 31, 1997.
The selected consolidated historical financial data for the fiscal years ended
October 31, 1995, 1996 and 1997 are derived from the audited consolidated
financial statements of the Company included elsewhere in this Prospectus. The
selected consolidated historical financial data for the fiscal years ended
October 31, 1993 and 1994 are derived from the audited consolidated financial
statements of the Company. The following table should be read in conjunction
with the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Consolidated Financial Statements of Newcor and
the related notes and other financial information presented elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED OCTOBER 31,(1) JANUARY 31,
-------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales............................... $65,383 $ 74,116 $90,173 $111,744 $130,848 $ 27,975 $ 30,134
Gross margin........................ 11,645 11,069 16,618 22,657 23,765 5,330 3,711
Selling, general and administrative
expense........................... 11,318 11,719 11,264 15,052 15,759 3,697 4,489
Nonrecurring items, net (gain)
loss.............................. -- -- -- 824 (297) 711 --
------- -------- ------- -------- -------- -------- --------
Operating income (loss) from
continuing operations............. 327 (650) 5,354 6,781 8,303 922 (778)
Interest expense.................... 575 1,111 1,504 1,787 2,070 432 825
Other income (expense).............. 394 174 (229) 178 (224) 74 (11)
------- -------- ------- -------- -------- -------- --------
Income (loss) from continuing
operations before income taxes.... 146 (1,587) 3,621 5,172 6,009 564 (1,614)
Provision (benefit) for income
taxes............................. 74 (737) 1,230 1,614 2,119 198 (582)
------- -------- ------- -------- -------- -------- --------
Income (loss) from continuing
operations........................ 72 (850) 2,391 3,558 3,890 366 (1,032)
Earnings (loss) per share from
continuing operations -- Basic and
Diluted........................... $ 0.01 $ (0.17) $ 0.49 $ 0.72 $ 0.79 $ 0.07 $ (0.21)
OTHER FINANCIAL DATA:
EBITDA(2)........................... $ 1,920 $ 1,585 $ 8,204 $ 10,403 $ 12,583 $ 1,925 $ 499
EBITDA margin(3).................... 2.9% 2.1% 9.1% 9.3% 9.6% 6.9% 1.7%
Depreciation and amortization,
continuing operations............. $ 1,593 $ 2,235 $ 2,850 $ 3,622 $ 4,280 $ 1,003 $ 1,277
Capital expenditures, continuing
operations........................ 4,951 4,568 4,580 2,946 3,539 620 1,749
Cash provided by (used in):
Operating activities.............. *(5) (2,028) 1,463 7,798 8,442 1,896 417
Investing activities.............. *(5) (12,653) (4,173) (12,120) (14,153) (12,701) (14,819)
Financing activities.............. *(5) 18,886 (6,412) (1,604) 6,828 10,865 14,454
Ratio of earnings to fixed
charges(4)........................ 1.2x -- 3.2x 3.5x 3.4x 2.1x --
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31, AS OF JANUARY 31,
-------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital...................... $25,309 $ 32,186 $26,575 $ 14,951 $ 17,938 $18,017 $ 16,899
Total assets......................... 73,305 84,836 77,553 77,499 90,883 89,357 124,449
Total debt........................... 12,000 31,500 26,200 25,400 33,100 36,500 69,450
Shareholders' equity................. 28,440 25,157 25,909 24,441 27,415 24,572 26,137
</TABLE>
- -------------------------
(1) Fiscal years 1993 through 1996 excludes the discontinued operations of
Wilson Automation sold on May 6, 1996.
(2) "EBITDA" is operating income (loss) from continuing operations plus
depreciation and amortization. EBITDA does not represent and should not be
considered as an alternative to net income or cash flow from operations, as
determined by GAAP. The Company's presentation may not be comparable to
similar measures reported by other companies. The Company believes EBITDA
and related ratios provide useful information regarding a company's ability
to service and/or incur indebtedness. EBITDA does not take into account the
Company's working capital requirements, debt service requirements, capital
expenditure requirements and other commitments. Thus, it is not necessarily
indicative of amounts that may be available for discretionary use.
(3) EBITDA margin is calculated by dividing EBITDA by sales for each of the
applicable periods.
(4) Calculated by dividing earnings by total fixed charges. Earnings consist of
earnings before income taxes and fixed charges. Fixed charges consist of
interest expense, amortization of deferred financing costs and the portion
of rental expense (one-third) that the Company believes to be representative
of interest. The Company's earnings were insufficient to cover fixed charges
by $1.6 million for the fiscal year ended October 31, 1994 and for the three
months ended January 31, 1998, respectively.
(5) Information is unavailable due to the divestiture of Wilson Automation,
which was accounted for as a discontinued operation.
39
<PAGE> 45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Consolidated Historical Financial Data" and the Company's financial statements
and the notes thereto, included elsewhere herein.
OVERVIEW
The Company is organized into three business groups: the Precision Machined
Products Group, the Rubber and Plastic Group and the Special Machines Group. The
Precision Machined Products Group produces transmission, powertrain and engine
components and assemblies for the automotive and agricultural vehicle
industries. The Rubber and Plastic Group produces cosmetic and functional seals
and boots and functional engine compartment products primarily for the
automotive industry. These two groups had previously been reported as a single
Components and Assemblies segment. Further segmentation has become necessary due
to the growth of the Company's Components and Assemblies business. The Special
Machines Group designs and manufactures welding, assembly, forming, heat
treating and testing machinery and equipment for the automotive, appliance and
other industries.
The last two fiscal years have marked a period of significant change and
transition for the Company. Newcor completed three acquisitions in the Rubber
and Plastic Group during fiscal 1996: Boramco, Inc. and Rubright, Inc. on
January 2, 1996 and Production Rubber Products, Inc. on April 1, 1996. These
acquisitions were combined with Midwest Rubber, a division acquired in fiscal
1992, to strengthen the Company's market position in this segment and to create
the critical mass management considers necessary to effectively provide the
engineering support, innovative products, and product line breadth required to
continue to meet its customers' needs. The Rubber and Plastic Group was further
enhanced with a fourth acquisition, Plastronics Plus, Inc. ("Plastronics"), in
January 1997.
Consistent with management's strategy of reducing the impact on the Company
of the volatility of results of the Special Machines Group, the Company
completed the sale of two of the three divisions within this group in fiscal
1996. On May 6, 1996, the Company sold the business and certain assets of its
Wilson Automation ("Wilson") division. The Wilson divestiture was accounted for
as a discontinued operation, and, accordingly, the results of operations of
Wilson have been removed from continuing operations in the Consolidated
Statements of Income and related notes and reclassified to discontinued
operations for fiscal 1996 and prior years. Effective October 21, 1996, the
Company also sold its Newcor Machine Tool ("NMT") division, which manufactured
multi-stationed metal cutting machines and CNC lathes.
The Company's strategy to build its Precision Machined Products Group as a
high volume automotive supplier took a significant step forward as a result of
the following actions: On March 6, 1997, the Company sold its Eonic, Inc.
("Eonic") division that was principally a low growth, low volume manufacturer of
industrial cams and camshafts. On December 23, 1997, the Company purchased the
assets of MT&G for $27.3 million, and assumed $5.8 million of debt, which was
subsequently retired. MT&G manufactures differential pinion and side gears,
output shafts and rear axle shafts for the automotive industry. Subsequent to
year-end, the Company also purchased the common stock of the three companies
comprising Deco for $54.9 million and the common stock of Turn-Matic for $17.0
million. Deco manufactures high-volume, precision-machined engine and powertrain
components and assemblies for the medium and heavy truck and automotive
industries, while Turn-Matic manufactures high volume, precision machined engine
components and assemblies for the automotive industry. These companies all have
product lines and capabilities that management believes will complement the
Company's other precision machining businesses. In the twelve months ended
September 30, 1997, sales for these three companies aggregated $111.8 million.
Assuming the acquisition of MT&G and the pending acquisitions of Deco and
Turn-Matic had occurred at the beginning of fiscal 1997, the Precision Machined
Products Group sales would have been 71.0% of fiscal 1997 consolidated sales,
while the Rubber and Plastic Group would have decreased to 20.0% of fiscal 1997
consolidated sales and the Special Machines Group would have decreased to 9.0%
of fiscal 1997 consolidated sales. As a result of these acquisitions, the
Company's financial condition and operations for 1998 and future years will
differ substantially compared with those for fiscal 1997 and prior years.
40
<PAGE> 46
RESULTS OF OPERATIONS FOR THE QUARTER ENDED JANUARY 31, 1998
The following table illustrates the factors causing the Company's
quarter-to-quarter change in sales by group, including the effect of
acquisitions and change in sales from existing operations.
<TABLE>
<CAPTION>
PRECISION
MACHINED RUBBER AND SPECIAL
PRODUCTS PLASTIC MACHINES TOTAL
(IN THOUSANDS)
<S> <C> <C> <C> <C>
First quarter 1997 sales................ $13,087 $10,057 $ 4,831 $27,975
Acquisitions.......................... 2,031 2,553 -- 4,584
Change from existing business ........ (492) (544) (1,389) (2,425)
------- ------- ------- -------
First quarter 1998 sales................ $14,626 $12,066 $ 3,442 $30,134
======= ======= ======= =======
</TABLE>
Except for approximately one month of results for MT&G, acquired on
December 23, 1997, the Company's results for the first quarter of fiscal year
1998 do not include the revenues or profits of MT&G, Deco and Turn-Matic. Sales
of MT&G, Deco and Turn-Matic aggregated $111.8 million for the twelve months
ended September 30, 1997, as compared to the Company's reported fiscal 1997
sales of $130.8 million. As a result of these acquisitions and the related
financing, the Company's financial condition and results of operations for
fiscal 1998 and future years will differ substantially from those for fiscal
1997 and prior years.
Consolidated sales were $30.1 million for the first quarter of 1998, an
increase of $2.1 million, or 7.7%, from first quarter 1997 sales of $28.0
million. Sales for the Precision Machined Products Group increased $1.5 million,
or 11.8%, to $14.6 million, sales for the Rubber and Plastic Group increased
$2.0 million, or 20.0%, to $12.1 million, while sales for the Special Machines
Group decreased $1.4 million, or 28.8%, to $3.4 million. The increase in sales
for the Precision Machined Products Group was due to sales at the recently
acquired MT&G division of approximately $2.0 million, partially offset by
reduced sales as a result of a customer's vehicle assembly line changeover. The
increase in sales for the Rubber and Plastic Group was due to full quarter
results of the Company's Plastronics acquisition that occurred in January 1997,
partially offset by reduced shipment of certain products as a result of customer
production schedules. The sales decrease for the Special Machines Group was
primarily due to not receiving a significant new order that had been
anticipated, as well as delays associated with certain new orders pending final
customer approval.
Consolidated gross profit decreased $1.6 million to $3.7 million in the
first quarter of 1998 from $5.3 million in the first quarter of 1997.
Consolidated gross margin decreased to 12.3% in the first quarter of 1998 from
19.1% in the first quarter of 1997. The decrease in gross profit and gross
margin was due to several reasons including: (i) decreased sales in the Special
Machines Group (which has generally commanded higher margins than other groups);
(ii) lower Precision Machined Products Group sales (excluding the effect of the
MT&G Acquisition) due to a vehicle assembly line changeover at a customer, which
resulted in a temporary halt in the shipment of parts for these vehicles; (iii)
Rubber and Plastic Group results being adversely affected by increased scrap,
high training costs and productivity issues (due to high hourly labor turnover
caused by full employment in local economies) and, to a lesser extent, by
pricing issues on certain coated metal parts produced by the group; and (iv) new
program launch start-up costs at MT&G and one other division within the
Precision Machined Products Group.
Selling, general and administrative expenses (SG&A) increased to $4.2
million in the first quarter of 1998 from $3.5 million in the first quarter of
1997. SG&A as a percentage of sales increased to 13.8% in the first quarter of
1998 from 12.6% in the first quarter of 1997. The increase in SG&A was due to
the following factors: (i) SG&A associated with Acquisitions of approximately
$0.3 million, which resulted from the MT&G Acquisition and a full quarter of
Plastronics SG&A; (ii) expenditures incurred to begin the implementation of a
company-wide information system; (iii) expenditures incurred to continue to
train employees in the Newcor Operating System; and (iv) expansion of the sales
department within the Rubber and Plastic Group. SG&A as a percentage of sales
increased due to the reasons described above.
Amortization expense increased to $0.3 million in the first quarter of 1998
from $0.2 million in the first quarter of 1997 due to the MT&G Acquisition and a
full quarter of Plastronics amortization.
41
<PAGE> 47
Operating income (loss) by group was as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------
JANUARY 31, 1998 JANUARY 31, 1997
<S> <C> <C>
Precision Machined Products...................... $ 460 $ 995
Rubber and Plastic............................... (468) 441
Special Machines................................. (348) 521
Corporate........................................ (422) (1,035)
----- -------
Total operating income (loss).................. $(778) $ 922
===== =======
</TABLE>
Consolidated operating income decreased $1.7 million to a $0.8 million loss
in the first quarter of 1998 from $0.9 million in income in the first quarter of
1997. Consolidated operating margin decreased to (2.6%) of sales in the first
quarter of 1998 from 3.3% of sales in the first quarter of 1997.
Operating income for the Precision Machined Products Group decreased $0.5
million to $0.5 million in the first quarter of 1998 from $1.0 million in the
first quarter of 1997. Operating margin decreased to 3.1% of group sales in the
first quarter of 1998 from 7.6% of group sales in the first quarter of 1997. The
decrease in operating income and margin was primarily due to lower sales at an
existing division within this group due to a vehicle assembly line changeover at
a customer, which resulted in a temporary halt in the shipment of higher margin
parts for these vehicles and to new program launch costs at MT&G and an existing
division within this group.
Operating income for the Rubber and Plastic Group decreased $0.9 million to
a loss of $0.5 million in the first quarter of 1998 from income of $0.4 million
in the first quarter of 1997. Operating margin decreased to (3.9%) of group
sales in the first quarter of 1998 from 4.4% of group sales in the first quarter
of 1997. The decrease in operating income was primarily due to operational
inefficiencies that resulted in increased scrap, high training costs and
productivity issues. These inefficiencies were mainly the result of high labor
turnover caused by full employment in local economies. Expansion of the sales
department within this group also adversely affected operation income. These
developments, and, to a lesser extent, pricing issues on certain coated metal
parts produced by the group, resulted in the operating margin reduction.
Operating income for the Special Machines group decreased $0.9 million to a
loss of $0.4 million in the first quarter of 1998 from income of $0.5 million in
the first quarter of 1997. Operating margin decreased to (10.1%) of group sales
in the first quarter of 1998 from 10.8% in the first quarter of 1997. The
decrease in operating income and operating margin was due to the decline in
sales at the remaining division within this group.
Corporate operating loss improved primarily due to the elimination of the
$0.7 million loss on the sale of Eonic that was incurred during the first
quarter of 1997, partially offset by expenditures incurred to begin the
implementation of a company-wide information system.
Interest expense increased $0.4 million to $0.8 million in the first
quarter of fiscal 1998 from $0.4 million in the first quarter of 1997. The
increase in interest expense was due to additional debt incurred related to: (i)
the MT&G Acquisition, which was comprised of a $3.1 million pre-closing cash
payment, pay off of $5.8 million of existing MT&G debt subsequent to closing and
the issuance of a $21.65 million note; and (ii) a $5.0 million deposit to the
Deco shareholders made in December 1997.
Certain of the factors impacting results for the first quarter of 1998,
such as vehicle assembly line changeover, new program launch and acquisition
related costs, were short-term or nonrecurring in nature. The customer's vehicle
changeover has been completed and the Precision Machined Products Group sales
outlook for the balance of fiscal 1998 is improved compared with the first
quarter. MT&G's new program launch is proceeding on schedule with full
production planned for early in the third quarter of fiscal 1998. Management is
implementing certain actions in response to the lower than expected results by
the Special Machines and Rubber and Plastic Groups, and believes these actions
will begin to favorably impact the performance of those groups during the second
quarter of fiscal 1998.
42
<PAGE> 48
ANNUAL RESULTS OF CONTINUING OPERATIONS
The following table illustrates the factors causing the Company's
year-to-year sales trends by group, including the effect of flow through sales,
acquisitions and divestitures, and net incremental business from operations
owned throughout each fiscal year presented.
<TABLE>
<CAPTION>
PRECISION
MACHINED RUBBER AND SPECIAL
PRODUCTS PLASTIC MACHINES TOTAL
<S> <C> <C> <C> <C>
1995 Sales............................... $ 42.4 $17.2 $30.6 $ 90.2
Acquisitions........................... -- 13.4 -- 13.4
Net incremental business............... 6.0 1.8 0.3 8.1
------ ----- ----- ------
1996 Sales............................... 48.4 32.4 30.9 111.7
Flow through sales..................... 14.5 -- -- 14.5
Acquisitions........................... -- 13.2 -- 13.2
Divestitures........................... (10.4) -- (6.5) (16.9)
Net incremental business............... 8.0 2.9 (2.6) 8.3
------ ----- ----- ------
1997 Sales............................... $ 60.5 $48.5 $21.8 $130.8
====== ===== ===== ======
</TABLE>
FISCAL 1997 COMPARED WITH FISCAL 1996
The Company achieved record sales in 1997 of $130.8 million, an increase of
$19.1 million, or 17.1%, from 1996 sales of $111.7 million. Sales for the
Precision Machined Products Group increased $12.1 million, or 24.8%, to $60.5
million, sales for the Rubber and Plastic Group increased $16.1 million, or
49.5%, to $48.5 million, while sales for the Special Machines Group decreased
$9.1 million, or 29.2% to $21.8 million. The increase in sales for the Precision
Machined Products Group was due to approximately $8.0 million of increased
product sales within existing divisions and flow through sales of material of
approximately $14.5 million, partially offset by the effect of $10.4 million in
1996 sales attributable to the divested Eonic division. The $14.5 million
increase from flow through sales occurred because a customer that had been
providing material to the Company decided to have the Company purchase the
material and include the value of the material in the selling price. Without the
flow through sales, the Company's overall sales would have increased $4.6
million, or 4.1%, over 1996 sales. The increase in sales for the Rubber and
Plastic Group was primarily due to the inclusion of a full year of results for
three rubber and plastic component companies acquired during the first two
quarters of fiscal 1996, as well as the January 1997 acquisition of Plastronics.
Additional sales from the four acquired Rubber and Plastic Group companies
aggregated approximately $13.2 million during 1997. The remaining growth within
the Rubber and Plastic Group of $2.9 million was due to incremental new business
at the existing division within this group. Sales decreases within the Special
Machines Group were due to the effect of $6.5 million in 1996 sales attributable
to the divested NMT division that was sold during 1996 and a $2.6 million sales
decrease at the remaining division within this group ("Bay City"). The sales
decrease at the Bay City division was due to insufficient new orders to sustain
the business that existed during 1996.
Consolidated gross profit increased $1.1 million to $23.8 million in 1997
from $22.7 million in 1996. The increase in gross profit is attributable to the
increase in sales, partially offset by a decrease in consolidated gross margin.
Consolidated gross margin decreased to 18.2% in 1997 from 20.3% in 1996. The
decrease in margin was primarily attributable to the effect of the $14.5 million
of flow through material sales that the Precision Machined Products Group
purchased in 1997 rather than receiving from the customer during 1996. These
sales generated $0.7 million of incremental gross profit. Other factors that
adversely impacted margin were the decline in sales in the Special Machines
Group (which has generally commanded higher margins than other groups), and
reduced margins due to product mix within this group. In addition, gross margin
within the Rubber and Plastic Group was negatively impacted by production
inefficiencies associated with high labor turnover caused by relatively full
employment and increased costs associated with starting production on new parts
for the 1998 model year. High labor turnover is continuing to affect certain
businesses in the Rubber and Plastic Group in 1998, as described in the Recent
Developments section below. Partially
43
<PAGE> 49
offsetting margin reductions were operating performance gains that resulted from
the Company's continuous improvement programs at certain of the Company's
divisions, particularly within the Precision Machined Products Group. The
genesis of the Company's commitment to continuous improvement began in late 1995
when the Newcor Operating System was introduced with an emphasis on the use of
continuous improvement tools such as cellular manufacturing, one-piece flow,
value engineering, kaizen, and team-oriented problem solving. As is common in
the automotive supplier industry, certain of the Company's long-term contracts
required price reductions over the term of the contract. These price reductions
were largely offset by the impact of pricing on new products and cost reductions
related to the continuous improvement programs.
Selling, general and administrative expenses ("SG&A") increased to $15.8
million in 1997 from $15.1 million in 1996. SG&A as a percentage of sales
decreased to 12.0% in 1997 from 13.5% in 1996. The increase in SG&A expense was
primarily due to the acquisitions in the Rubber and Plastic Group, which added
approximately $2.7 million of SG&A expense in 1997, largely offset by an
approximate $2.3 million reduction due to the divestitures of Eonic and NMT. The
remaining increase in SG&A was principally due to expenditures incurred to
evaluate and select hardware and software and begin the implementation of a
company-wide information system and train employees in the Newcor Operating
System. The primary reason for the decrease in SG&A as a percentage of sales was
the sales increase described above.
Consolidated operating income increased $1.5 million to $8.3 million in
1997 from $6.8 million in 1996, and consolidated operating margin increased to
6.3% of sales in 1997 from 6.1% of sales in 1996.
Operating income for the Precision Machined Products Group increased $1.6
million to $5.3 million in 1997 from $3.7 million in 1996. Operating margin
increased to 8.8% of group sales in 1997 from 7.7% of group sales in 1996. The
increase in operating income was due to $0.7 million of operating income from
the $14.5 million of flow through sales of previously provided customer material
as described above, incremental income associated with new business, the
elimination of significant start up costs that were incurred during 1996 for
certain new business and the reduction of controllable variable costs through
the continued implementation of the Newcor Operating System. The increase was
partially offset by the effect of $0.5 million in 1996 operating income, net of
a nonrecurring disposition charge of $0.2 million, attributable to the divested
Eonic division. Operating margins increased due to the elimination of
significant start up costs that affected 1996 results and implementation of the
Newcor Operating System as described above. The increase in operating margins
within this segment was partially offset by the lower margin on the $14.5
million of flow through sales described above.
Operating income for the Rubber and Plastic Group increased $0.1 million to
$2.0 million in 1997 from $1.9 million in 1996. Operating margin decreased to
4.2% of group sales in 1997 from 5.9% of group sales in 1996. The increase in
operating income was due to incremental income from the acquisitions described
above, largely offset by the effects of production inefficiencies associated
with high labor turnover caused by relatively full employment, increased costs
associated with starting production on new parts for the 1998 model year and an
incremental increase of goodwill amortization of $0.3 million as a result of the
four acquisitions during 1997 and 1996. These developments, and, to a lesser
extent, pricing issues on certain coated metal parts produced by the group,
resulted in the operating margin reduction.
Operating income for the Special Machines Group decreased $0.6 million to
$2.3 million in 1997 from $2.9 million in 1996. Operating margin increased to
10.4% of group sales in 1997 from 9.4% of group sales in 1996. The decrease in
operating income was primarily due to the decline in sales and a shift in
product mix at Bay City, the remaining division in this group, partially offset
by the elimination of $0.6 million in 1996 operating loss from the divested NMT
division, which was principally the nonrecurring loss on the sale of the
division. The overall increase in operating margin was primarily due to the
elimination of the NMT loss, partially offset by the change in product mix at
the Bay City division.
Consolidated operating income benefited from a net gain on the sale of a
building of $1.0 million, which was partially offset by a $0.7 million loss on
the sale of Eonic.
Interest expense was $2.1 million and $1.8 million in 1997 and 1996,
respectively. The increase in interest expense was due to additional debt
incurred to finance the acquisitions in the Rubber and Plastic Group. The
44
<PAGE> 50
effective tax rate was 35.3% in 1997 and 31.2% in 1996. The 1996 rate was
favorably impacted by the final settlement of an IRS audit.
FISCAL 1996 COMPARED TO FISCAL 1995
Consolidated sales in 1996 were $111.7 million, an increase of $21.5
million, or 23.9%, from 1995 sales of $90.2 million. Precision Machined Products
Group sales increased by $6.0 million, or 14.3%, to $48.4 million, sales for the
Rubber and Plastic Group increased $15.2 million, or 89.0%, to $32.4 million and
sales for the Special Machines Group increased $0.3 million, or 0.8%, to $30.9
million. Precision Machined Products Group sales increased as a result of sales
growth due to new parts programs that began production during fiscal 1996 and
1995. The sales growth was primarily the result of significant new orders where
the Company processed material provided by the customer and the value of the
material was not reflected in sales. If the orders had required the Company to
purchase these materials, reported sales would have been somewhat higher. Rubber
and Plastic Group sales increased primarily due to the three acquisitions during
1996, which represented $13.4 million of the sales increase. The remaining
growth within the Rubber and Plastic Group of $1.8 million was due to
incremental new business at the existing division within this group. Within the
Special Machines Group, sales at the divested NMT division decreased $3.6
million, while sales at Bay City, the remaining division, increased $3.9
million, or 18.5%, compared to 1995, as a result of an increase in orders,
primarily for proprietary machines.
Consolidated gross profit increased $6.1 million to $22.7 million in 1996
from $16.6 million in 1995. The increase in gross profit was attributable to the
increase in sales and an increase in consolidated gross margin to 20.3% in 1996
from 18.4% in 1995. The increase was primarily attributable to increased sales
of higher margin proprietary machines within the Special Machines Group and the
sales growth from new parts programs within the Precision Machined Products
Group, where the Company processed material provided by the customer and the
value of material was not reflected in cost of sales. If the orders had required
the Company to purchase these materials, reported gross margin would have been
somewhat lower. The margin increase related to these factors was partially
offset by the significant costs associated with starting production on certain
new orders within the Precision Machined Products Group, and, to a lesser
extent, pricing issues on certain coated metal parts produced at one of the
newly purchased divisions within the Rubber and Plastic Group. As is common in
the automotive supplier industry, certain of the Company's long-term contracts
required price reductions over the term of the contract. These price reductions
were largely offset by the impact of pricing on new products and cost reductions
related to continuous improvement programs.
SG&A increased to $15.1 million in 1996 from $11.3 million in 1995. SG&A as
a percentage of sales increased to 13.5% of sales in 1997 from 12.5% of sales in
1996. The increase was primarily due to $2.0 million of SG&A from the three
acquisitions in the Rubber and Plastic Group and the costs of hiring and
training management personnel to implement the Newcor Operating System,
primarily within the Precision Machined Products Group.
Consolidated operating income increased $1.4 million to $6.8 million in
1996 from $5.4 million in 1995, and consolidated operating margin increased to
6.1% of sales in 1996 from 5.9% of sales in 1995.
Operating income for the Precision Machined Products Group increased $0.1
million to $3.7 million in 1996 from $3.6 million in 1995. Operating margin
decreased to 7.7% of group sales in 1996 from 8.6% of group sales in 1995. The
increase in operating income was due to incremental operating income from new
business, largely offset by significant start up costs that were incurred during
1996 for the new parts programs and, to a lesser extent, the costs of hiring and
training management personnel to implement the Newcor Operating System. The
operating margin decrease that resulted from those factors was partially offset
by margins on new parts programs where the Company processed material provided
by the customer, the value of which was not reflected in sales or cost of sales.
Operating income for the Rubber and Plastic Group increased $0.7 million to
$1.9 million in 1996 from $1.2 million in 1995. Operating margin decreased to
5.9% of group sales in 1996 from 6.8% of group sales in 1995. The increase in
operating income was due to incremental income from the three acquisitions, as
well as from new business, partially offset by $0.3 million of goodwill
amortization and the costs of hiring and training
45
<PAGE> 51
management personnel to implement the Newcor Operating System. Operating margin
decreased as a result of these factors, and, to a lesser extent, pricing issues
on certain coated metal parts produced by the segment.
Operating income for the Special Machines Group increased $0.7 million to
$2.9 million in 1996 from $2.2 million in 1995. Operating margin increased to
9.4% of group sales in 1996 from 7.3% of group sales in 1995. Operating income
increased primarily as a result of sales of high margin proprietary machines at
the Bay City division. Operating income was partially offset by $0.6 million in
1996 operating loss from the NMT division, which was principally the
nonrecurring loss on the sale of the division. The combination of these factors
resulted in the increase in operating margin.
Interest expense was $1.8 million and $1.5 million in 1996 and 1995,
respectively. The increase in interest expense was due to additional debt
related to the acquisitions. The effective income tax rate was 31.2% in 1996,
which was below the statutory rate of 34.0% due to the final settlement of an
IRS audit during 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash outflows during fiscal 1997 of $14.6 million to finance acquisitions
and $3.5 million to purchase capital equipment were partially offset by positive
cash flow of $8.4 million from continuing operations, $2.5 million from the sale
of capital assets, primarily a building and $1.5 million of proceeds from the
sale of Eonic. Cash from continuing operations was primarily provided by
earnings and depreciation and amortization expense.
Cash outflows during the first quarter of 1998 of $13.1 million to finance
the MT&G Acquisition and deposit on Deco and $1.7 million to purchase capital
equipment were financed by increased borrowings of $14.7 million on the
Company's line of credit and positive cash flow of $0.4 million from operations.
Cash from operations was primarily provided by depreciation and amortization
expense, mostly offset by the loss incurred during the quarter.
During fiscal 1996, the Company amended its revolving credit agreement with
a major U.S. bank to allow for a portion of the revolving credit to be replaced
with a seven-year fixed-rate term loan in the amount of $10.0 million with an
annual interest rate of 7.85%. Monthly principal payments on the term loan of
$0.2 million are due from June 1998 through May 2003. At October 31, 1997, the
Company had $17.0 million outstanding on a $25.0 million revolving credit
agreement. Subsequent to October 31, 1997, this revolving credit facility was
amended and restated to become the Senior Credit Facility which upon
consummation of the Offering increased in total availability to $50.0 million.
Availability of funds under the Senior Credit Facility is subject to
satisfaction of certain financial ratios and other conditions, and as a result,
there can be no assurance of the actual amount the Company will be able to
borrow at any time under the Senior Credit Facility. See "Description of Other
Indebtedness -- Senior Credit Facility." At January 31, 1998, the Company had
$31.7 million outstanding on the Senior Credit Facility. Thereafter, a portion
of the net proceeds from the Offering was used to finance the Deco and
Turn-Matic Acquisitions, to refinance the MT&G Note and to pay down the Senior
Credit Facility (including repayment of borrowings incurred to finance the cash
portion of the MT&G Acquisition, debt assumed in connection with that
acquisition and borrowings incurred to finance the down payment made in
connection with the Deco Acquisition, as well as paying down working capital
borrowings).
The Company is highly leveraged as a result of the Offering. The Company's
ability to make scheduled payments of principal of, or to pay the interest or
Liquidated Damages (as defined herein), if any, on, or to refinance, its
indebtedness (including the Exchange Notes) or to fund planned capital
expenditures will depend on its future performance, which, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond its control.
The Company believes that, through a combination of cash flow from
operations and available cash, together with available credit under the Senior
Credit Facility, it will have adequate cash available to meet its anticipated
needs for fiscal 1998. However, there can be no assurance that the Company's
business will
46
<PAGE> 52
generate sufficient cash flow from operations, that anticipated growth
opportunities and operating improvements will be realized or that future
borrowings will be available under the Senior Credit Facility in an amount
sufficient to enable the Company to service its indebtedness, including the
Exchange Notes, or to fund its other liquidity needs, as further discussed under
the "Risk Factors -- Leverage" section of this Prospectus.
During fiscal 1997 and the first quarter of fiscal 1998, the Company
continued to pay a quarterly cash dividend of $.05 per share of common stock.
Total dividends paid were $1.0 million in 1997 and $0.9 million in 1996 and
1995, respectively, and $246,000 and $235,000 in the first quarter of fiscal
1998 and 1997, respectively. The terms of the Notes require suspension of the
cash dividend.
The Company is in the process of implementing a new company-wide Enterprise
Resource Planning (ERP) computer system. One of the anticipated benefits of this
system is year 2000 date conversion without any adverse effect on customers or
disruption to business operations. Implementation of the system is underway with
projected completion during mid 1999. The Company is also communicating with all
of its significant suppliers and large customers to coordinate year 2000
conversion. The identifiable cost of year 2000 compliance and its effect on the
Company's future results of operations is not expected to be material.
CAUTIONARY STATEMENTS UNDER THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Statements contained in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section and, in particular, the
information in the first paragraph of the "Results of Operations for the Quarter
Ended January 31, 1998" sub-section hereof concerning the Acquisitions, in the
paragraph of that sub-section concerning certain of the factors impacting
results in fiscal 1998 and the expected impact of management returns thereafter
and in the last paragraph of the "Liquidity and Capital Resources" sub-section
concerning year 2000 conversion constitute "forward-looking statements" within
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. A number of factors could cause actual results to differ materially from
those included in or suggested by such forward-looking statements, including
without limitation: the cyclical nature of the industries served by the Company,
all of which have encountered significant downturns in the past; the level of
production by and demand from the Company's principal customers, upon which the
Company is substantially dependent, including the three major domestic
automobile manufacturers and Deere & Company; whether, when and to what extent
expected orders materialize; whether the Company will be able to successfully
integrate Deco and Turn-Matic and other recent acquisitions such as MT&G and
Plastronics into the Company's pre-existing operations and operate them
profitably; whether the Company's recent initiatives to improve upon the recent
labor turnover experienced in its Rubber and Plastic Group will be successful
and cost-effective; the duration of the start-up phase of MT&G's new program and
the extent to which it is successful; the impact on the Company of actions by
its competitors, some of which are significantly larger and have greater
financial and other resources than the Company; developments with respect to
contingencies, including environmental matters, litigation and retained
liabilities from businesses previously sold by the Company; and the extent to
which the Company's new ERP computer system performs as anticipated and the
accuracy of the information supplied by the Company's suppliers and customers
concerning their year 2000 readiness. All forward-looking statements in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section are qualified by such factors, as well as by the further
discussion of these and other risks and uncertainties of the Company's business
provided in the "Risk Factors" section of this Prospectus. The Company disclaims
any obligation to update any such forward-looking statements.
47
<PAGE> 53
BUSINESS
GENERAL
The Company is a leading manufacturer of precision machined components and
assemblies for the automotive, medium and heavy duty truck and agricultural
vehicle industries and is a manufacturer of custom rubber and plastic products
primarily for the automotive industry. The Company is also a supplier of
standard and custom machines and systems primarily for the automotive and
appliance industries. The Company's largest customers include leading vehicle
OEMs such as Chrysler, Ford, General Motors and Deere, and Tier 1 suppliers such
as American Axle and Detroit Diesel. The Company's products are typically
supplied to customers on a sole-source basis. Sole-source sales represented
approximately 89% of fiscal 1997 pro forma sales. The Company's management has
extensive experience in the automotive supply industry and has integrated five
acquired businesses (excluding the Acquired Companies) into existing operations
over the past 48 months.
Through internal growth and acquisitions, the Company's sales from
continuing operations increased at a compound annual rate of 18.9%, from $65.4
million in fiscal 1993 to $130.8 million in fiscal 1997, and EBITDA (as defined
herein) increased from $1.9 million in fiscal 1993 to $12.6 million in fiscal
1997. The Acquired Companies had aggregate sales of $111.8 million and aggregate
pro forma EBITDA of $19.5 million for the twelve months ended September 30,
1997. On a pro forma basis, the Company had sales and EBITDA of $242.6 million
and $32.1 million, respectively, for fiscal 1997.
The Company's products are used in more than 25 passenger car models and
nearly all light truck and sport utility models manufactured in the United
States, including such leading vehicles as the Ford Taurus, Lincoln Continental,
Chrysler Concorde, Dodge Intrepid, Pontiac Grand Prix, Buick Park Avenue, Ford F
series of light trucks, General Motors C/K series of light trucks and sport
utility vehicles, Jeep sport utility vehicles and Dodge Ram series of light
trucks and sport utility vehicles. In addition, the Company is the leading
independent supplier of precision machined components to Deere's tractor
operations and to Detroit Diesel, the largest producer of engines for class 8
heavy duty trucks in North America.
The Company is organized into three business groups: the Precision Machined
Products Group, the Rubber and Plastic Group and the Special Machines Group.
Certain key products manufactured by each of these groups, and certain key
processes used to manufacture those products, are described in the "Glossary"
section of this Offering Memorandum. Pro forma fiscal 1997 EBITDA amounts
presented below for these groups do not reflect $1.2 million of certain
unallocated corporate expenses.
The Precision Machined Products Group produces transmission, powertrain and
engine components and assemblies, primarily for the automotive, medium and heavy
duty truck and agricultural vehicle industries. Automotive products include
gears, gear blanks and shafts for transmissions; bearing caps, oil filter
adapters and manifolds for engines; thrust and pressure plates for power
steering systems; and axles. Products for the medium and heavy duty truck
industry include rocker arm components and assemblies, accessory drive
assemblies and other engine components. Products for the agricultural vehicle
industry include transfer cases, differential cases, transmission housings and
brake pedals. The Precision Machined Products Group generated $172.2 million, or
71.0%, of the Company's pro forma sales and $27.0 million, or 81.0%, of the
Company's pro forma EBITDA in fiscal 1997.
The Rubber and Plastic Group produces cosmetic and functional seals and
boots and functional engine compartment products supplied primarily to the
automotive industry. The group's seals and boots include interior and exterior
floor gear shift lever boots, steering column seals, door lock actuator boots
and a variety of other products that insulate the passenger compartment from the
external environment. The group's functional engine compartment products include
custom designed vacuum reservoirs essential for the operation of air
conditioning, cruise control and other vehicle systems. The Rubber and Plastic
Group generated $48.5 million, or 20.0%, of the Company's pro forma sales and
$3.7 million, or 11.1%, of the Company's pro forma EBITDA in fiscal 1997.
48
<PAGE> 54
The Special Machines Group designs and manufactures standard and custom
welding, assembly, forming, heat treating and testing machines and systems for
the automotive, appliance and other industries. The Special Machines Group
generated $21.9 million, or 9.0%, of the Company's pro forma sales and $2.6
million, or 7.9%, of the Company's pro forma EBITDA in fiscal 1997.
COMPETITIVE STRENGTHS
Full-Service Supplier with Broad Manufacturing Capabilities. The Company's
diverse range of manufacturing capabilities enables it to tailor manufacturing
processes to meet each customer's specific requirements and reduces the need for
customers to rely on multiple suppliers. The Company specializes in the high
volume production of components and assemblies involving extremely close
tolerances, complex processes and in some cases difficult materials. The
Company's manufacturing operations utilize advanced equipment such as modern CNC
machines, synchronous and non-synchronous transfer lines, and proprietary custom
molding machines. Precision machining operations include milling, drilling,
turning, heat-treating, honing, broaching and electronic gauging, as well as
more demanding processes such as gun drilling, spline rolling, ultra precision
grinding, super-finishing, lapping and laser welding. Rubber and plastic molding
operations include conventional injection molding, as well as dip molding, slush
casting, rotational molding, injection molding of multiple-durometer products,
sonic welding and other processes. The Company designs and builds much of its
own automation and custom tooling and most of its non-standard machines.
Increasingly, the Company also provides its customers with value-added
capabilities such as design and development, engineering, assembly and testing,
and program management from concept development through production and assembly.
Management believes that the Acquisitions will further enhance the scope of the
Company's engineering, design and assembly capabilities and provide a
competitive advantage as OEMs and their Tier 1 suppliers increasingly rely on
and award new business to established and well-known suppliers.
Efficient, High Quality Operations. The Company's manufacturing expertise
allows it to focus primarily on higher value added, more complex components and
assemblies with very exacting dimensional, finish and cosmetic requirements. The
Company also proactively works with its customers to improve the design and
manufacturing processes used in its products. These initiatives often lead to
improved quality and product performance, improved efficiency and reduced
manufacturing costs. The Company uses the cost savings and other benefits
derived from these efforts to reinforce its customer relationships. In addition,
ISO 9000 and QS 9000 quality certifications are integral to the Company's
operating methodology and commitment to quality. Currently, 11 of the Company's
15 manufacturing facilities are ISO 9000 or QS 9000 certified, with the
remaining four expected to be certified by the end of 1998. Management believes
that the Company's manufacturing expertise and commitment to quality are among
the primary reasons for the Company's strong historical growth and customer
loyalty.
Strong Relationships with Customers. Approximately 78% of the Company's pro
forma fiscal 1997 sales were generated by the Company's six largest customers,
each of which the Company has served for over 25 years, and the Company is the
sole-source outside supplier on nearly all of the products it manufactures for
its major customers. The Company has developed collaborative relationships with
its customers by providing them with integrated product development and
manufacturing capabilities, high quality products, timely delivery and excellent
customer service. The Acquired Companies have products and customer bases which
complement the Company's other operations, and the combination of these
businesses makes the Company a larger supplier to several of its key customers
and creates cross-selling opportunities. Management intends to leverage the
Company's selling resources and established customer relationships to introduce
its customers to the full range of products and process capabilities of each of
its operations. For example, the Company plans to introduce its broad precision
machining capabilities to existing Deco customers such as Detroit Diesel.
Product, Vehicle, Customer and Industry Diversification. The Company offers
in excess of 50 different major products, many of which are sole-sourced, for
use on more than 60 different vehicle platforms. These products are sold to
customers who are diversified across the automotive, medium and heavy duty truck
and agricultural vehicle industries, with no single customer accounting for more
than approximately 20% of pro forma 1997 sales. Management believes that this
product, vehicle, customer and industry diversification can help reduce the
Company's dependence on any single source of revenue.
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<PAGE> 55
OPERATING STRATEGY
Strengthen Positions in Established Product Niches. The Company's goal is
to continue to develop expertise and expand market presence centered around its
two key operating platforms, which are (i) precision machined transmission,
powertrain and engine components and assemblies for the automotive, medium and
heavy duty truck and agricultural vehicle industries through the Precision
Machined Products Group, and (ii) manufacturing of rubber and plastic cosmetic,
functional sealing and underhood components for the automotive industry through
the Rubber and Plastic Group. Management believes that these two platforms
provide opportunities for profitable growth due to the existence of relatively
few competitors with comparable manufacturing and program management
capabilities.
Capitalize on Increased Outsourcing. Component and assembly outsourcing is
a well established trend in the automotive industry and is becoming increasingly
prevalent in the medium and heavy duty truck and agricultural vehicle
industries. The Company's status as an incumbent supplier positions it to
participate in the growth in outsourcing by capturing incremental business from
existing customers and marketing its experience and capabilities to new
customers with outsourcing needs. Management plans to continue to develop and
market the Company's design, engineering and assembly capabilities and believes
that its diverse process capabilities and full-service supplier status give the
Company the opportunity to compete more effectively for complex, higher
value-added and more profitable assembly work.
Pursue Continuous Operating Improvement. The Company's operating philosophy
is based on the rigorous implementation of lean production systems supported by
world-class quality management and excellence in customer service, as measured
by quality, on-time delivery, timely product launches and low manufacturing
cost. The Company has developed and is implementing the Newcor Operating System,
a comprehensive company-wide management system which emphasizes continuous
improvement and integrates a quality operating system, cellular manufacturing,
one-piece flow, working capital management, supply chain management, value
engineering, kaizen, team-oriented problem solving and leadership skills into an
overall culture and system of management. Implementation of the Newcor Operating
System has led to significant improvements in scrap rates, labor productivity,
working capital turnover and other measureables in certain of the Company's
businesses. Management believes that similar improvements can be achieved in
each of the Company's businesses, over time, as training is increased and the
Newcor Operating System is extended to all locations.
Selectively Pursue Strategic Acquisitions. Strategic acquisitions have
been, and will continue to be, an integral part of the Company's growth
strategy. The market niches in which the Company operates have a high degree of
fragmentation among competitors, often presenting significant opportunities for
consolidation. Management believes that the Company's reputation and market
leadership make it an attractive strategic acquiror for smaller competitors that
may be unable to meet the necessary investment requirements and increasingly
stringent criteria being imposed by OEMs and their Tier 1 suppliers. Management
plans to continue to pursue acquisition opportunities that are complementary to
the Company's existing niche platforms, particularly those that expand
technological capabilities, product offerings, customer base or geographical
scope. Other key factors management considers when reviewing acquisition
opportunities include the potential for cost savings and cross-selling, and the
opportunity to enhance engineering, assembly and other value-added operating and
program management capabilities.
INDUSTRY OVERVIEW
The two primary niches in which the Company operates -- precision machined
transmission, powertrain and engine components and assemblies for the
automotive, medium and heavy duty truck and agricultural vehicle industries
through the Precision Machined Products Group, and manufacturing of rubber and
plastic cosmetic, functional sealing and underhood components for the
automotive, medium and heavy duty truck and agricultural vehicle industries
through the Rubber and Plastic Group -- are highly fragmented. Although
available data is limited, management believes the Company is among the largest
independent (non-captive) suppliers of such components for the niche markets
served within these industries.
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<PAGE> 56
In recent years, the automotive supplier industry has undergone significant
consolidation. To lower costs and improve quality, OEMs have been reducing their
supplier base by increasingly awarding sole-source contracts to
well-established, full-service suppliers. OEMs are increasingly seeking
suppliers capable of providing sub-assemblies and complete assemblies rather
than only separate component parts, and who can offer engineering, design and
testing capabilities. This allows OEMs to focus more fully on overall vehicle
design and assembly, consumer marketing, distribution and other core
competencies. OEMs continuously evaluate suppliers on the basis of product
quality, cost control, reliability of delivery, product design capability,
financial strength, new technology implementation, and the quality and condition
of facilities and overall management. Suppliers that obtain superior ratings are
considered more favorably for sourcing new business.
These trends are also beginning to appear in the medium and heavy duty
truck and agricultural equipment industries. The Company believes that, if these
consolidation trends continue, they will present additional opportunities to
increase penetration in the Company's existing niche markets, both through
internal growth, and through the acquisition of quality companies that
complement its existing business.
OPERATING GROUPS
For each of the last three fiscal years, each operating group has accounted
for the amount and percentage of the Company's sales and pro forma sales for
1997 shown in the table below. Because each of the Acquired Companies operates
in the Precision Machined Products Group, the size of that group is
substantially larger on a pro forma basis. The Company sold two businesses in
the Special Machines Group, reducing the size of that group, during the periods
presented.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,
-------------------------------------------------------------- PRO FORMA
1995 1996 1997 1997
---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Precision Machined
Products.................. $42,382 47.0% $ 48,439 43.4% $ 60,471 46.2% $172,232 71.0%
Rubber and Plastic.......... 17,165 19.0 32,447 29.0 48,517 37.1 48,517 20.0
Special Machines............ 30,626 34.0 30,858 27.6 21,860 16.7 21,860 9.0
------- ----- -------- ----- -------- ----- -------- -----
Consolidated................ $90,173 100.0% $111,744 100.0% $130,848 100.0% $242,609 100.0%
</TABLE>
A discussion of the products manufactured and the customers served by each
of these three groups is set forth below.
PRECISION MACHINED PRODUCTS GROUP
PRODUCTS
The Precision Machined Products Group produces transmission, powertrain and
engine components and assemblies primarily for the automotive, medium and heavy
duty truck and agricultural vehicle industries. The group is typically the
sole-source provider of the components it supplies. Many of the group's products
are essential to a vehicle's reliability or comfort.
Automotive. The group manufactures a broad range of transmission components
including gears, gear blanks, turbine shafts, output shafts and various
assemblies. Powertrain components include differential pinion gears and pins,
differential side gears, stud yokes, slip yokes, machined axles, thrust and
pressure plates and power steering pump assemblies. Engine components include
bearing caps, oil filter adapters, EGR adapters, intake manifolds, exhaust
manifolds and related items.
Medium and Heavy Duty Trucks. The group's principal products for this
market are comprised of powertrain components including axles and hubs and
retainers, and engine components including rocker arm components and assemblies,
fuel pump drive assemblies, air compressor drive assemblies, fan spindle
assemblies and other accessory drive assemblies.
Agricultural Vehicles. The group's principal products include transmission
components such as transmission housings and reduction housings, powertrain
components such as transfer cases, differential cases and planetary carriers,
and miscellaneous products such as brake pedals and steering arms.
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<PAGE> 57
CUSTOMERS
The Precision Machined Products Group has strong niche positions in the
popular light truck, van and sport utility platforms. The group's principal
customers are OEMs such as Chrysler, Deere, Ford and General Motors, and Tier 1
suppliers such as American Axle, CAMI, Inc. ("CAMI"), Detroit Diesel, The Timken
Company ("Timken"), TRW Inc. ("TRW") and Wescast Industries, Inc. ("Wescast").
Each of the Company's precision machining operations has close, long-term
relationships with its major customers. These relationships, coupled with the
essential nature of many of the complex, close tolerance products manufactured
by this group, have enabled the Company to participate with its customers in the
development of products and to receive contracts that range in duration from
annual blanket purchase orders to five years. While these contracts are
contingent on meeting performance requirements that generally include quality,
delivery and pricing, they also typically provide an opportunity to cure
performance shortfalls.
The Company's engineering staff works closely with its OEM customers,
generally for periods of 18 to 30 months prior to the introduction of the
Company's products on an engine or transmission, to develop or adapt specific
components and assemblies to satisfy its customers' requirements. Due to the
expense and long lead times necessary to develop these application-specific
components and assemblies, it is rare for a competitor to replace an incumbent
component supplier such as the Company during the production term of a given
engine or transmission. Accordingly, the Company generally supplies components
to an OEM on a sole-source basis throughout the manufacturing term of a specific
engine or transmission, which has typically ranged from 7 to 15 years for
automobiles and 15 to 20 years for medium and heavy duty trucks and agricultural
equipment.
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The following table sets forth the principal products for which the Company
has been awarded precision machining business, including the vehicle or engine
platform where those products will be used. Where two names are listed together
under the "customer" column, the Company supplies products to the second name
listed, which is a Tier 1 supplier to the OEM listed beside it.
<TABLE>
<CAPTION>
CUSTOMER VEHICLE PRODUCT
<S> <C> <C>
Newcor
Ford Taurus, Sable, Continental, Transmission Output Shafts
Windstar Transmission Turbine Shafts
Contour, Mystique Transmission Pinion Gear
Blanks
Ford/Timken Taurus, Sable, Continental, Transmission Ring Gears
Windstar
Ford/MSP Industries F150 Light Trucks Transmission Parking Gears
Corporation Drive Shaft Stud Yokes
Explorer/Ranger Trucks Drive Shaft Stud Yokes
Ford/Jernberg Industries Jaguar X80 Drive Shaft Slip Yokes
Drive Shaft Weld Yokes
Ford/American Axle F250/F350 Light Trucks Rear Axle Shafts
Deere 9000 Series Agricultural Differential Cases
Tractors Pedals
8000 Series Agricultural Differential Cases
Tractors Transmission Cases
Steering Arms
7000 Series Agricultural Differential Cases
Tractors Reduction Housings
Planetary Carriers
Steering Arms
Pedals
Trax Agricultural Tractors Transmission Cases
Team-Mate II & III Industrial Differential Cases
Tractors
Clark Equipment Company/Funk Industrial Fork Trucks Differential Cases
Manufacturing Company
MT&G
General Motors/American Axle Camaro, C/K & S Series Light Rear Axle Shafts
Trucks, Firebird, Vans Floating Axle Shafts
Output Shafts
Differential Pinion Shafts
General Motors Caprice, Coupe DeVille, Rear Axle Shafts
Roadmaster Floating Axle Shafts
Output Shafts
CAMI Geo Tracker Rear Axle Shafts
Ford Expedition, Navigator & F250 Rear Axle Shafts
Light Trucks
F150 Light Trucks Output Shafts
</TABLE>
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<PAGE> 59
<TABLE>
<CAPTION>
CUSTOMER VEHICLE PRODUCT
<S> <C> <C>
Deco
Detroit Diesel Series 50/55/60 Engines Rocker Arm Assemblies
Accessory Drive Assemblies
Ford Taurus, Contour, Lincoln, Transmission Shafts
Marquis Distributor Cams
Volkswagen AG Golf Thrust and Pressure Plates
General Motors C/K Series Light Trucks Hubs and Retainers
GM Service Steering Knuckles
Chrysler/TRW Cirrus, Stratus Steering Rack Shafts
Mazda Motor Corporation/TRW 626 Steering Rack Shafts
Mercedes-Benz AG/Citation M Class Sport Utility Bearing Caps
Corporation Vehicles
</TABLE>
Turn-Matic
<TABLE>
<S> <C> <C>
Ford F Series Light Trucks, Oil Filter Adapters
Aerostar, Windstar Bearing Caps
Econoline, Mustang, Oil Filter Adapters
Continental
Explorer EGR Adapters
Contour, Mystique Brackets
Falcon (Australia) Intake Manifolds
Ford/Wescast Mustang Exhaust Manifolds
</TABLE>
The Company has been awarded new business (i.e., parts not previously
supplied by the Company) for the model year indicated for the models set forth
below.
<TABLE>
<CAPTION>
MODEL YEAR MODELS
<C> <S>
1998 GM: 800 C/K Series of Light Trucks and Sport Utility
Vehicles, Cadillac STS; Ford: F150/250/350 Light Trucks,
Mustang; Volkswagen Golf
1999 Ford: F150/250/350 Light Trucks, Escort, Small Sport Utility
Vehicles, Jaguar X80, Lincoln Continental LS
2000 Ford Medium Trucks and Motor Homes
</TABLE>
RUBBER AND PLASTIC GROUP
PRODUCTS
The Rubber and Plastic Group produces cosmetic, functional sealing and
underhood components for the automotive industry. Many of the group's components
require innovative technical production solutions to customer-specific
requirements, as well as considerable manufacturing expertise. The Company's
rubber and plastic process capabilities include dip molding, slush casting,
rotational molding, open face casting, injection molding and sonic welding. The
group manufactures both interior components (principally transmission shift
boots, steering column and gearshift lever seals and air conditioning ducts) and
engine compartment and other body components (steering column seals, body and
dash panel grommets and fuel filler seals). The group's injection molding
facilities are used to manufacture vacuum control assemblies, fluid recovery
systems, speaker covers and miscellaneous protective covers. The group also
supplies attachment and restraining products such as clips and brackets.
The Rubber and Plastic Group's products are all manufactured in their final
color (black, clear, white, yellow or blue), with no external post processing.
The product portfolio includes coated metal parts which are
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<PAGE> 60
dipped for sound, environmental or electrical exposure. The group uses rigid and
soft thermoplastics, PVC, sanoprene, polypropylene, silicon, neoprene,
polyethylene and polyurethane materials in its forming and finishing operations,
depending on customer requirements. The group also emphasizes complex products,
such as co-injection molded dual-durometer engine compartment mounts, and
products which require the assembly and testing of multiple components into an
integrated system, such as vacuum boost modules.
CUSTOMERS
The Rubber and Plastic Group's principal customers are OEMs such as
Chrysler, Ford and General Motors, and Tier 1 suppliers such as Robert Bosch
Corporation, Dura Automotive Systems, Inc. ("Dura"), Pollak, a Stoneridge
Company ("Pollak"), and Takata Inc. The Group currently supplies in excess of 50
different major products, many of which are sole-sourced, for use on more than
40 different passenger cars, minivans, light trucks and sport utility vehicles.
As a result of increasing industry focus on total system development and
integration, the Company has begun to target and pursue additional opportunities
with select, high growth Tier 1 suppliers. Using computer aided design and
customer-specific support, the Company is in the process of developing new
plastic, dual-durometer rubber and metal-rubber-plastic products for
introduction within the next two to three years. While there can be no assurance
that the development of these new products can be successfully completed or as
to the quantities which may be sold, based on progress to date, management
believes that, if successful, these programs have the potential to improve the
market position held by the Company.
In addition to serving customers in the automotive industry, the Company
supplies a limited amount of product to customers in the medium and heavy duty
truck and agricultural vehicle industries, including Deere, Detroit Diesel,
Freightliner Corp. and Navistar International Corp. The Company also sells
certain of its products to aftermarket product suppliers and various specialized
industries with product niches similar to those filled by the Company in the
automotive market.
The following table sets forth the principal customers, vehicles and
products for which the Company has been awarded rubber and plastic product
business:
<TABLE>
<CAPTION>
CUSTOMER VEHICLE PRODUCT
<S> <C> <C>
Chrysler Caravan, Cherokee, Dodge Dakota, Transmission Shift Boots
Dodge Neon, Durango, Plymouth Neon,
Plymouth Small Utility Vehicles, Town
& Country, Viper, Voyager, Wrangler
Cherokee, Wrangler Gap Hiders
Breeze, Cirrus, Concorde, Intrepid, Steering Column Seals
LHS, Sebring Convertible, Stratus,
T-300 Light Trucks
Caravan, Concorde, Dodge Neon, Drain Tubes
Intrepid, LHS, Plymouth Neon, Town &
Country, Voyager
Breeze, Cherokee, Cirrus, Concorde, Vacuum Reservoirs and
Dakota, Dodge Neon, Durango, Grand Control Assemblies
Cherokee, Intrepid, LHS, Plymouth
Neon, Plymouth Small Utility
Vehicles, Ram Vans, Sebring
Convertible, Stratus, T-300 Light
Trucks, Wrangler
Ford Heavy Duty Trucks F-700/F-900, Medium Transmission Shift Boots
Duty Trucks, Ranger Light Trucks,
Windstar
Continental, Heavy Duty Trucks, Steering Column Seals
Sable, Taurus, Villager, Windstar
</TABLE>
55
<PAGE> 61
<TABLE>
<CAPTION>
CUSTOMER VEHICLE PRODUCT
<S> <C> <C>
Ford/Irvin Industries Inc. F Series Light Trucks, F250 Super Transmission Shift Boots
Pick-up Trucks, Ranger Light Trucks,
Windstar
Ford/Dura Automotive Systems, Inc. Continental, Crown Victoria, Gap Hiders
Econoline, Expedition, Explorer, F
Series Light Trucks, Grand Marquis,
Heavy Duty Sport Utility Vehicles,
Mountaineer, Navigator, Ranger,
Sable, Town Car, Taurus, Windstar
Ford/Dana Corporation Medium Duty Trucks Steering Column Seals
General Motors Chevrolet Light Trucks, Corvette, Transmission Shift Boots
Saturn, Sierra Light Trucks,
Silverado Light Trucks, Topkick and
Kodiak Medium Trucks
Aurora, Bonneville, Century, Gap Hiders
Chevrolet Light Trucks, Corvette,
Deville, Grand Prix, Intrigue,
LeSabre, Lumina, Lumina APV, Monte
Carlo, Oldsmobile 88, Park Avenue,
Regal, Riviera, Seville, Sierra Light
Trucks, Silhouette APV, Supreme,
TransSport APV, Astro Vans, Safari
Vans
Astro, Aurora, Bonneville, Century, Steering Column Seals
DeVille, Eldorado, Grand Prix,
Intrigue, LeSabre, Lumina, Lumina
APV, Monte Carlo, Oldsmobile 88, Park
Avenue, Regal, Riviera, Safari,
Saturn, Seville, Silhouette APV,
Sportvan/Express, Supreme, TransSport
APV, Vandura/Savana, Venture APV
</TABLE>
The Company has been awarded new business (i.e., parts not previously
supplied by the Company) for the model year indicated for the models set forth
below:
<TABLE>
<CAPTION>
MODEL YEAR MODELS
<C> <S>
1998 Chrysler: Intrepid, Concorde, LHS, 300M; Ford: Lincoln
Navigator; GM: Oldsmobile Intrigue, Buick Regal, Buick
Century, Astro Vans, Safari Vans
1999 Ford: F-700 and F-900 Medium Duty Trucks; GM: Chevrolet
Impala, Chevrolet Monte Carlo
2000 Chrysler: Dodge and Plymouth Microvans; Ford P31 Sport
Utility Vehicles; GM: Pontiac AAV, Buick AAV, Oldsmobile AAV
2001 Chrysler: Cirrus, Sebring, Dodge Stratus; Ford Ranger
Speciality Light Trucks
</TABLE>
SPECIAL MACHINES GROUP
PRODUCTS
The Special Machines Group designs and assembles standard and special
custom machines and systems to meet its customers' welding, assembly, forming,
heat treating and testing process requirements. The group has an experienced
team of application and design engineers that customize standard products such
as drum barrel, compressor shell, brake shoe, motor shell, strip, seam and spot
welders to meet specific customer requirements. The group also designs special
purpose machines and systems for customer product applications such as washing
machine drums, refrigerator lines, automotive axles and automotive door and hood
panels. The machines sold by this group frequently are high value capital
expenditures for its customers, with orders
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<PAGE> 62
generally ranging in size from $500,000 to $5.0 million. For this reason, the
group's working capital requirements can vary significantly based on the stage
of contracts in progress.
CUSTOMERS
The Special Machines Group's principal customers are domestic OEMs in the
automotive and appliance industries, but the group's ability to design a broad
spectrum of metal joining applications enables it to sell machines and systems
to customers throughout the world. As a result, emerging industries in less
developed countries such as Brazil and China have resulted in new opportunities
to sell certain standard machines for which the group has a proprietary
advantage. The Special Machine business is affected by the timing of awards and
completion of specific projects and contracts with individual customers.
MARKETING
To improve customer service and strengthen relationships with its key
customers, the Company recently implemented a sales force reorganization, which
included replacing a number of independent sales representatives with in-house
account managers. As a result, the Company currently markets its products
principally through a direct sales staff, most of whom have technical
backgrounds. The sales staff has a thorough knowledge of the Company's products
and acts as a liaison between customers and the Company's engineering and
manufacturing personnel. The Company will continue to use sales representatives
to augment its direct sales staff, particularly when the customer location or
scope of business make outside sales representatives more efficient.
DESIGN, DEVELOPMENT AND ENGINEERING
The Company's Precision Machined Products Group works closely with
customers to design and develop products in order to optimize manufacturability
and product functionality. The group generally is able to develop its own tools,
processes and product prototypes, thereby reducing product variability and lead
times. To meet customer process and product design requirements, the Company
applies engineering techniques such as computer aided design and failure mode
and effects analysis, along with its in-house capability to develop and produce
prototypes using standard manufacturing equipment and processes. The Precision
Machined Products Group provides its customers with full program management
support using the "advanced product quality planning" ("APQP") process, which
controls program timing and seeks to ensure product quality and reliability
through all phases of design, launch and production manufacturing.
As a result of the recent acquisition of four rubber and plastic component
manufacturers, the Company believes its Rubber and Plastic Group has achieved
the critical mass necessary to provide its customers full service engineering
and test support for this business platform. Using computer aided design
techniques, the group often takes a leadership role in designing components such
as vacuum reservoirs for power steering systems and styled boots for manual
transmission gear shift levers. In one recent example, the Company successfully
merged two of its proven rubber and plastic process technologies to develop a
proprietary snap-fit boot design which simultaneously addresses the two most
common customer requirements for this type of part: ease of installation and
superior, noise free fit. Design parameters the Company addresses during the
development phase include noise, vibration and harshness analysis. The Company
uses fully equipped prototype and validation labs to validate product designs,
and customers are advised of the passage of critical development and timing
milestones.
By its nature, the Special Machines Group takes an innovative leadership
role in the development, design and assembly of machines and systems to solve
its customers' specific process requirements. The Special Machines Group has a
research and development lab where it is able to simulate various welding
techniques and develop new welding technologies which allow it to tailor
solutions to particular customer design requirements. This often involves
technology which is proprietary to the Company.
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MANUFACTURING
The core manufacturing techniques employed by the Precision Machined
Products Group include CNC turning, milling, boring, drilling, tapping and
burnishing; gun drilling, spline rolling, broaching, induction and carbo nitride
heat treating; tempering, straightening, OD (outside diameter) and centerless
grinding, hard turning, honing and superfinishing; welding, laser welding,
assembly, testing and cleaning. Management believes that this breadth of
in-house process capability provides the Company a competitive advantage.
The Rubber and Plastic Group produces injection molded, dip formed,
rotational molded, slush cast, open face cast and foam molded rubber, plastic
and urethane parts. To produce many of its components the group must develop
innovative technical solutions to customer-specific requirements. The group's
products are all manufactured in their final color (black, clear, white, yellow
or blue) with no external post processing. In its forming and finishing
operations, the Rubber and Plastic Group uses rigid and soft thermoplastics,
PVC, sanoprene, polypropylene, silicon, neoprene, polyethylene and polyurethane
materials. The group also emphasizes complex products, such as co-injection
molded dual-durometer engine compartment mounts, and products that require the
assembly and testing of multiple components into an integrated system, such as
vacuum boost modules.
The Special Machines Group engineers standard and custom machines and
systems to meet specific customer requirements. The machines are designed and
assembled at the Company's facilities in response to the customer's performance
specifications. They are then "run off" to demonstrate function and performance
for the customer's approval. The equipment may require disassembly for shipment
in which case it is reassembled at the customer's facility and may require
another trial run and final approval.
The Newcor Operating System uses visual management techniques and
encourages and facilitates employee participation to improve manufacturing cells
and operations by conducting regular kaizen events. Kaizen is a Japanese word
meaning "good change." Through kaizen, a cross-functional group of employees
analyzes and improves a particular manufacturing or business process. Through
these events, the Company seeks to continuously improve productivity, quality
and employee commitment while reducing work-in-process inventory, floorspace
requirements and lead times.
Each of the Company's operating groups has quality assurance programs and
has implemented monitoring and measurement equipment along with statistical
process control systems, simple fail-safe devices and automated process
control/feedback systems. The Company uses computer aided design, failure mode
and effects analysis and the APQP process in its efforts to ensure product
quality and reliability throughout all phases of design, launch and production
manufacturing. Under the Newcor Operating System, the Company utilizes team
problem solving techniques to drive quality improvement through root cause
analysis and employee participation.
The Company's operations have been recognized in the industries they serve
for their high quality standards. The Company has received Ford's Q1 Award, GM's
Target of Excellence Award, Chrysler's Pentastar Award, Deere's Certified
Supplier Quality Award and numerous QS 9000 certifications. The Company's
operations regularly meet customer expectations and requirements for on-time
delivery, quality levels and cost reductions, all of which have often enabled
the Company to be viewed by its customers as a preferred supplier.
SUBCONTRACTORS AND RAW MATERIAL
In connection with implementing the Newcor Operating System, the Company
has begun to rationalize its production materials, components and services
subcontractor base. The Company has an active supplier development program that,
among other things, assesses supplier capabilities and quality on an on-going
basis. The Company intends to reduce its subcontractor base to a group of key
suppliers that are able to compete effectively in the global market using
continuous quality improvement on a cost effect basis. The principal raw
materials used by the Company are steel bar stock, forgings, gray and nodular
iron castings and various rubber and plastic compounds. In addition, the Company
buys a variety of components, such as metal stampings, motors and electrical
controls. In many cases, the Company partners with its subcontractors and
customers in
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seeking to ensure that materials meet the highest standards for product quality
and value on a global basis. The Company purchases primary production materials
and indirect material and services such as cutting tools and freight at the
corporate level, thereby achieving the economies of scale associated with
centralized purchasing. The Company plans to continue to seek world-class
vendors who offer the latest technology in supplies and components to the
Company's operations. The Company has not experienced any difficulty obtaining
necessary raw materials and subcontractor services.
COMPETITION
The Company operates in very competitive markets where a variety of
suppliers with different subsets of the Company's product lines compete to
supply the stringent demands of large OEMs and Tier 1 suppliers, all of which
regularly exercise their significant bargaining leverage in negotiating terms
with their suppliers, including the Company. Competition is generally based on
quality, delivery, price, design and engineering support and service, with
increasing emphasis on delivery of assemblies or sub-assemblies rather than
individual components. To an extent, the OEMs themselves are sometimes
competitors of their suppliers, since they can produce their own components and
assemblies if they so choose.
In the market for precision-machined engine, transmission and powertrain
components and assemblies, products are generally complex in nature and have
close manufacturing tolerances that require suppliers with sophisticated
equipment, process control and a highly skilled workforce. The Company
principally competes in this market with Linamar Corporation, Simpson
Industries, Inc. and MascoTech, Inc. ("MascoTech"), as well as a number of
smaller companies. Management believes that the Company's size and capabilities
provide it with a competitive advantage over many other suppliers as OEMs and
their Tier 1 suppliers increasingly rely on, and award new business to,
established and well-known suppliers with proven capabilities and adequate
resources. Because of the time required to establish relationships with and
demonstrate process capability to these customers, as well as the financial
resources required to support investments in capital equipment, meaningful entry
into the Company's market niches has historically been difficult.
Management believes that dip molded, slush casted, or rotational molded
rubber and plastic products such as those produced by the Company often have a
competitive advantage over an alternate process such as injection or blow
molding due to lower tooling cost or piece price and/or improved cosmetic
appearance or functionality. While management believes that there are no large
direct competitors possessing all the Company's primary capabilities, Cooper
Tire and Rubber and Yale Rubber are two companies which compete with the Company
in applications where injection molding is a viable alternative to one of the
Company's rubber and plastic processes.
In the Special Machines Group, the Company competes with many small and
medium sized manufacturers of standard and custom machines. The Company's
ability to win new orders is a function of its engineering capabilities and
support to the customer and may depend on success at demonstrating a
technological or innovative advantage.
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PROPERTIES
The Company conducts its business in Company-owned facilities totaling
approximately 518,000 square feet (excluding facilities of divested businesses)
and leased facilities totaling approximately 331,000 square feet of office,
engineering, manufacturing and warehouse space, respectively. All of these
facilities are fully utilized and are suitable to meet the current capacity
needs of the divisions. Leases expire at various times through 2002, and the
Company generally has extension options.
Below is a summary of the existing facilities:
<TABLE>
<CAPTION>
SQUARE TYPE OF
LOCATION FOOTAGE INTEREST PRINCIPAL USE
<S> <C> <C> <C>
THE COMPANY:
Corporate Office
Bloomfield Hills, MI 7,000 Leased Administrative Office
PRECISION MACHINED PRODUCTS
GROUP:
Rochester Gear
Clifford, MI 45,000 Owned Transmission and powertrain components
Blackhawk Engineering
Cedar Falls, IA 54,000 Owned Tractor differential cases, transmission
Waterloo, IA 10,000 Leased cases, steering arms and brake pedals
MT&G
Corunna, MI 100,000 Owned Differential pinion and side gears, output
Fenton, MI 30,000 Leased shafts and rear axle shafts
Fenton, MI 10,000 Owned
Deco
Troy, MI 55,000 Leased Rocker arm components and assemblies,
Royal Oak, MI 107,000 Leased transmission shafts, accessory drive
assemblies and thrust and pressure plates
Turn-Matic
Clinton Township, MI 92,000 Leased Engine oil filter adapters, main bearing
caps and manifolds
RUBBER AND PLASTIC GROUP:
Deckerville Division
Deckerville, MI 85,000 Owned Gear shift boots, steering column seals,
Sandusky, MI 10,000 Owned shift lever gap hiders and windshield
wiper covers
Livonia Division
Livonia, MI 21,000 Leased Coated metal parts
Walkerton Division
Walkerton, IN 33,000 Owned Steering column seals and shift lever gap
hiders
Auburn Hills Division
Auburn Hills, MI 9,000 Leased Shift lever boots
</TABLE>
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<PAGE> 66
<TABLE>
<CAPTION>
SQUARE TYPE OF
LOCATION FOOTAGE INTEREST PRINCIPAL USE
<S> <C> <C> <C>
Plastronics
East Troy, WI 30,000 Owned Vacuum reservoirs and assemblies for air
East Troy, WI 28,000 Owned conditioning, power steering and cruise
control systems, hose and wire brackets
and dash panel grommets
SPECIAL MACHINES GROUP:
Newcor Bay City
Bay City, MI 123,000 Owned Automated welding and assembly systems
DIVESTED BUSINESSES WITH
FACILITIES OWNED BY NEWCOR:
Detroit, MI 58,000 Owned Formerly part of Eonic, which was sold
March 1997
Fraser, MI 40,000 Owned Formerly part of Newcor Machine Tool,
which was sold October 1996
</TABLE>
EMPLOYEES
As of December 31, 1997, the Company (on a pro forma basis) had 1,875
employees. Approximately 26% of these employees are represented by the United
Steel Workers or United Auto Workers ("UAW"). The Company's Special Machines
Group has a collective bargaining agreement with the UAW affecting approximately
60 employees that expires May 20, 1998. One of the Company's Rubber and Plastic
Group operations has a collective bargaining agreement with the UAW covering
approximately 40 employees that expires September 30, 1999. Deco has collective
bargaining agreements with the United Steel Workers affecting approximately 385
employees that expire June 30, 2001 and June 8, 2002. The Company considers its
employee relations to be generally good. Due to full employment conditions, the
Company has recently experienced high employee turnover in its Rubber and
Plastic Group at certain locations which, in recent periods, has adversely
impacted the Company's operations at those locations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Recent Developments" and "Risk Factors -- Labor Relations and Labor Market
Conditions."
ENVIRONMENTAL MATTERS
The Company believes it is in substantial compliance with applicable
environmental laws and regulations. Compliance by the Company with federal,
state and local laws and regulations pertaining to the discharge of material
into the environment has not and, based on presently available information, is
not anticipated to have any material effect upon the Company in conducting its
business and has not required material capital expenditures to achieve
compliance. However, due to the nature of its current and former operations, a
number of which have been in operation for many years and have not been
subjected to invasive testing, the Company does face risk of exposure to
environmentally-related liabilities, as described under "Risk Factors --
Potential Exposure to Environmental Liabilities."
LEGAL PROCEEDINGS AND CONTINGENCIES
The Company has been notified by one of its largest customers that the
customer is defending itself in a patent infringement lawsuit involving certain
processes/methods used on manufacturing equipment supplied by numerous vendors
including one of the Company's former divisions within the Special Machines
Group. Although Newcor is not a named party in this litigation, the Company
retained responsibility for this matter when it sold the related business. To
the extent that the Company incurs liability in connection with this matter, the
Company may have recourse against certain of its component suppliers, and such
component suppliers have been notified of their potential responsibility to the
Company in connection with this action.
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The Company does not possess sufficient information to evaluate the validity of
this claim and, accordingly, is unable to determine whether it will ultimately
be required to make any payment related to this lawsuit, or the extent to which
any such payment could be offset or mitigated by claims against suppliers.
Similar equipment also was sold to other OEMs.
During the past two years, the Company sold several of its businesses,
including the division that produced the equipment described above. In each
case, the Company's agreement with the purchaser requires it to indemnify the
purchaser for various claims including certain environmental, product liability,
warranty and other claims that may arise relating to the conduct of the business
before the date of sale, subject in some cases to limits on the time within
which an indemnification claim may be brought or the maximum amount the Company
may be required to pay. the Company provided for its estimated indemnification
obligations when these businesses were sold and has no reason to believe there
are potential claims against it in excess of this provision, although no
specific amounts are included in such reserve with respect to the patent
infringement action described above.
Various other legal matters arising during the normal course of business
are pending against the Company. Management does not expect that the ultimate
liability, if any, of these matters will have a material effect on future
consolidated financial statements.
SEASONALITY
The businesses of the Precisioned Machined Products and Rubber and Plastic
Groups are seasonal, with lower sales during the OEMs' semi-annual shutdowns in
July and December than at other times of the year.
BACKLOG
The Special Machines Group's backlog was $7.5 million and $10.5 million at
March 31, 1998 and 1997, respectively. All of the backlog orders existing at
March 31, 1998 (all of which management believes to be firm) are expected to be
filled during the current fiscal year. Backlog is not a significant
consideration in the Precision Machined Products and Rubber and Plastic Groups
because they operate primarily under long-term blanket purchase orders, with
purchase requisitions under such blanket purchase orders issued by customers on
a daily basis.
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GLOSSARY
<TABLE>
<CAPTION>
TERM DEFINITION
<S> <C>
Accessory Drive Assemblies Any of a number of assemblies which convert the internal
motion of an engine into motion to drive an engine
"accessory" such as air compressors, power steering pumps,
water pumps, engine cooling fans and others.
Air Conditioning Ducts Rigid ducting which runs behind the dashboard to direct the
flow of HVAC air into the passenger compartment.
Bearing Cap A "U" shaped, machined, cast iron component used to hold the
engine's crank shaft to the engine block.
Body and Dash Panel Grommets Synthetic rubber grommets which encase wiring, and plastic
and metal tubing (fuel, water, oil, etc.) to immobilize them
and protect them from sharp edges they pass through body
panels.
Boring The process of removing material from an internal
cylindrical feature of a workpiece by either spinning the
workpiece or the tool. The tool is forced into the
workpiece, causing unwanted material to shear away,
producing the desired shape.
Broaching The processes of cutting a workpiece by passing it over a
tool with teeth cut into it. Each tooth on the tool shears a
small amount of material from the workpiece. When the
workpiece has passed over the compete tool, it is in the
desired shape.
Burnishing The process of smoothing the surface of a metal component by
forcing a roller or set of rollers against the metal surface
with high pressure (like a rolling pin or steam roller).
Carbonitride Heat Treating The process of heating metal in a furnace while exposing the
metal to an atmosphere rich in carbon and nitrogen. The
carbon and nitrogen are absorbed into the surface of the
steel. The steel is rapidly cooled, causing the steel's
surface to become harder and more wear resistant.
Co-injection Molding Injection molding of two different rubber or plastic
compounds simultaneously to create a single product with
different hardness characteristics in different locations on
the product (see definitions of injection molding and dual
durometer products).
Detuner A slipping mechanism used in the powertrain to protect
critical components from jamming.
Differential Case The structural component that supports the axles, encloses
all drive components for the axle and contains the main
braking system.
Differential Pinion A steel gear, used in pairs, that connects the two
differential side gears in a differential gear set (which
splits the torque from a single driveshaft to the wheels).
Differential Pinion Shaft A cylindrical steel shaft that supports and positions the
differential pinions in a differential gear set.
Differential Side Gears A steel gear, used in pairs, that transmits torque from the
differential pinions to the axle shafts in a differential
gear set.
Dip Forming Formation of a part by dipping a formed mandrel or male
shaped mold into a vat of neoprene, natural latex or
plastisol for a specified length of time and then heating or
curing the part at a specified temperature for a
pre-determined length of time.
Drain Tube A flexible seal that protrudes into the engine compartment
from the firewall to allow air conditioning system
condensate to drain.
</TABLE>
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<PAGE> 69
<TABLE>
<CAPTION>
TERM DEFINITION
<S> <C>
Drive Shaft Slip Yoke A cylindrical steel shaft that connects the driveshaft stud
yoke to the universal joint. It allows the driveshaft to
transmit torque while letting the driveshaft angle fluctuate
as the vehicle's suspension moves up and down.
Drive Shaft Stud Yoke A cylindrical steel shaft that connects the driveshaft to
the slip yoke side of the universal joint. It allows the
driveshaft to transmit torque while letting the driveshaft
length fluctuate as the vehicle's suspension moves up and
down.
Drive Shaft Weld Yoke A cylindrical steel component that connects the driveshaft
to the universal joint. It allows the driveshaft to transmit
torque while letting the driveshaft angle fluctuate as the
vehicle's suspension moves up and down.
Dual Durometer Products Finished rubber or plastic products having different
hardness characteristics (durometers) in different locations
(e.g., a flexible shift lever boot with a rigid snap-in
base).
EGR Adapter A machined aluminum casting that provides a mounting
location for the engine's EGR valve. Frequently, it also
provides the mounting location for the throttle body
adapter, throttle cables and other miscellaneous hardware.
Exhaust Manifold A machined cast iron component that provides a passageway
for the exhaust gasses from each of the engine cylinders to
the exhaust pipe.
Floating Rear Axle Shaft A cylindrical steel shaft that connects the wheel hub to the
rear differential. It transmits torque from the differential
to the wheels.
Fluid & Vacuum Reservoirs and Control Plastic enclosures containing valves, tubes, sensors, etc.
Systems to hold air/vacuum fluids for metered release for vehicle
applications as required (such as air conditioning controls,
cruise control, etc.).
Foam Molding Formation of a part by filling a mold with a foaming plastic
compound, which is heated at a specified temperature for a
pre-determined time period to create a finished part.
Fuel Filler Seals A flexible seal which isolates a vehicle fuel filler pipe
from the body.
Gap Hiders Flexible boot or seal to cover the opening in the steering
column surrounding an automatic transmission shift lever.
Gearshift Lever Boots Flexible synthetic rubber boots or seals which surround
floor-mounted manual gearshift levers to cover up openings
and provide a clean appearance to the interior of the
vehicle (see also definitions of gap hiders and transmission
shift lever boots).
Grinding The process of removing material from a workpiece by forcing
a spinning wheel made of abrasive material into the
workpiece.
Gun Drilling A specialized process for drilling very deep holes. The
drill rotates and is forced into the workpiece though a
bushing or sleeve. The material removed by the drill process
is forced from the hole by coolants at high pressure.
Hard Turning The process of turning steels which have been hardened by
heat treatment. Requires the use of cubic boron nitride or
diamond cutting tools.
Honing The process of removing small amounts of material from a
hole in a workpiece using spinning abrasive stones.
Induction Heat Treating The process of heating steel using electromagnetic
induction. The steel is then rapidly cooled, causing the
steel's surface to become stronger and harder.
</TABLE>
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<PAGE> 70
<TABLE>
<CAPTION>
TERM DEFINITION
<S> <C>
Injection Molding Formation of a part by melting plastic pellets into liquid
plastic, and creating parts by injecting liquid plastic at a
specified temperature between two heated molds and forming
through pressure into desired shape.
Intake Manifold A machined aluminum casting that routes and distributes the
incoming air from the vehicles throttle body to each of the
engine's cylinders.
Milling The process of removing material from a workpiece by forcing
a rotating cutting tool into it. Unwanted material is
sheared away, producing the desired shape.
Oil Filter Adapter A machined aluminum casing that provides a mounting location
for the engine oil filter in a location that is convenient
for servicing the oil filter. Frequently, it also provides a
mounting location for the oil pressure sending unit and
other miscellaneous hardware.
Open Face Casting Formation of a part by filling a cavity mold which may
contain an inner core with soft-plastic PVC or urethane,
which is then heated at a specified temperature for a
pre-determined length of time to create a finished part.
Planetary Carrier It supplies mechanical front wheel drive assist to the
tractor.
Power Steering Pump Assemblies A pump mechanism, powered either mechanically or
electronically, which provides fluid under pressure to
provide the "power assist" in power steering.
Rear Axle Shaft A cylindrical steel shaft that connects the wheel to the
rear differential. It transmits torque from the differential
to the wheels and provides support for the wheel and wheel
bearing.
Reduction Housing A non-shiftable gear box used to reduce the RPMs from an
automatic transmission to the differential housing.
Rocker Arm Components and Assemblies The portion of the engine valve train which activates the
movement of the valves, based on input from the camshaft. An
integral part of an engine's valve train or overhead.
Rotational Molding Formation of a part by pouring a pre-determined amount of
soft-plastic PVC into a preheated mandrel, gyrating the mold
in a specified pattern for a specified time to create a
uniform wall thickness.
Slush Cast Molding Formation of a part by filling a cavity mold with
soft-plastic PVC, which is then heated at a specific
temperature for a pre-determined length of time to create a
part with a uniform wall thickness, and then pouring the
excess material from the mold.
Sonic Welding Welding or fusing two (typically plastic) components
together using ultra-sonic vibrations to heat the mating
surfaces to the point of fusion.
Speaker Covers A rigid cover (typically injection molded) that protects
in-door speakers from moisture.
Spline Rolling The process of forming a spline or serration on a
cylindrical workpiece by rolling the workpiece between two
tools. The tools, called racks, have teeth cut into them
that force the metal on the workpiece to move into the
desired form.
Steering Arms A component that connects the tie rods to the wheels and
also serves as a fender support.
Steering Column Seals Flexible synthetic rubber or plastic seals which cover the
steering column shaft (from the dashboard panel to the
steering gear) to protect the metal shaft from dirt, water,
etc., and to seal the hole in the firewall.
Superfinishing The process of creating very smooth surfaces on workpieces
by polishing the workpiece using extremely fine abrasive
film.
</TABLE>
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<PAGE> 71
<TABLE>
<CAPTION>
TERM DEFINITION
<S> <C>
Tapping The process of creating internal screw threads by either
spinning the workpiece or the tap cutter. The cutter is
forced into the workpiece, causing unwanted material to
shear away, producing the desired screw threads.
Tempering The process of heating metal to a low temperature (300-400
degrees F) and then allowing it to slowly cool. The process
relieves internal stresses and increase the parts life
expectancy.
Thrust and Pressure Plates A high precision mechanism, internal to a power steering
pump, to meter power steering fluid.
Transmission Output Shaft A cylindrical steel shaft that connects the differential
side gear to the inner CV joint on a front wheel drive
automatic transmission. It also serves as the central
support for all planetary gear sets and clutch packs in the
transmission.
Transmission Parking Gear A cylindrical steel disk with large notches cut on the
outside used in an automatic transmission to keep the
vehicle from moving when the transmission is placed into
park.
Transmission Planetary Pinion Gear A small steel gear used in sets of three or four, all
Blank positioned around the outside of a large central gear
(called a sun gear), in an automatic transmission. The gears
are used to reduce driveline speed and increase torque
output. A gear blank is what the part is called before the
teeth are cut. The group makes the blanks and its customers
cut the gear teeth.
Transmission Ring Gear A large steel cylinder with gear teeth cut on the inside. It
Blanks is positioned around the outside of a set of planetary
pinion gears in an automatic transmission. It reduces
driveline speed and increases torque output. A gear ring
blank is what the part is called before the teeth are cut.
The group makes the blanks and its customers cut the gear
teeth.
Transmission Shift Lever Boots/Seals Decorative trim cover which covers the lower portion of a
console- mounted transmission or drive axle shift lever,
which accommodates the movement of the lever back and forth,
while sealing dirt and noise out of the passenger
compartment. Also a second, lower functional seal for dirt
and noise.
Transmission Turbine Shaft A cylindrical steel shaft that connects the torque converter
to the main clutch pack on an automatic transmission. It
provides the primary power input from the engine to the
transmission.
Turning The process of removing material from a cylindrical
workpiece by rapidly spinning the workpiece while forcing a
cutting tool into it. Unwanted material is sheared away,
producing the desired shape.
</TABLE>
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MANAGEMENT AND DIRECTORS
EXECUTIVE OFFICERS AND DIRECTORS
The table that follows sets forth the name, age at December 31, 1997 and
positions or anticipated positions with the Company of each executive officer of
the Company and each director of the Issuer. Information concerning the business
experience for at least the past five years of each of the persons named is
provided after the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C> <C>
William A. Lawson......................... 64 Chairman of the Board
W. John Weinhardt......................... 47 President, Chief Executive Officer and a Director
Robert C. Ballou.......................... 44 Group Vice President Precision Machined Products
John J. Garber............................ 56 Vice President Finance, Chief Financial Officer
and Treasurer
Hale, Keith F............................. 57 Vice President and General Manager of the Deco
Group
Thomas D. Parker.......................... 50 Vice President Human Resources and Secretary
Dennis H. Reckinger....................... 62 Group Vice President Rubber and Plastic
Jerry D. Campell.......................... 57 Director
Shirley E. Gofrank........................ 49 Director
Jack R. Lousma............................ 61 Director
Richard A. Smith.......................... 58 Director
Kurt O. Tech.............................. 76 Director
</TABLE>
William A. Lawson, Chairman of the Board. Chairman and Chief Executive
Officer of Bernal International, Inc., a manufacturer of parts and equipment for
the packaging industry, since October 1995, Mr. Lawson first joined the Issuer's
Board of Directors in 1988. He became Vice Chairman of the Board in December
1990 and Chairman in March 1991 (both of which are considered executive officer
positions). He also is Chairman of W.A. Lawson Associates, an investments and
consulting firm, and a member of the board of directors of Energy Research Corp.
Mr. Lawson's current term of office as a director of the Issuer is scheduled to
expire at the annual meeting of shareholders of the Issuer in 1999.
W. John Weinhardt, President and Chief Executive Officer. Mr. Weinhardt
became the Company's President and Chief Executive Officer in March 1995, after
serving as a Vice President and Group Executive of Danaher Corp., a diversified
manufacturer of automotive products, process-environmental controls and hand
tools, from November 1990 to January 1995 and as President and CEO of its
subsidiary, Fayette Tubular Products, Inc., from November 1991 to January 1995.
In the aggregate, he has 25 years of managerial experience in the manufacture of
automotive components and assemblies. Mr. Weinhardt also became a director of
the Issuer upon joining the Company. His current term as a director is scheduled
to expire at the Issuer's 2001 annual meeting.
Robert C. Ballou, Group Vice President Precision Machined Products. Mr.
Ballou became Group Vice President Precision Machined Products of the Company in
October 1995, after serving as Director of Manufacturing of MascoTech, an
automotive supplier, from August 1992 to September 1995 and as Director of
Manufacturing Services of the Holley Automotive Division of Coltec Inc. from
September 1989 until joining MascoTech.
John J. Garber, Vice President Finance, Chief Financial Officer and
Treasurer. Mr. Garber has been with the Company in his present positions since
September 1991. Mr. Garber began his career in 1966 with Kelsey-Hayes, and by
1988 had advanced to Corporate Controller and CFO of its parent company,
Fruehauf Corporation. He also has served as CFO of Valley Industries, Inc., from
March 1990 until joining the Company.
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Keith F. Hale, Group Vice President and General Manager of Deco Group. Mr.
Hale became an executive officer of the Company, as Vice President and General
Manager of the Deco Group, at the closing of the Deco Acquisition. He served in
the same capacities with Deco from 1989 until the Deco Acquisition closed.
Thomas D. Parker, Vice President Human Resources and Secretary. Mr. Parker
joined the Company as Director of Human Resources in 1983. He was promoted to
Vice President Human Resources in November 1992 and became Secretary in June
1994.
Dennis H. Reckinger, Group Vice President Rubber and Plastic. From 1967
until its acquisition by the Company in August 1992, Mr. Reckinger served as
President and General Manager of Midwest Rubber Company. He continued with the
Company after the acquisition and was appointed its Group Vice President Rubber
and Plastic in November 1995.
Jerry D. Campbell, Director. Mr. Campbell, the Chairman and Chief Executive
Officer of Republic Bancorp Inc., first joined the Issuer's Board of Directors
in 1987. His current term as a director is scheduled to expire at the Company's
annual meeting in calendar year 1999. Mr. Campbell also serves as a director of
PICOM Insurance Company and of its holding company, Professionals Insurance
Company Management Group.
Shirley E. Gofrank, Director. Ms. Gofrank is President and Managing
Director of Gofrank & Mattina, P.C., a public accounting firm. A director of the
Issuer since 1995, her current term is scheduled to expire at the annual meeting
in 2001.
Jack R. Lousma, Director. A veteran of NASA's Sky-Lab and Columbia Space
Shuttle teams with over 27 million miles of space travel to his credit, Mr.
Lousma has been President and Chief Operating Officer of Diamond General
Development Corp., a developer and manufacturer of products for the dental
industry, since July 1996, after serving with Diamond in various other
capacities beginning in 1994, as Vice President Marketing and Sales of Aero
Sport, Inc., a developer and marketer of analyzers for the medical industry,
from 1993 until joining Diamond, and as President of Consortium for
International Earth Science Information Network from 1989 to 1993. He also is
President of Michigan Columbia Corp., an aerospace engineering/consulting
company, and serves on the board of directors of Republic Bank. Mr. Lousma has
been a director of the Issuer since 1991; his current term is scheduled to
expire at the annual meeting in 2000.
Richard A. Smith, Director. Mr. Smith served as the Company's President and
Chief Executive Officer from December 1990 until his retirement in March 1995
and as its President and Chief Operating Officer from May 1986 until his
advancement to CEO. A director of the Issuer since 1987, his current term is
scheduled to expire at the annual meeting in 2000. Mr. Smith also is a director
of Kettering University (formerly GMI Engineering and Management Institute) and
of Coating Specialties, Inc.
Kurt O. Tech, Director. Prior to his retirement in 1980, Mr. Tech was
President of The Cross Company. He has served on the Issuer's Board since 1981;
his current term also is scheduled to expire at the year 2000 annual meeting.
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<PAGE> 74
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION
The table that follows provides information, for each of the Company's last
three completed fiscal years in which they were executive officers, concerning
the compensation of W. John Weinhardt, Newcor's Chief Executive Officer ("CEO")
and of all other persons who served as executive officers of the Company during
the fiscal year ended October 31, 1997 (other than Mr. Lawson, whose total 1997
compensation from the Company was as a director of the Issuer).
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------- --------------------------------------------
SECURITIES
OTHER RESTRICTED UNDERLYING
NAME AND FISCAL ANNUAL STOCK STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY(2) BONUS(2) COMPENSATION(3) AWARDS(4) OPTIONS(#)(5) COMPENSATION(6)
<S> <C> <C> <C> <C> <C> <C> <C>
W. J. Weinhardt 1997 $290,000 $221,444 $20,071 $72,863 18,270 shares $28,836(7)
President and CEO 1996 $256,667 $176,000 $20,071 -- 0 shares $26,461(7)
1995 $166,667 $200,000 $20,071 -- 105,000 shares $27,211(7)
R. C. Ballou 1997 $145,000 $127,984 -- $25,125 6,300 shares $ 1,917
Grp VP Precision 1996 $135,000 $ 51,000 -- $16,500 6,300 shares --
Machined Products 1995 $ 11,250 $ 15,000 -- -- 0 shares --
J. J. Garber 1997 $133,100 $ 61,226 -- $16,750 4,200 shares $ 1,684
VP Finance, Treasurer 1996 $126,735 $ 51,315 -- $ 8,250 2,100 shares --
and CFO 1995 $120,700 -- -- -- 0 shares --
T. D. Parker 1997 $100,000 $ 35,742 -- $10,888 2,730 shares $ 1,920
VP Human Resources 1996 $ 92,600 $ 21,988 -- $ 4,125 2,100 shares --
and Secretary 1995 $ 87,780 -- -- -- 0 shares --
D. H. Reckinger 1997 $135,700 $ 10,747 -- $20,100 5,040 shares $ 1,586
Grp VP Rubber and 1996 $129,200 $ 46,784 -- $ 6,188 2,625 shares --
Plastic
J. D. Borseth 1997 $ 66,531 -- -- -- 0 shares $94,208
Former Grp VP(8) 1996 $159,675 $127,943 -- -- 0 shares --
1995 $152,800 -- -- -- 0 shares --
</TABLE>
- -------------------------
(1) Where compensation is reported for less than three years, the named
executive was not an executive officer of the Company during the years
omitted.
(2) Where applicable, includes salary or bonus amounts deferred into the
Company's Savings Plan, a so-called "401(k)" plan, at a named executive's
election. Bonus amounts for 1996 do not include the amount of any bonus
exchanged by a named executive for restricted shares of the Issuer's Common
Stock, $1.00 par value ("Common Stock"), pursuant to the Voluntary Program
of the Company's 1996 Employee Incentive Stock Plan (the "Employee Stock
Plan"). As to such restricted shares, see the "Restricted Stock Awards"
column of this table.
(3) Amounts reported do not include any perquisites or other non-cash benefits
provided to named executives, which in each case and for each fiscal year
did not exceed 10% of the executive's aggregate salary and bonus for the
year. The fiscal year amounts reported for Mr. Weinhardt represent a
so-called "gross up" for taxes payable by him due to the Company's
reimbursement of the life insurance premiums reported in this table under
"All Other Compensation."
(4) Dollars reported in this column for 1997 relate to awards of
transfer-restricted and forfeitable shares of Common Stock made in that
fiscal year to named executives under the Discretionary Program of the
Employee Stock Plan. Dollars reported for 1996 relate to awards of
transfer-restricted but nonforfeitable shares of Common Stock received by
named executives in 1997 under the Voluntary Program of the Employee Stock
Plan in exchange for portions of the cash bonuses awarded to them for fiscal
1996 performance under the Company's cash incentive bonus plan. In each
case, dollars reported have been calculated by multiplying the number of
shares received by the NASDAQ-reported closing price for an unrestricted
share of Common Stock on the pertinent award date. The transfer restrictions
imposed on shares awarded under the Voluntary Program lapse on the first
anniversary of the award date. Subject to
69
<PAGE> 75
earlier vesting upon death, disability or as otherwise provided in the
Employee Stock Plan, the transfer restrictions and risk of forfeiture
imposed on shares awarded under the Discretionary Program lapse on the third
anniversary of the award date. Holders of shares received under either
program possess all of the normal rights of a holder of Common Stock with
respect to these shares, including voting and dividend rights. Shares of
Common Stock received as a dividend upon shares received under the Employee
Stock Plan (the "awarded shares") pursuant to the 5% stock dividend paid by
Newcor on the Common Stock during the last quarter of fiscal 1997 (the "5%
Stock Dividend") are subject to the same transfer restrictions, risk of
forfeiture (if any) and shareholder rights as the awarded shares to which
they relate. As of the last business day of fiscal 1997, the named
executives, respectively, held the following aggregate numbers of shares
received under the Employee Stock Plan or in the 5% Stock Dividend that were
still subject to transfer restrictions: Mr. Weinhardt, 9,135 (all
forfeitable); Mr. Ballou, 5,250 (3,150 forfeitable); Mr. Garber, 3,150
(2,100 forfeitable); Mr. Parker, 1,890 (1,365 forfeitable); Mr. Reckinger,
3,307 (2,520 forfeitable); Mr. Borseth, none.
(5) Shares reported in this column for 1997 all relate to options granted under
the Discretionary Program of the Employee Stock Plan. Further information
concerning this plan is provided below under "Certain Information Concerning
Stock Options." Shares reported for 1996 include 4,000 subject to options
acquired by Mr. Ballou, 2,000 subject to options acquired by Mr. Garber,
1,050 subject to options acquired by Mr. Parker and 1,500 subject to options
acquired by Mr. Reckinger in that year as a result of participation in the
Voluntary Program of the Employee Stock Plan. The other shares reported for
1996 relate to options granted early in fiscal 1997 under the Discretionary
Program of the Company's 1993 Management Stock Incentive Plan, the
provisions of which are similar to those of the Employee Stock Plan. All
share numbers reported have been adjusted for the 5% Stock Dividend.
(6) Except as otherwise indicated in notes (7) and (8), all amounts reported in
this column represent the dollar value of matching contributions made by the
Company for the accounts of named executives under Newcor's 401(k) plan.
(7) For each year, the amount reported includes $26,461, representing
reimbursement of premiums paid by Mr. Weinhardt on a $1,500,000 insurance
policy on his life. Mr. Weinhardt is the owner of this policy; the Company
is not a beneficiary. The amount reported for 1995 also includes $750 of
director fees.
(8) Mr. Borseth's employment by the Company terminated on March 31, 1997. In
connection with his separation from the Company, he received $93,144 in cash
severance benefits, which amount is included under "All Other Compensation."
CERTAIN AGREEMENTS WITH EXECUTIVES
In connection with his engagement as President and CEO, W. John Weinhardt
entered into an employment agreement with the Company for an initial term ending
February 28, 1997. This agreement twice has been extended for an additional one
year periods and would extend for successive one year periods thereafter unless
either party notifies the other during the extended term then in effect that the
notifying party has elected to terminate the agreement at the end of that term.
Under this agreement, Mr. Weinhardt is entitled to receive salary at a specified
annual rate subject to periodic review by the Board (currently $300,000), to
cash bonuses under the Company's cash incentive bonus plan if and as earned, to
participate in other employee benefit plans available to executives of the
Company, to a $1,500,000 insurance policy on his life paid for by the Company
and to specified health insurance coverage for him and his family and certain
other non-cash fringe benefits. A one-time cash bonus of $100,000 also was paid
to Mr. Weinhardt under the agreement at the time he commenced his duties with
the Company. In addition, the agreement contemplated a "guaranteed" bonus of
$100,000 for fiscal 1995, which was paid to Mr. Weinhardt after year-end, and
the grant of options on Common Stock that was made to him in fiscal 1995.
Mr. Weinhardt's employment agreement would terminate immediately upon his
death or permanent disability and is terminable at any time by either party upon
30 days prior written notice to the other. If termination is due to Mr.
Weinhardt's permanent disability or an election by the Company not to the extend
the agreement for an additional term, or if termination is otherwise by the
Company and not for Cause (as defined in the agreement), he will be entitled for
one year following the termination date to continued payment by the Company of
the premiums on his life insurance policy and of his salary at the rate then in
effect (reduced by any amounts payable under the Company's long term disability
policy), to continuation of
70
<PAGE> 76
health insurance and certain other fringe benefits for up to one year after his
termination date, to any bonus earned at the time of termination and to
outplacement services. If termination is by Mr. Weinhardt's death or at his
election, or is by Newcor for Cause, he (or his estate) will be entitled only to
salary earned as of the termination date, and Newcor's other obligations to him
under the agreement also will cease as of that date.
Regardless of the time or circumstances of his employment termination, Mr.
Weinhardt for five years thereafter is prohibited by the employment agreement
from making any attempt to induce or encourage any employee of the Issuer or an
affiliate to leave for employment with a competitor. The agreement also imposes
confidentiality obligations upon Mr. Weinhardt, which continue indefinitely, and
provides that any intellectual property developed or invented by him during the
term of his employment will be the sole and exclusive property of the Issuer.
In connection with his engagement as President and CEO, Mr. Weinhardt and
the Company also entered into another agreement, providing for certain payments
to him in the event that, within eighteen months after a change in control, he
or the Company should terminate his employment. Depending on the reason for
termination and upon whether it is the Company or Mr. Weinhardt that terminates,
either no payments would be required under the agreement or the amount of the
required payments would be either 1.25 or 2.5 times the sum of (a) Mr.
Weinhardt's annual base salary in effect at the termination date or, if higher,
immediately preceding the change in control and (b) his average annual bonus for
the three full Newcor fiscal years (or, if shorter, the entire period of his
employment) immediately preceding the termination date or change in control. The
agreement also provides for continuance of health, life, and similar insurance
coverage for specified time periods following employment termination after a
change in control and, under some circumstances, for outplacement services. In
addition, it provides that, upon the occurrence of a change in control, all
outstanding but theretofore unexercisable options to acquire Common Stock held
by Mr. Weinhardt would become immediately exercisable in full, and that each
Common Stock option held by Mr. Weinhardt would continue to be exercisable for
six months following any termination of his employment within eighteen months
after a change in control or such lesser period as the option would have been
exercisable if his employment had not terminated.
Thomas D. Parker has a similar "change in control" agreement with the
Company. Under his agreement, the maximum cash amount that would be payable if
his employment terminated after a change in control is 1.5 times the sum of his
annual base salary and average bonus, determined as described above.
Each of Robert C. Ballou and Dennis H. Reckinger has a severance agreement
with the Company. Under the current terms of each agreement, both of which are
subject to change at the Company's discretion, if the covered executive were
terminated by the Company other than for cause (as therein defined), he would be
entitled to his salary at the rate in effect at the date of his termination and
to continuation of certain employee benefits for a specified severance period
thereafter (6 months for Mr. Ballou; 12 months for Mr. Reckinger). Mr.
Reckinger's severance agreement also includes a noncompetition agreement by him,
effective for his entire severance period.
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<PAGE> 77
CERTAIN INFORMATION CONCERNING STOCK OPTIONS
The table that follows provides information concerning grants of stock
options made during the Company's last-ended fiscal year to executives named in
the Summary Compensation Table.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE
SECURITIES % OF TOTAL VALUE AT ASSUMED
UNDERLYING OPTIONS/SARS APPRECIATION FOR
OPTIONS/ GRANTED TO EXERCISE OR OPTION TERM(4)
SARS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(2) FISCAL YEAR ($/SH)(2) DATE(3) 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
W. J. Weinhardt.............. 18,270 32.3% $8.0357 03/05/2007 $95,432 $241,843
R. C. Ballou................. 6,300 11.2% $8.0357 03/05/2007 $32,907 $ 83,394
J. J. Garber................. 4,200 7.4% $8.0357 03/05/2007 $21,938 $ 55,596
T. D. Parker................. 2,730 4.8% $8.0357 03/05/2007 $14,260 $ 36,137
D. H. Reckinger.............. 5,040 8.9% $8.0357 03/05/2007 $26,326 $ 66,715
J. D. Borseth................ -0- -0- NA NA NA NA
</TABLE>
- -------------------------
(1) All awards reported in this table are options to purchase Common Stock
granted under the Discretionary Program of the Employee Stock Plan. Both
nonqualified and incentive stock options may be awarded under this program
at the discretion of the Compensation/Stock Option Committee of the Issuer's
Board of Directors, but all grants under the program to date have been of
nonqualified stock options. As indicated in note (4) to the Summary
Compensation Table, the plan also includes a Voluntary Program, pursuant to
which a nonqualified stock option on two shares of Common Stock
automatically is awarded for each share acquired in lieu of or in exchange
for a cash bonus. Discretionary grants of so-called "freestanding" stock
appreciation rights also are authorized by the plan, but none to date have
been granted. Generally, all options granted under the Employee Stock Plan,
including the options reported in this table, first become exercisable with
respect to one-quarter of the shares covered by the option on each of the
first, second, third and fourth anniversaries of the date of grant. However,
pursuant to their respective change in control agreements with the Company,
the exercisability of options granted to Mr. Weinhardt and Mr. Parker would
accelerate upon a change in control, and the plan also permits the
Compensation/Stock Option Committee to accelerate the exercisability of
other options upon a change in control. Exercisable options under the plan
may be exercised for cash, by delivery of shares of Common Stock or (in the
case of a nonqualified stock option) by directing retention of shares
otherwise issuable upon exercise of the option.
(2) Adjusted for the 5% Stock Dividend.
(3) The expiration date reported in this table is the latest possible expiration
date for the option reported. If employment terminates earlier than the
expiration date shown, the option may expire or be canceled at an earlier
date.
(4) For each column, "potential realizable value" represents potential gain (net
of exercise price, but without any present value discount) based upon annual
compound price appreciation of the underlying Common Stock at 5% or 10%, as
applicable, through the full option term. The actual value, if any, which
may be realized with respect to a reported option will be dependent upon the
future performance of the Company and the Common Stock and overall market
conditions. There can be no assurance that any values actually realized in
the future will approximate the amounts reflected in either of these
columns.
During fiscal 1997, none of the executives named in the Summary
Compensation Table exercised any stock options granted by the Company. The
following table provides information concerning their holdings of such options
at fiscal year-end. Unexercised options reflected in the table include the
options reported in the immediately preceding table.
72
<PAGE> 78
FISCAL YEAR-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS/SARS AT FISCAL
YEAR-END(1) YEAR-END(2)
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C>
W. J. Weinhardt................................... 52,500/70,770 $106,874/$124,492
R. C. Ballou...................................... 525/12,075 $6/$10,894
J. J. Garber...................................... 4,922/7,350 $0/$6,450
T. D. Parker...................................... 2,702/4,568 $6,202/$3,842
D. H. Reckinger................................... 3,253/9,819 $1,886/$8,605
J. D. Borseth..................................... 6,300/0 $0/$0
</TABLE>
- -------------------------
(1) Reflects adjustment for the 5% Stock Dividend.
(2) For purposes of this column, "value" is determined by subtracting the
aggregate exercise price for the optioned shares from the product of that
number of shares and the NASDAQ-reported closing price for the Common Stock
as of the last business day of fiscal 1997.
NEWCOR, INC. RETIREMENT PLAN
This plan provides vested participants a monthly retirement benefit equal
to years of credited service times 1.1% of the participant's average monthly
earnings (salary and bonus) for the highest consecutive 60-month period
preceding retirement or other employment termination, subject to a limit imposed
under the Internal Revenue Code upon the maximum annual compensation amount that
may be taken into account for purposes of calculating benefits and to another
Code limit upon the maximum annual pension amount that may be paid.
Substantially all salaried employees of the Issuer (including all Company
executive officers named in the Summary Compensation Table) are eligible to
participate in this plan. Participants are vested after five years of
employment. The estimated credited years of service for the executives named in
the Summary Compensation Table are, respectively, as follows: Mr. Weinhardt, two
years; Mr. Ballou, three years; Mr. Garber, six years; Mr. Parker, fourteen
years; Mr. Reckinger, five years; Mr. Borseth, four years. Since January 1,
1997, the maximum annual compensation amount permitted by the Internal Revenue
Code to be considered for calculating Retirement Plan benefits has been
$160,000, subject to future adjustment in $10,000 increments as and when
justified by increases in the cost-of-living. The Code limit on the maximum
annual pension amount that may be paid to any participant currently is $130,000
per year, also subject to adjustment for future cost-of-living increases.
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<PAGE> 79
The following table shows the estimated annual benefits (which are not
subject to deduction for Social Security benefits or other amounts) payable
under this plan upon retirement at age 63 to persons in the compensation and
years of service classifications indicated, with benefits computed on the basis
of straight life annuities and without taking into account the Internal Revenue
Code compensation limits discussed above. Please note that, under the Code as
currently in effect, the benefits payable under the plan for average annual
compensation above $160,000 would be the same as those reflected in the $160,000
row of the table, rather than as presented therein, except to the extent that a
higher benefit amount may be required in order to preserve the benefit accrued
for a given participant at December 31, 1993, and except to the extent that
higher benefits become permissible due to cost-of-living adjustments.
RETIREMENT PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
ANNUAL ------------------------------------------------------------------------
COMPENSATION 10 15 20 25 30 35 40
<C> <S> <C> <C> <C> <C> <C> <C> <C>
$100,000 ................ $11,000 $16,500 $ 22,000 $ 27,500 $ 33,000 $ 38,500 $ 44,000
125,000 ................ 13,750 20,625 27,500 34,375 41,250 48,125 55,000
150,000 ................ 16,500 24,750 33,000 41,250 49,500 57,750 66,000
160,000 ................ 17,600 26,400 35,200 44,000 52,800 61,600 70,400
175,000 ................ 19,250 28,875 38,500 48,125 57,750 67,375 77,000
200,000 ................ 22,000 33,000 44,000 55,000 66,000 77,000 88,000
225,000 ................ 24,750 37,125 49,500 61,875 74,250 86,625 99,000
250,000 ................ 27,500 41,250 55,000 68,750 82,500 96,250 110,000
300,000 ................ 33,000 49,500 66,000 82,500 99,000 115,500 132,000
350,000 ................ 38,500 57,750 77,000 96,250 115,500 134,750 154,000
400,000 ................ 44,000 66,000 88,000 110,000 132,000 154,000 176,000
450,000 ................ 49,500 74,250 99,000 123,750 148,500 173,250 198,000
500,000 ................ 55,000 82,500 110,000 137,500 165,000 192,500 220,000
</TABLE>
DIRECTORS' COMPENSATION
The Chairman of the Board is paid a quarterly retainer of $7,125, and
non-employee Directors other than the Chairman are paid quarterly retainers of
$3,800, in each case reduced by the cost of any medical/dental benefits provided
to such director by the Company. Non-employee directors also receive a fee of
$750 for each Board meeting attended and a fee of $700 for each committee
meeting attended. Committee chairmen are paid an annual fee as follows:
Executive Committee (Mr. Lawson), none; Finance Committee (Mr. Campbell), $850;
Compensation/Stock Option Committee (Mr. Tech), $1,000; Audit Committee (Mr.
Lousma), $700. Directors may elect to defer all or a portion of their fees,
without interest, for payment in the future and also are reimbursed for travel
and other expenses relating to their attendance at Board and committee meetings.
In addition, subject to the share limits set forth in the Company's 1996
Non-Employee Directors Stock Option Plan (the "Directors Option Plan") at the
adjournment of each organizational meeting of the Board following an annual
meeting, each person then serving as a non-employee director of the Issuer
automatically is granted under this plan a nonqualified stock option covering
1,000 shares of Common Stock. All options so granted have per share exercise
prices equal to a share's grant date Fair Market Value (as defined in the plan),
have maximum terms of 10 years and are exercisable only for cash. Except in the
event of a Change in Control (as therein defined), which would accelerate
exercisability of all options then outstanding, each option granted under the
Directors Option Plan first becomes exercisable with respect to one-quarter of
the shares covered by the option on each of the first, second, third and fourth
anniversaries of the date of grant. Options exercisable at the time a grantee
leaves the Board would continue to be exercisable for one year or, if earlier,
until the tenth anniversary of grant. Options not exercisable at the time a
grantee leaves the Board would expire at that time.
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<PAGE> 80
The Company also maintains a plan that provides retirement benefits to
those non-employee directors who retire from Board service on or after age 65
and after at least 10 years of service as a director, or if such a director dies
while actively serving as a director. The plan currently provides for quarterly
payments equal to 70% of the maximum quarterly retainer paid to active
directors. The only director eligible for benefits if he were to retire
immediately is Mr. Tech.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation/Stock Option Committee of the Board of Directors is a
standing committee of the Board charged with the responsibilities, subject to
full Board approval, of establishing, periodically reevaluating and (as
appropriate) adjusting, and administering Company policies concerning the
compensation of management personnel, including Newcor's CEO and all of its
other executive officers. Throughout fiscal 1997, the members of this committee
were Messrs. Tech, Campbell and Lousma. None of these directors is or ever has
been an officer or employee of the Issuer or any affiliate.
By virtue of his position of Chairman of the Board, Mr. Lawson is entitled
to attend all meetings of this committee, but he is not and never has been a
voting member of the committee. Mr. Lawson is an executive officer and until
March 1995 also was an employee of the Company.
75
<PAGE> 81
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
So far as is known to the Company, the only persons who are or may be
beneficial owners (within the meaning of Commission Rule 13d-3) of over 5% of
the Common Stock are the persons indicated in the table that follows.
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES OF PERCENT OF OWNERSHIP OF
OF BENEFICIAL OWNER COMMON STOCK(1) SHARES OF COMMON STOCK(1)
<S> <C> <C>
David L. Babson & Co., Inc.(2)........................ 582,434(2) 11.79%
One Memorial Drive
Cambridge, MA 02142-1300
Dimensional Fund Advisors Inc.(3)..................... 347,381(3) 7.03%
1299 Ocean Avenue
Santa Monica, CA 90401
Kennedy Capital Management, Inc.(4)................... 379,204(4) 8.04%
10829 Olive Boulevard
St. Louis, MO 63141
Catherine A. Gofrank(5)............................... 283,375(5) 5.73%
26555 Evergreen Road
Southfield, MI 48076-4285
Shirley E. Gofrank(6)................................. 277,442(6) 5.61%
3001 W. Big Beaver Road
Troy, MI 48084
</TABLE>
- -------------------------
(1) Where the most recent source of information identified below for a listed
person precedes the payment date of the 5% Stock Dividend, the number of
shares listed in this table has been adjusted for the 5% Stock Dividend.
Except as indicated in note (6), ownership percentages are calculated based
on the number of shares (excluding treasury shares) outstanding at the close
of business on January 31, 1998.
(2) Information concerning David Babson & Co., Inc. ("Babson"), is based on a
Schedule 13G filed with the Commission by Babson, as amended through January
15, 1998. Holdings reported in this schedule are as of December 31, 1997.
The schedule states that Babson is a registered investment adviser and that
the reported shares are owned by numerous of its investment counselling
clients. Based on this schedule Babson has sole voting and dispositive power
over all of these shares.
(3) Information concerning Dimensional Fund Advisors Inc. ("Dimensional"), is
based on a Schedule 13G filed with the Commission by Dimensional, as amended
through February 9, 1998, and a supplementary letter that accompanied the
copy of the most recent amendment of the schedule when it was provided to
Newcor, Inc. Holdings reported in this schedule are as of December 31, 1997.
Based on the schedule, Dimensional has sole voting power over 208,698 of the
reported shares and sole dispositive power over all of them. According to
the schedule and the supplementary letter, Dimensional is a registered
investment adviser and all of the shares reported in the schedule are held
in portfolios of DFA Investment Dimensions Group, Inc., a registered
open-end investment company, or in series of the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional serves as investment manager.
Dimensional disclaims beneficial ownership of all of these shares.
(4) Information concerning Kennedy Capital Management, Inc. ("Kennedy"), is
based on a Schedule 13G filed by Kennedy with the Commission, dated February
10, 1998. Holdings reported in this schedule are as of December 31, 1997.
Based on this schedule, Kennedy has sole voting power over 339,043 of the
reported shares and sole dispositive power over all of them. The schedule
also states that Kennedy is a registered investment adviser.
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<PAGE> 82
(5) Information concerning Catherine A. Gofrank is based on a Schedule 13D filed
by her with the Commission, dated July 8, 1996, and supplementary updating
information concerning some of the reported shares recently provided to
Newcor by her sister, Shirley E. Gofrank, in Ms. Shirley Gofrank's capacity
as a Newcor, Inc. director. Based on this schedule and after giving effect
to the 5% Stock Dividend, Ms. Catherine Gofrank has sole voting and
dispositive power over 48,329 of the reported shares. Based on the schedule
and the supplementary information provided by her sister, the sisters share
voting and dispositive power over the rest of the reported shares, as
successor co-trustees of the trust referred to in note (6).
(6) Information concerning Shirley E. Gofrank is based on a Schedule 13D filed
by her with the Commission, dated July 10, 1996, and supplementary updating
information she recently has provided to Newcor in her capacity as a Newcor,
Inc. director. The reported shares include 41,609 shares over which she has
sole voting and dispositive power, 787 shares subject to options currently
exercisable or that will become exercisable within 60 days (which shares are
treated as outstanding for purposes of calculating her percentage of
ownership) and 235,046 shares over which she shares voting and dispositive
power with her sister, Catherine Gofrank, in their capacity as successor
co-trustees of a trust established by their father during his lifetime. The
reported shares do not include 381 shares owned by Ms. Shirley Gofrank's
husband, over which she has no voting or dispositive power.
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<PAGE> 83
SECURITY OWNERSHIP OF MANAGEMENT AND THE BOARD OF DIRECTORS
The following table sets forth the beneficial ownership (for purposes of
Rule 13d-3) of shares of the Common Stock by each director of the Issuer and
each current or former Newcor executive officer named in the Summary
Compensation Table, based in each case on information provided to Newcor by the
pertinent individual, and of all Issuer directors and current Newcor executive
officers as a group. Except as noted, share percentages are calculated based on
the number of shares of Common Stock (excluding treasury shares) outstanding at
the close of business on January 31, 1998, and each individual named in the
table exercises sole voting and dispositive power with respect to the shares
shown for him or her.
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF OWNERSHIP OF
NAME OF BENEFICIAL OWNER COMMON STOCK SHARES OF COMMON STOCK
<S> <C> <C>
Jerry D. Campbell..................................... 111,606(1) 2.26%
Shirley E. Gofrank.................................... 277,442(1)(2)(3) 5.61%
William A. Lawson..................................... 124,309(1) 2.51%
Jack R. Lousma........................................ 6,669(1) 0.13%
Richard A. Smith...................................... 67,897(1)(3) 1.37%
Kurt O. Tech.......................................... 12,281(1) 0.25%
W. John Weinhardt..................................... 102,367(1)(4) 2.04%
Robert C. Ballou...................................... 11,692(1)(4) 0.24%
John Garber........................................... 17,379(1)(4) 0.35%
Keith F. Hale......................................... 0 0.0%
Thomas D. Parker...................................... 6,111(1)(4) 0.12%
Dennis H. Reckinger................................... 11,850(1)(4) 0.24%
John D. Borseth....................................... 16,420(1)(4) 0.33%
All directors and current executive officers as a
group
(11 persons)(1)(2)(3)(4)............................ 749,603 14.80%
</TABLE>
- -------------------------
(1) Includes shares that may be acquired under stock options currently or within
60 days exercisable, as follows: Jerry D. Campbell, 787; Shirley E. Gofrank,
787; William A. Lawson, 16,005; Jack R. Lousma, 787; Richard A. Smith, 787;
Kurt O. Tech, 787; W. John Weinhardt, 83,317; Robert C. Ballou, 3,675; John
J. Garber, 6,497; Thomas D. Parker, 3,909; Dennis H. Reckinger, 5,693; John
D. Borseth, 6,300; all directors and current executive officers as a group,
123,031. For purposes of calculating the group percentage, all optioned
shares (other than those optioned to Mr. Borseth, who no longer is an
executive officer) are treated as outstanding. For purposes of calculating
individual percentages, only the shares optioned to a given individual are
treated as outstanding.
(2) Includes shares held as a co-trustee of a trust, as follows: Shirley E.
Gofrank, 235,046.
(3) Does not include shares held by spouses, the beneficial ownership of which
is disclaimed, as follows: Shirley E. Gofrank, 381; Richard A. Smith, 395.
(4) Includes shares held by the Company's 401(k) plan, as follows: W. John
Weinhardt, 2,565; Robert C. Ballou, 667; John Garber, 317; Thomas D. Parker,
312; Dennis H. Reckinger, 205; John D. Borseth, 145; all directors and
current executive officers as a group, 4,266. The individuals named have
sole dispositive power but no voting power over these shares.
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<PAGE> 84
DESCRIPTION OF EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued pursuant to the same Indenture under
which the Notes were issued. The terms of the Exchange Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (the "Trust Indenture Act"). The Exchange Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the Trust Indenture Act for a statement thereof. The following summary of
the material provisions of the Indenture does not purport to be complete and is
qualified by reference to the Indenture, including the definitions therein of
certain terms used below. A copy of the Indenture is incorporated by reference
as an exhibit to the Registration Statement. The definitions of certain terms
used in the following summary are set forth below under "-- Certain
Definitions." For purposes of this summary, the term "Issuer" refers only to
Newcor, Inc. and not to any of its Subsidiaries.
The Exchange Notes will be general unsecured obligations of the Issuer and
will be subordinated in right of payment to all existing and future Senior Debt
of the Issuer and equal or senior in right of payment to all other existing and
future subordinated Indebtedness of the Issuer. The Exchange Notes and the Notes
will rank equally with one another. At January 31, 1998, on a pro forma basis,
after giving effect to the Acquisitions, the Offering and the application of the
net proceeds of the Offering, the Notes would have been subordinate to $10.3
million of Senior Debt of the Issuer (excluding guarantees by the Issuer of
Senior Debt of its Subsidiaries), and the Subsidiary Guarantees would have been
subordinate to $6.1 million of Senior Debt of the Subsidiary Guarantors
(excluding guarantees by the Subsidiary Guarantors of Senior Debt of the
Issuer). The Indenture permits the incurrence of additional Senior Debt in the
future.
Currently, all of the Issuer's Subsidiaries are Restricted Subsidiaries.
However, under certain circumstances, the Issuer will be able to designate
current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted
Subsidiaries will not be subject to many of the restrictive covenants set forth
in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes will be limited in aggregate principal amount to $125.0
million and will mature on March 1, 2008. Interest on the Exchange Notes will
accrue at the rate of 9 7/8% per annum and will be payable semi-annually in
arrears on March 1 and September 1, commencing on September 1, 1998, to Holders
of record on the immediately preceding February 15 and August 15. Interest on
the Exchange Notes will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Principal, premium, if any, and interest and Liquidated Damages
on the Exchange Notes will be payable at the office or agency of the Issuer
maintained for such purpose within the City and State of New York or, at the
option of the Issuer, payment of interest and Liquidated Damages may be made by
check mailed to the Holders of the Exchange Notes at their respective addresses
set forth in the register of Holders of Exchange Notes; provided that all
payments of principal, premium and interest and Liquidated Damages with respect
to Holders of Global Exchange Notes and Exchange Notes the Holders of which have
given wire transfer instructions to the Issuer will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Issuer, the Issuer's office
or agency in New York will be the office of the Trustee maintained for such
purpose. The Exchange Notes will be issued in denominations of $1,000 and
integral multiples thereof.
SUBSIDIARY GUARANTEES
The Issuer's payment obligations under the Exchange Notes will be jointly
and severally guaranteed by the Subsidiary Guarantors. The Subsidiary Guarantee
of each Subsidiary Guarantor will be subordinated to the prior payment in full
of all Senior Debt of such Subsidiary Guarantor. Each Subsidiary Guarantor's
guarantee of the Exchange Notes will rank equally with its guarantee of the
Notes. As of January 31, 1998, on a pro forma basis, after giving effect to the
Acquisitions, the Subsidiary Guarantees would have been subordinated to
approximately $6.1 million of Senior Debt of the Subsidiary Guarantors
(excluding guarantees by the Subsidiary Guarantors of Senior Debt of the
Issuer). Furthermore, the obligations of each
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<PAGE> 85
Subsidiary Guarantor under its Subsidiary Guarantee will be limited with the
intention that such Subsidiary Guarantee not constitute a fraudulent conveyance
or improper distribution under applicable law. The maximum liability of each
Subsidiary Guarantor for purposes of the foregoing will vary depending upon the
law applied and the standards applied in any proceeding with respect to the
Subsidiary Guarantee. There can be no assurance as to what standard or law a
court would apply in making a determination as to what the maximum liability
would be for each Subsidiary Guarantor. See "Risk Factors -- Fraudulent
Conveyance."
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person) another corporation, Person or entity whether or not affiliated with
such Subsidiary Guarantor unless (i) subject to the provisions of the following
paragraph, the Person formed by or surviving any such consolidation or merger
(if other than such Subsidiary Guarantor) assumes all the obligations of such
Subsidiary Guarantor pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Notes, the Exchange Notes, the
Indenture, the Registration Rights Agreement and the Subsidiary Guarantees; (ii)
immediately after giving effect to such transaction, no Default or Event of
Default exists; and (iii) the Issuer would be permitted by virtue of the
Issuer's pro forma Fixed Charge Coverage Ratio, immediately after giving effect
to such transaction, to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the covenant described
above under the caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the capital stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all of the assets
of such Subsidiary Guarantor) will be released and relieved of any obligations
under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the applicable provisions of
the Indenture. See "-- Repurchase at Option of Holders -- Asset Sales."
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Exchange
Notes will be subordinated in right of payment, as set forth in the Indenture,
to the prior payment in full of all Senior Debt, whether outstanding on the date
of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Issuer in a liquidation or
dissolution of the Issuer or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Issuer or its property, an
assignment for the benefit of creditors or any marshaling of the Issuer's assets
and liabilities, the holders of Senior Debt will be entitled to receive payment
in full in cash or Cash Equivalents of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Debt) before the Holders of Exchange
Notes will be entitled to receive any payment with respect to the Exchange
Notes, and until all Obligations with respect to Senior Debt are paid in full in
cash or Cash Equivalents, any distribution to which the Holders of Exchange
Notes would be entitled shall be made to the holders of Senior Debt (except that
Holders of Notes may receive and retain Permitted Junior Securities and payments
made from the trust described under "-- Legal Defeasance and Covenant
Defeasance").
The Issuer also may not make any payment upon or in respect of the Exchange
Notes (except in Permitted Junior Securities or from the trust described under
"-- Legal Defeasance and Covenant Defeasance") if (i) a default in the payment
of the principal of, premium, if any, or interest on Designated Senior Debt
occurs and is continuing beyond any applicable period of grace or (ii) any other
default occurs and is continuing with respect to Designated Senior Debt that
permits holders of the Designated Senior Debt as to which such default relates
to accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the Issuer or the holders (or their
Representative, if applicable) of any Designated Senior Debt. Payments on the
Exchange Notes may and shall be resumed (a) in the case of a
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<PAGE> 86
payment default, upon the date on which such default is cured or waived and (b)
in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been accelerated. No new period of payment blockage
may be commenced unless and until (i) 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal, premium and Liquidated Damages, if any, and
interest on the Exchange Notes that have come due have been paid in full in
cash. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 180 days.
The Indenture further requires that the Issuer promptly notify holders of
Senior Debt if payment of the Exchange Notes is accelerated because of an Event
of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Exchange Notes may recover less
ratably than other creditors of the Issuer or of a Subsidiary Guarantor,
including holders of Senior Debt. On a pro forma basis, after giving effect to
the Offering and the application of the proceeds therefrom, the principal amount
of Senior Debt outstanding at January 31, 1998 would have been $16.4 million.
The Indenture limits, subject to certain financial tests, the amount of
additional Indebtedness, including Senior Debt, that the Issuer and its
Subsidiaries can incur. See "-- Certain Covenants -- Incurrence of Indebtedness
and Issuance of Preferred Stock."
OPTIONAL REDEMPTION
The Exchange Notes will not be redeemable at the Issuer's option prior to
March 1, 2003. Thereafter, the Exchange Notes will be subject to redemption at
any time at the option of the Issuer, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on March 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003........................................................ 104.938%
2004........................................................ 103.292%
2005........................................................ 101.646%
2006 and thereafter......................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to March 1, 2001, the
Issuer may on any one or more occasions redeem up to $43,750,000 principal
amount of Notes and Exchange Notes at a redemption price of 109.875% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of
one or more public offerings of common stock of the Issuer; provided that at
least $81,250,000 aggregate principal amount of Notes and Exchange Notes will
remain outstanding immediately after the occurrence of such redemption
(excluding Notes and Exchange Notes held by the Issuer and its Subsidiaries);
and provided, further, that such redemption shall occur within 45 days of the
date of the closing of such public offering.
SELECTION AND NOTICE
If less than all of the Exchange Notes are to be redeemed at any time,
selection of Exchange Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Exchange Notes are listed, or, if the Exchange Notes are
not so listed, on a pro rata basis, by lot or by such method as the Trustee
shall deem fair and appropriate; provided that no Exchange Notes of $1,000 or
less shall be redeemed in part. Notices of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each Holder of Exchange Notes to be redeemed at its registered address. Notices
of redemption may not be conditional. If any Exchange Note is to be redeemed in
part only, the notice of redemption that relates to such Exchange Note
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<PAGE> 87
shall state the portion of the principal amount thereof to be redeemed. A new
Exchange Note in principal amount equal to the unredeemed portion thereof will
be issued in the name of the Holder thereof upon cancellation of the original
Exchange Note. Exchange Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on
Exchange Notes or portions of them called for redemption.
MANDATORY REDEMPTION
The Issuer is not required to make mandatory redemption or sinking fund
payments with respect to the Exchange Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Exchange Notes
will have the right to require the Issuer to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Exchange Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, to the date of
purchase (the "Change of Control Payment"). Within ten days following any Change
of Control, the Issuer will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Exchange Notes on the date specified in such notice, which date
shall be no earlier than 30 days and no later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by the Indenture and described in such notice. The Issuer
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Exchange
Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Issuer will, to the extent
lawful, (1) accept for payment all Exchange Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all
Exchange Notes or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Exchange Notes so accepted together with an
Officers' Certificate stating the aggregate principal amount of Exchange Notes
or portions thereof being purchased by the Issuer. The Paying Agent will
promptly mail to each Holder of Exchange Notes so tendered the Change of Control
Payment for such Exchange Notes, and the Trustee will promptly authenticate and
mail (or cause to be transferred by book entry) to each Holder a new Exchange
Note equal in principal amount to any unpurchased portion of the Exchange Notes
surrendered, if any; provided that each such new Exchange Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Issuer will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Exchange Notes to require that the
Issuer repurchase or redeem the Exchange Notes in the event of a takeover,
recapitalization or similar transaction.
The Credit Agreement currently prohibits the Issuer from purchasing any
Exchange Notes prior to their maturity, and also provides that a Change of
Control with respect to the Issuer would constitute a default thereunder. Any
future credit agreements or other agreements relating to Senior Debt to which
the Issuer becomes a party may contain similar restrictions and provisions. The
Indenture provides that, prior to complying with the provisions of this
covenant, but in any event within 90 days following a Change of Control, the
Issuer will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of Exchange Notes required by this covenant. If the Issuer
does not obtain such a consent or repay such borrowings, the Issuer will remain
prohibited from purchasing Exchange Notes. In such case, the Issuer's failure to
purchase tendered Exchange Notes would constitute an Event of Default under the
Indenture which would, in turn, constitute as default
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<PAGE> 88
under the Credit Agreement. In such circumstances, the subordination provisions
in the Indenture would likely restrict payments to the Holders of Exchange
Notes.
The Issuer will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Issuer and
purchases all Exchange Notes validly tendered and not withdrawn under such
Change of Control Offer.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Issuer and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) (ii) the adoption of a plan relating to the liquidation or
dissolution of the Issuer, (iii) the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above) becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 35% of the Voting Stock of the
Issuer (measured by voting power rather than number of shares), (iv) the Issuer
consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the Issuer, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Issuer is converted into or exchanged for cash, securities or other property,
other than any such transaction where the Voting Stock of the Issuer outstanding
immediately prior to such transaction is converted into or exchanged for Voting
Stock (other than Disqualified Stock) of the surviving or transferee Person
constituting a majority of the outstanding shares of such Voting Stock of such
surviving or transferee Person (immediately after giving effect to such
issuance).
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Issuer and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Exchange Notes to require the
Issuer to repurchase such Exchange Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Issuer and
its Subsidiaries taken as a whole to another Person or group may be uncertain.
ASSET SALES
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Issuer
(or the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an officers' certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Issuer or such Restricted Subsidiary is in the form of cash;
provided that the amount of (x) any liabilities (as shown on the Issuer's or
such Restricted Subsidiary's most recent balance sheet), of the Issuer or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that are
assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases the Issuer or such Restricted Subsidiary from further
liability and (y) any securities, notes or other obligations received by the
Issuer or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Issuer or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Issuer may apply such Net Proceeds, at its option (a) to permanently reduce
Senior Debt (or, if such Senior Debt is revolving Indebtedness under a Credit
Facility, to permanently reduce any related commitments of lenders under the
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<PAGE> 89
Senior Debt) (provided that such reductions shall have no effect on the amount
of Indebtedness permitted to be incurred pursuant to clause (i)(A)(y) of the
second paragraph of the covenant described under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock"), or
(b) to the acquisition of a majority of the assets of, or a majority of the
Voting Stock of, another Permitted Business, the making of a capital expenditure
or the acquisition of other assets that are not classified as current assets
under GAAP and are used or useful in a Permitted Business. Pending the final
application of any such Net Proceeds, the Issuer may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Issuer will be required to make an
offer (pro rata in proportion to the principal amount (or accreted value, if
applicable) outstanding in respect of any asset sale offer required by the terms
of any pari passu Indebtedness incurred in accordance with the Indenture) to all
Holders of Notes and Exchange Notes (an "Asset Sale Offer") to purchase the
maximum principal amount of Notes and Exchange Notes that may be purchased out
of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase, in accordance with the
procedures set forth in the Indenture. To the extent that any Excess Proceeds
remain after consummation of an Asset Sale Offer, the Issuer may use such Excess
Proceeds for any purpose not otherwise prohibited by the Indenture. If the
aggregate principal amount of Notes and Exchange Notes tendered into such Asset
Sale Offer surrendered by Holders thereof (and any pari passu Indebtedness, as
aforesaid) exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes and Exchange Notes to be purchased on a pro rata basis. Upon completion of
such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Issuer's or
any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Issuer or any of its Restricted Subsidiaries) or to the direct or indirect
holders of the Issuer's or any of its Restricted Subsidiaries' Equity Interests
in their capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Issuer or to the Issuer
or a Restricted Subsidiary of the Issuer); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving the Issuer) any Equity Interests of the
Issuer, (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Exchange Notes, except a payment of interest or principal at
Stated Maturity; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Issuer would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under caption "-- Incurrence of Indebtedness and Issuance
of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Issuer and its Subsidiaries after the
date of the Indenture (excluding Restricted Payments permitted by clauses
(ii), (iii) and (iv) of the next succeeding paragraph), is less than the
sum, without duplication, of (i) 50% of the Consolidated Net Income of the
Issuer for the period (taken as one
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accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Issuer most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Issuer since
the date of the Indenture as a contribution to its common equity capital or
from the issue or sale of Equity Interests of the Issuer (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of the Issuer that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Issuer), plus
(iii) to the extent that any Restricted Investment that was made after the
date of the Indenture is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment plus (iv) 50% of any dividends
received by the Issuer or a Wholly Owned Restricted Subsidiary that is a
Subsidiary Guarantor after the date of the Indenture from an Unrestricted
Subsidiary of the Issuer, to the extent that such dividends were not
otherwise included in Consolidated Net Income of the Issuer for such
period, plus (v) to the extent that any Unrestricted Subsidiary is
redesignated as a Restricted Subsidiary after the date of the Indenture,
the lesser of (A) the fair market value of the Issuer's Investment in such
Subsidiary as of the date of such redesignation or (B) such fair market
value as of the date on which such Subsidiary was originally designated as
an Unrestricted Subsidiary.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Issuer
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Issuer) of, other Equity Interests of
the Issuer (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause (c)
(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or
other acquisition of subordinated Indebtedness with the net cash proceeds from
an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend by a Subsidiary of the Issuer to the holders of its common Equity
Interests on a pro rata basis; and (v) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Issuer or any
Subsidiary of the Issuer held by any member of the Issuer (or any of its
Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement in effect as of the date of the Indenture;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $250,000 in any twelve
month period and no Default or Event of Default shall have occurred and be
continuing immediately after such transaction; (vi) Investments in securities
not constituting cash or Cash Equivalents and received in connection with an
Asset Sale made pursuant to the provisions of the covenant described under "--
Repurchase at the Option of Holders -- Asset Sales" above or any other
disposition of assets not constituting an Asset Sale by reason of the threshold
contained in the definition thereof; and (vii) repurchases of Equity Interests
deemed to occur upon exercise of stock options if such Equity Interests
represent a portion of the exercise price of such options.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the Issuer
and its Restricted Subsidiaries (except to the extent repaid in cash) in the
Subsidiary so designated will be deemed to be Restricted Payments at the time of
such designation and will reduce the amount available for Restricted Payments
under the first paragraph of this covenant. All such outstanding Investments
will be deemed to constitute Investments in an amount equal to the fair market
value of such Investments at the time of such designation. Such designation will
only be permitted if such Restricted Payment would be permitted at such time and
if such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
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The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Issuer or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $1.0 million. Not later than five Business Days after making any
Restricted Payment, the Issuer shall deliver to the Trustee an officers'
certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Issuer will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Issuer will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that the Issuer may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock and any Subsidiary Guarantor may
incur Indebtedness or issue preferred stock if the Fixed Charge Coverage Ratio
for the Issuer's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock or
preferred stock is issued would have been at least 2.0 to 1, if such incurrence
or issuance is on or prior to March 1, 2000, or 2.5 to 1, if such incurrence or
issuance is after March 1, 2000, in each case determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Disqualified Stock or
preferred stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Issuer and the Subsidiary Guarantors of (A)
revolving credit Indebtedness and letters of credit pursuant to Credit
Facilities; provided that the aggregate principal amount of all revolving
credit Indebtedness (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Issuer and
its Restricted Subsidiaries thereunder) at any time outstanding under all
Credit Facilities after giving effect to such incurrence does not exceed an
amount equal to the greater of (x) $50.0 million of such Indebtedness less
the aggregate amount of all Net Proceeds of Asset Sales applied to
permanently reduce commitments with respect to Credit Facilities pursuant
to the covenant described above under the caption "-- Asset Sales" and (y)
the Borrowing Base; and (B) term Indebtedness under Credit Facilities,
provided that the aggregate principal amount of all term Indebtedness
outstanding under all Credit Facilities after giving effect to such
incurrence does not exceed $10.0 million less the aggregate amount of all
Net Proceeds of Asset Sales that have been applied since the date of the
Indenture to repay term Indebtedness under a Credit Facility pursuant to
the covenant described above under the caption "-- Repurchase at the Option
of Holders -- Asset Sales";
(ii) the incurrence by the Issuer and the Subsidiary Guarantors of the
Existing Indebtedness;
(iii) the incurrence by the Issuer of Indebtedness represented by the
Notes and Exchange Notes and the incurrence by the Subsidiary Guarantors of
the Subsidiary Guarantees;
(iv) the incurrence by the Issuer or the Subsidiary Guarantors of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the
Issuer or a Subsidiary Guarantor, in an aggregate principal amount not to
exceed $5.0 million at any time outstanding;
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(v) the incurrence by the Issuer or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred pursuant to the preceding paragraph or clause (ii) or (iii) of
this paragraph;
(vi) the incurrence by the Issuer or any of the Subsidiary Guarantors
of intercompany Indebtedness between or among the Issuer and any of the
Subsidiary Guarantors or between or among Wholly Owned Restricted
Subsidiaries; provided, however, that (i) if the Issuer is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations then due with respect to the
Exchange Notes and (ii)(A) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person
other than the Issuer or a Subsidiary Guarantor and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the Issuer
or a Subsidiary Guarantor shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Issuer or such Subsidiary Guarantor,
as the case may be, that was not permitted by this clause (vii);
(vii) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging (i) interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding; (ii) the value of foreign currencies purchased or received by
the Issuer in the ordinary course of business, or (iii) commodities
purchased in the ordinary course of business for use in a Permitted
Business and not for speculation;
(viii) the guarantee by the Issuer or any of the Subsidiary Guarantors
of Indebtedness of the Issuer or a Subsidiary Guarantor that was permitted
to be incurred by another provision of this covenant;
(ix) the incurrence by the Issuer or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (ix), not to exceed $15.0
million;
(x) the incurrence by the Issuer or any of its Unrestricted
Subsidiaries of Non-Recourse Debt (excluding Indebtedness owed by such
Unrestricted Subsidiary to the Issuer), provided, however, that if any such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary,
such event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of the Issuer that was not permitted by this clause
(x);
(xi) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Indebtedness incurred in respect of performance, surety and
similar bonds provided by the Issuer and the Restricted Subsidiaries in the
ordinary course of business, and refinancings thereof;
(xii) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Indebtedness for letters of credit relating to workers'
compensation claims and self-insurance or similar requirements in the
ordinary course of business; and
(xiii) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Indebtedness arising from guarantees of Indebtedness of the
Issuer or any Restricted Subsidiary or other agreements of the Issuer or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or Subsidiary,
other than guarantees of Indebtedness incurred by any person acquiring all
or any portion of such business, assets or Subsidiary for the purpose of
financing such acquisition, provided that the maximum aggregate liability
in respect of all such Indebtedness shall at no time exceed the gross
proceeds actually received by the Issuer and its Subsidiaries in connection
with such disposition.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xiii) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Issuer shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant. Accrual of
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interest, accretion or amortization of original issue discount, the payment of
interest on any Indebtedness in the form of additional Indebtedness with the
same terms, and the payment of dividends on Disqualified Stock in the form of
additional shares of the same class of Disqualified Stock will not be deemed to
be an incurrence of Indebtedness or an issuance of Disqualified Stock for
purposes of this covenant; provided, in each such case, that the amount thereof
is included in Fixed Charges of the Issuer as accrued.
LIENS
The Indenture provides that the Issuer will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom, except Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Issuer or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Issuer or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Issuer or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Issuer or any of its Restricted Subsidiaries. However, the
foregoing restrictions will not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the Credit Agreement as in effect as of the date of the
Indenture, and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in the Credit Agreement as in effect on the date of the Indenture, (c)
the Indenture and the Notes and Exchange Notes, (d) applicable law, (e) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Issuer or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of the Indenture to be incurred, (f) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (h) any
agreement for the sale of a Restricted Subsidiary that restricts distributions
by that Restricted Subsidiary pending its sale, (i) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive, taken
as a whole, than those contained in the agreements governing the Indebtedness
being refinanced, (j) secured Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under the caption "--
Liens" that limits the right of the debtor to dispose of the assets securing
such Indebtedness, (k) provisions with respect to the disposition or
distribution of assets or property in an Asset Sale (or in a transaction which,
but for it size, would be an Asset Sale), or in joint venture agreements and
other similar agreements entered into in the ordinary course of business and (l)
restrictions on cash or other deposits or net worth imposed by customers under
contracts entered into in the ordinary course of business.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Issuer may not consolidate or merge with or
into (whether or not the Issuer is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or
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entity unless (i) the Issuer is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Issuer) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Issuer) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Issuer under the
Registration Rights Agreement, the Notes and Exchange Notes and the Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a merger of the Issuer with or into a
Wholly Owned Subsidiary of the Issuer, the Issuer or the entity or Person formed
by or surviving any such consolidation or merger (if other than the Issuer), or
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described above under the caption
"-- Incurrence of Indebtedness and Issuance of Preferred Stock."
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Issuer will not, and will not permit any of
its Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Issuer or the relevant Subsidiary than those that would have been obtained in a
comparable transaction by the Issuer or such Subsidiary with an unrelated Person
and (ii) the Issuer delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution of the Board of Directors
set forth in an officers' certificate certifying that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors
and (b) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $5.0 million, an
opinion as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing. Notwithstanding the foregoing, the following items
shall not be deemed to be Affiliate Transactions: (i) any employment agreement
entered into by the Issuer or any of its Subsidiaries in the ordinary course of
business and consistent with the past practice of the Issuer or such Subsidiary,
(ii) transactions between or among the Issuer and/or its Restricted
Subsidiaries, (iii) payment of reasonable directors' fees to Persons who are not
otherwise Affiliates of the Issuer, (iv) Restricted Payments that are permitted
by the provisions of the Indenture described above under the caption "--
Restricted Payments," and (v) provision of officers' and directors'
indemnification and insurance in the ordinary course of business to the extent
permitted by applicable law.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Issuer may enter into a sale and leaseback transaction if (i)
the Issuer could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "-- Incurrence of Additional
Indebtedness and Issuance of Preferred Stock" and (b) incurred a Lien to secure
such Indebtedness pursuant to the covenant described above under the caption "--
Liens," (ii) the gross cash proceeds of such sale and leaseback transaction are
at least equal to the fair market value (as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is
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permitted by, and the Issuer applies the proceeds of such transaction in
compliance with, the covenant described above under the caption "-- Repurchase
at the Option of the Holders -- Asset Sales."
BUSINESS ACTIVITIES
The Issuer will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Issuer and its Subsidiaries taken as a whole.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Issuer nor any of its Restricted
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Exchange Notes for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of the Indenture or the Exchange Notes unless
such consideration is offered to be paid or is paid to all Holders of the Notes
and Exchange Notes that consent, waive or agree to amend in the time frame set
forth in the solicitation documents relating to such consent, waiver or
agreement.
NO SENIOR SUBORDINATED DEBT
The Indenture provides that (i) the Issuer will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes, and (ii) no Subsidiary Guarantor will
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to Guarantees of
Senior Debt or to Senior Debt of such Subsidiary Guarantor and senior in any
respect in right of payment to the Subsidiary Guarantees.
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that if the Issuer or any of its Restricted
Subsidiaries shall acquire or create another Restricted Subsidiary, which has
not been properly designated as an Unrestricted Subsidiary in accordance with
the Indenture for as long as it continues to constitute an Unrestricted
Subsidiary, after the date of the Indenture, then such newly acquired or created
Restricted Subsidiary shall become a Subsidiary Guarantor and execute a
Supplemental Indenture and deliver an Opinion of Counsel, in accordance with the
terms of the Indenture; provided, that (i) the Subsidiary Guarantee of such
Subsidiary Guarantor may be subordinated to Senior Debt of such Subsidiary
Guarantor, and (ii) such Restricted Subsidiary shall not be required to issue a
Subsidiary Guarantee if such Restricted Subsidiary is a Foreign Subsidiary and
such Foreign Subsidiary has not guaranteed and does not guarantee any other
Indebtedness of the Issuer or any other Restricted Subsidiary of the Issuer.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Exchange Notes are outstanding, the Issuer will furnish to the
Holders of Exchange Notes (i) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if the Issuer were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
the Issuer and its consolidated Subsidiaries (showing in reasonable detail,
either on the face of the financial statements or in the footnotes thereto and
in Management's Discussion and Analysis of Financial Condition and Results of
Operations, the financial condition and results of operations of the Issuer and
its Restricted Subsidiaries separate from the financial condition and results of
operations of the Unrestricted Subsidiaries of the Issuer) and, with respect to
the annual information only, a report thereon by the Issuer certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Issuer were required to file
such reports, in each case within the time periods specified in the Commission's
rules and
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regulations. For all reporting periods ending on or prior to January 31, 1999,
the Issuer shall include in each Form 10-Q and Form 10-K a presentation, which
need not be audited, of sales, operating income, interest expense, depreciation
and amortization, and capital expenditures for such operating period and the
twelve months ended on the last day of such reporting period, on a pro forma
basis consistent with the presentation under the "Unaudited Pro Forma
Consolidated Statement of Income" section of this Prospectus. In addition,
following the consummation of the Exchange Offer, whether or not required by the
rules and regulations of the Commission, the Issuer will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Issuer and the Subsidiary Guarantors have agreed that, for so long as any
Exchange Notes remain outstanding (unless the Issuer is subject to the reporting
requirements of the Exchange Act), they will furnish to the Holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes or Exchange Notes (whether or not
prohibited by the subordination provisions of the Indenture); (ii) default in
payment when due of the principal of or premium, if any, on the Notes or
Exchange Notes whether or not prohibited by the subordination provisions of the
Indenture); (iii) failure by the Issuer or any of its Subsidiaries to comply
with the provisions described under the captions "-- Repurchase at the Option of
the Holder -- Change of Control," "-- Repurchase at the Option of the Holder --
Asset Sales," "-- Certain Covenants -- Restricted Payments," "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock," or "--
Merger, Consolidation or Sale of Assets"; (iv) failure by the Issuer or any of
its Subsidiaries for 60 days after notice to comply with any of its other
agreements in the Indenture or the Notes or Exchange Notes; (v) default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed by
the Issuer or any of its Subsidiaries (or the payment of which is guaranteed by
the Issuer or any of its Subsidiaries) whether such Indebtedness or guarantee
now exists, or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $5.0
million or more; (vi) failure by the Issuer or any of its Subsidiaries to pay
final judgments aggregating in excess of $5.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days; (vii) except as permitted by
the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding
to be unenforceable or invalid or shall cease for any reason to be in full force
and effect or any Subsidiary Guarantor, or any Person acting on behalf of any
Subsidiary Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency with
respect to the Issuer or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes and
Exchange Notes may declare all the Notes and Exchange Notes to be due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, with respect to
the Issuer, any Subsidiary Guarantor constituting a Significant Subsidiary or
any group of Subsidiary Guarantors that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes and Exchange Notes will become due
and payable without further action or notice. Holders of the Exchange Notes may
not enforce the Indenture or the Exchange Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes and Exchange Notes may direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from Holders of
the Exchange Notes notice of any continuing
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Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuer with the
intention of avoiding payment of the premium that the Issuer would have had to
pay if the Issuer then had elected to redeem the Exchange Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Exchange Notes. If an Event of Default occurs prior
to March 1, 2003 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Issuer with the intention of avoiding the
prohibition on redemption of the Exchange Notes prior to March 1, 2003, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Exchange Notes.
The Holders of a majority in aggregate principal amount of the Notes and
Exchange Notes then outstanding by notice to the Trustee may on behalf of the
Holders of all of the Notes and Exchange Notes waive any existing Default or
Event of Default and its consequences under the Indenture except a continuing
Default or Event of Default in the payment of interest on, or the principal of,
the Notes or Exchange Notes.
The Issuer is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuer is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Issuer,
as such, shall have any liability for any obligations of the Issuer under the
Notes or Exchange Notes, the Indenture or the Subsidiary Guarantees or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Exchange Notes by accepting an Exchange Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Exchange Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuer may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Exchange Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Exchange Notes
to receive payments in respect of the principal of, premium, if any, and
interest and Liquidated Damages on such Exchange Notes when such payments are
due from the trust referred to below, (ii) the Issuer obligations with respect
to the Exchange Notes concerning issuing temporary Exchange Notes, registration
of Exchange Notes, mutilated, destroyed, lost or stolen Exchange Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Issuer obligations in connection therewith and (iv) the Legal
Defeasance provisions of the Indenture. In addition, the Issuer may, at its
option and at any time, elect to have the obligations of the Issuer released
with respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Exchange Notes.
In the event Covenant Defeasance occurs, certain events (not including
non-payment, bankruptcy, receivership, rehabilitation and insolvency events)
described under "-- Events of Default and Remedies" will no longer constitute an
Event of Default with respect to the Exchange Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Exchange Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the outstanding Exchange Notes on the stated maturity or
on the applicable redemption date, as the case may be, and the Issuer must
specify whether the Exchange Notes
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are being defeased to maturity or to a particular redemption date; (ii) in the
case of Legal Defeasance, the Issuer shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Issuer has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Exchange Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Issuer shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Exchange Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit (other than a Default or Event of Default resulting from
the borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance will not result in a breach or violation of,
or constitute a default under any material agreement or instrument (other than
the Indenture) to which the Issuer or any of its Subsidiaries is a party or by
which the Issuer or any of its Subsidiaries is bound; (vi) the Issuer must have
delivered to the Trustee an opinion of counsel to the effect that, assuming no
intervening bankruptcy of the Issuer between the date of deposit and the 91st
day following the deposit and assuming no Holder of Exchange Notes is an insider
of the Issuer, after the 91st day following the deposit, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
Issuer must deliver to the Trustee an officers' certificate stating that the
deposit was not made by the Issuer with the intent of preferring the Holders of
Exchange Notes over the other creditors of the Issuer or with the intent of
defeating, hindering, delaying or defrauding creditors of the Issuer or others;
and (viii) the Issuer must deliver to the Trustee an officers' certificate and
an opinion of counsel, each stating that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuer may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuer is not required to transfer or exchange
any Exchange Note selected for redemption. Also, the Issuer is not required to
transfer or exchange any Exchange Note for a period of 15 days before a
selection of Exchange Notes to be redeemed.
The registered Holder of an Exchange Note will be treated as the owner of
it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Exchange Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Notes and Exchange
Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes and
Exchange Notes), and any existing default or compliance with any provision of
the Indenture or the Notes or Exchange Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes and
Exchange Notes (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Notes and Exchange
Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Exchange Notes held by a non-consenting Holder): (i) reduce
the principal amount of Notes and Exchange Notes whose Holders must consent to
an amendment, supplement or waiver, (ii) reduce the principal of or
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change the fixed maturity of any Exchange Note or alter the provisions with
respect to the redemption of the Exchange Notes (other than provisions relating
to the covenants described above under the caption "-- Repurchase at the Option
of Holders"), (iii) reduce the rate of or change the time for payment of
interest on any Exchange Note, (iv) waive a Default or Event of Default in the
payment of principal of or premium, if any, or interest on the Exchange Notes
(except a rescission of acceleration of the Notes and Exchange Notes by the
Holders of at least a majority in aggregate principal amount of the Notes and
Exchange Notes and a waiver of the payment default that resulted from such
acceleration), (v) make any Exchange Note payable in money other than that
stated in the Exchange Notes, (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of
Exchange Notes to receive payments of principal of or premium, if any, or
interest on the Exchange Notes, (vii) waive a redemption payment with respect to
any Exchange Note (other than a payment required by one of the covenants
described above under the caption "-- Repurchase at the Option of Holders") or
(viii) make any change in the foregoing amendment and waiver provisions. In
addition, any amendment to the provisions of Article 10 of the Indenture (which
relate to subordination) will require the consent of the Holders of at least 75%
in aggregate principal amount of the Notes and Exchange Notes then outstanding
if such amendment would adversely affect the rights of Holders of Notes or
Exchange Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes
or Exchange Notes, the Issuer and the Trustee may amend or supplement the
Indenture or the Exchange Notes to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Exchange Notes in addition to or in place of
certificated Exchange Notes, to provide for the assumption of the Issuer or any
Subsidiary Guarantor's obligations to Holders of Exchange Notes in the case of a
merger or consolidation or sale of all or substantially all of the Issuer's or
such Subsidiary Guarantor's assets, to make any change that would provide any
additional rights or benefits to the Holders of Notes and Exchange Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder, or to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuer, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
and Exchange Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Exchange Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
BOOK-ENTRY, DELIVERY AND FORM
Exchange Notes exchanged for Notes sold to Qualified Institutional Buyers
and Notes offered and sold in offshore transactions in reliance on Regulation S,
if any, initially will be in the form of one or more registered global notes
without interest coupons (collectively, the "Global Exchange Notes"). Upon
issuance, the Global Exchange Notes will be deposited with the Trustee, as
custodian for The Depository Trust Company ("DTC"), in New York, New York, and
registered in the name of DTC or its nominee for credit to the accounts of DTC's
Direct and Indirect Participants (as defined below). Transfer of beneficial
interests in Global Exchange Notes will be subject to the applicable rules and
procedures of DTC and its Direct or Indirect Participants (including, if
applicable, those of the Euroclear System ("Euroclear") and Cedel Bank, societe
anonyme ("CEDEL")), which may change from time to time.
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The Global Exchange Notes may be transferred, in whole and not in part,
only to another nominee of DTC or to a successor of DTC or its nominee in
certain limited circumstances. Beneficial interests in the Global Exchange Notes
may be exchanged for Notes in certificated form in certain limited
circumstances. See "-- Transfer of Interests in Global Exchange Notes for
Certificated Exchange Notes."
Initially, the Trustee will act as Paying Agent and Registrar. The Exchange
Notes may be presented for registration of transfer and exchange at the offices
of the Registrar.
DEPOSITORY PROCEDURES
DTC has advised the Issuer that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry changes in accounts of its Participants. The Direct Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations
including Euroclear and CEDEL. Access to DTC's system is also available to other
entities that clear through or maintain a direct or indirect custodial
relationship with a Direct Participant (collectively, the "Indirect
Participants").
DTC has also advised the Issuer that, pursuant to DTC's procedures, (i)
upon deposit of the Global Exchange Notes, DTC will credit the accounts of the
Direct Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Exchange Notes that have been allocated to them
by the Initial Purchasers and (ii) DTC will maintain records of the ownership
interests of such Direct Participants in the Global Exchange Notes and the
transfer of ownership interests by and between Direct Participants. DTC will not
maintain records of the ownership interests of, or the transfer of ownership
interests by and between, Indirect Participants or other owners of beneficial
interests in the Global Exchange Notes. Direct Participants and Indirect
Participants must maintain their own records of the ownership interests of, and
the transfer of ownership interests by and between, Indirect Participants and
other owners of beneficial interests in the Global Exchange Notes.
Investors in the Global Exchange Notes may hold their interests therein
directly through DTC, if they are Direct Participants in DTC, or indirectly
through organizations (such as Euroclear and CEDEL) which are Direct
Participants in DTC. Morgan Guaranty Trust Company of New York, Brussels office,
is the operator and depository of Euroclear, and Citibank, N.A., is the operator
and depository of CEDEL. Therefore, they will each be recorded on DTC's records
as the holders of all ownership interests held by them on behalf of Euroclear
and CEDEL, respectively. Euroclear and CEDEL must maintain on their own records
the ownership interests, and transfers of ownership interests by and between,
their own customers' securities accounts. DTC will not maintain such records.
All ownership interests in any Global Exchange Notes, including those of
customers' securities accounts held through Euroclear or CEDEL, may be subject
to the procedures and requirements of DTC.
The laws of some states in the United States require that certain persons
take physical delivery in definitive, certificated form, of securities that they
own. This may limit or curtail the ability to transfer beneficial interests in a
Global Exchange Note to such persons. Because DTC can act only on behalf of
Direct Participants, which in turn act on behalf of Indirect Participants and
others, the ability of a person having a beneficial interest in a Global
Exchange Note to pledge such interest to persons or entities that are not Direct
Participants in DTC, or to otherwise take actions in respect of such interests,
may be affected by the lack of physical certificates evidencing such interests.
For certain other restrictions on the transferability of the Exchange Notes see
"-- Transfers of Interests in Global Exchange Notes for Certificated Exchange
Notes."
EXCEPT AS DESCRIBED IN "TRANSFERS OF INTERESTS IN GLOBAL EXCHANGE NOTES FOR
CERTIFICATED EXCHANGE NOTES," OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL
EXCHANGE NOTES WILL NOT HAVE EXCHANGE NOTES REGISTERED
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IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF EXCHANGE NOTES IN
CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS
THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Under the terms of the Indenture, the Issuer, the Subsidiary Guarantors and
the Trustee will treat the persons in whose names the Exchange Notes are
registered (including Exchange Notes represented by Global Exchange Notes) as
the owners thereof for the purpose of receiving payments and for any and all
other purposes whatsoever. Payments in respect of the principal, premium,
Liquidated Damages, if any, and interest on Global Exchange Notes registered in
the name of DTC or its nominee will be payable by the Trustee to DTC or its
nominee as the registered holder under the Indenture. Consequently, neither the
Issuer, any Subsidiary Guarantor, the Trustee nor any agent of the Issuer, any
Subsidiary Guarantor or the Trustee has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Direct Participant's or
Indirect Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Exchange Notes or for maintaining,
supervising or reviewing any of DTC's records or any Direct Participant's or
Indirect Participant's records relating to the beneficial ownership interests in
any Global Exchange Note or (ii) any other matter relating to the actions and
practices of DTC or any of its Direct Participants or Indirect Participants.
DTC has advised the Issuer that its current payment practice (for payments
of principal, interest and the like) with respect to securities such as the
Exchange Notes is to credit the accounts of the relevant Direct Participants
with such payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global Exchange Notes as
shown on DTC's records. Payments by Direct Participants and Indirect
Participants to the beneficial owners of the Exchange Notes will be governed by
standing instructions and customary practices between them and will not be the
responsibility of DTC, the Trustee, the Issuer or the Subsidiary Guarantors.
Neither the Issuer, the Subsidiary Guarantors nor the Trustee will be liable for
any delay by DTC or its Direct Participants or Indirect Participants in
identifying the beneficial owners of the Exchange Notes, and the Issuer, the
Subsidiary Guarantor and the Trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee as the registered
owner of the Exchange Notes for all purposes.
The Global Exchange Notes will trade in DTC's Same-Day Funds Settlement
System and, therefore, transfers between Direct Participants in DTC will be
effected in accordance with DTC's procedures, and will be settled in immediately
available funds. Transfers between Indirect Participants (other than Indirect
Participants who hold an interest in the Exchange Notes through Euroclear or
CEDEL) who hold an interest through a Direct Participant will be effected in
accordance with the procedures of such Direct Participant but generally will
settle in immediately available funds. Transfers between and among Indirect
Participants who hold interests in the Exchange Notes through Euroclear and
CEDEL will be effected in the ordinary way in accordance with their respective
rules and operating procedures.
Cross-market transfers between Direct Participants in DTC, on the one hand,
and Indirect Participants who hold interests in the Exchange Notes through
Euroclear or CEDEL, on the other hand, will be effected by Euroclear's or
CEDEL's respective nominee through DTC in accordance with DTC's rules on behalf
of Euroclear or CEDEL; however, delivery of instructions relating to crossmarket
transactions must be made directly to Euroclear or CEDEL, as the case may be, by
the counterparty in accordance with the rules and procedures of Euroclear or
CEDEL and within their established deadlines (Brussels time for Euroclear and UK
time for CEDEL). Indirect Participants who hold interest in the Exchange Notes
through Euroclear and CEDEL may not deliver instructions directly to Euroclear's
or CEDEL's nominee. Euroclear or CEDEL will, if the transaction meets its
settlement requirements, deliver instructions to its respective nominee to
deliver or receive interests on Euroclear's or CEDEL's behalf in the relevant
Global Exchange Note in DTC, and make or receive payment in accordance with
normal procedures for same-day fund settlement applicable to DTC.
Because of time zone differences, the securities accounts of an Indirect
Participant who holds an interest in the Exchange Notes through Euroclear or
CEDEL purchasing an interest in a Global Exchange Note from a Direct Participant
in DTC will be credited, and any such crediting will be reported to Euroclear or
CEDEL during the European business day immediately following the settlement date
of DTC in New York. Although recorded in DTC's accounting records as of DTC's
settlement date in New York, Euroclear and CEDEL
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customers will not have access to the cash amount credited to their accounts as
a result of a sale of an interest in a Global Exchange Note to a DTC Participant
until the European business day for Euroclear or CEDEL immediately following
DTC's settlement date.
DTC has advised the Issuer that it will take any action permitted to be
taken by a holder of Exchange Notes only at the direction of one or more Direct
Participants to whose account interests in the Global Exchange Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Exchange Notes to which such Direct Participant or Direct Participants
has or have given direction. However, if there is an Event of Default under the
Exchange Notes, DTC reserves the right to exchange Global Exchange Notes
(without the direction of one or more of its Direct Participants) for legended
Exchange Notes in certificated form, and to distribute such certificated forms
of Exchange Notes to its Direct Participants. See "-- Transfers of Interests in
Global Exchange Notes for Certificated Exchange Notes."
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interests in the Global Exchange Notes among Direct
Participants, including Euroclear and CEDEL, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. None of the Issuer, the Subsidiary Guarantors, the
Initial Purchasers or the Trustee shall have any responsibility for the
performance by DTC, Euroclear or CEDEL or their respective Direct and Indirect
Participants of their respective obligations under the rules and procedures
governing any of their operations.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Issuer believes
to be reliable, but the Issuer takes no responsibility for the accuracy thereof.
TRANSFERS OF INTERESTS IN GLOBAL EXCHANGE NOTES FOR CERTIFICATED EXCHANGE
NOTES
An entire Global Exchange Note may be exchanged for definitive Exchange
Notes in registered, certificated form without interest coupons ("Certificated
Exchange Notes") if (i) DTC (x) notifies the Issuer that it is unwilling or
unable to continue as depositary for the Global Exchange Notes and the Issuer
thereupon fails to appoint a successor depositary within 90 days or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Issuer, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Certificated Exchange Notes or (iii) there shall have occurred
and be continuing a Default or an Event of Default with respect to the Exchange
Notes. In any such case, the Issuer will notify the Trustee in writing that,
upon surrender by the Direct and Indirect Participants of their interest in such
Global Exchange Note, Certificated Exchange Notes will be issued to each person
that such Direct and Indirect Participants and the DTC identify as being the
beneficial owner of the related Exchange Notes.
Beneficial interests in Global Exchange Notes held by any Direct or
Indirect Participant may be exchanged for Certificated Exchange Notes upon
request to DTC, by such Direct Participant (for itself or on behalf of an
Indirect Participant), to the Trustee in accordance with customary DTC
procedures. Certificated Exchange Notes delivered in exchange for any beneficial
interest in any Global Exchange Note will be registered in the names, and issued
in any approved denominations, requested by DTC on behalf of such Direct or
Indirect Participants (in accordance with DTC's customary procedures).
Neither the Issuer, the Subsidiary Guarantors nor the Trustee will be
liable for any delay by the holder of any Global Exchange Note or DTC in
identifying the beneficial owners of Exchange Notes, and the Issuer and the
Trustee may conclusively rely on, and will be protected in relying on,
instructions from the holder of the Global Exchange Note or DTC for all
purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Exchange Notes
represented by the Global Exchange Notes (including principal, premium, if any,
interest and Liquidated Damages, if any) be made by wire transfer of immediately
available same day funds to the accounts specified by the holder of interests in
such Global Exchange Note. With respect to Certificated Exchange Notes, the
Issuer will make all payments
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of principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available same day funds to the accounts specified by
the holders thereof or, if no such account is specified, by mailing a check to
each such holder's registered address. The Issuer expects that secondary trading
in the Certificated Exchange Notes will also be settled in immediately available
funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Issuer and its Subsidiaries taken as a
whole will be governed by the provisions of the Indenture described above under
the caption "-- Repurchase at the Option of Holders -- Change of Control" and/or
the provisions described above under the caption "-- Merger, Consolidation or
Sale of Assets" and not by the provisions of the Asset Sale covenant), and (ii)
the issue or sale by the Issuer or any of its Subsidiaries of Equity Interests
of any of the Issuer Subsidiaries, in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $1.0 million or (b) for net proceeds in
excess of $1.0 million. Notwithstanding the foregoing, the following items shall
not be deemed to be Asset Sales: (i) a transfer of assets by the Issuer to a
Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to
the Issuer or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of
Equity Interests by a Wholly Owned Restricted Subsidiary to the Issuer or to
another Wholly Owned Restricted Subsidiary, and (iii) a Restricted Payment that
is permitted by the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments."
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Borrowing Base" means, as of any date, an amount equal to the sum of (a)
85% of the face amount of all accounts receivable owned by the Issuer and its
Subsidiaries as of such date that are not more than 60 days past due, and (b)
50% of the book value of all inventory owned by the Issuer and its Subsidiaries
as of such date, calculated on a consolidated basis and in accordance with GAAP.
To the extent that information is not available as to the amount of accounts
receivable or inventory as of a specific date, the Issuer may utilize the most
recent available information for purposes of calculating the Borrowing Base.
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"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership (whether general or limited) or membership interests and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million and a Thompson Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having the
highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition, (vi) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i) - (v) of this
definition, and (vii) with respect to Investments by Foreign Subsidiaries, the
local currency of such Foreign Subsidiaries.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations, but excluding
amortization of debt issuance costs), to the extent that any such expense was
deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Subsidiary of the referent Person
shall be added to Consolidated Net Income to compute Consolidated Cash Flow only
to the extent that a corresponding amount would be permitted at the date of
determination to be dividended to the Issuer by such Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
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Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Subsidiary
thereof that is a Guarantor, (ii) the Net Income of any Restricted Subsidiary
shall be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded, and (v) the Net Income (but not loss)
of any Unrestricted Subsidiary shall be excluded, whether or not distributed to
the Issuer or one of its Subsidiaries.
"Credit Agreement" means that certain Third Amended and Restated Revolving
Credit Agreement, dated as of January 15, 1998, as amended, by and between the
Issuer and Comerica Bank, providing for up to $50.0 million of revolving credit
borrowings and $10.0 million of term Indebtedness, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Credit Facilities" means, with respect to the Issuer, one or more debt
facilities (including, without limitation, the Credit Agreement) or commercial
paper facilities with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Indebtedness under Credit Facilities
outstanding on the Issue Date shall be deemed to have been incurred on such date
in reliance on the exception provided by clause (i) of the definition of
Permitted Indebtedness.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Credit Agreement or otherwise owed by the Issuer or any of its Subsidiaries to
Comerica Bank and (ii) any other Senior Debt permitted under the Indenture the
principal amount of which is, on the date of designation, $25 million or more
and that has been designated by the Issuer as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Exchange Notes mature; provided, however, that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require the Issuer to repurchase such Capital Stock upon the occurrence
of a Change of Control or an Asset Sale shall not constitute Disqualified Stock
if the terms of such Capital Stock provide that the Issuer may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described above under the caption "--
Certain Covenants -- Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Issuer and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the Issue Date, until such amounts are repaid including, without limitation,
a $6.1 million reimbursement obligation to Comerica Bank by Rochester Gear, Inc.
and the Issuer's guaranty thereof.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, original issue discount, non-cash interest payments, the
interest
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component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations, but excluding
amortization of debt issuance costs) and (ii) the consolidated interest of such
Person and its Restricted Subsidiaries that was capitalized during such period,
and (iii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such Guarantee or Lien is called upon) and (iv) the product of (a) all
dividend payments, whether or not in cash, on any series of preferred stock of
such Person or any of its Restricted Subsidiaries, other than dividend payments
on Equity Interests payable solely in Equity Interests of the Issuer (other than
Disqualified Stock) or to the Issuer or a Restricted Subsidiary of the Issuer,
times (b) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory tax
rate of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the referent
Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect (to the extent permitted by Regulation S-X)
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Issuer or any of its Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"Foreign Subsidiary" means any Subsidiary not organized and validly
existing under the laws of the United States or any state thereof or the
District of Columbia.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements; (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates, and
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(iii) agreements or arrangements designed to protect such Person against
fluctuations in the value of foreign currency.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations,
excepting from the foregoing any such balance that constitutes an accrued
expense or trade payable, if and to the extent any of the foregoing (other than
letters of credit and Hedging Obligations) would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP, as well as all
Indebtedness of others secured by a Lien on any asset of such Person (whether or
not such Indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall be
(i) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount, and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Issuer or any Subsidiary of the Issuer sells or otherwise disposes of any
Equity Interests of any direct or indirect Subsidiary of the Issuer such that,
after giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Issuer, the Issuer shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the fair market value of
the Equity Interests of such Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of the covenant described above
under the caption "-- Certain Covenants -- Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Issuer or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Senior Debt
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
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"Non-Recourse Debt" means Indebtedness (i) as to which neither the Issuer
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) as to which the lenders have
been notified in writing that they will not have any recourse to the stock or
assets of the Issuer or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means (a) any business in which the Issuer and its
Subsidiaries were engaged on the Issue Date or any reasonable extension or
expansion of such businesses and (b) any business similar or related to the
manufacture, design, marketing, distribution or resale of automotive parts or
plastic products, parts, components or assemblies.
"Permitted Investments" means (a) any Investment in the Issuer or in a
Wholly Owned Restricted Subsidiary of the Issuer that is a Subsidiary Guarantor;
(b) any Investment in Cash Equivalents; (c) any Investment by the Issuer or any
Restricted Subsidiary of the Issuer in a Person, if as a result of such
Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the
Issuer and a Subsidiary Guarantor or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Issuer or a Wholly Owned Restricted
Subsidiary of the Issuer that is a Subsidiary Guarantor and that is engaged in
the same or a similar line of business as the Issuer and its Subsidiaries were
engaged in on the date of the Indenture; (d) any Investment made as a result of
the receipt of non-cash consideration from an Asset Sale that was made pursuant
to and in compliance with the covenant described above under the caption "--
Repurchase at the Option of Holders -- Asset Sales"; (e) any acquisition of
assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Issuer; (f) Investments in Unrestricted Subsidiaries,
when taken together with all other Investments made pursuant to this clause (f)
that are at the time outstanding, having an aggregate fair market value
(measured on the date such Investment was made without giving effect to
subsequent changes in value) not to exceed $15.0 million; and (g) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (g) that are at the time outstanding, not to exceed $10 million.
"Permitted Junior Securities" means Equity Interests in the Issuer or any
Subsidiary Guarantor or debt securities that are subordinated to all Senior Debt
(and any debt securities issued in exchange for Senior Debt) to substantially
the same extent as, or to a greater extent than, the Exchange Notes are
subordinated to Senior Debt pursuant to Article 10 of the Indenture.
"Permitted Liens" means (i) Liens on assets of the Issuer or any of its
Subsidiaries securing Indebtedness under Credit Facilities that was permitted by
the terms of the Indenture to be incurred; (ii) Liens in favor of the Issuer;
(iii) Liens on property of a Person existing at the time such Person is merged
into or consolidated with the Issuer or any Subsidiary of the Issuer; provided
that such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Issuer; (iv) Liens on property existing at
the time of acquisition thereof by the Issuer or any Subsidiary of the Issuer,
provided that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (v) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted by clause (iv) of the second
paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance of
Preferred Stock" covering only the assets acquired with such Indebtedness; (vi)
Liens existing on the date of the Indenture; (vii) Liens for taxes, assessments
or governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(viii) Liens on assets of the Issuer or any Restricted Subsidiary to secure
Senior Debt that was permitted by the Indenture to be incurred; (ix) Liens on
assets of Unrestricted Subsidiaries that
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secure Non-Recourse Debt of Unrestricted Subsidiaries; (x) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (xi)
easements, rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Issuer or any of the
Restricted Subsidiaries; (xii) Liens encumbering property or assets under
construction arising from progress or partial payments by a customer of the
Issuer or its Restricted Subsidiaries relating to such property or assets;
(xiii) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease; (xiv) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xv) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods; (xvi) Liens
encumbering customary initial deposits and margin deposits, and other Liens that
are either within the general parameters customary in the industry and incurred
in the ordinary course of business, in each case securing Hedging Obligations;
(xvii) Liens arising out of conditional sale, title retention, consignment or
similar arrangements for the sale of goods entered into by the Issuer or any of
the Restricted Subsidiaries in the ordinary course of business in accordance
with the past practices of the Issuer and the Restricted Subsidiaries prior to
the Issue Date; and (xviii) Liens incurred in the ordinary course of business of
the Issuer or any Subsidiary of the Issuer with respect to obligations that do
not exceed $5.0 million at any one time outstanding and that (a) are not
incurred in connection with the borrowing of money or the obtaining of advances
or credit (other than trade credit in the ordinary course of business) and (b)
do not in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the Issuer or
such Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Issuer
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Issuer or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Exchange Notes, such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and is subordinated in right of
payment to, the Exchange Notes on terms at least as favorable to the Holders of
Exchange Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Indebtedness is incurred either by the Issuer or by the
Subsidiary who is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Debt" means (i) all Indebtedness outstanding under Credit
Facilities and all Hedging Obligations with respect thereto, (ii) any other
Indebtedness permitted to be incurred by the Issuer or any Subsidiary Guarantor
(including any Indebtedness under Credit Facilities or Hedging Obligations), as
applicable, under the terms of the Indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Exchange Notes and (iii) all Obligations
with respect to the foregoing. Notwithstanding anything to the contrary in the
foregoing, Senior Debt will not include (v) any liability for federal, state,
local or other taxes owed or owing by the Issuer, (w) any Indebtedness of the
Issuer to any of its Subsidiaries or other Affiliates, (x) any Indebtedness of
the Company which is classified as nonrecourse in accordance with GAAP or any
secured claim arising in respect thereof by reason of the application of section
1111(b)(1) of the United States bankruptcy code, (y) any trade payables or (z)
any Indebtedness that is incurred in violation of the Indenture.
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"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantor" means each of (i) Grand Machining Company, Deco
Technologies, Inc., Deco International, Inc., Turn-Matic, Inc., Rochester Gear,
Inc., and Plastronics Plus, Inc., and (ii) any other Subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of the Indenture, and
their respective successors and assigns.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with the Issuer or any Restricted Subsidiary of the
Issuer unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Issuer or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Issuer; (c) is a Person with respect to which neither the
Issuer nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Issuer or any of its Restricted Subsidiaries; and (e) has at least one director
on its board of directors that is not a director or executive officer of the
Issuer or any of its Restricted Subsidiaries and has at least one executive
officer that is not a director or executive officer of the Issuer or any of its
Restricted Subsidiaries. Any such designation by the Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of the Issuer as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant
described under the caption "Incurrence of Indebtedness and Issuance of
Preferred Stock," the Issuer shall be in default of such covenant). The Board of
Directors of the Issuer may at any time designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided that such designation shall be deemed to be
an incurrence of Indebtedness by a Restricted Subsidiary of the Issuer of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under the covenant
described under the caption "-- Certain Covenants -- Incurrence of Indebtedness
and Issuance of Preferred Stock," calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period,
and (ii) no Default or Event of Default would be in existence following such
designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Subsidiaries of
such Person and one or more Wholly Owned Subsidiaries of such Person.
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DESCRIPTION OF NOTES
The Notes evidence the same indebtedness as that which will be evidenced by
the Exchange Notes and are entitled to the benefits of the Indenture. The form
and terms of the Notes are the same as the form and terms of the Exchange Notes
except that none of the Notes was registered under the Securities Act.
Therefore, the Notes may not be offered or sold within the United States or to,
or for the account or benefit of, U.S. persons except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act. Accordingly, the Notes bear legends restricting the transfer
thereof. In addition, with certain exceptions, the Notes may not be sold or
transferred to, or acquired on behalf of, any pension or welfare plan (as
described in Section 3 of the Employee Retirement Income Security Act of 1974).
For a description of the terms of the Exchange Notes, see "Description of
Exchange Notes."
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Issuer, the Subsidiary Guarantors and the Initial Purchasers entered
into the Registration Rights Agreement, pursuant to which the Issuer and
Subsidiary Guarantors agreed to file the Registration Statement with the
Commission within 60 days of the Issue Date and use their respective best
efforts to have it declared effective at the earliest possible time. The Issuer
and the Subsidiary Guarantors also agreed to use their best efforts to cause the
Registration Statement to be effective continuously, to keep the Exchange Offer
open for a period of not less than 20 business days and cause the Exchange Offer
to be consummated no later than the 30th business day after it is declared
effective by the Commission. Pursuant to the Exchange Offer, certain Holders of
Notes which constitute Transfer Restricted Securities may exchange their
Transfer Restricted Securities for registered Exchange Notes. To participate in
the Exchange Offer, each Holder must make the representations and take the other
actions described under "The Exchange Offer."
If (i) the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) any Holder of Notes which are Transfer Restricted Securities
notifies the Issuer during the pendency of, or prior to the 20th business day
following the consummation of, the Exchange Offer that (a) it is or was, as the
case may be, prohibited by law or Commission policy from participating in the
Exchange Offer, (b) it may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus, and this
Prospectus is not appropriate or available for such resales by it, or (c) it is
a broker-dealer and holds Notes acquired directly from the Issuer or any of the
Issuer's affiliates, the Issuer and the Subsidiary Guarantors will file with the
Commission a Shelf Registration Statement to register for public resale the
Transfer Restricted Securities held by any such Holder who provides the Issuer
with certain information for inclusion in the Shelf Registration Statement.
For the purposes of the Registration Rights Agreement, "Transfer Restricted
Securities" means (i) each Note and the related Subsidiary Guarantees until the
earliest to occur of (a) the date on which such Note is exchanged in the
Exchange Offer for an Exchange Note which is entitled to be resold to the public
by the Holder thereof without complying with the prospectus delivery
requirements of the Securities Act, (b) the date on which such Note has been
disposed of in accordance with the Shelf Registration Statement, or (c) the date
on which such Note is distributed to the public pursuant to Rule 144 under the
Securities Act and (ii) each Exchange Note acquired by a Broker-Dealer for its
own account as a result of market making or other trading activities until the
date on which such Exchange Note is disposed of by a Broker-Dealer pursuant to
the "Plan of Distribution" contemplated by this Prospectus (including delivery
of this Prospectus).
The Registration Rights Agreement provides that (i) if the Issuer or the
Subsidiary Guarantors fail to file a registration statement relating to the
Exchange Offer with the Commission on or prior to the 60th day after the Issue
Date (which requirement has been satisfied by filing the Registration
Statement), (ii) if the Registration Statement is not declared effective by the
Commission on or prior to the 135th day after the Issue Date, (iii) if the
Exchange Offer is not consummated on or before the 30th business day after the
Registration Statement is declared effective, (iv) if obligated to file the
Shelf Registration Statement and the Issuer and the Subsidiary Guarantors fail
to file the Shelf Registration Statement with the Commission on or prior to the
30th day after such filing obligation arises, (v) if obligated to file a Shelf
Registration Statement and the Shelf Registration Statement is not declared
effective on or prior to the 60th day after the obligation to file a Shelf
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Registration Statement arises, or (vi) if the Registration Statement or the
Shelf Registration Statement, as the case may be, is declared effective but
thereafter ceases to be effective or useable in connection with resales of the
Transfer Restricted Securities, for such time of non-effectiveness or
non-usability (each, a "Registration Default"), the Issuer and the Subsidiary
Guarantors agree to pay to each Holder of Transfer Restricted Securities
affected thereby liquidated damages ("Liquidated Damages") in an amount equal to
$0.05 per week per $1,000 in principal amount of Transfer Restricted Securities
held by such Holder for each week or portion thereof that the Registration
Default continues for the first 90 day period immediately following the
occurrence of such Registration Default. The amount of the Liquidated Damages
shall increase by an additional $0.05 per week per $1,000 in principal amount of
Transfer Restricted Securities with respect to each subsequent 90 day period
until all Registration defaults have been cured, up to a maximum amount of
Liquidated Damages of $0.50 per week per $1,000 in principal amount of Transfer
Restricted Securities. The Issuer and the Subsidiary Guarantors shall not be
required to pay Liquidated Damages for more than one Registration Default at any
given time. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
All accrued Liquidated Damages shall be paid by the Issuer or the
Subsidiary Guarantors to Holders entitled thereto by wire transfer to the
accounts specified by them or by mailing checks to their registered address if
no such accounts have been specified.
DESCRIPTION OF OTHER DEBT
SENIOR CREDIT FACILITY
The Issuer has entered into a Third Amended and Restated Revolving Credit
Agreement ("Senior Credit Facility") with Comerica Bank ("Comerica"). The Senior
Credit Facility provides for both a revolving credit facility, letters of credit
and a term loan.
Revolving Credit Facility. The Senior Credit Facility provides for a
revolving credit facility in the amount of $50.0 million, less the amount of
letters of credit outstanding under the Senior Credit Facility. The revolving
credit facility matures on February 28, 2001. Amounts outstanding bear interest
at an interest rate equal to, at the option of the Issuer, either (A) the
greater of (i) the prime rate of Comerica and (ii) a designated federal funds
rate plus 1.0%, and (B) a reserve adjusted eurodollar rate plus a margin
determined by reference to the ratio of the Company's Funded Debt to EBITDA,
which margin will not be less than 0.5% nor greater than 2.5%.
Letters of Credit. The Senior Credit Facility also provides for the
issuance of letters of credit by Comerica at the request of the Issuer up to an
aggregate amount of $3.0 million.
Term Loan Facility. The Senior Credit Facility also provides for a term
loan of $10.0 million, of which $10.0 million in principal was outstanding as of
January 31, 1998. The term loan is payable in monthly principal installments of
$166,667 with the first monthly principal installment payable in June 1998. The
term loan matures on May 10, 2003 and bears interest at 7.85%.
Security. All indebtedness owed Comerica by the Issuer is secured by all or
substantially all of non-real estate assets of the Issuer and its domestic
subsidiaries and is also secured by the facilities of Rochester Gear, Inc.
("Rochester Gear") located in Clifford, Michigan and Oakland, Michigan. All
domestic subsidiaries of the Issuer have guaranteed the payment of such
indebtedness. Pursuant to the Senior Credit Facility, Comerica has the right at
any time to require the Issuer and each of its present and future subsidiaries
to grant to Comerica a lien on any real and personal property on which it does
not then have a lien. The Issuer is also required to cause any future
subsidiaries to guaranty all indebtedness owed to Comerica by the Issuer.
Covenants. The Senior Credit Facility contains a number of covenants that,
among other things, restrict the ability of the Issuer and its subsidiaries to
dispose of or acquire assets, incur additional indebtedness, prepay other
indebtedness, amend certain debt instruments (including without limitation the
Indenture), pay dividends or redeem stock, merge, consolidate, issue guarantees,
create liens on assets, enter into negative pledge agreements and make
investments, and which otherwise restrict certain corporate activities. In
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addition, the Senior Credit Facility requires that the Issuer and its
subsidiaries on a consolidated basis comply with certain financial covenants.
The amount the Company can actually borrow under the Senior Credit Facility at
any given time will be dependent upon its performance as measured by such
covenants.
The Senior Credit Facility requires the Company to have Net Worth not less
than the Base Net Worth Amount as of the last day of each fiscal quarter,
beginning January 31, 1998. The Base Net Worth Amount for the January 31, 1998
measurement is equal to $22.5 million. The Base Net Worth Amount is increased on
the last day of each subsequent fiscal quarter by an amount equal to one-half of
the Company's net income for such fiscal quarter. Once increased, the Base Net
Worth Amount does not decrease. "Net Worth" means an amount computed in
accordance with generally accepted accounting principles consistently applied by
subtracting total liabilities from total assets, but adjusted to exclude the
following, to the extent such items impact the Company's financial statements
after February 10, 1998: (i) charges related to legal proceedings, (ii) charges
related to restructuring activities, (iii) gains or losses on sales of
businesses or operations and (iv) income or losses from divested or discontinued
operations.
The Senior Credit Facility also requires the Company to have as of the last
day of each fiscal quarter for the Applicable Measuring Period ending on such
date, commencing April 30, 1998, a ratio of EBITDA less capital expenditures to
principal and interest payments payable with respect to any indebtedness of the
Company (including capital leases) of not less than 1.5 to 1.0.
The Applicable Measuring Period for the last day of each fiscal quarter is
the four fiscal quarters ending on such date, except that (a) the Applicable
Measuring Period for April 30, 1998 is the three-month period then ending, (b)
the Applicable Measuring Period for July 31, 1998 is the six-month period then
ending, and (c) the Applicable Measuring Period for October 31, 1998 is the
nine-month period then ending.
Further, the Senior Credit Facility requires the Company to have, as of the
end of each fiscal quarter, commencing on April 30, 1998, a ratio of Funded Debt
to Total Liabilities plus Net Worth of not more than (a) .85 to 1.0 as of the
end of each fiscal quarter ending before October 31, 1998, (b) .80 to 1.0 as of
the end of each fiscal quarter ending on or after October 31, 1998 and before
October 31, 1999, and (c) .75 to 1.0 as of the end of each fiscal quarter ending
on or after October 31, 1999. "Funded Debt" means the Company's indebtedness for
borrowed money and the principal component of its capital lease obligations,
less cash and cash equivalents to the extent exceeding $2.0 million. "Total
Liabilities" means all liabilities of the Company as determined in accordance
with generally accepted accounting principles consistently applied, less cash
and cash equivalents to the extent exceeding $2.0 million.
Additionally, the Senior Credit Facility requires the Company to have, as
of the end of each fiscal quarter, commencing on April 30, 1998, a ratio of
Funded Debt as of such date to EBITDA for the Applicable Measuring Period of not
more than (a) 6.0 to 1.0 as of the end of each fiscal quarter ending before
October 31, 1998, (b) 5.5 to 1.0 as of the end of each fiscal quarter ending on
or after October 31, 1998 and before October 31, 1999, and (c) 4.5 to 1.0 for
all fiscal quarters ending on or after October 31, 1999. The EBITDA used in
calculating this ratio is (a) for the fiscal quarter ending April 30, 1998, four
times the Company's EBITDA for that quarter, (b) for the fiscal quarter ending
July 31, 1997, twice the Company's EBITDA for the six months then ended, (c) for
the quarter ending October 31, 1998, one and one-third of the Company's EBITDA
for the nine months then ended, and (d) for each subsequent fiscal quarter, the
Company's EBITDA for the four quarters then ended.
For purposes of these calculations, EBITDA will be deemed to include an
assumed amount of EBITDA for Deco and Turn-Matic for the period from February 1,
1998 through the date they were actually acquired by the Company.
Events of Default. The Senior Credit Facility contains customary events of
default relating to nonpayment of principal or interest, material inaccuracy of
representations and warranties, violation of covenants, cross-default to other
indebtedness, certain events of bankruptcy and insolvency, judgments in an
aggregate amount greater than $100,000 against the Issuer or its subsidiaries,
invalidity of any guarantee or security interest, the revocation of any guaranty
or a change in control of the Issuer.
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ROCHESTER GEAR BOND INDEBTEDNESS
The Michigan Strategic Fund ("MSF") issued its limited obligation refunding
revenue bonds ("Bonds") in the amount of $6.1 million in 1995 for the benefit of
Rochester Gear. Rochester Gear is obligated to pay to the MSF all amounts
necessary to pay all principal, interest, purchase price and premium, if any, on
the Bonds.
Letter of Credit. Rochester Gear has supplied a letter of credit ("Letter
of Credit") on which the trustee for the holders of the Bonds can draw to pay
principal of the Bonds, principal and interest on Bonds tendered for purchase
and an amount equal to 35 days interest. The Letter of Credit presently is
issued by Comerica. Rochester Gear has entered into a reimbursement agreement
with Comerica (the "Reimbursement Agreement"), pursuant to which it has agreed
to reimburse Comerica for all payments made by Comerica under the Letter of
Credit, to pay it an annual fee equal to 1.0% of the amount of the Letter of
Credit, and to indemnify Comerica from any and all losses, costs, and damages
which it may suffer in connection with the Letter of Credit. These obligations
of Rochester Gear are secured by a mortgage on its manufacturing facilities in
Clifford, Michigan, and Oakland, Michigan and by substantially all of its other
assets. The Issuer also has guaranteed the obligations of Rochester Gear to
Comerica, which guarantee is secured by substantially all the assets of the
Issuer (other than real estate) and is indirectly secured by all assets of its
domestic Subsidiaries (other than real estate).
Interest Rate. The Bonds may bear interest at different interest rates
during applicable interest periods, each of which interest rate is equal to the
interest rate determined by a remarketing agent as being the lowest rate of
interest which would permit the Bonds to be remarketed at par on the first day
of the applicable interest period.
Purchase of Bonds. Each Bondholder has the right to cause the purchase of
his interest in the Bonds and, to the extent that such Bonds are not remarketed,
the trustee for the Bondholders is required to draw on the Letter of Credit to
pay the purchase price for the tendered Bonds. If the payment of such purchase
price is not available under the Letter of Credit, Rochester Gear is obligated
to fund the payment of the purchase price.
The Bonds are subject to mandatory purchase upon the occurrence of certain
events, which events include the failure of Rochester Gear to supply a new
letter of credit, to obtain an extension of the then outstanding letter of
credit, or to provide for an alternative credit facility meeting certain
requirements 25 days prior to the date that the then outstanding letter of
credit expires, terminates, or is released, and failure by the issuer of the
Letter of Credit, or a replacement letter of credit, to maintain a specified
creditworthiness rating.
Events of Default. The indenture pursuant to which the Bonds were issued
contains various customary events of default, including events relating to
nonpayment of principal, interest, fees, or the purchase price of a Bond,
violations of covenants, the occurrence of an event of default under the
Reimbursement Agreement and certain events of bankruptcy and insolvency.
The Reimbursement Agreement contains various events of default that are
customary in loan agreements, including events relating to nonpayment of any
moneys due Comerica under the Reimbursement Agreement or otherwise, material
inaccuracy of representations and warranties, violation of covenants, cross-
default to other indebtedness, uninsured judgments in the aggregate over
$250,000, material change in ownership of Rochester Gear and failure to maintain
certain employee benefit plans or default in performing requirements in
connection therewith.
CERTAIN FEDERAL TAX CONSIDERATIONS FOR FOREIGN PERSONS
THIS SUMMARY IS OF A GENERAL NATURE AND IS INCLUDED HEREIN SOLELY FOR
INFORMATIONAL PURPOSES. IT IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED AS
BEING, LEGAL OR TAX ADVICE. NO REPRESENTATION WITH RESPECT TO THE CONSEQUENCES
TO ANY PARTICULAR PURCHASER OF THE EXCHANGE NOTES IS MADE. PROSPECTIVE
PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THEIR
PARTICULAR CIRCUMSTANCES.
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The following discussion is a summary of certain United States federal
income and estate tax consequences of the ownership and disposition of the
Exchange Notes by a Foreign Person (as hereinafter defined), based upon current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
judicial decisions, and administrative interpretations, all of which are subject
to change at any time by legislative, judicial or administrative action. Any
such changes may be applied retroactively in a manner that could adversely
affect a holder of the Exchange Notes. There can be no assurance that the
Internal Revenue Service (the "IRS") will not challenge the conclusions stated
below, and no ruling from the IRS has been or will be sought on any of the
matters discussed below.
The following discussion does not purport to be a complete analysis of all
the potential federal income tax effects relating to the ownership and
disposition of the Exchange Notes by Foreign Persons or any other person, and,
without limiting the generality of the foregoing, this summary does not address
the effect of any special rules applicable to certain types of purchasers
(including dealers in securities, insurance companies, financial institutions,
tax-exempt entities, and persons who hold Exchange Notes as part of a straddle,
hedge, or conversion transaction). This discussion is limited to Foreign Persons
other than former United States citizens described in Section 877(a) of the Code
or former residents of the United States described in Sections 877(e) or
7701(b)(10) of the Code and is limited to Foreign Persons who hold the Exchange
Notes as capital assets within the meaning of Section 1221 of the Code. This
discussion does not address the effect of any state, local, or foreign tax laws.
Holders of Exchange Notes who are Foreign Persons are urged to consult their own
tax advisors regarding the specific tax consequences to them of owning and
disposing of Exchange Notes.
CERTAIN U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO FOREIGN PERSONS
For purposes of this discussion, the term "U.S. Person" means (i) an
individual who is a citizen or resident of the United States, (ii) a corporation
or partnership created or organized in or under the laws of the United States or
any state thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (iv) a trust if a
court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust. The term "Foreign
Person" means a person other than a U.S. Person.
Any interest or Liquidation Damages earned on an Exchange Note by a holder
who is a Foreign Person will be considered "portfolio interest" and will not be
subject to United States federal income tax, and will not be subject to United
States tax withholding (except for "backup withholding" in the circumstances
described below), if:
(1) such Foreign Person is neither (i) a "controlled foreign
corporation" that is related to the Issuer as described in Section
881(c)(3)(C) of the Code, (ii) a bank that has purchased Exchange Notes
pursuant to an extension of credit made in the ordinary course of its trade
or business, nor (iii) a person who owns, directly or under the attribution
rules of Section 871(h)(3)(C) of the Code, 10% or more of the voting power
in the Issuer;
(2) the person who would otherwise be required to withhold tax from
payments of such interest (the "withholding agent") is furnished an IRS
Form W-8 (or equivalent), signed under penalties of perjury, identifying
the beneficial owner of the Note and stating that the beneficial owner of
the Exchange Note is a Foreign Person; and
(3) the interest is not effectively connected with the conduct of a
trade or business within the United States by the Foreign Person.
Any interest or Liquidated Damages (other than "portfolio interest") earned
on an Exchange Note by a Foreign Person will be subject to United States federal
income tax and withholding at a rate of 30% (or at a lower rate under an
applicable tax treaty) if this interest or Liquidated Damages is not effectively
connected with the conduct of a trade or business within the United States by
this Foreign Person.
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Any interest or Liquidated Damages earned on an Exchange Note, and any gain
realized on a sale or exchange (including a redemption) of an Exchange Note,
that is effectively connected with the conduct of a trade or business within the
United States by the Foreign Person will be subject to United States federal
income tax at regular graduated rates (and, if the Foreign Person is a
corporation, may also be subject to a United States branch profits tax). Such
income will not be subject to United States income tax withholding, however, if
the Foreign Person furnishes the proper certificate to the withholding agent.
Any gain realized by a Foreign Person on a sale or exchange (including a
redemption) of an Exchange Note will not be subject to United States federal
income tax or withholding if (i) the gain is not effectively connected with the
conduct of a trade or business within the United States by the Foreign Person,
and (ii) in the case of a Foreign Person who is an individual, such individual
is not present in the United States for 183 days or more in the taxable year of
the sale or exchange, or the individual does not have a "tax home" in the United
States and the gain is not attributable to an office or other fixed place of
business maintained in the United States by the individual.
For United States estate tax purposes, the gross estate of an individual
who is not a U.S. citizen or resident (as specially defined for United States
estate tax purposes) and who holds an Exchange Note at the time of his death is
not deemed to include such Exchange Note if the interest thereon constitutes
"portfolio interest" (without regard to whether the "portfolio interest"
certification requirements are satisfied).
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting on IRS Form 1099 and backup withholding will not
apply to payments made by the Issuer or any agent thereof to a holder of an
Exchange Note if the holder has furnished a certification under penalties of
perjury that it is a Foreign Person, or has otherwise demonstrated that it
qualifies for an applicable exemption, provided that neither the Issuer nor such
agent has actual knowledge to the contrary. The interest and any Liquidated
Damages earned by a Foreign Person will generally be reported, however, by the
Issuer on IRS Form 1042S.
If a Foreign Person sells an Exchange Note through a United States office
of a broker, the broker is required to file an information report and is
required to withhold 31% of the sale proceeds unless the Foreign Person
certifies under penalties of perjury its non-United States status (and the payor
does not have actual knowledge to the contrary) or otherwise establishes an
exemption. If a Foreign Person sells an Exchange Note through a foreign office
of a broker, backup withholding is not required; but information reporting is
required if the broker does not have documentary evidence that the holder is a
Foreign Person and if (i) the broker is a U.S. Person, (ii) the broker is a
"controlled foreign corporation" (as defined in Section 957 of the Code), or
(iii) the broker derives 50% or more of its gross income for a specified three
year period from the conduct of a trade or business in the United States.
Any amount withheld from payment to a holder under the backup withholding
rules will generally be allowed as a credit against such holder's United States
federal income tax liability, if any, and may entitle such holder to a refund,
provided that the required information is furnished to the IRS.
NEW FINAL REGULATIONS
Recently, the U.S. Treasury Department has promulgated final regulations
regarding the withholding and information reporting rules discussed above. In
general, the final regulations do not significantly alter the substantive
withholding and information reporting requirements but unify current
certification procedures and forms and clarify reliance standards. Special rules
apply which permit the shifting of primary responsibility for withholding to
certain financial intermediaries acting on behalf of beneficial owners. The
final regulations are generally effective for payments made after December 31,
1998, subject to certain transition rules. Foreign Persons are urged to consult
their own tax advisors with respect to these final regulations.
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PLAN OF DISTRIBUTION
Any broker or dealer registered under the Exchange Act (a "Broker-Dealer")
who holds Transfer Restricted Securities that were acquired for the account of
such Broker-Dealer as a result of market-making activities or other trading
activities (other than Notes acquired from the Issuer or any Affiliate of the
Company) may exchange such Transfer Restricted Securities pursuant to the
Exchange Offer. Each Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by any Broker-Dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired as a result of market-making activities or other trading
activities. The Issuer and Subsidiary Guarantors have agreed that, for a period
of one year after the Exchange Offer is consummated, they will make this
Prospectus, as amended or supplemented, available to any Broker-Dealer for use
in connection with any such resale.
The Company will not receive any proceeds from any sales of the Exchange
Notes by Broker-Dealers. Exchange Notes received by Broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to the purchaser or to or through brokers or dealers who
may receive compensation in the form of commissions or concessions from any such
Broker-Dealer and/or the purchasers of any such Exchange Notes. Any
Broker-Dealer that resells the Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of one year after the date of consummation of the Exchange
Offer, the Issuer will promptly send additional copies of this Prospectus and
any amendment or supplement to this Prospectus to any Broker-Dealer that
requests such documents in the Letter of Transmittal. The Issuer has agreed to
pay certain expenses incident to the Exchange Offer, other than commission or
concessions of any brokers or dealers, and will indemnify the holders of the
Exchange Notes (including any Broker-Dealers) against certain liabilities,
including liabilities under the Securities Act.
By acceptance of the Exchange Offer, each Broker-Dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer agrees that,
upon receipt of notice from the Issuer of the happening of any event which makes
any statement in this Prospectus untrue in any material respect or which
requires the making of any changes in this Prospectus in order to make the
statements therein not misleading (which notice the Issuer agrees to deliver
promptly to such Broker-Dealer), such Broker-Dealer will suspend use of the
Prospectus until the Issuer and Subsidiary Guarantors have amended or
supplemented this Prospectus to correct such misstatement or omission and have
furnished copies of the amended or supplemental Prospectus to such
Broker-Dealer.
LEGAL MATTERS
The validity of the issuance of the Exchange Notes offered hereby will be
passed on for the Issuer by Miller, Canfield, Paddock and Stone, P.L.C.,
Detroit, Michigan.
EXPERTS
The financial statements of (i) the Company at October 31, 1997 and 1996
and for each of the three years in the period ended October 31, 1997, (ii) MT&G
at December 31, 1996 and for the year ended
113
<PAGE> 119
December 31, 1996, (iii) Deco at December 31, 1997, 1996 and 1995 and for each
of the three years in the period ended December 31, 1997 and (iv) Turn-Matic at
September 30, 1997 and for the year then ended that are included in this
Prospectus, and the financial statements from which certain of the Summary and
Selected Financial Data included in this Prospectus have been derived, have been
audited by Coopers & Lybrand, L.L.P, independent accountants, as indicated in
their reports appearing herein and elsewhere in the Registration Statement. Such
financial statements have been included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
114
<PAGE> 120
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
NEWCOR, INC.
Report of Independent Accountants........................... F-2
Consolidated Statements of Income for the years ended
October 31, 1997, 1996 and 1995........................... F-3
Consolidated Statements of Income for the three months ended
January 31, 1998 and 1997 (Unaudited)..................... F-4
Consolidated Statements of Shareholders' Equity for the
years ended October 31, 1997, 1996 and 1995............... F-5
Consolidated Balance Sheets as of October 31, 1997 and
1996...................................................... F-6
Condensed Consolidated Balance Sheet as of January 31, 1998
(Unaudited)............................................... F-7
Consolidated Statements of Cash Flows for the years ended
October 31, 1997, 1996 and 1995........................... F-8
Condensed Consolidated Statements of Cash Flows for the
three months ended January 31, 1998 and 1997
(Unaudited)............................................... F-9
Notes to Consolidated Financial Statements.................. F-10
MACHINE TOOL & GEAR, INC.
Report of Independent Accountants........................... F-22
Balance Sheets as of September 30, 1997 (Unaudited) and
December 31, 1996......................................... F-23
Statements of Income and Retained Earnings for the
nine-months ended September 30, 1997 and 1996 (Unaudited)
and for the year ended December 31, 1996.................. F-24
Statements of Cash Flows for the nine-months ended September
30, 1997 and 1996 (Unaudited) and for the year ended
December 31, 1996......................................... F-25
Notes to Financial Statements............................... F-26
THE DECO GROUP
Report of Independent Accountants........................... F-30
Combined Balance Sheets as of December 31, 1997, 1996 and
1995...................................................... F-31
Combined Statements of Income and Retained Earnings for the
years ended December 31, 1997, 1996 and 1995.............. F-32
Combined Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.......................... F-33
Notes to Financial Statements............................... F-34
TURN-MATIC, INC.
Report of Independent Accountants........................... F-39
Balance Sheets as of September 30, 1997 and December 31,
1997 (Unaudited).......................................... F-40
Statements of Income and Retained Earnings for the year
ended September 30, 1997 and for the three months ended
December 31, 1997 and 1996 (Unaudited).................... F-41
Statements of Cash Flows for the year ended September 30,
1997 and for the three months ended December 31, 1997 and
1996 (Unaudited).......................................... F-42
Notes to Financial Statements............................... F-43
</TABLE>
F-1
<PAGE> 121
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Newcor, Inc.
We have audited the consolidated balance sheets of Newcor, Inc. and
Subsidiaries as of October 31, 1997 and 1996, and the related consolidated
statements of income, shareholders' equity, and cash flows for the years ended
October 31, 1997, 1996, and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Newcor, Inc.
and Subsidiaries as of October 31, 1997, and 1996 and the consolidated results
of operations and cash flows for the years ended October 31, 1997, 1996, and
1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
December 5, 1997, except as to the information
presented in Note B, for which the date is
January 16, 1998.
F-2
<PAGE> 122
NEWCOR, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED OCTOBER 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Sales....................................................... $130,848 $111,744 $ 90,173
Cost of sales............................................... 107,083 89,087 73,555
-------- -------- --------
Gross margin................................................ 23,765 22,657 16,618
Selling, general and administrative expense................. 15,759 15,052 11,264
Nonrecurring items, net (gain) loss......................... (297) 824 --
-------- -------- --------
Operating income from continuing operations................. 8,303 6,781 5,354
Other income (expense):
Interest expense.......................................... (2,070) (1,787) (1,504)
Other..................................................... (224) 178 (229)
-------- -------- --------
Income from continuing operations before income taxes....... 6,009 5,172 3,621
Provision for income taxes.................................. 2,119 1,614 1,230
-------- -------- --------
Income from continuing operations........................... 3,890 3,558 2,391
-------- -------- --------
Discontinued operations:
Loss from discontinued operations, net of income tax
benefit of $611 and $853, respectively................. -- (1,203) (1,510)
Loss on sale of discontinued operations, net of income tax
benefit of $1,800...................................... -- (3,500) --
-------- -------- --------
Loss from discontinued operations........................... -- (4,703) (1,510)
-------- -------- --------
Net income (loss)........................................... $ 3,890 $ (1,145) $ 881
======== ======== ========
Amounts per share of common stock -- Basic and Diluted:
Income from continuing operations......................... $ 0.79 $ 0.72 $ 0.49
Loss from discontinued operations......................... -- (0.96) (0.31)
======== ======== ========
Net income (loss)......................................... $ 0.79 $ (0.24) $ 0.18
======== ======== ========
Weighted average common shares outstanding.................. 4,940 4,923 4,913
======== ======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-3
<PAGE> 123
NEWCOR, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JANUARY 31,
--------------------
1998 1997
-------- --------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
(UNAUDITED)
<S> <C> <C>
Sales....................................................... $30,134 $27,975
Cost of sales............................................... 26,423 22,645
------- -------
Gross margin................................................ 3,711 5,330
Selling, general and administrative expense................. 4,164 3,511
Amortization expense........................................ 325 186
Nonrecurring items, net loss................................ 711
------- -------
Operating income (loss)..................................... (778) 922
Other income (expense):
Interest expense.......................................... (825) (432)
Other..................................................... (11) 74
------- -------
Income (loss) before income taxes........................... (1,614) 564
Provision (benefit) for income taxes........................ (582) 198
------- -------
Net income (loss)........................................... $(1,032) $ 366
======= =======
Amounts per share of common stock:
Net income (loss) -- Basic................................ $ (0.21) $ 0.07
Net income (loss) -- Diluted.............................. $ (0.21) $ 0.07
Weighted average common shares outstanding.................. 4,942 4,932
======= =======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-4
<PAGE> 124
NEWCOR, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL IN UNFUNDED TOTAL
COMMON EXCESS PENSION RETAINED SHAREHOLDERS'
STOCK OF PAR LIABILITY EARNINGS EQUITY
------ ---------- --------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, November 1, 1994..................... $4,676 $ 374 $(1,319) $21,426 $25,157
Unfunded pension liability.................. 783
Net income.................................. 881
Cash dividends, $.20 per share.............. (936)
Shares issued under employee stock plans.... 3 21
------ ------ ------- ------- -------
Balance, October 31, 1995..................... 4,679 395 (536) 21,371 $25,909
Unfunded pension liability.................. 481
Net loss.................................... (1,145)
Cash dividends, $.20 per share.............. (938)
Shares issued under employee stock plans.... 18 116
------ ------ ------- ------- -------
Balance, October 31, 1996..................... 4,697 511 (55) 19,288 $24,441
Unfunded pension liability.................. (44)
Net income.................................. 3,890
Cash dividends, $.20 per share.............. (954)
Shares issued under employee stock plans.... 10 72
Stock dividend, 5%.......................... 235 1,675 (1,910)
------ ------ ------- ------- -------
Balance, October 31, 1997..................... $4,942 $2,258 $ (99) $20,314 $27,415
====== ====== ======= ======= =======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-5
<PAGE> 125
NEWCOR, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
OCTOBER 31,
------------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Current Assets:
Cash...................................................... $ 34 $ 34
Accounts receivable....................................... 22,523 17,369
Inventories............................................... 8,084 8,196
Prepaid expenses and other................................ 7,219 4,634
Deferred income taxes..................................... 1,453 1,891
------- -------
Total current assets........................................ 39,313 32,124
Property, plant and equipment, net of accumulated
depreciation.............................................. 28,119 23,131
Prepaid pension expense..................................... 3,180 3,871
Cost in excess of assigned value of acquired companies, net
of amortization........................................... 16,080 12,689
Net assets held for sale.................................... -- 3,844
Other long-term assets...................................... 4,191 1,840
------- -------
Total assets...................................... $90,883 $77,499
======= =======
LIABILITIES
Current Liabilities:
Current portion of long-term debt......................... $ 833 $ --
Accounts payable.......................................... 14,874 10,175
Accrued payroll and related expenses...................... 3,584 3,401
Other accrued liabilities................................. 2,084 3,597
------- -------
Total current liabilities................................... 21,375 17,173
Long-term debt.............................................. 32,267 25,400
Postretirement benefits other than pensions................. 6,338 6,345
Pension liability and other................................. 3,488 4,140
------- -------
Total liabilities................................. 63,468 53,058
------- -------
SHAREHOLDERS' EQUITY
Preferred stock, no par value,
Authorized: 1,000 shares. Issued: None
Common stock, par value $1 per share.
Authorized: 10,000 shares.
Issued: 4,942 shares in 1997 and 4,697 shares in
1996.................................................. 4,942 4,697
Capital in excess of par.................................... 2,258 511
Unfunded pension liability.................................. (99) (55)
Retained earnings........................................... 20,314 19,288
------- -------
Total shareholders' equity........................ 27,415 24,441
------- -------
Total liabilities and shareholders' equity........ $90,883 $77,499
======= =======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-6
<PAGE> 126
NEWCOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
JANUARY 31,
1998
--------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C>
Current Assets:
Cash...................................................... $ 86
Accounts receivable....................................... 21,138
Inventories............................................... 7,927
Other current assets...................................... 7,998
--------
Total current assets........................................ 37,149
Property, plant and equipment, net of accumulated
depreciation of $15,496................................... 37,116
Goodwill, net of amortization............................... 40,202
Other long-term assets...................................... 9,982
--------
Total assets...................................... $124,449
========
LIABILITIES
Current Liabilities:
Current portion of long-term debt......................... $ 1,333
Accounts payable.......................................... 14,319
Other accrued liabilities................................. 4,598
--------
Total current liabilities................................... 20,250
Long-term debt.............................................. 68,117
Postretirement benefits and other........................... 9,945
--------
Total liabilities................................. 98,312
--------
SHAREHOLDERS' EQUITY
Preferred stock, no par value, Authorized: 1,000 shares.
Issued: None
Common stock, par value $1 per share.
Authorized: 10,000 shares.
Issued: 4,942 shares in 1998........................... 4,942
Capital in excess of par.................................... 2,258
Unfunded pension liability.................................. (99)
Retained earnings........................................... 19,036
--------
Total shareholders' equity........................ 26,137
--------
Total liabilities and shareholders' equity........ $124,449
========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-7
<PAGE> 127
NEWCOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED OCTOBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating Activities:
Income from continuing operations........................ $ 3,890 $ 3,558 $ 2,391
Adjustments to reconcile net income to net cash provided
by operating activities:
Loss on sale of businesses............................ 711 824 --
Depreciation and amortization......................... 4,280 3,622 2,850
Deferred income taxes................................. 692 (637) 1,577
Pensions.............................................. (125) (893) 451
Gain on sale of capital assets........................ (1,025) (168) (354)
Other -- net.......................................... 888 (27) (131)
Changes in operating assets and liabilities:
Accounts receivable................................. (3,258) 444 (3,072)
Inventories......................................... 1,498 747 (815)
Other current assets................................ 320 (2,004) (790)
Accounts payable.................................... 1,741 2,921 (1,783)
Accrued liabilities................................. (1,170) (589) 1,139
-------- -------- --------
Cash provided by continuing operating activities......... 8,442 7,798 1,463
-------- -------- --------
Cash provided by (used in) discontinued operations....... (1,117) 5,931 9,096
-------- -------- --------
Investing Activities:
Capital expenditures..................................... (3,539) (2,946) (4,580)
Proceeds from sale of businesses......................... 1,500 1,984 --
Acquisitions, net of cash acquired....................... (14,581) (11,578) --
Proceeds from sale of capital assets..................... 2,467 420 407
-------- -------- --------
Net cash used in investing activities.................... (14,153) (12,120) (4,173)
-------- -------- --------
Financing Activities:
Net borrowings (repayments) on revolving credit line..... 7,700 (10,800) (11,000)
Term note proceeds....................................... -- 10,000 --
Revenue bond proceeds.................................... -- -- 6,100
Principal payment on bonds............................... -- -- (600)
Shares issued under employee stock plans................. 82 134 24
Cash dividends paid...................................... (954) (938) (936)
-------- -------- --------
Net cash provided by (used in) financing activities...... 6,828 (1,604) (6,412)
-------- -------- --------
Increase (decrease) in cash.............................. -- 5 (26)
Cash, beginning of year.................................. 34 29 55
-------- -------- --------
Cash, end of year........................................ $ 34 $ 34 $ 29
======== ======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-8
<PAGE> 128
NEWCOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
JANUARY 31,
--------------------------
1998 1997
----------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Operating Activities:
Net income (loss)......................................... $ (1,032) $ 366
Depreciation and amortization.......................... 1,277 1,003
Other -- net........................................... 8 (407)
Changes in operating assets and liabilities, net....... 164 934
-------- --------
Net cash provided by operations........................... 417 1,896
-------- --------
Investing Activities:
Capital expenditures...................................... (1,749) (620)
Acquisitions, net of cash acquired........................ (13,070) (12,081)
-------- --------
Net cash used in investing activities..................... (14,819) (12,701)
-------- --------
Financing Activities:
Net borrowings (repayments) on revolving credit line...... 14,700 11,100
Cash dividends paid....................................... (246) (235)
-------- --------
Net cash from financing activities........................ 14,454 10,865
-------- --------
Increase in cash.......................................... 52 60
Cash, beginning of period................................. 34 34
-------- --------
Cash, end of period....................................... 86 94
======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-9
<PAGE> 129
NEWCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
A. ACCOUNTING POLICIES
Description of the Business: Newcor, Inc. and its subsidiaries (the
"Company") design and manufacture precision machined components and assemblies
and custom rubber and plastic products primarily for the automotive and
agricultural vehicle markets. The Company is also a supplier of standard and
specialty machines and equipment systems mainly for the automotive and appliance
industries.
Principles of Consolidation -- The consolidated financial statements
include the accounts of Newcor, Inc. and all subsidiaries. All significant
intercompany accounts and transactions are eliminated.
Interim Financial Information -- The unaudited interim basic financial
statements included herein as of January 31, 1998 and for the three-month
periods ended January 31, 1998 and 1997 include, in the opinion of management,
all adjustments (consisting of normal recurring adjustments) necessary to
present fairly the Company's financial position, results of operations, and cash
flows. Operating results for the three-months ended January 31, 1998 are not
necessarily indicative of the results that may be expected for the year ended
October 31, 1998.
Inventory Valuation -- Inventories are stated at the lower of cost or net
realizable value. Costs, other than those specifically identified to contracts,
are determined primarily on the first-in, first-out (FIFO) basis.
Contract Accounting -- The percentage of completion method of accounting is
used by the Company's Special Machines segment. Sales and gross profit are
recognized as work is performed based on the relationship between actual costs
incurred and total estimated costs at completion. Sales and gross profit are
adjusted prospectively for revisions in estimated total contract costs and
contract values. Estimated losses are recognized when determinable.
Property, Plant and Equipment -- Property, plant and equipment is stated at
cost and is depreciated using the straight-line method. The general range of
lives is fifteen to thirty years for building and land improvements and four to
ten years for machinery, office equipment and vehicles.
Cost in Excess of Assigned Value of Acquired Companies -- The costs of
acquired companies that exceed the assigned value at dates of acquisition
(goodwill) are generally being amortized over a twenty year period using the
straight-line method. Several factors are used to evaluate the recoverability of
goodwill, including management's plans for future operations, recent operating
results and each division's projected undiscounted cash flows. Accumulated
amortization was $2,715 and $1,825 at October 31, 1997 and 1996, respectively.
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of "
(FAS 121) was adopted in fiscal 1997. FAS 121 requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable. The effect of
adopting FAS 121 was not material.
Income Taxes -- Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities.
Use of Estimates -- The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires the Company to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosures of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Financial Instruments -- The carrying amount of the Company's financial
instruments, which includes cash, accounts receivable, accounts payable, notes
payable and long-term debt approximates their fair value at
F-10
<PAGE> 130
NEWCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A. ACCOUNTING POLICIES -- (CONTINUED)
October 31, 1997 and 1996. Fair values have been determined through information
obtained from market sources and management estimates.
Stock dividend -- On June 11, 1997, the Company declared a 5% stock
dividend which was paid on September 12, 1997 to shareholders of record on
August 14, 1997. The dividend was charged to retained earnings in the amount of
$1,910. Per share amounts and shares outstanding included in the accompanying
consolidated financial statements and notes are based on the increased number of
shares giving retroactive effect to the stock dividend.
Earnings per share -- Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (FAS 128) establishes an updated standard for computing and
presenting earnings per share. The statement is effective in fiscal 1998 but
will not result in a materially different reported earnings per share amount for
the Company.
Reclassifications -- Certain items in prior years' financial statements
have been reclassified to conform with the presentation used in the year ended
October 31, 1997.
B. FISCAL 1998 ACQUISITIONS
In December 1997, the Company purchased the assets and business of Machine
Tool & Gear, Inc. ("MT&G") for $27.25 million plus the assumption of
approximately $5.8 million of debt, which was subsequently retired. MT&G
manufactures differential pinion and side gears, output shafts and rear axle
shafts for the automotive industry. For these assets, the Company paid cash of
$2.5 million in October 1997 and an additional $3.1 million in December 1997. A
promissory note for $21.65 million, paying interest at 8%, has been issued for
the balance of the purchase price. The note is due at the completion of
acquisition financing. If acquisition financing is not completed by April 15,
1998, then the Company must pay $5.0 million of the note, with the balance
payable on May 23, 1998. On December 5, 1997, the Company's revolving credit
agreement was increased from $25.0 million to $37.0 million to pay off acquired
bank debt and make the down payment on the MT&G acquisition. On January 15,
1998, the revolving credit agreement was amended to allow the Company to
increase total availability to $50.0 million upon satisfaction of certain
conditions relating to the acquisition financing described below.
The Company signed a definitive agreement to purchase the common stock of
the three companies comprising The Deco Group ("Deco") for approximately $55
million in cash in December 1997. Deco manufactures high-volume, complex
machined components and assemblies for the medium and heavy truck and automotive
industries. Deco's products include rocker arms and assemblies, transmission
shafts, axle shafts, thrust plates and other specialized products. The Company
made a non-refundable $5.0 million deposit to the Deco shareholders at the time
the agreement was signed.
In January 1998, the Company signed a definitive agreement to purchase the
common stock of Turn-Matic, Inc. ("Turn-Matic") for approximately $17 million in
cash. Contingent consideration of up to $3.5 million may be paid if
profitability achieves certain levels over the next five years. Turn-Matic
manufactures high volume, precision machined close tolerance components and
assemblies for the automotive industry. Turn-Matic's products include oil filter
adapters, main bearing caps, EGR spacers, intake and exhaust manifolds, steering
brackets and throttle body adapters.
The Company is in the process of reviewing alternatives to complete the
financing of its MT&G acquisition and finance the pending acquisitions of Deco
and Turn-Matic. The most likely financing methods are subordinated debt,
increased bank borrowings, or a combination of both.
It is anticipated that the Company's current and future domestic
subsidiaries, presently representing Plastronics and Rochester Gear only, will
be full and unconditional guarantors of obligations issued under any
F-11
<PAGE> 131
NEWCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
B. FISCAL 1998 ACQUISITIONS -- (CONTINUED)
financing alternatives. The following summarized financial information is
derived from the combined financial statements of the two wholly-owned
subsidiaries as of October 31, 1997 and 1996, and for the years then ended. No
intercompany balances or transactions occurred among the subsidiaries during the
periods presented.
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Current assets.............................................. $11,400 $ 3,200
======= =======
Total assets................................................ $30,800 $14,400
======= =======
Current liabilities......................................... $ 6,200 $ 2,800
======= =======
Long-term debt.............................................. $ 6,100 $ 6,100
======= =======
Sales....................................................... $29,200 $17,000
======= =======
Operating income............................................ $ 2,300 $ 1,000
======= =======
</TABLE>
The Company plans to consummate the Deco and Turn-Matic acquisitions
contemporaneously with the consummation of financing. All three acquisitions
will be accounted for using the purchase method of accounting. The cost in
excess of net assets acquired of approximately $72 million will be amortized on
a straight-line basis over twenty years.
C. FISCAL 1997 AND 1996 ACQUISITIONS
On January 13, 1997, the Company purchased for cash the common stock of
Plastronics Plus, Inc. (Plastronics), a Wisconsin corporation. Plastronics
primarily manufactures custom plastic injection-molded components for the
automotive industry. The purchase price was approximately $8 million in cash
plus the assumption of $4.1 million of Plastronics debt, which was subsequently
retired. The purchase was financed through the Company's existing line of credit
facility. The acquisition was accounted for using the purchase method of
accounting. The cost in excess of net assets acquired of approximately $4
million is being amortized on a straight-line basis over twenty years.
In December 1995, the Company signed three separate definitive agreements
to purchase for cash certain assets of three unrelated companies in the molded
rubber and plastic component parts industry. Each company primarily manufactures
parts for the automotive industry. Two of the acquisitions were completed on
January 2, 1996, and the third was completed on April 1, 1996. The total
purchase price for all three acquisitions was approximately $11.6 million. The
acquisitions were accounted for using the purchase method of accounting. The
cost in excess of net assets acquired of approximately $8 million is being
amortized on a straight-line basis over twenty years.
The 1996 unaudited pro forma results of operations as if the four
acquisitions described above had been acquired at the beginning of fiscal 1996
would have been sales of $133,023, income from continuing operations of $3,965
($.81 per share) and net loss of $738 ($.15 per share). These pro forma results
do not purport to be indicative of the results that would have occurred had the
acquisitions been made at the beginning of fiscal 1996 or which may occur in the
future. The unaudited pro forma results of operations for 1997 would have
approximated the 1997 actual reported results.
D. DISCONTINUED OPERATIONS
The Company sold the business and certain assets of its Wilson Automation
division (Wilson) on May 6, 1996. All receivables, the land and building, and
certain liabilities were retained by the Company. The building was leased to the
buyer through April 30, 2001. Although assets were sold at approximately net
book
F-12
<PAGE> 132
NEWCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
D. DISCONTINUED OPERATIONS -- (CONTINUED)
value, accruals were established for curtailment of the pension plan, employee
separation costs, costs associated with the collection of accounts receivable
and additional liabilities related to contracts for which the Company retained
responsibility. These accruals coupled with the operating loss from the
measurement date (March 31, 1996) to the sale date resulted in a net loss of
$3.5 million on the disposition of Wilson. The remaining accruals at October 31,
1997 are not material. Summary operating results of discontinued operations
through the measurement date are as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Revenues.................................................... $ 9,173 $26,457
Loss before income taxes.................................... (1,814) (2,363)
Benefit from income taxes................................... 611 853
Net loss from discontinued operations....................... (1,203) (1,510)
</TABLE>
The Company sold the Wilson land and building during 1997 for approximately
$2.3 million, net of selling expenses. The pre-tax net gain on this disposition
was $1,008 and has been recognized as a nonrecurring item in the consolidated
statements of income.
E. BUSINESS DISPOSITIONS AND NET ASSETS HELD FOR SALE
On March 6, 1997, the Company sold the business and substantially all
assets of its Eonic operation. Although assets were sold at approximately net
book value, accruals were established for employee separation costs, costs
associated with the collection of accounts receivable and pension plan costs,
resulting in an additional $711 loss on disposition being recognized as a
nonrecurring item in the consolidated statements of income. The Company received
cash of $1.5 million, which was used to reduce long-term debt and a $816 note
due over six years. The note pays interest equal to the prime interest rate. The
Company was negotiating an agreement to sell this division during 1996 and,
accordingly, classified the net assets of this division as a long-term asset at
October 31, 1996.
On October 21, 1996, the Company sold the business and substantially all
assets of its Newcor Machine Tool operation. Although assets were sold at
approximately net book value, accruals were established for employee separation
costs, costs associated with the collection of accounts receivable and pension
plan costs. The Company recorded a loss of $824 at October 31, 1996 for the loss
on the sale of Newcor Machine Tool and the estimated loss on disposition of
Eonic. The remaining accruals associated with these dispositions at October 31,
1997 were not material.
F. INVENTORIES
Inventories at October 31, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Costs and estimated earnings of uncompleted contracts in
excess of related billings of $1,066 in 1997 and $225 in
1996...................................................... $2,379 $4,075
Raw materials............................................... 3,752 2,641
Work in process and finished goods.......................... 1,953 1,480
------ ------
$8,084 $8,196
====== ======
</TABLE>
Costs and estimated earnings of uncompleted contracts in excess of related
billings represents revenue recognized under the percentage of completion method
in excess of amounts billed.
F-13
<PAGE> 133
NEWCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
G. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at October 31, 1997 and 1996 is summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Land and improvements....................................... $ 1,096 $ 1,036
Buildings................................................... 11,815 11,956
Machinery................................................... 25,457 20,935
Office and transportation equipment......................... 3,078 2,893
Construction in progress.................................... 1,217 723
------- -------
42,663 37,543
Less accumulated depreciation............................... 14,544 14,412
------- -------
$28,119 $23,131
======= =======
</TABLE>
H. OPERATING LEASES
The Company leases certain manufacturing equipment and facilities, office
space and other equipment under lease agreements accounted for as operating
leases. Rent expense related to these leases aggregated approximately $1,342,
$866, and $355 in 1997, 1996 and 1995, respectively.
Future minimum rental payments for leases extending beyond one year from
October 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
OCTOBER 31, AMOUNT
- ----------- ------
<S> <C>
1998........................................................ $1,437
1999........................................................ 1,297
2000........................................................ 1,220
2001........................................................ 1,257
2002........................................................ 1,246
Thereafter.................................................. 2,678
------
$9,135
======
</TABLE>
The Company also entered into operating lease commitments in October 1997
for approximately $11 million of equipment, the terms of which have not been
finalized, but are expected to extend over seven years.
I. CREDIT ARRANGEMENTS AND LONG-TERM DEBT
A summary of long-term debt at October 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Revolving credit line....................................... $17,000 $ 9,300
Term note................................................... 10,000 10,000
Limited obligation revenue bonds, variable interest rate
(average 3.8% in 1997 and 3.6% in 1996), payable January
1, 2008................................................... 6,100 6,100
------- -------
$33,100 $25,400
======= =======
</TABLE>
As of October 31, 1997, the Company had $17 million outstanding under a
revolving credit agreement with a major U.S. bank which was scheduled to expire
February 28, 1999. At that time the credit agreement
F-14
<PAGE> 134
NEWCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
I. CREDIT ARRANGEMENTS AND LONG-TERM DEBT -- (CONTINUED)
allowed for maximum borrowings of $25 million. The rate of interest on
outstanding borrowings is principally at the Eurodollar base rate plus 1% or
6.63%. Borrowings under the credit agreement are primarily supported by
Eurodollar notes principally with maturities of three months or less. During
1996, the Company converted $10 million from the revolving credit agreement to a
term note. The interest rate is fixed at 7.85%. The term note requires quarterly
interest payments through May 1998 and monthly interest and principal payments
from June 1998 through May 2003. The revolving credit agreement and the term
note require the Company to comply with certain financial covenants including
working capital, total debt and tangible net worth.
As mentioned in Note B., the Company increased its revolving credit
agreement to $37 million on December 5, 1997. On January 15, 1998, the revolving
credit agreement was amended to allow the Company to increase total availability
to $50.0 million upon satisfaction of certain conditions relating to the
acquisition financing for MT&G, Deco and Turn-Matic. The revolving credit
agreement is collateralized by substantially all of the Company's non-real
estate assets and by Rochester Gear, Inc. real estate. The current expiration
date for the revolving credit agreement is February 28, 2001.
In September 1995, Rochester Gear, Inc., a wholly owned subsidiary of the
Company (the Subsidiary), entered into a loan agreement whereby $6.1 million of
limited obligation refunding revenue bonds were issued. These bonds which mature
on January 1, 2008 are collateralized by the Subsidiary's land, building and
equipment and guaranteed by the Company.
Total interest payments aggregated $2,114, $2,109, and $1,553 in 1997,
1996, and 1995, respectively. Annual maturities of long-term debt are as
follows:
<TABLE>
<CAPTION>
YEAR
ENDING
OCTOBER 31, AMOUNT
- ----------- -------
<S> <C>
1998......................................................... $ 833
1999......................................................... 19,000
2000......................................................... 2,000
2001......................................................... 2,000
2002......................................................... 2,000
Thereafter................................................... 7,267
-------
$33,100
=======
</TABLE>
J. INCOME TAXES
Provision (benefit) for federal income taxes from continuing operations is
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Currently payable........................................ $1,430 $ 940 $1,411
Deferred, net............................................ 689 674 (181)
------ ------ ------
$2,119 $1,614 $1,230
====== ====== ======
</TABLE>
F-15
<PAGE> 135
NEWCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
J. INCOME TAXES -- (CONTINUED)
Significant components of the deferred tax assets and liabilities as of
October 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Deferred tax assets:
Accrued postretirement benefits........................... $2,408 $2,157
Percentage of completion revenue.......................... 265 113
Accrued vacation and employee benefits.................... 380 379
Costs related to sale of businesses....................... 684 1,270
Other..................................................... 728 819
------ ------
Total deferred tax assets......................... 4,465 4,738
------ ------
Deferred tax liabilities:
Depreciation.............................................. 2,658 1,395
Pensions.................................................. 755 634
Goodwill and other........................................ 374 258
------ ------
Total deferred tax liabilities.................... 3,787 2,287
------ ------
Net deferred tax asset............................ $ 678 $2,451
====== ======
</TABLE>
Reconciliation of the statutory federal tax rate to the effective rate is
summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ---- -------
<S> <C> <C> <C>
Statutory rate............................................ 34.0% 34.0% 34.0%
Nondeductible expenses.................................... 2.1 1.6 1.8
Foreign sales corporation................................. (0.5) (1.2) (1.4)
Other items, net.......................................... (0.3) (3.2) (0.4)
------ ---- -------
Effective tax rate........................................ 35.3% 31.2% 34.0%
====== ==== =======
Income taxes paid (refunded).............................. $1,615 $550 $(1,667)
</TABLE>
K. EMPLOYEE RETIREMENT BENEFITS
Pension Plans:
The Company provides retirement benefits for certain employees under
several defined benefit pension plans. Benefits from these plans are based on
compensation, years of service and either fixed dollar amounts per year of
service or employee compensation during the later years of employment. The
assets of the plans consist principally of cash equivalents, corporate and
government bonds, and common and preferred stocks. The Company's policy is to
fund only amounts required to satisfy minimum legal requirements.
F-16
<PAGE> 136
NEWCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
K. EMPLOYEE RETIREMENT BENEFITS -- (CONTINUED)
The following tables summarize the funded status, net periodic pension
(benefit) expense and actuarial assumptions:
<TABLE>
<CAPTION>
1997 1996
--------------------------- -------------------------
ACCUMULATED ASSETS ACCUMULATED
ASSETS EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of accumulated
benefit obligations:
Vested benefit obligation................. $16,853 $8,321 $15,438 $ 7,974
Nonvested benefit obligation.............. 214 249 499 99
------- ------ ------- -------
$17,067 $8,570 $15,937 $ 8,073
------- ------ ------- -------
Actuarial present value of projected benefit
obligations............................... $18,514 $8,570 $17,851 $ 8,073
Plan assets at market value................. 23,826 7,438 21,230 6,428
------- ------ ------- -------
Plan assets in excess of (less than)
projected benefit obligation.............. 5,312 (1,132) 3,379 (1,645)
Unrecognized net asset...................... (1,236) (109) (1,500) (131)
Unrecognized net (gain) loss and other...... (1,384) 614 414 1,425
------- ------ ------- -------
Prepaid (accrued) pension expense........... $ 2,692 $ (627) $ 2,293 $ (351)
======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1996
------- ------- -------
<S> <C> <C> <C>
Net periodic pension (benefit) expense:
Service cost-benefits earned during the period............ $ 460 $ 808 $ 846
Interest cost on projected benefit obligation............. 1,968 1,938 1,912
Actual return on assets................................... (5,337) (4,045) (4,015)
Amortization of net gain and deferral..................... 2,828 2,335 2,370
------- ------- -------
Net periodic pension (benefit) expense.................... $ (81) $ 1,036 $ 1,113
------- ------- -------
Actuarial assumptions at end of year:
Discount rates............................................ 7.5% 8.0% 8.0%
Expected return on plan assets............................ 9.0% 9.0% 9.0%
Compensation increases.................................... 5.0% 5.0% 6.0%
</TABLE>
The sale of Wilson during 1996 resulted in Wilson employees no longer
earning additional benefits under the plans. As a result of the recognition of
prior service costs for these employees, the Company recognized a pre-tax
pension curtailment charge of approximately $400 as a component of the loss on
discontinued operations in 1996.
Retiree Health Care and Life Insurance Benefits
The Company provides health care and life insurance benefits to certain
eligible retired employees but has discontinued retiree health benefits for all
active employees who retire after January 1, 1993. The plans are unfunded.
Benefits and cost-sharing provisions vary by location. Generally, the medical
plans pay a stated percentage of most medical expenses, reduced for any
deductible and payments made by government programs or other group coverage. The
cost of providing most of these benefits is shared with the retirees. The
F-17
<PAGE> 137
NEWCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
K. EMPLOYEE RETIREMENT BENEFITS -- (CONTINUED)
cost sharing limits the Company's future retiree medical cost increases to the
rate of inflation, as measured by the Consumer Price Index.
The following tables summarize the accrued postretirement benefit
obligation, net periodic postretirement benefit costs and actuarial assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ----
<S> <C> <C> <C>
Accumulated postretirement benefit obligations:
Retirees.................................................. $6,048 $6,333
Other fully eligible participants......................... 105 98
------ ------
Total accumulated postretirement benefit obligations........ 6,153 6,431
Unrecognized net gain (loss) from changes in assumptions.... 185 (86)
------ ------
Accrued postretirement benefit cost......................... $6,338 $6,345
====== ======
Net periodic postretirement benefit cost, principally
interest cost on projected benefit obligations............ $ 478 $ 485 $538
====== ====== ====
Actuarial assumptions:
Discount rates............................................ 8.0% 8.0%
Health care cost current rate of increase:
Medical................................................... 7.8% 8.0%
Prescription drugs........................................ 9.6% 10.0%
Ultimate health care cost rate of increase by 2004:
Medical................................................... 6.0% 6.0%
Prescription drugs........................................ 6.0% 6.0%
Increase due to a 1% increase in health care cost trend
rate:
APBO...................................................... 7.3% 6.6%
Net periodic postretirement benefit cost.................. 7.6% 6.9%
</TABLE>
L. STOCK OPTION PLANS
The Company has four stock option plans: a 1982 plan and a 1993 plan which
are expired except as to options still outstanding and two 1996 plans (the
Non-Employee Directors Stock Option Plan and the Employee Incentive Stock Plan).
Under the Non-Employee Directors Stock Option Plan, 105,000 common stock options
may be granted to non-employee directors. The Employee Incentive Stock Plan
provides for the use of several long-term incentive compensation tools for key
employees, including incentive stock options which are limited to a maximum of
315,000 shares. Option prices for both plans must not be less than the fair
market value of the Company's stock on the date granted. Options are exercisable
over 10 years and vest at a rate of 25% each year, commencing in the second
year. All options granted to date under these plans have a grant/exercise price
the same as the fair market value at the date of grant. Options expire upon
termination of
F-18
<PAGE> 138
NEWCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
L. STOCK OPTION PLANS -- (CONTINUED)
employment or one year following death or retirement. No charge is made against
income when options are exercised. Common stock options outstanding are as
follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES OPTION PRICE
------- ------------
<S> <C> <C>
Outstanding at November 1, 1994............................. 75,264 $8.77
Granted................................................... 113,925 6.68
Exercised................................................. (1,889) 5.13
Expired................................................... (26,364) 9.89
-------
Outstanding at October 31, 1995............................. 160,936 7.63
Granted................................................... 16,695 9.01
Exercised................................................. (7,631) 5.13
Expired................................................... (5,513) 8.33
-------
Outstanding at October 31, 1996............................. 164,487 7.86
Granted................................................... 73,815 8.00
Exercised................................................. -- --
Expired................................................... (6,300) 9.14
-------
Outstanding at October 31, 1997............................. 232,002 $7.83
-------
Exercisable shares at October 31, 1997...................... 91,062 $8.09
=======
Options available to grant at October 31, 1997.............. 339,501
=======
</TABLE>
The exercise price range for the outstanding options at each year end date
was $4.29 - $11.19. Approximately 40 percent of the outstanding options at
October 31, 1997 had exercise prices of $8.00 or more. The average weighted
average remaining exercise period relating to outstanding options at October 31,
1997 was approximately seven years.
The Company applies the intrinsic value based method to account for stock
options granted to employees. This method is set forth in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees". Under this
method, no compensation expense is recognized on the grant date since on that
date the option price equals the market price of the underlying common stock.
Net income and net income per share for 1997 and 1996 would not have been
materially different from reported amounts if compensation expense had been
determined based on the fair value method as set forth in Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation."
M. SEGMENT REPORTING
The Company reports its activities under three industry segments: Precision
Machined Products, Rubber and Plastic, and Special Machines. The Precision
Machined Products segment consists of automotive components and farm equipment
parts machined in dedicated manufacturing cells. The Rubber and Plastic segment
consists of molded rubber and plastic parts primarily for the automotive
industry. These two segments had previously been known as the Components and
Assemblies segment. Further segmentation was due to the growth of the Company's
Components and Assemblies business. Special Machines consist of standard
F-19
<PAGE> 139
NEWCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
M. SEGMENT REPORTING -- (CONTINUED)
individual machines, as well as custom designed machines, all manufactured on a
made-to-order basis. Information by industry segment is summarized below:
<TABLE>
<CAPTION>
PRECISION
MACHINED RUBBER AND SPECIAL
PRODUCTS PLASTIC MACHINES CORPORATE CONSOLIDATED
--------- ---------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers(1)
1997........................... $60,471 $48,517 $21,860 $130,848
1996........................... 48,439 32,447 30,858 111,744
1995........................... 42,382 17,165 30,626 90,173
Operating income (loss) from
continuing operations
1997........................... $ 5,336 $ 2,015 $ 2,275 $(1,323) $ 8,303
1996........................... 3,711 1,908 2,907 (1,745) 6,781
1995........................... 3,638 1,161 2,228 (1,673) 5,354
Identifiable assets
1997........................... $32,683 $34,192 $10,855 $13,153 $ 90,883
1996........................... 30,789 20,940 15,050 10,720 77,499
1995........................... 32,036 6,050 30,857 8,610 77,553
Capital expenditures
1997........................... $ 1,332 $ 1,057 $ 332 $ 818 $ 3,539
1996........................... 1,547 755 639 5 2,946
1995........................... 3,499 661 395 25 4,580
Depreciation and amortization
1997........................... $ 2,113 $ 1,677 $ 376 $ 114 $ 4,280
1996........................... 2,278 770 468 106 3,622
1995........................... 2,080 284 453 33 2,850
</TABLE>
- ---------------
(1) Sales to three manufacturers in the automotive industry, all representing
over 10% of consolidated sales, aggregated approximately $58, $46, and $39
million in 1997, 1996, and 1995, respectively. Sales to agricultural
equipment manufacturers, principally one customer, were $40, $19, and $14
million in 1997, 1996, and 1995, respectively.
F-20
<PAGE> 140
NEWCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
N. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
-------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1997:
Sales..................................... $27,975 $34,589 $32,385 $35,899 $130,848
Gross margin.............................. 5,330 6,539 5,465 6,431 23,765
Net income................................ 366 1,082 1,222 1,220 3,890
Net income per share...................... $ 0.07 $ 0.22 $ 0.25 $ 0.25 $ 0.79
Share prices:
High................................... $ 9.41 $ 9.17 $ 8.69 $ 9.88 --
Low.................................... 7.03 7.50 6.91 7.50 --
Dividends................................. 0.05 0.05 0.05 0.05 --
1996:
Sales..................................... $23,260 $27,128 $27,902 $33,454 $111,744
Gross margin.............................. 5,335 5,497 5,038 6,787 22,657
Income from continuing operations......... 1,247 834 604 873 3,558
Loss from discontinued operations......... (772) (3,931) -- -- (4,703)
------- ------- ------- ------- --------
Net income (loss)......................... $ 475 $(3,097) $ 604 $ 873 $ (1,145)
Earnings (loss) per share:
Continuing operations.................. $ 0.25 $ 0.17 $ 0.12 $ 0.18 $ 0.72
Discontinued operations................ (0.16) (0.80) -- -- (0.96)
------- ------- ------- ------- --------
Net income (loss) per share............... $ 0.09 $ (0.63) $ 0.12 $ 0.18 $ (0.24)
Share prices:
High................................... $ 9.77 $ 10.23 $ 11.91 $ 9.41 --
Low.................................... 6.91 7.27 8.45 7.86 --
Dividends................................. 0.05 0.05 0.05 0.05 --
</TABLE>
O. CONTINGENT LIABILITIES
The Company has been notified by one of its largest customers that the
customer is defending itself in a patent infringement lawsuit involving certain
processes/methods used on manufacturing equipment supplied by numerous vendors
including one of the Company's former divisions within the Special Machines
segment. The Company retained responsibility for this matter when it sold the
related business. Certain component suppliers of the Company have been notified
of their potential responsibility to the Company in connection with this action.
The Company does not possess sufficient information to evaluate the validity of
this claim and, accordingly, is unable to determine whether it will ultimately
be required to make any payment related to this lawsuit, or the extent to which
any such payment could be offset or mitigated by claims against suppliers.
During the past two years, the Company sold several of its businesses,
including the division that produced the equipment described above. In each case
the Company's agreement with the purchaser requires it to indemnify the
purchaser for various claims including certain environmental, product liability,
warranty and other claims that may arise relating to the conduct of the business
before the date of sale, subject in some cases to limits on the time within
which an indemnification claim may be brought or the maximum amount the Company
may be required to pay. The Company provided for its estimated indemnification
obligations when these businesses were sold and has no reason to believe there
are potential claims against it in excess of this provision, although no
specific amounts are included in such reserve with respect to the patent
infringement action described above.
Various other legal matters arising during the normal course of business
are pending against the Company. Management does not expect that the ultimate
liability, if any, of these matters will have a material effect on future
consolidated financial statements.
F-21
<PAGE> 141
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Machine Tool & Gear, Inc.:
We have audited the accompanying balance sheet of Machine Tool & Gear, Inc.
as of December 31, 1996 and the related statements of income and retained
earnings, and cash flows for the year 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 audit.
We conducted our audit 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 audit provides 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 Machine Tool & Gear, Inc. as
of December 31, 1996, and the results of operations and cash flows for the year
then ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
November 19, 1997, except as to the last paragraph
of Note 8 for which the date is December 24, 1997.
F-22
<PAGE> 142
MACHINE TOOL & GEAR, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 234,379 $ 827,891
Accounts receivable....................................... 2,393,512 2,530,031
Inventories............................................... 1,218,183 1,983,258
Prepaid expenses and other................................ 62,213 111,108
Deposits on equipment to be leased........................ 501,876 2,482,587
---------- -----------
Total current assets................................... 4,410,163 7,934,875
Property, plant and equipment, net.......................... 4,757,897 6,083,664
---------- -----------
Total assets........................................... $9,168,060 $14,018,539
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 582,053 $ 2,686,283
Borrowings under revolving credit agreement............... 250,000 1,566,500
Accounts payable.......................................... 1,444,320 2,876,706
Accrued expenses.......................................... 70,748 123,824
---------- -----------
Total current liabilities.............................. 2,347,121 7,253,313
Long-term debt, less current portion........................ 2,188,802 3,427,516
---------- -----------
Total liabilities...................................... 4,535,923 10,680,829
Common stock, par value $1 per share:
Authorized: 50,000 shares
Issued and outstanding: 14,000 shares..................... 14,000 14,000
Capital in excess of par.................................... 8,000 8,000
Retained earnings........................................... 5,051,531 3,879,575
Advances to officers/shareholders........................... (441,394) (563,865)
---------- -----------
Total shareholders' equity............................. 4,632,137 3,337,710
---------- -----------
Total liabilities and shareholders' equity............. $9,168,060 $14,018,539
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE> 143
MACHINE TOOL & GEAR, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
NINE NINE
YEAR MONTHS MONTHS
ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996
------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Sales................................................. $23,262,343 $16,596,725 $18,071,974
Cost of sales......................................... 18,033,213 13,413,924 14,002,494
----------- ----------- -----------
Gross margin.......................................... 5,229,130 3,182,801 4,069,480
Selling, general and administrative expenses.......... 2,473,105 2,662,411 1,910,905
----------- ----------- -----------
Operating income.................................... 2,756,025 520,390 2,158,575
Other expense:
Interest expense.................................... 176,045 364,716 144,167
Charitable contributions............................ 201,400 739,930 160,200
Loss on sale of fixed assets........................ 18,212 -- 18,212
----------- ----------- -----------
Net income (loss)................................... 2,360,368 (584,256) 1,835,996
Retained earnings, beginning of period................ 4,422,363 5,051,531 4,422,363
Distributions to shareholders......................... (1,731,200) (587,700) (921,200)
----------- ----------- -----------
Retained earnings, end of period...................... $ 5,051,531 $ 3,879,575 $ 5,337,159
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE> 144
MACHINE TOOL & GEAR, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE NINE
YEAR ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996
------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................... $ 2,360,368 $ (584,256) $ 1,835,996
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation..................................... 686,887 504,357 509,807
Loss on sales of fixed assets.................... 18,212 -- 18,212
Changes in operating assets and liabilities:
Accounts receivable............................ (216,053) (136,519) (694,822)
Inventories.................................... 227,974 (765,075) 191,746
Deposits....................................... (483,375) (1,980,711) (358,875)
Prepaid expenses and other assets.............. (28,558) (48,895) (10,153)
Accounts payable and accrued expenses.......... (465,395) 1,485,462 272,155
----------- ----------- -----------
Total adjustments................................ (260,308) (941,381) (71,930)
----------- ----------- -----------
Net cash provided by (used in) operating
activities..................................... 2,100,060 (1,525,637) 1,764,066
Cash flows from investing activities:
Expenditures for property, plant and equipment...... (1,359,210) (1,830,124) (1,209,229)
Proceeds from sale of assets........................ 291,000 -- 291,000
----------- ----------- -----------
Net cash used in investing activities............ (1,068,210) (1,830,124) (918,229)
Cash flows from financing activities:
Net (payments) borrowings under revolving credit
agreement........................................ (1,100,000) 1,316,500 (50,000)
Proceeds from term debt obligations................. 2,800,000 3,763,948 500,000
Payments on term debt obligations................... (919,080) (421,004) (500,290)
Distributions to shareholders....................... (1,731,200) (587,700) (921,200)
Advances to officers/shareholders................... (370,986) (122,471) (288,274)
----------- ----------- -----------
Net cash (used in) provided by financing
activities..................................... (1,321,266) 3,949,273 (1,259,764)
----------- ----------- -----------
Net increase (decrease) in cash....................... (289,416) 593,512 (413,927)
Cash, beginning of year............................... 523,795 234,379 523,795
----------- ----------- -----------
Cash, end of year..................................... $ 234,379 $ 827,891 $ 109,868
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest.............. $ 176,045
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE> 145
MACHINE TOOL & GEAR, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Nature of Business: Machine Tool & Gear, Inc. (the "Company") is a
manufacturer of differential pinion and side gears, output shafts and rear axle
shafts for the automotive industry in North America.
b. Interim Financial Information: The unaudited interim basic financial
statements included herein as of September 30, 1997 and for the nine-month
periods ended September 30, 1997 and 1996, include, in the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the Company's financial position, results of
operations, and cash flows. Operating results for the nine-months ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997.
c. Accounts Receivable: The Company's trade receivables are substantially
due from customers in the automotive industry. One customer represented more
than 50 percent of the sales of the Company during 1996.
d. Inventory: Inventories are stated at the lower of cost or market with
cost being determined on the first-in, first-out basis.
e. Property, Plant and Equipment: Property, plant and equipment are stated
at cost and are depreciated using the straight-line method over the estimated
useful lives of the assets. The general range of lives is fifteen to thirty-nine
years for buildings and leasehold improvements and five to ten years for
machinery and equipment, furniture and fixtures and vehicles. Upon sale or
retirement, the cost of the assets and related accumulated depreciation are
eliminated from the respective accounts, and the resulting gain or loss is
included in income. Normal repairs and maintenance are charged to expense when
incurred.
f. Income Taxes: The Company has elected to be treated as an S corporation
under the Internal Revenue Code. Under these provisions, the Company does not
pay federal corporate income taxes on its taxable income. The shareholders of
the Company are taxed on their proportionate share of the Company's taxable
income. Accordingly, no provision for federal corporate income taxes has been
reflected in the financial statements.
g. 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 as of 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.
2. INVENTORY:
Inventory at December 31, 1996 consists of the following:
<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
Finished goods.............................................. $ 474,494
Work in Process............................................. 616,929
Raw Materials............................................... 126,760
-----------
$ 1,218,183
===========
</TABLE>
F-26
<PAGE> 146
MACHINE TOOL & GEAR, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at December 31, 1996 consists of the
following:
<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
Land........................................................ $ 101,725
Buildings................................................... 655,845
Leasehold improvements...................................... 836,282
Furniture, fixtures and other............................... 444,583
Machinery and equipment..................................... 6,587,339
Construction in progress.................................... 93,920
-----------
8,719,694
Accumulated depreciation.................................... (3,961,797)
-----------
Property, plant and equipment, net........................ $ 4,757,897
===========
</TABLE>
4. CREDIT AGREEMENTS AND LONG-TERM DEBT:
At December 31, 1996 the Company had $250,000 outstanding under a revolving
credit agreement with a bank. The credit agreement allows for maximum borrowings
of $4,300,000 with interest at the lower of the prime rate (the bank's prime
rate was 8.25 percent at December 31, 1996) or a lesser interest rate that is
based upon certain financial ratios and is due upon demand. During 1996, the
Company converted $2,300,000 from the credit agreement to two term notes. A
summary of long-term debt at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
MATURITY INTEREST RATE AMOUNT
--------- ------------- ----------
<S> <C> <C> <C>
Term notes, bank.................................. 2001-2002 8.25% $2,220,000
Mortgage notes.................................... 1999-2001 8.0-8.25% 550,855
----------
Total........................................... 2,770,855
Portion due within one year....................... 582,053
----------
Total long-term debt............................ $2,188,802
==========
</TABLE>
Borrowings under the bank credit agreement are collateralized by accounts
receivable and substantially all assets not otherwise encumbered, as well as a
first mortgage on all commercial property owned by the Company, and are
guaranteed by a related entity under common ownership. The term notes require
quarterly payments of principal and interest through maturity. The mortgage
notes require monthly payments of principal and interest through maturity. In
addition, the Company is bound by various restrictive covenants including
working capital, total debt and tangible net worth. The Company has an
additional revolving credit agreement of $1,500,000 with a bank which was unused
at December 31, 1996.
F-27
<PAGE> 147
MACHINE TOOL & GEAR, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
4. CREDIT AGREEMENTS AND LONG-TERM DEBT -- CONTINUED
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
Year ended December 31:
1997...................................................... $ 582,053
1998...................................................... 592,417
1999...................................................... 572,658
2000...................................................... 570,835
2001...................................................... 417,892
Thereafter................................................ 35,000
----------
$2,770,855
==========
</TABLE>
5. OPERATING LEASES:
During the year ended December 31, 1996, the Company leased an operating
facility on a month-to-month basis from a related entity under common control
for $7,500 per month. The Company leased another facility in Detroit from a
non-related entity on a month-to-month basis for $6,204 per month. Total lease
expense for both facilities for the year ended December 31, 1996 was $164,446.
The Company leases certain machinery and equipment under noncancelable
operating leases expiring in various years through 2001. Several new leases were
entered into at the end of 1996 which will increase rent expense in future
years. Total rent expense for this machinery and equipment for the year ended
December 31, 1996 was $65,181.
Minimum future lease payments under noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
1997........................................................ $ 336,381
1998........................................................ 329,671
1999........................................................ 310,332
2000........................................................ 296,519
2001........................................................ 271,809
----------
$1,544,712
==========
</TABLE>
6. RELATED PARTY TRANSACTIONS:
For the year ended December 31, 1996, the Company made contributions
totaling $201,400 to a private academy. The officers of the Company also serve
as directors of the academy. In addition, the Company owns a house on the
premises of the academy which is provided rent free to academy personnel.
7. CONTINGENCIES AND COMMITMENTS:
Various claims arising during the normal course of business are pending
against the Company. Management does not reasonably expect that the ultimate
liability, if any, of these matters will have a material effect on future
financial statements.
F-28
<PAGE> 148
MACHINE TOOL & GEAR, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
8. SUBSEQUENT EVENTS:
The Company has been awarded substantial new business commencing in 1997
through 2003. To accommodate this new business, the Company is currently
expanding an existing manufacturing facility. The expansion is expected to cost
approximately $2,000,000. At December 31, 1996, total costs incurred were
$93,920.
In addition, the Company has placed orders for machinery and equipment in
excess of $10,000,000 as a result of the newly acquired business. Of this
amount, machinery with an approximate value of $6,000,000 will be leased for up
to seven years based on a commitment from a leasing company and the remaining
$4,000,000 is expected to be leased for up to seven years.
In 1997, the Company refinanced existing credit agreements and obtained
additional bank credit facilities of $8,550,000.
In October 1997, the Company signed a definitive agreement to sell the
assets and business of the Company to Newcor, Inc. The sale was completed in
December 1997. Newcor, Inc. designs and manufacturers precision machined
components and assemblies and custom rubber and plastic products primarily for
the automotive and agricultural vehicle markets.
F-29
<PAGE> 149
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Grand Machining Company and
Deco Technologies, Inc., "The Deco Group":
We have audited the accompanying combined balance sheets of Grand Machining
Company and Deco Technologies, Inc. ("the Deco Group") as of December 31, 1997,
1996 and 1995 and the related combined statements of income and retained
earnings, and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 the Deco Group as of
December 31, 1997, 1996 and 1995 and the results of operations and cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
Detroit, Michigan
March 27, 1998
F-30
<PAGE> 150
THE DECO GROUP
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 4,782,328 $ 4,678,857 $ 7,616,441
Marketable securities............................... 8,600,034 7,415,571 6,418,244
Accounts receivable, trade.......................... 6,377,381 6,773,906 6,398,508
Inventories......................................... 2,046,713 2,299,291 2,248,910
Prepaid expenses and other assets................... 172,347 99,169 119,291
Receivable, affiliates.............................. -- -- 121,331
----------- ----------- -----------
Total current assets............................. 21,978,803 21,266,794 22,922,725
Property, plant and equipment, net.................... 7,743,710 8,727,182 10,955,374
----------- ----------- -----------
Total assets................................... $29,722,513 $29,993,976 $33,878,099
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, current portion...................... $ -- $ 111,808 $ 99,224
Payable, affiliates................................. 195,423 52,516 --
Accounts payable, trade............................. 3,065,889 1,869,151 3,863,245
Accrued liabilities:
Payroll and related expenses..................... 1,285,056 1,533,657 1,264,051
Pension and profit sharing plans................. 504,255 252,339 238,216
Property taxes................................... 363,114 288,875 301,169
Other accrued liabilities........................ 280,358 217,360 254,437
----------- ----------- -----------
Total current liabilities...................... 5,694,095 4,325,706 6,020,342
Notes payable, stock redemption agreement........... -- 20,017 131,825
----------- ----------- -----------
Total liabilities.............................. 5,694,095 4,345,723 6,152,167
Shareholders' equity:
Common stock........................................ 16,408 16,408 16,408
Additional paid in capital.......................... 10,534,242 10,534,242 8,734,242
Retained earnings................................... 10,936,278 14,010,834 18,080,094
Unrealized net holding gain on marketable
securities....................................... 2,541,490 1,086,769 895,188
----------- ----------- -----------
Total shareholders' equity..................... 24,028,418 25,648,253 27,725,932
----------- ----------- -----------
Total liabilities and shareholders' equity..... $29,722,513 $29,993,976 $33,878,099
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-31
<PAGE> 151
THE DECO GROUP
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net sales............................................. $75,516,647 $74,122,960 $77,632,368
Cost of sales......................................... 61,462,979 59,967,536 63,635,554
----------- ----------- -----------
Gross margin........................................ 14,053,668 14,155,424 13,996,814
Selling, general and administrative expenses.......... 13,084,475 13,091,555 13,861,869
----------- ----------- -----------
Operating income.................................... 969,193 1,063,869 134,945
Other income, net, principally investment earnings.... 786,978 1,101,871 739,256
----------- ----------- -----------
Net income.......................................... 1,756,171 2,165,740 874,201
Retained earnings, beginning of year.................. 14,010,834 18,080,094 18,156,893
Distributions to shareholders......................... 4,830,727 6,235,000 951,000
----------- ----------- -----------
Retained earnings, end of year........................ $10,936,278 $14,010,834 $18,080,094
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-32
<PAGE> 152
THE DECO GROUP
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................... $ 1,756,171 $ 2,165,740 $ 874,201
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation..................................... 2,758,967 2,994,311 2,804,530
Gain on sale of investments...................... (394,165) (607,090) (419,100)
Changes in operating assets and liabilities:
Accounts receivable............................ 396,525 (375,398) 2,130,145
Inventories.................................... 252,578 (50,381) 430,189
Prepaid expenses and other assets.............. (73,178) 20,122 28,779
Accounts payable and accrued liabilities....... 1,337,290 (1,759,736) (842,242)
----------- ----------- -----------
Total adjustments................................ 4,278,017 221,828 4,132,301
----------- ----------- -----------
Net cash provided by operating activities........ 6,034,188 2,387,568 5,006,502
Cash flows from investing activities:
Investment in property and equipment................ (1,775,495) (766,119) (1,745,503)
Investments in marketable securities................ (4,004,355) (7,339,042) (7,409,729)
Proceeds from sale of marketable securities......... 4,668,778 7,140,386 9,256,358
Received from (payments to) affiliates, net......... 142,907 173,847 (179,354)
----------- ----------- -----------
Net cash used in investing activities............ (968,165) (790,928) (78,228)
Cash flows from financing activities:
Principal payments on debt obligations.............. (131,825) (99,224) (88,057)
Distributions to shareholders....................... (4,830,727) (6,235,000) (951,000)
Shareholders' capital contributions................. -- 1,800,000 1,400,000
----------- ----------- -----------
Net cash provided by (used in) financing
activities..................................... (4,962,552) (4,534,224) 360,943
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents......................................... 103,471 (2,937,584) 5,289,217
Cash and cash equivalents, beginning of year.......... 4,678,857 7,616,441 2,327,224
----------- ----------- -----------
Cash and cash equivalents, end of year................ $ 4,782,328 $ 4,678,857 $ 7,616,441
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-33
<PAGE> 153
THE DECO GROUP
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Nature of Business: The Deco Group ("the Company") is a manufacturer of
high volume, precision machined components and assemblies for the North American
medium and heavy truck and automotive industries of which over 50 percent of
such products are sold to one customer. The Company's products include rocker
arms and assemblies, transmission shafts, axle shafts and thrust plates.
b. Basis of Presentation: The financial statements represent the combined
financial operations of Grand Machining Company and Deco Technologies, Inc.,
corporations under common control. All significant intercompany balances and
transactions have been eliminated. Deco International, Inc., another affiliated
company under common control, is immaterial and experienced insignificant
business activity during the periods presented and has not been combined in
these financial statements.
c. Cash and Cash Equivalents: Cash and cash equivalents are defined as
short-term, highly liquid investments with original maturities of three months
or less.
d. Marketable Securities: Marketable equity securities are carried at their
fair value. The cost of marketable securities used in determining realized gains
and losses upon sale is in accordance with the specific identification method.
e. Inventories: Inventories, which consist primarily of work in process,
are stated at the lower of cost or net realizable value. Cost is determined on
the first-in, first-out basis.
f. Property, Plant and Equipment: Property, plant and equipment is stated
at cost and is depreciated using principally the straight-line method over the
assets estimated useful lives. The general range of lives is thirty-one to
thirty-nine years for buildings and building improvements and five to ten years
for machinery and equipment, furniture and fixtures and vehicles. Maintenance
and repairs are charged to expense as incurred. Upon sale or retirement, the
cost of the assets and related accumulated depreciation are eliminated from the
respective accounts, and the resulting gain or loss is included in income.
g. Income Taxes: There is no provision for federal income taxes since the
Company as an "S" Corporation is not liable for such taxes. Taxable income of
the Company will be included in the tax returns of the Company's shareholders.
h. 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 as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-34
<PAGE> 154
THE DECO GROUP
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
2. MARKETABLE SECURITIES:
At December 31, 1997, 1996, and 1995 the marketable securities of the
Company were classified as available for sale. Accordingly, the securities are
carried at fair value with unrealized gains and losses excluded from income and
reported as a separate component of shareholders' equity.
The cost and fair values of the securities at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING FAIR
COST GAIN LOSS VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Corporate bonds......................... $ 502,454 $ 15,046 -- $ 517,500
Mutual stock funds...................... 2,535,546 813,446 -- 3,348,992
Other securities, primarily common
stocks................................ 3,020,544 1,712,998 -- 4,733,542
---------- ---------- -- ----------
$6,058,544 $2,541,490 -- $8,600,034
========== ========== == ==========
</TABLE>
The cost and fair values of the securities at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING FAIR
COST GAIN LOSS VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Corporate bonds......................... $1,205,295 $ 13,850 -- $1,219,145
Mutual stock funds...................... 2,319,933 325,577 -- 2,645,510
Other securities, primarily common
stocks................................ 2,803,574 747,342 -- 3,550,916
---------- ---------- -- ----------
$6,328,802 $1,086,769 -- $7,415,571
========== ========== == ==========
</TABLE>
The cost and fair values of the securities at December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING FAIR
COST GAIN LOSS VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Corporate bonds.......................... $ 940,534 $ -- $18,849 $ 921,685
Mutual stock funds....................... 2,057,051 429,237 -- 2,486,288
Other securities, primarily common
stocks................................. 2,525,471 484,800 -- 3,010,271
---------- -------- ------- ----------
$5,523,056 $914,037 $18,849 $6,418,244
========== ======== ======= ==========
</TABLE>
For the years ended December 31, 1997, 1996 and 1995 adjustments to the
cost basis of debt securities to recognize discount or premium between the
original cost of the securities and their face value were immaterial.
F-35
<PAGE> 155
THE DECO GROUP
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
3. PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Land.......................................... $ 68,346 $ 68,346 $ 68,346
Buildings..................................... 511,553 511,553 511,553
Building Improvements......................... 306,721 294,021 294,021
Furniture and fixtures........................ 710,609 698,359 649,540
Machinery and equipment....................... 23,278,899 21,751,848 21,253,919
Vehicles...................................... 79,855 101,554 101,554
Deposits...................................... -- -- 186,005
----------- ----------- -----------
24,955,983 23,425,681 23,064,938
Less: accumulated depreciation.............. 17,212,273 14,698,499 12,109,564
----------- ----------- -----------
Net property, plant and equipment........ $ 7,743,710 $ 8,727,182 $10,955,374
=========== =========== ===========
</TABLE>
4. STOCK REDEMPTION NOTES PAYABLE:
In 1988, final stock redemption agreements with two shareholders were
entered into, resulting in promissory notes of $353,164 payable to each
shareholder. These notes were paid in full in 1997.
5. COMMON STOCK:
The authorized share capital of Grand Machining Company consists of 500
$100 par value common shares. At December 31, 1997, 1996, and 1995 163.086
common shares were issued and outstanding.
The authorized share capital of Deco Technologies, Inc. consists of 60,000
no par value common shares. At December 31, 1997, 1996, and 1995 100 common
shares were issued and outstanding.
6. EMPLOYEE BENEFIT PLANS:
a. Profit Sharing Contributions: A profit sharing contribution is made
annually as determined by the Board of Directors subject to limitations based
upon current operating profits and participant's compensation. Contributions
expensed for 1997, 1996 and 1995, were $294,895, $186,065 and $213,110,
respectively.
b. Pension Plans: Substantially all employees are covered by defined
benefit pension plans. Plan benefits under the hourly employees' pension plan
are based primarily on years of service. The benefit levels used to compute
pension costs and related disclosures under SFAS No. 87 were $12.00 per month
for 1997 and $9.50 per month for 1996 and 1995. The Plan benefits under the
salaried employees' pension plan are a function of years of service and
employee's compensation near retirement. Plan assets for both plans consist
primarily of short-term funds, commercial paper, and common stock. The Company's
funding policy is to contribute the amount of maximum tax deduction allowed.
The actuarially computed pension cost for 1997, 1996 and 1995 included the
following components:
<TABLE>
<CAPTION>
1997 1996 1995
SALARIED SALARIED SALARIED
AND HOURLY AND HOURLY AND HOURLY
---------- ---------- ----------
<S> <C> <C> <C>
Service cost............................................. $ 142,866 $136,373 $ 121,225
Interest cost on projected benefit obligation............ 138,131 116,851 86,281
Actual return on assets.................................. (161,785) (82,038) (101,205)
Net amortization and deferraltion........................ 14,528 (34,400) (4,622)
--------- -------- ---------
Total pension cost..................................... $ 133,740 $136,786 $ 101,679
========= ======== =========
</TABLE>
F-36
<PAGE> 156
THE DECO GROUP
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
6. EMPLOYEE BENEFIT PLANS -- CONTINUED:
The following table presents the funded status of the plans and significant
assumptions as of December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
SALARIED SALARIED SALARIED
AND HOURLY AND HOURLY AND HOURLY
---------- ---------- ----------
<S> <C> <C> <C>
Accumulated benefit obligation (vested and
nonvested)......................................... $1,736,807 $1,146,068 $ 897,737
========== ========== ==========
Actuarial present value of projected benefit
obligation......................................... $2,068,920 $1,476,396 $1,147,350
Plan assets at fair value............................ 1,644,515 1,465,367 1,276,777
---------- ---------- ----------
Plan assets in excess of (less than) projected
benefit obligation................................. (424,405) (11,029) 129,427
Unamortized net assets at transition................. (267,774) (288,358) (308,942)
Unrecognized prior service costs and net gain........ 330,684 248,897 144,274
---------- ---------- ----------
Accrued pension liability.......................... $ (361,495) $ (50,490) $ (35,241)
========== ========== ==========
Discount rate........................................ 7.5% 8.5% 8.5%
Long-term rate of return:
Salaried........................................... 9% 7.75% 7.75%
Hourly............................................. 9% 7.5% 7.5%
Rate of Increase in compensation level (salaried) per
annum.............................................. 5% 5% 5%
</TABLE>
c. Self-Insured Workers' Compensation: In January 1990, the Company elected
to operate a self-insured program for costs incurred pursuant to the Workers'
Compensation Laws of the State of Michigan. The Company entered into a contract
with a service agent who supervises and administers claims as well as a contract
with an insurance company for excess liability coverage.
The Company recognizes expense for the self-insured program as claims are
paid. The amount of, and change in, the estimated incurred but not paid claims
at each balance sheet date was immaterial to net worth and net income for each
year presented.
d. Self-Insured Health Care Benefits: The Company operates a self-insured
health care program for the benefit of all of its employees. The Company has a
contract with a service provider who supervises and processes claims under the
program. The Company recognizes expense for the self-insured program as claims
are paid. The amount of, and change in, the estimated incurred but not reported
claims at each balance sheet date was immaterial to net worth and net income for
each year presented.
7. LEASE AGREEMENTS:
Grand Machining Company leases space from one of its shareholders. The
lease provides for annual rental payments of $318,800 through 2001. Deco
Technologies, Inc. leases a building under an operating lease from a third party
which expires in 1998 but contains options to extend the term. In addition, the
Company pays real and personal property taxes and all repairs and maintenance
costs on the leased premises. Total combined rent expense for the years ended
December 31, 1997, 1996, and 1995 was $581,454, $518,233 and $510,900,
respectively.
8. CONTINGENCIES:
Various claims arising during the normal course of business are pending
against the Company. Management does not reasonably expect that the ultimate
liability, if any, of these matters will have a material effect on future
financial statements.
F-37
<PAGE> 157
THE DECO GROUP
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
9. SUBSEQUENT EVENT:
In December 1997, the Company signed a definitive agreement to sell the
common stock of the Company to Newcor, Inc. The sale was completed in early
March of 1998. Newcor, Inc. designs and manufacturers precision machined
components and assemblies and custom rubber and plastic products primarily for
the automotive and agricultural vehicle markets.
F-38
<PAGE> 158
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Turn-Matic, Inc.:
We have audited the accompanying balance sheet of Turn-Matic, Inc. as of
September 30, 1997 and the related statements of income and retained earnings,
and cash flows for the year 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 audit.
We conducted our audit 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 audit provides 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 Turn-Matic, Inc. as of
September 30, 1997 and the results of operations and cash flows for the year
then ended in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Detroit, Michigan
December 5, 1997 except as to
Note 10 for which the date is January 19, 1998.
F-39
<PAGE> 159
TURN-MATIC, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1997
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,217,568 $ 2,926,691
Accounts receivable, trade................................ 1,790,765 2,005,951
Notes receivable, officer/shareholder..................... 248,454 766,891
Inventory................................................. 899,844 884,392
Prepaid expenses.......................................... 98,793 63,740
----------- -----------
Total current assets................................... 6,255,424 6,647,665
Property, plant and equipment, net.......................... 5,253,416 5,135,911
Cash surrender value of officers' life insurance............ 306,342 306,342
----------- -----------
Total assets........................................... $11,815,182 $12,089,918
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt, current portion........................... $ 541,167 $ 541,167
Accounts payable.......................................... 754,845 541,858
Accrued liabilities, principally payroll and related
expenses............................................... 259,797 122,225
Federal income tax payable................................ 147,653 319,747
----------- -----------
Total current liabilities.............................. 1,703,462 1,524,997
Long-term debt, noncurrent portion.......................... 2,040,285 1,904,994
Deferred federal income tax................................. 600,665 602,300
----------- -----------
Total liabilities...................................... 4,344,412 4,032,291
Shareholders' equity:
Common stock, $1.00 par value:
Authorized:
50,000 shares
Issued and outstanding: 30,000 shares.................. 30,000 30,000
Retained earnings......................................... 7,440,770 8,027,627
----------- -----------
Total shareholders' equity............................. 7,470,770 8,057,627
----------- -----------
Total liabilities and shareholders' equity............. $11,815,182 $12,089,918
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-40
<PAGE> 160
TURN-MATIC, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1997 1996
------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Sales................................................ $15,796,477 $3,504,566 $4,615,910
Cost of sales........................................ 11,291,823 2,388,699 2,968,483
----------- ---------- ----------
Gross profit....................................... 4,504,654 1,115,867 1,647,427
Selling, general and administration expenses......... 1,946,300 360,638 417,607
Interest expense, net of interest income of $68,606,
$38,914, and $6,807, respectively.................. 173,111 40,432 57,445
----------- ---------- ----------
Income before nonrecurring gain and federal income
taxes........................................... 2,385,243 714,797 1,172,375
Nonrecurring gain on sale of machinery and
equipment.......................................... 440,810 -- 133,000
Other income*........................................ -- 196,872 --
Federal income taxes................................. (970,000) (324,812) (442,184)
----------- ---------- ----------
Net income......................................... 1,856,053 586,857 863,191
Retained earnings, beginning of year................. 5,584,717 7,440,770 5,584,717
----------- ---------- ----------
Retained earnings, end of year....................... $ 7,440,770 $8,027,627 $6,447,908
=========== ========== ==========
</TABLE>
* Represents the agreed upon repayment by an officer/shareholder of disallowed
fiscal year 1996 compensation resulting from an IRS examination.
The accompanying notes are an integral part of the financial statements.
F-41
<PAGE> 161
TURN-MATIC, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1997 1996
------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 1,856,053 $ 586,857 $ 863,191
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation...................................... 1,002,002 257,505 242,259
Gain on sale of property and equipment............ (440,810) -- (133,000)
Deferred income taxes............................. 85,467 1,635 18,120
Other income...................................... -- (196,872) --
Changes in operating assets and liabilities:
Accounts receivable............................... 1,079,002 (215,186) 89,559
Inventory......................................... (26,058) 15,452 (41,331)
Prepaid expenses.................................. 13,075 35,053 7,100
Cash surrender value.............................. (47,408) -- (8,830)
Accounts payable.................................. (62,205) (212,987) 217,794
Accrued expenses.................................. (12,370) (137,572) (24,398)
Federal income tax payable........................ (211,612) 172,094 156,919
----------- ---------- ----------
Net cash provided by operating activities....... 3,235,136 305,979 1,387,383
----------- ---------- ----------
Cash flows from investing activities:
Expenditures for property, plant and equipment....... (1,175,810) (140,000) (699,456)
Proceeds from sale of property, plant and
equipment......................................... 448,000 -- 133,000
----------- ---------- ----------
Net cash used in investing activities........... (727,810) (140,000) (566,456)
----------- ---------- ----------
Cash flows from financing activities:
Net payments/(borrowings) note receivable,
officer/shareholder............................... (1,659) (321,565) 2,502
Principal payments on long-term debt................. (541,167) (135,291) (180,389)
----------- ---------- ----------
Net cash used in financing activities........... (542,826) (456,856) (177,887)
----------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents.................................. 1,964,500 (290,877) 643,040
Cash and cash equivalents at beginning of year......... 1,253,068 3,217,568 1,253,068
----------- ---------- ----------
Cash and cash equivalents at end of year............... $ 3,217,568 $2,926,691 $1,896,108
=========== ========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest............... $ 243,301
-----------
Cash paid during the year for federal income taxes... $ 1,096,145
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-42
<PAGE> 162
TURN-MATIC, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Nature of Business: Turn-Matic, Inc. (the "Company") is a manufacturer
of engine components including oil filter adapters, main bearing caps and intake
and exhaust manifolds for the automotive industry in North America of which
nearly 80 percent is sold to one customer.
b. Interim Financial Information: The unaudited interim basic financial
statements included herein as of December 31, 1997 and for the three-month
periods ended December 31, 1997 and 1996 include, in the opinion of management,
all adjustments (consisting of normal recurring adjustments) necessary to
present fairly the Company's financial position, results of operations, and cash
flows. Operating results for the three-months ended December 31, 1997 are not
necessarily indicative of the results that may be expected for the year ended
September 30, 1998.
c. Revenue Recognition/Accounts Receivable: Revenue from sale of
manufactured products is recognized upon passage of title to the customer, which
generally coincides with physical delivery.
d. 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.
e. Inventory: Inventory is stated at the lower of cost or market, with cost
being determined by actual purchased material, processing and labor costs
incurred against specific jobs, plus an allocated portion of factory burden.
f. Property, Plant and Equipment: Property, plant and equipment are
recorded at cost. The Company provides for depreciation using the straight line
method at rates based on the estimated service lives as indicated below:
<TABLE>
<S> <C>
Leasehold improvements...................................... 5-31 years
Machinery and equipment..................................... 5-12 years
Furniture and fixtures...................................... 5-10 years
</TABLE>
Assets retired or disposed of are removed from the asset and accumulated
depreciation accounts, and the net amount, less proceeds from disposal, is
charged or credited to income. Normal repairs and maintenance are charged to
expense when incurred.
g. Cash and Cash Equivalents: For purposes of reporting cash flows, the
Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
2. NOTE RECEIVABLE, SHAREHOLDER:
At September 30, 1997, the Company has an unsecured 6 percent demand note
receivable in the amount of $248,454 from Raymond B. Dorris, Sr., a shareholder
of the Company.
3. INVENTORY:
Inventory at September 30, 1997 is summarized as follows:
<TABLE>
<S> <C>
Material, tooling and outside processing.................... $848,598
Direct labor and factory burden............................. 51,246
--------
$899,844
========
</TABLE>
F-43
<PAGE> 163
TURN-MATIC, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
4. NOTE PAYABLE, BANK, LINE OF CREDIT:
The Company has a revolving line of credit aggregating $2,000,000 with a
bank bearing interest at the prime interest rate. Accounts receivable, inventory
and machinery and equipment serve as collateral for borrowings under the line.
The line was unused at September 30, 1997.
5. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following:
<TABLE>
<S> <C>
Leasehold improvements...................................... $ 454,165
Machinery and equipment..................................... 10,599,677
Furniture and fixtures...................................... 96,004
-----------
11,149,846
Accumulated depreciation.................................... (5,896,430)
-----------
Property, plant and equipment, net.......................... $ 5,253,416
===========
</TABLE>
6. LONG-TERM DEBT:
The Company's long-term debt at September 30, 1997 is summarized as
follows:
<TABLE>
<CAPTION>
CURRENT NONCURRENT
PORTION PORTION TOTAL
------- ---------- -----
<S> <C> <C> <C>
Bank loan dated September 14, 1995, due May 14,
2002. The loan in the original amount of
$2,748,012 is payable in monthly installments of
$34,323 plus interest at the prime rate. All the
assets of the Company serve as collateral........ $411,881 $1,512,369 $1,924,250
Bank loan dated September 28, 1995, due September
28, 2002. The loan in the original amount of
$905,000 is payable in monthly installments of
$10,774 plus interest at the prime rate. All the
assets of the Company serve as collateral........ 129,286 527,916 657,202
-------- ---------- ----------
$541,167 $2,040,285 $2,581,452
======== ========== ==========
</TABLE>
Principal payments on long-term debt during the next five years are due as
follows:
<TABLE>
<S> <C>
Year ended September 30:
1998...................................................... $ 541,167
1999...................................................... 541,167
2000...................................................... 541,167
2001...................................................... 541,167
2002...................................................... 416,784
----------
$2,581,452
==========
</TABLE>
F-44
<PAGE> 164
TURN-MATIC, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
7. FEDERAL INCOME TAX EXPENSE:
Federal income tax expense at September 30, 1997 is summarized as follows:
<TABLE>
<S> <C>
Current..................................................... $884,533
Deferred.................................................... 85,467
--------
$970,000
========
</TABLE>
The deferred federal income tax liability is a result of temporary
differences due to the utilization of accelerated depreciation methods for tax
purposes.
8. LEASE AGREEMENTS:
The Company leased a building located in Clinton Township, Michigan from
Raymond B. Dorris, Sr. and Marie E. Dorris, shareholders of the Company. The
month to month lease agreement was for the Company to pay monthly rent of $4,500
plus taxes, insurance, maintenance and utilities. The lease was terminated on
September 30, 1997.
The Company leases two buildings located in Clinton Township, Michigan from
a related partnership. The 5-year lease agreements dated April 1, 1995 are for
the Company to pay monthly rent of $10,000 and $24,000, respectively, plus
taxes, insurance, maintenance and utilities. The mortgages held by the
partnership are guaranteed by the Company.
Total rental expense, net of sublease rental income of $19,800 and
exclusive of taxes, insurance, maintenance and utilities for the year ended
September 30, 1997 was $442,220.
9. PROFIT SHARING PLAN:
The Company has a profit sharing plan for all eligible employees. Eligible
employees are defined as those completing one year of service and have reached
the age of 21. The amount of contribution to the plan each year is discretionary
and is determined by the Company based on eligible employees compensation not to
exceed the maximum allowable as a deduction to the Company under the provisions
of the Internal Revenue Code. Profit sharing plan expense for the year ended
September 30, 1997 was $152,158.
10. SUBSEQUENT EVENT:
In January 1998 the Company signed a definitive agreement to sell all of
the common stock of the Company to Newcor, Inc. The sale is expected to be
completed in early 1998. Newcor, Inc. designs and manufacturers precision
machined components and assemblies and custom rubber and plastic products
primarily for the automotive and agricultural vehicle markets.
F-45
<PAGE> 165
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
EXCHANGE NOTES BY ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING THE
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Additional Information................ i
Forward-Looking Statements............ ii
Summary............................... 1
Risk Factors.......................... 13
The Exchange Offer.................... 20
Certain Federal Income Tax
Consequences of the Exchange
Offer............................... 27
The Acquisitions...................... 28
Pro Forma Capitalization.............. 30
Unaudited Pro Forma Condensed
Consolidated Financial Data......... 31
Selected Consolidated Historical
Financial Data...................... 39
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 40
Business.............................. 48
Glossary.............................. 63
Management and Directors.............. 67
Security Ownership of Certain
Beneficial Owners and Management.... 76
Description of Exchange Notes......... 79
Description of Notes.................. 107
Registration Rights; Liquidated
Damages............................. 107
Description of Other Debt............. 108
Certain Federal Tax Considerations for
Foreign Persons..................... 110
Plan of Distribution.................. 113
Legal Matters......................... 113
Experts............................... 113
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
NEWCOR, INC. LOGO
NEWCOR, INC.
OFFER TO EXCHANGE
ALL OUTSTANDING
9 7/8% SENIOR SUBORDINATED
NOTES DUE 2008
($125,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
9 7/8% SERIES B SENIOR
SUBORDINATED NOTES DUE 2008
($125,000,000 PRINCIPAL AMOUNT)
--------------------
PROSPECTUS
--------------------
, 1998
======================================================
<PAGE> 166
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of the State of Delaware ("DGCL"), under which
the Issuer is organized, empowers a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any action, suit or
proceeding (each a "proceeding"), other than a proceeding 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, at the corporation's request,
a director, officer, employee, or agent of another entity or enterprise against
expenses, judgments, fines, and amounts paid in settlement actually and
reasonably incurred by the indemnitee in connection with the proceeding, if the
Indemnitee 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 and, with respect
to any criminal proceeding, without reasonable cause to believe his or her
conduct was unlawful. The DGCL further empowers a corporation to indemnify any
of the same types of indemnitees against expenses actually and reasonably
incurred by him or her in connection with the defense or settlement of a
proceeding by or in the right of the corporation if the indemnitee met the same
standards of conduct, except that indemnification with respect to any claim,
issue, or matter as to which the indemnitee has been adjudged to be liable to
the corporation may be made only if and to the extent determined to be proper by
a court. In addition, the DGCL also requires such a corporation to indemnify any
such indemnitee who is successful on the merits or otherwise in defense of any
proceeding of the types described above, or in defense of any claim, issue, or
matter in any such proceeding, against his or her actual and reasonable expenses
incurred in connection with such defense, and it permits advancement by the
corporation of an indemnitee's expenses under certain circumstances. In general,
Article Ninth of the Issuer's Restated Certificate of Incorporation requires
indemnification of and expense advancement to all of the potential types of
indemnitees described above (including each current Newcor director or officer
and each of its directors, officers, employees, or agents who currently is
serving at the Issuer's request as a director or officer of a Subsidiary
Guarantor) to the fullest extent permitted by the DGCL.
The Michigan Business Corporation Act ("MBCA"), under which each Subsidiary
Guarantor other than Plastronics Plus, Inc. is organized, contains mandatory and
permissive indemnification provisions indemnification provisions substantially
similar to those of the DGCL. The bylaws of each of these Subsidiary Guarantors
contain provisions effectively mandating indemnification of and the advancement
of expense to such Subsidiary Guarantor's directors and officers to the fullest
extent permitted by the MBCA.
The Wisconsin Business Corporation Law ("WBCL"), under which Plastronics
Plus, Inc. is organized, generally requires a Wisconsin business corporation to
indemnify any current or former director or officer who has been successful on
the merits or otherwise in the defense of a proceeding for all reasonable
expenses incurred in the proceeding, if the indemnitee was a party to the
proceeding because of being a director or officer of the corporation. In
addition, the WBCL generally mandates indemnification against liability incurred
by such an indemnitee in any other proceeding, unless the liability was incurred
because the indemnitee breached or failed to perform a duty owed by him or her
to the corporation and the breach or failure to perform constitutes (i) a
violation of the criminal law (unless the indemnitee had reasonable cause to
believe that his or her conduct was lawful or no reasonable cause to believe
that it was unlawful), (ii) a wilful failure to deal fairly with the corporation
in a matter in which the indemnitee has a material conflict of interest, (iii) a
transaction in which the indemnitee derived an improper personal profit, or (iv)
wilful misconduct. The WBCA permits a corporation to limit the indemnification
obligations described above by doing so in its articles of incorporation, but
the Articles of Incorporation of Plastronics Plus, Inc. contain no such
limitations.
Insurance is maintained on a regular basis (and not specifically in
connection with this offering or the offering of the Notes) against liabilities
arising on the part of directors and officers out of their performance in such
capacities or arising on the part of any of the Registrants out of the
above-described indemnification provisions of such Registrant, subject to
certain exclusions and to the policy limits.
II-1
<PAGE> 167
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. (File number for all documents incorporated by reference is
Commission File Number 1-5985.)
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the Issuer, as
amended
3.2 Bylaws of the Issuer
3.3 Articles of Incorporation of Rochester Gear, Inc., as
amended
3.4 Bylaws of Rochester Gear, Inc.
3.5 Articles of Incorporation of Plastronics Plus, Inc.
3.6 Bylaws of Plastronics Plus, Inc.
3.7 Restated Articles of Incorporation of Grand Machining
Company
3.8 Bylaws of Grand Machining Company
3.9 Articles of Incorporation of Deco Technologies, Inc.
3.10 Bylaws of Deco Technologies, Inc.
3.11 Articles of Incorporation of Deco International, Inc.
3.12 Bylaws of Deco International, Inc.
3.13 Restated Articles of Incorporation of Turn-Matic, Inc.
3.14 Amended and Restated Bylaws of Turn-Matic, Inc.
4.1.1 Indenture relating to the Notes (including forms of Notes
and related Subsidiary Guarantees), dated as of March 4,
1998, among the Issuer, the Subsidiary Guarantors, and First
Trust National Association, as trustee, relating to the
Notes (incorporated by reference to exhibit 4.(a) to the
Issuer's Form 8-K current report filed on March 13, 1998)
4.1.2 A/B Exchange Registration Rights Agreement, dated as of
March 4, 1998, among the Issuer, the Subsidiary Guarantors,
and the Initial Purchasers (incorporated by reference to ex-
hibit 4.(b) to the Issuer's Form 8-K current report filed on
March 13, 1998)
4.1.3 Form of Exchange Notes (including related Subsidiary
Guarantees)
4.2.1 Third Amended and Restated Revolving Credit Agreement, dated
January 15, 1998, between the Issuer and Comerica Bank
(incorporated by reference to exhibit 4(a) to the Issuer's
Form 10-K annual report for the fiscal year ended October
31, 1997)
4.2.2 First Amendment to Third Amended and Restated Revolving
Credit Agreement, dated February 12, 1998, between the
Issuer and Comerica Bank (incorporated by reference to
exhibit 4(m) to the Issuer's Form 10-Q quarterly report for
the quarterly period ended January 31, 1998)
4.2.3 Guaranty in favor of Comerica Bank entered into as of
January 15, 1998 by certain of subsidiaries of the Issuer,
including Rochester Gear, Inc. and Plastronics Plus, Inc.
4.2.4 Guaranty entered into as of March 4, 1998 by all other
Subsidiary Guarantors
The Issuer hereby undertakes to furnish to the Commission,
upon its request, copies of documents relating to the $6.1
million Michigan Strategic Fund Limited Obligation Refunding
Revenue Bonds, Series 1995 referred to in Part I of this
Registration Statement.
5.1 Opinion and consent of Miller, Canfield, Paddock and Stone,
P.L.C.
10.1 Purchase Agreement, dated February 27, 1998, among the
Issuer, the Subsidiary Guarantors, and the Initial
Purchasers (incorporated by reference to exhibit 1. to the
Issuer's Form 8-K current report filed on March 13, 1998)
</TABLE>
II-2
<PAGE> 168
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
10.2.1 Asset Purchase Agreement dated October 1, 1997 between the
Issuer and Machine Tool & Gear, Inc. ("MT&G") (incorporated
by reference to exhibit 2 to the Issuer's Form 8-K/A filed
on March 6, 1998)
10.2.2 First Amendment to Asset Purchase Agreement, dated October
28, 1997, between the Issuer and MT&G (incorporated by
reference to exhibit 2.1 to the Issuer's Form 8-K/A filed on
March 6, 1998)
10.2.3 Second Amendment to Asset Purchase Agreement between the
Issuer and MT&G (incorporated by reference to exhibit 2.3 to
the Issuer's Form 8-K/A filed on March 6, 1998)
10.2.4 Third Amendment to Asset Purchase Agreement between the
Issuer and MT&G (incorporated by reference to exhibit 2,3 to
the Issuer's Form 8-K/A filed on March 6, 1998)
10.2.5 Fourth Amendment to Asset Purchase Agreement between the
Issuer and MT&G (incorporated by reference to exhibit 2.4 to
the Issuer's Form 8-K/A filed on March 6, 1998)
10.3.1 Stock Purchase Agreement, dated December 9, 1997, between
the Issuer and Stephen Grand, individually and as Trustee of
the Stephen Grand Revocable Trust u/a dtd July 5, 1979 and
the Stephen M. Grand Property Trust u/a dtd January 22, 1997
(incorporated by reference to exhibit 10(1) to the Issuer's
Form 10-K annual report for the fiscal year ended October
31, 1997)
10.3.2 Amendment to Stock Purchase Agreement, dated March 4, 1998,
between the Issuer and Stephen Grand, individually and as
Trustee of the Stephen Grand Revocable Trust u/a dtd July 5,
1979 and the Stephen M. Grand Property Trust u/a dtd January
22, 1997 (incorporated by reference to exhibit 10.(b) to the
Issuer's Form 8-K current report filed on March 13, 1998)
10.4 Stock Purchase Agreement, dated January 16, 1998, by and
among the Issuer and each of the shareholders of Turn-Matic,
Inc. (incorporated by reference to exhibit 10(m) to the
Issuer's Form 10-K annual report for the fiscal year ended
October 31, 1997)**
10.5 1982 Incentive Stock Option Plan (incorporated by reference
to exhibit 10(a) to the Issuer's Form 10-K annual report for
the fiscal year ended October 31, 1983)**
10.6 Newcor, Inc. Directors' Retirement Plan (incorporated by
reference to exhibit 10(b) to the Issuer's Form 10-K annual
report for the fiscal year ended October 31, 1988)**
10.7 Board of Directors Deferred Directors' Fees plan
(incorporated by reference to exhibit 10(e) to the Issuer's
Form 10-K annual report for the fiscal year ended October
31, 1987)**
10.8.1 Newcor, Inc. Management Stock Incentive Plan (incorporated
by reference to exhibit 10(j) to the Issuer's Form 10-K
annual report for the fiscal year ended October 31, 1994)**
10.8.2 Amendment to Newcor, Inc. Management Stock Incentive Plan
(incorporated by reference to exhibit 10(k) to the Issuer's
Form 10-K annual report for the fiscal year ended October
31, 1994)**
10.9 1996 Employee Incentive Stock Plan (incorporated by
reference to Appendix A to the Issuer's proxy statement
dated February 5, 1996)**
10.10 1996 Non-Employee Directors Stock Option Plan (incorporated
by reference to Appendix B to the Issuer's proxy statement
dated February 5, 1996)**
10.11 Employment Agreement with W. John Weinhardt, dated February
13, 1995 (incorporated by reference to exhibit 10(g) to the
Issuer's Form 10-K annual report for the fiscal year ended
October 31, 1995)**
10.12 Change in Control Agreement with W. John Weinhardt, dated
February 13, 1995 (incorporated by reference to exhibit
10(h) to the Issuer's Form 10-K annual report for the fiscal
year ended October 31, 1995)**
</TABLE>
II-3
<PAGE> 169
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
10.13 Agreement with Thomas D. Parker, dated June 7,1988
(incorporated by reference to exhibit 10(h) to the Issuer's
Form 10-K annual report for the fiscal year ended October
31, 1992)**
10.14 Employment Agreement with Dennis H. Reckinger, dated July
31, 1992 (incorporated by reference to exhibit 10(n) to the
Issuer's Form 10-K annual report for the fiscal year ended
October 31, 1997)**
10.15 Employment Agreement with Robert C. Ballou, dated September
25, 1992 (incorporated by reference to exhibit 10(o) to the
Issuer's Form 10-K annual report for the fiscal year ended
October 31, 1997)**
10.16 Employment Agreement with Keith Hale, dated March 4, 1998
(incorporated by reference to exhibit 4(l) to the Issuer's
Form 10-Q quarterly report for the quarterly period ended
January 31, 1998)**
12.1 -- Statement re computation of ratios
21.1 -- List of subsidiaries of the Issuer
23.1 -- Consent of Coopers & Lybrand LLP
23.2 -- Consent of Miller, Canfield, Paddock and Stone, P.L.C.
(contained in Exhibit 5.1)
24.1 -- Powers of Attorney (contained in signature pages of this
Registration Statement)
25.1 -- Statement of Eligibility and Qualification of Trustee on
Form T-1 of First Trust National Association under the Trust
Indenture Act of 1939
99.1 -- Form of Letter of Transmittal with respect to the Exchange
Offer
99.2 -- Form of Notice of Guaranteed Delivery with respect to the
Exchange Offer
*99.3 -- Form of Exchange Agent Agreement
</TABLE>
- -------------------------
* To be filed by amendment
** Indicates contract or compensatory plan or arrangement with one or more
Company executive officers and/or directors of the Issuer
(b) Financial Statement Schedules
None required
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of any
of the Registrants pursuant to the foregoing provisions, or otherwise, each
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a Registrant
of expenses incurred or paid by a director, officer or controlling person of
such Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, such Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-4
<PAGE> 170
Each undersigned Registrant hereby undertakes:
(a) (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 date of this Registration Statement (or most recent post-effective
amendment thereof) which, individual or in the aggregate, represent a
fundamental change in the information set forth in this Registration
Statement. Notwithstanding the foregoing, any increase or decrease in
volume of the securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement.
(2) That, for the purpose of determining any 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.
(b) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
this Registration Statement through the date of responding to the request.
(c) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in this Registration Statement when it
became effective.
II-5
<PAGE> 171
NEWCOR, INC.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
named above 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 April 30, 1998.
NEWCOR, INC.
By: W. JOHN WEINHARDT
--------------------------------------
W. John Weinhardt
President and Chief Executive Officer
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. By signing below, each of the undersigned
does hereby severally constitute and appoint William A. Lawson, W. John
Weinhardt, and John J. Garber, and each or any one of them, the undersigned's
true and lawful attorneys and agents, with full power of substitution and
resubstitution, for the undersigned and in the undersigned's name, place and
stead, in any and all capacities, to sign any and all amendments or
post-effective amendments to this Registration Statement and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys and agents,
and each or any of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done, as fully to all intents
and purposes as the undersigned might or could do in person, hereby ratifying
and confirming all that said attorneys and agents, and each of them, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
---- -------- ----
<C> <S> <C>
WILLIAM A. LAWSON Chairman of the Board and Director April 30, 1998
- ------------------------------------------
William A. Lawson
W. JOHN WEINHARDT President and Chief Executive Officer and April 30, 1998
- ------------------------------------------ Director
W. John Weinhardt
JOHN J. GARBER Vice President-Finance, Treasurer and April 30, 1998
- ------------------------------------------ Chief Financial Officer (also principal
John J. Garber accounting officer)
Director April , 1998
- ------------------------------------------
Jerry D. Campbell
SHIRLEY E. GOFRANK Director April 30, 1998
- ------------------------------------------
Shirley E. Gofrank
Director April , 1998
- ------------------------------------------
Jack R. Lousma
RICHARD A. SMITH Director April 30, 1998
- ------------------------------------------
Richard A. Smith
Director April , 1998
- ------------------------------------------
Kurt O. Tech
</TABLE>
S-1
<PAGE> 172
ROCHESTER GEAR, INC.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
named above 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 April 30, 1998.
ROCHESTER GEAR, INC.
By: W. JOHN WEINHARDT
------------------------------------
W. John Weinhardt
Chairman of the Board
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. By signing below, each of the undersigned
does hereby severally constitute and appoint William A. Lawson, W. John
Weinhardt, and John J. Garber, and each or any one of them, his true and lawful
attorneys and agents, with full power of substitution and resubstitution, for
him and in his name, place and stead, in any and all capacities, to sign any and
all amendments or post-effective amendments to this Registration Statement and
to file the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys and agents, and each or any of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys and agents, and each of them,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
---- -------- ----
<C> <S> <C>
W. JOHN WEINHARDT Chairman of the Board (principal April 30, 1998
- ------------------------------------------ executive officer) and Director
W. John Weinhardt
JOHN J. GARBER Treasurer (principal financial officer April 30, 1998
- ------------------------------------------ and principal accounting officer)
John J. Garber
ROBERT C. BALLOU Director April 30, 1998
- ------------------------------------------
Robert C. Ballou
Director April , 1998
- ------------------------------------------
Donald A. Septer
</TABLE>
S-2
<PAGE> 173
PLASTRONICS PLUS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
named above 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 April 30, 1998.
PLASTRONICS PLUS, INC.
By: W. JOHN WEINHARDT
------------------------------------
W. John Weinhardt
Chairman of the Board
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. By signing below, each of the undersigned
does hereby severally constitute and appoint William A. Lawson, W. John
Weinhardt, and John J. Garber, and each or any one of them, his true and lawful
attorneys and agents, with full power of substitution and resubstitution, for
him and in his name, place and stead, in any and all capacities, to sign any and
all amendments or post-effective amendments to this Registration Statement and
to file the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys and agents, and each or any of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys and agents, and each of them,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
---- -------- ----
<C> <S> <C>
W. JOHN WEINHARDT Chairman of the Board (principal April 30, 1998
- ------------------------------------------ executive officer) and Director
W. John Weinhardt
JOHN J. GARBER Treasurer (principal financial officer April 30, 1998
- ------------------------------------------ and principal accounting officer)
John J. Garber
DENNIS H. RECKINGER Director April 30, 1998
- ------------------------------------------
Dennis H. Reckinger
Director April , 1998
- ------------------------------------------
Clifford R. Haggenjos, Jr.
</TABLE>
S-3
<PAGE> 174
GRAND MACHINING COMPANY
DECO TECHNOLOGIES, INC.
DECO INTERNATIONAL, INC.
TURN-MATIC, INC.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants named above 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 April 30, 1998.
GRAND MACHINING COMPANY
DECO TECHNOLOGIES, INC.
DECO INTERNATIONAL, INC.
TURN-MATIC, INC.
By: W. JOHN WEINHARDT
------------------------------------
W. John Weinhardt
Chairman of the Board (of each)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities with each of the above-named registrants and on the dates indicated.
By signing below, each of the undersigned does hereby severally constitute and
appoint William A. Lawson, W. John Weinhardt, and John J. Garber, and each or
any one of them, his true and lawful attorneys and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments or post-effective
amendments to this Registration Statement and to file the same, with all
exhibits thereto and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys and agents, and
each or any of them, full power and authority to do and perform each and every
act and thing requisite or necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
---- -------- ----
<C> <S> <C>
W. JOHN WEINHARDT Chairman of the Board (principal April 30, 1998
--------------------------------------------- executive officer) and Director
W. John Weinhardt
JOHN J. GARBER Treasurer (principal financial April 30, 1998
--------------------------------------------- officer and principal accounting
John J. Garber officer) and Director
KEITH HALE Director April 30, 1998
---------------------------------------------
Keith Hale
</TABLE>
S-4
<PAGE> 175
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the Issuer, as
amended
3.2 Bylaws of the Issuer
3.3 Articles of Incorporation of Rochester Gear, Inc., as
amended
3.4 Bylaws of Rochester Gear, Inc.
3.5 Articles of Incorporation of Plastronics Plus, Inc.
3.6 Bylaws of Plastronics Plus, Inc.
3.7 Restated Articles of Incorporation of Grand Machining
Company
3.8 Bylaws of Grand Machining Company
3.9 Articles of Incorporation of Deco Technologies, Inc.
3.10 Bylaws of Deco Technologies, Inc.
3.11 Articles of Incorporation of Deco International, Inc.
3.12 Bylaws of Deco International, Inc.
3.13 Restated Articles of Incorporation of Turn-Matic, Inc.
3.14 Amended and Restated Bylaws of Turn-Matic, Inc.
4.1.1 Indenture relating to the Notes (including forms of Notes
and related Subsidiary Guarantees), dated as of March 4,
1998, among the Issuer, the Subsidiary Guarantors, and First
Trust National Association, as trustee, relating to the
Notes (incorporated by reference to exhibit 4.(a) to the
Issuer's Form 8-K current report filed on March 13, 1998)
4.1.2 A/B Exchange Registration Rights Agreement, dated as of
March 4, 1998, among the Issuer, the Subsidiary Guarantors,
and the Initial Purchasers (incorporated by reference to ex-
hibit 4.(b) to the Issuer's Form 8-K current report filed on
March 13, 1998)
4.1.3 Form of Exchange Notes (including related Subsidiary
Guarantees)
4.2.1 Third Amended and Restated Revolving Credit Agreement, dated
January 15, 1998, between the Issuer and Comerica Bank
(incorporated by reference to exhibit 4(a) to the Issuer's
Form 10-K annual report for the fiscal year ended October
31, 1997)
4.2.2 First Amendment to Third Amended and Restated Revolving
Credit Agreement, dated February 12, 1998, between the
Issuer and Comerica Bank (incorporated by reference to
exhibit 4(m) to the Issuer's Form 10-Q quarterly report for
the quarterly period ended January 31, 1998)
4.2.3 Guaranty in favor of Comerica Bank entered into as of
January 15, 1998 by certain of subsidiaries of the Issuer,
including Rochester Gear, Inc. and Plastronics Plus, Inc.
4.2.4 Guaranty entered into as of March 4, 1998 by all other
Subsidiary Guarantors
The Issuer hereby undertakes to furnish to the Commission,
upon its request, copies of documents relating to the $6.1
million Michigan Strategic Fund Limited Obligation Refunding
Revenue Bonds, Series 1995 referred to in Part I of this
Registration Statement.
5.1 Opinion and consent of Miller, Canfield, Paddock and Stone,
P.L.C.
10.1 Purchase Agreement, dated February 27, 1998, among the
Issuer, the Subsidiary Guarantors, and the Initial
Purchasers (incorporated by reference to exhibit 1. to the
Issuer's Form 8-K current report filed on March 13, 1998)
10.2.1 Asset Purchase Agreement dated October 1, 1997 between the
Issuer and Machine Tool & Gear, Inc. ("MT&G") (incorporated
by reference to exhibit 2 to the Issuer's Form 8-K/A filed
on March 6, 1998)
</TABLE>
<PAGE> 176
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
10.2.2 First Amendment to Asset Purchase Agreement, dated October
28, 1997, between the Issuer and MT&G (incorporated by
reference to exhibit 2.1 to the Issuer's Form 8-K/A filed on
March 6, 1998)
10.2.3 Second Amendment to Asset Purchase Agreement between the
Issuer and MT&G (incorporated by reference to exhibit 2.3 to
the Issuer's Form 8-K/A filed on March 6, 1998)
10.2.4 Third Amendment to Asset Purchase Agreement between the
Issuer and MT&G (incorporated by reference to exhibit 2,3 to
the Issuer's Form 8-K/A filed on March 6, 1998)
10.2.5 Fourth Amendment to Asset Purchase Agreement between the
Issuer and MT&G (incorporated by reference to exhibit 2.4 to
the Issuer's Form 8-K/A filed on March 6, 1998)
10.3.1 Stock Purchase Agreement, dated December 9, 1997, between
the Issuer and Stephen Grand, individually and as Trustee of
the Stephen Grand Revocable Trust u/a dtd July 5, 1979 and
the Stephen M. Grand Property Trust u/a dtd January 22, 1997
(incorporated by reference to exhibit 10(1) to the Issuer's
Form 10-K annual report for the fiscal year ended October
31, 1997)
10.3.2 Amendment to Stock Purchase Agreement, dated March 4, 1998,
between the Issuer and Stephen Grand, individually and as
Trustee of the Stephen Grand Revocable Trust u/a dtd July 5,
1979 and the Stephen M. Grand Property Trust u/a dtd January
22, 1997 (incorporated by reference to exhibit 10.(b) to the
Issuer's Form 8-K current report filed on March 13, 1998)
10.4 Stock Purchase Agreement, dated January 16, 1998, by and
among the Issuer and each of the shareholders of Turn-Matic,
Inc. (incorporated by reference to exhibit 10(m) to the
Issuer's Form 10-K annual report for the fiscal year ended
October 31, 1997)**
10.5 1982 Incentive Stock Option Plan (incorporated by reference
to exhibit 10(a) to the Issuer's Form 10-K annual report for
the fiscal year ended October 31, 1983)**
10.6 Newcor, Inc. Directors' Retirement Plan (incorporated by
reference to exhibit 10(b) to the Issuer's Form 10-K annual
report for the fiscal year ended October 31, 1988)**
10.7 Board of Directors Deferred Directors' Fees plan
(incorporated by reference to exhibit 10(e) to the Issuer's
Form 10-K annual report for the fiscal year ended October
31, 1987)**
10.8.1 Newcor, Inc. Management Stock Incentive Plan (incorporated
by reference to exhibit 10(j) to the Issuer's Form 10-K
annual report for the fiscal year ended October 31, 1994)**
10.8.2 Amendment to Newcor, Inc. Management Stock Incentive Plan
(incorporated by reference to exhibit 10(k) to the Issuer's
Form 10-K annual report for the fiscal year ended October
31, 1994)**
10.9 1996 Employee Incentive Stock Plan (incorporated by
reference to Appendix A to the Issuer's proxy statement
dated February 5, 1996)**
10.10 1996 Non-Employee Directors Stock Option Plan (incorporated
by reference to Appendix B to the Issuer's proxy statement
dated February 5, 1996)**
10.11 Employment Agreement with W. John Weinhardt, dated February
13, 1995 (incorporated by reference to exhibit 10(g) to the
Issuer's Form 10-K annual report for the fiscal year ended
October 31, 1995)**
10.12 Change in Control Agreement with W. John Weinhardt, dated
February 13, 1995 (incorporated by reference to exhibit
10(h) to the Issuer's Form 10-K annual report for the fiscal
year ended October 31, 1995)**
10.13 Agreement with Thomas D. Parker, dated June 7,1988
(incorporated by reference to exhibit 10(h) to the Issuer's
Form 10-K annual report for the fiscal year ended October
31, 1992)**
10.14 Employment Agreement with Dennis H. Reckinger, dated July
31, 1992 (incorporated by reference to exhibit 10(n) to the
Issuer's Form 10-K annual report for the fiscal year ended
October 31, 1997)**
</TABLE>
<PAGE> 177
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
10.15 Employment Agreement with Robert C. Ballou, dated September
25, 1992 (incorporated by reference to exhibit 10(o) to the
Issuer's Form 10-K annual report for the fiscal year ended
October 31, 1997)**
10.16 Employment Agreement with Keith Hale, dated March 4, 1998
(incorporated by reference to exhibit 4(l) to the Issuer's
Form 10-Q quarterly report for the quarterly period ended
January 31, 1998)**
12.1 -- Statement re computation of ratios
21.1 -- List of subsidiaries of the Issuer
23.1 -- Consent of Coopers & Lybrand LLP
23.2 -- Consent of Miller, Canfield, Paddock and Stone, P.L.C.
(contained in Exhibit 5.1)
24.1 -- Powers of Attorney (contained in signature pages of this
Registration Statement)
25.1 -- Statement of Eligibility and Qualification of Trustee on
Form T-1 of First Trust National Association under the Trust
Indenture Act of 1939
99.1 -- Form of Letter of Transmittal with respect to the Exchange
Offer
99.2 -- Form of Notice of Guaranteed Delivery with respect to the
Exchange Offer
*99.3 -- Form of Exchange Agent Agreement
</TABLE>
- -------------------------
* To be filed by amendment
** Indicates contract or compensatory plan or arrangement with one or more
Company executive officers and/or directors of the Issuer
<PAGE> 1
EXHIBIT 3.1
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATION
FILED 09:00AM 08/03/1998
90215548-697924
RESTATED CERTIFICATE OF INCORPORATION
OF
NEWCOR, INC.
NEWCOR, INC., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
1. The name of the corporation is NEWCOR, INC.
The date of filing of its original Certificate of Incorporation
with the Secretary of State was January 3, 1969.
2. This Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Certificate of
Incorporation of this corporation as heretofore amended or supplemented and
there is no discrepancy between those provisions and the provisions of this
Restated Certificate of Incorporation.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments or
changes to read as herein set forth in full:
FIRST. The name of the corporation is NEWCOR, INC.
SECOND. The address of its registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or
promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
To design, manufacture, fabricate, machine, assemble, buy, sell and
otherwise trade and deal in and with welding machines and other types of
machinery, machine parts, metal fabrications, castings, metals, and electrical
apparatus and equipment of every kind and character.
To acquire, and pay for in cash, stock or bonds of this corporation or
otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect
of, mortgage or otherwise dispose of letters patent of
<PAGE> 2
the United States or any foreign country, patent rights, licenses and
privileges, inventions, improvements and processes, copyrights, trademarks and
trade names, relating to or useful in connection with any business of this
corporation.
To acquire by purchase, subscription or otherwise, and to receive, hold,
own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or otherwise
dispose of or deal in and with any of the shares of the capital stock, or any
voting trust certificates in respect of the shares of capital stock, scrip,
warrants, rights, bonds, debentures, notes, trust receipts, and other
securities, obligations, choses in action and evidence of indebtedness or
interest issued or created by any corporations, joint stock companies,
syndicates, associations, firms, trusts or persons, public or private, or by the
government of the United States of America, or by any foreign government, or by
any state, territory, province, municipality or other political subdivision or
by any governmental agency, and as owner thereof to possess and exercise all the
rights, powers and privileges of ownership, including the right to execute
consents and vote thereon, and to do any and all acts and things necessary or
advisable for the preservation, protection, improvement and enhancement in value
thereof.
To borrow or raise moneys for any of the purposes of the corporation
and, from time to time without limit as to amount, to draw, make, accept,
endorse, execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures and other negotiable or non-negotiable instruments
and evidences of indebtedness, and to secure the payment of any thereof and of
the interest thereon by mortgage upon or pledge, conveyance or assignment in
trust of the whole or any part of the property of the corporation, whether at
the time owned or thereafter acquired, and to sell, pledge or otherwise dispose
of such bonds or other obligations of the corporation for its corporate
purposes.
To purchase, receive, take by grant, gift, devise, bequest or otherwise
lease, or otherwise acquire, own, hold, improve, employ, use and otherwise deal
in and with real or personal property, or any interest therein, wherever
situated, and to sell, convey, lease, exchange, transfer or otherwise dispose
of, or mortgage or pledge, all or any of the corporation's property and assets,
or any interest therein, wherever situated.
In general, to possess and exercise all the powers and privileges
granted by the General Corporation Law of Delaware or by any other law of
Delaware or by this Certificate of Incorporation together with any powers
incidental thereto, so far as such powers and privileges are necessary or
convenient to the conduct, promotion or attainment of the business or purposes
of the corporation.
-2-
<PAGE> 3
The business and purposes specified in the foregoing clauses shall,
except where otherwise expressed, be in nowise limited or restricted by
reference to, or inference from, the terms of any other clause in this
certificate of incorporation, but the business and purpose specified in each of
the foregoing clauses of this article shall be regarded as independent business
and purposes.
FOURTH. The total number of shares of stock of all classes which the
corporation shall have authority to issue is four million, five hundred thousand
(4,500,000) of which three million, five hundred thousand (3,500,000) shall be
shares of Common Stock with a par value of one dollar ($1.00) per share, and one
million (1,000,000) shall be shares of Preferred Stock without par value.
Each share of Common Stock shall entitle the holder thereof to one vote,
in person or by proxy, at any and all meetings of the stockholders of the
corporation.
The Preferred Stock shall be issuable in series, and in connection with
the issuance of any series of Preferred Stock and to the extent now or
hereafter permitted by the laws of the State of Delaware, the Board of Directors
is authorized to fix by resolution the designation of each series, the stated
value of the shares of each series, the dividend rate of each series and the
date or dates or other provisions respecting the payment of dividends, the
provisions, if any, for a sinking fund for the shares of each series, the
preferences of the shares of each series in the event of liquidation or
dissolution of the corporation, the provisions, if any, respecting the
redemption of the shares of each series and, subject to requirements of the laws
of the State of Delaware, the voting rights (except that such shares shall not
have more than one vote per share), the terms, if any, upon which the shares of
each series shall be convertible into or exchangeable for any other shares of
stock of the corporation and any other relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
of the shares of each series.
FIFTH. The corporation is to have perpetual existence.
SIXTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To make, alter, amend or repeal the by-laws of the corporation; to
issue, sell, grant options to purchase and dispose of shares of the authorized
and previously unissued stock of any class of the corporation and shares of its
outstanding stock of any class held in its treasury; to issue, sell and dispose
of the bonds, debentures, notes and other obligations or evidences of
indebtedness of the corporation, including bonds, debentures, notes and other
obligations or evidences of
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<PAGE> 4
indebtedness of the corporation convertible into stock of any class of the
corporation; to authorize and cause to be executed mortgages and liens upon the
real and personal property of the corporation including after-acquired property;
to declare and pay dividends on the stock of any class of the corporation; to
set apart out of any of the funds of the corporation available for dividends or
otherwise a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
To designate one or more committees, by resolution passed by a majority
of the whole Board, each committee to consist of two or more of the directors of
the corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. Any such committee, to the extent provided in the
resolution or in the by-laws of the corporation, shall have and may exercise the
powers of the Board of Directors in the management of the business and affairs
of the corporation, and may authorize the seal of the corporation to be affixed
to all papers which may require it; provided, however, the by-laws may provide
that in the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
When and as authorized by the affirmative vote of the holders of a
majority of the stock issued and outstanding having voting power given at a
stockholders' meeting duly called upon such notice as is required by statute, or
when authorized by the written consent of the holders of a majority of the
voting stock issued and outstanding, to sell, lease or exchange all or
substantially all of the property and assets of the corporation, including its
good will and its corporate franchises, upon such terms and conditions and for
such consideration, which may consist in whole or in part of money or property
including shares of stock in, and/or other securities of, any other corporation
or corporations, as the Board of Directors shall deem expedient and for the best
interests of the corporation.
To exercise all other corporate powers and to do all other acts and
things as may be exercised or done by the corporation, subject, however, to the
provisions of the statutes of the State of Delaware and of this Certificate of
Incorporation and the by-laws of the corporation.
SEVENTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
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<PAGE> 5
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this corporation under the provisions of
section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders, of this
corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
EIGHTH. Meetings of stockholders may be held within or without the State
of Delaware, as the by-laws may provide. The books of the corporation may be
kept (subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the by-laws of the corporation. Elections of directors
need not be by written ballot unless the by-laws of the corporation shall so
provide.
NINTH. (a) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, against expenses (including attorneys' fees and ERISA excise
taxes or penalties), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, 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, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
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<PAGE> 6
(b) The corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, against expenses (including attorneys' fees and ERISA excise
taxes or penalties), actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation and except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent that the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b) of this Article
Ninth or in defense of any claim, issue or matter therein, he shall be
indemnified by the corporation against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) of this Article
Ninth, 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, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in said paragraphs (a) and
(b). Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit, or proceeding, or (ii) if such a quorum is not obtainable, or even
if obtainable and a quorum of disinterested directors so directs, by independent
legal counsel (compensated by the corporation) in a written opinion, or (iii) by
the stockholders.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article.
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<PAGE> 7
(f) The indemnification and advancement of expenses provided by or
granted pursuant to this Article shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
(g) 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,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article or of applicable law. The indemnification rights
conferred in this Article Ninth shall be contract rights between the corporation
and the officer or director or other individual entitled to indemnification.
(h) A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
TENTH. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ELEVENTH. 1. Except as set forth in paragraph (2) of this Article, the
affirmative vote or consent of the holders of not less than 75% of the
outstanding shares of stock of the corporation entitled to vote in elections of
directors shall be required:
(a) to adopt any agreement for, or to approve, the merger or
consolidation of the corporation or any subsidiary (as hereinafter
defined) with or into any other person (as hereinafter defined),
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<PAGE> 8
(b) to authorize any sale, lease, transfer, exchange, mortgage, pledge
or other disposition to any other person of all or substantially all of
the assets of the corporation or any subsidiary, or
(c) to authorize the issuance or transfer by the corporation or any
subsidiary of any voting securities of the corporation or any subsidiary
in exchange or payment for the securities or assets of any other person,
if such authorization is otherwise required by law or by any agreement
between the corporation and any national securities exchange or by any
other agreement to which the corporation or any subsidiary is a party,
if, in any such case, as of the record date for the determination of
shareholders entitled to notice thereof and to vote thereon or consent thereto,
such other person is, or at any time within the preceding twelve months has
been, the beneficial owner (as hereinafter defined) of 5 percent or more of the
outstanding shares of stock of the corporation entitled to vote in elections of
directors. If such other person is not, and has not been, such a 5 percent
beneficial owner, the provisions of this paragraph 1 shall not apply, and the
provisions of Delaware law shall apply.
2. The provisions of paragraph (1) of this Article shall not apply, and
the provisions of Delaware law shall apply to (a) any transaction described
therein if the Board of Directors by resolutions shall have approved a
memorandum of understanding with such other person setting forth the principal
terms of such transaction and such transaction is substantially consistent
therewith, provided that a majority of those members of the Board of Directors
voting in favor of such resolution were duly elected and acting members of the
Board of Directors prior to the time such other person become the beneficial
owner of 5 percent or more of the outstanding shares of stock of the corporation
entitled to vote in elections of directors; or (b) any transaction described
therein if such other person is a corporation of which a majority of the
outstanding shares of all classes of stock entitled to vote in elections of
directors is owned of record or beneficially by the corporation or its
subsidiaries.
3. The affirmative vote or consent of the holders of not less than 75%
of the outstanding shares of the corporation entitled to vote in election of
directors shall be required for the adoption of any plan for the dissolution of
the corporation if the Board of Directors shall not have, by resolution,
recommended to the shareholders the adoption of such plan for dissolution of the
corporation. If a majority of the whole Board of Directors then in office shall
have so recommended to the shareholders such plan for dissolution of the
corporation, the provisions of Delaware law shall apply.
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<PAGE> 9
4. For purposes of this Article,
(a) any specified person shall be deemed to be the "beneficial owner" of
shares of stock of the corporation (i) which such specified person or any of its
affiliates or associates (as such terms are hereinafter defined) owns, directly
or indirectly, whether of record or not, (ii) which such specified person or any
of its affiliates or associates has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights, warrants or options, or
otherwise, or (iii) which are beneficially owned, directly or indirectly
(including shares deemed owned through application of clauses (i) and (ii)
above) by any other person with which such specified person or any of its
affiliates or associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of stock of the corporation;
(b) a "subsidiary" is any corporation more than 49 percent of the
voting securities of which are owned, directly or indirectly, by the
corporation;
(c) a "person" is any individual, corporation or other entity;
(d) an "affiliate" of a specified person is any person that directly, or
indirectly through one or more intermediates, controls or is controlled by, or
is under common control with, the specified person; and
(e) an "associate" of a specified person is (i) any person of which such
specified person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity securities, (ii)
any trust or other estate in which such specified person has a substantial
beneficial interest or as to which such specified person serves as trustee or in
a similar capacity; or (iii) any relative or spouse of such specified person, or
any relative of such spouse, who has the same home as such specified person or
who is a director or officer of such specified person or any corporation which
controls or is controlled by such specified person.
5. For purposes of determining whether a person owns beneficially 5
percent or more of the outstanding shares of stock of the corporation entitled
to vote in elections of directors, the outstanding shares of stock of the
corporation shall include shares deemed owned through application of clauses
(i), (ii) or (iii) of paragraph (4)(a) above but shall not include any other
shares which may be issuable pursuant to any agreement or upon exercise of
conversion rights, warrants or options, or otherwise.
6. The Board of Directors shall have the power and duty to determine,
for purposes of this Article, on the basis of information available to such
Board,
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(a) whether any person referred to in paragraph (1) of this Article
owns beneficially 5 percent or more of the outstanding shares of stock of the
corporation entitled to vote in elections of directors; and
(b) whether a proposed transaction is substantially consistent with any
memorandum of understanding of the character referred to in paragraph (2) of
this Article. Any such determination shall be conclusive and binding for all
purposes of this Article.
7. The provisions of this Article may not be amended, modified or
repealed unless authorized and approved by the affirmative vote or consent of
the holders of not less than 75% of the outstanding shares of stock of the
corporation entitled to vote in elections of directors.
8. To the extent that the provisions of this Article are in conflict
with any other provisions of the Articles of Incorporation, the provisions of
this Article shall be controlling.
TWELFTH. 1. Notwithstanding any provisions of the By-Laws of the
corporation, the shareholders of this corporation shall not have the right to
amend, modify or repeal any and all provisions of the By-Laws of the corporation
relating to number, qualifications or term of directors unless so adopted by the
affirmative vote or consent of the holders of not less than 75% of the
outstanding shares of stock of the corporation entitled to vote in elections of
directors.
2. The provisions of this Article may not be amended, modified or
repealed unless authorized and approved by the affirmative vote or consent of
the holders of not less than 75% of the outstanding shares of stock of the
corporation entitled to vote in elections of directors.
4. This Restated Certificate of Incorporation was duly adopted by the
Board of Directors in accordance with Section 245 of the General Corporation Law
of the State of Delaware.
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IN WITNESS WHEREOF, said NEWCOR, INC. has caused this Certificate to be
signed by Richard A. Smith, its President, and attested by Marjorie H. Edwards,
its Secretary, this 25th day of July, 1990.
NEWCOR, INC.
By /s/ R. A. Smith
---------------------------
Richard A. Smith, President
ATTEST:
By Marjorie H. Edwards
--------------------------------
Marjorie H. Edwards, Secretary
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<PAGE> 12
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE PAGE 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "NEWCOR, INC.", FILED IN THIS OFFICE ON THE THIRTY-FIRST DAY OF
MARCH, A.D. 1992, AT 10 O'CLOCK A.M.
[SEAL]
Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
0697924 8100 AUTHENTICATION: 8940398
981072516 DATE: 02-25-98
<PAGE> 13
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10:00 AM 03/31/1992
920925108 - 697924
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
Newcor, Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the state of Delaware, DOES HEREBY CERTIFY:
FIRST: that at a meeting of the Board of Directors of said corporation,
resolutions were duly adopted setting forth proposed amendments to the Restated
Certificate of Incorporation of said corporation, declaring said amendments
to be advisable and calling a meeting of the Stockholders of said corporation
for consideration thereof. The resolutions setting forth the proposed amendments
are as follows:
1. RESOLVED, that the Restated Certificate of Incorporation of Newcor, Inc.
be amended by changing Article Fourth thereof so that, as amended, said
Article shall be and read in its entirety as follows:
"FOURTH. The total number of shares of stock of all classes which
the corporation shall have authority to issue is 11 million
(11,000,000) of which 10 million (10,000,000) shall be shares of
Common Stock with a par value of one dollar ($1.00) per share, and one
million (1,000,000) shall be shares of Preferred Stock without par
value.
Each share of Common Stock shall entitle the holder thereof to
one vote, in person or by proxy, at any and all meetings of the
stockholders of the corporation.
The Preferred Stock shall be issuable in series, and in
connection with the issuance of any series of Preferred Stock and to
the extent now or hereafter permitted by the laws of the State of
Delaware, the Board of Directors is authorized to fix by resolution
the designation of each series, the stated value of the shares of each
series, the dividend rate of each series and the date or dates or
other provisions respecting the payment of dividends, the provisions,
if any, for a sinking fund for the shares of each series, the
preferences, of the shares of each series in the event of
<PAGE> 14
liquidation or dissolution of the corporation, the provisions, if any,
respecting the redemption of the shares of each series and subject to
requirements of the laws of the State of Delaware, the voting rights
(except that such shares shall not have more than one vote per share),
the terms, if any, upon which the shares of each series shall be
convertible into or exchangeable for any other shares of stock of the
corporation and any other relative, participating, optional or other
special rights, and qualifications, limitations or restrictions
thereof, of the shares of each series."
2. RESOLVED, that the Restated Certificate of Incorporation of Newcor,
Inc. be amended by adding thereto a new Article Thirteenth to read in its
entirety as follows:
"THIRTEENTH. At the 1992 annual meeting of the shareholders
of the corporation, the directors of the corporation shall be divided
into three classes with respect to the time that they severally hold
office, as nearly equal in number as possible, with the initial term
of office of the first class of directors to expire at the 1993 annual
meeting of shareholders, the initial term of office of the second
class of directors to expire at the 1994 annual meeting of
shareholders, and the initial term of the third class of directors to
expire at the 1995 annual meeting of shareholders. Commencing with the
1993 annual meeting of shareholders, directors elected to succeed
those directors whose terms have expired at such meeting shall be
elected for a term of office to expire at the third succeeding annual
meeting of shareholders after their election. If the number of
directors constituting the entire Board of Directors is changed, any
increase or decrease shall be apportioned among the classes so as to
maintain or attain, if possible, the equality of the number of
directors in each class. If such equality is not possible, the
increase or decrease shall be apportioned among the classes in such a
way that the difference between the number of directors in any two
classes shall not exceed one. In no case, however, shall a decrease
in the number of directors shorten the term of any incumbent
director."
SECOND: That thereafter, pursuant to resolution of its board of directors,
an annual meeting of the stockholders of said corporation was duly called and
held, upon notice and in accordance with Section 222 of the General Corporation
Law of the State of Delaware at which meeting the necessary number of votes of
shares as required by statute were voted in favor of the amendment.
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<PAGE> 15
THIRD: That the aforesaid amendments were duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, said Newcor Inc. has caused this certificate to be
signed by Richard A. Smith, its President, and attested by Marjorie H. Edwards,
its Secretary, this 11th day of March, 1992.
NEWCOR INC.
By: /s/ R. A. Smith
---------------------------
Richard A. Smith, President
ATTEST:
By: /s/ Marjorie H. Edwards
------------------------------
Marjorie H. Edwards, Secretary
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<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
NEWCOR, INC.
A DELAWARE CORPORATION
ARTICLE I.
Stockholders
Section 1. Annual Meeting. The annual meeting of the
stockholders of the corporation shall be held at such time on such date in the
month of February or March following the end of each fiscal year of the
corporation ending after the fiscal year ended October 31, 1978 at its
registered office in the City of Wilmington, Delaware, or at such other place
within or without the State of Delaware, as may from time to time be designated
at least 60 days prior to the date designated by the Board of Directors, for the
purpose of electing directors and for the transaction of such other business as
may properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the
stockholders may be held upon call of the President or Secretary or of the Board
of Directors at the registered office of the corporation in the City of
Wilmington, Delaware, or at such other place within or without the State of
Delaware as may be stated in the notice thereof and at such time and for such
purpose as may be stated in the notice. It shall be the duty of the President or
the Secretary or of the Board of Directors to call a special meeting of the
stockholders whenever requested in writing so to do by the holders of at least
twenty-five (25%) per cent in amount of the stock, regardless of class, then
outstanding and entitled to vote at such meeting.
Section 3. Notice of Meetings. Notice of the time, place
and the purpose of each meeting of the stockholders, signed by the President or
a Vice President or the Secretary or any Assistant Secretary shall be served
either personally or by mail upon each stockholder of record entitled to vote at
such meeting not less than ten (10) nor more than fifty (50) days before the
meeting; provided, that no notice of adjourned meetings need be given. If
mailed, the notice shall be directed to each stockholder entitled to notice at
his address as it appears on the stock books of the corporation unless he shall
have filed with the Secretary thereof a written request that notices intended
for him be mailed to some other address, in which case it shall be mailed to the
address designated in such request. Such further notice shall be given as may be
required by law. Meetings may be held without notice if all stockholders
entitled to vote thereat
<PAGE> 2
Page 2.
are present in person or by proxy or if notice of the time, place and purpose
of such meeting is waived by telegram, radiogram, cablegram or other writing,
either before or after the holding thereof, by all stockholders not present,
and entitled to vote at such meeting.
Section 4. Quorum. The holders of record of a majority of the
shares of stock of the corporation issued and outstanding regardless of class
and entitled to vote thereat, present in person or by proxy shall, except as
otherwise provided by law or by the Certificate of Incorporation of the
corporation as from time to time amended, constitute a quorum at all meetings of
the stockholders; if there be no such quorum, the holders of a majority of such
shares so present or represented may adjourn the meeting from time to time to a
further date without further notice other than the announcement at such meeting,
and when a quorum shall be present upon such adjourned day, any business may be
transacted which might have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders
shall be presided over by the President or the Chairman of the Board of
Directors, or if they are not present by a Vice President or if none of the Vice
Presidents are present by a Chairman to be chosen at the meeting. The Secretary
or an Assistant Secretary of the corporation, or, in their absence, a person
chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder
present at a meeting of the stockholders shall request the appointment of
inspectors, the Chairman of the meeting shall appoint inspectors who need not be
shareholders. If the right of any person to vote at such meeting shall be
challenged, the inspectors of election shall determine such right. The
inspectors shall receive and count the votes either upon an election or for the
decision of any question, and shall determine the result. Their certificate of
any vote shall be prima facie evidence thereof.
Section 7. Proxy and Voting. Except as otherwise provided by
statute, the Certificate of Incorporation, or any certificate duly filed in the
State of Delaware pursuant to Section 151 of the Delaware General Corporation
Law, each holder of record of shares of stock of the corporation having voting
power shall be entitled at each meeting of the stockholders to one vote for
every share of such stock standing in his name on the record of stockholders of
the corporation on the date fixed by the Board as the record date for the
determination of the stockholders who shall be entitled to notice of and to vote
at such meeting; or if such record date shall not have been so fixed, then at
the close of business on the day next preceding the day on which notice thereof
shall be given, or if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; or each stockholder entitled to
vote at any meeting of stockholders may authorize another person or persons to
act for him by a proxy
<PAGE> 3
Page 3.
signed by such stockholder or his attorney-in-fact. Any such proxy shall be
delivered to the secretary of such meeting at or prior to the time designated in
the order of business for so delivering such proxies. No proxy shall be valid
after the expiration of three years from the date thereof, unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of the
stockholder executing it, except in those cases where an irrevocable proxy is
permitted by law. Except as otherwise provided by statute, these By-Laws, or the
Certificate of Incorporation, any corporate action to be taken by vote of the
stockholders shall be authorized by a majority of the total votes, or when
stockholders are required to vote by class by a majority of the votes of the
appropriate class, cast at a meeting of stockholders by the holders of shares
present in person or represented by proxy and entitled to vote on such action.
Unless required by statute, or determined by the chairman of the meeting to be
advisable, the vote on any question need not be by written ballot. On a vote by
written ballot, each ballot shall be signed by the stockholder voting, or by his
proxy, if there be such proxy, and shall state the number of shares voted.
Section 8. Consent of Stockholders in Lieu of Meeting. Whenever
the vote of stockholders at a meeting thereof is required or permitted to be
taken for or in connection with any corporate action, the meeting and vote of
stockholders can be dispensed with: (1) if all of the stockholders who would
have been entitled to vote upon the action if such meeting were held shall
consent in writing to such corporate action being taken; or (2) unless the
Certificate of Incorporation provides otherwise, with the written consent of the
holders of not less than the minimum percentage of the total vote required by
statute for the proposed corporate action, and provided that prompt notice must
be given to all stockholders of the taking of corporate action without a meeting
and by less than unanimous written consent.
<PAGE> 4
ARTICLE II
DIRECTORS
Amended 3/8/95
Section 1. Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors and shall consist of not less than three (3) nor more than eleven (11)
persons, the exact number of which shall be determined from time to time by
resolution adopted by affirmative vote of a majority of the Board of Directors,
subject to the provisions of Section 2 of this Article II and Article Thirteenth
of the Restated Certificate of Incorporation, as amended. All of the directors
shall be of full age. Directors need not be stockholders. The Board of Directors
shall be divided into three classes, with the term of office of one class
expiring each year, and shall be elected at annual meetings of stockholders in
the manner, and otherwise subject to the provisions of, Article Thirteenth of
the Certificate of Incorporation, as amended. Each director elected shall hold
office until his successor is elected and qualified or until his earlier death,
resignation or removal. Except as otherwise provided by statute or these Bylaws,
directors shall be elected at an annual meeting of stockholders for the election
of directors for which a quorum is present, and the persons receiving the
plurality of the votes cast as such election shall be elected.
<PAGE> 5
Page 4.
Section 2. Vacancies. Vacancies and any newly created
directorships may be filled by a majority of the directors then in office,
though less than a quorum, or by a sole remaining director, and the directors so
chosen shall hold office until the next election of the class for which such
directors shall have been chosen and until their successors are duly elected and
shall qualify, unless sooner displaced. If there are no directors in office,
then an election of directors may be held in the manner provided by statute. If,
at the time of filling any vacancy or any newly created directorship, the
directors then in office shall constitute less than a majority of the whole
Board (as constituted immediately prior to any such increase), the Court of
Chancery may, upon application of any stockholder or holders of at least ten
percent of the votes of the shares at the time outstanding having the right to
vote for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office. Except as otherwise provided in these By-Laws,
when one or more directors shall resign from the Board, effective at a future
date, a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each director so chosen shall hold office as provided in this section in the
filling of other vacancies.
Section 3. Meetings. The meetings of the Board of Directors
shall be held at such place or places within or without the State of Delaware as
may from time to time be determined by a majority of the Board. Regular meetings
of the Board shall be held at such time and place as shall from time to time be
determined by resolution of the Board of Directors. Special meetings may be held
at any time upon the call of the President, Chairman of the Board or Vice
President or of not less than a majority of the directors then in office.
Section 4. Notice of Meetings. Oral telegraphic or written
notice of the time, place and purpose of all the meetings of the Board, regular
and special, shall be duly served on or sent, mailed or telegraphed to each
director not less than two (2) nor more than fifteen (15) days before the
meeting except that a regular meeting of the Board may be held without notice
immediately after the annual meeting of the stockholders at the same place as
such meeting was held, for the purpose of electing or appointing officers for
the ensuing year; provided, that no notice of adjourned meetings need be given.
Meetings may be held at any time without notice if all the directors are present
or if those not present waive notice of the time, place and purpose of such
meeting by telegram, radiogram, cablegram or other writing, either before or
after the holding thereof.
<PAGE> 6
Page 5.
Section 5. Executive and Other Committees. The Board of
Directors may, by resolution passed by a majority of the whole Board,
designate two or more of their number to constitute an executive or any other
committee, who, to the extent provided in said resolution, shall have and
exercise the authority of the Board of Directors in the management of the
business of the corporation between the meetings of the Board.
Section 6. Removal of Directors. Except as otherwise provided
in the Certificate of Incorporation or in these By-Laws, any director may be
removed, either with or without cause, at any time, by the affirmative vote of a
majority of the votes of the issued and outstanding stock entitled to vote for
the election of directors of the Corporation given at a special meeting of the
stockholders called and held for the purpose; and the vacancy in the Board
caused by any such removal may be filled by such stockholders at such meeting,
or, if the stockholders shall fail to fill such vacancy, as in these By-Laws
provided.
Section 7. Vice Chairman. The Board may elect members of the
Board of Directors to the position of Vice Chairman. A Vice Chairman shall
perform such duties and functions as shall be assigned to him from time to time
by the Chairman of the Board of Directors.
ARTICLE III.
Officers
Section 1. Election or Appointment. At its first meeting
following the annual meeting of stockholders, the Board of Directors shall elect
a President, who need not be a member of the Board of Directors, and shall also
elect a Secretary and a Treasurer; and may from time to time select a Chairman
of the Board, one or more Vice Presidents, Assistant Secretaries and Assistant
Treasurers. The same person may hold any two offices excepting those of
President and Vice President, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity. The Board may also appoint such
other officers and agents as they may deem necessary for the transaction of the
business of the corporation.
Section 2. Term of Office. The term of office of all officers
shall be one (1) year or until their respective successors are chosen but any
officer may be removed from office at any meeting of the Board of Directors by
the affirmative vote of a majority of the Directors then in office, whenever in
their judgment the business interests of the corporation will be served thereby.
The Board of Directors shall have power to fill any vacancies in any offices
occurring from whatever reason.
<PAGE> 7
Page 6.
Section 3. Eligibility of Officers. The President and
Chairman of the Board of Directors shall be stockholders. The Chairman of the
Board shall be a director of the corporation. The Vice Presidents, Secretary and
Treasurer and such other officers as may be elected or appointed need not be
stockholders or directors of the corporation.
Section 4. Chief Executive Officer. At the first meeting of
each newly elected Board of Directors, the board shall designate the Chairman of
the Board or the President as the Chief Executive Officer of the corporation;
provided, however, that if a motion is not made and carried to change the
designation, the designation shall be the same as the designation for the
preceding year; provided, further, that the designation of the Chief Executive
Officer may be changed at any meeting of the Board of Directors. The President
shall be the Chief Executive Officer whenever the office of Chairman of the
Board is vacant. The Chief Executive Officer shall be responsible to the Board
of Directors for the general supervision and management of the business and
affairs of the corporation and shall see that all orders and resolutions of the
board are carried into effect. The Chairman of the Board or President who is not
Chief Executive Officer shall be subject to the authority of the Chief Executive
Officer, but shall exercise all of the powers and discharge all of the duties of
the Chief Executive Officer during the absence or disability of the Chief
Executive Officer.
Section 5. Chairman of the Board of Directors. The
Chairman of the Board of Directors shall preside at all meetings of
stockholders, of the Board of Directors and of any Executive Committee. He shall
perform such other duties and functions as shall be assigned to him from time to
time by the Board of Directors, and by any Executive Committee. He shall be, ex
officio, a member of all standing committees. Except where by law the signature
of the President of the corporation is required, the Chairman of the Board of
Directors shall possess the same power and authority to sign all certificates,
contracts, instruments, papers and documents of every conceivable kind and
character whatsoever in the name of and on behalf of the corporation which may
be authorized by the Board of Directors. During the absence or disability of the
President, or while that office is vacant, the Chairman of the Board of
Directors shall exercise all of the powers and discharge all of the duties of
the President.
Section 6. President. The President shall during the absence
or disability of the Chairman of the Board, or while that office is vacant,
preside over all meetings of the Board of Directors, of the stockholders,
and of any Executive Committee, and shall perform all of the duties and
functions, and when so acting shall have all powers and authority, of the
Chairman of the Board. He shall be, ex officio, a member of all standing
committees. The President, unless some other person is specifically authorized
by the Board of Directors, shall have the power to sign all certificates of
stock, bonds, deeds, mortgages, extension agreements, leases and contracts
of the corporation. The President shall, in general, perform all duties as
may be prescribed by the Board of Directors.
<PAGE> 8
Page 7.
Section 7. Vice President. Except as specifically limited by vote of
the Board of Directors, any Vice President shall perform the duties and have the
powers of the President during the absence or disability of the President and
shall have the power to sign all certificates of stock, bonds, deeds, and
contracts of the corporation. He shall perform such other duties and have such
other powers as the Board of Directors shall designate.
Section 8. Secretary. The Secretary shall keep accurate minutes of all
meetings of the stockholders and the Board of Directors, and shall perform such
other duties and have such other powers as the Board of Directors shall
designate. The Secretary shall have power, together with the President or a Vice
President, to sign certificates of stock of the corporation. In his absence at
any meeting, an Assistant Secretary or a Secretary pro tempore shall perform his
duties thereat. The Secretary, any Assistant Secretary, and any Secretary pro
tempore shall be sworn to the faithful discharge of their duties.
Section 9. Treasurer. The Treasurer, subject to the order of the Board
of Directors, shall have the care and custody of the money, funds, valuable
papers, and documents of the corporation (other than his own bond, if any, which
shall be in the custody of the President), and shall have and exercise, under
the supervision of the Board of Directors, all the powers and duties commonly
incident to this office, and shall give bond in such form and with such sureties
as shall be required by the Board of Directors. He shall deposit all funds of
the corporation in such bank or banks, trust company or trust companies, or with
such firm or firms, doing a banking business, as the directors shall designate.
He may endorse for deposit or collection all checks and notes payable to the
corporation or to its order, may accept drafts on behalf of the corporation, and
together with the President or a Vice President may sign certificates of stock.
He shall keep accurate books of account of the corporation's transactions which
shall be the property of the corporation, and, together with all its property in
his possession, shall be subject at all times to the inspection and control of
the Board of Directors.
Section 10. General Powers as to Negotiable Paper. The Board of
Directors may, from time to time, prescribe the manner of the making, signature
or endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
Section 11. Removal. Any officer or agent of the Corporation may be
removed, either with or without cause, at any time, by the vote of the majority
of the entire Board at any meeting of the Board, or, except in the case of an
officer or agent elected or appointed by the Board, by the Chairman of the Board
or the President. Such removal shall be without prejudice to the contractual
rights, if any, of the person so removed.
<PAGE> 9
Page 8.
ARTICLE IV.
Certificate of Stock
Section 1. Form and Transfer. The interest of each stockholder
in the corporation shall be evidenced by certificates for shares of stock in
such form as the Board of Directors may, from time to time, prescribe in
accordance with the laws of the State of Delaware. Shares of stock of the
corporation may be transferred on the books of the corporation in the manner
prescribed by the laws of the State of Delaware by the holder thereof in person
or by his duly authorized attorney upon surrender for cancellation of
certificates for the same number of shares of the same class with an assignment
and power of attorney duly endorsed thereon or attached thereto, duly executed
and such proof of the authenticity of the signature as the corporation or its
agents may reasonably require.
Section 2. Signature, Countersignature and Registration. The
certificates of stock of the corporation shall be signed by or in the name of
the corporation by the President or a Vice President, and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed with
the seal of the corporation and countersigned and registered in such manner, if
any, as the Board of Directors may by resolution prescribe; and to this end the
Board of Directors may, from time to time, appoint such Transfer Agents and
Registrars of stock of any class within or outside the State of Delaware as to
it may seem expedient; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, whether because of death, resignation, or
otherwise, before such certificate or certificates shall have been delivered by
the corporation, such certificate or certificates may nevertheless be adopted by
the corporation and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures shall
have been used thereon had not ceased to be such officer or officers of the
corporation.
Section 3. List of Stockholders. The officer who has charge of
the stock ledger of the corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
<PAGE> 10
Page 9.
Section 4. Mutilated, Stolen, Lost or Destroyed Certificates.
In case a certificate for shares of the capital stock of the corporation is
mutilated, stolen, lost or destroyed, a new certificate may be secured as
provided for lost or destroyed certificates under applicable Delaware law;
provided, however, that the owner of such certificate so mutilated, stolen, lost
or destroyed, registered on the books of the corporation, may, in the discretion
of the Board of Directors, upon making proof satisfactory to the Board of
Directors of such mutilation or alleged theft, loss or destruction, and upon
amply indemnifying the corporation and its Transfer Agents or Registrars, if
any, by a surety bond or otherwise to the satisfaction of said Board and such
Transfer Agents and Registrars, and upon the lapse of such reasonable time as
may be prescribed by the Board after written notice of such mutilation or
alleged theft, loss or destruction shall have been received by the Corporation,
receive a new certificate for the same number of shares of the same class in
lieu thereof, but only upon specific authorization by the Board of Directors
which may be given or withheld in the absolute discretion of the Board. If the
corporation shall voluntarily and in good faith have a new certificate issued in
lieu of one believed to have been stolen, lost or destroyed, or shall issue a
new certificate in compliance with an order of a Court of competent
jurisdiction, the corporation may recognize the person in whose name the new
certificate, or any certificate thereafter issued in exchange or substitution
therefor, is issued as the owner of the shares described therein for all
purposes, including the right to vote and the right to receive payment of
dividends, distribution or redemption price, until the owner of the original
certificate or a transferee thereof, without notice and for value, shall enjoin
the corporation and the holder of such new certificate or any certificate issued
in exchange or substitution therefor from so acting.
Section 5. Closing of Stock Transfer Books. The Board of
Directors may close the stock transfer books for a period not exceeding sixty
(60) days preceding the date of any meeting of stockholders or the date for the
payment of any dividend or the date for the allotment of rights or the date when
any change or conversion or exchange of capital stock shall go into effect,
during which time no stock of the corporation shall be transferred upon the
books of the corporation; provided, that in lieu of closing the stock transfer
books as aforesaid, the Board of Directors may fix in advance a date, not
exceeding sixty (60) days preceding the date of any meeting of shareholders, or
the date for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital stock
shall go into effect, as a record date for the determination of the shareholders
entitled to notice of, and to vote at, any such meeting, or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to exercise
the rights in respect of any such change, conversion or exchange of capital
stock, and in such case, such shareholders and only such shareholders as shall
be shareholders of record on the date so fixed, shall be entitled to such notice
of, and to vote at such meeting, or to receive payment of such dividend, or to
receive such allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any stock on the books of the corporation or
otherwise after any such record date fixed as aforesaid.
<PAGE> 11
Page 10.
ARTICLE V.
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal years of the corporation
shall begin on the first day of November of each year and shall end on the
thirty-first day of October following.
Section 2. Corporate Seal. The Board of Directors shall provide
a suitable corporate seal for use by the corporation.
ARTICLE VI.
Amendments
Except as otherwise provided in Article XIII of the Articles of
Incorporation, the By-Laws of the corporation may be amended, added to or
repealed, or other or new By-Laws may be adopted in lieu thereof by a majority
vote of the shareholders or of the Board of Directors of the corporation,
provided that notice thereof shall have been given in the notice of the meeting,
and provided further that the Board of Directors shall not make or alter any
By-Laws fixing their qualifications, classifications or term of office.
<PAGE> 1
EXHIBIT 3.3
(PLEASE DO NOT WRITE IN SPACES BELOW -- FOR DEPARTMENT USE)
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
EFFECTIVE DATE FILED DATE RECEIVED
IF DIFFERENT THAN
DATE OF FILING: OCT 21 1981 OCT 12 1981
Administrator
MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau
CORPORATION NUMBER 256-114
(SEE INSTRUCTIONS ON REVERSE SIDE)
ARTICLES OF INCORPORATION
(Domestic Profit Corporation)
These Articles of Incorporation are signed by the incorporator(s) for
the purpose of forming a profit corporation pursuant to the provisions of Act
284, Public Acts of 1972, as amended, as follows:
ARTICLE I (See Part 2 of instructions on Page 4.)
The name of the corporation is RICHARD A. SMITH, INC.
ARTICLE II (See Part 3 of instructions on Page 4.)
(If space below is insufficient, continue on Page 3.)
The purpose or purposes for which the corporation is organized is to
engage in any activity within the purposes for which corporations may be
organized under the Business Corporation Act of Michigan.
ARTICLE III
The total authorized capital stock is:
Common Shares 50,000 Par Value Per Share $ 1.00
-------------- ---------------
1.
Preferred Shares None Par Value Per Share $ None
---------- ---------------
and/or shares without par value as follows (See Part 4 of instructions on Page
4.)
Common Shares None Stated Value Per Share $ None
------------ ------------
2.
Preferred Shares None Stated Value Per Share $ None
------------ ------------
3. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
(If space below is insufficient, continue on Page 3.)
This Corporation is a small business corporation as defined in the
Internal Revenue Code and such stock as is authorized and issued shall
qualify to receive the benefits of Section 1244 of the Internal
Revenue Code of 1954, as amended.
Page 1
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 2
ARTICLE IV
1. The address of the initial registered office is: (See Part 5 of
instructions on Page 4.)
4483 Orion Road Rochester Michigan 48063
- -------------------------------------------------- ------------------
NO. AND STREET CITY ZIP
2. Mailing address of the initial registered office if different than above
(See Part 5 of instructions on Page 4.)
same Michigan
- -------------------------------------------------- ------------------
P.O. Box CITY ZIP
3. The name of the initial resident agent at the registered office is:
Richard A. Smith
- --------------------------------------------------------------------------------
ARTICLE V (See Part 6 Of Instructions On Page 4.)
The name(s) and address(es) of the incorporator(s) is (are) as follows:
NAME RESIDENCE OR BUSINESS ADDRESS
Richard A. Smith 4483 Orion Road Rochester, MI 48063
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE VII OPTIONAL (Delete Article VII If Not Applicable.)
Any action required or permitted by this act to be taken at an annual
or special meeting of shareholders may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, is signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take the action
at a meeting at which all shares entitled to vote thereon were present and
voted.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to shareholders who have
not consented in writing.
Page 2
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 3
(Use space below for continuation of previous Articles and/or for additional
Articles.)
Please indicate which article you are responding to and/or insert any
desired additional provisions authorized by the act by adding additional
articles here.
(We), the incorporator(s) sign my (our) name(s) this 6th day of October 1981,
X /s/ RICHARD A. SMITH
- ------------------------------- --------------------------------
RICHARD A. SMITH
- ------------------------------- --------------------------------
- ------------------------------- --------------------------------
- ------------------------------- --------------------------------
- ------------------------------- --------------------------------
(INSTRUCTIONS ON PAGE 4)
Page 3
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 4
<TABLE>
<S><C>
MAIL RETURNED COPY TO:
(Fill In Name And Address Here)
L. Gene DeAgostino Telephone:
Powers, Chapman, DeAgostino & Meyers, P.C. Area Code 313
3001 West Big Beaver Road, Suite 704
Troy, Michigan 48084 Number 643-6500
INFORMATION AND INSTRUCTIONS
Articles of Incorporation - Profit Domestic Corporations
1. Submit one original copy of the Articles of Incorporation. Upon the
filing, a microfilm copy will be prepared for the records in the
Corporation and Securities Bureau. The original copy of the document
will be returned as evidence of the filing. Please complete the box
above to reflect the name, street and number (or P.O. Box), city,
state and zip code to which the copy is to be returned.
2. Article I--The corporate name of a domestic profit corporation is
required to contain one of the following words or abbreviations:
"Corporation", "Company", "Incorporated", "Limited", "Corp.", "Co.",
"Inc." or "Ltd."
3. Article II may state, in general terms, the character of the
particular business to be carried on. Under section 202(b) of the
law, it is a sufficient compliance to state substantially, alone or
with specifically enumerated purposes, that the corporation may engage
in any activity within the purposes for which corporations may be
organized under the Business Corporation Act. The law requires,
however, that educational corporations must state their specific
purposes.
4. Article III (2)--the law requires the incorporators or a domestic
corporation having shares without par value to submit in
writing the amount of consideration proposed to be received for each
share which shall be allocated to stated capital. Such stated value
may be indicated either in Article III (2) or in a written statement
accompanying the Articles of Incorporation.
5. Article IV--A post office box is not permitted to be designated as
the address of the registered office in part 1 of Article IV. The
mailing address in part 2 of Article IV may differ from the address
of the registered office only if a post office box address in the same
city as the registered office is designated as the mailing address.
6. Article V--The law requires one or more incorporators.
The addresses should include a street number and name (or other
designation), in addition to the name of the city and state.
7. The duration of the corporation should be stated in the Articles only
if the duration is not perpetual.
8. The Articles must be signed in ink by each incorporator. The names
of the incorporators as set out in Article V should correspond with
the signatures.
9. Since the corporate documents are microfilmed for the Bureau's files,
it is imperative that the document submitted for filing be legible so
that a usable microfilm can be obtained. Corporate documents with
poor black and white contrast, whether due to the use of a worn
typewriter ribbon or due to a poor quality of reproduction, will be
rejected.
10. An effective date, not later than 90 days after the date of filing,
may be stated on page 3 of the Articles of Incorporation.
11. FEES: Filing Fee................................................................$10.00
Franchise Fee --1/2 mill (.0005) on each dollar of authorized capital
stock, with a minimum franchise fee of....................................$25.00
(Make fee payable to State of Michigan) ------
Total minimum Fees............$35.00
12. Mail Articles of Incorporation and Fees to:
Michigan Department of Commerce
Corporation and Securities Bureau
Corporation Division
P.O. Box 30054
Lansing, Michigan 48909
</TABLE>
SEAL APPEARS ONLY ON ORIGINAL
Page 4
<PAGE> 5
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MICHIGAN DEPARTMENT OF COMMERCE -- CORPORATION AND SECURITIES BUREAU
- -------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) Date Received
AUG 07 1986
-------------------
FILED
AUG 12 1986
ADMINISTRATOR
MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau -------------------
-------------------
- -------------------------------------------------------------------------------
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC CORPORATIONS
(Please read instructions and Paperwork Reduction Act notice on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended
(profit corporations), or Act 162, Public Acts of 1982 (nonprofit
corporations), the undersigned corporation executes the following Certificate:
- -------------------------------------------------------------------------------
1. The present name of the corporation is: RICHARD A. SMITH, INC.
2. The corporation identification number (CID) assigned by the Bureau is:
/2/5/6/-/1/1/4/
3. The location of its registered office is:
3270 W. Big Beaver, Ste 430 Troy 48084
-----------------------------------------, Michigan -----------------------
(Street Address) (City) (ZIP Code)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4. Article I of the Articles of Incorporation is hereby amended to read as
follows:
The name of the corporation is Rochester Gear, Inc.
- -------------------------------------------------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 6
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS CONSENT
OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD OF DIRECTORS OR
TRUSTEES; OTHERWISE, COMPLETE SECTION (b) a. [ ] The foregoing amendment
to the Articles of Incorporation was duly adopted on the _______ day of
_______, 19 ____, in accordance with the provisions of the Act by the
unanimous consent of the incorporator(s) before the first meeting of the
board of directors or trustees.
Signed this _______ day of _________________________________________, 19__
___________________________________ ________________________________
___________________________________ ________________________________
___________________________________ ________________________________
___________________________________ ________________________________
(Signatures of all incorporators; type or print name under each signature)
b. [X] The foregoing amendment to the Articles of Incorporation was duly
adopted on the 6th day of August, 1986. The amendment: (check one of
the following)
[ ] was duly adopted in accordance with Section 611(2) of the Act by the
vote of the shareholders if a profit corporation, or by the
vote of the shareholders or members if a nonprofit corporation, or by
the vote of the directors if a nonprofit corporation organized on a
nonstock directorship basis. The necessary votes were cast in favor of
the amendment.
[ ] was duly adopted by the written consent of all the directors pursuant
to Section 525 of the Act and the corporation is a nonprofit
corporation organized on a nonstock directorship basis.
[ ] was duly adopted by the written consent of the shareholders or members
having not less than the minimum number of votes required by statute in
accordance with Section 407(1) and (2) of the Act. Written notice to
shareholders or members who have not consented in writing has been
given. (Note: Written consent by less than all of the shareholders or
members is permitted only if such provision appears in the Articles of
Incorporation.)
[X] was duly adopted by the written consent of all the shareholders or
members entitled to vote in accordance with Section 407(3) of the Act.
Signed this 6th day of August, 1986
--- ------ --
By /s/ Richard A. Smith
-------------------------------
(Signature)
Richard A. Smith, President
-------------------------------
(Type or Print Name and Title)
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 7
DOCUMENT WILL BE RETURNED TO NAME AND MAILING ADDRESS
INDICATED IN THE BOX BELOW. Include name, street and number
(or P.O. box), city, state and ZIP code.
Name of person or organization
remitting fees:
Newcor, Inc.
------------------------------
(Shareholder)
------------------------------
Steven G. Jonas Preparer's name and business
Newcor, Inc. telephone number:
3270 W. Big Beaver Road
Troy, MI 48084 Steven G. Jonas
------------------------------
(313) 643-7730
------------------------------
INFORMATION AND INSTRUCTIONS
1. This form is issued under the authority of Act 284, P.A. of 1972, as
amended, and Act 162, P.A. of 1982. The amendment cannot be filed until
this form, or a comparable document, is submitted.
2. Submit one original copy of this document. Upon filing, a microfilm copy
will be prepared for the records of the Corporation and Securities Bureau.
The original copy will be returned to the address appearing in the box
above as evidence of filing.
Since this document must be microfilmed, it is important that the filing be
legible. Documents with poor black and white contrast, or otherwise
illegible, will be rejected.
3. This document is to be used pursuant to the provisions of section 631 of the
Act for the purpose of amending the articles of incorporation of a domestic
profit or nonprofit corporation. A nonprofit corporation is one
incorporated to carry out any lawful purpose or purposes not involving
pecuniary profit or gain for its directors, officers, shareholders, or
members. A nonprofit corporation organized on a nonstock directorship
basis, as authorized by Section 302 of the Act, may or may not have
members, but if it has members, the members are not entitled to vote.
4. Item 2 - Enter the identification number previously assigned by the Bureau.
If this number is unknown, leave it blank.
5. Item 4 - The entire article being amended must be set forth in its
entirety. However, if the article being amended is divided into separately
identifiable sections, only the sections being amended need be included.
6. This document is effective on the date approved and filed by the Bureau. A
later effective date, no more than 90 days after the date of delivery, may
be stated.
7. If the amendment is adopted before the first meeting of the board of
directors, item 5(a) must be completed and signed in ink by all of the
incorporators. If the amendment is otherwise adopted, item 5(b) must be
completed and signed in ink by the president, vice-president, chairperson,
or vice-chairperson of the corporation.
8. FEES: Filing fee (Make remittance payable to State of Michigan)....$10.00
Franchise fee for profit corporations (payable only if authorized
capital stock has increased)-1/2 mill (.0005) on each dollar of
increase over highest previous authorized capital stock.
9. Mail form and fee to:
Michigan Department of Commerce
Corporation and Securities Bureau
Corporation Division
P.O. Box 30054
Lansing, MI 48909
Telephone: (517) 373-0493
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 1
Exhibit 3.4
BY-LAWS
OF
ROCHESTER GEAR, INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the Corporation
shall be located in the City of Rochester, State of Michigan.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Michigan as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Seal
Section 1. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation and the word(s) "Seal" or "Corporate Seal."
Said seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
ARTICLE III
Shareholders' Meetings
Section 1. Annual Meetings.
(a) The annual meeting of the shareholders of the Corporation,
commencing with the year 1983, shall be held at the principal office of the
Corporation in the State of Michigan or at such other place within or without
the State of Michigan as may be determined by the Board of Directors and as may
be designated in the notice of such meeting. The meeting shall be held on the
first Thursday of June of each year at 3:00 P.M. If said day is a legal holiday,
the meeting shall be held on the next succeeding day not a legal holiday. The
business to be transacted at such meeting shall be the election of directors and
such other business as shall be properly brought before the meeting.
<PAGE> 2
(b) If the annual meeting is not held on the date designated therefor,
the Board of Directors shall cause the meeting to be held as soon thereafter as
convenient.
(c) In the event the annual meeting is not held at the time prescribed
in Article III, Section 1(a) above and if a period of ninety (90) days shall
elapse without the holding of such meeting, then any shareholder may call such
meeting, and at such meeting the shareholders may elect the directors and
transact other business with the same force and effect as at an annual meeting
duly called and held.
Section 2. Special Meetings. Special meetings of the shareholders may
be called by the Chairman of the Board, the President or a Vice-President, by a
majority of the Board of Directors, or by the holders of at least fifty (50%)
percent of the shares of stock entitled to vote at such meeting, upon written
request therefor to the Secretary. It shall be the duty of the Secretary to send
notices of such meeting not more than forty (40) days after receipt of the
request. The Board of Directors shall fix the time and place of the meeting
within the limits set forth in Section 3. of this Article III. If the Board of
Directors shall fail to fix a time or place, the meeting shall be held at the
registered office of the Corporation in the State of Michigan at such time as
shall be fixed by the Secretary within the said limits.
Section 3. Notice and Purpose of Meetings; Waiver. Each shareholder of
record entitled to vote at any meeting shall be given, in person or by mail,
written or printed notice of the purpose or purposes, and the time and place
within or without the State of Michigan, of every meeting of shareholders. Such
notice shall be mailed or delivered in person not less than ten (10) days nor
more than sixty (60) days before the meeting. If mailed, it shall be directed to
the shareholder's address as it appears on the stock ledger unless the
shareholder shall have requested of the Secretary in writing that notice
intended for him be mailed to some other address, in which case the notice shall
be transmitted to the address so designated. No publication of the notice of
meeting shall be required. A shareholder may waive the notice of meeting by
attendance, either in person or by proxy, at the meeting, or by so stating in
writing, either before or after such meeting. Attendance at a meeting for the
express purpose of objecting at the beginning of the meeting, that the meeting
was not lawfully called or convened shall not, however, constitute a waiver of
notice. Except where otherwise required by law, notice need not be given of any
adjourned meeting of the shareholders if the time and place to which the meeting
is adjourned are announced at the meeting at which the adjournment is taken and
at the adjourned meeting only
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<PAGE> 3
such business is transacted as might have been transacted at the original
meeting.
Section 4. Quorum. Except as otherwise provided by law, a quorum at
all meetings of shareholders shall consist of the holders of record of a
majority of the shares entitled to vote thereat, present in person or by proxy.
Section 5. Closing of Stock Transfer Books; Record Date.
(a) In order to determine the holders of record of the Corporation's
stock who are entitled to notice of meetings, to vote at a meeting or
adjournment thereof, and to receive payment of any dividend, or to make a
determination of the shareholders of record for any other proper purpose, the
Board of Directors may fix a date as the record date for such determination of
shareholders. Such date shall be no more than sixty (60) days prior to the date
of the action which requires such determination, nor, in the case of a
shareholders' meeting, shall it be less than ten (10) days in advance of such
meeting.
(b) If a record date is not fixed (i) the record date for determination
of shareholders entitled to notice of or to vote at a meeting of shareholders
shall be the close of business on the day next preceding the day on which notice
is given, or, if no notice is given, the day next preceding the day on which the
meeting is held, and (ii) the record date for determining shareholders for any
purpose other than that specified in subdivision (i) shall be the close of
business on the day on which the resolution of the board relating thereto is
adopted.
(c) When a determination of shareholders of record entitled to notice
of or to vote at a meeting of shareholders has been made as provided in this
section, the determination applies to any adjournment of the meeting, unless the
board fixes a new record date under this section for the adjourned meeting.
Section 6. Presiding Officer; Order of Business.
(a) Meetings of the shareholders shall be presided over by the Chairman
of the Board, or if he is not present or is unwilling to so act, by the
President or if neither the Chairman of the Board nor the President is present
or willing to so act, by a Vice-President, or if none of the before named are
present or willing to so act, by a Chairman to be chosen by a majority of the
shareholders entitled to vote at the meeting who are present in person or by
proxy. The Secretary of the Corporation shall act as Secretary of every meeting,
but if the Secretary is not present, the shareholders entitled to vote in person
or by proxy at the meeting shall choose any person present to act as Secretary
of the meeting.
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<PAGE> 4
(b) The order of business shall be as follows:
1. Call of meeting to order.
2. Proof of notice of meeting and determination of quorum.
3. Reading of minutes of last previous annual meeting.
4. Reports of officers.
5. Reports of committees.
6. Election of directors.
7. Miscellaneous business.
Section 7. Voting.
(a) Except as otherwise provided in the Articles of Incorporation, the
By-Laws, or the laws of the State of Michigan, at every meeting of the
shareholders, each shareholder of the Corporation entitled to vote at such
meeting shall have, as to each matter submitted to a vote, one vote in person or
by proxy for each share of stock having voting rights registered in his name on
the stock transfer books of the Corporation. A shareholder may vote his shares
through a proxy appointed by a written instrument signed by the shareholder or
by his duly authorized attorney in fact and delivered to the Secretary of the
meeting. No proxy shall be valid after three (3) months from the date of its
execution unless a longer period is expressly provided therein.
(b) When an action, other than the election of directors, is to be
taken by vote of the shareholders, it shall be authorized by a majority of the
votes cast by the holders of shares entitled to vote thereon, unless a greater
plurality is required by the Articles of Incorporation or the laws of the State
of Michigan. Except as otherwise provided by the Articles, directors shall be
elected by a plurality of the votes cast at an election.
(c) At all elections of directors, the voting shall be by written
ballot only if called for by the person presiding at the meeting, or by the duly
supported motion of a shareholder adopted by voice vote of a majority of the
shares entitled to vote in person or by proxy at the meeting.
Section 8. List of Shareholders.
(a) A complete list of the shareholders of the Corporation entitled to
vote at the ensuing meeting, arranged in alphabetical order within each class
and series, and showing the address of, and number of shares owned by each
shareholder shall be prepared by the Secretary, or other officer of the
Corporation having charge of the stock ledger. This list shall be kept on file
for
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<PAGE> 5
a period of at least ten (10) days prior to the meeting at the registered office
of the Corporation in the State of Michigan and shall be subject to inspection
during the usual business hours of such period by any shareholder. This list
shall also be produced at the meeting and shall be subject to inspection by any
shareholder at any time during the meeting.
(b) The original or duplicate stock ledger or list shall be prima
facie evidence as to shareholders who are entitled to examine such list or the
books of the Corporation, or to vote in person or by proxy at any meeting of the
shareholders.
Section 9. Inspectors of Election. The Board of Directors, in advance
of any shareholders' meeting, may appoint one or more Inspectors of Election,
who need not be shareholders, to act at the meeting or any adjournment thereof.
If Inspectors of Election are not so appointed, the person presiding at a
shareholders' meeting may, and shall on the request of any shareholder entitled
to vote thereat, appoint one or more Inspectors of Election. In case any person
appointed as Inspector of Election fails to appear or act, the vacancy may be
filled by the Board of Directors in advance of the meeting or at the meeting by
the person presiding thereat. The Inspectors shall determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine challenges and
questions arising in connection with the right to vote, count and tabulate
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all shareholders. On request of
the person presiding at the meeting or a shareholder entitled to vote thereat,
the Inspectors shall make and execute a written report to the person presiding
at the meeting of any of the facts found by them and matters determined by them.
The report is prima facie evidence of the facts stated and of the vote as
certified by the Inspectors.
ARTICLE IV
Directors
Section 1. Number, Qualifications, Term, Quorum and Vacancies.
(a) The property, affairs and business of the Corporation shall be
managed by the Board of Directors of three (3) persons. The first Board of
Directors shall be selected by a majority vote of the incorporators and shall
hold office for a term ending at the first annual meeting of the shareholders.
Thereafter, except as hereinafter provided, directors shall be elected at the
annual
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<PAGE> 6
meeting of the shareholders and each director shall serve for one year or until
his successor shall be elected and qualify.
(b) The number of directors may be increased or decreased from time to
time by an amendment to these By-Laws. A directorship to be filled because of an
increase in the number of directors created by vote of the directors, or by vote
of the shareholders where the shareholders have failed to elect a director to
fill the vacancy at the meeting at which the vote was taken, may be filled by
the Board of Directors for a term of office continuing only until the next
regular annual meeting of shareholders or a special meeting of shareholders
called prior thereto for the purpose of electing a director to fill the vacancy.
(c) Directors need not be shareholders of the Corporation.
(d) A majority of the directors in office shall be necessary to
constitute a quorum for the transaction of business. If, at any meeting of the
Board of Directors, there shall be less than a quorum present, a majority of
those present may adjourn the meeting, without further notice from time to time
until a quorum shall have been obtained. In case there are vacancies on the
Board of Directors, other than vacancies created by the removal of a director or
directors by the shareholders, the remaining directors, although less than a
quorum, may by a majority vote elect a successor or successors for the unexpired
term or terms.
Section 2. Meetings. Meetings of the Board of Directors may be held
either within or without the State of Michigan. Regular meetings of the Board of
Directors shall be held at such times as are fixed from time to time by
resolution of the Board. Special meetings may be held at any time upon call of
the Chairman of the Board, the President, a Vice-President, or any one (1)
director upon written or telegraphic notice deposited in the U.S. Mail or
delivered to the telegraph company at least three (3) days prior to the day of
the meeting. A meeting of the Board of Directors may be held without notice
immediately following the annual meeting of the shareholders. Notice need not be
given of regular meetings of the Board of Directors held at times fixed by
resolution of the Board of Directors nor need notice be given of adjourned
meetings. Meetings may be held at any time without notice if all the directors
are present or if, before or after the meeting, those not present waive such
notice in writing. Attendance constitutes waiver of notice unless it is for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Notice of a meeting of the Board of
Directors need not state the purpose of, nor the business to be transacted at,
such meeting.
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<PAGE> 7
Section 3. Action by Unanimous Written Consent. Action required or
permitted to be taken pursuant to authorization voted at a meeting of the Board
or a committee thereof may be taken without a meeting if, before or after the
action, all members of the Board or of the committee consent thereto in writing.
The written consents shall be filed with minutes of the proceedings of the Board
of committee. The consent shall have the same effect as a vote of the Board or
committee for all purposes.
Section 4. Removal.
(a) At any meeting of the shareholders, any director or directors may
be removed from office, without assignment of any reason therefor, by a majority
vote of the shares or class of shares, as the case may be, which elected the
director or directors to be removed.
(b) When any director or directors are removed, new directors may
be elected at the same meeting of the shareholders for the unexpired term of
the director or directors removed. If the shareholders fail to elect persons to
fill the unexpired term or terms of the director or directors removed, such
unexpired terms shall be considered vacancies on the board to be filled by the
remaining directors.
Section 5. Indemnification.
(a) The Corporation shall indemnify any and all of its directors or
officers, former directors and officers, and the current and former directors or
officers of another corporation, partnership, joint venture, trust or other
enterprise in which they are or were serving at the request of the Corporation,
and their respective heirs, administrators, executors, successors and assigns,
against any and all expenses and liabilities, including amounts paid upon
judgments, legal fees, and amounts paid in settlement, either before or after
suit is commenced, reasonably and necessarily incurred by such directors or
officers or former directors or officers in connection with the defense or
settlement of any claim, action, suit, or proceeding in which they, or any of
them, are made parties or a party, including a suit by or in the right of the
Corporation to procure a judgment in its favor, by reason of being or having
been directors or officers of the Corporation, or of such other entity, if they
acted in good faith and in a manner they 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, had no reason to believe their
conduct was unlawful.
(b) With respect to actions or suits by or in the right of the
Corporation to procure a judgment in its favor, no indemnification shall be made
in respect of any claim, issue or matter as
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<PAGE> 8
to which such director or officer shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper.
(c) Such indemnification shall be in addition to, and not exclusive
of, any and all other rights to which such a director or officer may be entitled
by law, under any agreement, by vote of shareholders or directors, or otherwise,
provided that no provision for indemnification shall be in conflict with the
Michigan statutes pertinent thereto.
Section 6. Compensation. Directors, and members of any committee of
the Board of Directors, may receive such reasonable compensation for their
services as directors and members of any such committee as shall be fixed from
time to time by resolution of the Board of Directors, and may also receive such
reimbursement for any reasonable expenses incurred in attending such meetings as
may be determined by resolution of the Board of Directors. The compensation of
directors may be on such basis as is determined in the resolution of the Board
of Directors. Any director receiving compensation under these provisions shall
not be barred from serving the Corporation in any other capacity and receiving
reasonable compensation for such other services.
Section 7. Committees.
(a) The Board of Directors, by a resolution or resolutions adopted by
a majority of the members of the whole Board, may appoint an Executive Committee
and such other committees as it may deem appropriate. Each such committee shall
consist of one (1) or more members of the Board of Directors. Each committee
shall have and may exercise such powers as shall be conferred or authorized by
the resolutions appointing it. A majority of any such committee may determine
its action and may fix the time and place of its meetings, unless provided
otherwise by the Board of Directors. The Board of Directors shall have the power
at any time to fill vacancies in, to change the size of membership of, and to
discharge any such committee.
(b) Each such committee shall keep a written record of its acts and
proceedings and shall submit such record to the Board of Directors at each
regular meeting thereof and at such other times as requested by the Board of
Directors. Failure to submit such record, or failure of the Board to approve any
action indicated therein will not, however, invalidate such action to the extent
it has been carried out by the Corporation prior to the time the
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<PAGE> 9
record of such action was, or should have been, submitted to the Board of
Directors as herein provided.
(c) The Executive Committee shall advise and aid the officers of the
Corporation in all matters concerning the Corporation's interests and the
management of its business, and when the Board of Directors is not in session,
the Executive Committee shall have and may exercise all the powers of the Board
of Directors in the conduct of the business of the Corporation, subject to
limitations imposed by statute. Regular meetings of the Executive Committee may
be held without call or notice at such times and places as it may fix by
resolution from time to time. Other meetings may be called by any member thereof
either by oral, telegraphic or written notice not later than the day prior to
the date set for the meeting.
Section 8. Dividends. Subject always to the provisions of laws of the
State of Michigan and the Articles of Incorporation, the Board of Directors
shall have full power to determine whether any, and, if so, what part, of the
funds legally available for the payment of dividends shall be declared in
dividends and paid to the shareholders of the Corporation. The Board of
Directors may fix a sum which may be set aside or reserved over and above the
paid in capital of the Corporation for working capital or as a reserve for any
proper purpose, and from time to time may increase, diminish and vary such fund
in the Board's absolute judgment and discretion.
ARTICLE V
Officers
Section 1. Number. The officers of the Corporation shall be a Chairman
of the Board, a President, one or more Vice-Presidents, a Treasurer, and a
Secretary. In addition, there may be such subordinate officers as the Board of
Directors may deem necessary, such as controller, assistant secretary, etc. Any
person may hold two, but no more than two, offices except that no person shall
hold the offices of President and Vice-President simultaneously.
Section 2. Term of Office. The principal officers shall be chosen by
the Board of Directors. The first officers of the Corporation shall be chosen at
the time of the organization of the Corporation, and thereafter the officers
shall be chosen at the first meeting of the Board following the shareholders'
annual meeting, or as soon thereafter as is conveniently possible. Subordinate
officers may be elected from time to time. Each officer shall serve until his
successor shall have been chosen and qualified, or until his death, resignation
or removal.
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Section 3. Removal. Any officer may be removed from office, with or
without cause, at any time by the affirmative vote of a majority of the Board of
Directors then in office. Such removal shall not prejudice the contract rights,
if any, of the person so removed.
Section 4. Vacancies. Any vacancy in an office from any cause may be
filled for the unexpired portion of the term by the Board of Directors.
Section 5. Duties.
(a) The Chairman of the Board shall be a director and shall preside at
all meetings of the shareholders and directors. Except where by law the
signature of the President is required, the Chairman of the Board shall possess
the same power as the President to sign all certificates, contracts and other
instruments which may be authorized by the Board of Directors.
(b) The President shall be a director and the chief Executive Officer
of the Corporation. In the absence or disability of the Chairman of the Board,
he shall have the right to preside at all meetings of the shareholders and of
the Board of Directors. He shall have general supervision of the affairs of the
Corporation, shall sign or countersign all certificates, contracts or other
instruments of the Corporation as authorized by the Board of Directors, shall
make reports to the Board of Directors and shareholders, and shall perform such
other duties as are incident to his office or are properly required of him by
the Board of Directors.
(c) The Vice-Presidents, in the order designated by the Board of
Directors, shall exercise the functions of the President during the absence or
disability of the President. Each Vice-President shall have such other duties as
are assigned to him from time to time by the Board of Directors.
(d) The Secretary and the Treasurer, shall perform such duties as are
incident to their offices, or are properly required of them by the Board of
Directors, or are assigned to them by the Articles of Incorporation or by these
By-Laws. The Assistant Secretaries, if any, in the order of their seniority,
shall, in the absence of the Secretary, perform the duties and exercise the
power of the Secretary, and shall perform such other duties as may be assigned
by the Board of Directors.
(e) Other subordinate officers appointed by the Board of Directors
shall exercise such powers and perform such duties as may be delegated to them
by the resolutions appointing them, or by subsequent resolutions adopted from
time to time.
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(f) In case of the absence or disability of any officer of the
Corporation and of any person hereby authorized to act in his place during such
period of absence or disability, the Board of Directors may from time to time
delegate the powers and duties of such officer to any other officer, or any
director, or any other person whom it may select.
Section 6. Salaries. The salaries of all officers of the Corporation
shall be fixed by the Board of Directors. No officer shall be ineligible to
receive such salary by reason of the fact that he is also a Director of the
Corporation and receiving compensation therefor.
Section 7 added by amendment - 2/25/98
ARTICLE VI
Certificates of Stock
Section 1. Form.
(a) The interest of each shareholder of the Corporation shall be
evidenced by certificates for shares of stock, certifying the number of shares
represented thereby and in such form not inconsistent with the Articles of
Incorporation as the Board of Directors may from time to time prescribe.
(b) The certificates of stock shall be signed by the Chairman of the
Board, or the President or a Vice-President and by the Secretary or an Assistant
Secretary or the Treasurer, and sealed with the seal of the Corporation. Such
seal may be a facsimile, engraved or printed. Where any certificate is manually
signed by a transfer agent, a transfer clerk and/or by a registrar, the
signatures of the Chairman of the Board, President, Vice-President, Secretary,
or Treasurer upon such certificate may be facsimiles, engraved or printed. In
case any officer who has signed or whose facsimile signature has been placed
upon any certificate shall have ceased to be such before the certificate is
issued, it may be issued by the Corporation with the same effect as if such
officer had not ceased to be such at the time of its issue.
Section 2. Subscriptions for Shares. Unless the subscription agreement
provides otherwise, subscription for shares, regardless of the time when they
are made, shall be paid in full at such time, or in such installments and at
such periods, as shall be specified by the Board of Directors. All calls for
payments on subscriptions shall carry the same terms with regard to, and be
ratable as to all shares of, the same class or series.
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AMENDMENT TO BYLAWS
OF
ROCHESTER GEAR, INC.
Adopted by the Board of Directors: February 25, 1998
RESOLVED, that Article V of the Corporation's By-Laws is hereby amended by
adding thereto a new Section 7 reading in its entirety as follows:
Section 7. Execution of Documents. Notwithstanding any other
provision of these By-Laws, the board of directors shall have power to
designate the officers and agents who shall have authority to execute any
instrument, contract, or other document on behalf of the Corporation.
<PAGE> 13
Section 3. Transfers.
(a) Transfers of shares of the capital stock of the Corporation shall
be made only on the stock transfer books of the Corporation by the registered
owner thereof, or by his duly authorized attorney, with a transfer clerk or
transfer agent appointed as provided in Section 5. of this Article of the
By-Laws, and on surrender of the certificates for such shares properly endorsed
and with all taxes thereon paid.
(b) The person in whose name shares of stock stand on the stock
transfer books of the Corporation shall be deemed by the Corporation to be the
owner thereof for all purposes. However, if any transfer of shares is made only
for the purpose of furnishing collateral security, and such fact is made known
to the Secretary of the Corporation, or to the Corporation's transfer clerk or
transfer agent, the entry of the transfer shall record such fact.
Section 4. Lost, Destroyed, or Stolen Certificates. No certificate for
shares of stock in the Corporation shall be issued in place of any certificate
alleged to have been lost, destroyed or stolen except on production of evidence,
satisfactory to the Board of Directors, of such loss, destruction or theft, and,
if the Board of Directors so requires, upon the furnishing of an indemnity bond
in such amount (but not to exceed twice the value of the shares represented by
the certificate) and with such terms and such surety as the Board of Directors
may, in its discretion, require.
Section 5. Transfer Agent or Registrar. The Board of Directors may
appoint one or more transfer agents or transfer clerks and one or more
registrars, and may require all certificates for shares to bear the signature,
or signatures of any of them. In absence of appointment of a transfer agent or
transfer clerk, the Secretary of the Corporation shall assume the duties
thereof.
ARTICLE VII
Corporate Actions
Section 1. Deposits. The Board of Directors shall select banks, trust
companies, or other depositories in which all funds of the Corporation not
otherwise employed shall, from time to time, be deposited to the credit of the
Corporation.
Section 2. Voting Securities Held by the Corporation. Unless otherwise
ordered by the Board of Directors, the Chairman of the Board or the President
shall have full power and authority
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<PAGE> 14
on behalf of the Corporation to attend, act and vote at any meeting of security
holders of other corporations in which the Corporation may hold securities. At
such meeting the Chairman of the Board or the President shall possess and may
exercise any and all rights and powers incident to the ownership of such
securities which the Corporation might have possessed and exercised if it had
been present. The Board of Directors may, from time to time, confer like powers
upon any other person or persons.
Section 3. Certifications. The President, the Secretary and any
Assistant Secretary shall each have the authority to issue and certify a copy of
these By-Laws or any part hereof, as they may be in effect from time to time,
and the President and the Secretary shall each have the further authority to
certify the general or specific powers and authority of other officers and
employees to execute contracts, instruments and obligations of the Corporation.
ARTICLE VIII
Fiscal Year
The fiscal year shall begin the first day of April in each year.
ARTICLE IX
Amendment of By-Laws
The shareholders or the Board of Directors may alter, amend, add to, or
repeal these By-Laws.
Approved and Adopted
June 3, 1982
-13-
<PAGE> 1
EXHIBIT 3.5
ARTICLES OF INCORPORATION
OF
PLASTRONICS PLUS, INC.
I, the undersigned, for the purpose of forming a corporation under and
pursuant to the provisions of Business Corporation Law of Wisconsin, and any
amendment thereto, do hereby associate myself as a body corporate and do hereby
adopt the following Articles of Incorporation:
ARTICLE I
The name of this corporation shall be Plastronics Plus, Inc.
ARTICLE II
The location and post office address of the registered office of this
corporation in the State of Wisconsin shall be 132 Beloit Street, Walworth,
Wisconsin 53184. The name of the registered agent of this corporation in
Wisconsin is Christian J. Hubertz, 132 Beloit Street, Walworth, WI.
ARTICLE III
The nature of the business to be conducted or promoted and the purposes of
the Corporation are to engage in any lawful act or activity for which
corporations may be organized under the Wisconsin Business Corporation Law.
<TABLE>
<S> <C>
Remit $70.00
This filing -
Other filing -
Credit 70.00
</TABLE>
ARTICLE IV
The period of existence and duration of this corporation shall be perpetual.
ARTICLE V
The aggregate number of shares of common stock which the corporation shall
have authority to issue shall be one million shares of common capital stock with
each having a part
<PAGE> 2
value of One Cent ($.01) per share.
ARTICLE VI
The aggregate number of shares of preferred stock which the corporation has
the authority to issue shall be one million (1,000,000) shares of non-voting,
non-participating cumulative redeemable preferred stock, each having a par
value of One Cent ($.01) per share, upon terms and conditions to be determined
by the Board of Directors in their discretion.
The holders of the preferred shares shall be entitled to cumulative
dividends thereon at the rate of twelve percent (12%) per annum payable on the
purchase price per share, as such price is set and duly noted by the Board in
their sole discretion, in priority to the payments of dividends on the common
shares. Such dividends are to be payable annually with accrual of the dividend
to begin on the first day of the quarter following the quarter in which the
individual preferred shares are purchased. All remaining profits which the
directors may determine to apply in payment of dividends shall be distributed
among the holders of the common shares exclusively.
Upon the dissolution of this corporation and the distribution of its
assets, the preferred shares shall be paid in full at the purchase price
thereof as recorded in the corporate records, before any amount shall be paid
on account of the common shares. If payment in full can not be made then all
the preferred shares shall be paid on a pro-rata basis until all funds from
dissolution are exhausted.
-2-
<PAGE> 3
The corporation shall have the right to redeem all of its non-voting,
non-participating cumulative redeemable preferred stock ($.01 par value), or any
number of shares thereof (on a pro-rata basis amongst all preferred
shareholders), issued and outstanding, at any time within five (5) years from
the purchase thereof for two hundred fifty percent (250%) of the purchase price
of such shares, as set and duly noted by the Board in their sole discretion,
plus any accumulated and unpaid dividends owing to such preferred shareholders.
Such redemption price shall escalate at a rate of five percent (5%) of the
purchase price thereof per year after the fifth year on the day after the
annual meeting of shareholders as set out in the Bylaws.
In all instances, the Board shall have complete authority to determine upon
and take the necessary proceedings fully to effect the purchase or redemption of
the shares selected for redemption, and the cancellation of the certificates
representing such shares. Upon the completion of such proceedings, the rights
of holders of the shares of such preferred stock which have been redeemed and
called, in the case of a redemption of less than all outstanding preferred
shares, shall be reduced ratably with all other preferred shareholders, and in
the case of a redemption of all outstanding preferred stock such rights shall in
all respects cease, except that such holders shall be entitled to receive the
redemption price for their respective shares.
Whenever any shares of such preferred stock of the Corporation are
purchased or redeemed as herein authorized, the Corporation may,
<PAGE> 4
by resolution of its Board of Directors, retire such shares, and thereupon
this Corporation shall, in connection with the retirement of such shares,
cause to be filed a certificate of reduction of stated capital.
ARTICLE VII
The sale of the stock of this corporation by any shareholder may be
restricted in the Bylaws or in any contract between two or more shareholders to
the extent that said stock may be required by such Bylaws or contract to be
offered first to the corporation or to other shareholders at a price to be
fixed in accordance with such Bylaws or contract; provided, however, that no
such restrictions shall be valid unless stated upon the stock certificate.
Each holder of record of the common stock shall be entitled to one (1) vote
per share of each share of common stock standing in his name on the books of
the corporation. No shareholder entitled to vote shall have or exercise the
right to accumulate his votes in electing directors or for any other purpose.
Each holder of record of the non-voting, non-participating cumulative
redeemable preferred stock shall be entitled to one vote per share of such stock
only upon matters relating solely to the terms and conditions of the
non-voting, non-participating cumulative redeemable preferred stock.
The shareholders of the common stock shall have preemptive rights upon
further issuance of common stock whether a new issue or from treasury stock.
No shareholder or preferred stock shall have any preemptive rights upon the
further issuance of preferred stock of the corporation.
-4-
<PAGE> 5
ARTICLE VIII
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized:
A. To make, alter or repeal the Bylaws of the corporation, subject to the
right of the stockholders to review, amend or alter.
B. To authorize and cause to be executed mortgages and liens upon the
real and personal property of the corporation.
C. To designate one or more committees from the Board which committees
shall have such powers and authority as are provided in the resolutions of the
Board of Directors, or in the Bylaws of the corporation, but no such committee
shall, except as otherwise provided by the Business Corporation Law of
Wisconsin, have any power or authority with reference to amending the Articles
of Incorporation, adopting an agreement of merger or consolidation, or for the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, except by consent of the stockholders.
ARTICLE IX
The number of directors which shall constitute the whole Board of Directors
shall be at least three (3). Each director shall continue in office for the
term of one (1) year or for the term for which he was named, if less than one
(1) year, and until his successor is elected and has qualified.
The directors shall choose or elect a chief executive officer, a chief
financial officer, and such other officers as may be designated in the Bylaws
and offices elected
-5-
<PAGE> 6
at each annual meeting of the Board of Directors, or at a special meeting of the
Board of Directors in case of a vacancy or vacancies to serve as such until the
next regular annual meeting of the Board of Directors.
The names of the members of the first Board of Directors are as
follows:
Curtis John Hubertz
Craig Hubertz
JoEllen Hubertz
Christian J. Hubertz
Curtis M. Hubertz
Said named directors shall serve as such until the next regular meeting of the
shareholders of the corporation.
ARTICLE X
Certain Contracts
No transaction between the corporation and one or more of its
directors or officers, or between the corporation and any corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for such reason, or solely because the director
or officer is present at or participates in the meeting of the Board of
Directors or a committee thereof which authorizes the contract or transaction,
or solely because his or their votes are counted for such purpose, if:
1. The material facts as to his interest and as to the
transaction are disclosed or are known to the Board of
-6-
<PAGE> 7
Directors or the committee, and the Board or committee in good faith
authorizes the transaction by a vote sufficient for such purposes
without counting the vote of the interest director or directors; or
2. The material facts as to this interest and as to the
transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the transaction is specifically approved in good
faith by vote of the stockholders; or
3. The transaction is fair as to the corporation as of the time
it is authorized, approved or ratified by the Board of Directors, a
committee thereof, or the stockholders. Interested directors may be
counted in determining the presence of a quorum at a meeting of the
Board of Directors or of a committee which authorizes the transaction.
ARTICLE XI
The provisions Section 180.05 of the Business Corporation Law of
Wisconsin permitting indemnification of employees, officers and directors and
others shall be and hereby is incorporated by reference hereto as mandatory upon
the corporation and made a mandatory part of these Articles of Incorporation.
ARTICLE XII
These Articles of Incorporation may not be amended except upon the
affirmative vote of the holders of not less than two-thirds (2/3) of the
outstanding shares of the common stock.
-7-
<PAGE> 8
Christian J. Hubertz
P.O. Box 557
Walworth, Wisconsin 53184
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his hand
this 11 day of April, 1985.
/s/ Christian J. Hubertz
--------------------------------------------
Christian J. Hubertz, Incorporator
132 Beloit Street
Walworth, Wisconsin 53184
<PAGE> 9
STATE OF MINNESOTA )
COUNTY OF RAMSEY )
On this 11th day of April, 1985, before me, a Notary Public,
personally appeared Christian Hubertz to me known to be the person named in and
who executed the foregoing instrument and acknowledged to me that he executed
the same as his free act and deed and for the uses and purposes therein
expressed.
G.J. Moffet
--------------------------------
[NOTARY SEAL]
GREGORY J. MOFFET
NOTARY PUBLIC-MINNESOTA
RAMSEY COUNTY
My Comm. Expires Aug. 21, 1990
<PAGE> 1
Exhibit 3.6
BYLAWS OF
PLASTRONICS PLUS, INC.
ARTICLE I
Name and Location
Section 1. The name of this corporation shall be Plastronics Plus, Inc.
Section 2. The registered office of this corporation shall be located
at 132 Beloit Street, Walworth, Wisconsin. This registered place of business may
be transferred to such place as the Board of Directors may from time to time
determine and certify to the Secretary of State, and other offices for the
transaction of business may be located at such place as the Board of Directors
may deem desirable.
ARTICLE II
Meetings of Shareholders
Section 1. Meetings of the shareholders of this corporation shall be
held at the registered office of the corporation or at such place as is
designated by the President, Board of Directors or by consent of a majority of
the shareholders entitled to vote thereat.
Section 2. The annual meeting of the shareholders of this corporation
shall be held on the first Monday in April of each year. At such meeting the
shareholders shall elect a Board of Directors to serve until the next annual
meeting of shareholders and until their successors are elected and qualified.
The shareholders shall transact such other business at the annual meeting as may
properly come before them.
<PAGE> 2
Section 3. Special meetings of the shareholders may be called for any
purpose at any time and at any place by the President, by the Board of
Directors or by any two (2) or more members thereof.
Section 4. Every holder of common stock of this corporation shall be
entitled to one (1) vote for each share held in his name on the books of
the corporation. Such votes may be cast by each shareholder either in
person or by proxy.
A majority of the shares of common stock issued and outstanding,
represented in person or by proxy, shall constitute a quorum for the transaction
of business at any meeting; but the shareholders present at any meeting though
less than a quorum, may adjourn the meeting to a future time.
Section 5. Written notice of the holding of the annual meeting or
any special meeting of shareholders shall be mailed to each shareholder entitled
to vote thereat at least ten (10) days but not more than sixty (60) days prior
to the meeting. Such notice shall state the time and place of the meeting, and
the purposes of the meeting if it is a special meeting. It shall be mailed to
the last known address of such shareholder as the same appears upon the books of
the corporation. Notice may be waived in writing either before or after the
meeting.
ARTICLE III
Directors
Section 1. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors who shall have all
the powers that may be exercised and
-2-
<PAGE> 3
performed by the corporation pursuant to law, to the Articles of Incorporation,
and to the Bylaws.
Section 2. The Board of Directors shall consist of not less than three
(3) nor more than nine (9) members, as fixed from time to time by the Directors.
Directors shall be elected by the holders of the common stock at the annual
meeting of shareholders. Each director shall hold office until the next annual
meeting of shareholders, or until his successor shall be elected and qualified.
Section 3. Whenever any vacancy shall occur in the Board of Directors
by death, resignation, increase in the number of directors, or otherwise, such
vacancy may be filled by the affirmative vote of a majority of the remaining
directors, though less than a quorum, of the Board of Directors. If after such
resignation no directors remain, then any vacancy may be filled by a majority
vote of the shareholders present at a special meeting called for the purpose of
such election. A director so elected to fill a vacancy shall serve until his
successor is elected by the shareholders at the next annual meeting or at any
special meeting of shareholders called for that purpose.
Section 4. The meetings of the Board of Directors of this corporation,
both regular and special, shall be held at such place as the directors may from
time to time determine. Such meetings may be held and directors may participate
in meetings of the Board of Directors by means of electronic communication to
the extent permitted.
-3-
<PAGE> 4
Section 5. Special meetings of the Board of Directors may be called by
the President or any two members of the Board of Directors. Notice of all
special meetings shall be given by the Secretary to each director at least
twenty-four (24) days previous to the time fixed for the meeting. All notices of
special meetings shall state the purpose thereof. Notice may be waived in
writing or by telegram before or after any meeting.
Section 6. A majority of the Board of Directors shall constitute a
quorum for the transaction of business. The act of the majority of the directors
present at a meeting, at which a quorum is present, shall be the act of the
Board of Directors, except as may be otherwise specifically provided by statute,
by the Articles of Incorporation or by these Bylaws.
ARTICLE IV
Officers
Section 1. The officers of this corporation shall consist of a
President, a Vice-President, a Secretary, a Treasurer, and such other officers
and assistant officers and agents as may be deemed necessary by the Board of
Directors. Any two or more offices may be held by the same person.
Section 2. Whenever any vacancy shall occur in any office by death,
resignation, increase in the number of offices of the corporation, or otherwise,
such vacancy shall be filled by an affirmative vote of a majority of the Board
of Directors, and such officer so elected shall hold office until his successor
is elected and qualified.
-4-
<PAGE> 5
Section 3. President. The President shall be the chief executive
officer, and shall perform such other duties as the Bylaws or the Board of
Directors shall prescribe.
Section 4. Vice-President. The Vice-President shall perform all duties
incumbent upon the President during the absence or disability of the President,
and shall perform such other duties as these Bylaws may require or the Board of
Directors shall prescribe.
Section 5. Secretary. The Secretary shall:
(a) Keep the minutes of the meetings of the shareholders and
of the Board of Directors in books provided for that purpose;
(b) See that all notices are duly given in accordance with
the provisions of these Bylaws and as required by law;
(c) Be custodian of the records of the corporation;
(d) Keep a register of the post office address of each
shareholder, and make all proper changes in such register, retaining and filing
his authority for all such entries;
(e) See that all books, reports, statements, certificates and
all other documents and records required by law are properly kept and filed; and
(f) In general, perform all duties incident to the office of
Secretary and such other duties as these Bylaws may require or the Board of
Directors may prescribe.
Section 6. Treasurer. The Treasurer shall be the chief financial
officer and shall keep correct and complete records of accounts, showing
accurately at all times the financial position of the corporation. In addition,
the Treasurer shall:
-5-
<PAGE> 6
(a) Have charge and custody of and be responsible for all
funds and securities of the corporation and deposit all such funds in the name
of the corporation in such banks, trust companies, and other depositories as
shall be selected by the Board of Directors in accordance with the provisions of
these Bylaws;
(b) At all times exhibit his books of account and records to
any of the directors of this corporation or any other persons legally entitled
to inspect said books and records upon application during business hours at the
office of this corporation or such other corporation where such books are kept;
(c) Render statements of the condition of finance of the
corporation at all regular meetings of the Board of Directors and at meetings of
the shareholders if called upon to do so;
(d) Receive and give receipts for all money payments to the
corporation from any source whatsoever; and
(e) In general, perform all duties incident to and customarily
performed by such officer and perform such other duties as these Bylaws may
require or the Board of Directors may prescribe.
Section 7. In the case of absence of any officer of the corporation, or
for any other reason that the Board may deem sufficient, the Board of Directors
may delegate the powers or duties of such officer to any other officer or to any
director or employee of the corporation, for the time being, provided that the
majority of the entire Board of Directors concurs therein.
-6-
<PAGE> 7
ARTICLE V
These Bylaws may be altered, amended or repealed:
(a) At any regular or duly called special meeting of
shareholders at which a quorum is present, by the affirmative vote of a majority
of the stock entitled to vote at such meetings and present or represented
thereat; or
(b) At any regular meeting of the board of directors, or at
any special meeting of the Board if notice of the proposed alteration or
amendment or repeal is contained in the notice of such special meeting, by the
affirmative vote of a majority of the Board of Directors at such meeting, at
which a quorum is present.
/s/ Christian J. Hubertz
-----------------------------------
Christian J. Hubertz, Secretary
-7-
<PAGE> 1
EXHIBIT 3.7
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE -- CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) FILED DATE RECEIVED
DEC 23 1986 DEC 23 1986
Administrator
MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau
- --------------------------------------------------------------------------------
RESTATED ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATIONS
(Please read instructions and Paperwork Reduction Act notice on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended,
the undersigned corporation executes the following Articles:
- --------------------------------------------------------------------------------
1. The present name of the corporation is: GRAND MACHINING CO.
2. The corporation identification number (CID) assigned by the Bureau is:
081-636
3. All former names of the corporation are: none
4. The date of filing the original Articles of Incorporation was:
March 3, 1954
- --------------------------------------------------------------------------------
The following Restated Articles of Incorporation supersede the Articles
of Incorporation as amended and shall be the Articles of Incorporation for
the corporation:
ARTICLE I
- --------------------------------------------------------------------------------
The name of the corporation is: GRAND MACHINING CO.
- --------------------------------------------------------------------------------
ARTICLE II
- --------------------------------------------------------------------------------
The purpose or purposes for which the corporation is organized are: to engage in
any activities within the purposes for which corporations may be organized
under the Business Corporation Act of Michigan.
- --------------------------------------------------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 2
ARTICLE III
- --------------------------------------------------------------------------------
The total authorized capital stock is:
1. Common shares 500 Par Value Per Share $ 100.00
Preferred shares ________________ Par Value Per Share $ ___________
and/or shares without par value as follows:
2. Common shares ___________________ Stated Value Per Share $ ________
Preferred shares ________________ Stated Value Per Share $ _______
3. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
Each share of common stock shall have one vote and be equal to every
other share of common stock in all respects.
- --------------------------------------------------------------------------------
ARTICLE IV
- --------------------------------------------------------------------------------
1. The address of the current registered office is:
1600 West Maple Road, Troy , Michigan 48084
---------------------------------------------- ---------------
(Street Address) (City) (ZIP Code)
2. The mailing address of the current registered office if different than
above:
Michigan
----------------------------------------------, ----------------
(P.O. Box) (City) (ZIP Code)
3. The name of the current resident agent is: Stephen Grand
- --------------------------------------------------------------------------------
ARTICLE V
- --------------------------------------------------------------------------------
When a compromise or arrangement or a plan of reorganization of this corporation
is proposed between this corporation and its creditors or any class of them or
between this corporation and its shareholders or any class of them, a court of
equity jurisdiction within the state, on application of this corporation or of a
creditor or shareholder thereof, or on application of a receiver appointed for
the corporation, may order a meeting of the creditors or class of creditors or
of the shareholders or class of shareholders to be affected by the proposed
compromise or arrangement or reorganization, to be summoned in such manner as
the court directs. If a majority in number representing 3/4 in value of the
creditors or class of creditors, or of the shareholders or class of shareholders
to be affected by the proposed compromise or arrangement or a reorganization,
agree to a compromise or arrangement or a reorganization of this corporation as
a consequence of the compromise or arrangement, the compromise or arrangement
and the reorganization, if sanctioned by the court to which the application has
been made, shall be binding on all the creditors or class of creditors, or on
all the shareholders or class of shareholders and also on this corporation.
- --------------------------------------------------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 3
ARTICLE VI
- --------------------------------------------------------------------------------
Any action required or permitted by the act to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior notice
and without a vote if a consent in writing setting forth the action so taken,
is signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take the action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to shareholders who have
not consented in writing.
- --------------------------------------------------------------------------------
ARTICLE VII (Additional provisions, if any, may be inserted here; attach
additional pages if needed.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. COMPLETE SECTION (a) IF THE RESTATED ARTICLES WERE ADOPTED BY THE UNANIMOUS
CONSENT OF THE INCORPORATORS BEFORE THE FIRST MEETING OF THE BOARD OF
DIRECTORS; OTHERWISE, COMPLETE SECTION (b)
a. [ ] These Restated Articles of Incorporation were duly adopted on the
____ day of _____________, 19__, in accordance with the provisions of
Section 642 of the Act by the unanimous consent of the incorporators
before the first meeting of the Board of Directors.
Signed this _____day of __________________________________, 19 ______
___________________________________ ________________________________
___________________________________ ________________________________
(Signatures of all incorporators: type or print name under each
signature)
b.[XX] Thes Restated Articles of Incorporation were duly adopted on the
18th day of December, 1986, in accordance with the provisions of
Section 642 of the Act and: (check one of the following)
[ ] were duly adopted by the Board of Directors without a vote of the
shareholders. These Restated Articles of Incorporation only restate
and integrate and do not further amend the provisions of the Articles
of Incorporation as heretofore amended and there is no material
discrepancy between those provisions and the provisions of these
Restated Articles.
[XXX] were duly adopted by the shareholders. The necessary number of
shares as required by statute were voted in favor of these Restated
Articles.
[ ] were duly adopted by the written consent of the shareholders having
not less than the minimum number of votes required by statute in
accordance with Section 407(1) and (2) of the Act. Written notice
to shareholders who have not consented in writing has been given.
(Note: Written consent by less than all of the shareholders is
permitted only if such provision appears in the Articles of
Incorporation.)
[ ] were duly adopted by the written consent of all the shareholders
entitled to vote in accordance with Section 407(3) of the Act.
Signed this 18th day of December, 1986
By /s/ Stephen Grand
------------------------------------
(Signature)
Stephen Grand - President
------------------------------------
(Type or Print Name and Title)
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 1
EXHIBIT 3.8
BY-LAWS
OF
GRAND MACHINING COMPANY
ARTICLE I
MEETINGS
SECTION 1. PLACE OF MEETING. Any or all meetings of the shareholders or
the Board of Directors of this Corporation may be held within or without the
State of Michigan, provided that no meeting may be held at a place other than
within Michigan except pursuant to By-Laws or resolutions adopted by the Board
of Directors.
SECTION 2. ANNUAL MEETING OF SHAREHOLDERS. An annual meeting of the
shareholders shall be held in each year on the last day of the fiscal year, or
at such other time as the Board of Directors may designate. If the day fixed for
the annual meeting shall be a legal holiday, such meeting shall be held on the
next succeeding business day. One of the purposes of such meeting shall be the
election of a Board of Directors.
SECTION 3. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS. At least ten (10)
days prior to the date fixed by Section 2 of this Article for the holding of the
annual meeting of shareholders, written notice of the time, place and purpose of
such meeting shall be mailed, as hereinafter provided, to each shareholder
entitled to vote at such meeting.
SECTION 4. DELAYED ANNUAL MEETING. If, for any reason, the annual
meeting of the shareholders shall not be held on the day hereinbefore
designated, such meeting may be called and held as a special meeting, and the
same proceedings may be had thereat as at an annual meeting, provided, however,
that the notice of such meeting shall be the same herein required for the annual
meeting, namely, not less than a ten (10) day notice.
SECTION 5. ORDER OF BUSINESS AT ANNUAL MEETING. The order of business
at the annual meeting of the shareholders shall be as follows:
(a) Roll Call
(b) Reading Notice and Proof of Mailing
(c) Report of President
(d) Report of Secretary
(e) Report of Treasurer
(f) Election of Directors
1
<PAGE> 2
(g) Transaction of other business
mentioned in the Notice
(h) Adjournment
Provided that in the absence of any objection the presiding officer
may vary the order of business at his discretion.
SECTION 6. SPECIAL MEETING OF SHAREHOLDERS. A special meeting of the
shareholders may be called at any time by the President, or by a majority of the
Board of Directors, or by Shareholders entitled to vote upon not less than an
aggregate of 25% of the outstanding shares of the corporation having the right
to vote at such special meeting. The method by which such meeting may be called
is as follows: Upon receipt of a specification in writing setting forth the date
and objects of such proposed special meeting, signed by the President, or by a
majority of the Board of Directors, or by shareholders as above provided, the
Secretary of this corporation shall prepare, sign and mail the notices requisite
to such meeting.
SECTION 7. NOTICE OF SPECIAL MEETING OF SHAREHOLDERS. At least ten (10)
days prior to the date fixed for the holding of any special meeting of
shareholders, written notice of the time, place and purposes of such meeting
shall be mailed, as hereinbefore provided, to each shareholder entitled to vote
at such meeting. No business not mentioned in the notice shall be transacted at
such meeting.
SECTION 8. ORGANIZATION MEETING OF BOARD. At the place of holding the
annual meeting of shareholders, and immediately following the same, the Board of
Directors as constituted upon final adjournment of such annual meeting shall
convene for the purpose of electing officers and transacting any other business
properly brought before it; provided, that the organization meeting in any year
may be held at a different time and place than herein provided by consent of a
majority of the Directors of such new Board.
SECTION 9. REGULAR MEETINGS OF BOARD. Regular meetings of the Board of
Directors shall be held upon the call of the President and not less frequently
than once in each year at such time and place as the Board of Directors shall
from time to time determine. No notice of regular meeting of the Board of
Directors shall be required.
SECTION 10. SPECIAL MEETINGS OF THE BOARD. Special meetings of the
Board of Directors may be called by the Board of Directors or by the
President, at any time, by means of such written notice delivered to the
Directors' business address. Said notice shall state the time, place and purpose
of such meeting as the President, in his discretion, shall deem
2
<PAGE> 3
sufficient, but action taken at any such meeting shall not be invalidated
for want of notice if such notice shall be waived as hereinafter provided.
SECTION 11. NOTICE AND MAILINGS. All notices required to be given by
any provision of these By-Laws shall state the authority pursuant to which they
are issued, (as, "by order of President", or "by order of the Board of
Directors", or "by order of the Shareholders", as the case may be), and shall
bear the written or printed signature of the President or Secretary. Every
notice shall be deemed duly served if personally delivered to the sendee's
regular business or residence address or when the same has been deposited in the
United States Mail, with postage fully prepaid, plainly addressed to the sendee
at his, her or its last address appearing upon the original or duplicate stock
letter of this corporation at its registered office in Michigan.
SECTION 12. WAIVER OF NOTICE. Notice of the time, place and purpose of
any meeting of the shareholders or of the Board of Directors, may be waived by
telegram, radiogram, cablegram or other writing, either before or after such
meeting has been held.
SECTION 13. PARTICIPATION BY TELEPHONE. Unless otherwise restricted by
the Articles of Incorporation or By-Laws of this corporation, a member of the
Board of Directors or of a committee designated by the Board of Directors may
participate in a meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this section
constitutes presence in person at the said meeting.
SECTION 14. NEW SHAREHOLDERS. Every person becoming a shareholder in
this corporation shall be deemed to assent to these By-Laws. Said person shall
deliver to the Secretary the address to which he desires notices to be sent. All
notices mailed to said address shall be deemed to have been properly served upon
said new shareholder. Any person who fails to so designate his address to the
said Secretary shall be deemed to have waived any and all notices.
SECTION 15. VOTING LISTS. The officer or agent having charge of the
transfer book for shares of the Corporation shall make, within twenty (20) days
after the record date for a meeting of shareholders or ten (10) days before such
meeting, whichever is earlier, a complete list of the shareholders entitled to
vote at such meeting, arranged in alphabetical order, with the address of and
the number of shares held by each, which list, for a period of ten (10) days
prior to such
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meeting, shall be kept on file at the registered office of the Corporation and
shall be subject to inspection by any shareholder, and to copying at the
shareholder's expense, at any time during usual business hours. Such list shall
also be produced and kept open at the time and place of the meeting and shall
be subject to the inspection of any shareholder during the whole time of the
meeting. The original share ledger or transfer book, or a duplicate thereof
kept in the offices of the Corporation, shall be prima facie evidence as to who
are the shareholders entitled to examine such list or share ledger or transfer
book or to vote at any meeting of shareholders.
SECTION 16. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of the shareholders, may be taken without a meeting and without a
vote, if a consent in writing, setting forth the action so taken shall be signed
(a) if five (5) days prior notice of the proposed action is given in writing to
all of the shareholders entitled to vote with respect to the subject matter
thereof, by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voting or
(b) by all the shareholders entitled to vote with respect to the subject matter
thereof.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given in writing to those
shareholders who have not consented in writing. In the event that the action
which is consented to is such as would have required the filing of a certificate
under any section of the Business Corporation Act of the State of Michigan, if
such action had been voted on by the shareholders at a meeting thereof, the
certificate filed under such section shall state, in lieu of any statement
required by such section concerning any vote of shareholders, that written
consent has been given in accordance with the provisions of the Business
Corporation Act, and that written notice has been given as provided in the said
Act.
SECTION 17. WAIVER BY ATTENDANCE. Attendance of a person at a meeting
of Shareholders, in person or by proxy, or at a meeting of the Board of
Directors, constitutes a waiver of the notice of the meeting, except when a
Shareholder or Director attends a meeting for the express purpose of objecting
at the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened.
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ARTICLE II
QUORUM
SECTION 1. QUORUM OF SHAREHOLDERS. A majority of the outstanding shares
of this corporation entitled to vote, present by record holder thereof in person
or by proxy, shall constitute a quorum at any meeting of the shareholders.
SECTION 2. QUORUM OF DIRECTORS. Two (2) Directors shall constitute a
quorum.
ARTICLE III
VOTING, ELECTIONS AND PROXIES
SECTION 1. THOSE ENTITLED TO VOTE. Except as the Articles of
Incorporation or Amendments thereto otherwise provide, each shareholder of this
corporation shall, at every meeting of the shareholders, be entitled to one vote
in person or by proxy for each share of stock of this corporation held by such
shareholder, subject to the limitations set forth in the Articles of
Incorporation of this Corporation.
SECTION 2. RECORD DATE FOR DETERMINATION OF SHAREHOLDERS. The Board of
Directors shall have the right to fix a date not more than sixty (60) nor less
than ten (10) days preceding:
(a) The date of any meeting of shareholders;
(b) The date for payment of any dividends;
(c) The date for the allotment of rights;
(d) The date when any change or conversion or exchange of
capital stock shall go into effect,
as a record date for the determination of the shareholders entitled to notice
of, and to vote at, any such meeting, or entitled to receive payment of any such
dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock. Only such
shareholders as shall be shareholders of record on the date so fixed shall be
entitled to such notice of, and to vote at such meeting, or to receive payment
of such rights as the case may be, notwithstanding any transfer of any stock on
the books of the Corporation or otherwise after such record date fixed as
aforesaid. Nothing in this Section shall affect the rights of a shareholder and
his transferee or transferor as between themselves.
SECTION 3. PROXIES. No proxy shall be deemed operative unless and until
signed by the shareholder and filed with the
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Corporation. In the absence of a limitation to the contrary contained in the
proxy, a proxy shall extend to all meetings of the shareholders and shall remain
in force for three (3) years from its date, and no longer.
SECTION 4. VOTE BY SHAREHOLDER CORPORATION. Any other corporation
owning voting shares in this Corporation may vote upon the same by the President
of such shareholder corporation, or by proxy appointed by him, unless some other
person shall be appointed to vote upon such shares by resolution of the Board of
Directors of such shareholder corporation.
SECTION 5. VOTING OF SHARES BY CERTAIN HOLDERS. Shares held by the
Corporation in a fiduciary capacity may be voted and shall be counted in
determining the total number of outstanding shares entitled to vote at any given
time.
Shares registered in the name of a deceased person, a minor ward or a
person under legal disability, may be voted by his or her administrator,
executor, personal representative, or court-appointed guardian, either in person
or by proxy, without a transfer of such shares into the name of such
administrator, executor, personal representative or court-appointed guardian.
Shares registered in the name of a trustee may be voted by the trustee, either
in person or by proxy.
Shares registered in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his or her name if authority to
do so is contained in an appropriate order of the court by which such receiver
was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Any number of shareholders may create a voting trust for the purpose of
conferring upon a trustee or trustees the right to vote or otherwise represent
their shares, for a period not in excess of the period allowable by the laws of
the State of incorporation, by entering into a written voting trust agreement
specifying the terms and conditions of the voting trust, and by transferring
their shares to such trustee or trustees for the purpose of the agreement. Any
such trust agreement shall not become effective until a counterpart of the
agreement is deposited with the Corporation at its registered office. The
counterpart of the voting trust agreement so deposited with the Corporation
shall be subject to the same right of examination by a shareholder of the
Corporation, in person or by agent or
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attorney, as are the books and records of the Corporation, and shall be
subject to examination by any holder of a beneficial interest in the voting
trust, either in person or by agent or attorney, at any reasonable time for
any proper purpose.
No provision of these By-Laws shall be deemed to limit the ability of
any shareholders to enter into voting agreements which are otherwise lawful.
Shares of its own stock belonging to this Corporation shall not be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time, but shares
of its own stock held by it in a fiduciary capacity may be voted and shall be
counted in determining the total number of outstanding shares at any given time.
SECTION 6. VOTING. Each outstanding share of stock is entitled to one
vote on each matter submitted to a vote. The votes shall be cast orally unless
the holders of a majority present and entitled to vote at said meeting shall
determine that the vote shall be in writing. The Directors shall be voted for at
one time as a group on one ballot, and shall not be voted for individually, one
at a time. Any shareholder may vote in person or by proxy provided that the
proxy shall be signed by the shareholder or his authorized agent or
representative.
SECTION 7. INSPECTORS OF ELECTION. Whenever any person entitled to vote
at a meeting of the shareholders shall request the appointment of inspectors, a
majority of the shareholders present at such meeting and entitled to vote
thereat shall appoint not more than three (3) inspectors, who need not be
shareholders. If the right of any person to vote at such meetings shall be
challenged, the inspectors shall determine such right. The inspectors shall
receive and count the votes either upon the election or for the decision of any
questions and shall determine the results. Their certification of any vote shall
be prima facia evidence thereof.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1. NUMBER AND TERM OF DIRECTORS. The business, property and
affairs of this Corporation shall be managed by a board of Directors composed of
not more than two (2) member(s) who need not be shareholders. Each director
shall hold office for the term for which he is elected and until his successor
is elected and qualified, provided, however, that in the event any director
shall at any time resign from his office as a director
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by depositing his written resignation with any officer of the Corporation or
with any director, such director so depositing his written resignation shall
forthwith cease to be a member of the Board of Directors of this Corporation
and his office as a director shall immediately become vacant at the time of
the deposit of such resignation, as herein provided.
SECTION 2. REMOVAL OF DIRECTORS. Any Director of this Corporation may
be removed at any annual or special meeting of the shareholders by the same vote
as that required to elect a Director, provided, however, that such proposed
action is stated in the notice of the meeting. If the Articles of Incorporation
shall call for cumulative voting for the Board of Directors, and if less than
the entire Board is to be removed, no one of the Directors may be removed if the
votes cast against his removal would be sufficient to elect him if then
cumulatively voted at an election of the entire Board of Directors. Further, any
Director of the Corporation may be removed at any time, either with or without
cause, by the vote of a majority of a quorum of Directors present at a meeting
of the Board called for that purpose.
SECTION 3. VACANCIES. Vacancies in the Board of Directors shall be
filled by appointment made by the remaining Directors. Each person so elected to
fill a vacancy shall remain a Director for the term of the Director he has
replaced or until he has resigned or been removed as aforesaid, or until his
successor has been elected by the shareholders at their next annual meeting or
at any special meeting duly called for that purpose, which ever of the foregoing
events shall occur first.
SECTION 4. VOTE REQUIRED AT DIRECTORS' MEETING. The Directors shall in
all cases act as a board regularly convened, and, in the transaction of
business, the act of a majority present at a meeting except as otherwise
provided by law or the Articles of Incorporation shall be the act of the Board,
provided a quorum is present. The Directors may adopt such rules and regulations
for the conduct of their meetings and the management of the Corporation as they
deem proper, not inconsistent with law or these By-Laws.
SECTION 5. ACTION BY UNANIMOUS WRITTEN CONSENT. If and when all of the
directors shall severally or collectively consent in writing to any action to be
taken by the Corporation, such action shall be a valid corporate action as
though it had been authorized at a meeting of the Board of Directors.
SECTION 6. WRITTEN CONSENT. Any action required or permitted by the
Board of Directors to be taken at an annual or special meeting of the Board of
Directors may be taken without a meeting, without prior notice and without a
vote, if a consent
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in writing, setting forth the action so taken, is signed by members of the
Board having not less than the minimum number of votes that would be necessary
to authorize or take action at a meeting at which all directors were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to the directors
who have not consented in writing.
SECTION 7. POWER TO MAKE BY-LAWS. The Board of Directors shall have the
power to make and alter any By-Law or By-Laws including the fixing and altering
of the number of directors; provided, that the Board shall not make or alter any
By-Law or By-Laws fixing the qualifications, classifications or terms of office
of any member or members of the then existing Board.
SECTION 8. POWER TO ELECT OFFICERS. The Board of Directors shall select
a president, a secretary, a treasurer and a vice president, if it is deemed
necessary. No officer, except the president, need be a member of the Board.
SECTION 9. POWER TO APPOINT OTHER OFFICERS AND AGENTS. The Board of
Directors shall have power to appoint such other officers and agents as the
Board may deem necessary. No officer, except the President, need be a member of
the Board.
SECTION 10. POWER TO FILL VACANCIES. The Board shall have the power to
fill any vacancies in any office occurring for any reason whatsoever.
SECTION 11. DELEGATION OF POWERS. For any reason deemed sufficient by
the Board of Directors, whether occasioned by absence or otherwise, the Board
may delegate all or any of the powers and duties of any officer to any other
officer or director, but no officer or director shall execute, acknowledge or
verify any instrument in more than one capacity.
SECTION 12. COMMITTEES. A majority of the Board of Directors may create
one or more committees of two or more members to exercise appropriate authority
of the Board of Directors. A majority of such committee shall constitute a
quorum for transaction of business. A committee may transact business without a
meeting by unanimous written consent. The Board of Directors may further
appoint, by resolution, an executive committee composed of three directors who,
to the extent provided by such resolution, shall have and exercise the authority
of the Board of Directors in the management of the business of the Corporation
between meetings of the Board.
SECTION 13. POWER TO REQUIRE BOND. The Board of Directors may require
any officer or agent to file with the corporation a satisfactory bond
conditioned on faithful performance of his
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duties.
SECTION 14. COMPENSATION. The Board of Directors, by the affirmative
vote of a majority of directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the Corporation as directors,
officers or otherwise notwithstanding any director conflict of interest. By
resolution of the Board of Directors, the directors may be paid their expenses,
if any, of attendance at each meeting of the Board. No such payment previously
mentioned in this section shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
SECTION 15. PRESUMPTION OF ASSENT. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken unless his or her dissent shall be entered in the Minutes of the Meeting
or unless he or she shall file his or her written dissent to such action with
the person acting as the Secretary of the Meeting before the adjournment thereof
or shall forward such dissent by registered or certified mail to the secretary
of the Corporation immediately after the adjournment of the Meeting. Such right
to dissent shall not apply to a director who voted in favor of such action.
ARTICLE V
OFFICERS
SECTION 1. PRESIDENT. The President shall be the chief executive
officer of the Corporation, and in the recess of the Board of Directors shall
have the general control and the management of its business and affairs,
subject, however, to the right of the Board of Directors to delegate any
specific power except such as may be by statute exclusively conferred upon the
President, to any other officer or officers of the Corporation. The President
shall preside at all meetings of the Directors and at all meetings of the
Shareholders, unless otherwise determined by a majority of all the shares of the
capital stock issued and outstanding, present in person or by proxy.
SECTION 2. VICE-PRESIDENT. The Vice-President shall act in the absence
of, or disability of the President and shall act in the capacity of the
President until the absence or disability of the Vice-President, then succession
to the President's duties by reason of absence or disability of the President
shall be in the order of seniority of the office.
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SECTION 3. SECRETARY. The Secretary shall attend all meetings of the
shareholders, and of the Board of Directors and of the executive committee, and
shall preserve in books of the company true minutes of the proceedings of all
such meetings. He shall safely keep in his custody the seal of the corporation
and shall have authority to affix the same to all instruments where its use is
required. He shall give all notices required by statutes, by-law or resolution.
He shall perform such other duties as may be delegated to him by the Board of
Directors or by the executive committee.
SECTION 4. TREASURER. The Treasurer shall have custody of all corporate
funds and securities and shall keep in books belonging to the corporation full
and accurate accounts of all receipts and disbursements; he shall deposit all
monies, securities and other valuable effects in the name of the corporation in
such depositories as may be designated for that purpose by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board, taking proper vouchers for such disbursements, and shall render to
the President and Directors at the regular meetings of the Board and whenever
requested by them, an account of all his transactions as Treasurer and of the
financial condition of the corporation. If required by the Board, he shall
deliver to the President of the company, and shall keep in force, a bond in
form, account and with surety or sureties satisfactory to the Board, conditioned
for the faithful performance of the duties of his office, and for restoration to
the corporation in case of his death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money and property of whatever kind in
his possession or under his control belonging to the corporation.
SECTION 5. ASSISTANT SECRETARY. The Assistant Secretary, if one
is appointed, in the absence or disability of the Secretary, shall perform
the duties and exercise the powers of the Secretary.
SECTION 6. ASSISTANT TREASURER. The Assistant Treasurer, if one is
appointed, in the absence or disability of the Treasurer, shall perform the
duties and exercise the powers of the Treasurer.
ARTICLE VI
STOCKS AND TRANSFERS
SECTION 1. CERTIFICATES FOR SHARES. Every shareholder shall be
entitled to a certificate of his share signed by the President and the
Secretary, or the Assistant Secretary or the
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Treasurer, or the Assistant Treasurer, if one be appointed, under the seal of
the corporation, certifying the number of shares represented by such
certificates which certificates shall state the terms and provisions of said
shares; provided, that where such certificate is signed by a transfer agent or
an assistant transfer agent or by a transfer clerk acting on behalf of such
corporation, or by a registrar, the signatures of any such President,
Secretary, Assistant Secretary, Treasurer or Assistant Treasurer and the seal
of the corporation may be facsimile.
SECTION 2. TRANSFERABLE ONLY ON BOOKS OF CORPORATION. Shares shall be
transferable only on the books of the corporation by the person named in the
certificate, or by an attorney lawfully constituted in writing, and upon
surrender of the certificate therefor. A record shall be made of every such
transfer and issue. Whenever any transfer is made for collateral security and
not absolutely the fact shall be so expressed in the entry of such transfer.
SECTION 3. REGISTERED SHAREHOLDERS. The corporation shall have the
right to treat the registered holder of any share as the absolute owner thereof,
and shall not be bound to recognize any equitable or other claim to, or interest
in, such share on the part of any other person, whether or not the corporation
shall have express or other notice thereof, save as may be otherwise provided by
the law of the State of Michigan.
SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
appoint a transfer agent and a registrar of transfers, and may require all
certificates of shares to bear the signature of such transfer agent and of such
registrar of transfers, or as the Board may otherwise direct.
SECTION 5. REGULATIONS. The Board of Directors shall have the power
and authority to make all such rules and regulations as the Board shall deem
expedient regulating the issue, transfer and registration of certificates for
shares in this corporation.
SECTION 6. LOST CERTIFICATES. In case of the loss of any certificate
of shares of stock, upon due proof by the registered holder or his
representatives, by affidavit of such loss, the Secretary shall issue a
duplicate certificate in its place, upon the Corporation being fully indemnified
therefor.
ARTICLE VII
DIVIDENDS AND RESERVES
SECTION 1. SOURCES OF DIVIDENDS. The Board of Directors
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shall have power and authority to declare dividends from the following sources:
(a) From earned surplus,
(b) From net earnings,
(c) From appreciation of the value of the
assets of the corporation, provided
that such dividend shall be payable in
stock only;
the above being at all times subject to the provisions and conditions contained
in the Articles of Incorporation filed by the corporation.
In determining earned surplus the judgment of the Board shall be
conclusive in the absence of bad faith or gross neglect.
SECTION 2. MANNER OF PAYMENT OF DIVIDEND. Dividends may be paid in
cash, in property, in obligations of the corporation or in shares of the capital
stock of the corporation.
SECTION 3. RESERVES. The Board of Directors shall have power and
authority to set apart, subject to the provisions of the Articles of
Incorporation, out of any funds available for dividends, such reserve or
reserves, for any proper purpose, as the Board in its discretion shall approve;
and the Board shall have power and authority to abolish any reserve created by
the Board.
SECTION 4. RECORD DATE FOR DETERMINATION OF SHAREHOLDERS. The record
date for the determination of shareholders shall be as set forth in Article
III, Section 2 of these By-Laws.
ARTICLE VIII
RIGHT OF INSPECTION
Section 1. Inspection of List of Shareholders. At least ten (10) days
before every election of directors, a complete list of shareholders entitled to
vote at such election shall be open to examination by any registered shareholder
entitled to vote at such election.
ARTICLE IX
EXECUTION OF INSTRUMENTS
Section 1. Checks, Etc. All checks, drafts and orders for
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payment of money shall be signed in the name of the corporation and shall be
countersigned, by such officers or agents as the Board of Directors shall from
time to time designate for that purpose.
SECTION 2. CONTRACTS, CONVEYANCES, ETC. When the execution of any
contract, conveyance or other instrument has been authorized without
specification of the executing officers, the President and the Secretary may
execute the same in the name and on behalf of this corporation and may affix the
corporate seal thereto. The Board of Directors shall have power and authority to
execute any instrument on behalf of this corporation, or to designate an officer
or officers to execute any instrument on behalf of the corporation.
ARTICLE X
AMENDMENT OF BY-LAWS
SECTION 1. AMENDMENTS, HOW EFFECTED. These By-Laws may be amended,
altered, changed, added to or repealed by the affirmative vote of a majority of
the shares entitled to vote at a regular or special meeting of the shareholders
if notice of the proposed amendment, alteration, change, addition or repeal be
contained in the notice of the meeting, or by the affirmative vote of a majority
of the Board of Directors if the amendment, or alteration, change addition or
repeal be proposed at a regular or special meeting of the Board and adopted at a
subsequent regular meeting; provided, that any By-Laws made by the affirmative
vote of a majority of the Board of Directors as provided herein may be amended,
altered, changed, added to or repealed by the affirmative vote of a majority of
the shares entitled to vote at any regular or special meeting of the
shareholders; also, provided, however, that no change of the date for the annual
meeting of shareholders shall be made within thirty (30) days next before the
date on which such meeting is to be held unless consented to in writing, or by a
resolution adopted at a meeting, by all shareholders entitled to vote at an
annual meeting.
ARTICLE XI
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
SECTION 1. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other
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than an action by or in the right of the Corporation) by reason of the fact that
such person is or was a director, officer, employee or agent of the Corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. The termination of any action, suit or
proceeding by judgment or settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall 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 interest of the Corporation, and
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
SECTION 2. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if he or she 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 and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
SECTION 3. To the extent that a director, officer, employee or agent of
a corporation has been successful, on the merits or otherwise, in the defense of
any action, suit or proceeding referred to in sections 1 and 2, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses actually and reasonably incurred by such person in connection
therewith.
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SECTION 4. Any indemnification under sections 1 and 2 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 1 and 2. Such determination shall be made (a) by the board
of directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (b) if such a quorum is not
obtainable, or even if obtainable, a quorum of disinterested directors so
directors, by independent legal counsel in a written option, or (c) by the
shareholders.
SECTION 5. Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding, as authorized by the board of
directors in the specific case, upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount, unless it
shall ultimately be determined that he or she is entitled to be indemnified by
the corporation as authorized in this article.
SECTION 6. The indemnification provided by this article shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any by-law, agreement vote of shareholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
his or her status as such, whether or not the corporation would have the power
to indemnify such person against such liability under the provisions of these
sections.
SECTION 8. If the corporation has paid indemnity or had advanced
expenses to a director, officer, employee or agent, the corporation shall report
the indemnification or advance in writing to the shareholders with or before the
notice of the next shareholders' meeting.
16
<PAGE> 17
SECTION 9. Reference to "the corporation" shall include, in addition
to the surviving corporation, any merging corporation, including any
corporation having merged with a merging corporation, absorbed in a merger
which otherwise would have lawfully been entitled to indemnify its directors,
officers, and employees or agents.
ARTICLE XII
DISALLOWANCE OF EXPENSES
PAYMENTS DISALLOWED BY THE INTERNAL REVENUE SERVICE. Any payments made
to an officer, agent or employee of the Corporation such as a salary,
commission, bonus, interest, rent or travel or entertainment expense incurred by
him, which shall be disallowed in whole or in part as a deductible expense by
the Internal Revenue Service, shall be reimbursed by such officer, agent or
employee to the Corporation to the full extent of such disallowance. It shall be
the duty of the Directors, as a Board, to enforce payment of each such amount
disallowed. In lieu of payment by the officer, agent, or employee, subject to
the determination of the Directors, proportionate amounts may be withheld from
his future compensation payments until the amount owed to the Corporation has
been recovered.
ARTICLE XIII
FISCAL YEAR
SECTION 1. FISCAL YEAR. The fiscal year of the corporation shall be
established by the Board of Directors.
17
<PAGE> 1
EXHIBIT 3.9
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
Date Received (FOR BUREAU USE ONLY)
APR 14 1993
FILED
Name APR 14 1993
JANIS K. KUJAN, LEGAL ASSISTANT
- ------------------------------------------- Administrator
Address HONIGMAN MILLER SCHWARTZ AND COHN MICHIGAN DEPARTMENT OF
2290 FIRST NATIONAL BUILDING COMMERCE
- ------------------------------------------- Corporation & Securities
City State Zip Code Bureau
DETROIT, MI 48226
- -------------------------------------------
- DOCUMENT WILL BE RETURNED TO THE NAME EFFECTIVE DATE:
AND ADDRESS YOU ENTER ABOVE. -
457-767
ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATIONS
(Please read information and instructions on the last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, the
undersigned corporation executes the following Articles:
ARTICLE I
- --------------------------------------------------------------------------------
The name of the corporation is: DECO TECHNOLOGIES, INC.
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ARTICLE II
- --------------------------------------------------------------------------------
The purpose or purposes for which the corporation is formed is to engage in
any activity within the purposes for which corporations may be formed under the
Business Corporation Act of Michigan.
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ARTICLE III
- --------------------------------------------------------------------------------
The total authorized shares:
1. Common Shares 60,000 No Par Value
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Preferred Shares N/A
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2. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows: None
- --------------------------------------------------------------------------------
<PAGE> 2
ARTICLE IV
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1. The address of the registered office is:
4850 Coolidge Highway, Royal Oak , Michigan 48073-1023
- -------------------------------------------- -------------------
(Street Address) (City) (ZIP Code)
2. The mailing address of the registered office if different than above:
, Michigan
- -------------------------------------------- -------------------
(P.O. Box) (City) (ZIP Code)
3. The name of the resident agent at the registered office is: STEPHEN M. GRAND
----------------
ARTICLE V
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The name(s) and address(es) of the incorporator(s) is (are) as follows:
Name Residence or Business Address
JANIS K. KUJAN 2290 FIRST NATIONAL BUILDING, DETROIT, MI 48226
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- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE VI (Optional. Delete if not applicable)
- --------------------------------------------------------------------------------
Any action required or permitted by the Act to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior notice,
and without a vote, if consents in writing, setting forth the action so taken,
are signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take the action
at a meeting at which all shares entitled to vote on the action were present
and voted. The written consents shall bear the date of signature of each
shareholder who signs the consent. No written consents shall be effective to
take the corporate action referred to unless, within 60 days after the record
date for determining shareholders entitled to express consent to or to dissent
from a proposal without a meeting, written consents signed by a sufficient
number of shareholders to take the action are delivered to the corporation.
Delivery shall be to the corporation's registered office, its principal place
of business, or an officer or agent of the corporation having custody of the
minutes of the proceedings of its shareholders. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to shareholders who have not
consented in writing.
- --------------------------------------------------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 3
ARTICLE VI (CONTINUED)
- --------------------------------------------------------------------------------
delivered to the corporation. Delivery shall be to the corporation's registered
office, its principal place of business, or an officer or agent of the
corporation having custody of the minutes of the proceedings of its
shareholders. Delivery made to a corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to shareholders who have not
consented in writing.
Use space below for additional Articles or for continuation of previous
Articles. Please identify any Article being continued or added. Attach
additional pages if needed.
ARTICLE VII
A director of the corporation shall not be personally liable to the corporation
or its shareholders for monetary damages for breach of the director's fiduciary
duty. However, this Article shall not eliminate or limit the liability of a
director for any of the following.
(1) A breach of the director's duty of loyalty to the corporation or
its shareholders.
(2) Acts or omissions not in good faith or that involve intentional
misconduct or knowing violation of law.
(3) A violation of Section 551(1) of the Michigan Business
Corporation Act.
(4) A transaction from which the director derived an improper personal
benefit.
(5) An act or omission occurring before the effective date of this
Article.
Any repeal or modification of this Article by the shareholders of the
corporation shall not adversely affect any right or protection of any director
of the corporation existing at the time of, or for or with respect to, any acts
or omissions occurring before such repeal or modification.
I (the incorporator) sign my name this 13th day of April, 1993.
/s/ Janis K. Kujan
- ------------------------------ --------------------------------------
Janis K. Kujan
- ------------------------------ --------------------------------------
- ------------------------------ --------------------------------------
- ------------------------------ --------------------------------------
- ------------------------------ --------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 1
EXHIBIT 3.10
BYLAWS OF
DECO TECHNOLOGIES, INC.
ARTICLE I
OFFICES
1.1 Registered Office. The registered office of the Corporation shall be
located at such place in Michigan as the Board of Directors from time to time
determines.
1.2 Other Offices. The Corporation may also have offices or branches at
such other places as the Board of Directors from time to time determines or the
business of the Corporation requires.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 Time and Place. All meetings of the shareholders shall be held at
such place and time as the Board of Directors determines.
2.2 Annual Meetings. An annual meeting of shareholders shall be held on
the first Tuesday of the third month of each fiscal year of the corporation if
not a legal holiday in the state in which the meeting shall be held, and if a
legal holiday, then on the next secular day following, at such time as
determined by the Board of Directors, or at such other date and time as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. At the annual meeting, the shareholders shall elect directors
and transact such other business as is properly brought before the meeting and
described in the notice of meeting. If the annual meeting is not held on its
designated date, the Board of Directors shall cause it to be held as soon
thereafter as convenient.
2.3 Special Meetings. Special meetings of the shareholders, for any
purpose, (a) may be called by the Corporation's chief executive officer or the
Board of Directors, and (b) shall be called by the President or Secretary upon
written request (stating the purpose for which the meeting is to be called) of
the holders of a majority of all the shares entitled to vote at the meeting.
2.4 Notice of Meetings. Written notice of each shareholders' meeting,
stating the place, date and time of the meeting and the purposes for which the
meeting is called, shall be given (in the manner described in Section 5.1 below)
not less than 10 nor more than 60 days before the date of the meeting to each
shareholder of record entitled to vote at the meeting. Notice of adjourned
meetings is governed by Section 2.6 below.
<PAGE> 2
2.5 List of Shareholders. The officer or agent who has charge of the
stock transfer books for shares of the Corporation shall make and certify a
complete list of the shareholders entitled to vote at a shareholders' meeting or
any adjournment of the meeting. The list shall be arranged alphabetically within
each class and series and shall show the address of, and the number of shares
held by, each shareholder. The list shall be produced at the time and place of
the meeting and may be inspected by any shareholder at any time during the
meeting.
2.6 Quorum: Adjournment. At all shareholders' meetings, the shareholders
present in person or represented by proxy who, as of the record date for the
meeting, were holders of shares entitled to cast a majority of the votes at the
meeting, shall constitute a quorum. Once a quorum is present at a meeting, all
shareholders present in person or represented by proxy at the meeting may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum. Regardless of whether a quorum
is present, a shareholders' meeting may be adjourned to another time and place
by a vote of the shares present in person or by proxy without notice other than
announcement at the meeting; provided, that (a) only such business may be
transacted at the adjourned meeting as might have been transacted at the
original meeting and (b) if the adjournment is for more than 60 days or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting must be given to each shareholder of record entitled to
vote at the meeting.
2.7 Voting. Each shareholder shall at every meeting of the shareholders
be entitled to one vote in person or by proxy for each share having voting power
held by such shareholder and on each matter submitted to a vote. A vote may be
cast either orally or in writing. When an action, other than the election of
directors, is to be taken by vote of the shareholders, it shall be authorized by
a majority of the votes cast by the holders of shares entitled to vote on such
action. Directors shall be elected by a plurality of the votes cast at any
election.
2.8 Proxies. A shareholder entitled to vote at a meeting of shareholders
or to express consent or dissent without a meeting may authorize other persons
to act for him or her by proxy. Each proxy shall be in writing and signed by the
shareholder or the shareholder's authorized agent or representative. A proxy is
not valid after the expiration of three years after its date unless otherwise
provided in the proxy.
2.9 Questions Concerning Elections. The Board of Directors may, in
advance of the meeting, or the presiding officer may, at the meeting, appoint
one or more inspectors to act at a shareholders' meeting. If appointed, the
inspectors shall determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine challenges and questions arising in connection with the right
to vote, count and tabulate votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all shareholders.
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<PAGE> 3
2.10 Telephonic Attendance. Shareholders may participate in any
shareholders' meeting by means of conference telephone or similar communications
equipment through which all persons participating in the meeting may communicate
with the other participants and all participants are advised of the
communications equipment and the names of the participants in the conference.
Participation in a meeting pursuant to this Section 2.10 constitutes presence in
person at such meeting.
2.11 Action by Written Consent. To the extent permitted by the Articles
of Incorporation or applicable law, any action required or permitted to be taken
at any shareholders' meeting may be taken without a meeting, prior notice and a
vote, by written consent of shareholders.
ARTICLE III
DIRECTORS
3.1 Number and Residence. The business and affairs of the Corporation
shall be managed by or under the direction of a Board of Directors consisting of
not less than one nor more than fifteen members. The number of Directors shall
be determined from time to time by the Board of Directors. Directors need not be
Michigan residents or shareholders of the Corporation.
3.2 Election and Term. Except as provided in Section 3.5 below,
Directors shall be elected at the annual shareholders' meeting. Each Director
elected shall hold office for the term for which he or she is elected and until
his or her successor is elected and qualified or until his or her resignation or
removal.
3.3 Resignation. A Director may resign by written notice to the
Corporation. A Director's resignation is effective upon its receipt by the
Corporation or a later time set forth in the notice of resignation.
3.4 Removal. One or more Directors may be removed, with or without
cause, by vote of the holders of a majority of the shares entitled to vote at an
election of Directors.
3.5 Vacancies. Vacancies, including vacancies resulting from an increase
in the number of Directors, may be filled by the Board of Directors, by the
affirmative vote of a majority of all the Directors remaining in office, if the
Directors remaining in office constitute less than a quorum, or by the
shareholders. Each Director so chosen shall hold office until the next annual
election of Directors by the shareholders and until his or her successor is
elected and qualified, or until his or her resignation or removal.
-3-
<PAGE> 4
3.6 Place of Meetings. The Board of Directors may hold meetings at any
location. The location of annual and regular Board of Directors' meetings shall
be determined by the Board and the location of special meetings shall be
determined by the person calling the meeting.
3.7 Annual Meetings. Each newly elected Board of Directors may meet
promptly after the annual shareholders' meeting for the purposes of electing
officers and transacting such other business as may properly come before the
meeting. No notice of the annual Directors' meeting shall be necessary to the
newly elected Directors in order to legally constitute the meeting, provided a
quorum is present.
3.8 Regular Meetings. Regular meetings of the Board of Directors or
Board committees may be held without notice at such places and times as the
Board or committee determines at least 30 days before the date of the meeting.
3.9 Special Meetings. Special meetings of the Board of Directors may be
called by the chief executive officer, and shall be called by the President or
Secretary upon the written request of two Directors, on two days notice to each
Director or committee member by mail or 24 hours notice by any other means
provided in Section 5.1. The notice must specify the place, date and time of the
special meeting, but need not specify the business to be transacted at, nor the
purpose of, the meeting. Special meetings of Board committees may be called by
the Chairperson of the committee or a majority of committee members pursuant to
this Section 3.9.
3.10 Quorum. At all meetings of the Board or a Board committee, a
majority of the Directors then in office, or of members of such committee,
constitutes a quorum for transaction of business, unless a higher number is
otherwise required. If a quorum is not present at any Board or Board committee
meeting, a majority of the Directors present at the meeting may adjourn the
meeting to another time and place without notice other than announcement at the
meeting. Any business may be transacted at the adjourned meeting which might
have been transacted at the original meeting, provided a quorum is present.
3.11 Voting. The vote of a majority of the members present at any Board
or Board committee meeting at which a quorum is present constitutes the action
of the Board of Directors or of the Board committee, unless a higher vote is
otherwise required.
3.12 Telephonic Participation. Members of the Board of Directors or any
Board committee may participate in a Board or Board committee meeting by means
of conference telephone or similar communications equipment through which all
persons participating in the meeting can communicate with each other.
Participation in a meeting pursuant to this Section 3.12 constitutes presence in
person at such meeting.
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<PAGE> 5
3.13 Action by Written Consent. Any action required or permitted to be
taken under authorization voted at a Board or Board committee meeting may be
taken without a meeting if, before or after the action, all members of the Board
then in office or of the Board committee consent to the action in writing. Such
consents shall be filed with the minutes of the proceedings of the Board or
committee and shall have the same effect as a vote of the Board or committee for
all purposes.
3.14 Committees. The Board of Directors may, by resolution passed by a
majority of the entire Board, designate one or more committees, each consisting
of one or more Directors. The Board may designate one or more Directors as
alternate members of a committee, who may replace an absent or disqualified
member at a committee meeting. In the absence or disqualification of a member of
a committee, the committee members present and not disqualified from voting,
regardless of whether they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in place of such absent
or disqualified member. Any committee, to the extent provided in the resolution
of the Board, may exercise all powers and authority of the Board of Directors in
management of the business and affairs of the Corporation, except a committee
does not have power or authority to:
(a) Amend the Articles of Incorporation.
(b) Adopt an agreement of merger or consolidation.
(c) Recommend to shareholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets.
(d) Recommend to shareholders a dissolution of the Corporation
or a revocation of a dissolution.
(e) Amend the Bylaws of the Corporation.
(f) Fill vacancies in the Board.
(g) Unless the resolution designating the committee or a later
Board of Director's resolution expressly so provides, declare a
distribution or dividend or authorize the issuance of stock.
Each committee and its members shall serve at the pleasure of the Board, which
may at any time change the members and powers of, or discharge, the committee.
Each committee shall keep regular minutes of its meetings and report them to the
Board of Directors when required.
3.15 Compensation. The Board, by affirmative vote of a majority of
Directors in office and irrespective of any personal interest of any of them,
may establish reasonable compensation of Directors for services to the
Corporation as directors, officers or members of a Board committee. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation for such service.
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<PAGE> 6
ARTICLE I
OFFICERS
4.1 Officers and Agents. The Board of Directors, at its first meeting
after each annual meeting of shareholders, shall elect a President, a Secretary
and a Treasurer, and may also elect and designate as officers a Chairperson of
the Board, a Vice Chairperson of the Board and one or more Executive Vice
Presidents, Vice Presidents, Assistant Vice Presidents, Assistant Secretaries
and Assistant Treasurers. The Board of Directors may also from time to time
appoint, or delegate authority to the Corporation's chief executive officer to
appoint, such other officers and agents as it deems advisable. Any number of
offices may be held by the same person, but an officer shall not execute,
acknowledge or verify an instrument in more than one capacity if the instrument
is required by law to be executed, acknowledged or verified by two or more
officers. An officer has such authority and shall perform such duties in the
management of the Corporation as provided in these Bylaws, or as may be
determined by resolution of the Board of Directors not inconsistent with these
Bylaws, and as generally pertain to their offices, subject to the control of the
Board of Directors.
4.2 Compensation. The compensation of all officers of the CORPORATION
SHALL BE FIXED by the Board of Directors.
4.3 Term. Each officer of the Corporation shall hold office for the term
for which he or she is elected or appointed and until his or her successor is
elected or appointed and qualified, or until his or her resignation or removal.
The election or appointment of an officer does not, by itself, create contract
rights.
4.4 Removal. An officer elected or appointed by the Board of Directors
may be removed by the Board of Directors with or without cause. An officer
elected by the shareholders may be removed, with or without cause, only by vote
of the shareholders, but his or her authority to act as an officer may be
suspended by the Board of Directors for cause. The removal of an officer shall
be without prejudice to his or her contract rights, if any.
4.5 Resignation. An officer may resign by written notice to the
Corporation. The resignation is effective upon its receipt by the Corporation or
at a subsequent time specified in the notice of resignation.
4.6 Vacancies. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
4.7 Chairperson of the Board. The Chairperson of the Board, if such
office is filled, shall be a Director and shall preside at all shareholders' and
Board of Directors' meetings.
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<PAGE> 7
4.8 Chief Executive Officer. The Chairperson of the Board, if any, or
the President, as designated by the Board, shall be the chief executive officer
of the Corporation and shall have the general powers of supervision and
management of the business and affairs of the Corporation usually vested in the
chief executive officer of a corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. If no designation
of chief executive officer is made, or if there is no Chairperson of the Board,
the President shall be the chief executive officer. The chief executive officer
may delegate to the other officers such of his or her authority and duties at
such time and in such manner as he or she deems advisable.
4.9 President. If the office of Chairperson of the Board is not filled,
the President shall perform the duties and execute the authority of the
Chairperson of the Board. If the Chairperson of the Board is designated by the
Board as the Corporation's chief executive officer, the President shall be the
chief operating officer of the Corporation, shall assist the Chairperson of the
Board in the supervision and management of the business and affairs of the
Corporation and, in the absence of the Chairperson of the Board, shall preside
at all shareholders' and Board of Directors' meetings. The President may
delegate to the officers other than the Chairperson of the Board, if any, such
of his or her authority and duties at such time and in such manner as he or she
deems appropriate.
4.10 Executive Vice Presidents and Vice Presidents. The Executive Vice
Presidents and Vice Presidents shall assist and act under the direction of the
Chairman of the Board and President. The Board of Directors may designate one or
more Executive Vice Presidents and may grant other Vice Presidents titles which
describe their functions or specify their order of seniority. In the absence or
disability of the President, the authority of the President shall descend to the
Executive Vice Presidents or, if there are none, to the Vice Presidents in the
order of seniority indicated by their titles or otherwise specified by the
Board. If not specified by their titles or the Board, the authority of the
President shall descend to the Executive Vice Presidents or, if there are none,
to the Vice Presidents, in the order of their seniority in such office.
4.11 Secretary. The Secretary shall act under the direction of the
Corporation's chief executive officer and President. The Secretary shall attend
all shareholders' and Board of Directors' meetings, record minutes of the
proceedings and maintain the minutes and all documents evidencing corporate
action taken by written consent of the shareholders and Board of Directors in
the Corporation's minute book. The Secretary shall perform these duties for
Board committees when required. The Secretary shall see to it that all notices
of shareholders' meetings and special Board of Directors' meetings are duly
given in accordance with applicable law, the Articles of Incorporation and these
Bylaws. The Secretary shall have custody of the Corporation's seal and, when
authorized by the Corporation's chief executive officer, President or the Board
of Directors, shall affix the seal to any instrument requiring it and attest
such instrument.
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<PAGE> 8
4.12 Treasurer. The Treasurer shall act under the direction of the
Corporation's chief executive officer and President. The Treasurer shall have
custody of the corporate funds and securities and shall keep full and accurate
accounts of the Corporation's assets, liabilities, receipts and disbursements in
books belonging to the Corporation. The Treasurer shall deposit all moneys and
other valuables in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Corporation's
chief executive officer, the President or the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Corporation's chief
executive officer, the President and the Board of Directors (at its regular
meetings or whenever they request it) an account of all his or her transactions
as Treasurer and of the financial condition of the Corporation. If required by
the Board of Directors, the Treasurer shall give the Corporation a bond for the
faithful discharge of his or her duties in such amount and with such surety as
the Board prescribes.
4.13 Assistant Vice Presidents, Secretaries and Treasurers. The
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers, if
any, shall act under the direction of the Corporation's chief executive officer,
the President and the officer they assist. In the order of their seniority, the
Assistant Secretaries shall, in the absence or disability of the Secretary,
perform the duties and exercise the authority of the Secretary. The Assistant
Treasurers, in the order of their seniority, shall, in the absence or disability
of the Treasurer, perform the duties and exercise the authority of the
Treasurer.
4.14 Execution of Contracts and Instruments. The Board of Directors may
designate an officer or agent with authority to execute any contract or other
instrument on the Corporation's behalf; the Board may also ratify or confirm any
such execution. If the Board authorizes, ratifies or confirms the execution of a
contract or instrument without specifying the authorized executing officer or
agent, the Corporation's chief executive officer, the President or any Executive
Vice President or Vice President may execute the contract or instrument in the
name and on behalf of the Corporation and may affix the corporate seal to such
document or instrument.
4.15 Voting of Shares and Securities of Other Corporations and Entities.
Unless the Board of Directors otherwise directs, the Corporation's chief
executive officer shall be entitled to vote or designate a proxy to vote all
shares and other securities which the Corporation owns in any other corporation
or entity.
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<PAGE> 9
ARTICLE V
NOTICES AND WAIVERS OF NOTICE
5.1 Delivery of Notices. All written notices to shareholders, Directors
and Board committee members shall be given personally or by mail (registered,
certified or other first class mail, with postage pre-paid), addressed to such
person at the address designated by him or her for that purpose or, if none is
designated, at his or her last known address. Written notices to Directors or
Board committee members may also be delivered at his or her office on the
Corporation's premises, if any, or by overnight carrier, telegram, telex,
telecopy, radiogram, cablegram, facsimile, computer transmission or similar
form of communication, addressed to the address referred to in the preceding
sentence. Notices given pursuant to this Section 5.1 shall be deemed to be given
when dispatched, or, if mailed, when deposited in a post office or official
depository under the exclusive care and custody of the United States postal
service. Notices given by overnight carrier shall be deemed "dispatched" at 9:00
a.m. on the day the overnight carrier is reasonably requested to deliver the
notice. The Corporation shall have no duty to change the written address of any
Director, Board committee member or shareholder unless the Secretary receives
written notice of such address change.
5.2 Waiver of Notice. Action may be taken without a required notice and
without lapse of a prescribed period of time, if at any time before or after the
action is completed the person entitled to notice or to participate in the
action to be taken or, in the case of a shareholder, his or her
attorney-in-fact, submits a signed waiver of the requirements, or if such
requirements are waived in such other manner permitted by applicable law.
Neither the business to be transacted at, nor the purpose of, the meeting need
be specified in the written waiver of notice. Attendance at any shareholders'
meeting (in person or by proxy) will result in both of the following:
(a) Waiver of objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting.
(b) Waiver of objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder objects to considering the matter when it is
presented.
A director's attendance at or participation in any Board or Board committee
meeting waives any required notice to him or her of the meeting unless he or
she, at the beginning of the meeting or upon his or her arrival, objects to the
meeting or the transacting of business at the meeting and does not thereafter
vote for or assent to any action taken at the meeting.
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<PAGE> 10
ARTICLE VI
SHARE CERTIFICATES AND SHAREHOLDERS OF RECORD
6.1 Certificates for Shares. The shares of the Corporation shall be
represented by certificates signed by the Chairperson of the Board,
Vice-chairperson of the Board, President or a Vice-president and which also may
be signed by another officer of the Corporation. The officers' signatures may be
facsimiles if the certificate is countersigned by a transfer agent or registered
by a registrar other than the Corporation or its employee. If any officer who
has signed or whose facsimile signature has been placed upon a certificate
ceases to be such officer before the certificate is issued, it may be issued by
the Corporation with the same effect as if the person were such officer at the
date of issue.
6.2 Lost or Destroyed Certificates. The Board of Directors may direct or
authorize an officer to direct that a new certificate for shares be issued in
place of any certificate alleged to have been lost or destroyed. When
authorizing such issue of a new certificate, the Board of Directors or officer
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner (or the owner's legal representative) of such lost or
destroyed certificate to give the Corporation an affidavit claiming that the
certificate is lost or destroyed or a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to such old or new certificate.
6.3 Transfer of Shares. Shares of the Corporation are transferable only
on the Corporation's stock transfer books upon surrender to the Corporation or
its transfer agent of a certificate for the shares, duly endorsed for transfer,
and the presentation of such evidence of ownership and validity of the transfer
as the Corporation requires.
6.4 Record Date. The Board of Directors may fix, in advance, a date as
the record date for determining shareholders for any purpose, including
determining shareholders entitled to (a) notice of, and to vote at, any
shareholders' meeting or any adjournment of such meeting; (b) express consent
to, or dissent from, a proposal without a meeting; or (c) receive payment of a
share dividend or distribution or allotment of a right. The record date shall
not be more than 60 nor less than 10 days before the date of the meeting, nor
more than 10 days after the Board resolution fixing a record date for
determining shareholders entitled to express consent to, or dissent from, a
proposal without a meeting, nor more than 60 days before any other action.
If a record date is not fixed:
(a) the record date for determining the shareholders entitled
to notice of, or to vote at, a shareholders' meeting shall be the close
of business on the day next preceding the day on which notice of the
meeting is given, or, if no notice is given, the close of business on
the day next preceding the day on which the meeting is held; and
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<PAGE> 11
(b) if prior action by the Board of Directors is not required
with respect to the corporate action to be taken without a meeting, the
record date for determining shareholders entitled to express consent to,
or dissent from, a proposal without a meeting, shall be the first date
on which a signed written consent is properly delivered to the
Corporation; and
(c) the record date for determining shareholders for any other
purpose shall be the close of business on the day on which the
resolution of the Board of Directors relating to the action is adopted.
A determination of shareholders of record entitled to notice of, or to vote at,
a shareholders' meeting shall apply to any adjournment of the meeting, unless
the Board of Directors fixes a new record date for the adjourned meeting.
Only shareholders of record on the record date shall be entitled to
notice of, or to participate in, the action relating to the record date,
notwithstanding any transfer of shares on the Corporation's books after the
record date. This Section 6.4 shall not affect the rights of a shareholder and
the shareholder's transferor or transferee as between themselves.
6.5 Registered Shareholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of a share for all purposes, including notices, voting, consents, dividends and
distributions, and shall not be bound to recognize any other person's equitable
or other claim to interest in such share, regardless of whether it has actual or
constructive notice of such claim or interest.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify to the fullest extent authorized or
permitted by the Michigan Business Corporation Act any person, and his or her
heirs, executors, administrators and legal representatives, who was, is, or is
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding (whether civil, criminal, administrative or investigative) by
reason of the fact that such person 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, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, and may provide such other indemnification
to directors, officers, employees and agents by insurance, contract or otherwise
as is permitted by law and authorized by the Board of Directors.
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<PAGE> 12
ARTICLE VIII
GENERAL PROVISIONS
8.1 Checks and Funds. All checks, drafts or demands for money and notes
of the Corporation must be signed by such officer or officers or such other
person or persons as the Board of Directors from time to time designates. All
funds of the Corporation not otherwise employed shall be deposited or used as
the Board of Directors from time to time designates.
8.2 Fiscal Year. The fiscal year of the Corporation shall end on
December 31st of each year or on such date as the Board of Directors from time
to time determines.
8.3 Corporate Seal. The Board of Directors may adopt a corporate seal
for the Corporation. The corporate seal, if adopted, shall be circular and
contain the name of the Corporation and the words "Corporate Seal Michigan". The
seal may be used by causing it or a facsimile of it to be impressed, affixed,
reproduced or otherwise.
8.4 Books and Records. The Corporation shall keep within or outside of
Michigan books and records of account and minutes of the proceedings of its
shareholders, Board of Directors and Board committees, if any. The Corporation
shall keep at its registered office or at the office of its transfer agent
within or outside of Michigan records containing the names and addresses of all
shareholders, the number, class and series of shares held by each and the dates
when they respectively became recordholders of shares. Any of such books,
records or minutes may be in written form or in any other form capable of being
converted into written form within a reasonable time.
8.5 Financial Statements. The Corporation shall cause to be made and
distributed to its shareholders, within four months after the end of each fiscal
year, a financial report (including a statement of income, year-end balance
sheet, and, if prepared by the Corporation, its statement of sources and
application of funds) covering the preceding fiscal year of the Corporation.
ARTICLE IX
AMENDMENTS
These Bylaws may be amended or repealed, or new Bylaws may be adopted,
by action of either the shareholders or a majority of the Board of Directors
then in office. The shareholders or the Board may from time to time specify
particular provisions of the Bylaws which may not be altered or repealed by the
Board of Directors.
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<PAGE> 13
ARTICLE X
SCOPE OF BYLAWS
These Bylaws govern the regulation and management of the affairs of the
Corporation to the extent that they are consistent with applicable law and the
Articles of Incorporation; to the extent they are not consistent, applicable law
and the Articles of Incorporation shall govern. Greater voting, notice or other
requirements than those set forth in these Bylaws may be established by
contract.
C1527G
-13-
<PAGE> 1
EXHIBIT 3.11
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500 MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
Date Received (FOR BUREAU USE ONLY)
JUL 25 1994 943D#8611 0725 ORG&FI $60.00
FILED
Name JUL 26 1994
Larry J. Spilkin, Esquire
- -----------------------------------------
Address Spilkin, Shapiro & Feeney, P.C. ADMINISTRATOR
P.O. Box 5039 MICHIGAN DEPARTMENT OF COMMERCE
- ----------------------------------------- Corporation & Securities Bureau
City State ZIP Code
Southfield, MI 48086-5039 EFFECTIVE DATE:
- --------------------------------------------------------------------------------
DOCUMENT WILL BE RETURNED TO NAME AND
ADDRESS INDICATED ABOVE
CORPORATION IDENTIFICATION NUMBER
144-527
ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATIONS
(Please read information and instructions on the last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, the
undersigned corporation executes the following Articles:
ARTICLE I
- --------------------------------------------------------------------------------
The name of the corporation is:
Deco International, Inc.
- --------------------------------------------------------------------------------
ARTICLE II
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The purpose or purposes for which the corporation is formed is to engage in
any activity within the purposes for which corporations may be formed under the
Business Corporation Act of Michigan.
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ARTICLE III
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The total authorized shares:
1. Common Shares 6,000 $10.00 Par Value
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Preferred Shares
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2. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
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SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 2
<TABLE>
<S><C>
ARTICLE IV
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1. The address of the registered office is:
4850 Coolidge Highway, Royal Oak , Michigan 48073
---------------------------------------------------- -----------
(Street Address) (City) (ZIP Code)
2. The mailing address of the registered office if different from the
registered office address:
, Michigan
---------------------------------------------------- -----------
(P.O. BOX) (City) (ZIP Code)
3. The name of the resident agent at the registered office is: Stephen Grand
----------------
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ARTICLE V
- --------------------------------------------------------------------------------
The name(s) and address(es) of the incorporator(s) is (are) as follows:
Name Residence or Business Address
Larry J. Spilkin 29621 Northwestern Highway, Southfield, MI 48034
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</TABLE>
ARTICLE VI (OPTIONAL. DELETE IF NOT APPLICABLE)
- --------------------------------------------------------------------------------
When a compromise or arrangement or a plan of reorganization of this
corporation is proposed between this corporation and its creditors or any class
of them or between this corporation and its shareholders or any class of them,
a court of equity jurisdiction within the state, on application of this
corporation or of a creditor or shareholder thereof, or on application of a
receiver appointed for the corporation, may order a meeting of the creditors or
class of creditors or of the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement or reorganization, to be
summoned in such manner as the court directs. If a majority in number
representing 3/4 in value of the creditors or class of creditors, or of the
shareholders or class of shareholders to be affected by the proposed compromise
or arrangement or a reorganization, agree to a compromise or arrangement or a
reorganization of this corporation as a consequence of the compromise or
arrangement, the compromise or arrangement and the reorganization, if
sanctioned by the court to which the application has been made, shall be
binding on all the creditors or class of creditors, or on all the shareholders
or class of shareholders and also on this corporation.
- --------------------------------------------------------------------------------
ARTICLE VII (OPTIONAL. DELETE IF NOT APPLICABLE)
- --------------------------------------------------------------------------------
Any action required or permitted by the Act to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior notice,
and without a vote. If consents in writing, setting forth the action so
taken, are signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take the action
at a meeting at which all shares entitled to vote on the action were present
and voted. The written consents shall bear the date of signature of each
shareholder who signs the consent. No written consents shall be effective to
take the corporate action referred to unless, within 60 days after the record
date for determining shareholders entitled to express consent to or to dissent
from a proposal without a meeting, written consents signed by a sufficient
number of shareholders to take the action are delivered to the corporation.
Delivery shall be to the corporation's registered office, its principal place
of business, or an officer or agent of the corporation having custody of the
minutes of the proceedings of its shareholders. Delivery made to a
corporation's registered office shall be by hand or by certified mail, return
receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to shareholders who have not
consented in writing.
- --------------------------------------------------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 3
Use space below for additional Articles or for continuation of previous
Articles. Please identify any Article being continued or added. Attach
additional pages if needed.
I (We), the incorporator(s) sign my (our) name(s) this 18th day of July, 1994.
/s/ Larry J. Spilkin
- --------------------------- ---------------------------
Larry J. Spilkin
- --------------------------- ---------------------------
- --------------------------- ---------------------------
- --------------------------- ---------------------------
- --------------------------- ---------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 1
EXHIBIT 3.12
BY-LAWS
OF
DECO INTERNATIONAL, INC.
ARTICLE
Meetings
SECTION 1. PLACE OF MEETING. Any or all meetings of the shareholders
or the Board of Directors of this Corporation may be held within or without the
State of Michigan, provided that no meeting may be held at a place other than
within Michigan except pursuant to By-Laws or resolutions adopted by the Board
of Directors.
SECTION 2. ANNUAL MEETING OF SHAREHOLDERS. Beginning with the year
1994, an annual meeting of the shareholders shall be held in each year on the
last day of the fiscal year, or at such other time as the Board of Directors may
designate. If the day fixed for the annual meeting shall be a legal holiday,
such meeting shall be held on the next succeeding business day. One of the
purposes of such meeting shall be the election of a Board of Directors.
SECTION 3. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS. At least ten (10)
days prior to the date fixed by Section 2 of this Article for the holding of the
annual meeting of shareholders, written notice of the time, place and purpose of
such meeting shall be mailed, as hereinafter provided, to each shareholder
entitled to vote at such meeting.
SECTION 4. DELAYED ANNUAL MEETING. If, for any reason, the annual
meeting of the shareholders shall not be held on the day hereinbefore
designated, such meeting may be called and held as a special meeting, and the
same proceedings may be had thereat as at an annual meeting, provided, however,
that the notice of such meeting shall be the same herein required for the annual
meeting, namely, not less than a ten (10) day notice.
SECTION 5. ORDER OF BUSINESS AT ANNUAL MEETING. The order of
business at the annual meeting of the shareholders shall be as follows:
(a) Roll Call
(b) Reading Notice and Proof of Mailing
(c) Report of President
(d) Report of Secretary
(e) Report of Treasurer
(f) Election of Directors
(g) Transaction of other business mentioned in the Notice
(h) Adjournment
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<PAGE> 2
Provided that in the absence of any objection the presiding officer
may vary the order of business at his discretion.
SECTION 6. SPECIAL MEETING OF SHAREHOLDERS. A special meeting of the
shareholders may be called at any time by the President, or by a majority of the
Board of Directors, or by Shareholders entitled to vote upon not less than an
aggregate of 25% of the outstanding shares of the corporation having the right
to vote at such special meeting. The method by which such meeting may be called
is as follows: Upon receipt of a specification in writing setting forth the date
and objects of such proposed special meeting, signed by the President, or by a
majority of the Board of Directors, or by shareholders as above provided, the
Secretary of this corporation shall prepare, sign and mail the notices requisite
to such meeting.
SECTION 7. NOTICE OF SPECIAL MEETING OF SHAREHOLDERS. At least ten
(10) days prior to the date fixed for the holding of any special meeting of
shareholders, written notice of the time, place and purposes of such meeting
shall be mailed, as hereinbefore provided, to each shareholder entitled to vote
at such meeting. No business not mentioned in the notice shall be transacted at
such meeting.
SECTION 8. ORGANIZATION MEETING OF BOARD. At the place of holding the
annual meeting of shareholders, and immediately following the same, the Board of
Directors as constituted upon final adjournment of such annual meeting shall
convene for the purpose of electing officers and transacting any other business
properly brought before it; provided, that the organization meeting in any year
may be held at a different time and place than herein provided by consent of a
majority of the Directors of such new Board.
SECTION 9. REGULAR MEETINGS OF BOARD. Regular meetings of the Board of
Directors shall be held upon the call of the President and not less frequently
than once in each year at such time and place as the Board of Directors shall
from time to time determine. No notice of regular meeting of the Board of
Directors shall be required.
SECTION 10. SPECIAL MEETINGS OF THE BOARD. Special meetings of the
Board of Directors may be called by the Board of Directors or by the President,
at any time, by means of such written notice delivered to the Directors'
business address. Said notice shall state the time, place and purpose of such
meeting as the President, in his discretion, shall deem sufficient, but action
taken at any such meeting shall not be invalidated for want of notice if such
notice shall be waived as hereinafter provided.
SECTION 11. NOTICE AND MAILINGS. All notices required to be given by
any provision of these By-Laws shall state the authority pursuant to which they
are issued, (as, "by order of President", or "by order of the Board of
Directors", or "by order of the Shareholders", as the case may be), and shall
bear the written or printed signature of the President or Secretary. Every
notice shall be deemed duly served if personally delivered to the sendee's
regular business or residence address or when the same has been deposited in the
United States Mail, with postage fully prepaid, plainly addressed to the sendee
at his, her or its last address appearing upon the original or duplicate stock
letter of this corporation at its registered office in Michigan.
2
<PAGE> 3
SECTION 12. WAIVER OF NOTICE. Notice of the time, place and purpose of
any meeting of the shareholders or of the Board of Directors, may be waived by
telegram, radiogram, cablegram or other writing, either before or after such
meeting has been held.
SECTION 13. PARTICIPATION BY TELEPHONE. Unless otherwise restricted by
the Articles of Incorporation or By-Laws of this corporation, a member of the
Board of Directors or of a committee designated by the Board of Directors may
participate in a meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this section
constitutes presence in person at the said meeting.
SECTION 14. NEW SHAREHOLDERS. Every person becoming a shareholder in
this corporation shall be deemed to assent to these By-Laws. Said person shall
deliver to the Secretary the address to which he desires notices to be sent. All
notices mailed to said address shall be deemed to have been properly served upon
said new shareholder. Any person who fails to so designate his address to the
said Secretary shall be deemed to have waived any and all notices.
SECTION 15. VOTING LISTS. The officer or agent having charge of the
transfer book for shares of the Corporation shall make, within twenty (20) days
after the record date for a meeting of shareholders or ten (10) days before such
meeting, whichever is earlier, a complete list of the shareholders entitled to
vote at such meeting, arranged in alphabetical order, with the address of and
the number of shares held by each, which list, for a period of ten (10) days
prior to such meeting, shall be kept on file at the registered office of the
Corporation and shall be subject to inspection by any shareholder, and to
copying at the shareholder's expense, at any time during usual business hours.
Such list shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting. The original share ledger or transfer book, or a
duplicate thereof kept in the offices of the Corporation, shall be prima facie
evidence as to who are the shareholders entitled to examine such list or share
ledger or transfer book or to vote at any meeting of shareholders.
Section 16. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of the shareholders, may be taken without a meeting and without a
vote, if a consent in writing, setting forth the action so taken shall be signed
(a) if five (5) days prior notice of the proposed action is given in writing to
all of the shareholders entitled to vote with respect to the subject matter
thereof, by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voting or
(b) by all the shareholders entitled to vote with respect to the subject matter
thereof.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given in writing to those
shareholders who have not consented in writing. In the event that the action
which is consented to is such as would have required the filing of a certificate
under any section of the Business Corporation Act of the State
3
<PAGE> 4
of Michigan, if such action had been voted on by the shareholders at a meeting
thereof, the certificate filed under such section shall state, in lieu of any
statement required by such section concerning any vote of shareholders, that
written consent has been given in accordance with the provisions of the Business
Corporation Act, and that written notice has been given as provided in the said
Act.
SECTION 17. WAIVER BY ATTENDANCE. Attendance of a person at a meeting
of Shareholders, in person or by proxy, or at a meeting of the Board of
Directors, constitutes a waiver of the notice of the meeting, except when a
Shareholder or Director attends a meeting for the express purpose of objecting
at the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE II
QUORUM
SECTION 1. QUORUM OF SHAREHOLDERS. A majority of the outstanding
shares of this corporation entitled to vote, present by record holder thereof in
person or by proxy, shall constitute a quorum at any meeting of the
shareholders.
SECTION 2. QUORUM OF DIRECTORS. One (1) Director shall constitute a
quorum.
ARTICLE III
VOTING, ELECTIONS AND PROXIES
SECTION 1. THOSE ENTITLED TO VOTE. Except as the Articles of
Incorporation or Amendments thereto otherwise provide, each shareholder of this
corporation shall, at every meeting of the shareholders, be entitled to one vote
in person or by proxy for each share of stock of this corporation held by such
shareholder, subject to the limitations set forth in the Articles of
Incorporation of this Corporation.
SECTION 2. RECORD DATE FOR DETERMINATION OF SHAREHOLDERS. The Board of
Directors shall have the right to fix a date not more than sixty (60) nor less
than ten (10) days preceding:
(a) The date of any meeting of shareholders;
(b) The date for payment of any dividends;
(c) The date for the allotment of rights;
(d) The date when any change or conversion or exchange
of capital stock shall go into effect,
as a record date for the determination of the shareholders entitled to notice
of, and to vote at, any such meeting, or entitled to receive payment of any such
dividend, or to any such allotment
4
<PAGE> 5
of rights, or to exercise the rights in respect of any such change, conversion
or exchange of capital stock. Only such shareholders as shall be shareholders of
record on the date so fixed shall be entitled to such notice of, and to vote at
such meeting, or to receive payment of such rights as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation or
otherwise after such record date fixed as aforesaid. Nothing in this Section
shall affect the rights of a shareholder and his transferee or transferor as
between themselves.
SECTION 3. PROXIES. No proxy shall be deemed operative unless and until
signed by the shareholder and filed with the Corporation. In the absence of a
limitation to the contrary contained in the proxy, a proxy shall extend to all
meetings of the shareholders and shall remain in force for three (3) years from
its date, and no longer.
SECTION 4. VOTE BY SHAREHOLDER CORPORATION. Any other corporation
owning voting shares in this Corporation may vote upon the same by the President
of such shareholder corporation, or by proxy appointed by him, unless some other
person shall be appointed to vote upon such shares by resolution of the Board of
Directors of such shareholder corporation.
SECTION 5. VOTING OF SHARES BY CERTAIN HOLDERS. Shares held by the
Corporation in a fiduciary capacity may be voted and shall be counted in
determining the total number of outstanding shares entitled to vote at any given
time.
Shares registered in the name of a deceased person, a minor ward or a
person under legal disability, may be voted by his or her administrator,
executor, personal representative, or court-appointed guardian, either in person
or by proxy, without a transfer of such shares into the name of such
administrator, executor, personal representative or court-appointed guardian.
Shares registered in the name of a trustee may be voted by the trustee, either
in person or by proxy.
Shares registered in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his or her name if authority to
do so is contained in an appropriate order of the court by which such receiver
was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Any number of shareholders may create a voting trust for the purpose of
conferring upon a trustee or trustees the right to vote or otherwise represent
their shares, for a period not in excess of the period allowable by the laws of
the State of incorporation, by entering into a written voting trust agreement
specifying the terms and conditions of the voting trust, and by transferring
their shares to such trustee or trustees for the purpose of the agreement. Any
such trust agreement shall not become effective until a counterpart of the
agreement is deposited with the Corporation at its registered office. The
counterpart of the voting trust agreement so deposited with the Corporation
shall be subject to the same right of examination by a shareholder of the
Corporation, in person or by agent or attorney, as are the books and records
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<PAGE> 6
of the Corporation, and shall be subject to examination by any holder of a
beneficial interest in the voting trust, either in person or by agent or
attorney, at any reasonable time for any proper purpose.
No provision of these By-Laws shall be deemed to limit the ability of
any shareholders to enter into voting agreements which are otherwise lawful.
Shares of its own stock belonging to this Corporation shall not be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time, but shares
of its own stock held by it in a fiduciary capacity may be voted and shall be
counted in determining the total number of outstanding shares at any given time.
SECTION 6. VOTING. Each outstanding share of stock is entitled to one
vote on each matter submitted to a vote. The votes shall be cast orally unless
the holders of a majority present and entitled to vote at said meeting shall
determine that the vote shall be in writing. The Directors shall be voted for at
one time as a group on one ballot, and shall not be voted for individually, one
at a time. Any shareholder may vote in person or by proxy provided that the
proxy shall be signed by the shareholder or his authorized agent or
representative.
SECTION 7. INSPECTORS OF ELECTION. Whenever any person entitled to
vote at a meeting of the shareholders shall request the appointment of
inspectors, a majority of the shareholders present at such meeting and entitled
to vote thereat shall appoint not more than three (3) inspectors, who need not
be shareholders. If the right of any person to vote at such meetings shall be
challenged, the inspectors shall determine such right. The inspectors shall
receive and count the votes either upon the election or for the decision of any
questions and shall determine the results. Their certification of any vote shall
be prima facia evidence thereof.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1. NUMBER AND TERM OF DIRECTORS. The business, property and
affairs of this Corporation shall be managed by a board of Directors composed of
not more than one (1) member(s) who need not be shareholders. Each director
shall hold office for the term for which he is elected and until his successor
is elected and qualified, provided, however, that in the event any director
shall at any time resign from his office as a director by depositing his written
resignation with any officer of the Corporation or with any director, such
director so depositing his written resignation shall forthwith cease to be a
member of the Board of Directors of this Corporation and his office as a
director shall immediately become vacant at the time of the deposit of such
resignation, as herein provided.
SECTION 2. REMOVAL OF DIRECTORS. Any Director of this Corporation may
be removed at any annual or special meeting of the shareholders by the same vote
as that required to elect a Director, provided, however, that such proposed
action is stated in the notice of the meeting.
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<PAGE> 7
If the Articles of Incorporation shall call for cumulative voting for the Board
of Directors, and if less than the entire Board is to be removed, no one of the
Directors may be removed if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
Board of Directors. Further, any Director of the Corporation may be removed at
any time, either with or without cause, by the vote of a majority of a quorum
of Directors present at a meeting of the Board called for that purpose.
SECTION 3. VACANCIES. Vacancies in the Board of Directors shall be
filled by appointment made by the remaining Directors. Each person so elected to
fill a vacancy shall remain a Director for the term of the Director he has
replaced or until he has resigned or been removed as aforesaid, or until his
successor has been elected by the shareholders at their next annual meeting or
at any special meeting duly called for that purpose, which ever of the foregoing
events shall occur first.
SECTION 4. VOTE REQUIRED AT DIRECTORS' MEETING. The Directors shall in
all cases act as a board regularly convened, and, in the transaction of
business, the act of a majority present at a meeting except as otherwise
provided by law or the Articles of Incorporation shall be the act of the Board,
provided a quorum is present. The Directors may adopt such rules and regulations
for the conduct of their meetings and the management of the Corporation as they
deem proper, not inconsistent with law or these By-Laws.
SECTION 5. ACTION BY UNANIMOUS WRITTEN CONSENT. If and when all of the
directors shall severally or collectively consent in writing to any action to be
taken by the Corporation, such action shall be a valid corporate action as
though it had been authorized at a meeting of the Board of Directors.
SECTION 6. WRITTEN CONSENT. Any action required or permitted by the
Board of Directors to be taken at an annual or special meeting of the Board of
Directors may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, is signed by
members of the Board having not less than the minimurn number of votes that
would be necessary to authorize or take action at a meeting at which all
directors were present and voted. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to the directors who have not consented in writing.
SECTION 7. POWER TO MAKE BY-LAWS. The Board of Directors shall have the
power to make and alter any By-Law or By-Laws including the fixing and altering
of the number of directors; provided, that the Board shall not make or alter any
By-Law or ByLaws fixing the qualifications, classifications or terms of office
of any member or members of the then existing Board.
SECTION 8. POWER TO ELECT OFFICERS. The Board of Directors shall select
a president, a secretary, a treasurer and a vice president, if it is deemed
necessary. No officer, except the president, need be a member of the Board.
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SECTION 9. POWER TO APPOINT OTHER OFFICERS AND AGENTS. The Board of
Directors shall have power to appoint such other officers and agents as the
Board may deem necessary. No officer, except the President, need be a member of
the Board.
SECTION 10. POWER TO FILL VACANCIES. The Board shall have the power
to fill any vacancies in any office occurring for any reason whatsoever.
SECTION 11. DELEGATION OF POWERS. For any reason deemed sufficient by
the Board of Directors, whether occasioned by absence or otherwise, the Board
may delegate all or any of the powers and duties of any officer to any other
officer or director, but no officer or director shall execute, acknowledge or
verify any instrument in more than one capacity.
SECTION 12. COMMITTEES. A majority of the Board of Directors may
create one or more committees of two or more members to exercise appropriate
authority of the Board of Directors. A majority of such committee shall
constitute a quorum for transaction of business. A committee may transact
business without a meeting by unanimous written consent. The Board of Directors
may further appoint, by resolution, an executive committee composed of three
directors who, to the extent provided by such resolution, shall have and
exercise the authority of the Board of Directors in the management of the
business of the Corporation between meetings of the Board.
SECTION 13. POWER TO REQUIRE BOND. The Board of Directors may require
any officer or agent to file with the corporation a satisfactory bond
conditioned on faithful performance of his duties.
SECTION 14. COMPENSATION. The Board of Directors, by the affirmative
vote of a majority of directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the Corporation as directors,
officers or otherwise notwithstanding any director conflict of interest. By
resolution of the Board of Directors, the directors may be paid their expenses,
if any, of attendance at each meeting of the Board. No such payment previously
mentioned in this section shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
SECTION 15. PRESUMPTION OF ASSENT. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be conclusively presumed to have assented to the
action taken unless his or her dissent shall be entered in the Minutes of the
Meeting or unless he or she shall file his or her written dissent to such action
with the person acting as the Secretary of the Meeting before the adjournment
thereof or shall forward such dissent by registered or certified mail to the
secretary of the Corporation immediately after the adjournment of the Meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.
8
<PAGE> 9
ARTICLE V
OFFICERS
SECTION 1. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors and at all meetings of the shareholders and exercise and
perform such other powers and duties as may be, from time to time, assigned to
him by the Board of Directors or prescribed by the Bylaws.
SECTION 2. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the chief executive officer of the
Corporation, and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation, and shall have the general powers and duties of management usually
vested in the office of President of a corporation, and shall have such other
powers and duties as may be prescribed by the Board of Directors or the Bylaws.
Within this authority and in the course of his duties, he shall:
(a) Preside at all meetings of the shareholders or the
Board of Directors if there shall be no Chairman of
the Board appointed, or if the Chairman of the Board
shall be absent;
(b) When authorized by the Board of Directors, execute,
in the name of the corporation, such papers and
instruments and writings as may be set forth in such
authorization, or as may be otherwise stated in
these Bylaws;
(c) Appoint and remove, employ and discharge, and
prescribe the duties and fix the compensation of all
agents, employees, and clerks of the corporation
other than the duly appointed officers, subject to
the approval of the Board of Directors, and control
all of the officers, agents and employees of the
corporation, subject to the direction of the Board
of Directors.
SECTION 3. EXECUTIVE VICE-PRESIDENT. The Executive Vice-President, if
one shall be elected, shall direct the day to day activities of the corporation
in accordance with the policies and objectives established by the President and
the Board of Directors to achieve maximum profitability of operations. He shall
assist the President in developing policies and/or organization of the
corporation which will ensure that full advantage is taken of the long range
potential of the business. In the absence of the President, he shall direct and
coordinate the activities of the corporation's staff and operations.
SECTION 4. VICE-PRESIDENT. If there shall be no Executive
Vice-President elected, then the Vice-President shall have the duties assigned
to the Executive Vice-President above. If there shall be an Executive
Vice-President, then the Vice-President shall act in accordance with the
policies and objectives established by the President and the Board of Directors
and assist the
9
<PAGE> 10
President and Executive Vice-President in developing policies and an
organization of the corporation which will ensure that full advantage is taken
of the long range potentials of the business. In the absence of the President
and Executive Vice-President, he shall direct and coordinate the activities of
the corporation's staff and operations.
SECTION 5. SECRETARY. The Secretary shall attend all meetings of the
shareholders, and of the Board of Directors and of the executive committee, and
shall preserve in books of the company true minutes of the proceedings of all
such meetings. He shall safely keep in his custody the seal of the corporation
and shall have authority to affix the same to all instruments where its use is
required. He shall give all notices required by statutes, by-law or resolution.
He shall perform such other duties as may be delegated to him by the Board of
Directors or by the executive committee.
SECTION 6. TREASURER. The Treasurer shall have custody of all corporate
funds and securities and shall keep in books belonging to the corporation full
and accurate accounts of all receipts and disbursements; he shall deposit all
monies, securities and other valuable effects in the name of the corporation in
such depositories as may be designated for that purpose by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board, taking proper vouchers for such disbursements, and shall render to
the President and Directors at the regular meetings of the Board and whenever
requested by them, an account of all his transactions as Treasurer and of the
financial condition of the corporation. If required by the Board, he shall
deliver to the President of the company, and shall keep in force, a bond in
form, account and with surety or sureties satisfactory to the Board,
conditioned for the faithful performance of the duties of his office, and for
restoration to the corporation in case of his death, resignation, retirement, or
removal from office, of all books, papers, vouchers, money and property of
whatever kind in his possession or under his control belonging to the
corporation.
SECTION 7. ASSISTANT SECRETARY. The Assistant Secretary, if one is
appointed, in the absence or disability of the Secretary, shall perform the
duties and exercise the powers of the Secretary.
SECTION 8. ASSISTANT TREASURER. The Assistant Treasurer, if one is
appointed, in the absence or disability of the Treasurer, shall perform the
duties and exercise the powers of the Treasurer.
SECTION 9. CONTROLLER. If the Board of Directors shall elect a
Controller, the Controller shall be responsible for developing and maintaining
the necessary procedures for the financial control of the business; for the
safeguarding of assets; for directing internal auditing; for seeing that all
necessary accounting activities are developed and maintained; for directing the
preparation and interpretation of consolidation financial statements and profit
plans; for directing studies of administrative and office systems and
procedures; for developing data processing; and for recommending changes in
accounting, auditing and profit planning policies.
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<PAGE> 11
ARTICLE VI
STOCKS AND TRANSFERS
SECTION 1. CERTIFICATES FOR SHARES. Every shareholder shall be
entitled to a certificate of his share signed by the President and the
Secretary, or the Assistant Secretary or the Treasurer, or the Assistant
Treasurer, if one be appointed, under the seal of the corporation, certifying
the number of shares represented by such certificates which certificates shall
state the terms and provisions of said shares; provided, that where such
certificate is signed by a transfer agent or an assistant transfer agent or by a
transfer clerk acting on behalf of such corporation, or by a registrar, the
signatures of any such President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and the seal of the corporation may be facsimile.
SECTION 2. TRANSFERABLE ONLY ON BOOKS OF CORPORATION. Shares shall be
transferable only on the books of the corporation by the person named in the
certificate, or by an attorney lawfully constituted in writing, and upon
surrender of the certificate therefor. A record shall be made of every such
transfer and issue. Whenever any transfer is made for collateral security and
not absolutely the fact shall be so expressed in the entry of such transfer.
SECTION 3. REGISTERED SHAREHOLDERS. The corporation shall have the
right to treat the registered holder of any share as the absolute owner thereof,
and shall not be bound to recognize any equitable or other claim to, or interest
in,such share on the part of any other person, whether or not the corporation
shall have express or other notice thereof, save as may be otherwise provided by
the law of the State of Michigan.
SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
appoint a transfer agent and a registrar of transfers, and may require all
certificates of shares to bear the signature of such transfer agent and of such
registrar of transfers, or as the Board may otherwise direct.
SECTION 5. REGULATIONS. The Board of Directors shall have the power
and authority to make all such rules and regulations as the Board shall deem
expedient regulating the issue, transfer and registration of certificates for
shares in this corporation.
SECTION 6. LOST CERTIFICATES. In case of the loss of any certificate
of shares of stock, upon due proof by the registered holder or his
representatives, by affidavit of such loss, the Secretary shall issue a
duplicate certificate in its place, upon the Corporation being fully indemnified
therefor.
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<PAGE> 12
ARTICLE VII
DIVIDENDS AND RESERVES
SECTION 1. SOURCES OF DIVIDENDS. The Board of Directors shall have
power and authority to declare dividends from the following sources:
(a) From earned surplus,
(b) From net earnings,
(c) From appreciation of the value of the assets of the
corporation, provided that such dividend shall be
payable in stock only;
the above being at all times subject to the provisions and conditions contained
in the Articles of Incorporation filed by the corporation.
In determining earned surplus the judgment of the Board shall be
conclusive in the absence of bad faith or gross neglect.
SECTION 2. MANNER OF PAYMENT OF DIVIDEND. Dividends may be paid in
cash, in property, in obligations of the corporation or in shares of the capital
stock of the corporation.
SECTION 3. RESERVES. The Board of Directors shall have power and
authority to set apart, subject to the provisions of the Articles of
Incorporation, out of any funds available for dividends, such reserve or
reserves, for any proper purpose, as the Board in its discretion shall approve;
and the Board shall have power and authority to abolish any reserve created by
the Board.
SECTION 4. RECORD DATE FOR DETERMINATION OF SHAREHOLDERS. The record
date for the determination of shareholders shall be as set forth in Article III,
Section 2 of these By-Laws.
ARTICLE VIII
RIGHT OF INSPECTION
SECTION 1. INSPECTION OF LIST OF SHAREHOLDERS. At least ten (10) days
before every election of directors, a complete list of shareholders entitled to
vote at such election shall be open to examination by any registered shareholder
entitled to vote at such election.
ARTICLE IX
EXECUTION OF INSTRUMENTS
SECTION 1. CHECKS, ETC. All checks, drafts and orders for payment of
money shall be signed in the name of the corporation and shall be countersigned,
by such officers or agents as the Board of Directors shall from time to time
designate for that purpose.
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<PAGE> 13
SECTION 2. CONTRACTS, CONVEYANCES, ETC. When the execution of any
contract, conveyance or other instrument has been authorized without
specification of the executing officers, the President and the Secretary may
execute the same in the name and on behalf of this corporation and may affix
the corporate seal thereto. The Board of Directors shall have power and
authority to execute any instrument on behalf of this corporation, or to
designate an officer or officers to execute any instrument on behalf of the
corporation.
ARTICLE X
AMENDMENT OF BY-LAWS
SECTION 1. AMENDMENTS, HOW EFFECTED. These By-Laws may be amended,
altered, changed, added to or repealed by the affirmative vote of a majority of
the shares entitled to vote at a regular or special meeting of the shareholders
if notice of the proposed amendment, alteration, change, addition or repeal be
contained in the notice of the meeting, or by the affirmative vote of a majority
of the Board of Directors if the amendment, or alteration, change addition or
repeal be proposed at a regular or special meeting of the Board and adopted at a
subsequent regular meeting; provided, that any By-Laws made by the affirmative
vote of a majority of the Board of Directors as provided herein may be amended,
altered, changed, added to or repealed by the affirmative vote of a majority of
the shares entitled to vote at any regular or special meeting of the
shareholders; also, provided, however, that no change of the date for the annual
meeting of shareholders shall be made within thirty (30) days next before the
date on which such meeting is to be held unless consented to in writing, or by a
resolution adopted at a meeting, by all shareholders entitled to vote at an
annual meeting.
ARTICLE XI
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND
AGENTS
SECTION 1. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment or settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall 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 interest of the
Corporation, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
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<PAGE> 14
SECTION 2. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if he or she 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 and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
SECTION 3. To the extent that a director, officer, employee or agent
of a corporation has been successful, on the merits or otherwise, in the defense
of any action, suit or proceeding referred to in sections 1 and 2, or in defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses actually and reasonably incurred by such person in connection
therewith.
SECTION 4. Any indemnification under sections 1 and 2 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 1 and 2. Such determination shall be made (a) by the board
of directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (b) if such a quorum is not
obtainable, or even if obtainable, a quorum of disinterested directors so
directors, by independent legal counsel in a written option, or (c) by the
shareholders.
SECTION 5. Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding, as authorized by the board of
directors in the specific case, upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount, unless it
shall ultimately be determined that he or she is entitled to be indemnified by
the corporation as authorized in this article.
SECTION 6. The indemnification provided by this article shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any by-law, agreement vote of shareholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
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<PAGE> 15
SECTION 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
his or her status as such, whether or not the corporation would have the power
to indemnify such person against such liability under the provisions of these
sections.
SECTION 8. If the corporation has paid indemnity or had advanced
expenses to a director, officer, employee or agent, the corporation shall report
the indemnification or advance in writing to the shareholders with or before the
notice of the next shareholders' meeting.
SECTION 9. Reference to "the corporation" shall include, in addition to
the surviving corporation, any merging corporation, including any corporation
having merged with a merging corporation, absorbed in a merger which otherwise
would have lawfully been entitled to indemnify its directors, officers, and
employees or agents.
ARTICLE XII
DISALLOWANCE OF EXPENSES
PAYMENTS DISALLOWED BY THE INTERNAL REVENUE SERVICE. Any payments made
to an officer, agent or employee of the Corporation such as a salary,
commission, bonus, interest, rent or travel or entertainment expense incurred by
him, which shall be disallowed in whole or in part as a deductible expense by
the Internal Revenue Service, shall be reimbursed by such officer, agent or
employee to the Corporation to the full extent of such disallowance. It shall be
the duty of the Directors, as a Board, to enforce payment of each such amount
disallowed. In lieu of payment by the officer, agent, or employee, subject to
the determination of the Directors, proportionate amounts may be withheld from
his future compensation payments until the amount owed to the Corporation has
been recovered.
ARTICLE XIII
FISCAL YEAR
SECTION 1. FISCAL YEAR. The fiscal year of the corporation shall be
established by the Board of Directors.
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CERTIFIED COPY OF BYLAWS FOR TURN-MATIC, INC.
I am the Secretary of Turn-Matic, Inc., a Michigan
corporation, and I certify that the attached copy of the Bylaws of the
Corporation is a true, authentic and exact copy of the Bylaws as recorded in the
books and records of the Corporation.
Date: /s/ Louella Sabel
------------------------ ---------------------------
LOUELLA SABEL
<PAGE> 1
978B# 7366 0610
ORG & FI $10.00
EXHIBIT 3.13
ADJUSTED PURSUANT TO
TELEPHONE AUTHORIZATION
<TABLE>
<S><C>
- ------------------------------------------------------
AFTER FILING RETURN TO: | FILED
|
Name: William H. Heritage, III | JUN 11, 1997
- -----------------------------------------------------|
Address: 201 W. Big Beaver Road, Ste. 500 | Administrator
- -----------------------------------------------------| MI DEPARTMENT OF CONSUMERS INDUSTRY SERVICES
City, State, Zip: Troy, MI 48084-4160 | CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU
- -----------------------------------------------------|
RESTATED ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATION
Pursuant to the provisions of Act 284, Public Acts of 1972, the
undersigned limited liability company executes the following
Restated Articles:
- ------------------------------------------------------------------------------------------------------------------------------------
1. The present name of the corporation is: Turn-Matic, Inc.
2. The corporation identification number (CID) assigned by the Bureau is: 001-812
3. All former names of the corporation are:
4. The date of filing the original Articles of Incorporation was: October 3, 1968
- ------------------------------------------------------------------------------------------------------------------------------------
The following Restated Articles of Incorporation supersede the Articles of Incorporation as
amended and shall be the Articles of Incorporation for the corporation:
- ------------------------------------------------------------------------------------------------------------------------------------
ARTICLE I:
The name of the corporation is: Turn-Matic, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 2
- --------------------------------------------------------------------------------
ARTICLE II:
The purpose of purposes for which the corporation is formed is to
engage in any activity within the purposes for which corporations may be formed
under the Business Corporation Act of Michigan.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE III:
The total authorized capital stock consists of:
Common Shares: 50,000
Preferred Shares:
A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE IV:
1. The address of the registered office is: 22805 Interstate
Drive, Clinton Township, Michigan 48035
2. The mailing address of the registered office, if different than
above, is:
3. The name of the resident agent at the registered office is:
Raymond B. Dorris, Sr.
- --------------------------------------------------------------------------------
2
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 3
ARTICLE V:
Any action required or permitted by the Act to be taken at an annual or
special meeting of shareholders may be taken without a meeting, without
prior notice and without a vote, if consents in writing, setting forth
the action so taken, are signed by the holders of outstanding shares
having not less than the minimum number of votes that would be
necessary to authorize or take action at a meeting at which all shares
entitled to vote on the action were present and voted. The written
consents shall bear the date of signature of each shareholder who signs
the consent. No written consents shall be effective to take the
corporate action referred to unless, within 60 days after the record
date for determining shareholders entitled to express consent to or to
dissent from a proposal without a meeting, written consents signed by a
sufficent number of shareholders to take the action are delivered to the
corporation. Delivery shall be to the corporation's registered office,
its principal place of business, or an officer or agent of the
corporation having custody of the minutes of the proceedings of its
shareholders. Delivery made to a corporation's registered office shall
be by hand or by certified or registered mail, return receipt
requested.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to shareholders
who have not consented in writing.
ARTICLE VI:
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages, for a breach of
the director's fiduciary duty, except for the following:
(a) A breach of the director's duty of loyalty to the
corporation or its shareholders;
(b) Acts or omissions not in good faith or that involve
intentional misconduct or knowing violation of law;
(c) Any violation of Section 551 (1) of the Michigan
Business Corporation Act;
(d) A transaction from which the director derived an improper
personal benefit; and
(e) Any act or omission occurring prior to the date of this
Article.
These Restated Articles of Incorporation were duly adopted on
May 1, 1997, in accordance with the provisions of Section
642 of the Act by the shareholders. The necessary number of shares as
required by statute were voted in favor of these Restated Articles.
/s/ Raymond B. Dorris
Signed on May 1, 1997 --------------------------------
Raymond B. Dorris, Sr., President
SEAL APPEARS ONLY ON ORIGINAL
3
<PAGE> 1
EXHIBIT 3.14
AMENDED AND RESTATED
BYLAWS
OF
TURN-MATIC, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Offices ........................................................... 1
1.1 Principal Office ........................................ 1
1.2 Other Offices ........................................... 1
2. Seal and Fiscal Year .............................................. 1
2.1 Seal .................................................... 1
2.2 Fiscal Year ............................................. 1
3. Capital Stock ..................................................... 1
3.1 Issuance of Shares ...................................... 1
3.2 Certificates for Shares ................................. 1
3.3 Transfer of Shares ...................................... 2
3.4 Registered Shareholders ................................. 2
3.5 Lost or Destroyed Certificates .......................... 2
3.6 Lien .................................................... 2
4. Shareholders and Meetings of Shareholders ......................... 3
4.1 Annual Meeting .......................................... 3
4.2 Special Meetings ........................................ 3
4.3 Time and Place of Meetings .............................. 3
4.4 Attendance Via Telephone Conference Call ................ 3
4.5 Record Dates ............................................ 3
4.6 List of Shareholders .................................... 4
4.7 Quorum .................................................. 4
4.8 Proxies ................................................. 5
4.9 Inspectors of Election .................................. 5
4.10 Voting .................................................. 5
4.11 Shareholders' Action Without a Meeting .................. 6
5. Board of Directors ................................................ 6
5.1 Scope of Authority ...................................... 6
5.2 Number .................................................. 6
5.3 Qualifications of Directors ............................. 7
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
5.4 Election, Resignation, and Removal ........................ 7
5.5 Vacancies ................................................. 7
5.6 Annual Meeting ............................................ 7
5.7 Regular Meetings .......................................... 7
5.8 Special Meetings .......................................... 7
5.9 Attendance Via Telephone Conference Call .................. 7
5.10 Quorum .................................................... 8
5.11 Directors' Action Without a Meeting ....................... 8
5.12 Executive and Other Committees ............................ 8
5.13 Dissents .................................................. 9
5.14 Compensation .............................................. 9
6. Notices; Waivers of Notice ........................................ 9
6.1 Manner of Giving Notice ................................... 9
6.2 Time for Giving Notice .................................... 9
6.3 Waiver of Notice .......................................... 10
7. Officers .......................................................... 11
7.1 Number .................................................... 11
7.2 Term of Office, Resignation, and Removal .................. 11
7.3 Vacancies ................................................. 11
7.4 Authority ................................................. 11
8. Duties of Officers ................................................ 11
8.1 Chairperson of the Board .................................. 11
8.2 President ................................................. 11
8.3 Vice Presidents ........................................... 12
8.4 Secretary ................................................. 12
8.5 Treasurer ................................................. 12
8.6 Assistant Secretaries and Treasurers ...................... 12
9. Execution of Contracts and Instruments ............................ 13
9.1 Checks and Drafts ......................................... 13
9.2 Contracts and Instruments ................................. 13
10. Books and Records ................................................. 13
10.1 Maintenance of Books and Records .......................... 13
10.2 Reliance on Books and Records ............................. 13
11. Indemnification ................................................... 14
11.1 Nonderivative Actions ..................................... 14
11.2 Derivative Actions ........................................ 14
11.3 Expenses of Successful Defense ............................ 15
11.4 Determination that Indemnification is Proper .............. 15
</TABLE>
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<TABLE>
<S> <C> <C>
11.5 Expense Advance .................. 16
11.6 Former Directors and Officers .... 16
11.7 Insurance ........................ 16
12. Governing Rules and Amendments .......... 16
12.1 Governing Rules .................. 16
12.2 Amendments ....................... 17
</TABLE>
iii
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AMENDED AND RESTATED
BYLAWS
OF
TURN-MATIC, INC.
1. Offices.
1.1 Principal Office. The principal office of the Corporation
shall be located in the State of Michigan, where the Board of Directors
determines from time to time.
1.2 Other Offices. The Corporation may also have other
offices, inside or outside of Michigan, where the Board of Directors determines
from time to time.
2. Seal and Fiscal Year.
2.1 Seal. The Board of Directors may adopt, alter or terminate
the use of a corporate seal at any time. The form or design of the seal shall be
determined periodically by the Board of Directors. The seal may be used by
causing it or a facsimile to be impressed, affixed, or reproduced.
2.2 Fiscal Year. The fiscal year of the Corporation shall be
determined from time to time by the Board of Directors.
3. Capital Stock.
3.1 Issuance of Shares. The Board of Directors may, subject to
its discretion, issue some or all of the shares of stock authorized in the
Articles of Incorporation. The amount, time, consideration and other terms and
conditions of any issuance of stock shall be determined by the Board of
Directors.
3.2 Certificates for Shares. The shares of stock of the
Corporation shall be represented by one or more certificates. A certificate
shall state on its face that the Corporation is formed under the laws of the
State of Michigan; the name of the person to whom it is issued; the number of
shares; and the designation of the class and series, if any. A certificate shall
be signed by the Chairperson of the Board, President or a Vice President, and
may also be signed by another officer of the Corporation. The signatures may be
facsimiles. If an officer who has signed or whose facsimile signature has been
placed upon a certificate ceases to be an officer before the certificate is
issued, it may be issued by the Corporation with the same effect as if he or she
was an
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officer at the date of issuance. Certificates may be sealed with the seal of the
Corporation or a facsimile.
3.3 Transfer of Shares. A transfer of shares of the capital
stock of the Corporation shall not be effective until recorded on the books and
records of the Corporation. The Corporation shall record a transfer of shares
only upon the surrender of the certificate or an assignment of the shares
separate from the certificate, properly endorsed for transfer, and the
presentation of such evidence of ownership and validity of the transfer or
assignment as the Corporation may require.
3.4 Registered Shareholders. The Corporation shall be entitled
to treat the person in whose name any share of stock is registered on the books
of the Corporation as the owner for all purposes, including the declaration or
payment of dividends and other distributions; voting or the approval or consent
of shareholders without a vote; and the provision of notice to shareholders. The
Corporation shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not the
Corporation shall have notice of such claim or interest, except as expressly
required by the laws of the State of Michigan.
3.5 Lost or Destroyed Certificates. Upon the presentation to
the Corporation of an affidavit attesting to the loss, destruction or mutilation
of any certificate for shares of stock of the Corporation, the Board of
Directors may direct the issuance of a new certificate to replace the lost,
destroyed, or mutilated certificate. The Board of Directors may require, as a
condition precedent to the issuance of a new certificate, any or all of the
following:
(a) Presentation of additional evidence or proof of the loss,
destruction, or mutilation claimed;
(b) Advertisement of loss in such manner as the Board of
Directors may direct or approve;
(c) A bond or agreement of indemnity, in such form and amount
and with such sureties as the Board of Directors may direct or approve; or
(d) The order or approval of a court or judge.
3.6 Lien. The Corporation shall retain a security interest in
all stock of the Corporation subscribed for by a shareholder to secure the
payment of the subscription price and the performance of any other obligations
under the subscription agreement. To perfect such security interest, the
shareholder shall pledge his or her
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stock to the Corporation, and shall deliver his or her stock certificate to the
Corporation at the time that the stock is issued. The Corporation shall return
the certificate when the subscription price has been paid in full and the
subscription agreement has been fully performed.
4. Shareholders and Meetings of Shareholders.
4.1 Annual Meeting. An annual meeting of the shareholders
shall be held shortly after the Company's annual accounting for the preceding
fiscal year has been completed, at a place, date, and time as the Board of
Directors determines. At the meeting, the shareholders shall elect the Board of
Directors, and review the financial condition of the Company and the results of
operations during the preceding fiscal year, and may take any other action that
properly comes before the meeting. If the annual meeting is not held, however,
such action may be taken at a special meeting or by the written consent of the
shareholders pursuant to Section 4.11 of these Bylaws.
4.2 Special Meetings. Special meetings of the shareholders may
be called at any time by the Board of Directors, the Chairperson of the Board
(if such office is filled) or the President, and shall be called by the
President or Secretary at the written request of shareholders holding thirty
percent of the shares of stock of the Corporation outstanding and entitled to
vote. The request shall state the purposes for which the meeting is to be
called.
4.3 Time and Place of Meetings. The Board of Directors, the
Chairperson of the Board (if such office is filled), or the President, shall
determine the time and place of all meetings of the shareholders. If the place
of a shareholders' meeting has not otherwise been specified, it shall be held at
the principal office of the Corporation.
4.4 Attendance Via Telephone Conference Call. Shareholders may
participate in a shareholders' meeting by means of conference telephone or
similar communication equipment, provided that all persons participating in the
meeting can communicate with each other, all participants in the meeting are
advised of the use of such equipment, and the names of all participants in the
meeting are disclosed to all participants. Participation in a meeting pursuant
to this section shall constitute presence in person at a shareholders' meeting.
4.5 Record Dates. The Board of Directors may fix a record date
for the purpose of determining shareholders entitled to a distribution. The
Board of Directors, the Chairperson of the Board (if such office is filled), or
the President may specify in advance a record date for any other corporate
purpose, including determining
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shareholders entitled to notice of and to vote at a meeting of shareholders, and
to express consent or dissent with regard to proposed corporate action to be
taken without a meeting. If a record date is not fixed as provided above, the
record date shall be the date the Board authorizes the distribution (except in
the case of a distribution involving a purchase, redemption or acquisition of
the Corporation's shares) or other corporate action.
The record date shall not precede the date on which
the resolution fixing the record date is adopted by the Board, the Chairperson
of the Board or the President. Furthermore, the record date shall not be:
(a) For the purpose of determining shareholders
entitled to notice of and to vote at a meeting of shareholders or an adjournment
of a meeting, more than 60 nor less than 10 days before the date of the meeting;
(b) For the purpose of determining shareholders
entitled to express consent to or to dissent from a proposal without a meeting,
more than 10 days after the resolution; and
(c) For the purpose of determining shareholders
entitled to receive payment of a share dividend or distribution, or allotment
of a right, or for the purpose of any other action, more than 60 days before
the payment of the share dividend or distribution, or the allotment of a right
or other action.
Only shareholders of record on the record date shall
be entitled to notice of and to vote at a meeting, to express consent or
dissent with regard to proposed corporate action to be taken without a meeting,
to receive a dividend or distribution, or an allotment of rights, or to
participate in any other action, notwithstanding any transfer of stock after
the record date. Nothing in this Bylaw shall affect the rights of a shareholder
and his transferee or transferor as between themselves.
4.6 List of Shareholders. The Secretary of the Corporation
shall make and certify a complete list of the shareholders entitled to vote at a
shareholders' meeting. The list shall be arranged alphabetically within each
class and series, with the address of and the number of shares of stock held by
each shareholder. The list shall be produced at the meeting, and shall be
subject to inspection by any shareholder during the entire meeting. The list
shall be prima facie evidence as to the shareholders entitled to examine the
list or vote at the meeting.
4.7 Quorum. Unless a greater or lesser quorum is provided
in the Articles of Incorporation, these Bylaws or the laws of the State of
Michigan, shareholders
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present at a meeting in person or by proxy who hold a majority of the
outstanding shares of stock of the Corporation entitled to vote at the meeting,
shall constitute a quorum. The shareholders present at a meeting in person or by
proxy may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum. Whether or not a
quorum is present, a meeting of shareholders may be adjourned by a vote of the
shares present in person or by proxy. When the holders of a class or series of
shares are entitled to vote separately on an item of business, this Bylaw
applies in determining the presence of a quorum of such class or series for the
transaction of such item of business.
4.8 Proxies. A shareholder entitled to vote at a meeting of
shareholders, or to express consent or dissent to proposed action to be taken
without a meeting, may authorize another person to act for him or her by proxy.
A proxy shall be signed by the shareholder or his or her authorized agent or
representative, and shall not be valid after the expiration of three years from
its date unless otherwise provided in the proxy. A proxy may be revocable or
irrevocable, subject to the laws of the State of Michigan.
4.9 Inspectors of Election. In advance of a shareholders'
meeting, the Board of Directors may appoint one or more inspectors to act at the
meeting or any adjournment. If inspectors are not appointed, the person
presiding at the shareholders' meeting may, and on request of a shareholder
entitled to vote shall, appoint one or more inspectors. In case an appointed
person fails to appear or act, the vacancy may be filled by the Board of
Directors in advance of the meeting, or at the meeting, by the person presiding.
If appointed, the inspectors shall determine the number
of shares outstanding, the voting power of each, the shares represented
at the meeting, the existence of a quorum and the validity and effect of
proxies; shall receive votes, ballots, or consents; shall hear and determine
challenges and questions arising in connection with the right to vote; shall
count and tabulate votes, ballots, or consents, and determine the result;
and shall do such acts as are proper to conduct the election or vote
with fairness to all shareholders. On request of the person presiding at the
meeting or a shareholder entitled to vote, the inspectors shall make and execute
a written report to the person presiding at the meeting of the facts found by
them and matters determined by them. The report shall be prima facie evidence of
the facts stated and of the vote as certified by the inspectors.
4.10 Voting. Each outstanding share of stock is entitled to
one vote on each matter submitted to a vote, unless otherwise provided in the
Articles of Incorporation of the Corporation. Votes shall be cast orally, unless
the holders of a majority of the shares present and entitled to vote shall
determine that the vote shall be
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in writing. Action other than the election of directors shall be authorized by
votes representing a majority of the outstanding shares of stock of the
Corporation, unless a greater amount is required by the Articles of
Incorporation or by the laws of the State of Michigan. Except as otherwise
provided by the Articles of Incorporation, directors shall be elected by a
plurality of the votes cast at any election.
4.11 Shareholders' Action Without a Meeting. To the extent
permitted by the Articles of Incorporation, any action required or permitted to
be taken at any annual or special meeting of the shareholders of the Corporation
may be taken without a meeting, without prior notice and without a vote, if
written consents setting forth the action taken are signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take the action at a meeting at which all shares
entitled to vote were present and voted. The written consents shall bear the
date of signature of each shareholder who signs it.
No written consent shall be effective, however, unless
within 60 days after the record date for determining shareholders entitled
to express consent to or to dissent from a proposal without a meeting,
written consents dated not more than 10 days before the record date and signed
by a sufficient number of shareholders to take the action are delivered to the
Corporation. Delivery shall be to the Corporation's registered office, its
principal place of business, or an officer or agent of the Corporation having
custody of the minutes of the proceedings of its shareholders. Delivery made to
the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to
shareholders who would have been entitled to notice of the shareholder meeting
if the action had been taken at a meeting and who have not consented in writing.
5. Board of Directors.
5.1 Scope of Authority. The business and affairs of the
Corporation shall be managed by a Board of Directors. The Board of Directors may
exercise all powers of the Corporation, and take any action in the name or on
behalf of the Corporation, not prohibited or reserved to the shareholders by
statute, the Articles of Incorporation or these Bylaws.
5.2 Number. The Board of Directors shall consist of at least
one and not more than four directors. Any change in the number of directors
shall be determined by resolution of the shareholders at the annual meeting or a
special meeting
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called for the purpose of electing directors. Absent a resolution changing the
number, the number of directors shall remain the same.
5.3 Qualifications of Directors. Directors need not be
residents of Michigan or shareholders of the Corporation.
5.4 Election, Resignation, and Removal. Directors shall be
elected at each annual meeting of the shareholders. Each director shall hold
office until the election of a qualified successor, or until his or her
resignation or removal. A director may resign by written notice to the
Corporation. A resignation shall be effective upon its receipt by the
Corporation, or upon a subsequent time specified in the notice of resignation. A
director or the entire Board of Directors may be removed, with or without cause,
by vote of the holders of a majority of the shares entitled to vote at an
election of directors. To the extent that the Articles of Incorporation provide
for cumulative voting, however, if less than the entire Board is to be removed,
no one director may be removed if the votes cast against his or her removal
would be sufficient to elect him or her if then cumulatively voted at an
election of the entire Board of Directors.
5.5 Vacancies. Vacancies in the Board of Directors occurring
by reason of death, resignation, removal, increase in the number of directors,
or otherwise may be filled by the shareholders or by the vote of a majority of
the remaining directors, even though less than a quorum of the Board of
Directors.
5.6 Annual Meeting. The Board of Directors shall meet each
year, within three business days after the annual meeting of the shareholders,
at the same place as the meeting of the shareholders or at such other place as
the Board of Directors may determine. At the meeting, the Board of Directors
shall elect officers and shall consider any other business that is properly
brought before the meeting.
5.7 Regular Meetings. The Board of Directors may hold regular
meetings at times and places that a majority of the directors determine.
5.8 Special Meetings. A special meeting of the Board of
Directors shall be called by the Chairman or the President upon the written
request of a majority of the directors. The request shall state the purposes for
which the meeting is to be called.
5.9 Attendance Via Telephone Conference Call. A director, or a
member of a committee appointed by the Board of Directors, may participate in a
meeting by means of conference telephone or similar communication equipment,
provided that all persons participating in the meeting can hear each other.
Participation in a meeting in this manner shall constitute presence in person at
the meeting.
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5.10 Quorum. A majority of the members of the Board of
Directors or of a committee shall constitute a quorum for the transaction of
business unless otherwise provided in the Articles of Incorporation or, in the
case of a committee, in the resolution of the Board of Directors establishing
the committee. The vote of a majority of the members of the Board of Directors
or a committee shall constitute the act of the Board or the committee, unless a
greater vote is required by the laws of the State of Michigan, the Articles of
Incorporation, these Bylaws or the Board resolution establishing the committee.
5.11 Directors' Action Without a Meeting. Any action required
or permitted to be taken at a meeting of the directors or a committee of
directors may be taken without a meeting, without prior notice and without a
vote if all of the directors or committee members entitled to vote consent to
such action in writing. The written consent shall be filed in the corporate
minute book, and shall have the same effect for all purposes as a vote of the
Board or committee, as the case may be.
5.12 Executive and Other Committees. The Board of Directors
may, by resolution passed by a majority of the whole Board, appoint one or more
members of the Board as an executive committee to exercise some or all of the
power and authority of the Board of Directors, provided, however, that such
committee shall not have power or authority to:
(a) Amend the Articles of Incorporation;
(b) Adopt an agreement of merger or consolidation;
(c) Recommend to shareholders the sale, lease, or
exchange of all or substantially all of the Corporation's property and assets;
(d) Recommend to shareholders a dissolution of the
Corporation or revocation of a dissolution;
(e) Amend these Bylaws;
(f) Fill vacancies in the Board of Directors;
(g) Establish the compensation of the directors for
serving on the Board of Directors or on a committee; or
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(h) Unless expressly authorized by the Board of
Directors, declare a distribution, dividend or authorize the issuance of stock.
The resolution passed by the Board of Directors
establishing such a committee shall specify the duties and obligations of the
committee. Committee members shall serve at the pleasure of the Board. The Board
of Directors may terminate, or modify the duties, obligations or membership of,
any committee at any time. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace an absent or
disqualified member at any meeting.
5.13 Dissents. A director who is present at a meeting of the
Board of Directors, or a committee of which he or she is a member, at which
corporate action is taken is presumed to have concurred in that action, unless
his or her dissent is entered in the minutes of the meeting or he or she files a
written dissent to the action with the person acting as secretary of the meeting
before the adjournment of the meeting, or he or she forwards such dissent by
registered mail to the Secretary of the Corporation promptly after the
adjournment of the meeting. Such right to dissent does not apply to a director
who voted in favor of such action. A director who is absent from a meeting of
the Board of Directors or a committee of which he or she is a member at which
any such action is taken is presumed to have concurred in the action unless he
or she files a written dissent with the Secretary of the Corporation within 10
days after he or she has knowledge of the action.
5.14 Compensation. The Board of Directors, by affirmative vote
of a majority of the directors in office, and irrespective of any personal
interest of any of them, may establish reasonable compensation of directors for
services to the Corporation as directors.
6. Notices; Waivers of Notice.
6.1 Manner of Giving Notice. All notices of meetings required
to be given to a shareholder, director or member of any committee of directors
shall be in writing, and shall be given by personal delivery, U.S. mail, private
mail or courier service or telegram, addressed to the shareholder, director or
committee member at his or her last known address as indicated on the books of
the Corporation. Such notice shall be deemed to be given when the notice is
personally served, mailed or otherwise dispatched. The notice shall state the
date, time, place and purpose or purposes of the meeting. The Corporation shall
bear the expense of all notices.
6.2 Time for Giving Notice. Except as otherwise provided by
statute, notice of a meeting shall be given as follows:
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(a) Shareholder Meetings. For meetings of shareholders,
notice shall be given not less than 10 nor more than 60 days before the date of
the meeting, to each shareholder of record entitled to vote at the meeting. No
notice need be given of an adjourned meeting, provided the time and place to
which such meeting is adjourned are announced at the original meeting, and only
such business is transacted at the adjourned meeting as might have been
transacted at the original meeting. However, if a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record on the new record date.
(b) Board of Directors and Committee Meetings. No notice
shall be required for annual or regular meetings of the Board of Directors, or
of a committee appointed by the Board of Directors, or for adjourned meetings,
whether regular or special, provided that the business conducted at the
adjourned meeting is limited to that which could have been conducted at the
original meeting. For special meetings, four days' notice shall be given.
6.3 Waiver of Notice. Notice of a meeting may be waived by
personal delivery, U.S. mail, private mail or courier service, facsimile,
telegram, radiogram, cablegram or other writing, either before or after the
meeting, or in such other manner as may be permitted by the laws of the State of
Michigan. Attendance of a person at a meeting (including attendance by proxy in
the case of a shareholders' meeting) shall result in the following:
(a) In the case of a shareholders' meeting, waiver of
objection to lack of notice or defective notice of the meeting, unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting;
(b) In the case of a shareholders' meeting, waiver of
objection to consideration of a particular matter at the meeting that is not
within the purpose or purposes described in the notice of meeting, unless the
shareholder objects to considering the matter when it is presented; and
(c) In the case of a meeting of the Board of Directors,
waiver of any required notice of the meeting, unless he or she at the beginning
at the meeting, or upon his or her arrival, objects to the meeting or the
transaction of business at the meeting and does not thereafter vote for or
assent to any action taken at the meeting.
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7. Officers.
7.1 Number. The Board of Directors shall elect or appoint a
President, Secretary, and Treasurer, and may elect or appoint a Chairperson of
the Board, and one or more Vice Presidents, Assistant Secretaries, and/or
Assistant Treasurers. Any of these offices may be held by the same person, but
no officer may execute, acknowledge, or verify an instrument in more than one
capacity.
7.2 Term of Office, Resignation, and Removal. An officer shall
hold office for the term for which he or she is elected or appointed, or until
the election or appointment of a successor, or until his or her resignation or
removal. An officer may resign by written notice to the Corporation. The
resignation shall be effective upon its receipt by the Corporation or upon a
subsequent time specified in the notice of resignation. Subject to any
contractual rights to the contrary, an officer shall serve at the will of the
Board of Directors, and may be removed by the Board of Directors at any time
with or without cause. The removal of an officer shall be without prejudice to
his or her contract rights, if any. The election or appointment of an officer
does not, of itself, create contract rights.
7.3 Vacancies. The Board of Directors may fill any vacancy in
any office occurring for any reason.
7.4 Authority. All officers, employees, and agents of the
Corporation shall have such authority and shall perform such duties in the
conduct and management of the business and affairs of the Corporation as the
Board of Directors and these Bylaws designate.
8. Duties of Officers.
8.1 Chairperson of the Board. The Chairperson of the Board, if
such office is filled, shall be the chief executive officer of the Corporation
and shall preside at all meetings of the shareholders or Board of Directors at
which he or she is present. He or she shall serve as an ex officio member of any
committee appointed by the Board of Directors. The Chairperson shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
or she shall have the general powers of supervision and management usually
vested in the chief executive officer of a corporation, including the authority
to vote all securities of other corporations and business organizations which
are held by the Corporation.
8.2 President. If the office of Chairperson of the Board is
filled, the President shall be the chief operating officer of the Corporation
and shall have the
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general powers of supervision and management over the day-to-day operations of
the Corporation. In the absence or disability of the Chairperson of the Board,
or if that office has not been filled, he or she shall also perform the duties
and execute the powers of the Chairperson of the Board.
8.3 Vice Presidents. The Vice Presidents, in order of
seniority, shall, in the absence or disability of the President, perform his or
her duties and exercise his or her powers, and shall also perform such other
duties as the Board of Directors or the President may from time to time
designate.
8.4 Secretary. The Secretary shall attend all meetings of the
Board of Directors and shareholders, and shall record all votes and minutes of
all proceedings in the corporate minute book. He or she shall give, or cause to
be given, notice of all meetings to the extent required under the Bylaws or
Michigan law. The Secretary shall keep in safe custody the seal of the
Corporation, if one is adopted by the Board of Directors, and when authorized by
the Board of Directors, may affix the seal to any instrument requiring it. When
so affixed, the instrument may be attested by the Secretary, the Treasurer or an
Assistant Secretary. The Secretary may delegate any of his or her duties, powers
or authority to one or more Assistant Secretaries, unless such delegation is
disapproved by the Board of Directors.
8.5 Treasurer. The Treasurer shall have the custody of the
corporate funds and securities. The Treasurer shall keep full and accurate
accounts of receipts and disbursements in the books of the Corporation. The
Treasurer shall deposit all money and other valuable effects in the name and to
the credit of the Corporation in such depositories as the Board of Directors may
designate. He or she shall render to the President and the Board of Directors,
whenever they may require it, an account of his or her transactions as Treasurer
and of the financial condition of the Corporation. The Treasurer may delegate
any of his or her duties, powers or authority to one or more Assistant
Treasurers unless such delegation is disapproved by the Board of Directors.
8.6 Assistant Secretaries and Treasurers. The Assistant
Secretaries, in the order of their seniority, shall perform the duties and
exercise the power and authority of the Secretary in case of his or her absence
or disability. The Assistant Treasurers, in the order of their seniority, shall
perform the duties and exercise the power and authority of the Treasurer in case
of his or her absence or disability. The Assistant Secretaries and Assistant
Treasurers shall also perform any duties delegated to them by the Secretary and
Treasurer, respectively, or assigned to them by the Board of Directors.
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9. Execution of Contracts and Instruments.
9.1 Checks and Drafts. All checks, drafts, notes, bills of
exchange, and orders for the payment of money of the Corporation shall be signed
by one or more officers or other persons periodically designated by the Board of
Directors.
9.2 Contracts and Instruments. The Board of Directors may at
any time designate one or more officers or agents to execute any contract,
instrument or document on behalf of the Corporation. When the execution of a
contract, instrument or document has been authorized but no officer or agent has
been specified to execute it, the Chairperson of the Board, President, Vice
President, Secretary or Treasurer may execute the instrument or document on
behalf of the Corporation.
10. Books and Records.
10.1 Maintenance of Books and Records. The officers and
agents of the Corporation shall keep and maintain books, records, and accounts
of the Corporation's business and affairs, minutes of the proceedings of its
shareholders, Board of Directors, and committees, if any, stock ledgers and
lists of shareholders, and any other books or records specified by the Board of
Directors or required by law. Books, records and minutes may be kept inside or
outside the State of Michigan, in a place periodically designated by the Board
of Directors.
10.2 Reliance on Books and Records. Except as otherwise
provided below, in discharging his or her duties, a director or officer of the
Corporation may rely upon information, opinions, reports or statements,
including financial statements and other financial data, if prepared or
presented by any of the following:
(a) One or more directors, officers or employees of the
Corporation, or of a business organization under joint control or common
control, whom the director or officer reasonably believes to be reliable and
competent in the matters presented;
(b) Legal counsel, public accountants, engineers or
other persons as to matters the director or officer reasonably believes are
within the person's professional or expert competence; and
(c) A committee of the Board of Directors of which he or
she is not a member if the director or officer reasonably believes the committee
merits confidence.
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A director or officer is not entitled to rely on such
information if he or she has knowledge concerning the matter in question that
makes reliance that would otherwise be permitted unwarranted under the
circumstances.
11. Indemnification.
11.1 Nonderivative Actions. Subject to all of the other
provisions of this Article, the Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding ("Legal Action"), whether civil, criminal,
administrative or investigative (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, employee or agent of another corporation,
partnership, joint venture, trust, or other enterprise, whether for profit or
not. This indemnity shall cover expenses (including attorney fees), judgments,
fines, and amounts paid in settlement, actually and reasonably incurred by him
or her in connection with such Legal Action. To be entitled to indemnification,
he or she must have 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. In addition, with respect to any criminal action or proceeding, he
or she must have had no reasonable cause to believe his or her conduct was
unlawful. The termination of any Legal Action by judgment, order, settlement,
conviction, or by a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith or in a
manner that 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 any
criminal Legal Action, had reasonable cause to believe that his or her conduct
was unlawful.
11.2 Derivative Actions. Subject to all of the other
provisions of this Article, the Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the Corporation ("Derivative
Action") 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, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, or other enterprise, whether for profit or not. This
indemnity shall cover expenses (including attorney fees), and amounts paid in
settlement actually and reasonably incurred by him or her in connection with the
Derivative Action, provided that he or she 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. No person shall be entitled to
indemnification for a claim, issue or matter in which he or she has been found
liable to the Corporation, unless and to the
<PAGE> 18
TURN-MATIC, INC.
Amended and Restated Bylaws Page 15
extent that the court in which such action or suit was brought determines, upon
application, that despite the adjudication of liability, in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity with respect to reasonable expenses incurred.
11.3 Expenses of Successful Defense. To the extent that a
person has been successful on the merits or otherwise in defense of any action,
suit, or proceeding referred to in Section 11.1 or 11.2 of these Bylaws, or in
defense of any claim, issue, or matter contained in such action, suit or
proceeding, he or she shall be indemnified against actual and reasonable
expenses (including attorney fees) incurred by him or her in connection with
such defense.
11.4 Determination that Indemnification is Proper. An
indemnification under Section 11.1 or 11.2 of these Bylaws (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 person is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in Section 11.1 or 11.2, whichever applies, and upon an evaluation of the
reasonableness of expenses and amounts paid in settlement. Such determination
shall be made in any of the following ways:
(a) By a majority vote of a quorum of the Board of
Directors consisting of directors who are not parties or threatened to be made
parties to such action, suit, or proceeding;
(b) If such quorum is not obtainable, by majority vote
of a committee duly designated by the Board of Directors and consisting solely
of two or more directors who are not 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 one of the following ways:
(i) By the Board of Directors in the manner
prescribed in Subsection 11.4(a); or
(ii) If a quorum of the Board of Directors cannot be
obtained under Subsection 11.4(a), and a committee cannot be designated under
Subsection 11.4(b), by the full Board of Directors;
<PAGE> 19
TURN-MATIC, INC.
Amended and Restated Bylaws Page 16
(d) By all independent directors (within the meaning of
Section 107(3) of the Michigan Business Corporation Act), if any, who are not
parties and are not threatened to be made parties to the action, suit or
proceeding; or
(e) By the shareholders, but shares of stock held by
directors, officers, employees or agents who are parties or are threatened to be
made parties to the action, suit or proceeding may not be voted.
11.5 Expense Advance. The Corporation may pay or reimburse the
reasonable expenses incurred by a director or officer who is a party or is
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 with a written
affirmation of his or her good faith belief that he or she has met the
applicable standard of conduct for indemnification set forth in Section 11.1 or
11.2 of these Bylaws;
(b) The person furnishes the Corporation with 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 applicable
standard of conduct for indemnification set forth in Section 11.1 or 11.2 of
these Bylaws; and
(c) A determination is made in the same manner
prescribed under Section 11.4 of these Bylaws that the facts then known to those
making the determination would not preclude indemnification under this Article.
11.6 Former Directors and Officers. The indemnification
provided in this Article continues as to a person who ceases to be a director or
officer, and shall inure to the benefit of the heirs, personal representatives,
executors, and administrators of such person.
11.7 Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who 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, trustee, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against 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 such liability under these Bylaws or the laws of
the State of Michigan.
<PAGE> 20
TURN-MATIC, INC.
Amended and Restated Bylaws Page 17
12. Governing Rules and Amendments.
12.1 Governing Rules. These Bylaws shall govern the internal
affairs of the Corporation to the extent they are consistent with Michigan Law
and the Articles of Incorporation. Nothing contained in the Bylaws, however,
shall prevent the imposition by contract of greater voting, notice, or other
requirements than those set forth in these Bylaws.
12.2 Amendments. These Bylaws may be amended or repealed, or
new Bylaws may be adopted, by action of either the shareholders or the board of
Directors. Any Bylaw Adopted or amended by the Board of Directors concerning the
qualifications, term of office, compensation or other rights or duties of any
director shall not take effect, however, until the expiration of the term of
office of the Board of Directors then in office. The shareholders may from time
to time specify particular provisions of the Bylaws which may not be altered or
repealed by the Board of Directors.
ADOPTED BY ACTION OF THE SHAREHOLDERS OF TURN-MATIC, INC. ON MAY
1, 1997.
/s/ Raymond B. Dorris
----------------------------
Raymond B. Dorris, Sr.
President
<PAGE> 1
Exhibit 4.1.3
(FACE OF EXCHANGE NOTE)
CUSIP/CINS 651186AC2
9-7/8% Series B Senior Subordinated Notes due 2008
No. B-1 $__________________
NEWCOR, INC.
promises to pay to Cede & Co. or registered assigns, the principal sum of
$________________ on March 1, 2008.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
DATED: __________, 1998
NEWCOR, INC.
BY:________________________________
Name: W. John Weinhardt
Title: President and Chief
Executive Officer
BY:________________________________
Name: John Garber
Title: Vice President Finance and
Chief Financial Officer
This is one of the 9-7/8% Series B Senior
Subordinated Notes due 2008 referred to
in the within-mentioned Indenture:
U.S. Bank Trust National Association,
as Trustee
By:________________________________
<PAGE> 2
(Back of Note)
9-7/8% Series B Senior Subordinated Notes due 2008
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF NEWCOR, INC.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Newcor, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
9-7/8% per annum from March 4, 1998 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company will pay interest and Liquidated Damages
semi-annually on March 1 and September 1 of each year, or
-2-
<PAGE> 3
if any such day is not a Business Day, on the next succeeding Business Day (each
an "Interest Payment Date"). Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be September 1, 1998. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the February 15 or
August 15 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest, premium and
Liquidated Damages on, all Global Notes and all other Notes the Holders of which
shall have provided wire transfer instructions to the Company or the Paying
Agent. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.
3. PAYING AGENT AND REGISTRAR. Initially, U.S. Bank Trust
National Association (formerly known as First Trust National Association), the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of March 4, 1998 ("Indenture") between the Company, the Subsidiary
Guarantors (as defined therein) and the Trustee. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. To the
-3-
<PAGE> 4
extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the Indenture shall govern and be controlling. The
Notes are obligations of the Company limited to $125,000,000 million in
aggregate principal amount, plus amounts, if any, issued to pay Liquidated
Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION
(a) Except as set forth in subparagraph (b) of this Paragraph
5, the Company shall not have the option to redeem the Notes prior to March 1,
2003. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on March 1 of the years indicated below:
YEAR PERCENTAGE
2003................................................................ 104.938%
2004................................................................ 103.292%
2005................................................................ 101.646%
2006 and thereafter................................................. 100.000%
(b) Notwithstanding the foregoing, at any time prior to March
1, 2001, the Company may on any one or more occasions redeem up to 35% of the
aggregate principal amount of Notes originally issued under the Indenture at a
redemption price of 109.875% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date,
with the net cash proceeds of one or more public offerings of common stock of
the Company; provided that at least 65% of the aggregate principal amount of
Notes remain outstanding immediately after the occurrence of such redemption
(excluding the Notes held by the Company and its Subsidiaries); and provided,
further, that such redemption shall occur within 45 days of the date of the
closing of such public offering.
6. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
-4-
<PAGE> 5
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 10 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Subsidiary consummates any Asset
Sales, when the aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company shall commence an offer to all Holders of Notes (as "Asset Sale Offer")
pursuant to Section 3.09 of the Indenture to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase, in accordance with the procedures set forth in the Indenture. To
the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company (or such Subsidiary) may use
such deficiency for general corporate purposes. If the aggregate principal
amount of Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a pro rata
basis. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the
-5-
<PAGE> 6
corresponding Interest Payment Date.
10. SUBORDINATION. The Notes are subordinated in right of
payment, to the extent and in the manner provided in Article 10 of the
Indenture, to the prior payment in full in cash or Cash Equivalents of all
Senior Debt. To the extent provided in the Indenture, Senior Debt must be paid
before the Notes may be paid. The Company agrees and each Holder of Notes by
accepting a Note consents and agrees to the subordination provided in the
Indenture and authorizes the Trustee to give its consent.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Subsidiary Guarantees or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the then outstanding Notes voting as a single class, and
any existing default or compliance with any provision of the Indenture, the
Subsidiary Guarantees or the Notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes voting
as a single class. Without the consent of any Holder of a Note, the Indenture,
the Subsidiary Guarantees or the Notes may be amended or supplemented to cure
any ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's or any Subsidiary Guarantor's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act, or to allow
any Subsidiary Guarantor to execute a supplemental indenture to the Indenture
and/or a Subsidiary Guarantee with respect to the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 days in the payment when due of interest or Liquidated Damages on
the Notes; (ii) default in payment when due of principal of or premium, if any,
on the Notes when the same becomes due and payable at maturity, upon redemption
(including in connection with an offer to purchase) or otherwise, (iii) failure
by the Company or any of its Restricted Subsidiaries to comply with Section
4.07, 4.09, 4.10, 4.15 or 5.01 of the Indenture; (iv) failure by the Company or
any of its Restricted Subsidiaries for 60 days after notice to comply with
certain other agreements in the Indenture or the Notes; (v) default under
certain other agreements relating to Indebtedness of the Company which default
results in the acceleration of such Indebtedness prior to its express maturity;
(vi) certain final judgments for the payment of money that remain undischarged
for a period of 60 days; (vii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Material Subsidiaries; and (viii) except as
permitted by the Indenture, any Subsidiary Guarantee shall be held in any
judicial
-6-
<PAGE> 7
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any Subsidiary Guarantor or any Person acting on its
behalf shall deny or disaffirm its obligations under such Subsidiary Guarantor's
Subsidiary Guarantee. If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Except as otherwise
provided in the Indenture, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest. The Holders of a majority in aggregate principal amount of
the Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Notes. The Company is
required to deliver to the Trustee annually a statement regarding compliance
with the Indenture, and the Company is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company or any of the Subsidiary Guarantors,
as such, shall not have any liability for any obligations of the Company or such
Subsidiary Guarantor under the Notes, the Subsidiary Guarantees or the Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
-7-
<PAGE> 8
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of March 4, 1998, between the Company and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Newcor, Inc.
1825 S. Woodward, Suite 240
Bloomfield Hills, MI 48302
Attention: John Garber
-8-
<PAGE> 9
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
-------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- -------------------------------------------------------------------------------
Date: __________________
Your Signature: ______________________
(Sign exactly as your name appears on the
face of this Note)
SIGNATURE GUARANTEE.
-9-
<PAGE> 10
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased:
$
------------------
Date: __________________ Your Signature:______________________
(Sign exactly as your name appears on the
Note)
Tax Identification No:_________________
Signature Guarantee.
-10-
<PAGE> 11
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized
Principal Amount Principal Amount Note following officer of
Date of of this Global of this Global such decrease (or Trustee or
Exchange Note Note increase) Note Custodian
<S> <C> <C> <C> <C>
</TABLE>
-11-
<PAGE> 12
SUBSIDIARY GUARANTEE
For value received, each Subsidiary Guarantor (which term
includes any successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture dated as of March 4, 1998 (the "Indenture")
among Newcor, Inc., the Subsidiary Guarantors listed on Schedule I thereto and
U.S. Bank Trust National Association (formerly known as First Trust National
Association), as trustee (the "Trustee"), (a) the due and punctual payment of
the principal of, premium, if any, and interest on the Notes (as defined in the
Indenture), whether at maturity, by acceleration, redemption or otherwise, the
due and punctual payment of interest on overdue principal and premium, and, to
the extent permitted by law, interest, and the due and punctual performance of
all other obligations of the Company to the Holders or the Trustee all in
accordance with the terms of the Indenture and (b) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise. The obligations of the Subsidiary Guarantors to the
Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the
Indenture are expressly set forth in Article XI of the Indenture and reference
is hereby made to the Indenture for the precise terms of the Subsidiary
Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall
be bound by such provisions, (b) authorizes and directs the Trustee, on behalf
of such Holder, to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints the
Trustee attorney-in-fact of such Holder for such purpose; provided, however,
that the Indebtedness evidenced by this Subsidiary Guarantee shall cease to be
so subordinated and subject in right of payment upon any defeasance of this Note
in accordance with the provisions of the Indenture.
GRAND MACHINING COMPANY
By:
-----------------------------
Name: John Garber
Title: Treasurer
DECO TECHNOLOGIES, INC.
By:
-------------------------------
Name: John Garber
Title: Treasurer
-12-
<PAGE> 13
DECO INTERNATIONAL, INC.
By:
-----------------------
Name: John Garber
Title: Treasurer
TURN-MATIC, INC.
By:
-----------------------
Name: John Garber
Title: Treasurer
ROCHESTER GEAR, INC.
By:
-----------------------
Name: John Garber
Title: Treasurer
PLASTRONICS PLUS, INC.
By:
-----------------------
Name: John Garber
Title: Treasurer
ENC CORP.
By:
-----------------------
Name: John Garber
Title: Treasurer
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<PAGE> 1
EXHIBIT 4.2.3
[COMERICA LOGO] GUARANTY
As of January 15, 1998, the undersigned, for value received, unconditionally and
absolutely guarantee(s) to Comerica Bank ("Bank"), a Michigan banking
corporation, payment when due, whether by stated maturity, demand, acceleration
or otherwise, of all existing and future indebtedness ("Indebtedness") to the
Bank of Newcor, Inc., a Delaware corporation ("Borrower"). Indebtedness includes
without limit any and all obligations or liabilities of the Borrower to the
Bank, whether absolute or contingent, direct or indirect, voluntary or
involuntary, liquidated or unliquidated, joint or several, known or unknown; any
and all indebtedness, obligations or liabilities for which Borrower would
otherwise be liable to the Bank were it not for the invalidity, irregularity or
unenforceability of them by reason of any bankruptcy, insolvency or other law or
order of any kind, or for any other reason; any and all amendments,
modifications, renewals and/or extensions of any of the above; and all costs of
collecting Indebtedness, including, without limit, attorney fees. Any reference
in this Guaranty to attorney fees shall be deemed a reference to reasonable
fees, charges, costs and expenses of both in-house and outside counsel and
paralegals, whether or not a suit or action is instituted, and to court costs if
a suit or action is instituted, and whether attorney fees or court costs are
incurred at the trial court level, on appeal, in a bankruptcy, administrative or
Probate Proceeding or otherwise. All costs shall be payable immediately by the
undersigned when incurred by the Bank, without demand, and until paid shall bear
interest at the highest per annum rate applicable to any of the Indebtedness,
but not in excess of the maximum rate permitted by law.
1. LIMITATION: The total obligation of the undersigned under this Guaranty is
UNLIMITED unless specifically limited in the Additional Provisions of this
Guaranty, and this obligation (whether unlimited or limited to the extent
specified in the Additional Provisions) shall include, IN ADDITION TO any
limited amount of principal guaranteed, all interest on that limited
amount, and all costs incurred by the Bank in collection efforts against
the Borrower and/or the undersigned or otherwise incurred by the Bank in
any way relating to the Indebtedness, or this Guaranty, including without
limit attorney fees.The undersigned agree(s) that (a) this limitation shall
not be a limitation on the amount of Borrower's Indebtedness to the Bank;
(b) any payments by the undersigned shall not reduce the maximum liability
of the undersigned under this Guaranty unless written notice to that effect
is actually received by the Bank at, or prior to, the time of the payment;
and (c) the liability of the undersigned to the Bank shall at all times be
deemed to be the aggregate liability of the undersigned under this Guaranty
and any other guaranties previously or subsequently given to the Bank by
the undersigned and not expressly revoked, modified or invalidated in
writing.
2. NATURE OF GUARANTY: This is a continuing Guaranty of payment and not of
collection and remains effective whether the Indebtedness is from time to
time reduced and later increased or entirely extinguished and later
reincurred. The undersigned deliver(s) this Guaranty based solely on the
undersigned's independent investigation of (or decision not to investigate)
the financial condition of Borrower and is (are) not relying on any
information furnished by the Bank. The undersigned assume(s) full
responsibility for obtaining any further information concerning the
Borrower's financial condition, the status of the Indebtedness or any other
matter which the undersigned may deem necessary or appropriate now or
later. The undersigned knowingly accept(s) the full range of risk
encompassed in this Guaranty, which risk includes, without limit, the
possibility that Borrower may incur Indebtedness to the Bank after the
financial condition of the Borrower, or the Borrower's ability to pay debts
as they mature, has deteriorated.
3. APPLICATION OF PAYMENTS: The undersigned authorize(s) the Bank, either
before or after termination of this Guaranty, without notice to or demand
on the undersigned and without affecting the undersigned's liability under
this Guaranty, from time to time to: (a) apply any security and direct the
order or manner of sale; and (b) apply payments received by the Bank from
the Borrower to any indebtedness of the Borrower to the Bank, in such order
as the Bank shall determine in its sole discretion, whether or not this
indebtedness is covered by this Guaranty, and the undersigned waive(s) any
provision of law regarding application of payments which specifies
otherwise. The undersigned agree(s) to provide to the Bank copies of the
undersigned's financial statements upon request.
4. SECURITY: The undersigned grant(s) to the Bank a security interest in and
the right of setoff as to any and all property of the undersigned now or
later in the possession of the Bank. The undersigned further assign(s) to
the Bank as collateral for the obligations of the undersigned under this
Guaranty all claims of any nature that the undersigned now or later has
(have) against the Borrower (other than any claim under a deed of trust or
mortgage covering California real property) with full right on the part of
the Bank, in its own name or in the name of the undersigned, to collect and
enforce these claims. The undersigned agree(s) that no security now or
later held by the Bank for the payment of any Indebtedness, whether from
the Borrower, any guarantor, or otherwise, and whether in the nature of a
security interest, pledge, lien, assignment, setoff, suretyship, guaranty,
indemnity, insurance or otherwise, shall affect in any manner the
unconditional obligation of the undersigned under this Guaranty, and the
Bank, in its sole discretion, without notice to the undersigned, may
release, exchange, enforce and otherwise deal with any security without
affecting in any manner the unconditional obligation of the undersigned
under this Guaranty. The undersigned acknowledge(s) and agree(s) that the
Bank has no obligation to acquire or perfect any lien on or security
interest in any asset(s), whether realty or personalty, to secure payment
of the Indebtedness, and the undersigned is (are) not relying upon any
asset(s) in which the Bank has or may have a lien or security interest for
payment of the Indebtedness.
5. OTHER GUARANTORS: If any Indebtedness is guaranteed by two or more
guarantors, the obligation of the undersigned shall be several and also
joint, each with all and also each with any one or more of the others, and
may be enforced at the option of the Bank against each severally, any two
or more jointly, or some severally and some jointly. The Bank, in its sole
discretion, may release any one or more of the guarantors for any
consideration which it deems adequate, and may fail or elect not to prove a
claim against the estate of any bankrupt, insolvent, incompetent or
deceased guarantor; and after that, without notice to any guarantor, the
Bank may extend or renew any or all Indebtedness and may permit the
Borrower to incur additional Indebtedness, without affecting in any manner
the unconditional obligation of the remaining guarantor(s). The undersigned
acknowledge(s) that the effectiveness of this Guaranty is not conditioned
on any or all of the indebtedness being guaranteed by anyone else.
6. TERMINATION: Any of the undersigned may terminate their obligation under
this Guaranty as to future Indebtedness (except as provided below) by (and
only by) delivering written notice of termination to an officer of the Bank
and receiving from an officer of the Bank written acknowledgement of
delivery; provided, however, the termination shall not be effective until
the opening of business on the fifth (5th) day ("effective date") following
written acknowledgement of delivery. Any termination shall not affect in
any way the unconditional obligations of the remaining guarantor(s),
whether or not the termination is known to the remaining guarantor(s). Any
termination shall not affect in any way the unconditional obligations of
the terminating guarantor(s) as to any Indebtedness existing at the
effective date of termination or any Indebtedness created after that
pursuant to any commitment or agreement of the Bank or pursuant to any
Borrower loan with the Bank existing at the effective date of termination
(whether advances or readvances by the Bank after the effective date of
termination are optional or obligatory), or any modifications, extensions
or renewals of any of this Indebtedness,
<PAGE> 2
whether in whole or in part, and as to all of this Indebtedness and
modifications, extensions or renewals of it, this Guaranty shall continue
effective until the same shall have been fully paid. The Bank has no duty to
give notice of termination by any guarantor(s) to any remaining guarantor(s).
The undersigned shall indemnify the Bank against all claims, damages, costs and
expenses, including, without limit, attorney fees, incurred by the Bank in
connection with any suit, claim or action against the Bank arising out of any
modification or termination of a Borrower loan or any refusal by the Bank to
extend additional credit in connection with the termination of this Guaranty.
7. REINSTATEMENT: Notwithstanding any prior revocation, termination, surrender
or discharge of this Guaranty (or of any lien, pledge or security interest
securing this Guaranty) in whole or in part, the effectiveness of this
Guaranty, and of all liens, pledges and security interests securing this
Guaranty, shall automatically continue or be reinstated in the event that
any payment received or credit given by the Bank in respect of the
Indebtedness is returned, disgorged or rescinded under any applicable state
or federal law, including, without limitation, laws pertaining to
bankruptcy or insolvency, in which case this Guaranty, and all liens,
pledges and security interests securing this Guaranty, shall be enforceable
against the undersigned as if the returned, disgorged or rescinded payment
or credit had not been received or given by the Bank, and whether or not
the Bank relied upon this payment or credit or changed its position as a
consequence of it. In the event of continuation or reinstatement of this
Guaranty and the liens, pledges and security interests securing it, the
undersigned agree(s) upon demand by the Bank, to execute and deliver to the
Bank those documents which the Bank determines are appropriate to further
evidence (in the public records or otherwise) this continuation or
reinstatement, although the failure of the undersigned to do so shall not
affect in any way the reinstatement or continuation. If the undersigned
(does) not execute and deliver to the Bank upon demand such documents, the
Bank and each Bank officer is irrevocably appointed (which appointment is
coupled with an interest) the true and lawful attorney of the undersigned
(with full power of substitution) to execute and deliver such documents in
the name and on behalf of the undersigned.
8. WAIVERS: The undersigned waive(s) any right to require the Bank to: (a)
proceed against any person or property; (b) give notice of the terms, time
and place of any public or private sale of personal property security held
from the Borrower or any other person, or otherwise comply with the
provisions of Section 9-504 of the Michigan or other applicable Uniform
Commercial Code; or (c) pursue any other remedy in the Bank's power. The
undersigned waive(s) notice of acceptance of this Guaranty and presentment,
demand, protest, notice of protest, dishonor, notice of dishonor, notice of
default, notice of intent to accelerate or demand payment of any
Indebtedness, any and all other notices to which the undersigned might
otherwise be entitled, and diligence in collecting any Indebtedness, and
agree(s) that the Bank may, once or any number of times, modify the terms
of any Indebtedness, compromise, extend, increase, accelerate, renew or
forbear to enforce payment of any or all Indebtedness, or permit the
Borrower to incur additional Indebtedness, all without notice to the
undersigned and without affecting in any manner the unconditional
obligation of the undersigned under this Guaranty.
The undersigned unconditionally and irrevocably waive(s) each and every
defense and set off of any nature which, under principles of guaranty or
otherwise, would operate to impair or diminish in any way the obligation
of the undersigned under this Guaranty, and acknowledge(s) that each such
waiver is by this reference incorporated into each security agreement,
collateral assignment, pledge and/or other document from the undersigned
now or later securing this Guaranty and/or the Indebtedness, and
acknowledge(s) that as of the date of this Guaranty no such defense or
set off exists.
9. WAIVER OF SUBROGATION: The undersigned waive(s) any and all rights (whether
by subrogation, indemnity, reimbursement, or otherwise) to recover from the
Borrower any amounts paid by the undersigned pursuant to this Guaranty
until the Indebtedness has been paid in full.
10. SALE/ASSIGNMENT: The undersigned acknowledge(s) that the Bank has the right
to sell, assign, transfer, negotiate, or grant participations in all or any
part of the Indebtedness and any related obligations, including, without
limit, this Guaranty, without notice to the undersigned and that the Bank
may disclose any documents and information which the Bank now has or later
acquires relating to the undersigned or to the Borrower in connection with
such sale, assignment, transfer, negotiation, or grant. The undersigned
agree(s) that the Bank may provide information relating to this Guaranty or
relating to the undersigned to the Bank's parent, affiliates, subsidiaries
and service providers.
11. GENERAL: This Guaranty constitutes the entire agreement of the undersigned
and the Bank with respect to the subject matter of this Guaranty. No
waiver, consent, modification or change of the terms of the Guaranty shall
bind any of the undersigned or the Bank unless in writing and signed by the
waiving party or an authorized officer of the waiving party, and then this
waiver, consent, modification or change shall be effective only in the
specific instance and for the specific purpose given. This Guaranty shall
inure to the benefit of the Bank and its successors and assigns and shall
be binding on the undersigned and the undersigned's heirs, legal
representatives, successors and assigns including, without limit, any
debtor in possession or trustee in bankruptcy for any of the undersigned.
The undersigned has (have) knowingly and voluntarily entered into this
Guaranty in good faith for the purpose of inducing the Bank to extend
credit or make other financial accommodations to the Borrower. If any
provision of this Guaranty is unenforceable in whole or in part for any
reason, the remaining provisions shall continue to be effective. THIS
GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF MICHIGAN, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES.
12. HEADINGS: Headings in this Agreement are included for the convenience of
reference only and shall not constitute a part of this Agreement for any
purpose.
13. ADDITIONAL PROVISIONS: None.
14. JURY TRIAL WAIVER: THE UNDERSIGNED AND BANK ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH
PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH
COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL
BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION
REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS
GUARANTY OR THE INDEBTEDNESS.
2
<PAGE> 3
IN WITNESS WHEREOF, Guarantor(s) has (have) signed and delivered this Guaranty
the day and year first written above.
WITNESSES (as to all signatures): GUARANTOR(S): PLASTRONICS, INC.
By:
- --------------------------------- -----------------------------
SIGNATURE OF
Its:
---------------------------
By:
- --------------------------------- -----------------------------
SIGNATURE OF
Its:
---------------------------
ENC CORP.
By:
-----------------------------
Its:
---------------------------
By:
-----------------------------
Its:
---------------------------
NEWCOR M-T-L, INC.
By:
-----------------------------
Its:
---------------------------
By:
-----------------------------
Its:
---------------------------
ROCHESTER GEAR, INC.
By:
-----------------------------
Its:
---------------------------
By:
-----------------------------
Its:
---------------------------
GUARANTOR'S ADDRESS:
1825 S. Woodward, Suite 240
Bloomfield Hills, Michigan 48302
3
<PAGE> 1
EXHIBIT 4.2.4
[COMERICA LOGO] GUARANTY
- --------------------------------------------------------------------------------
As of March 4, 1998, the undersigned, for value received, unconditionally and
absolutely guarantee(s) to Comerica Bank ("Bank"), a Michigan banking
corporation, payment when due, whether by stated maturity, demand, acceleration
or otherwise, of all existing and future indebtedness ("Indebtedness") to the
Bank of Newcor, Inc., a Delaware corporation ("Borrower"). Indebtedness includes
without limit any and all obligations or liabilities of the Borrower to the
Bank, whether absolute or contingent, direct or indirect, voluntary or
involuntary, liquidated or unliquidated, joint or several, known or unknown; any
and all indebtedness, obligations or liabilities for which Borrower would
otherwise be liable to the Bank were it not for the invalidity, irregularity or
unenforceability of them by reason of any bankruptcy, insolvency or other law or
order of any kind, or for any other reason; any and all amendments,
modifications, renewals and/or extensions of any of the above; and all costs of
collecting Indebtedness, including, without limit, attorney fees. Any reference
in this Guaranty to attorney fees shall be deemed a reference to reasonable
fees, charges, costs and expenses of both in-house and outside counsel and
paralegals, whether or not a suit or action is instituted, and to court costs if
a suit or action is instituted, and whether attorney fees or court costs are
incurred at the trial court level, on appeal, in a bankruptcy, administrative or
probate proceeding or otherwise. All costs shall be payable immediately by the
undersigned when incurred by the Bank, without demand, and until paid shall bear
interest a the highest per annum rate applicable to any of the Indebtedness, but
not in excess of the maximum rate permitted by law.
1. LIMITATION: The total obligation of the undersigned under this Guaranty is
UNLIMITED unless specifically limited in the Additional Provisions of this
Guaranty, and this obligation (whether unlimited or limited to the extent
specified in the Additional Provisions) shall include, IN ADDITION TO any
limited amount of principal guaranteed, all interest on that limited
amount, and all costs incurred by the Bank in collection efforts against
the Borrower and/or the undersigned or otherwise incurred by the Bank in
any way relating to the Indebtedness, or this Guaranty, including without
limit attorney fees. The undersigned agree(s) that (a) this limitation
shall not be a limitation on the amount of Borrower's Indebtedness to the
Bank; (b) any payments by the undersigned shall not reduce the maximum
liability of the undersigned under this Guaranty unless written notice to
that effect is actually received by the Bank at, or prior to, the time of
the payment; and (c) the liability of the undersigned to the Bank shall at
all times be deemed to be the aggregate liability of the undersigned under
this Guaranty and any other guaranties previously or subsequently given to
the Bank by the undersigned and not expressly revoked, modified or
invalidated in writing.
2. NATURE OF GUARANTY: This is a continuing Guaranty of payment and not of
collection and remains effective whether the Indebtedness is from time to
time reduced and later increased or entirely extinguished and later
reincurred. The undersigned deliver(s) this Guaranty based solely on the
undersigned's independent investigation of (or decision not to investigate)
the financial condition of Borrower and is (are) not relying on any
information furnished by the Bank. The undersigned assume(s) full
responsibility for obtaining any further information concerning the
Borrower's financial condition, the status of the Indebtedness or any other
matter which the undersigned may deem necessary or appropriate now or
later. The undersigned knowingly accept(s) the full range of risk
encompassed in this Guaranty, which risk includes, without limit, the
possibility that Borrower may incur Indebtedness to the Bank after the
financial condition of the Borrower, or the Borrower's ability to pay debts
as they mature, has deteriorated.
3. APPLICATION OF PAYMENTS: The undersigned authorize(s) the Bank, either
before or after termination of this Guaranty, without notice to or demand
on the undersigned and without affecting the undersigned's liability under
this Guaranty, from time to time to: (a) apply any security and direct the
order or manner of sale; and (b) apply payments received by the Bank from
the Borrower to any indebtedness of the Borrower to the Bank, in such order
as the Bank shall determine in its sole discretion, whether or not this
indebtedness is covered by this Guaranty, and the undersigned waive(s) any
provision of law regarding application of payments which specifies
otherwise. The undersigned agree(s) to provide to the Bank copies of the
undersigned's financial statements upon request.
4. SECURITY: The undersigned grant(s) to the Bank a security interest in and
the right of setoff as to any and all property of the undersigned now or
later in the possession of the Bank. The undersigned further assign(s) to
the Bank as collateral for the obligations of the undersigned under this
Guaranty all claims of any nature that the undersigned now or later has
(have) against the Borrower (other than any claim under a deed of trust or
mortgage covering California real property) with full right on the part of
the Bank, in its own name or in the name of the undersigned, to collect and
enforce these claims. The undersigned agree(s) that no security now or
later held by the Bank for the payment of any Indebtedness, whether from
the Borrower, any guarantor, or otherwise, and whether in the nature of a
security interest, pledge, lien, assignment, setoff, suretyship, guaranty,
indemnity, insurance or otherwise, shall affect in any manner the
unconditional obligation of the undersigned under this Guaranty, and the
Bank, in its sole discretion, without notice to the undersigned, may
release, exchange, enforce and otherwise deal with any security without
affecting in any manner the unconditional obligation of the undersigned
under this Guaranty. The undersigned acknowledge(s) and agree(s) that the
Bank has no obligation to acquire or perfect any lien on or security
interest in any asset(s), whether realty or personalty, to secure payment
of the Indebtedness, and the undersigned is (are) not relying upon any
asset(s) in which the Bank has or may have a lien or security interest for
payment of the Indebtedness.
5. OTHER GUARANTORS: If any Indebtedness is guaranteed by two or more
guarantors, the obligation of the undersigned shall be several and also
joint, each with all and also each with any one or more of the others, and
may be enforced at the option of the Bank against each severally, any two
or more jointly, or some severally and some jointly. The Bank, in its sole
discretion, may release any one or more of the guarantors for any
consideration which it deems adequate, and may fail or elect not to prove a
claim against the estate of any bankrupt, insolvent, incompetent or
deceased guarantor; and after that, without notice to any guarantor, the
Bank may extend or renew any or all Indebtedness and may permit the
Borrower to incur additional Indebtedness, without affecting in any manner
the unconditional obligation of the remaining guarantor(s). The undersigned
acknowledge(s) that the effectiveness of this Guaranty is not conditioned
on any or all of the indebtedness being guaranteed by anyone else.
6. TERMINATION: Any of the undersigned may terminate their obligation under
this Guaranty as to future Indebtedness (except as provided below) by (and
only by) delivering written notice of termination to an officer of the Bank
and receiving from an officer of the Bank written acknowledgement of
delivery; provided, however, the termination shall not be effective until
the opening of business on the fifth (5th) day ("effective date") following
written acknowledgement of delivery. Any termination shall not affect in
any way the unconditional obligations of the remaining guarantor(s),
whether or not the termination is known to the remaining guarantor(s). Any
termination shall not affect in any way the unconditional obligations of
the terminating guarantor(s) as to any Indebtedness existing at the
effective date of termination or any Indebtedness created after that
pursuant to any commitment or agreement of the Bank or pursuant to any
Borrower loan with the Bank existing at the effective date of termination
(whether advances or readvances by the Bank after the effective date of
termination are optional or obligatory), or any modifications, extensions
or renewals of any of this Indebtedness,
<PAGE> 2
whether in whole or in part, and as to all of this Indebtedness and
modifications, extensions or renewals of it, this Guaranty shall continue
effective until the same shall have been fully paid. The Bank has no duty
to give notice of termination by any guarantor(s) to any remaining
guarantor(s). The undersigned shall indemnify the Bank against all claims,
damages, costs and expenses, including, without limit, attorney fees,
incurred by the Bank in connection with any suit, claim or action against
the Bank arising out of any modification or termination of a Borrower loan
or any refusal by the Bank to extend additional credit in connection with
the termination of this Guaranty.
7. REINSTATEMENT: Notwithstanding any prior revocation, termination, surrender
or discharge of this Guaranty (or of any lien, pledge or security interest
securing this Guaranty) in whole or in part, the effectiveness of this
Guaranty, and of all liens, pledges and security interests securing this
Guaranty, shall automatically continue or be reinstated in the event that
any payment received or credit given by the Bank in respect of the
Indebtedness is returned, disgorged or rescinded under any applicable state
or federal law, including, without limitation, laws pertaining to
bankruptcy or insolvency, in which case this Guaranty, and all liens,
pledges and security interests securing this Guaranty, shall be enforceable
against the undersigned as if the returned, disgorged or rescinded payment
or credit had not been received or given by the Bank, and whether or not
the Bank relied upon this payment or credit or changed its position as a
consequence of it. In the event of continuation or reinstatement of this
Guaranty and the liens, pledges and security interests securing it, the
undersigned agree(s) upon demand by the Bank, to execute and deliver to the
Bank those documents which the Bank determines are appropriate to further
evidence (in the public records or otherwise) this continuation or
reinstatement, although the failure of the undersigned to do so shall not
affect in any way the reinstatement or continuation. If the undersigned
do(es) not execute and deliver to the Bank upon demand such documents, the
Bank and each Bank officer is irrevocably appointed (which appointment is
coupled with an interest) the true and lawful attorney of the undersigned
(with full power of substitution) to execute and deliver such documents in
the name and on behalf of the undersigned.
8. WAIVERS: The undersigned waive(s) any right to require the Bank to: (a)
proceed against any person or property; (b) give notice of the terms, time
and place of any public or private sale of personal property security held
from the Borrower or any other person, or otherwise comply with the
provisions of Section 9-504 of the Michigan or other applicable Uniform
Commercial Code; or (c) pursue any other remedy in the Bank's power. The
undersigned waive(s) notice of acceptance of this Guaranty and presentment,
demand, protest, notice of protest, dishonor, notice of dishonor, notice of
default, notice of intent to accelerate or demand payment of any
Indebtedness, any and all other notices to which the undersigned might
otherwise be entitled, and diligence in collecting any Indebtedness, and
agree(s) that the Bank may, once or any number of times, modify the terms
of any Indebtedness, compromise, extend, increase, accelerate, renew or
forbear to enforce payment of any or all Indebtedness, or permit the
Borrower to incur additional Indebtedness, all without notice to the
undersigned and without affecting in any manner the unconditional
obligation of the undersigned under this Guaranty.
The undersigned unconditionally and irrevocably waive(s) each and every
defense and setoff of any nature which, under principles of guaranty or
otherwise, would operate to impair or diminish in any way the obligation of
the undersigned under this Guaranty, and acknowledge(s) that each such
waiver is by this reference incorporated into each security agreement,
collateral assignment, pledge and/or other document from the undersigned
now or later securing this Guaranty and/or the Indebtedness, and
acknowledge(s) that as of the date of this Guaranty no such defense or
setoff exists.
9. WAIVER OF SUBROGATION: The undersigned waive(s) any and all rights (whether
by subrogation, indemnity, reimbursement, or otherwise) to recover from the
Borrower any amounts paid by the undersigned pursuant to this Guaranty
until the Indebtedness has been paid in full.
10. SALE/ASSIGNMENT: The undersigned acknowledge(s) that the Bank has the right
to sell, assign, transfer, negotiate, or grant participations in all or any
part of the Indebtedness and any related obligations, including, without
limit, this Guaranty, without notice to the undersigned and that the Bank
may disclose any documents and information which the Bank now has or later
acquires relating to the undersigned or to the Borrower in connection with
such sale, assignment, transfer, negotiation, or grant. The undersigned
agree(s) that the Bank may provide information relating to this Guaranty or
relating to the undersigned to the Bank's parent, affiliates, subsidiaries
and service providers.
11. GENERAL: This Guaranty constitutes the entire agreement of the undersigned
and the Bank with respect to the subject matter of this Guaranty. No
waiver, consent, modification or change of the terms of the Guaranty shall
bind any of the undersigned or the Bank unless in writing and signed by the
waiving party or an authorized officer of the waiving party, and then this
waiver, consent, modification or change shall be effective only in the
specific instance and for the specific purpose given. This Guaranty shall
inure to the benefit of the Bank and its successors and assigns and shall
be binding on the undersigned and the undersigned's heirs, legal
representatives, successors and assigns including, without limit, any
debtor in possession or trustee in bankruptcy for any of the undersigned.
The undersigned has (have) knowingly and voluntarily entered into this
Guaranty in good faith for the purpose of inducing the Bank to extend
credit or make other financial accommodations to the Borrower. If any
provision of this Guaranty is unenforceable in whole or in part for any
reason, the remaining provisions shall continue to be effective. THIS
GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF MICHIGAN, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES.
12. HEADINGS: Headings in this Agreement are included for the convenience of
reference only and shall not constitute a part of this Agreement for any
purpose.
13. ADDITIONAL PROVISIONS: None.
14. JURY TRIAL WAIVER: THE UNDERSIGNED AND BANK ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH
PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH
COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL
BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION
REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS
GUARANTY OR THE INDEBTEDNESS.
2
<PAGE> 3
IN WITNESS WHEREOF, Guarantor(s) has (have) signed and delivered this Guaranty
the day and year first written above.
GUARANTOR(S): GRAND MACHINING COMPANY
WITNESSES (as to all signatures):
_________________________________ By:___________________________________
SIGNATURE OF
Its:_____________________________________
_________________________________ By:___________________________________
SIGNATURE OF
Its:_____________________________________
_________________________________
DECO TECHNOLOGIES, INC.
_________________________________
By:______________________________________
_________________________________
Its:___________________________________
_________________________________
By:______________________________________
_________________________________
Its:___________________________________
DECO INTERNATIONAL, INC.
_________________________________
By:______________________________________
_________________________________
Its:___________________________________
_________________________________
By:______________________________________
Its:___________________________________
TURN-MATIC, INC.
By:______________________________________
Its:___________________________________
3
<PAGE> 4
By:______________________________________
__________________________________
Its:
GUARANTOR'S ADDRESS:
__________________________________
1825 S. Woodward, Suite 240
Bloomfield Hills, Michigan 48302
4
<PAGE> 1
EXHIBIT 5.1
[MILLER, CANFIELD, PADDOCK AND STONE, P.L.C. LETTERHEAD]
April 30, 1998
Newcor, Inc.ND
1825 South Woodward
Suite 240
Bloomfield Hills, Michigan 48302
Gentlemen:
This opinion relates to the registration statement on Form S-4 (the
"Registration Statement") being filed today by Newcor, Inc., a Delaware
corporation (the "Issuer"), and certain of its subsidiaries which are
"Subsidiary Guarantors" (as defined in the Registration Statement) with the
Securities and Exchange Commission (the "Commission") for the purpose of
registering under the Securities Act of 1933, as amended (the "Act"): (a)
$125,000,000 principal amount of the Issuer's 9 7/8% Series B Senior
Subordinated Notes due 2008 (the "Exchange Notes"); and (b) the Subsidiary
Guarantors' guarantees of the Exchange Notes (the "Subsidiary Guarantees"). The
Exchange Notes are to be issued in exchange for the Issuer's outstanding 9 7/8%
Senior Subordinated Notes due 2008 (the "Notes") pursuant to the Exchange
Offer described in the Registration Statement. As your counsel, we have
examined such certificates, instruments, and documents and reviewed such
questions of law as we have considered necessary or appropriate for the
purposes of this opinion, and, on the basis of such examination and review, we
advise you that, in our opinion:
1. The Exchange Notes have been duly authorized by all necessary corporate
action on the part of the Issuer, and the Subsidiary Guarantees have been
duly authorized by all necessary corporate action on the part of the
Subsidiary Guarantors.
2. When the Registration Statement has become effective and the Exchange
Notes have been issued in exchange for the Notes pursuant to the Exchange
Offer, the Exchange Notes will be legally issued and will be binding
obligations of the Issuer, and the Subsidiary Guarantees will be
<PAGE> 2
[MILLER, CANFIELD, PADDOCK AND STONE, P.L.C. LETTERHEAD]
-2-
legally issued and will be binding obligations of the Subsidiary
Guarantors.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the prospectus forming a part of the Registration Statement. In
giving this consent, we do not thereby admit that we are within the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission.
Very truly yours,
Miller, Canfield, Paddock and Stone, P.L.C.
<PAGE> 1
EXHIBIT 12.1
NEWCOR, INC. AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended October 31, Three Months Ended January 31,
-------------------------------------------------------------------- ------------------------------
Pro Forma Pro Forma
Income (loss): 1993 1994 1995 1996 1997 1997 1997 1998 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before
income taxes $ 146 $ (1,587) $ 3,621 $ 5,172 $ 6,009 $ 7,284 $ 564 $ (1,614) $ (1,536)
Fixed charges 692 1,228 1,621 2,073 2,513 14,841 506 989 3,729
----- -------- -------- -------- -------- -------- ------ -------- --------
Income (loss) before
fixed charges $ 838 $ (359) $ 5,242 $ 7,245 $ 8,522 $ 22,125 $1,070 $ (625) $ 2,193
===== ======== ======== ======== ======== ======== ====== ======== ========
Fixed Charges:
Interest $ 575 $ 1,111 $ 1,504 $ 1,787 $ 2,070 $ 13,877 $ 432 $ 825 $ 3,451
Portion of rental
expense 117 117 117 286 443 964 74 164 278
----- -------- -------- -------- -------- -------- ------ -------- --------
Fixed charges $ 692 $ 1,228 $ 1,621 $ 2,073 $ 2,513 $ 14,841 $ 506 $ 989 $ 3,729
===== ======== ======== ======== ======== ======== ====== ======== ========
Ratios of earnings to
fixed charges 1.2 --(1) 3.2 3.5 3.4 1.5 2.1 --(2) --(3)
</TABLE>
(1) The Company's earnings were insufficient to cover fixed charges by $1.6
million for the fiscal year ended October 31, 1994.
(2) The Company's earnings were insufficient to cover fixed charges by $1.6
million for the three months ended January 31, 1998.
(3) On a pro forma basis, earnings were insufficient to cover fixed charges
by $1.5 million for the three months ended January 31, 1998.
<PAGE> 1
EXHIBIT 21
NEWCOR, INC.
Exhibit 21 to Report on Form S-4
List of Subsidiaries of the Registrant
<TABLE>
<CAPTION>
Jurisdiction Percentage of
of Outstanding Securities
Name of Subsidiary Incorporation Owned by Parent
<S> <C> <C>
ENC Corp. Michigan 100%
Newcor Foreign Sales Corporation Michigan 100%
Newcor M-T-L, Inc. Michigan 100%
Plastronics Plus, Inc. Wisconsin 100%
Rochester Gear, Inc. Michigan 100%
Deco International, Inc. Michigan 100%
Deco Technologies, Inc. Michigan 100%
Grand Machining Company Michigan 100%
Turn-Matic, Inc. Michigan 100%
</TABLE>
<PAGE> 1
EX-23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-4 (File No.
33-XXXXX) of our reports for the dates and periods indicated in such reports on
our audits of the financial statements of Newcor, Inc., Machine Tool & Gear,
Inc., The Deco Group, and Turn-Matic, Inc. appearing on pages F-2, F-22, F-30
and F-39, respectively, in such Registration Statement. We also consent to the
reference of our Firm under the caption "Experts."
Detroit, Michigan
April 29, 1998
<PAGE> 1
EXHIBIT 25.1
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER
THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of
a Trustee Pursuant to Section 305(b)(2)___
--------------------------------------------------------
U.S. BANK TRUST NATIONAL ASSOCIATION
F/K/A FIRST TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
<TABLE>
<S><C>
111 E. WACKER DRIVE, SUITE 3000
CHICAGO, ILLINOIS 60601 36-4046888
(Address of principal executive offices) (Zip Code) I.R.S. Employer Identification No.
</TABLE>
James D. Khami
535 Griswold, Suite 740
Detroit, Michigan 48226
Telephone (313) 234-4713
(Name, address and telephone number of agent for service)
NEWCOR, INCORPORATED
(Exact name of obligor as specified in its charter)
<TABLE>
<S><C>
DELAWARE 38-0865770
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
MICHIGAN ROCHESTER GEAR, INC. 38-2379349
WISCONSIN PLASTRONICS PLUS, INC. 39-1513019
MICHIGAN GRAND MACHINING COMPANY 38-1447019
MICHIGAN DECO TECHNOLOGIES, INC. 38-3111177
MICHIGAN DECO INTERNATIONAL, INC. 38-3188128
MICHIGAN TURN-MATIC, INC. 38-1876306
(Exact name of each guarantor as specified in its charter)
1825 SOUTH WOODWARD AVE. SUITE 240
BLOOMFIELD HILLS, MICHIGAN 48302
(Address of Principal Executive Offices) (Zip Code)
9 7/8% SENIOR EXCHANGE NOTES DUE 2008
(Title of the Indenture Securities)
==============================================================================
<PAGE> 2
FORM T-1
ITEM 1. GENERAL INFORMATION. Furnish the following information as to the
Trustee.
a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Washington, D.C.
b) Whether it is authorized to exercise corporate trust powers.
Yes
ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
Trustee, describe each such affiliation.
None
ITEMS 3-15 Not applicable because, to the best of Trustee's knowledge, the
Trustee is not a trustee under any other indenture under which any
other securities or certificates of interest or participation in
any other securities of the obligor are outstanding and there is
not, nor has there been, a default with respect to securities
issued under this indenture.
ITEM 16. LIST OF EXHIBITS: List below all exhibits filed as a part of
this statement of eligibility and qualification.
1. A copy of the Articles of Association of the Trustee now in
effect, filed herewith.
2. A copy of the certificate of authority of the Trustee to commence
business, incorporated herein by reference to Exhibit 2 to Item 16
of Form T-1, Registration No. 33-64175.*
3. A copy of the certificate of authority of the Trustee to exercise
corporate trust powers, incorporated herein by reference to
Exhibit 3 to Item 16 of Form T-1, Registration No. 33-64175.*
4. A copy of the existing bylaws of the Trustee, as now in effect,
filed herewith.
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Trust
Indenture Act of 1939, incorporated herein by reference to Exhibit
6 of Form T-1, Registration No. 33-64175.*.
7. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority, filed herewith.
8. Not applicable.
9. Not applicable.
2
<PAGE> 3
* Exhibits thus designated are incorporated herein by reference to Exhibits
bearing identical numbers in Item 16 of the Form T-1 filed by the Trustee
with the Securities and Exchange Commission with the specific references
noted.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, U.S. BANK TRUST NATIONAL ASSOCIATION, F/K/A FIRST
TRUST NATIONAL ASSOCIATION, a national banking association organized and
existing under the laws of the United States of America, has duly caused
this statement of eligibility and qualification to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Detroit, State of Michigan on the 17th day of April, 1998.
U.S. BANK TRUST NATIONAL ASSOCIATION
f/k/a FIRST TRUST NATIONAL ASSOCIATION
By: /s/ James D. Khami
------------------------------------
James D. Khami
Vice President and Assistant
Secretary
3
<PAGE> 4
EXHIBIT 1
U.S. BANK TRUST NATIONAL ASSOCIATION
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
For the purpose of organizing an association to perform any lawful
activities of national banks, the undersigned do enter into the following
Amended and Restated Articles of Association:
FIRST. The title of this Association shall be "U.S. Bank Trust National
Association."
SECOND. The main office of this Association shall be in the City of
Chicago, County of Cook and State of Illinois. The business of this
Association will be limited to that of a national trust bank, and to support
activities incidental thereto. This Association will not amend these Articles
of Association to expand the scope of or alter its business beyond that stated
in this Article Second without the prior approval of the Comptroller of the
Currency. Prior to the transfer of any stock of the Association, the
Association will seek the prior approval of the appropriate federal depository
institution regulatory agency.
THIRD. The board of directors of the Association shall consist of not less
than five nor more than 25 persons, the exact number to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of a majority of the shareholders at any annual or special
meeting thereof. Each director shall own common or preferred stock of this
Association with an aggregate par, fair market, or equity value of not less
than $1,000.00, as of either (i) the date of purchase, (ii) the date the person
became a director, whichever is more recent. Any combination of common or
preferred stock of this Association or U.S. Bancorp may be used.
Any vacancy in the board of directors may be filled by action of a
majority of the remaining directors between meetings of shareholders. The
board of directors may not increase the number of directors between meetings of
shareholders to a number that (1) exceeds by more than two the number of
directors last elected by shareholders where the number was fifteen or less;
and (2) exceeds by more than four the number of directors last elected by
shareholders where the number was sixteen or more, but in no event shall the
number of directors exceed twenty-five.
- 1 -
<PAGE> 5
Terms of directors, including directors selected to fill vacancies, shall
expire at the next regular meeting of shareholders at which directors are
elected, unless the directors resign or are removed from office.
Despite the expiration of a director's term, the director shall continue
to serve until his or her successor is elected and qualifies or until there is
a decrease in the number of directors and his or her position is eliminated.
Honorary or advisory members of the board of directors, without voting
power or power of final decision in matters concerning the business of this
Association, may be appointed by resolution of a majority of the full board of
directors, or by resolution of shareholders at any annual or special meeting.
Honorary or advisory directors shall not be counted for purposes of determining
the number of directors of this Association or the presence of a quorum in
connection with any board action, and shall not be required to own qualifying
shares.
FOURTH. There shall be an annual meeting of the shareholders to elect
directors and transact whatever other business may be brought before the
meeting. It shall be held at the main office or any other convenient place the
board of directors may designate, on the day of each year specified therefore
in the bylaws, or if that day falls on a legal holiday in the State in which
this Association is located, on the next following banking day. If no election
is held on the day fixed, or in event of a legal holiday, an election may be
held on any subsequent day within sixty days of the day fixed, to be designated
by the board of directors, or, if the directors fail to fix the day, by
shareholders representing two-thirds of the shares issued and outstanding. In
all cases at least ten-days advance notice of the meeting shall be given to the
shareholders by first class mail.
A director may resign at any time by delivering written or oral notice to
the board of directors, its chairperson, or to this Association, which
resignation shall be effective when the notice is delivered unless the notice
specifies a later effective date.
A director may be removed by shareholders at a meeting called to remove
him or her, when notice of the meeting stating that the purpose or one of the
purposes is to remove him or her is provided, if there is a failure to fulfill
one of the affirmative requirements for qualification, or for cause; provided,
however, that a director may not be removed if the number of votes sufficient
to elect him or her under cumulative voting is voted against his or her
removal.
FIFTH. The authorized amount of capital stock of this Association shall
be 10,000 shares of common stock of the par value of one-hundred dollars
($100.00) each; but said capital stock may be increased or decreased from time
to time, according to the provisions of the laws of the United States.
- 2 -
<PAGE> 6
No holder of shares of the capital stock of any class of this Association
shall have any preemptive or preferential right of subscription to any shares
of any class of stock of this Association, whether now or hereafter authorized,
or to any obligations convertible into stock of this Association, issued, or
sold, nor any right of subscription to any thereof other than such, if any, as
the board of directors, in its discretion may from time to time determine and
at such price as the board of directors may from time to time fix.
Unless otherwise specified in these Articles of Association or required by
law, (1) all matters requiring shareholder action, including amendments to the
articles of Association must be approved by shareholders owning a majority
voting interest in the outstanding voting stock, and (2) each shareholder shall
be entitled to one vote per share.
Unless otherwise provided in the bylaws, the record date for determining
shareholders entitled to notice of and to vote at any meeting is the close of
business on the day before the first notice is mailed or otherwise sent to the
shareholders, provided that in no event may a record date be more than seventy
days before the meeting.
SIXTH. The board of directors shall appoint one of its members president
of this Association and one of its members chairperson of the board. The board
of directors shall also have the power to appoint one or more vice presidents,
a secretary who shall keep minutes of the directors' and shareholders' meetings
and be responsible for authenticating the records of this Association, and such
other officers and employees as may be required to transact the business of
this Association. A duly appointed officer may appoint one or more officers or
assistant officers if authorized by the board of directors in accordance with
the bylaws.
The board of directors shall have the power to:
(1) Define the duties of the officers,
employees, and agents of this Association.
(2) Delegate the performance of its duties,
but not the responsibility for its duties, to the
officers, employees, and agents of this Association.
(3) Fix the compensation and enter into
employment contracts with its officers and employees
upon reasonable terms and conditions, consistent with
applicable law.
(4) Dismiss officers and employees.
- 3 -
<PAGE> 7
(5) Require bonds from officers and employees
and to fix the penalty thereof.
(6) Ratify written policies authorized by this
Association's management or committees of the board.
(7) Regulate the manner in which any increase
or decrease of the capital of this Association shall be
made; provided, however, that nothing herein shall
restrict the power of shareholders to increase or
decrease the capital of this Association in accordance
with law, and nothing shall raise or lower from
two-thirds the percentage required for shareholder
approval to increase or reduce the capital.
(8) Manage and administer the business and
affairs of this Association.
(9) Adopt bylaws, not inconsistent with law or
these Articles of Association, for managing the
business and regulating the affairs of this
Association.
(10) Amend or repeal bylaws, except to the
extent that the articles of Association reserve this
power in whole or in part to shareholders.
(11) Make contracts.
(12) Generally to perform all acts that are
legal for a board of directors to perform.
SEVENTH. The board of directors shall have the power to change the
location of the main office to any other place within the limits of the City of
Chicago without the approval of the shareholders, and shall have the power to
establish or change the location of any branch or branches of this Association
to any other location permitted under applicable law, without the approval of
the shareholders, subject to approval by the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated according to the laws of the United States.
- 4 -
<PAGE> 8
NINTH. The board of directors of this Association, or any three (3) or
more shareholders owning, in the aggregate, not less than twenty-five percent
(25%) of the stock of this Association, may call a special meeting of
shareholders at any time. Unless otherwise provided by the bylaws or the laws
of the United States, or waived by shareholders, a notice of the time, place,
and purpose of every annual and special meeting of the shareholders shall be
given by first-class mail, postage prepaid, mailed at least ten, and no more
than sixty, days prior to the date of the meeting to each shareholder of record
at his/her address as shown upon the books of this Association. Unless
otherwise provided by these Articles of Association or the bylaws, any action
requiring approval of shareholders must be effected at a duly called annual or
special meeting.
TENTH. Any action required to be taken at a meeting of the shareholders
or directors or any action that may be taken at a meeting of the shareholders
or directors may be taken without a meeting if consent in writing, setting
forth the action as taken shall be signed by all the shareholders or directors
entitled to vote with respect to the matter thereof. Such action shall be
effective on the date on which the last signature is placed on the writing, or
such earlier date as is set forth therein.
ELEVENTH. Meetings of the board of directors or shareholders, regular or
special, may be held by means of conference telephone or similar communication
equipment by means of which all persons participating in the meeting can
simultaneously hear each other, and participation in such meeting by such
aforementioned means shall constitute presence in person at such meeting.
TWELFTH. (a) 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 (other than any action
by or in the right of the Association) by reason of the fact that he is or was
a director, officer, employee or agent of the Association, or is or was serving
at the request of the Association as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall be indemnified by the Association, unless similar indemnification is
provided by such other corporation, partnership, joint venture, trust or other
enterprise (any funds received by any person as a result of the provisions of
this Article being deemed an advance against his receipt of any such other
indemnification from any such other corporation, partnership, joint venture,
trust or other enterprise), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interest of the Association, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction
- 5 -
<PAGE> 9
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person seeking indemnification did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interest of the Association, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) Any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the Association to procure a judgment in its favor by reason of the fact that
such person is or was a director, officer, employee or agent of the
Association, or is or was serving at the request of the Association as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other corporation, partnership, joint venture, trust or other
enterprise shall be indemnified by the Association, unless similar
indemnification is provided by such other corporation, partnership, joint
venture, trust or other enterprise (any funds received by any person as a
result of the provisions of this Article being deemed an advance against his
receipt of any such other indemnification from any such other corporation,
partnership, joint venture, trust or other enterprise), against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Association and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Association unless and only to the
extent that the Court of Chancery of the State of Delaware or the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all of the circumstances
of the case, such person is fairly and reasonably entitled to indemnify for
such expenses which the Court of Chancery or such other court shall deem
proper.
(c) To the extent that a director, officer, employee or agent of the
Association has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in defense
of any claim, issue or matter therein, such person shall be indemnified by the
Association against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(d) Except as set forth in paragraph (c) of this Article, any
indemnification under paragraphs (a) and (b) of this Article (unless ordered by
the court), shall be made by the Association 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 such person has met
the applicable standard of conduct set forth in paragraphs (a) and (b) of this
Article. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding,
- 6 -
<PAGE> 10
even though less than a quorum, or (2) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion, or
(3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Association in advance of the
final disposition of such action, suit or proceeding upon receipt of any
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Association. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by this
Article shall not be deemed exclusive of any other rights to which those
seeking indemnification or seeking advancement of expenses may be entitled
under any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in
another capacity while holding such office.
(g) By action of the Board of Directors, notwithstanding any interest of
the directors in the action, the Association may purchase and maintain
insurance, in such amounts as the Board of Directors deems appropriate, on
behalf of any person who is or was a director, officer, employee or agent of
the Association, or is or was serving at the request of the Association as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Association shall have the power to indemnify him against
such liability under the provisions of this Article.
(h) For purpose of this Article, references to "the Association" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under this Article with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; reference to "fines" shall include any excise
taxes assessed on a
- 7 -
<PAGE> 11
person with respect to an employee benefit plan; and references to "serving at
the request of the Association" shall include any service as a director,
officer, employee or agent of the Association which imposes duties on, or
involves services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
Association" as referred to in this Article.
(j) The indemnification and advancement of expenses hereby provided shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
THIRTEENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. This Association's board of directors may
propose one or more amendments to these Articles of Association for submission
to the shareholders.
- 8 -
<PAGE> 12
EXHIBIT 4
U.S. BANK TRUST NATIONAL ASSOCIATION
BYLAWS
AS LAST AMENDED ON MARCH 30, 1998
ARTICLE I
Meetings of Shareholders
Section 1.1. Annual Meeting. The annual meeting of the shareholders, for
the election of directors and the transaction of other business, shall be held
at a time and place as the Chairman or President may designate. Notice of such
meeting shall be given at least ten days prior to the date thereof, to each
shareholder of the Association. If, for any reason, an election of directors is
not made on the designated day, the election shall be held on some subsequent
day, as soon thereafter as practicable, with prior notice thereof.
Section 1.2. Special Meetings. Except as otherwise specially provided by
law, special meetings of the shareholders may be called for any purpose, at any
time by a majority of the board of directors, or by any shareholder or group of
shareholders owning at least ten percent of the outstanding stock. Every such
special meeting, unless otherwise provided by law, shall be called upon not
less than ten days prior notice stating the purpose of the meeting.
Section 1.3. Nominations for Directors. Nominations for election to the
board of directors may be made by the board of directors or by any shareholder.
Section 1.4. Proxies. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing. Proxies shall be valid only
for one meeting and any adjournments of such meeting and shall be filed with
the records of the meeting.
Section 1.5. Quorum. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law. A majority of the votes cast
shall decide every question or matter submitted to the shareholders at any
meeting, unless otherwise provided by law or by the Articles of Association.
ARTICLE II
Directors
Section 2.1. Board of Directors. The board of directors (hereinafter
referred to as the "board"), shall have power to manage and administer the
business and affairs of the Association. All authorized corporate powers of
the Association shall be vested in and may be exercised by the board.
Section 2.2. Powers. In addition to the foregoing, the board of directors
shall have and may exercise all of the powers granted to or conferred upon it
by the Articles of Association, the Bylaws and by law.
- 1 -
<PAGE> 13
Section 2.3. Number. The board shall consist of a number of members to be
fixed and determined from time to time by resolution of the board or the
shareholders at any meeting thereof, in accordance with the Articles of
Association.
Section 2.4. Organization Meeting. The newly elected board shall meet for
the purpose of organizing the new board and electing and appointing such
officers of the Association as may be appropriate. Such meeting shall be held
on the day of the election or as soon thereafter as practicable, and, in any
event, within thirty days thereafter. If, at the time fixed for such meeting,
there shall not be a quorum present, the directors present may adjourn the
meeting until a quorum is obtained.
Section 2.5. Regular Meetings. The regular meetings of the board shall be
held, without notice, as the Chairman or President may designate and deem
suitable.
Section 2.6. Special Meetings. Special meetings of the board may be
called by the Chairman or the President of the Association, or at the request
of two or more directors. Each member of the board shall be given notice
stating the time and place of each such meeting.
Section 2.7. Quorum. A majority of the directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but fewer may
adjourn any meeting. Unless otherwise provided, once a quorum is established,
any act by a majority of those constituting the quorum shall be the act of the
board.
Section 2.8. Vacancies. When any vacancy occurs among the directors, the
remaining members of the board may appoint a director to fill such vacancy at
any regular meeting of the board, or at a special meeting called for that
purpose.
ARTICLE III
Committees
Section 3.1. Advisory Board of Directors. The board may appoint persons,
who need not be directors, to serve as advisory directors on an advisory board
of directors established with respect to the business affairs of either this
Association alone or the business affairs of a group of affiliated
organizations of which this Association is one. Advisory directors shall have
such powers and duties as may be determined by the board, provided, that the
board's responsibility for the business and affairs of this Association shall
in no respect be delegated or diminished.
Section 3.2. Audit Committee. The board shall appoint an Audit Committee
which shall consist of at least two Directors of the Association or of an
affiliate of the Association. If legally permissible, the board may determine
to name itself as the Audit Committee. The Audit Committee shall direct and
review audits of the Association's fiduciary activities.
The members of the Audit Committee shall be appointed each year and shall
continue to act until their successors are named. The Audit Committee shall
have power to adopt its own rules and procedures and to do those things which
in the judgment of such Committee are
- 2 -
<PAGE> 14
necessary or helpful with respect to the exercise of its functions or the
satisfaction of its responsibilities.
Section 3.3. Executive Committee. The board may appoint an Executive
Committee which shall consist of at least three directors and which shall have,
and may exercise, all the powers of the board between meetings of the board or
otherwise when the board is not meeting.
Section 3.4. Other Committees. The board may appoint, from time to time,
committees of one or more persons who need not be directors, for such purposes
and with such powers as the board may determine. In addition, either the
Chairman or the President may appoint, from time to time, committees of one or
more officers, employees, agents or other persons, for such purposes and with
such powers as either the Chairman or the President deems appropriate and
proper.
Whether appointed by the board, the Chairman, or the President, any such
Committee shall at all times be subject to the direction and control of the
board.
Section 3.5. Meeting Minutes and Rules. An advisory board of directors
and/or committee shall meet as necessary in consideration of the purpose of the
advisory board of directors or committee, and shall maintain minutes in
sufficient detail to indicate actions taken or recommendations made; unless
required by the members, discussions, votes or other specific details need not
be reported. An advisory board of directors or a committee may, in
consideration of its purpose, adopt its own rules for the exercise of any of
its functions or authority.
ARTICLE IV
Officers and Employees
Section 4.1. Chairman of the Board. The board may appoint one of its
members to be Chairman of the board to serve at the pleasure of the board. The
Chairman shall supervise the carrying out of the policies adopted or approved
by the board; shall have general executive powers, as well as the specific
powers conferred by these Bylaws; shall also have and may exercise such powers
and duties as from time to time may be conferred upon or assigned by the board.
Section 4.2. President. The board may appoint one of its members to be
President of the Association. In the absence of the Chairman, the President
shall preside at any meeting of the board. The President shall have general
executive powers, and shall have and may exercise any and all other powers and
duties pertaining by law, regulation or practice, to the Office of President,
or imposed by these Bylaws. The President shall also have and may exercise
such powers and duties as from time to time may be conferred or assigned by the
board.
Section 4.3. Vice President. The board may appoint one or more Vice
Presidents who shall have such powers and duties as may be assigned by the
board and to perform the duties of the President on those occasions when the
President is absent, including presiding at any meeting of the board in the
absence of both the Chairman and President.
- 3 -
<PAGE> 15
Section 4.4. Secretary. The board shall appoint a Secretary, or other
designated officer who shall be Secretary of the board and of the Association,
and shall keep accurate minutes of all meetings. The Secretary shall attend to
the giving of all notices required by these Bylaws to be given; shall be
custodian of the corporate seal, records, document and papers of the
Association; shall provide for the keeping of proper records of all transactions
of the Association; shall have and may exercise any and all other powers and
duties pertaining by law, regulation or practice, to the Secretary, or imposed
by these Bylaws; and shall also perform such other duties as may be assigned
from time to time by the board.
Section 4.5. Other Officers. The board may appoint, and may authorize the
Chairman or the President to appoint, any officer as from time to time may
appear to the board, the Chairman or the President to be required or desirable
to transact the business of the Association. Such officers shall exercise such
powers and perform such duties as pertain to their several offices, or as may
be conferred upon or assigned to them by these Bylaws, the board, the Chairman
or the President.
Section 4.6. Tenure of Office. The Chairman or the President and all
other officers shall hold office for the current year for which the board was
elected, unless they shall resign, become disqualified, or be removed. Any
vacancy occurring in the Office of Chairman or President shall be filled
promptly by the board.
Any officer elected by the board or appointed by the Chairman or the
President may be removed at any time, with or without cause, by the affirmative
vote of a majority of the board or, if such officer was appointed by the
Chairman or the President, by the Chairman or the President, respectively.
ARTICLE V
Stock
Section 5.1. Shares of stock shall be transferable on the books of the
Association, and a transfer book shall be kept in which all transfers of stock
shall be recorded. Every person becoming a shareholder by such transfer shall,
in proportion to such person's shares, succeed to all rights of the prior
holder of such shares. Each certificate of stock shall recite on its face that
the stock represented thereby is transferable only upon the books of the
Association properly endorsed.
ARTICLE VI
Corporate Seal
Section 6.1. The Association shall have no corporate seal; provided,
however, that if the use of a seal is required by, or is otherwise convenient
or advisable pursuant to, the laws or regulations of any jurisdiction, the
following seal may be used, and the Chairman, the President, the Secretary and
any Assistant Secretary shall have the authority to affix such seal:
- 4 -
<PAGE> 16
ARTICLE VII
Miscellaneous Provisions
Section 7.1. Execution of Instruments. All agreements, checks, drafts,
orders, indentures, notes, mortgages, deeds, conveyances, transfers,
endorsements, assignments, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, guarantees, proxies and other instruments or
documents may be signed, countersigned, executed, acknowledged, endorsed,
verified, delivered or accepted on behalf of the Association, whether in a
fiduciary capacity or otherwise, by any officer of the Association, or such
employee or agent as may be designated from time to time by the board by
resolution, or by the Chairman or the President by written instrument, which
resolution or instrument shall be certified as in effect by the Secretary or an
Assistant Secretary of the Association. The provisions of this section are
supplementary to any other provision of the Articles of Association or Bylaws.
Section 7.2. Records. The Articles of Association, the Bylaws and the
proceedings of all meetings of the shareholders, the board, and standing
committees of the board, shall be recorded in appropriate minute books provided
for the purpose. The minutes or each meeting shall be signed by the Secretary,
or other officer appointed to act as Secretary of the meeting.
Section 7.3. Trust Files. There shall be maintained in the Association
files all fiduciary records necessary to assure that its fiduciary
responsibilities have been properly undertaken and discharged.
Section 7.4. Trust Investments. Funds held in a fiduciary capacity shall
be invested according to the instrument establishing the fiduciary relationship
and according to law. Where such instrument does not specify the character and
class of investments to be made and does not vest in the Association a
discretion in the matter, funds held pursuant to such instrument shall be
invested in investments in which corporate fiduciaries may invest under law.
Section 7.5. Notice. Whenever notice is required by the Articles of
Association, the Bylaws or law, such notice shall be by mail, postage prepaid,
telegram, in person, or by any other means by which such notice can reasonably
be expected to be received, using the address of the person to receive such
notice, or such other personal data, as may appear on the records of the
Association. Prior notice shall be proper if given not more than 30 days nor
less than 10 days prior to the event for which notice is given.
ARTICLE VIII
Indemnification
Section 8.1. The Association shall indemnify to the full extent permitted
by, and in the manner permissible under, the Articles of Association and the
laws of the United States of America, as applicable and as amended from time to
time, any person made, or threatened to be made, a party to any action, suit or
proceeding, whether criminal, civil, administrative or investigative, by reason
of the fact that such person is or was a director, advisory director, officer
- 5 -
<PAGE> 17
or employee of the Association, or any predecessor of the Association, or
served any other enterprise as a director or officer at the request of the
Association or any predecessor of the Association.
Section 8.2. The board in its discretion may, on behalf of the
Association, indemnify any person, other than a director, advisory director,
officer or employee, made a party to any action, suit or proceeding by reason
of the fact that such person is or was an agent of the Association or any
predecessor of the Association serving in such capacity at the request of the
Association or any predecessor of the Association.
ARTICLE IX
Interpretation and Amendment
Section 9.1. These Bylaws shall be interpreted in accordance with and
subject to appropriate provisions of law, and may be amended, altered or
repealed, at any regular or special meeting of the board.
Section 9.2. A copy of the Bylaws, with all amendments, shall at all
times be kept in a convenient place at the main office of the Association, and
shall be open for inspection to all shareholders during Association hours.
- 6 -
<PAGE> 18
EXHIBIT 7
<TABLE>
<S><C>
First Trust National Association Call Date: 12/31/97 ST-BK: 17-1638 FFIEC 003
400 North Michigan Avenue Page RC- 1
Chicago, IL 60611 Vendor ID: D CERT: 34094
Transit Number: 09600069 9
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.
SCHEDULE RC - BALANCE SHEET
C200 <-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): RCON
a. Noninterest-bearing balances and currency and coin (1)_________________________ 0081. . 55,536 1.a
b. Interest-bearing balances (2)__________________________________________________ 0071. . 0 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)_____________________ 1754. . 0 2.a
b. Available-for-sale securities (from Schedule RC-B, column D)___________________ 1773. . 3,216 2.b
3. Federal funds sold and securities purchased under agreements to resell____________ 1350. . 0 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income RCON
(from Schedule RC-C)______________________________ 2122. . 0 . . . . . 4.a
b. LESS: Allowance for loan and lease losses_________ 3123. . 0 . . . . . 4.b
c. LESS: Allocated transfer risk reserve_____________ 3128. . 0 . . . . . 4.c
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c)____________________________ 2125. . 0 4.d
5. Trading assets____________________________________________________________________ 3545. . 0 5.
6. Premises and fixed assets (including capitalized leases)__________________________ 2145. . 95 6.
7. Other real estate owned (from Schedule RC-M)______________________________________ 2150. . 0 7.
8. Investments in unconsolidated subsidiaries and associated companies (from
Schedule RC-M)____________________________________________________________________ 2130. . 0 8.
9. Customers' liability to this bank on acceptances outstanding______________________ 2155. . 0 9.
10. Intangible assets (from Schedule RC-M)____________________________________________ 2143. . 48,072 10.
11. Other assets (from Schedule RC-F)_________________________________________________ 2160. . 2,435 11.
12. Total assets (sum of items 1 through 11)__________________________________________ 2170. . 109,354 12.
_________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
<PAGE> 19
<TABLE>
<S><C>
First Trust National Association Call Date: 12/31/97 ST-BK: 17-1638 FFIEC 033
400 North Michigan Avenue Page RC-2
Chicago, IL 60611 Vendor ID: D CERT: 34094 10
Transit Number: 09600069
Schedule RC - Continued
Dollar Amounts in Thousands
______________________________________________________________________________________________________________________
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of RCON
columns A and C from Schedule RC-E)_________________________________________ 2200. . 0 13.a
RCON
(1) Noninterest-bearing(1)_____________________ 6631. . 0 . . . . . . 13.a.1
(2) Interest-bearing___________________________ 6636. . 0 . . . . . . 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs_______________ . . . . . .
(1) Noninterest-bearing_____________________________________________________ . . . . . .
(2) Interest-bearing________________________________________________________ . . . . . .
14. Federal funds purchased and securities sold under agreements to repurchase_____ 2800. . 0 14.
15. a. Demand notes issued to the U.S. Treasury____________________________________ 2840. . 0 15.a
b. Trading liabilities_________________________________________________________ 3548. . 0 15.b
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases:
a. With a remaining maturity of one year or less_______________________________ 2332. . 0 16.a
b. With a remaining maturity of more than one year through three years_________ A547. . 0 16.b
c. With a remaining maturity of more than three years__________________________ A548. . 0 16.c
17. Not applicable
18. Bank's liability on acceptances executed and outstanding_______________________ 2920. . 0 18.
19. Subordinated notes and debentures(2)___________________________________________ 3200. . 0 19.
20. Other liabilities (from Schedule RC-G)_________________________________________ 2930. . 2,072 20.
21. Total liabilities (sum of items 13 through 20)_________________________________ 2948. . 2,072 21.
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus__________________________________ 3838. . 0 23.
24. Common stock___________________________________________________________________ 3230. . 1,000 24.
25. Surplus (exclude all surplus related to preferred stock)_______________________ 3839. . 106,712 25.
26. a. Undivided profits and capital reserves______________________________________ 3632. . ( 430) 26.a
b. Net unrealized holding gains (losses) on available-for-sale securities______ 8434. . 0 26.b
27. Cumulative foreign currency translation adjustments____________________________ . . . . . .
28. Total equity capital (sum of items 23 through 27)______________________________ 3210. . 107,282 28.
29. Total liabilities and equity capital (sum of items 21 and 28)__________________ 3300. . 109,354 29.
Memorandum
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the bank
by independent external auditors as of any date during 1996____________________ 6724. . N/A M.1
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
____________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited life preferred stock and related surplus.
<PAGE> 20
<TABLE>
<S><C>
First Trust National Association Call Date: 12/31/97 ST-BK: 17-16 38
400 North Michigan Avenue FFIEC 033
Chicago, IL 60611 Vendor ID: D CERT: 34094 Page RC-3
Transit Number: 09600069 11
Schedule RC-A - Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
C205 < -
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------
1. Cash items in process of collection, unposted debits, and currency and coin: RCON
a. Cash items in process of collection and unposted debits ________________ 0020.. 0 1.a
b. Currency and coin ______________________________________________________ 0080.. 0 1.b
2. Balances due from depository institutions in the U.S.:
a. U.S. branches and agencies of foreign banks ____________________________ 0083.. 0 2.a
b. Other commercial banks in the U.S. and other depository institutions in
the U.S. _______________________________________________________________ 0085.. 55,536 2.b
3. Balances due from banks in foreign countries and foreign central banks:
a. Foreign branches of other U.S. banks ___________________________________ 0073.. 0 3.a
b. Other banks in foreign countries and foreign central banks _____________ 0074.. 0 3.b
4. Balances due from Federal Reserve Banks ____________________________________ 0090.. 0 4.
5. Total (sum of items 1 through 4) (must equal Schedule RC, sum of items
1.a and 1.b) _______________________________________________________________ 0010.. 55,536 5.
Memorandum
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------
1. Noninterest-bearing balances due from commercial banks in the U.S. RCON
(included in items 2.a and 2.b above) ______________________________________ 0050.. 55,536 M.1
</TABLE>
<PAGE> 1
LETTER OF TRANSMITTAL
NEWCOR, INC.
OFFER TO EXCHANGE
9 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
FOR ANY AND ALL OF THE OUTSTANDING
9 7/8% SENIOR SUBORDINATED NOTES DUE 2008
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON , 1998
UNLESS THE OFFER IS EXTENDED
U.S. BANK TRUST NATIONAL ASSOCIATION
(THE "EXCHANGE AGENT")
<TABLE>
<S> <C> <C>
By Registered, Certified, or By Hand: By First Class Mail:
Overnight Mail or Courier:
U.S. BANK TRUST N.A. U.S. BANK TRUST N.A. U.S. BANK TRUST N.A.
ATTN: SPECIALIZED FINANCE 4TH FLOOR BOND DROP WINDOW P.O. BOX 64485
SPFT0414 180 EAST FIFTH STREET ST. PAUL, MN 55164-9549
180 EAST FIFTH STREET ST. PAUL, MN 55101
ST. PAUL, MN 55101
</TABLE>
By Facsimile:
(FOR ELIGIBLE INSTITUTIONS ONLY):
(612) 244-1537
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the ones listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (the "Prospectus") of Newcor, Inc. (the "Issuer") and this
Letter of Transmittal, which together constitute the Issuer's offer (the
"Exchange Offer") to exchange $1,000 principal amount of its 9 7/8% Series B
Senior Subordinated Notes due 2008 (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which the Prospectus is a part, for each
$1,000 principal amount of its outstanding 9 7/8% Senior Subordinated Notes due
2008 (the "Notes"), respectively. The term "Expiration Date" shall mean 5:00
p.m., New York City time, on , 1998, unless the Issuer, in its
reasonable judgment, extend the Exchange Offer, in which case the term shall
mean the latest date and time to which the Exchange Offer is extended.
Capitalized terms used but not defined herein have the meaning given to them in
the Prospectus.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
<PAGE> 2
List below the Notes to which this Letter of Transmittal relates. If the
space indicated is inadequate, the Certificate or Registration Numbers and
Principal Amounts should be listed on a separately signed schedule affixed
hereto.
<TABLE>
<S> <C> <C> <C>
=====================================================================================================================
DESCRIPTION OF NOTES TENDERED HEREBY
- ---------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF CERTIFICATE AGGREGATE PRINCIPAL
REGISTERED OWNER(S) OR REGISTRATION AMOUNT REPRESENTED BY PRINCIPAL AMOUNT
(PLEASE FILL IN) NUMBERS* NOTES TENDERED**
- ---------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
TOTAL
- ---------------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, the Holder will be deemed to have tendered the full aggregate principal amount
represented by such Notes. All tenders must be in integral multiples of $1,000.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
This Letter of Transmittal is to be used if (i) certificates representing
Notes are to be physically delivered to the Exchange Agent herewith, (ii) tender
of Notes is to be made by book-entry transfer to an account maintained by the
Exchange Agent at The Depository Trust Company ("DTC"), pursuant to the
procedures set forth in "The Exchange Offer -- Book-Entry Transfer; ATOP" in the
Prospectus or (iii) tender of the Notes is to be made according to the
guaranteed delivery procedures described in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2.
Delivery of documents to a book-entry transfer facility does not constitute
delivery to the Exchange Agent.
As used in this Letter of Transmittal, the term "Holder" with respect to the
Exchange Offer means any person in whose name Notes are registered on the books
of the Issuer or, with respect to interests in the Global Notes held by DTC, any
DTC participant listed in an official DTC proxy. The undersigned has completed,
executed and delivered this Letter of Transmittal to indicate the action the
undersigned desires to take with respect to the Exchange Offer. Holders who wish
to tender their Notes must complete this letter in its entirety.
Holders of Notes that are tendering by book-entry transfer to the Exchange
Agent's account at DTC can execute the tender through the Book-Entry Transfer
Facility Automated Tender Offer Program ("ATOP"), for which the transaction will
be eligible. DTC participants that are accepting the Exchange Offer must
transmit their acceptances to DTC, which will verify the acceptance and execute
a book-entry delivery to the Exchange Agent's account at DTC. DTC will then send
an Agent's Message to the Exchange Agent for its acceptance. Each DTC
participant transmitting an acceptance of the Exchange Offer through the ATOP
procedures will be deemed to have agreed to be bound by the terms of this Letter
of Transmittal.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
NAME OF TENDERING INSTITUTION
ACCOUNT NUMBER
TRANSACTION CODE NUMBER
Holders whose Notes are not immediately available or who cannot deliver
their Notes and all other documents required hereby to the Exchange Agent on or
prior to the Expiration Date must tender their Notes according to the guaranteed
delivery procedure set forth in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 2.
2
<PAGE> 3
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
NAME OF REGISTERED HOLDER(S)
NAME OF ELIGIBLE INSTITUTION THAT GUARANTEED DELIVERY
---------------------------------------------------------------------------
IF DELIVERY BY BOOK-ENTRY TRANSFER:
ACCOUNT NUMBER
TRANSACTION CODE NUMBER
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
NAME
ADDRESS
3
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuer the principal amount of the Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
such Notes tendered hereby, the undersigned hereby exchanges, assigns and
transfers to, or upon the order, of, the Issuer all right, title and interest in
and to such Notes as are being tendered hereby, including all rights to accrued
and unpaid interest thereon as of the Expiration Date. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the Issuer in connection with the Exchange
Offer) to cause the Notes to be assigned, transferred and exchanged. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that when the same are
accepted for exchange, the Issuer will acquire good and unencumbered title to
the tendered Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim.
The undersigned represents to the Issuer and each of the Subsidiary
Guarantors (as defined in the Prospectus) that (i) the Exchange Notes acquired
pursuant to the Exchange Offer are being obtained in the ordinary course of
business of the person receiving such Exchange Notes, whether or not such person
is the undersigned, and (ii) neither the undersigned nor any such other person
has an arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. If the undersigned or the person receiving
the Exchange Notes covered hereby is a broker-dealer that is receiving the
Exchange Notes for its own account in exchange for Notes that were acquired as a
result of market-making activities or other trading activities, the undersigned
acknowledges that it or such other person will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The undersigned and any such other person
acknowledge that, if they are participating in the Exchange Offer for the
purpose of distributing the Exchange Notes, (i) they cannot rely on the position
of the staff of the Securities and Exchange Commission enunciated in Exxon
Capital Holdings Corporation (April 13, 1988), Morgan Stanley & Co., Inc. (June
5, 1991) or similar no-action letters and, in the absence of an exemption
therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with the resale transaction and
(ii) failure to comply with such requirements in such instance could result in
the undersigned or any such other person incurring liability under the
Securities Act for which such persons are not indemnified by the Issuer or any
Subsidiary Guarantor. If the undersigned or the person receiving the Exchange
Notes covered by this letter is an affiliate (as defined under Rule 405 of the
Securities Act) of the Issuer, the undersigned represents to the Issuer and the
Subsidiary Guarantors that the undersigned understands and acknowledges that
such Exchange Notes may not be offered for resale, resold or otherwise
transferred by the undersigned or such other person without registration under
the Securities Act or an exemption therefrom.
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Issuer to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Notes or transfer ownership of such Notes on the account books
maintained by a book-entry transfer facility. The undersigned further agrees
that, except in the special situations described in the Prospectus, acceptance
of any tendered Notes by the Issuer and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Issuer and the
Subsidiary Guarantors of their obligations under the Registration Rights
Agreement and the Issuer and the Subsidiary Guarantors shall have no further
obligations or liabilities thereunder for the registration of the Notes or the
Exchange Notes.
The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Issuer), as more particularly set forth in the Prospectus,
the Issuer may
4
<PAGE> 5
not be required to exchange any of the Notes tendered hereby and, in such event,
the Notes not exchanged will be returned to the undersigned at the address shown
below the signature of the undersigned.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tendered Notes may be withdrawn at any time
prior to the Expiration Date.
Unless otherwise indicated in the box entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" in this Letter
of Transmittal, certificates for all Exchange Notes delivered in exchange for
tendered Notes, and any Notes delivered herewith but not exchanged, will be
registered in the name of the undersigned and shall be delivered to the
undersigned at the address shown below the signature of the undersigned. If an
Exchange Note is to be issued to a person other than the person(s) signing this
Letter of Transmittal, or if the Exchange Note is to be mailed to someone other
than the person(s) signing this Letter of Transmittal or to the person(s)
signing this Letter of Transmittal at an address different than the address
shown on this Letter of Transmittal, the appropriate boxes of this Letter of
Transmittal should be completed. If Notes are surrendered by Holder(s) that have
completed either the box entitled "Special Registration Instructions" or the box
entitled "Special Delivery Instructions" in this Letter of Transmittal,
signature(s) on this Letter of Transmittal must be guaranteed by an Eligible
Institution (defined in Instruction 2).
5
<PAGE> 6
SPECIAL REGISTRATION INSTRUCTIONS
To be completed ONLY if the Exchange Notes are to be issued in
the name of someone other than the undersigned.
Name:
------------------------------------------------------------------------
Address:
---------------------------------------------------------------------
Book-Entry Transfer Facility Account:
------------------------------------------------------------------------------
Employee Identification or Social Security Number:
------------------------------------------------------------------------------
(Please print or type)
SPECIAL DELIVERY INSTRUCTIONS
To be completed ONLY if the Exchange Notes are to be sent to someone other
than the undersigned, or to the undersigned at an address other than that shown
under "Description of Notes Tendered Hereby."
Name:
------------------------------------------------------------------------
Address:
---------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
(Please print or type)
REGISTERED HOLDER(S) OF NOTES OR DTC PARTICIPANT(S) SIGN HERE
(In addition, complete Substitute Form W-9 below)
X
---------------------------------------------------------------------------
X
---------------------------------------------------------------------------
(Signature(s) of Registered Holder(s) or DTC Participant(s))
Must be signed by registered holder(s) or DTC participant(s) exactly
as name(s) appear(s) on the Notes or on a security position listing as the
owner of the Notes or by person(s) authorized to become registered
holder(s) by properly completed bond powers transmitted herewith. If
signature is by attorney-in-fact, trustee, executor, administrator,
guardian, officer of a corporation or other person acting in a fiduciary
capacity, please provide the following information. (Please print or
type):
Name and Capacity (full title):
---------------------------------------------
Address (including zip code):
-----------------------------------------------
----------------------------------------------------------------------------
Area Code and Telephone Number:
---------------------------------------------
Taxpayer Identification or Social Security No.:
-----------------------------
Dated:
------------
SIGNATURE GUARANTEE
(If Required -- See Instruction 5)
Authorized Signature:
-------------------------------------------------------
(Signature of Representative of Signature Guarantor)
Name and Title:
-------------------------------------------------------------
Name of Plan:
---------------------------------------------------------------
Area Code and Telephone Number:
---------------------------------------------
(Please print or type)
Dated:
------------
6
<PAGE> 7
PAYOR'S NAME: NEWCOR, INC.
THIS SUBSTITUTE FORM W-9 MUST BE COMPLETED AND SIGNED
PLEASE PROVIDE YOUR SOCIAL SECURITY NUMBER OR OTHER TAXPAYER IDENTIFICATION
NUMBER ON THE FOLLOWING SUBSTITUTE FORM W-9 AND CERTIFY THEREIN THAT YOU ARE NOT
SUBJECT TO BACKUP WITHHOLDING.
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT ------------------------------
SUBSTITUTE RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Social Security Number
FORM W-9 PART 2--Check the box if you are not subject to
backup withholding under the provisions of Section OR
3406(A)(1)(C) of the Internal Revenue Code because ---------------------------
(1) you are exempt from backup withholding, (2) Employer Identification
DEPARTMENT OF you have not been notified that you are subject to Number
THE TREASURY backup withholding as a result of failure to
INTERNAL REVENUE SERVICE report all interest or dividends or (3) the
Internal Revenue Service has notified you that you
are no longer subject to backup withholding. [ ]
-------------------------------------------------------------------------------------
PAYOR'S REQUEST FOR CERTIFICATION: Under penalties of perjury, I PART 3--
TAXPAYER IDENTIFICATION certify that the information provided on this form Awaiting TIN [ ]
NUMBER (TIN) is true, correct and complete.
Signature:
----------------------------------------
Date:
---------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY CASH PAYMENTS IN EXCESS OF $10.00 MADE TO YOU.
NOTE: YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Officer or (b) I intend to mail
or deliver such an application in the near future. I understand that if I do not
provide a taxpayer identification number within 60 days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a number.
SIGNATURE DATE
--------------------------------------------- ------------------
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
All physically delivered Notes or confirmation of any book-entry transfer
to the Exchange Agent's account at a book-entry transfer facility of Notes
tendered by book-entry transfer, as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile thereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date (as defined in the Prospectus). The method of delivery of this
Letter of Transmittal, the Notes and any other required documents is at the
election and risk of the Holder, and except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
If such delivery is by mail, it is suggested that registered mail with return
receipt requested, properly insured, be used.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Notes for exchange.
Delivery to an address other than as set forth herein, or instructions via
a facsimile number other than the ones set forth herein, will not constitute a
valid delivery.
2. GUARANTEED DELIVERY PROCEDURES.
Holders who wish to tender their Notes, but whose Notes are not immediately
available and thus cannot deliver their Notes, the Letter of Transmittal or any
other required documents to the Exchange Agent (or comply with the procedures
for book-entry transfer) prior to the Expiration Date, may effect a tender if:
(a) the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(an "Eligible Institution");
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the registration
number(s) of such Notes and the principal amount of Notes tendered,
stating that the tender is being made thereby and guaranteeing that,
within three New York Stock Exchange trading days after the Expiration
Date, the Letter of Transmittal (or facsimile thereof), together with
the Notes (or a confirmation of book-entry transfer of such Notes into
the Exchange Agent's account at DTC) and any other documents required
by the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Notes into
the Exchange Agent's account at DTC) and all other documents required
by the Letter of Transmittal, are received by the Exchange Agent within
three New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above. Any Holder who wishes to tender Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery relating to such
Notes prior to the Expiration Date. Failure to complete the guaranteed delivery
procedures outlined above will not, of itself, affect the
8
<PAGE> 9
validity or effect a revocation of any Letter of Transmittal form properly
completed and executed by a Holder who attempted to use the guaranteed delivery
procedures.
3. BENEFICIAL OWNER INSTRUCTIONS.
Only a Holder of Notes (i.e., a person in whose name Notes are registered
on the books of the registrar or, with respect to interests in the Global Notes
held by DTC, a DTC participant listed in an official DTC proxy), or the legal
representative or attorney-in-fact of a Holder, may execute and deliver this
Letter of Transmittal. Any beneficial owner of Notes who wishes to accept the
Exchange Offer must arrange promptly for the appropriate Holder to execute and
deliver this Letter of Transmittal on his or her behalf through the execution
and delivery to the appropriate Holder of the Instructions to Registered Holder
and/or DTC Participant from Beneficial Owner form accompanying this Letter of
Transmittal.
4. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Notes evidenced by a submitted
certificate is tendered, the tendering Holder should fill in the principal
amount tendered in the column entitled "Principal Amount Tendered" of the box
entitled "Description of Notes Tendered Hereby." A newly issued Note for the
principal amount of Notes submitted but not tendered will be sent to such Holder
as soon as practicable after the Expiration Date. All Notes delivered to the
Exchange Agent will be deemed to have been tendered in full unless otherwise
indicated.
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date, after which tenders of Notes are irrevocable. To
be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Exchange Agent. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Notes to
be withdrawn (the "Depositor"), (ii) identify the Notes to be withdrawn
(including the registration number(s) and principal amount of such Notes, or, in
the case of Notes transferred by book-entry transfer, the name and number of the
account at DTC to be credited), (iii) be signed by the Holder in the same manner
as the original signature on this Letter of Transmittal (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Notes register the transfer of such Notes
into the name of the person withdrawing the tender and (iv) specify the name in
which any such Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Issuer, whose
determination shall be final and binding on all parties. Any Notes so withdrawn
will be deemed not to have been validly tendered for purposes of the Exchange
Offer and no Exchange Notes will be issued with respect thereto unless the Notes
so withdrawn are validly retendered. Any Notes which have been tendered but
which are not accepted for exchange will be returned to the Holder thereof
without cost to such Holder as soon as practicable after withdrawal, rejection
of tender or termination of Exchange Offer.
5. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered Holder(s) of the
Notes tendered hereby, the signature must correspond with the name(s) as written
on the face of the certificates without alteration or enlargement or any change
whatsoever. If this Letter of Transmittal is signed by a participant in DTC, the
signature must correspond with the name as it appears on the security position
listing as the owner of the Notes.
If any of the Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Notes registered in different names are tendered, it will be
necessary to complete, sign and submit as many separate copies of this Letter of
Transmittal as there are different registrations of Notes.
9
<PAGE> 10
Signatures of this Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution unless the Notes
tendered hereby are tendered (i) by a registered Holder who has not completed
the box entitled "Special Registration Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If this Letter of Transmittal is signed by the registered Holder or Holders
of Notes (which term, for the purposes described herein, shall include a
participant in DTC whose name appears on a security listing as the owner of the
Notes) listed and tendered hereby, no endorsements of the tendered Notes or
separate written instruments of transfer or exchange are required. In any other
case, the registered Holder (or acting Holder) must either properly endorse the
Notes or transmit properly completed bond powers with this Letter of Transmittal
(in either case, executed exactly as the name(s) of the registered Holder(s)
appear(s) on the Notes, and, with respect to a participant in DTC whose name
appears on a security position listing as the owner of Notes, exactly as the
name of the participant appears on such security position listing), with the
signature on the Notes or bond power guaranteed by an Eligible Institution
(except where the Notes are tendered for the account of an Eligible
Institution).
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Issuer, proper evidence
satisfactory to the Issuer of their authority so to act must be submitted.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS.
Tendering Holders should indicate, in the applicable box, the name and
address (or account at DTC) in which the Exchange Notes or substitute Notes for
principal amounts not tendered or not accepted for exchange are to be issued (or
deposited), if different from the names and addresses or accounts of the person
signing this Letter of Transmittal. In the case of issuance in a different name,
the employer identification number or social security number of the person named
must also be indicated and the tendering Holder should complete the applicable
box.
If no instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the acting
Holder of the Notes or deposited at such Holder's account at DTC.
7. TRANSFER TAXES.
The Issuer will pay all transfer taxes, if any, applicable to the transfer
and exchange of Notes to it or its order pursuant to the Exchange Offer. If a
transfer tax is imposed for any other reason other than the transfer and
exchange of Notes to the Issuer, or its order pursuant to the Exchange Offer,
the amount of any such transfer taxes (whether imposed on the registered Holder
or any other person) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exception therefrom is not submitted
herewith, the amount of such transfer taxes will be collected from the tendering
Holder by the Exchange Agent.
Except as provided in this Instruction 7, it will not be necessary for
transfer stamps to be affixed to the Notes listed in this Letter of Transmittal.
8. WAIVER OF CONDITIONS.
The Issuer reserves the right, in its reasonable judgment, to waive, in
whole or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
9. MUTILATED, LOST, STOLEN OR DESTROYED NOTES.
Any Holder whose Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
10
<PAGE> 11
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number(s) set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to Newcor, Inc., Suite 240, 1825 S. Woodward,
Bloomfield Hills, Michigan 49302-0574, telephone (248_) 253-2400.
11. VALIDITY AND FORM.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Issuer in its sole discretion, which determination will be
final and binding. The Issuer reserves the absolute right to reject any and all
Notes not properly tendered or any Notes the Issuer's acceptance of which would,
in the opinion of counsel for the Issuer, be unlawful. The Issuer also reserves
the right, in its reasonable judgment, to waive any defects, irregularities or
conditions of tender as to particular Notes. The Issuer's interpretation of the
terms and conditions of the Exchange Offer (including the instructions in this
Letter of Transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Notes must be cured
within such time as the Issuer shall determine. Although the Issuer intends to
notify Holders of defects or irregularities with respect to tenders of Notes,
neither the Issuer, the Exchange Agent nor any other person shall incur any
liability for failure to give such notification. Tenders of Notes will not be
deemed to have been made until such defects or irregularities have been cured or
waived. Any Notes received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived will
be returned by the Exchange Agent to the tendering Holder as soon as practicable
following the Expiration Date.
11
<PAGE> 12
IMPORTANT TAX INFORMATION
Under federal income tax law, a Holder tendering Notes is required to
provide the Exchange Agent with such Holder's correct TIN on Substitute Form W-9
above. If such Holder is an individual, the TIN is the Holder's social security
number. The Certificate of Awaiting Taxpayer Identification Number should be
completed if the tendering Holder has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future. If the Exchange
Agent is not provided with the correct TIN, the Holder may be subject to a $50
penalty imposed by the Internal Revenue Service. In addition, payments that are
made to such Holder may be subject to backup withholding.
Certain Holders (including, among others, all domestic corporations and
certain foreign individuals and foreign entities) are not subject to these
backup withholding and reporting requirements. Such a Holder, who satisfies one
or more of the conditions set forth in Part 2 of the Substitute Form W-9, should
execute the certification following such Part 2. In order for a foreign Holder
to qualify as an exempt recipient, that Holder must submit to the Exchange Agent
a properly completed Internal Revenue Service Form W-8, signed under penalties
of perjury, attesting to that Holder's exempt status. Such forms can be obtained
from the Exchange Agent.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any amounts otherwise payable to the Holder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a Holder, the
Holder is required to notify the Exchange Agent of his or her correct TIN by
completing the form herein certifying that the TIN provided on Substitute Form
W-9 is correct (or that such Holder is awaiting a TIN) and that (i) each Holder
is exempt, (ii) such Holder has not been notified by the Internal Revenue
Service that he or she is subject to backup withholding as a result of failure
to report all interest or dividends or (iii) the Internal Revenue Service has
notified such Holder that he or she is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
Each Holder is required to give the Exchange Agent the social security
number or employer identification number of the record Holder(s) of the Notes.
If Notes are in more than one name or are not in the name of the actual Holder,
consult the instructions on Internal Revenue Service Form W-9, which may be
obtained from the Exchange Agent, for additional guidance on which number to
report.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
If the tendering Holder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, write "Applied For"
in the space for the TIN on Substitute Form W-9, sign and date the form and the
Certificate of Awaiting Taxpayer Identification Number and return them to the
Exchange Agent. If such certificate is completed and the Exchange Agent is not
provided with the TIN within 60 days, the Exchange Agent will withhold 31% of
all payments made thereafter until a TIN is provided to the Exchange Agent.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS)
OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR
PRIOR TO THE EXPIRATION DATE.
12
<PAGE> 13
INSTRUCTIONS
TO REGISTERED HOLDER AND/OR
DTC PARTICIPANT FROM BENEFICIAL OWNER
OF
NEWCOR, INC.
9 7/8% SENIOR SUBORDINATED NOTES DUE 2008
To Registered Holder and/or Participant in DTC.
The undersigned hereby acknowledges receipt of the Prospectus, dated
, 1998 (the "Prospectus") of Newcor, Inc. (the "Issuer"), and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), that together
constitute the Issuer's offer (the "Exchange Offer"). Capitalized terms used but
not defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or DTC participant, as to
action to be taken by you relating to the Exchange Offer with respect to the
9 7/8% Senior Subordinated Notes due 2008 (the "Notes") held by you for the
account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (fill in amount):
$ of the 9 7/8% Senior Subordinated Notes due 2008
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY):
$
[ ] NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the Notes held by you for the
account of the undersigned, it is understood that you are: (a) to make, on
behalf of the undersigned (and the undersigned, by its signature below, hereby
makes to you), the representations and warranties contained in the Latter of
Transmittal that are to be made with respect to the undersigned as a beneficial
owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (FILL IN THE NAME OF THE
STATE) , (ii) the undersigned is acquiring the Exchange
Notes in the ordinary course of business of the undersigned, (iii) the
undersigned is not participating, does not participate, and has no arrangement
or understanding with any person to participate in the distribution of the
Exchange Notes, (iv) the undersigned acknowledges that any person participating
in the Exchange Offer for the purpose of distributing the Exchange Notes must
comply with the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (the "Act"), in connection with a secondary
resale transaction of the Exchange Notes acquired by such person and cannot rely
on the position of the Staff of the Securities and Exchange Commission set forth
in no-action letters that are discussed in the section of the Prospectus
entitled "The Exchange Offer -- Resale of Exchange Notes," and (v) the
undersigned is not an "affiliate," as defined in Rule 405 under the Act, of the
Issuer; (b) to agree, on behalf of the undersigned, as set forth in the Letter
of Transmittal; and (c) to take such other actions as necessary under the
Prospectus or the Letter of Transmittal to effect the valid tender of such
Notes.
[ ] Check this box if the beneficial owner of the Notes is a broker-dealer
and such broker-dealer acquired the Notes for its own account as a result of
market-making activities or other trading activities.
<PAGE> 14
SIGN HERE
Name of beneficial owner(s):
---------------------------------------------------
Signature(s):
------------------------------------------------------------------
Name (please print):
-----------------------------------------------------------
Address:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Telephone number:
--------------------------------------------------------------
Taxpayer Identification or Social Security Number:
-----------------------------
Date:
--------------------------------------------------------------------------
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
9 7/8% SENIOR SUBORDINATED NOTES DUE 2008
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF
NEWCOR, INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Newcor, Inc. (the "Issuer") made pursuant to the Prospectus
dated , 1998 (the "Prospectus") if certificates for the outstanding
9 7/8% Senior Subordinated Notes due 2008 of the Issuer (the "Notes") are not
immediately available or if the procedure for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date of the Exchange Offer. Such form may be delivered or transmitted
by telegram, telex, facsimile transmission, mail or hand delivery to U.S. Bank
Trust National Association (the "Exchange Agent") as set forth below. In
addition, in order to utilize the guaranteed delivery procedure to tender Notes
pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal (or facsimile thereof) must also be received by the Exchange Agent
prior to 5:00 p.m., New York City time, on the Expiration Date. Capitalized
terms not defined herein are defined in the Prospectus.
U.S. BANK TRUST NATIONAL ASSOCIATION, EXCHANGE AGENT
<TABLE>
<S> <C> <C>
By Registered, Certified, or By Hand: By First Class Mail:
Overnight Mail or Courier: U.S. Bank Trust N.A. U.S. Bank Trust N.A.
U.S. Bank Trust N.A. 4th Floor Bond Drop Window P.O. Box 64485
Attn: Specialized Finance 180 East Fifth Street St. Paul, MN 55164-9549
SPFT0414 St. Paul, MN 55101
180 East Fifth Street
St. Paul, MN 55101
</TABLE>
By Facsimile:
(For Eligible Institutions Only):
(612) 244-1537
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the Issuer
the principal amount of Notes set forth below pursuant to the guaranteed
delivery procedure described in "The Exchange Offer -- Guaranteed Delivery
Procedures" section of the Prospectus.
Principal Amount of Notes Tendered.*
$
- ------------------------------------------
Certificate No(s). (if available):
- ------------------------------------------
Total Principal Amount Represented by Certificate(s):
- ------------------------------------------
*Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
<PAGE> 2
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
PLEASE SIGN HERE
<TABLE>
<S> <C>
X
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X
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Signature(s) of Owner(s)
or Authorized Signatory
Area Code and Telephone Number:
---------------------------------------
</TABLE>
Must be signed by the holder(s) of Notes as their name(s) appear on
certificates for Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person
must set forth his or her full title below. If Notes will be delivered by
book-entry transfer to The Depository Trust Company, provide account
number.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
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Capacity:
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Address(es):
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Account Number:
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<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchanges Medallion Program, hereby guarantees
that the undersigned will deliver to the Exchange Agent the certificates
representing the Notes being tendered hereby or confirmation of book-entry
transfer of such Notes into the Exchange Agent's account at The Depository Trust
Company, in proper form for transfer, together with any other documents required
by the Letter of Transmittal, within three New York Stock Exchange trading days
after the Expiration Date.
Name of Firm
-------------------------------------------------------------------
Address
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Area Code & Telephone No.
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Authorized Signature
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Name
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(PLEASE TYPE OR PRINT)
Title
-------------------------------------------------------------------------
Date
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NOTE: DO NOT SEND CERTIFICATES REPRESENTING NOTES WITH THIS FORM. CERTIFICATES
REPRESENTING NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY
EXECUTED LETTER OF TRANSMITTAL.
