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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the fiscal year ended December 31, 1996
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the Transition Period from________to ______.
Commission File Number 0-13601
DURAKON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Michigan 38-2492342
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
<TABLE>
<S> <C>
2101 N. Lapeer Road, Lapeer, Michigan 48446
Registrant's telephone number, including area code: (810) 664-0850
Securities registered pursuant to Section 12(b)of the Act: None
Securities registered pursuant to Section 12(g)of the Act: Common Stock, without
par value (Title of Class)
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ x ]
The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant as of March 21, 1997, computed by reference to
the last sale price for such stock on that date as reported on the Nasdaq
National Market System, was $56,684,725.
At March 21, 1997, the number of shares outstanding of the registrant's
Common Stock, without par value, was 6,210,292.
Portions of the registrant's Proxy Statement for its 1997 Annual Meeting
of Shareholders have been incorporated by reference in Part III of this Annual
Report on Form 10-K.
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<PAGE> 2
PART I
ITEM 1. BUSINESS
Durakon Industries, Inc. (the "Company") was incorporated in Michigan on
December 21, 1983, and is the successor by merger to Durakon, Inc. which was
incorporated in Michigan in 1979. The Company operates its business in two
segments, the Vehicle Accessories segment and the Towing & Recovery segment.
Vehicle Accessories Segment. This segment's principal product is a
one-piece, seamless pickup truck bedliner, custom engineered and molded in
various sizes to fit most domestic and foreign pickup trucks. A matching
protector is supplied with each bedliner to protect the truck's tailgate.
Bedliners are constructed of high density polyethylene plastic, and are designed
to protect the entire bed area including the floor, front panel and sidewalls.
The Company markets bedliners under the Duraliner(R), AllStar(R) and Bodygard(R)
brand names and, to a lesser extent, manufactures for private labels. Purchasers
of the Duraliner(R) product also receive proprietary cargo restraining board
pockets (Duraloc(R)), two tier stacking capability and other premium features.
The Company's marketing strategy for pickup truck bedliners is to service
the aftermarket through distributors of light truck accessories, camper top
manufacturers, retail chains and mass merchandisers as well as directly
servicing original equipment manufacturers. Management believes that
purchasers of light trucks generally prefer to purchase add-on accessories,
such as a pickup truck bedliner, at the time they purchase their truck. This
allows installation of the bedliner prior to delivery, before damage to the
truck occurs, and also permits the buyer to finance the bedliner in conjunction
with the truck.
The Company also distributes through its Duraliner U.S.A. network, which
consists of 10 warehouses located throughout the country. Those warehouses sell
the Company's bedliners, as well as, DuraMat(R) bed floormats, Duratrunk(R)
storage containers, bumpers, running boards, bug shields, and a variety of other
accessories, all of which are manufactured by other companies. DuraMat(R) mats,
which are constructed of recycled rubber, are designed to protect the floor area
of pickup truck beds. The Duratrunk(R) is a high-density polyethylene plastic
storage container with proprietary design improvements over conventional
tool/storage boxes. During the third quarter of 1996, Durakon introduced the
DuraSport(TM) cargo liner, a protective liner for the back interiors of sport
utility vehicles.
Towing & Recovery Segment. Through its wholly-owned subsidiary Jerr-Dan
Corporation ("Jerr-Dan"), the Company manufactures and distributes rollback
carriers and tow trucks for use in the vehicle transportation, towing and
recovery industry.
Rollback carriers are fabricated from aluminum, steel and wood to provide
platforms which hydraulically tilt to allow a vehicle to be loaded thereon for
transportation. Carriers equipped with a towbar attachment can tow an
additional vehicle behind the unit. Some models are also available with an
optional platform above the driver's cab enabling an additional vehicle to be
transported. The Wrangler(TM), Shark(TM), Vector(TM), Rustler(TM), and
Elite(TM) models are designed for transporting automobiles and light-duty
vehicles, while the Transporter(TM) and Super Series(TM) models, with deck
capacities up to 30,000 pounds, can also transport heavy equipment. Rollback
carriers are typically purchased by salvage dealers, towing companies,
automobile dealers, industrial equipment distributors, and antique and race car
owners.
The towing and recovery products lift disabled vehicles by the wheels for
general towing applications. Wheel lift tow trucks have supplanted the
conventional hook and sling equipment by providing for damage-free towing to
vehicles with plastic front-end components and/or front-wheel drive. Jerr-Dan's
medium and heavy-duty towing units are equipped with frame-fork attachments to
enable a disabled vehicle to be picked up by its front axle. Units are
customarily supplied with boom and winch features for use in vehicle recovery
applications. Jerr-Dan's towing and recovery product line includes the HPL(TM),
HDL(TM), Power Grid(TM), and DeWalt(TM) models.
Jerr-Dan's marketing strategy is to compete nationally through its
independently-owned distributor network with innovative products of high
quality and superior customer service. Methods used to accomplish this
objective include advertising in trade journals, trade show participation,
publication of the Company's "Write-Carrier" magazine and utilization of the
distributor/customer in product development and improvement activities.
Jerr-Dan's manufacturing operations include the machining and fabrication
of steel and aluminum parts and assemblies, and the manufacture of hydraulic
componentry. Jerr-Dan's products are assembled, tested and
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installed on truck chassis purchased by Jerr-Dan or its customers, or sold in
kit form for installation by its distributors.
OTHER CORPORATE MATTERS
Employment. At December 31, 1996, the Company and its subsidiaries
employed 879 persons. Approximately 24% of its employees are covered by a
collective bargaining agreement with the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America. The most
recent agreement was ratified by the union on March 4, 1997, expires February
29, 2000, and covers 247 employees at the Lapeer, Michigan plant.
Significant Customers. No one customer accounts for more than 10% of
consolidated net sales and no material part of the Company's business is
dependent upon a single customer or a few customers.
Competition. In the opinion of management, the competitive factors in
each industry in which the Company and its subsidiaries operate include brand
recognition, total quality, marketing support, price, customer service, prompt
delivery and reputation. The Company emphasizes all of these factors in its
operating strategy.
The Vehicle Accessories segment markets its products worldwide to original
equipment manufacturers and to independent aftermarket distributors. The
Company's primary competitor in all of these markets is Penda Corporation, a
privately owned company headquartered in Portage, Wisconsin. While no market
data is readily available, the Company believes it has the largest share of the
market for pickup truck bedliners but believes that in 1996 Penda was the
largest supplier to original equipment manufacturers. There are many other
manufacturers of pickup truck bedliners but the Company believes that none of
them maintains a market share comparable to the Company or Penda.
In the Towing & Recovery segment, the Company primarily sells in North
America. While the Company is not aware of any source of market data on this
industry, it believes that Miller Industries, Inc., a publicly held company
headquartered in Atlanta, Georgia has the largest market share. There are
several smaller manufacturers of towing and recovery equipment, the largest of
which is believed to be Chevron, Inc., a privately held company headquartered
in Mercer, Pennsylvania is also a major competitor of the company. The Company
believes it maintains the second largest market share in the towing and
recovery industry.
Patents. The Company has a policy of filing patent applications for its
important product designs and manufacturing methods. The patents the Company
considers most valuable expire after 1999.
Backlogs. Neither the Vehicle Accessories segment nor the Towing &
Recovery segment maintain a sales backlog as sales orders are generally filled
within one month.
Raw Materials. Raw materials used in the production of the Company's
products are available from several sources. Management believes that its
present sources and adequate replacement sources will be available to meet the
Company's anticipated demand for the foreseeable future. Hydrocarbon based
resin, which is the principal raw material of the Vehicle Accessories segment,
is subject to significant price fluctuation.
Regulatory Requirements. The Company, as a manufacturer utilizing
hydrocarbon substances, is subject to provisions of state and federal laws
governing discharges of pollutants into the environment and the exposure of
employees to harmful substances. The Company believes that it is currently in
compliance with such applicable provisions and that continued compliance will
not require material capital expenditures.
ITEM 2. PROPERTIES ($ in 000's)
Vehicle Accessories Segment. The Company has two domestic manufacturing
locations for pickup truck bedliners. The largest one is owned, the other
facility is leased. The owned facility is a 326,800 square foot building
complex on 135 acres of land in Lapeer, Michigan. This facility also houses
the Company's warehouse facility, distribution center and administrative
offices. The leased facility is 102,000 square feet on 7 acres of land in
Clinton, Tennessee. The lease expires in 2003; rental under this lease was
approximately $255 in 1996.
The Company's Mexican subsidiary leases a 46,692 square foot manufacturing
facility in Lerma, Mexico. Rental under this lease agreement was $97 during
1996.
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The Company has 10 leased locations which operate under the name
"Duraliner U.S.A." that are primarily used as wholesale distribution centers.
These facilities, located in Santa Fe Springs and Stockton, California; Ft.
Lauderdale and Lakeland, Florida; New Orleans, Louisiana; Springfield,
Massachusetts; Westland, Michigan; Ft. Worth and Houston, Texas; and
Charleston, West Virginia, have approximately 9,000 to 21,000 square feet per
location. Aggregate rentals under these leases were approximately $550 in
1996. The expiration dates for these leases range from 1997 to 2002.
Towing & Recovery Segment. The Company owns an 112,000 square foot
manufacturing facility located on 12.5 acres of land in Greencastle,
Pennsylvania. This location also houses storage facilities and administrative
offices.
The Company leases two additional manufacturing and assembly facilities in
Greencastle, Pennsylvania. A 126,000 square foot manufacturing building on 10
acres has an annual rent of $360 with a lease expiration of June 30, 2011. An
assembly location of approximately 6,000 square feet with an annual rent of $18
is leased on a month-to-month basis.
The company also leases a manufacturing location in Channelview, Texas.
This facility is approximately 13,000 square feet at an annual rent of $50.
The lease expires November 30, 1999.
Additional warehousing and assembly space of 60,000 square feet is leased
in Las Vegas, Nevada to provide inventory availability for Jerr-Dan's western
distributors. Annual rent is $336. This lease expires July 31, 2000.
Adequacy of Facilities and Production Capacity. In the opinion of
management, the facilities and manufacturing capacity for both business
segments are adequate to operate at current market conditions. In 1997, the
company recognized a need for additional warehouse space to accommodate new
business.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in certain routine litigation incidental to its
business. The effect of such litigation on the business and financial
condition of the Company is not expected by management to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
No matters were submitted to a vote of shareholders during the fourth
quarter of the fiscal year covered by this Report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq Stock Market under the
symbol "DRKN". The following table sets forth the high and low sale prices
reported on the Nasdaq Stock Market for the quarterly periods indicated:
<TABLE>
1996 1995
Quarter High Low Quarter High Low
------- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
First $13 $11 1/2 First $17 5/8 $15
Second 14 3/4 12 1/4 Second 16 7/8 15 1/4
Third 15 11 3/4 Third 16 12 3/4
Fourth 13 1/4 12 Fourth 15 1/4 11 1/4
</TABLE>
On March 21, 1997, the last available sale price for shares of the Common
Stock of the Company, as reported on the Nasdaq Stock Market, was $12 1/2. As
of such date, the approximate number of record holders of the Common Stock was
358.
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Durakon has not paid a dividend on the Common Stock since the date on
which the Common Stock was first offered to the public. The Company's policy
is not to pay dividends, but to use excess cash to fund for future growth.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data presented below have been derived
from the Company's Consolidated Financial Statements which have been audited by
Coopers & Lybrand L.L.P., and should be read in conjunction with the
Consolidated Financial Statements and related Notes.
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<CAPTION>
1996 1995(1) 1994 1993(2) 1992
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($ in 000's, except per
share amounts)
OPERATIONS STATEMENT DATA:
Net sales $183,628 $172,051 $144,483 $105,738 $86,961
Operating income 13,133 5,171 19,487 14,937 13,458
Interest income/(expense), net 629 358 427 195 (445)
Net income 8,904 2,299 12,101 11,974 7,632
Net income per common share 1.34 .34 1.82 1.82 1.22
BALANCE SHEET DATA:
Working capital $ 35,150 $ 25,696 $ 25,539 $ 27,769 $21,666
Total assets 84,079 78,869 75,542 56,224 56,825
Long-term obligations 795 1,572 2,641 446 4,078
Shareholders' equity 65,760 56,556 54,237 41,673 29,202
PERCENTAGES AND RATIOS:
Gross profit 21.6% 21.1% 29.0% 31.9% 35.1%
Return on sales 4.8% 1.3% 8.4% 11.3% 8.8%
Current ratio 3.2 2.3 2.4 2.9 2.7
Ratio of long-term debt to
total capitalization .01 .03 .05 .01 .12
</TABLE>
(1) Includes pre-tax charges of $2,900 for the loss on disposition of the ZZ
Wheelz subsidiary, $1,455 for re-engineering and consolidation of pickup
truck bedliner manufacturing operations, and $1,103 related to settlement
of a patent issue and write-off of a license agreement.
(2) Includes a pre-tax gain of $2,358 relating to the sale of a warrant to
purchase a minority share of DFM Corporation.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion relating to the three years ended December 31,
1996, should be read in conjunction with the Company's Consolidated Financial
Statements and related Notes:
CORPORATE DEVELOPMENT. ($ in 000's) In July of 1996, Jerr-Dan leased
approximately 126,000 square feet of additional manufacturing space to
accommodate the production of its new medium-duty towing vehicle. The addition
of the medium-duty towing vehicle model to its product line enables the
Company to offer a full range of towing and recovery equipment to its
distributors for the first time. Several innovative and patentable features are
incorporated into this new product including an industry-first corrosion-
resistant composite body.
On December 12, 1995, the Company decided to dispose of its ZZ Wheelz
subsidiary. The operation acquired in 1994 did not fit the long-term focus of
the Company. A $2,900 pre-tax charge was recorded in the fourth quarter of
1995 to write-off the investment and provide for anticipated costs to close the
facility.
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Effective July 1, 1995, Jerr-Dan acquired substantially all the assets of
DeWalt Manufacturing, Inc., a manufacturer of heavy-duty towing and recovery
vehicles in Channelview, Texas. Jerr-Dan's DeWalt Division provides a proven
product line in the heavy-duty market segment previously not serviced by the
Company.
Also in July 1995, Jerr-Dan opened a warehouse in Las Vegas, Nevada to
provide improved service to the Company's West Coast distributors. Inventory
is available in both kit and turnkey configurations.
In July 1994, the Company acquired Benton Plastics, Inc. ("Benton").
Benton is a manufacturer and distributor of bedliners under the brand name
"Bodygard." The total purchase price was $14,388.
NET SALES. ($ in 000's) The following table summarizes net sales by
business segment for the last three years:
<TABLE>
<CAPTION>
Segment 1996 % 1995 % 1994 %
------- ---- - ---- - ---- -
<S> <C> <C> <C> <C> <C> <C>
Vehicle Accessories $ 85,109 46% $ 81,684 47% $ 75,163 52%
Towing & Recovery 98,519 54% 90,367 53% 69,320 48%
-------- ---- -------- ---- -------- ----
Total $183,628 100% $172,051 100% $144,483 100%
======== ==== ======== ==== ======== ====
</TABLE>
Net sales increased 7% to $183,628 in 1996 versus 1995. In 1995 sales
increased 19% or $27,568 compared to 1994.
In the Vehicle Accessories segment net sales increased $3,425 or 4% from
1995. Bedliner unit sales increased 12.5% from the prior year. The Durakon
international distribution channels increased unit sales by 20.8% in 1996
compared to 1995. Domestic unit sales increased 11.7% in 1996 compared to
1995. Average bedliner net selling prices were down 6.2% from last
year due to the increased domestic aftermarket competition which put downward
pressure on pricing throughout the market. In 1995, sales increased $6,521 or
9% from 1994. Bedliner unit sales increased 16% from 1994. International
unit sales increased 43% in 1995 compared to 1994.
In the Towing & Recovery segment, 1996 net sales increased $8,152 or 9%
from 1995. The increase reflects a 10% improvement in sales of manufactured
equipment and an 8% rise in sales of truck chassis. Unit sales of rollback
carriers increased by less than 1% while the increase in unit sales of tow
truck bodies increased by 8%. Average selling prices for rollback carriers
were higher by 4% in 1996 as compared to 1995. Average tow truck equipment
selling prices increased by 20% in 1996 over 1995 reflecting increased sales
of medium and heavy-duty models. Net sales increased $21,047 or 30% in 1995
versus 1994. The increase was due to an equipment sales increase of 13% and
truck chassis sales increase of 52% over 1994. Unit sales of rollback carriers
increased 21%, while the volume of towing products were down 16% due to the
inability for a period of six months in 1995 to sell several models in the
light-duty product line following a patent settlement. A more advanced
light-duty towing product was introduced in the third quarter of 1995 and unit
sales of this new product had exceeded sales of the former product for
comparative periods in 1995 versus 1994. Average net selling prices for both
rollback carriers and tow truck bodies were higher, up 3% and 5%, respectively,
in 1995 compared to 1994.
GROSS PROFIT. ($ in 000's) The following table summarizes gross profit in
dollars and as a percent of sales by segment for the last three years:
<TABLE>
<CAPTION>
Segment 1996 % 1995 % 1994 %
- ------- ---- - ---- - ---- -
<S> <C> <C> <C> <C> <C> <C>
Vehicle Accessories $24,946 29% $22,137 27% $29,240 39%
Towing & Recovery 14,732 15% 14,222 16% 12,707 18%
------- --- ------- --- ------- ---
Total $39,678 22% $36,359 21% $41,947 29%
======= === ======= === ======= ===
</TABLE>
In 1996, gross margin in the Vehicle Accessories segment improved from 27%
to 29%. Margin rates improved primarily due to improved efficiencies and cost
reduction efforts in the manufacturing area. Manufacturing fixed cost
absorption rates also improved due to increased production volumes in 1996.
Manufacturing cost improvements were offset by a marked reduction in average
unit selling prices in the latter part of 1996. The implementation of an
aggressive pricing strategy was required to combat new competition in the
aftermarket channels. In 1995, gross margin in the Vehicle Accessories
segment declined 12 percentage points from 1994. Selling price decreased
coupled with increased material cost (raw material cost increases and higher
material usage to improve quality), a change to prepaid customer freight in
1995, and spending to improve manufacturing efficiency and product quality were
the reasons for the decline in gross margin. In 1995, approximately $1,898 of
non-recurring costs to improve manufacturing operations are reflected in gross
profit. The impact of these
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non-recurring costs was expected to be realized in lower unit production costs
beginning in the first quarter of 1996.
In the Towing & Recovery segment, gross margin in 1996 was 15% compared to
16% in 1995. The margin on manufactured equipment and service was 26% in 1996,
down 1% from 1995, which reflects the impact of increased sales of lower-margin
towing vehicles 1996. Margins on rollback carriers and light-duty tow trucks
remained consistent year to year. In 1995, gross margin was 16% compared to
18% in 1994. The margin on equipment sales was 27% in 1995, down 2% from the
prior year. In 1995, the increased costs of materials and product enhancements
were not completely offset by selling price increases and reductions realized
in fabrication costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. ($ in 000's) The following
table presents selling, general and administrative expenses by business segment
and as a percent of net sales for the last three years:
<TABLE>
<CAPTION>
% Net % Net % Net
Segment 1996 Sales 1995 Sales 1994 Sales
------- ---- ------ ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
Vehicle Accessories $17,949 21% $18,375 23% $14,905 20%
Towing & Recovery 8,596 9% 9,913 11% 7,555 11%
------ --- ------- --- ------- ---
Total $26,545 14% $28,288 16% $22,460 16%
======= === ======= === ======= ===
</TABLE>
Selling, general and administrative expenses (SG&A) were 6% less in 1996
compared to 1995, and two points less as a percentage of net sales. In 1995,
SG&A expenses were 26% higher compared to 1994, but as a percentage of net
sales were unchanged.
In the Vehicle Accessories segment, 1996 SG&A was $426 less than in 1995
and as a percentage of net sales was two full percentage points lower. The
overall spending reduction was primarily the result of the elimination of costs
associated with ZZ Wheelz which was closed in 1995. In 1995, SG&A was $3,470
higher than in 1994 and as a percentage of sales was three points higher. The
majority of the increase was attributable to the inclusion of the Benton
Division and ZZ Wheelz for a full year which had SG&A of $3,707 versus five
months in 1994 which had SG&A of $1,568. The remainder of the increase
reflects spending to facilitate a software conversion, increased advertising
and increased salaries and wages.
In the Towing & Recovery segment, 1996 SG&A was $1,317 lower than 1995 and
2% lower as a percentage of net sales. The reduction is primarily due to
approximately $1,103 in one-time charges related to patent litigation and the
write-off of a license agreement which are reflected in 1995 expenses, together
with savings attained in other areas in 1996. In 1995 SG&A was $2,358 higher
than 1994 but as a percent of net sales was unchanged. Approximately $1,103 in
one-time charges were related to patent litigation and the write-off of a
license agreement. The balance of the increase relates to new product
development related to the new medium-duty wrecker products and administrative
expenses associated with the new DeWalt Division.
DISPOSITION OF SUBSIDIARY ($ in 000's) In December 1995 the Company
decided to close its ZZ Wheelz operations. The pre-tax charge of $2,900 to
write off the investment and provide for anticipated costs to close the
operation was recorded in the fourth quarter of 1995.
INTEREST INCOME/(EXPENSE), NET. ($ in 000's) Net interest income was $629
in 1996, $358 in 1995 and $427 in 1994. The 1996 increase in net interest
income primarily reflects lower interest expense in 1996 due to lower
outstanding debt. The reduction in net interest income in 1995 versus 1994
reflects higher interest income on larger cash balances offset by increased
interest expense from higher debt.
OTHER INCOME/(EXPENSE), NET. ($ in 000's) Other income in 1996 is $59
versus an expense of $411 in 1995 and income of $86 in 1994. In 1996, other
income related primarily to a gain on disposal of fixed assets and Duramex
royalties. In 1995, other expense relates primarily to transaction and
devaluation losses associated with the Mexican peso. In 1994, other income
includes the gain from the sale of a bond fund, net of Mexican peso transaction
and devaluation losses.
MINORITY INTEREST. ($ in 000's) Minority interest reflects the minority
shareholders' portion of the net income of Duramex which began operations in
April 1993. The minority interest elimination was $124 in 1996 compared to
$73 and $143 in 1995 and 1994, respectively.
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PROVISION FOR INCOME TAXES. The Company's effective tax rate was 35% in
1996, 54% in 1995 and 39% in 1994. The effective tax rate in 1996 is equal to
the statutory rate of 35%. The difference between 1995 effective rate and the
statutory rate of 35% is primarily due to the non-deductible portion of the
loss on disposition of ZZ Wheelz and a provision for state income taxes. The
difference between the 1994 effective rate and the statutory rate of 35% was
primarily due to a provision for state income taxes.
NET INCOME. ($ in 000's) Net income was $8,904 in 1996, $2,299 in 1995,
and $12,101 in 1994. The increase of $6,605 in 1996 reflects improved gross
margins and lower SG&A expenses.
The 1995 decrease of $9,802 from 1994 was primarily the result of lower
gross margins in both business segments, non-recurring charges related to the
loss on disposition of the ZZ Wheelz business unit, costs related to
re-engineering the manufacturing operations at the pickup truck bedliner
plants, expenses to consolidate manufacturing operations in the Vehicle
Accessories segment and costs associated with a patent settlement in the Towing
& Recovery segment.
Management does not believe that inflation had a significant impact on the
Company's operations during the last three years.
LIQUIDITY AND CAPITAL RESOURCES ($ in 000's)
At year-end 1996, the Company's cash balance was $8,597, compared to
$12,757 at year-end 1995 and $11,628 at year-end 1994. The current ratio was
3.2 at December 31, 1996 versus 2.3 in 1995 and 2.4 in 1994. During 1996, cash
of $3,350 was provided by operations versus $8,944 in 1995 and $12,488 in 1994.
Cash used in investing activities in 1996 was $5,774 compared to $6,636 in
1995 and $14,230 in 1994. The main usage of cash in 1996 was to build
inventories to service a new customer in the first quarter of 1997 and for the
purchase of equipment. In 1995, the main use of cash was for the purchase of
equipment. In 1994, the main uses of cash were investments in Benton Plastics
and ZZ Wheelz. Financing activities resulted in a net cash use of $1,722 in
1996 compared to $1,462 in 1995 and $1,755 in 1994. The decrease in cash in
1996 was $4,160 versus a net cash increase of $1,129 in 1995.
The Company's anticipated internal cash flow is expected to provide
sufficient liquidity to fund its near-term working capital needs. The Company
believes that its long-term working capital and other investment needs will be
satisfied through its internal cash flow and future borrowings, if necessary.
The Company also maintains a $20,000 revolving credit facility. There were no
borrowings against this facility as of December 31, 1996. However, letters of
credit have been issued against the credit line totaling $800 at December 31,
1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary financial information included
in this Report are set forth on the Index to Consolidated Financial Statements
and Financial Statement Schedule appearing on page F-1 of this Report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III
The information called for by the items within this part will be included
in the Company's 1997 Proxy Statement, and is incorporated herein by reference,
as follows:
<TABLE>
<CAPTION>
Captions(s) in 1997
Proxy Statement
------------------
<S> <C> <C>
ITEM 10. Directors and Executive Officers of the "Election of Directors", "Other Information
Registrant Relating To Directors" and "Executive Officers"
ITEM 11. Executive Compensation "Compensation of Executive Officers and Directors"
ITEM 12. Security Ownership of Certain "Election of Directors"
Beneficial Owners and Management
ITEM 13. Certain Relationships and Related "Certain Transactions with Management"
Transactions
</TABLE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULE AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements:
The financial statements filed with this Report are listed on page F-1.
2. Financial Statement Schedule:
The financial statement schedule filed with this Report is listed on
page F-1. Other financial statement schedules, for which provision is
made in the applicable accounting regulations of the Securities and
Exchange Commission, are not required under the related instructions or
are inapplicable and, therefore, have been omitted.
3. Exhibits:
The exhibits filed with this Report are listed on the "Exhibit Index"
on page E-1.
(b) Reports on Form 8-K.
The Company was not required to file any current reports on Form 8-K
during the quarter ended December 31, 1996, and none was filed during
that period.
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized, on March 21, 1997.
DURAKON INDUSTRIES, INC.
By: /s/David W. Wright
---------------------------------
David W. Wright, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated on March 21, 1997.
Signature Title
--------- -----
/s/David W. Wright Director (Principal Executive Officer)
- ------------------------
David W. Wright
/s/Thomas A. Galas Senior Vice President, Chief Financial Officer
- ------------------------ (Principal Financial and Accounting Officer)
Thomas A. Galas
/s/David Aronow Director
- ------------------------
David Aronow
/s/Phillip Wm. Fisher Director
- ------------------------
Phillip Wm. Fisher
/s/Richard J. Jacob Director
- ------------------------
Richard J. Jacob
/s/James P. Kelly Director
- ------------------------
James P. Kelly
/s/Robert M. Teeter Director
- ------------------------
Robert M. Teeter
<PAGE> 11
DURAKON INDUSTRIES, INC. AND SUBSIDIARIES
INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Durakon Industries, Inc. are
referred to in Item 8:
Page
----
Report of Independent Accountants F-2
Consolidated Balance Sheets - December 31, 1996 and 1995 F-3
Consolidated Statements of Income - Years ended
December 31, 1996, 1995 and 1994 F-4
Consolidated Statements of Shareholders' Equity - Years
ended December 31, 1996, 1995 and 1994 F-5
Consolidated Statements of Cash Flows - Years ended
December 31, 1996, 1995 and 1994 F-6
Notes to consolidated financial statements F-7 to F-17
The following consolidated financial statement schedule of Durakon Industries,
Inc. is included herein:
Schedule II -- Valuation and qualifying accounts S-1
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
F-1
<PAGE> 12
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Durakon Industries, Inc.:
We have audited the consolidated financial statements and financial statement
schedule of Durakon Industries, Inc. and Subsidiaries listed in the index on
page F-1 of this Form 10-K. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule 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 Durakon
Industries, Inc. and Subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
Coopers & Lybrand, L.L.P.
Detroit, Michigan
February 21, 1997
F-2
<PAGE> 13
DURAKON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
($ in 000's)
<TABLE>
<CAPTION>
1996 1995
ASSETS ---- ----
<S> <C> <C>
Current assets:
Cash and equivalents $ 8,597 $12,757
Accounts receivable, less allowances of $637 and $640 20,175 17,468
Inventories 18,427 12,140
Prepaid expenses and other current assets 2,005 1,141
Deferred income taxes 2,245 2,526
------- -------
Total current assets 51,449 46,032
Property, plant and equipment less accumulated depreciation
of $24,656 and $20,673 20,754 18,346
Goodwill 11,278 13,870
Patents, less accumulated amortization of $1,804 and $2,369 406 507
Other assets 192 114
------- -------
TOTAL ASSETS $84,079 $78,869
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 251 $ 1,342
Accounts payable 9,940 10,058
Other current liabilities 6,108 8,936
------- -------
Total current liabilities 16,299 20,336
------- -------
Long-term debt 795 1,572
Deferred income taxes 1,050 346
Minority interest 175 59
------- -------
Total long-term liabilities 2,020 1,977
------- -------
Shareholders' equity:
Preferred stock, $1 par value - 100,000 shares authorized;
none issued -- --
Common stock, without par value - 15,000,000 shares authorized;
6,565,292 and 6,520,292 shares issued and outstanding 21,820 21,506
Accumulated translation adjustment (289) (275)
Retained earnings 44,229 35,325
------- -------
Total shareholders' equity 65,760 56,556
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $84,079 $78,869
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 14
DURAKON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
($ in 000's, except per share amounts)
1996 1995 1994
---- ---- ----
Net sales $183,628 $172,051 $144,483
Cost of products sold 143,950 135,692 102,536
-------- -------- -------
Gross profit 39,678 36,359 41,947
Selling, general and
administrative expenses 26,545 28,288 22,460
Disposition of subsidiary -- 2,900 --
-------- -------- -------
Operating income
13,133 5,171 19,487
Interest income 778 775 612
Interest expense (149) (417) (185)
Other income/(expense), net 59 (411) 86
Minority interest (124) (73) (143)
-------- -------- -------
Income before income taxes 13,697 5,045 19,857
Provision for income taxes 4,793 2,746 7,756
-------- -------- -------
Net income $ 8,904 $ 2,299 $12,101
======== ======== =======
Net income per share of common stock $ 1.34 $ 0.34 $ 1.82
======== ======== =======
Weighted average shares (000's) 6,647 6,687 6,654
======== ======== =======
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 15
DURAKON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
($ in 000's)
<TABLE>
<CAPTION>
Shares Equity
------- -------------------------------
Accumulated
Common Common Translation Retained
Stock Stock Adjustment Earnings
------- -------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 6,476,359 $ 20,748 -- $ 20,925
--------- -------- ---- --------
Exercise of stock options 3,333 41 -- --
Issuance of common stock 40,600 710 -- --
Tax benefit of exercised options -- 7 -- --
Net income -- -- -- 12,101
Translation adjustments -- -- ($295) --
--------- -------- ---- --------
Balance at December 31, 1994 6,520,292 21,506 (295) 33,026
--------- -------- ---- --------
Net income -- -- -- 2,299
Translation adjustments -- -- 20 --
--------- -------- ---- --------
Balance at December 31, 1995 6,520,292 21,506 (275) 35,325
--------- --------- ---- --------
Exercise of stock options 45,000 146 -- --
Tax benefit of exercised options -- 168 -- --
Net income -- -- -- 8,904
Translation adjustments -- -- (14) --
--------- -------- ---- --------
Balance at December 31, 1996 6,565,292 $ 21,820 ($289) $ 44,229
========= ======== ==== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 16
DURAKON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
($ in 000's)
<TABLE>
<CAPTION>
1996 1995 1994
----- ---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,904 $ 2,299 $12,101
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,179 5,002 3,897
Increase/(decrease) in minority interest, net 116 (222) 41
Increase/(decrease) in deferred income taxes 1,153 (1,084) (570)
Gain/(loss) on disposal of property, plant and equipment (36) 440 (83)
Net decrease/(increase) of other assets (82) 15 462
Increase/(decrease) due to changes in operating assets
and liabilities:
Accounts receivable (2,711) (2,454) (2,067)
Inventories (6,282) 1,462 (3,186)
Prepaid expenses and other current assets (859) 372 1,199
Accounts payable (124) 1,180 2,302
Accrued expenses and other current liability (908) 1,934 (1,608)
------- ------- -------
Net cash provided by operating activities 3,350 8,944 12,488
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (5,932) (6,763) (3,395)
Purchase of Benton Plastics and ZZ Wheelz -- -- (11,861)
Proceeds from cash receipt on note receivable -- -- 836
Proceeds from sale of property, plant and equipment 158 127 190
------- ------- -------
Net cash used in investing activities (5,774) (6,636) (14,230)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in long-term debt (1,868) (1,659) (3,039)
Proceeds from issuance of debt -- 197 1,243
Cash proceeds from exercise of stock options 146 -- 41
------- ------- -------
Net cash used in financing activities (1,722) (1,462) (1,755)
------- ------- -------
Effect of exchange rate changes on cash (14) 283 (424)
------- ------- -------
CASH AND EQUIVALENTS:
Increase/(decrease) for year (4,160) 1,129 (3,921)
Balance, beginning of year 12,757 11,628 15,549
------- ------- -------
BALANCE, END OF YEAR $ 8,597 $12,757 $11,628
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 17
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Durakon
Industries, Inc. and its domestic wholly-owned subsidiaries and foreign
majority-owned subsidiary (the "Company"). All significant
intercompany accounts and transactions have been eliminated.
CASH AND EQUIVALENTS:
At December 31, 1996, 1995 and 1994, substantially all cash was held
at Comerica Bank.
For purposes of the statement of cash flows, cash and equivalents include
cash on hand, amounts due from banks and debt instruments purchased with an
original maturity of three months or less.
INVENTORIES:
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method for the Vehicle Accessories segment
and the last-in, first-out (LIFO) method for the Towing & Recovery segment.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Depreciation is provided
on the straight-line method over the estimated useful lives of the assets.
Upon retirement or disposal of assets the costs and accumulated depreciation
are removed from the related accounts, and any gain or loss is included in
income.
INTANGIBLES:
Goodwill is being amortized using the straight-line method over periods not
exceeding 20 years. At each balance sheet date, management assesses whether
there has been an impairment in the carrying value of goodwill, primarily by
comparing current and projected sales, operating income and annual cash
flows with the carrying value of the assets. Purchase costs of patents are
being amortized using the straight-line method over the legal lives of the
patents, not to exceed 17 years.
RETIREMENT PLANS:
The Company has defined contribution retirement plans covering substantially
all employees. The Company's policy is to fund retirement costs accrued.
INCOME TAXES:
Income taxes are provided based on the liability method of accounting
pursuant to Statement of Financial Accounting Standards (FASB) No. 109,
"Accounting for Income Taxes". Deferred income taxes are recorded to
reflect the tax liability/benefit on future years of differences between the
tax basis and financial reporting amount of assets and liabilities at each
year-end.
FOREIGN CURRENCY TRANSLATION:
The assets and liabilities of the Company's foreign operation are translated
into U.S. dollars at current exchange rates, and revenues and expenses are
translated at average exchange rates for the year. Resulting translation
adjustments are reflected as a separate component of shareholders' equity.
Currency transaction gains and losses are reported in income.
F-7
<PAGE> 18
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NET INCOME PER SHARE OF COMMON STOCK:
Net income per share of common stock is based on the weighted average number
of common shares outstanding after giving effect for common stock
equivalents arising from stock options.
SEGMENTS:
The Company operates in two business segments, Vehicle Accessories and
Towing & Recovery.
REPORTING:
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.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS:
In March 1997, the FASB issued SFAS 128, "Earnings Per Share." SFAS 128
supersedes APB 15, "Earning Per Share," and simplifies the computation of
earning per share ("EPS") by replacing the "primary" EPS requirements of APB
15 with a "basic" EPS computation based upon weighted shares outstanding.
The new standard requires a dual presentation of basic and diluted EPS.
Diluted EPS is similar to "fully diluted" EPS required under APB 15. The
Company will adopt the provisions of this statement, as required, in 1997.
The impact the adoption of this statement is expected to have on the
financial statements has not yet been determined.
F-8
<PAGE> 19
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. ACQUISITIONS ($ IN 000'S)
On July 29, 1994, Benton Plastics, Inc. ("Benton") was acquired for
$14,388. Benton is a manufacturer of bedliners with production
facilities in Maine and Tennessee. In 1995, manufacturing operations
were terminated in Maine.
The acquisition was accounted for as a purchase with the results of
Benton included from the acquisition date. The fair value of assets
acquired, including goodwill, was $16,753 and liabilities assumed totaled
$2,464. Goodwill of $13,273 is being amortized over 20 years on a
straight-line basis.
On June 10, 1994, G.C. Concepts, Inc. doing business as ZZ Wheelz, Inc.
was acquired for $656 in cash plus other consideration. ZZ Wheelz
manufactures and assembles wheel covers.
The acquisition was accounted for as a purchase with the results of ZZ
Wheelz included from the acquisition date. The fair value of assets
acquired, including goodwill, was $2,751 and liabilities assumed totaled
$1,385. Goodwill of $2,138 was being amortized over 15 years on a
straight-line basis. The disposition of ZZ Wheelz resulted in the
write-off of goodwill during 1995.
3. INVENTORIES
Inventories are summarized below ($ in 000's):
December 31,
-------------------
1996 1995
---- ----
[S] [C] [C]
Raw materials and work in process . . . . . . . . . $ 8,722 $ 5,838
Finished goods. . . . . . . . . . . . . . . . . . . 9,705 6,302
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . $18,427 $12,140
======= =======
The LIFO method of inventory valuation is used to value the inventory of
the Towing & Recovery segment, which represented approximately 54% of total
inventory at December 31, 1996 and 55% at December 31, 1995. The effect of LIFO
adjustments was to reduce net income by $181 in 1996 and $316 in 1995. At
December 31, 1996 and 1995, the Company's LIFO reserve was $1,547 and $1,276,
respectively.
F-9
<PAGE> 20
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment is shown below ($ in 000's):
<TABLE>
<CAPTION>
December 31,
------------
1996 1995
---- ----
<S> <C> <C>
Land. . . . . . . . . . . . . . . . . $ 1,990 $ 1,911
Buildings . . . . . . . . . . . . . . 8,137 8,055
Machinery and equipment . . . . . . . 35,283 29,053
------- -------
Total property, plant and equipment . 45,410 39,019
Less accumulated depreciation . . . . 24,656 20,673
------- -------
Net property, plant and equipment . . $20,754 $18,346
======= =======
</TABLE>
5. OTHER CURRENT LIABILITIES
A summary of other current liabilities is shown below ($ in 000's):
<TABLE>
<CAPTION>
December 31,
-----------------
1996 1995
---- ----
<S> <C> <C>
Accrued compensation . . . . . . . . . . . . . . . $1,594 $2,201
Legal reserve . . . . . . . . . . . . . . . . . . 1,031 1,004
Workers' compensation . . . . . . . . . . . . . . 369 233
Accrued income taxes . . . . . . . . . . . . . . . 89 --
Reserve for disposition of subsidiary. . . . . . . 362 2,900
Commission and royalties . . . . . . . . . . . . . 374 617
Health insurance . . . . . . . . . . . . . . . . . 532 521
Other . . . . . . . . . . . . . . . . . . . . . . 1,757 1,460
------ ------
Total . . . . . . . . . . . . . . . . . . . . . . $6,108 $8,936
====== ======
</TABLE>
6. RETIREMENT PLANS
Employer contributions to the 401(k) retirement plans amounted to $435
in 1996, $389 in 1995 and $368 in 1994.
7. LEASES
Rental expense under operating leases approximated $2,539 in 1996, $2,396
in 1995 and $2,019 in 1994. At December 31, 1996, future minimum lease
commitments under these leases were as follows:
Year ending December 31 ($ in 000's):
1997. . . . . . . . . . . . . . . . . . . . . $ 2,381
1998. . . . . . . . . . . . . . . . . . . . . 1,912
1999. . . . . . . . . . . . . . . . . . . . . 1,646
2000. . . . . . . . . . . . . . . . . . . . . 1,030
2001 and thereafter . . . . . . . . . . . . . 5,049
-------
$12,018
=======
F-10
<PAGE> 21
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. CONTINGENCIES ($ IN 000'S)
The Company is contingently liable under the terms of agreements covering
certain of its customer's financing arrangements. The agreements provide
for the repurchase of products sold to customers in the event of default by
the customer to the financing company. The contingent liability under
these agreements was approximately $8,502 and $5,800 at December 31, 1996
and 1995, respectively. The Company has incurred no material losses
related to these agreements.
9. LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consisted of the following at December 31 ($ in 000's):
1996 1995
---- ----
<S> <C> <C>
Note payable, interest at 6%, to employees of Company, $1,000 due
August 31, 1996, collateralized by a standby letter of credit . . . . . . . $ -- $1,000
Duramex note payable to bank, interest at Libor plus 2.675%, which was
8.36% at December 31, 1996 and 1995, due in semi-annual installments
of $51 through 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 448
Promissory notes to individuals, interest at 10%, interest paid annually,
principal due March 26, 1998 . . . . . . . . . . . . . . . . . . . . . . . -- 539
Loan payable to Pennsylvania Industrial Development Association,
interest at 2%, due in monthly installments of $3, through 2009 . . . . . . 368 393
Loan payable to Machinery and Equipment Loan Fund, interest at 2%,
due in monthly installments of $4, through 2001 . . . . . . . . . . . . . . 230 273
Duramex note payable to bank, interest at Libor plus 2.675%, which was
8.36% at December 31, 1996 and 1995, due in semi-annual installments
of $33, through 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 173
Note payable, net of imputed interest at 7.45%, of $11 in 1995 and
$22 in 1994, due in monthly installments of $8, through 1996. . . . . . . . -- 88
------ ------
1,046 2,914
Less current maturities. . . . . . . . . . . . . . . . . . . . . . . . . . . 251 1,342
------ ------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 795 $1,572
====== ======
Maturities of long-term debt during the next five years are $251, $257,
$191, $84 and $84.
The Company has a $20,000 unsecured revolving credit agreement with
Comerica Bank which expires June 30, 1997. Four standby letters of credit
totaling $800 reduced the available balance to $19,200 at December 31,
1996.
</TABLE>
F-11
<PAGE> 22
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company adopted the disclosure requirements of Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation", effective with the 1996 financial statements. The Company,
however, has elected to continue to measure compensation cost using the
intrinsic value method, in accordance with APB Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees".
The Company has stock options outstanding under the 1988 Stock Option Plan
and the 1996 Stock Option Plan. Under the 1988 Stock Option Plan, the
Company has made available 500,000 shares of common stock for key
employees. The options vest and become exercisable in equal annual
installments, generally over a period of 4 years. In the 1988 and 1996
plans, the options expire after a period of 10 years. Certain options
which were issued in 1995 were immediately exercisable. At December 31,
1996, there were 20,734 shares that remained available for grant under the
1988 plan.
Under the 1996 Stock Option Plan, the Company has made available 500,000
shares of common stock for key employees. The options vest and become
exercisable in equal annual installments as defined in the agreements. At
December 31, 1996, there were 350,000 share that remained available for
grant under this plan.
In addition to the aforementioned plan, the Company has a stock option
agreement under which the Company has made available and granted 100,000
shares of common stock for this agreement. During 1996, no options were
exercised under this agreement.
Information concerning stock options under the 1988 and 1996 plans are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- ------------------ ---------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Shares Price Shares Price Shares Price
-------------------- ------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 468,334 $11.50 258,334 $ 6.68 241,667 $ 5.46
Options granted 150,000 $12.69 230,000 $16.00 20,000 $16.25
Options exercised 45,000 $3.25 -- -- 3,333 $12.25
Options canceled 3,334 $12.25 20,000 $16.25 -- --
Outstanding at December 31 570,000 $12.67 468,334 $11.98 258,334 $ 6.68
Exercisable at December 31 257,500 $10.10 248,334 $ 6.01 210,000 $ 6.09
</TABLE>
The fair value of each option grant was estimated as of the date of the grant
using the Black-Scholes option-pricing model with the following assumptions used
for options granted in:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Estimated fair value per share of options granted during the year $6.22 $8.71
Assumptions:
Dividend yield 0% 0%
Common stock volatility 45.34% 54.66%
Risk-free rate of return 6.3% 6.6%
Expected option term (in years) 5 5
</TABLE>
F-12
<PAGE> 23
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. ACCOUNTING FOR STOCK-BASED COMPENSATION (CONTINUED)
The Company has elected to continue applying the provisions of APB 25 and,
accordingly, no stock option compensation cost is included in income for
the 1988 and 1996 Plans. Had stock option compensation cost for these
plans been determined based on the fair value at the 1996 and 1995 grant
dates for awards under those Plans consistent with the methodology of SFAS
123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
---------------------------- -------------------------
As reported Pro forma* As reported Pro forma*
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net Income (in 000's) $8,904 $8,286 $2,299 $1,986
Net income per common share $1.34 $1.25 $0.34 $0.30
</TABLE>
* The pro forma disclosures may not be representative of the effects on
reported net income and earnings per share because only stock options
granted beginning in 1995 are reflected in the pro forma amounts. Other
factors that may impact pro forma disclosures in future years include the
vesting period of stock options, timing of additional grants and number of
additional shares granted.
The following table summarizes the status of the Company's stock
options outstanding and exercisable at December 31, 1996:
<TABLE>
<CAPTION>
------------------------------------- -------------------------
Stock Options Stock Options
Outstanding Exercisable
------------------------------------- -------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Shares Contractual Exercise Shares Exercise
Exercise Prices (000's) Life Price (000's) Price
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 3.25 - $ 8.50 180 4.7 $ 4.08 180 $ 4.08
$ 8.51 - $12.69 200 4.7 $12.64 10 $12.50
$12.70 - $16.00 190 8.3 $15.88 68 $15.65
- -------------------------------------------------------------------------------------
Total 570 258
- -------------------------------------------------------------------------------------
</TABLE>
F-13
<PAGE> 24
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Business Segments
The Company operates in two segments, Vehicle Accessories and Towing &
Recovery. The Vehicle Accessories segment manufactures and distributes
pickup truck bedliners and other vehicle accessories. The Towing &
Recovery segment manufactures and mounts systems on purchased and
customer-supplied truck chassis, which provide the converted trucks with
the ability to transport vehicles ranging in size from automobiles to
heavy equipment. Foreign assets, revenues and export sales each
represent less than 10% of the Company's total.
Information regarding the Company's segments follows ($ in 000's):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net sales:
Vehicle Accessories $ 85,109 $ 81,684 $ 75,163
Towing & Recovery 98,519 90,367 69,320
-------- -------- --------
$183,628 $172,051 $144,483
======== ======== ========
Operating profit:
Vehicle Accessories $ 6,997 $ 862 $ 14,335
Towing & Recovery 6,136 4,309 5,152
-------- -------- --------
$ 13,133 $ 5,171 $ 19,487
======== ======== ========
Depreciation and amortization:
Vehicle Accessories $ 3,413 $ 3,780 $ 3,147
Towing & Recovery 766 1,222 750
-------- -------- --------
$ 4,179 $ 5,002 $ 3,897
======== ======== ========
Capital expenditures:
Vehicle Accessories $ 3,227 $ 6,079 $ 2,371
Towing & Recovery 2,705 684 1,024
-------- -------- --------
$ 5,932 $ 6,763 $ 3,395
======== ======== ========
Identifiable assets:
Vehicle Accessories $ 56,317 $ 57,546 $ 57,129
Towing & Recovery 27,789 21,323 18,413
-------- -------- --------
$ 84,106 $ 78,869 $ 75,542
======== ======== ========
</TABLE>
F-14
<PAGE> 25
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. INCOME TAXES
The provisions for income taxes are summarized below ($in 000's):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal income taxes:
Currently payable . . . . . . . . $3,156 $3,227 $6,275
Deferred. . . . . . . . . . . . . 1,208 (935) 302
------ ------ ------
4,364 2,292 6,577
State income taxes . . . . . . . . 429 454 1,179
------ ------ ------
Provision for income taxes . . . . $4,793 $2,746 $7,756
====== ====== ======
</TABLE>
Temporary differences which give rise to the deferred tax assets and
liabilities as of December 31, 1996 and 1995 are as follows ($ in 000's):
<TABLE>
<CAPTION>
1996 1995
---- ----
Deferred Deferred Tax Deferred Deferred Tax
Tax Asset Liability Tax Asset Liability
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Depreciation and goodwill amortization -- $895 -- $ 614
Bad debt allowance . . . . . . . . . . . . . . . $ 224 -- $ 224 --
Inventory . . . . . . . . . . . . . . . . . . . . 377 -- 493 --
Litigation reserve . . . . . . . . . . . . . . . 339 -- 329 --
Reserve for disposition of subsidiary . . . . . . 75 -- 398 --
Vacation pay accrual . . . . . . . . . . . . . . 206 -- 187 --
Reserve for returns and allowances. 186 -- 252 --
Warranty reserve . . . . . . . . . . . . . . . . 167 -- 95 --
Patent amortization . . . . . . . . . . . . . . . 145 -- 387 --
Reserve employee health benefit
claims . . . . . . . . . . . . . . . . . . 283 -- 205 --
Other miscellaneous accrued and
prepaid expenses . . . . . . . . . . . . . 88 -- 224 --
------ ---- ------ -----
Total deferred taxes $2,090 $895 $2,794 $ 614
====== ==== ====== =====
</TABLE>
The consolidated income tax provision was different than the amount
computed using the United States statutory income tax rate for the reasons
set forth in the following table ($ in 000's):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- -----
<S> <C> <C> <C>
Tax at the statutory rate . . . . . . . . . . . . . . . $4,658 $1,715 $6,950
State income taxes . . . . . . . . . . . . . . . . . . 279 295 766
Change in valuation allowance . . . . . . . . . . -- -- (53)
Non-deductible loss from disposition of
subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . (114) 599 --
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30) 137 93
------ ------ ------
Provision for income tax. . . . . . . . . . . . . . . $4,793 $2,746 $7,756
====== ====== ======
Effective tax rate. . . . . . . . . . . . . . . . . . . . . 35.0% 54.4% 39.1%
====== ====== ======
</TABLE>
F-15
<PAGE> 26
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. STATEMENT OF CASH FLOWS ADDITIONAL INFORMATION
Supplemental disclosures of cash flow information ($ in 000's):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 200 $ 420 $ 79
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . $3,430 $4,165 $7,440
</TABLE>
Supplemental non-cash investing activities:
In 1996 the Company received a $168 tax benefit from the exercise of stock
options. In 1995 there were no stock options exercised. In 1994 the
Company received a $7 tax benefit from the exercise of stock options.
In connection with the acquisition of Benton Plastics in 1994, the Company
had recorded $1,000 to be paid over the next year to the former owners of
Benton.
14. OTHER INCOME AND (EXPENSE) ($ IN 000'S)
Net other income for 1996 of $59 primarily represents $36 of a gain on the
sale of property, plant and equipment and $16 of Duramex royalties.
Net other expense for 1995 of ($411) represents a loss due to the change
in exchange rates of the Mexican peso of ($438) which was offset by
miscellaneous income items.
Net other income for 1994 of $86 primarily represents gain on the sale of
property, plant and equipment partially offset by an additional provision
for contingent lease transactions.
F-16
<PAGE> 27
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following presents financial data regarding the Company's quarterly
results of operations for 1996 and 1995 ($ in 000's, except per share
amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter (a)
------- ------ ------ ----------
<S> <C> <C> <C> <C>
1996:
Net sales. . . . . . . . . . . . . . . . . . . . $43,895 $49,430 $46,253 $44,050
Gross profit. . . . . . . . . . . . . . . . . . . 10,156 11,458 9,240 8,824
Net income . . . . . . . . . . . . . . . . . . . . 2,138 2,757 1,932 2,077
Net income per share of common
stock . . . . . . . . . . . . . . . . . . . . . . $ 0.32 $ 0.42 $ 0.29 $ 0.31
1995:
Net sales. . . . . . . . . . . . . . . . . . . . . . $44,044 $42,667 $42,596 $42,744
Gross profit. . . . . . . . . . . . . . . . . . . . 11,509 10,722 8,211 5,917
Net income/(loss) . . . . . . . . . . . . . . . 2,868 3,072 925 (4,566)
Net income/(loss) per share of common
stock . . . . . . . . . . . . . . . . . . . . . . . $ 0.43 $ 0.46 $ 0.14 $ (0.69)
</TABLE>
(a) 1995 fourth quarter adjustments, relating to the disposition
of the ZZ Wheelz subsidiary ($2,900 before tax) reduced net income by
$2,490 ($0.37 per share), the re-engineering and consolidation of bedliner
manufacturing operations charges reduced gross profit by $1,606 and net
income $1,028 ($0.15 per share), and the patent settlement, license
write-down and outside engineering ($642 before tax) reduced net income by
$398 ($0.06 per share).
16. DISPOSITION OF SUBSIDIARY ($ IN 000'S, EXCEPT PER SHARE AMOUNTS)
On December 12, 1995, the Company decided to dispose of its ZZ Wheelz
subsidiary in Richardson, Texas. The disposal of ZZ Wheelz was
substantially completed in 1996. A $2,900 charge was recorded in the
fourth quarter of 1995 to write-off the investment and provided for
anticipated costs to close the facility. The operation had a net loss of
$560 or $0.08 per share in 1995.
17. SUBSEQUENT EVENTS
In the first quarter of 1997, the Company had repurchased 400,000 shares
of its outstanding common stock at a price of $13 per share. The shares
were retired. The Company believes that the repurchase of 6% of its
outstanding common stock will have a positive impact on the value of the
shareholders' investment.
F-17
<PAGE> 28
DURAKON INDUSTRIES, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
($ in 000's)
<TABLE>
<CAPTION>
Balance at Charged to
beginning costs an Other Charges Balance at
Year Description of year expenses accounts add (deduct) end of year
- --- ----------- -------- --------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1996 Allowance for doubtful
accounts. . . . . . . . . ($640) ($478) $481 (1) ($637)
Patents, net of accumulated
amortization. . . . . . . $507 ($131) ($26) (5) $56 (3) $406
Non-compete, net of
accumulated amortization $143 ($143) $0
Goodwill, net of accumulated
amortization. . . . . . . $13,870 ($676) ($1,916) (5) $11,278
1995 Allowance for doubtful
accounts. . . . . . . . . ($474) ($221) -- $55 (1) ($640)
Patents, net of accumulated
amortization. . . . . . . $1,122 ($615) -- $507
Non-compete, net of
accumulated amortization. . $203 ($60) -- $143
Goodwill, net of accumulated
amortization. . . . . . . $15,078 ($885) ($323) (4) $13,870
1994 Allowance for doubtful
accounts. . . . . . . . . ($374) ($174) -- $51 (1) ($474)
$23 (2)
Patents, net of accumulated
amortization. . . . . . . $1,345 ($254) -- $29 (2) $1,122
$2 (3)
Non-compete, net of
accumulated amortization. . $136 ($133) -- $200 (3) $203
Goodwill, net of accumulated
amortization. . . . . . . -- ($333) -- $15,411 (3) $15,078
</TABLE>
(1) Bad debts written off, net of recoveries.
(2) Adjustment due to acquisition of subsidiaries.
(3) Amount represents addition to goodwill, patent and non-compete agreement.
(4) Adjustments to prior acquisitions within last 18 months.
(5) Adjustment for write off of ZZ Wheelz.
S-1
<PAGE> 29
EXHIBIT INDEX
Exhibit Sequential
Number Description of Exhibit Page Number
3(a) Articles of Incorporation of Durakon Industries, Inc., as amended
(4)
3(b) By-laws of Durakon Industries, Inc., as amended (4)
10.1 Employees' Retirement Savings Plan, as amended and restated (5)
10.4 1988 Stock Option Plan, as amended (6)
10.5 $20,000,000 Revolving Credit Loan Agreement by and between Durakon
Industries, Inc. and Comerica Bank, dated October 17, 1994, as
amended (2)
10.20 Consulting Agreement, dated August 1, 1994, by and between Durakon
Industries, Inc. and Robert Teeter (2)
10.22 Non-Qualified Stock Option Agreement, dated August 5, 1991, between
Durakon Industries, Inc. and Robert Teeter (4)
10.26 Indemnity Agreement, dated June 11, 1991, between Durakon Industries,
Inc. and Phillip Wm. Fisher (4)
10.28 Indemnity Agreement, dated August 8, 1991, between Durakon
Industries, Inc. and Robert Teeter (4)
10.30 Indemnity Agreement, dated June 11, 1991, between Durakon Industries,
Inc. and David W. Wright (4)
10.31 Indemnity agreement, dated October 25, 1993, between Durakon
Industries, Inc. and Richard J. Jacob (3)
10.32 Indemnity Agreement, dated May 16, 1995, between Durakon Industries,
Inc. and James P. Kelly (1)
10.33 Indemnity Agreement, dated July 18, 1995, between Durakon Industries,
Inc. and David S. Aronow (1)
10.34* Employment Agreement, dated June 27, 1996, effective July 1, 1996, by
and between Durakon Industries, Inc. and David Wright
10.35* Non-Qualified Stock Option Agreement, dated June 27, 1996 between
Durakon Industries, Inc. and David Wright
10.36* Employment Agreement, dated July 1, 1996 by and between Durakon
Industries, Inc. and Jim Kelly
E-1
<PAGE> 30
10.37* 1996 Stock Option Plan
10.38* Non-Qualified Stock Option Agreement, dated May 16, 1995
between Durakon Industries, Inc. and Thomas A. Galas
10.39* Non-Qualified Stock Option Agreement, dated May 16, 1995
between Durakon Industries, Inc. and James P. Kelly
10.40* Non-Qualified Stock Option Agreement, dated April 1, 1996
between Durakon Industries, Inc. and David Wright
11* Calculation of Earnings Per Share
21* Subsidiaries of the Registrant
23.1* Consent of Independent Accountants
* Filed with this Report
(1) Previously filed under the corresponding Exhibit Number as an exhibit
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995, and incorporated herein by reference.
(2) Previously filed under the corresponding Exhibit Number as an exhibit
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.
(3) Previously filed under the corresponding Exhibit Number as an exhibit
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.
(4) Previously filed under the corresponding Exhibit Number as an exhibit
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by reference.
(5) Previously filed under the corresponding Exhibit Number as an exhibit
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990, and incorporated herein by reference.
(6) Previously filed under the corresponding Exhibit Number as an exhibit
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1987, and incorporated herein by reference.
E-2
<PAGE> 1
EXHIBIT 10.34
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made on June 27, 1996,
effective as of July 1, 1996, between Durakon Industries, Inc., a Michigan
corporation (the "Company"), and David W. Wright ("Mr. Wright").
RECITALS
A. Mr. Wright presently serves as the president of the bedliner
operations of the Company.
B. The Company desires to continue to employ Mr. Wright and to
name Mr. Wright as president and chief executive officer of the consolidated
Company, and Mr. Wright desires to serve as president and chief executive
officer of the consolidated Company, pursuant to the terms of this Agreement.
Therefore, the parties agree as follows:
1. DUTIES AND NATURE OF EMPLOYMENT. During the Employment Term (as
defined in Section 2.1 below), Mr. Wright shall, in accordance with this
Agreement, (a) be employed by the Company as president and chief executive
officer of the consolidated Company, (b) report directly to the Board of
Directors of the Company and (c) devote his working time, attention and best
efforts to the business of the Company. The Company shall use its best efforts
to have Mr. Wright named as nominee for the office of director of the Company
at each annual meeting of shareholders during the Employment Term (as defined
below).
2. TERM.
2.1 Employment Term. The term of Mr. Wright's employment under
this Agreement (the "Employment Term") shall begin on July 1, 1996 and shall
continue until terminated in accordance with Section 2.2 of this Agreement.
Notwithstanding the termination of the Employment Term pursuant to Section 2.2
below, Mr. Wright's obligations under Sections 6 and 7 shall, according to
their terms, survive any termination of Mr. Wright's employment and Mr. Wright
and the Company shall in all events be bound by and comply with the provisions
of such applicable Sections at all times after such termination.
2.2 Termination of Employment Term. The Employment Term shall
terminate upon the earliest to occur of the following:
(a) the death of Mr. Wright, effective as of the date of death;
(b) the substantial disability of Mr. Wright, as determined by a
competent medical doctor selected by the Board of Directors of the Company, for
a period of 180 days;
<PAGE> 2
(c) without "Cause", as defined below, upon written notice to Mr.
Wright by the Company, effective as of the date of such notice;
(d) with "Cause" (defined as gross insubordination, intentional
neglect of principal duties, commission of a felony or breach of duty of
loyalty in connection with his activities relating to the Company after
reasonable advance notice of the alleged "Cause" is given to Mr. Wright by the
Company, and Mr. Wright is given a reasonable opportunity to cure or
adequately explain the alleged or perceived "Cause"), upon written notice to
Mr. Wright by the Company, effective as of the date of such notice;
(e) upon 90 days prior written notice to the Company by Mr.
Wright, if and within 90 days after the Company breaches any material provision
of this Agreement, after reasonable advance notice of the alleged breach is
given to the Company by Mr. Wright, and the Company is given a reasonable
opportunity to cure or adequately explain the alleged or perceived breach;
(f) upon 90 days prior written notice to the Company by Mr.
Wright;
(g) upon Mr. Wright's retirement from the employ of the Company
(of which Mr. Wright shall give the Company at least 90 days prior written
notice); or
(h) upon 90 days prior written notice to the Company by Mr.
Wright, which notice may only be given by Mr. Wright if, and prior to the end
of 6 months after, substantially all of the Company's common stock or assets
are sold by the Company to a third party.
2.3 At Will Employment. While Mr. Wright shall have certain
rights upon the termination of his employment, Mr. Wright's employment
hereunder shall be terminable at will, with or without Cause, at any time, and
Mr. Wright shall have no right to continued employment hereunder.
3. COMPENSATION OF MR. Wright. As full compensation for the services to
be rendered by Mr. Wright pursuant to this Agreement, the Company shall pay Mr.
Wright, during the Employment Term, the following:
(a) An annual salary of $225,000, payable in arrears, semi-monthly
or otherwise in accordance with the Company's regular payroll procedures. Such
salary shall be reviewed by the Compensation Committee of the Board of
Directors of the Company (the "Committee") on an annual basis, and may be
increased (but not decreased) annually, effective January 1 of each year (or
such other date as Mr. Wright and the Company shall agree), to the extent
determined by the Committee to be appropriate. Mr. Wright's annual salary may
also be increased by the Committee, in its discretion, to compensate him for
superior performance.
(b) Mr. Wright shall be eligible to be paid a bonus, targeted at
50% of his annual base salary, based upon his and the Company's performance of
objectives determined by Mr. Wright
- 2 -
<PAGE> 3
and the Committee, as measured by the Committee. Mr. Wright shall also be
eligible to receive additional bonuses for achieving additional long-term
goals, as awarded by the Committee.
4. FRINGE BENEFITS AND BUSINESS EXPENSES.
4.1 Fringe Benefits.
(a) Mr. Wright shall be entitled, during the Employment Term, to
receive reimbursement for his monthly dues (but not for initiation fees,
assessments or the like) at Warwick Hills Country Club and to receive those
benefits generally provided to other officers of the Company from time to time.
(b) During the Employment Term, the Company shall provide Mr.
Wright with a luxury automobile of category and quality similar to that
provided to Mr. Wright as of the date hereof equipped with a phone.
4.2 Business Expenses. The Company shall pay or reimburse Mr.
Wright from time to time for all reasonable expenses incurred by Mr. Wright
during the Employment Term on behalf of the Company, including expenses of
operating his automobile for business purposes; provided that (a) such expenses
must be reasonable business expenses which are incurred by Mr. Wright in the
normal course of business and (b) Mr. Wright shall supply to the Company
itemized accounts or receipts in accordance with the Company's usual accounting
procedures.
5. PAYMENTS UPON CERTAIN TERMINATIONS.
5.1 Termination of Employment.
(a) If Mr. Wright's employment with the Company terminates for any
reason whatsoever, Mr. Wright (or, if applicable, his legal representative)
shall be entitled to receive the pro rata portion of Mr. Wright's earned but
unpaid salary under Section 3(a) above and benefits under Section 4 above
through the date of termination.
(b) If Mr. Wright's employment with the Company terminates
pursuant to Section 2.2(c) or 2.2(e) above, or if Mr. Wright's employment
terminates pursuant to Section 2.2(h) and Mr. Wright is not re-employed by the
Company, by the third party which acquires the assets or the common stock of
the Company or by any affiliate thereof within one year thereafter, Mr. Wright
shall also be entitled to receive, in addition to any payment under Section
5.1(a), an amount equal to 200% of the annual salary then being paid to Mr.
Wright by the Company.
(c) If (i) Mr. Wright's employment with the Company terminates
pursuant to Section 2.2(g) above on or after July 1, 2003, (ii) Mr. Wright's
retirement is with the consent of the Company's Board of Directors and (iii)
Mr. Wright provides such transitional assistance to his successor as the
Company's Board of Directors requires, performed to the satisfaction of the
- 3 -
<PAGE> 4
Company's Board of Directors, then Mr. Wright shall also be entitled to
receive, in addition to any payment under Section 5.1(a), an amount equal to
100% of the annual salary then being paid to Mr. Wright by the Company.
(d) Notwithstanding anything contained in Section 5.1(b) or in
Section 5.1(c), the Company shall not be obligated to pay to Mr. Wright under
either Section 5.1(b) or Section 5.1(c) any amount which shall not be
deductible by the Company or which shall subject Mr. Wright to any excise tax
under I.R.S. rules and regulations applicable to so-called "golden parachute"
payments. If payable, the payment provided for in Section 5.1(b) or in Section
5.1(c) shall be paid to Mr. Wright in a lump sum within 30 days after the
termination of his employment (or, in the case of termination of employment
pursuant to Section 2.2(h), within 30 days after the expiration of the
one-year nonemployment period referred to in Section 5.1(b)), except that if
the Company is at such time unable to make a distribution to its shareholders
in such amount pursuant to Section 345 of the Michigan Business Corporation
Act (or any successor provision), then the Company shall pay such amount to Mr.
Wright in equal, consecutive, monthly installments as if Mr. Wright were still
employed.
(e) Upon the termination of Mr. Wright's employment with the
Company pursuant to Section 2.2(b), 2.2(c), 2.2(e), 2.2(g) or 2.2(h) above, Mr.
Wright shall have the option to purchase from the Company the automobile then
provided to him pursuant to Section 4.1(b) at a price equal to the net book
value thereof on the Company's books or to purchase a new vehicle from the
Company at its cost through an OE vehicle supplier program.
5.2 Limitation of Termination Payments and Withholding of Taxes.
Except as set forth in this Agreement, the termination payments described in
this Section 5 shall be in lieu of any termination or severance payments
required by Company policy or applicable law (including unemployment
compensation) and shall constitute Mr. Wright's exclusive rights and remedies
with respect to termination of his employment with the Company. The Company
may withhold from any payments under this Section 5 all applicable federal,
state, city or other taxes required by applicable law to be so withheld.
6. CONFIDENTIALITY, NON-COMPETITION AND CONSIDERATION FOR COVENANTS.
6.1 Confidential Information.
(a) Mr. Wright shall not, except as required by his duties to the
Company, as authorized by the Board of Directors of the Company or as required
by law, at any time during or after the termination of his employment with the
Company, directly or indirectly use, publish, disseminate, distribute or
otherwise disclose any Confidential Information (as defined below). Mr. Wright
shall keep all Confidential Information in trust for the use and benefit of the
Company. Mr. Wright shall take all reasonable steps necessary or reasonably
requested by the Company to ensure that all Confidential Information is kept
confidential for the use and benefit of the Company.
- 4 -
<PAGE> 5
(b) Upon termination of his employment by the Company or at any
other time the Company may so request, Mr. Wright shall promptly deliver to the
Company all materials constituting Confidential Information (including all
copies) that are in his possession or under his control and Mr. Wright shall
not make or retain any copy of or extract from such materials.
(c) For purposes of this Section 6.1, "Confidential Information"
means any proprietary or confidential information of or relating to the Company
that is not generally known in any industry in which the Company is or may
become engaged and which is material to the Company. Mr. Wright acknowledges
that the Confidential Information of the Company is valuable, special and
unique to the business of the Company and on which such business depends, and
is proprietary to the Company, and that the Company wishes to protect such
Confidential Information by keeping it secret and confidential for the sole use
and benefit of the Company.
6.2 Non-Competition. During Mr. Wright's employment by the
Company and for two years thereafter, Mr. Wright shall not, either directly or
indirectly, through any person or entity:
(a) Engage in any activities or conduct any businesses which are
in competition with the activities engaged in or business conducted by the
Company; or
(b) Hire any person who is then employed by, is a consultant to or
is an agent of the Company or who was employed by, a consultant to or an agent
of the Company at any time during the three months prior to such date, or
encourage, induce or attempt to induce, or aid, assist or abet any other party
or person in encouraging, inducing or attempting to induce, any such employee,
consultant or agent to alter or terminate his or her employment, consultation
or agency with the Company.
(c) Be engaged by, consult with, or invest in, any person or
entity wherever located, which conducts a business in competition with the
business of the Company, except that Mr. Wright may, at any time, own stock in
a corporation which may be in competition with the Company, whose shares are
listed for trading on a national or regional stock exchange or trade on the
over-the-counter market, provided that Mr. Wright owns, in the aggregate, fewer
than 5% of the issued and outstanding shares of such corporation.
7. REMEDIES.
7.1 Injunctive Relief. The covenants and obligations contained in
Sections 6.1 and 6.2 above relate to matters which are of a special, unique and
extraordinary character and a violation of any of the terms of such Sections
shall cause irreparable injury to the Company, the amount of which shall be
difficult if not impossible to estimate or determine and which cannot be
adequately compensated. Therefore, the Company shall be entitled to an
injunction, restraining order or other equitable relief from any court of
competent jurisdiction, restraining any violation or threatened violation of
any of such terms by Mr. Wright and such other persons as the court orders.
7.2 Cumulative Rights and Remedies. Rights and remedies provided
by Section 7.1 above are cumulative and are in addition to any other rights and
remedies the Company may have at law or equity.
- 5 -
<PAGE> 6
8. STOCK OPTIONS. As of June 27, 1996, subject to approval of the
Company's 1996 Stock Option Plan by the shareholders of the Company at the
Company's 1997 annual meeting of shareholders, Mr. Wright is being granted
options to purchase 150,000 shares of the Company's common stock, which options
shall vest over four years. During the Employment Term, Mr. Wright shall be
eligible for such additional stock option grants as may be awarded by the Board
of Directors of the Company or by any authorized committee thereof.
9. MISCELLANEOUS.
9.1 Headings. The descriptive headings of the Sections of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
9.2 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if sent by certified or
registered mail, postage prepaid, addressed to the Company at its principal
executive offices or to Mr. Wright at his address as shown in the Company's
records. Any such notice or communication shall be deemed to have been given as
of the date so mailed.
9.3 Assignment. Mr. Wright may not assign, transfer or delegate
his rights or obligations under this Agreement and any attempt to do so shall
be void. Upon any assignment of this Agreement by the Company, the Company
shall obtain the written acknowledgement of the assignee or successor that such
party is bound by this Agreement. This Agreement is binding on and inures to
the benefit of the parties, their successors and assigns and the executors,
administrators and other legal representatives of Mr. Wright. The Company may
not freely assign this Agreement to other parties, but, instead, may assign
this Agreement only to a successor or related entity, with no disruption in the
business of Company and no material adverse effect upon Mr. Wright.
9.4 Counterparts. This Agreement may be signed in counterparts.
9.5 Governing Law. This Agreement and any dispute relating to or
arising out of the matters covered by this Agreement shall be governed by the
laws of the State of Michigan (regardless of the laws that might be applicable
under principles of conflicts of law) as to all matters (including validity,
construction, effect and performance). Each party hereto consents to, and
shall submit to, the jurisdiction of the courts of the State of Michigan and of
any Federal court whose district includes Lapeer, Michigan, which shall have
exclusive jurisdiction with respect to any action or proceeding, and process in
any such action or proceeding may be served in the manner provided by Michigan
law for service on foreign corporations or persons.
9.6 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
9.7 Entire Agreement. This Agreement constitutes the entire
Agreement, and supersedes all prior agreements and understandings, written or
oral, among the parties with respect to the subject matter of this Agreement.
This Agreement may not be amended or modified except by agreement in
- 6 -
<PAGE> 7
writing, signed by the party against whom enforcement of any waiver, amendment,
modification or discharge is sought.
IN WITNESS WHEREOF, this Agreement has been signed on the date first
written above.
DURAKON INDUSTRIES, INC.,
a Michigan corporation
By: /s/ Phillip Wm. Fisher
-----------------------------------
Phillip Wm. Fisher
Its: Chairman
/s/ David W. Wright
--------------------------------------
DAVID W. WRIGHT
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<PAGE> 1
EXHIBIT 10.35
NONQUALIFIED STOCK OPTION AGREEMENT
TO: David W. Wright Dated as of: June 27, 1996
Pursuant to and subject to the Durakon Industries, Inc. 1996 Stock
Option Plan (the "Plan"), and to resolutions of the Compensation Committee of
the Board of Directors of Durakon Industries, Inc., a Michigan corporation (the
"Corporation"), the Corporation hereby grants to you an option (the "Option")
to purchase up to one hundred fifty thousand (150,000) shares of the
Corporation's Common Stock, no par value (the "Shares"), at a price of twelve
and 6875/10,000 Dollars ($12.6875) per Share, upon the terms and conditions
contained herein.
1. This Option may not be transferred or assigned by you during your
lifetime.
2. (a) Subject to the terms of this Paragraph 2, you may exercise
this Option as follows:
(i) you may exercise this Option as to 37,500 of the
Shares beginning on June 27, 1997;
(ii) you may exercise this Option as to an additional
37,500 of the Shares beginning on June 27, 1998;
(iii) you may exercise this Option as to an additional
37,500 of the Shares beginning on June 27, 1999; and
(iv) you may exercise this Option as to the final 37,500
of the Shares beginning on June 27, 2000.
(b) This Option shall expire (to the extent not previously
exercised) on the earlier of (i) the tenth anniversary of the date hereof or
(ii) the date you cease to be employed by the Corporation for any cause other
than death or permanent disability; provided, however, that if your employment
by the Corporation is terminated for any reason other than death or permanent
disability, or if you resign, you shall have the right for a period not to
exceed three months following such termination or resignation, but in no event
subsequent to the expiration date of this Option, to exercise that portion of
this Option, if any, which is exercisable by you at the date of termination of
your employment by the Corporation.
(c) If your employment by the Corporation is terminated due to
your death, your personal representatives shall have the right, on your behalf,
for a period of one year following such termination, but in no event subsequent
to the expiration date of this Option, to exercise that portion of this Option,
if any, which is exercisable by you at the date of termination of your
employment by the Corporation.
(d) If your employment by the Corporation is terminated due to
your permanent disability, you shall have the right for a period of three
months following such termination, but
<PAGE> 2
in no event subsequent to the expiration date of this Option, to exercise that
portion of this Option, if any, which is exercisable by you at the date of
termination of your employment by the Corporation.
3. This Option may be exercised by giving a written notice of
exercise to the Treasurer of the Corporation. Such notice shall specify the
number of Shares to be purchased and shall be accompanied by payment in full of
the aggregate Option price for the number of Shares purchased and, unless a
current Registration Statement is in effect covering the resale of Shares
acquired upon exercise of this Option, by a representation that the Shares are
being acquired for your own account, for investment purposes and not with a
view to the resale or distribution of the Shares and that any subsequent offer
for sale or sale of such Shares shall be made either pursuant to (a) a
Registration Statement on an appropriate form under the Securities Act of 1933,
as amended (the "Securities Act"), which Registration Statement has become
effective and is current with respect to the Shares being offered and sold, or
(b) a specific exemption from the registration requirements of the Securities
Act, but in claiming such exemption you shall, prior to any offer for sale of
such Shares, obtain a favorable written opinion from counsel for or approved by
the Corporation as to the availability of such exemption. The Corporation
shall endorse an appropriate legend referring to the foregoing restriction upon
the certificate or certificates representing any Shares issued or transferred
upon exercise of this Option. Such exercise shall be effective only upon the
actual receipt of such written notice, of the aggregate Option price and of the
representation described above, and no rights or privileges of a shareholder of
the Corporation in respect of any of the Shares issuable upon the exercise of
any part of this Option shall inure to you, or to any other person entitled to
exercise this Option, unless and until certificates representing such Shares
shall have been issued.
4. It is understood and agreed that nothing contained in this Option
shall confer upon you any right with respect to the continuation of your
employment by the Corporation, nor interfere in any way with the right of the
Board of Directors to terminate such employment at any time.
5. This Option and the grant described in this Stock Option
Agreement are conditioned upon and subject to the approval of the Plan by the
Corporation's shareholders prior to the first anniversary of the date of this
Agreement. If the Plan is not so approved by the Corporation's shareholders
prior to the first anniversary of the date of this Agreement, this Stock Option
Agreement shall be void and of no further force and effect.
<PAGE> 3
6. If upon the exercise of this Option there shall be payable by the
Corporation any amount for income tax withholding, either you shall pay such
amount to the Corporation, or theamount of Common Stock delivered by the
Corporation upon exercise of this Option shall be appropriately reduced, to
reimburse the Corporation for such payment.
Very truly yours,
DURAKON INDUSTRIES, INC.,
a Michigan corporation
By: /s/ Phillip Wm. Fisher
------------------------------------
Phillip Wm. Fisher, Chairman of
the Board of Directors
AGREED TO AND ACCEPTED:
/s/ David W. Wright
- ----------------------------------
David W. Wright
<PAGE> 1
EXHIBIT 10.36
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of July 1,
1996, by and between Durakon Industries, Inc., a Michigan corporation (the
"Company"), and James P. Kelly ("Mr. Kelly").
Recitals
A. Mr. Kelly has been employed by the Company as its President
and Chief Executive Officer.
B. Due to issues relating to his health, Mr. Kelly has resigned
as President of the Company, effective June 30, 1996.
C. The Company and Mr. Kelly wish to provide for the continued
employment of Mr. Kelly by the Company on a modified basis.
Therefore, the parties agree as follows:
1. Services as Employee.
(a) Beginning on July 1, 1996 (the "Effective Date") through June
30, 1997, Mr. Kelly will be employed to render such services to or for the
benefit of the Company or any of its subsidiaries as may be reasonably
requested by the President of the Company, and will promote the best interests
of the Company and its subsidiaries. Such services will be primarily related
to matters relating to the Company's Jerr-Dan Corporation subsidiary and may
also relate to the other areas in which Mr. Kelly has developed expertise. Mr.
Kelly will make himself available to the Company as reasonably requested by the
President of the Company, subject to prior commitments and health limitations
of Mr. Kelly. Notwithstanding the foregoing, Mr. Kelly shall not be required
to render services to the Company in excess of ten (10) days during each month
during such period unless Mr. Kelly reasonably determines that his prior
commitments allow him to do so.
(b) Beginning on July 1, 1997 through June 30, 1999, Mr. Kelly
shall make himself available to serve as a director of the Company to the
extent that he is nominated and elected to so serve.
2. Term. This Agreement will take effect on the Effective Date and will
remain in effect until the earliest to occur of the following (the "Term"):
(a) June 30, 1999; or
(b) the death of Mr. Kelly.
<PAGE> 2
3. Consideration. As full consideration for Mr. Kelly's performance of
services pursuant to this Agreement, the Company will pay Mr. Kelly (i) during
the period through June 30, 1997, the sum of $100,000, payable bi-weekly in
arrears or otherwise in accordance with the Company's standard payment
practices and (ii) during the period from and after July 1, 1997, an amount
equal to the amount paid by the Company to its non-employee directors.
4. Expense. The Company will pay or reimburse Mr. Kelly for all
reasonable, direct, out- of-pocket expenses incurred by Mr. Kelly during the
Term on behalf of the Company in the performance of his duties under this
Agreement in accordance with the Company's policies.
5. Housing Sales Assistance and Benefits.
(a) Mr. Kelly is in the process of selling his current residence
in the Grand Blanc, Michigan area. Mr. Kelly shall consult with the Company
with respect to any proposed sale of such residence, and upon the sale of such
residence, the Company shall pay to Mr. Kelly the difference between $250,000
and the net sale price (that is, the gross sale price less any real estate
commissions payable by Mr. Kelly) of such residence.
(b) During the period from the Effective Date until June 30, 1997,
Mr. Kelly shall be entitled to the use of his current leased automobile.
During the Term, Mr. Kelly shall receive no other benefits from the Company.
6. Treatment of Stock Options.
Pursuant to a Nonqualified Stock Option Agreement dated as of May 16,
1995, an option to purchase 150,000 shares was granted to Mr. Kelly, which
option was to vest over time. Under the Nonqualified Stock Option Agreement,
the right to purchase 37,500 shares of the Company's common stock has vested
and is exercisable by Mr. Kelly. Such 37,500 share option shall remain
exercisable during the Term of this Agreement and thereafter in accordance with
the terms of such Nonqualified Stock Option Agreement. The Company and Mr.
Kelly agree that, notwithstanding anything contained in the Nonqualified Stock
Option Agreement, no additional vesting of stock options under such
Nonqualified Stock Option Agreement shall take place, during the Term or
otherwise.
7. Miscellaneous.
(a) Any notice required or permitted to be given under this
Agreement must be sent by certified or registered mail, postage prepaid, to the
Company at 2101 N. Lapeer Road, Lapeer, Michigan 48446-8799, Attn: President,
or to Mr. Kelly at the address set forth in the Company's records.
(b) The captions and headings contained in this Agreement are
solely for convenience of reference and will not affect the interpretation of
any provision of this Agreement.
- 2 -
<PAGE> 3
(c) This Agreement will bind and inure to the benefit of the
parties and their respective successors and assigns. This Agreement will not
be assignable or delegable without the prior written consent of all parties.
(d) This Agreement contains the entire agreement of the parties
with respect to the subject matter of this Agreement. This Agreement may be
altered or amended only by an instrument in writing, duly executed by both
parties.
(e) No waiver of any breach of any provision of this Agreement
will be deemed a waiver of any preceding or succeeding breach or of any other
provision of this Agreement. No extension of time for performance of any
obligations or acts will be deemed an extension of the time for performance of
any other obligations or acts.
(f) This Agreement may be executed in counterparts, both of which
together will be deemed an original of this Agreement.
(g) This Agreement is being entered into among competent persons,
who are experienced in business and have had the opportunity to consult with
counsel.
(h) This Agreement will be construed in accordance with and
governed by the laws of the State of Michigan.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date set forth in the introductory paragraph of this
Agreement.
the "Company": DURAKON INDUSTRIES, INC.,
a Michigan corporation
By: /s/ Phillip Wm. Fisher
-----------------------------------
Phillip Wm. Fisher
Its: Chairman of the Board of
Directors
"Mr. Kelly":
/s/ James P. Kelly
---------------------------------------
JAMES P. KELLY
- 3 -
<PAGE> 1
EXHIBIT 10.37
DURAKON INDUSTRIES, INC.
1996 STOCK OPTION PLAN
1. Definitions: As used herein, the following terms shall have
the following meanings:
(a) "Code" shall mean the Internal Revenue Code of 1986,
as amended, and the applicable rules and regulations thereunder.
(b) "Committee" shall mean, (i) with respect to
administration of the Plan regarding Participants who are subject to
Section 16(a) and (b) of the Exchange Act, a committee meeting the
standards of Rule 16b-3 of the Rules and Regulations under the
Exchange Act, or any similar successor rule, appointed by the Board of
Directors of the Company to perform any of the functions and duties of
the Committee under the Plan, or the Board of Directors as a whole,
and (ii) with respect to administration of the Plan regarding all
other Participants, such committee or the Board of Directors of the
Company, as described in clause (i), or such other committee or entity
appointed by the Board of Directors of the Company to perform any of
the functions and duties of the Committee under the Plan.
(c) "Common Shares" shall mean the Common Shares, no par
value, of the Company.
(d) "Company" shall mean Durakon Industries, Inc., a
Michigan corporation, or any successor thereof.
(e) "Discretion" shall mean the sole discretion of the
Committee, with no requirement whatsoever that the Committee follow
past practices, act in a manner consistent with past practices, or
treat any key employee, director, consultant or advisor in a manner
consistent with the treatment afforded other key employees, directors,
consultants or advisors with respect to the Plan or otherwise.
(f) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder.
(g) "Incentive Option" shall mean an option to purchase
Common Shares which meets the requirements set forth in the Plan and
also is intended to be, and qualifies as, an incentive stock option
within the meaning of Section 422 of the Code.
(h) "Nonqualified Option" shall mean an option to
purchase Common Shares which meets the requirements set forth in the
Plan but is not intended to be, or does not qualify as, an incentive
stock option within the meaning of the Code.
(i) "Participant" shall mean any individual designated by
the Committee under Paragraph 6 for participation in the Plan.
<PAGE> 2
(j) "Plan" shall mean this Durakon Industries, Inc. 1996
Stock Option Plan.
(k) "Securities Act" shall mean the Securities Act of
1933, as amended, and the rules and regulations thereunder.
(l) "Subsidiary" shall mean any corporation or other
entity in which the Company has a direct or indirect ownership
interest of 50% or more of the total combined voting power of all
classes of outstanding voting equity interests.
2. Purpose of Plan: The purpose of the Plan is to provide key
employees (including officers), directors, consultants and advisors of the
Company and its Subsidiaries (collectively, "key employees") with an increased
incentive to make significant and extraordinary contributions to the long-term
performance and growth of the Company and its Subsidiaries, to join the
interests of key employees, directors, consultants and advisors with the
interests of the shareholders of the Company, and to facilitate attracting and
retaining key employees, directors, consultants and advisors of exceptional
ability.
3. Administration: The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee shall
determine, from those eligible to be Participants under the Plan, the persons
to be granted stock options, the amount of stock to be optioned to each such
person, the time such options shall be granted and the terms and conditions of
any stock options. Such terms and conditions may, in the Committee's
Discretion, include, without limitation, provisions providing for termination
of the option, forfeiture of the gain on any option exercises or both if the
Participant competes with the Company or otherwise acts contrary to the
Company's interests, and provisions imposing restrictions, potential forfeiture
or both on shares acquired upon exercise of options granted pursuant to this
Plan. The Committee may condition any grant on the potential Participant's
agreement to such terms and conditions.
Subject to the provisions of the Plan, the Committee is authorized to
interpret the Plan, to promulgate, amend and rescind rules and regulations
relating to the Plan and to make all other determinations necessary or
advisable for its administration. Interpretation and construction of any
provision of the Plan by the Committee shall, unless otherwise determined by
the Board of Directors of the Company, be final and conclusive. A majority of
the Committee shall constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present, or acts approved
in writing by a majority of the Committee, shall be the acts of the Committee.
4. Indemnification: In addition to such other rights of
indemnification as they may have, the members of the Committee shall be
indemnified by the Company in connection with any claim, action, suit or
proceeding relating to any action taken or failure to act under or in
connection with the Plan or any option granted hereunder to the full extent
provided for under the Company's articles of incorporation or bylaws with
respect to indemnification of directors of the Company.
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<PAGE> 3
5. Maximum Number of Shares Subject to Plan: The maximum number
of shares with respect to which stock options may be granted under the Plan
shall be an aggregate of 500,000 Common Shares, which may consist in whole or
in part of authorized and unissued or reacquired Common Shares. Unless the
Plan shall have been terminated, shares covered by the unexercised portion of
canceled, expired or otherwise terminated options under the Plan shall again be
available for option and sale.
Subject to Paragraph 16, the number and type of shares subject to each
outstanding stock option, the option price with respect to outstanding stock
options, the aggregate number and type of shares remaining available under the
Plan, and the maximum number and type of shares that may be granted to any
Participant in any fiscal year of the Company pursuant to Paragraph 6, shall be
subject to such adjustment as the Committee, in its Discretion, deems
appropriate to reflect such events as stock dividends, stock splits,
recapitalizations, mergers, statutory share exchanges or reorganizations of or
by the Company; provided that no fractional shares shall be issued pursuant to
the Plan, no rights may be granted under the Plan with respect to fractional
shares, and any fractional shares resulting from such adjustments shall be
eliminated from any outstanding option.
6. Participants: The Committee shall determine and designate
from time to time, in its Discretion, those key employees (including officers),
directors, consultants and advisors of or to the Company or any Subsidiary to
whom options are to be granted and who thereby become Participants under the
Plan; provided, however, that (a) Incentive Options shall be granted only to
employees (as defined in the Code) of the Company or a corporate Subsidiary, to
the extent required by Section 422 of the Code, or any successor provision, and
(b) no Participant may be granted stock options to purchase more than 100,000
Common Shares in the aggregate in any fiscal year of the Company, subject to
any adjustments provided in the final paragraph of Paragraph 5 and in Paragraph
16.
7. Allotment of Shares: The Committee shall determine and fix
the number of Common Shares to be offered to each Participant; provided that no
Incentive Option may be granted under the Plan to any one Participant which
would result in the aggregate fair market value, determined as of the date the
option is granted, of the underlying stock with respect to which Incentive
Options are exercisable for the first time by such individual during any
calendar year (under all of such plans of the Company and its parent and
Subsidiary corporations) exceeding $100,000.
8. Option Price: Subject to the rules set forth in this
Paragraph 8, the Committee, in its Discretion, shall establish the option price
at the time any option is granted. Such option price shall not be less than
100% of the fair market value of the stock on the date on which such option is
granted; provided that with respect to an Incentive Option granted to an
employee who at the time of the grant owns (after applying the attribution
rules of Section 424(d) of the Code) more than 10% of the total combined voting
stock of the Company or of any parent or Subsidiary, the option price shall not
be less than 110% of the fair market value of the stock subject to the
Incentive Option on the date such option is granted. Fair market value of a
share
-3-
<PAGE> 4
shall be determined by the Committee and may be determined by using the closing
sale price of the Company's stock on any exchange or other market on which the
Common Shares shall be traded on such date, or if there is no sale on such
date, on the next following date on which there is a sale, or the average of
the closing bid and asked prices in any market or quotation system in which the
Common Shares shall be listed or traded on such date. The option price will be
subject to adjustment in accordance with the provisions of Paragraphs 5 and 16
of the Plan.
9. Granting and Exercise of Options: The granting of options
under the Plan shall be effected in accordance with determinations made by the
Committee pursuant to the provisions of the Plan, by execution of instruments
in writing in form approved by the Committee. Such instruments shall
constitute binding contracts between the Company and the Participant.
Subject to the terms of the Plan, the Committee, in its Discretion,
may grant to Participants Incentive Options, Nonqualified Options or any
combination thereof. Each option granted under the Plan shall designate the
number of shares covered thereby, if any, with respect to which the option is
an Incentive Option and the number of shares covered thereby, if any, with
respect to which the option is a Nonqualified Option.
Subject to the terms of the Plan, each option granted under the Plan
shall be exercisable at any such time or times or in any such installments as
may be determined by the Committee in its Discretion; provided that the
aggregate fair market value (determined as of the date the option is granted)
of the underlying stock with respect to which Incentive Options are exercisable
for the first time by such individual during any calendar year (under all of
such plans of the Company and its parent and Subsidiary corporations) shall not
exceed $100,000. Except as provided in Paragraph 13, options may be exercised
only while the Participant is an employee, director, consultant or advisor of
the Company or a Subsidiary.
Notwithstanding any other term or provision of this Plan, but subject
to the requirements of the Code with respect to Incentive Options that are
intended to remain Incentive Options, in connection with a Participant ceasing
to be an employee of the Company or a Subsidiary for any reason, the stock
option agreement may provide for the acceleration of, or the Committee may
accelerate, in its Discretion (exercised at the date of the grant of the stock
option or after the date of grant), in whole or in part, the time or times or
installments with respect to which any option granted under this Plan shall be
exercisable in connection with termination of a Participant's employment with
the Company or a Subsidiary, subject to any restrictions, terms and conditions
fixed by the Committee either at the date of the award or at the date it
exercises such Discretion.
Successive stock options may be granted to the same Participant,
whether or not the option or options previously granted to such Participant
remain unexercised. A Participant may exercise any option granted under the
Plan, if then exercisable, notwithstanding that options granted to such
Participant prior to the option then being exercised remain unexercised.
10. Payment of Option Price: At the time of the exercise in whole
or in part of any option granted under this Plan, payment in full in cash, or
with the consent of the Committee,
-4-
<PAGE> 5
in its Discretion, in Common Shares or by a promissory note payable to the
order of the Company which is acceptable to the Committee, shall be made by the
Participant for all shares so purchased. Such payment may, with the consent of
the Committee, in its Discretion, also consist of a cash down payment and
delivery of such a promissory note in the amount of the unpaid exercise price.
In the Discretion of, and subject to such conditions as may be established by,
the Committee, payment of the option price may also be made by the Company
retaining from the shares to be delivered upon exercise of the stock option
that number of shares having a fair market value on the date of exercise equal
to the option price of the number of shares with respect to which the
Participant exercises the option. In the Discretion of the Committee, a
Participant may exercise an option, if then exercisable, in whole or in part,
by delivery to the Company of written notice of the exercise in such form as
the Committee may prescribe, accompanied by irrevocable instructions to a stock
broker to promptly deliver to the Company full payment for the shares with
respect to which the option is exercised from the proceeds of the stock
broker's sale of or loan against some or all of the shares. Such payment may
also be made in such other manner as the Committee determines is appropriate,
in its Discretion. No Participant shall have any of the rights of a
shareholder of the Company under any option until the actual issuance of shares
to such Participant, and prior to such issuance no adjustment shall be made for
dividends, distributions or other rights in respect of such shares, except as
provided in Paragraphs 5 and 16.
11. Transferability of Option: Except as otherwise provided in
this Paragraph 11, (i) to the extent required by Section 422 of the Code, or
any successor section, but only with respect to Incentive Options, or (ii) to
the extent determined by the Committee in its Discretion (either by resolution
or by a provision in, or amendment to, the option), (a) no option granted under
the Plan to a Participant shall be transferable by such Participant otherwise
than (1) by will, or (2) by the laws of descent and distribution or, (3) with
respect to Nonqualified Options only (unless permitted by Section 422 of the
Code or any successor section), pursuant to a qualified domestic relations
order as defined in the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder, and (b) such option shall be
exercisable, during the lifetime of the Participant, only by the Participant.
The Committee may, in its Discretion, authorize all or a portion of
the options to be granted to an optionee to be on terms which permit transfer
by such optionee to, and the exercise of such option by, (i) the spouse,
children or grandchildren of the optionee ("Immediate Family Members"), (ii) a
trust or trusts for the exclusive benefit of such Immediate Family Members,
(iii) a partnership in which such Immediate Family Members are the only
partners, or (iv) such other persons or entities as determined by the
Committee, in its Discretion, on such terms and conditions as the Committee, in
its Discretion, may determine; provided that (y) the stock option agreement
pursuant to which such options are granted must be approved by the Committee
and must expressly provide for transferability in a manner consistent with this
Paragraph 11, and (z) subsequent transfers of transferred options shall be
prohibited except for transfers the original optionee would be permitted to
make (if he or she were still the owner of the option) in accordance with this
Paragraph 11.
-5-
<PAGE> 6
Following transfer, any such options shall continue to be subject to
the same terms and conditions as were applicable immediately before transfer,
provided that for purposes of Paragraphs 9, 10, 14, 16 and 18 the term
"Participant" shall be deemed to refer to the transferee. The events of
termination of employment of Paragraph 13 shall continue to be applied with
respect to the original optionee, following which the options shall be
exercisable by the transferee only to the extent, and for the periods,
specified in Paragraph 13. The original optionee shall remain subject to
withholding taxes and related requirements upon exercise provided in Paragraph
15. The Company shall have no obligation to provide any notice to any
transferee, including, without limitation, notice of any termination of the
option as a result of termination of the original optionee's employment with,
or other service to, the Company.
12. Continuance of Employment; No Right to Continued Employment:
The Committee may require, in its Discretion, that any Participant under the
Plan to whom an option shall be granted shall agree in writing as a condition
of the granting of such option to remain in his or her position as an employee,
director, consultant or advisor of the Company or a Subsidiary for a designated
minimum period from the date of the granting of such option as shall be fixed
by the Committee.
Nothing contained in the Plan or in any option granted pursuant to the
Plan, nor any action taken by the Committee hereunder, shall confer upon any
Participant any right with respect to continuation of employment, consultation
or other service by or to the Company or a Subsidiary nor interfere in any way
with the right of the Company or a Subsidiary to terminate such person's
employment, consultation or other service at any time.
13. Termination of Employment; Expiration of Options: Subject to
the other provisions of the Plan, including, without limitation, Paragraphs 9
and 16 and this Paragraph 13, all rights to exercise options shall terminate
when a Participant ceases to be an employee, director, consultant or advisor of
or to the Company or a Subsidiary for any cause, except that the Committee may,
in its Discretion, permit the exercise of all or any portion of the options
granted to such Participant
(i) for a period not to exceed three months following such
termination with respect to Incentive Options that are intended to
remain Incentive Options if such termination is not due to death or
permanent disability of the Participant,
(ii) for a period not to exceed one year following termination
of employment with respect to Incentive Options that are Intended to
remain Incentive Options if termination of employment is due to the
death or permanent disability of the Participant, and
(iii) for a period not to extend beyond the expiration date
with respect to Nonqualified Options or Incentive Options that are not
intended to remain Incentive Options,
-6-
<PAGE> 7
all subject to any restrictions, terms and conditions fixed by the Committee
either at the date of the award or at the date it exercises such Discretion.
In no event, however, shall an option be exercisable after its expiration date,
and, unless the Committee in its Discretion determines otherwise (pursuant to
Paragraph 9 or Paragraph 16), an option may only be exercised after termination
of a Participant's employment, consultation or other service by or to the
Company to the extent exercisable on the date of such termination or to the
extent exercisable as a result of the reason for such termination. The
Committee may evidence the exercise of its Discretion under this Paragraph 13
in any manner it deems appropriate, including by resolution or by a provision
in, or amendment to, the option.
If not sooner terminated, each stock option granted under the Plan
shall expire not more than 10 years from the date of the granting thereof;
provided that with respect to an Incentive Option granted to a Participant who,
at the time of the grant, owns (after applying the attribution rules of Section
424(d) of the Code) more than 10% of the total combined voting stock of all
classes of stock of the Company or of any parent or Subsidiary, such option
shall expire not more than 5 years after the date of granting thereof.
14. Investment Purpose: If the Committee in its Discretion
determines that as a matter of law such procedure is or may be desirable, it
may require a Participant, upon any exercise of any option granted under the
Plan or any portion thereof and as a condition to the Company's obligation to
deliver certificates representing the shares subject to exercise, to execute
and deliver to the Company a written statement, in form satisfactory to the
Committee, representing and warranting that the Participant's purchase of
Common Shares upon exercise thereof shall be for such person's own account, for
investment and not with a view to the resale or distribution thereof and that
any subsequent sale or offer for sale of any such shares shall be made either
pursuant to (a) a Registration Statement on an appropriate form under the
Securities Act, which Registration Statement has become effective and is
current with respect to the shares being offered and sold, or (b) a specific
exemption from the registration requirements of the Securities Act, but in
claiming such exemption the Participant shall, prior to any offer for sale or
sale of such shares, obtain a favorable written opinion from counsel for or
approved by the Company as to the availability of such exemption. The Company
may endorse an appropriate legend referring to the foregoing restriction upon
the certificate or certificates representing any shares issued or transferred
to the Participant upon exercise of any option granted under the Plan.
15. Withholding Payments: If upon the exercise of any
Nonqualified Option or a disqualifying disposition (within the meaning of
Section 422 of the Code) of shares acquired upon exercise of an Incentive
Option, there shall be payable by the Company or a Subsidiary any amount for
income tax withholding, in the Committee's Discretion, either the Participant
shall pay such amount to the Company, or the amount of Common Shares delivered
by the Company to the Participant shall be appropriately reduced, to reimburse
the Company or such Subsidiary for such payment. The Company or any of its
Subsidiaries shall have the right to withhold the amount of such taxes from any
other sums or property due or to become due from the Company or any of its
Subsidiaries to the Participant upon such terms and conditions as the Committee
shall prescribe. The Company may also defer issuance of the stock upon
exercise of such option
-7-
<PAGE> 8
until payment by the Participant to the Company of the amount of any such tax.
The Committee may, in its Discretion, permit Participants to satisfy such
withholding obligations, in whole or in part, by electing to have the amount of
Common Shares delivered or deliverable by the Company upon exercise of a stock
option appropriately reduced, or by electing to tender Common Shares back to
the Company subsequent to exercise of a stock option to reimburse the Company
or such Subsidiary for such income tax withholding, subject to such rules and
regulations, if any, as the Committee may adopt. The Committee may make such
other arrangements with respect to income tax withholding as it shall
determine.
16. Extraordinary Transactions: In case the Company (i)
consolidates with or merges into any other corporation or other entity and is
not the continuing or surviving entity of such consolidation or merger, or (ii)
permits any other corporation or other entity to consolidate with or merge into
the Company and the Company is the continuing or surviving entity but, in
connection with such consolidation or merger, the Common Shares are changed
into or exchanged for stock or other securities of any other corporation or
other entity or cash or any other assets, or (iii) transfers all or
substantially all of its properties and assets to any other corporation or
other person or entity, or (iv) dissolves or liquidates, or (v) effects a
capital reorganization or reclassification in such a way that holders of Common
Shares shall be entitled to receive stock, securities, cash or other assets
with respect to or in exchange for the Common Shares, then, and in each such
case, proper provision shall be made so that, each Participant holding a stock
option upon the exercise of such option at any time after the consummation of
such consolidation, merger, transfer, dissolution, liquidation, reorganization
or reclassification (each transaction, for purposes of this Paragraph 16, being
herein called a "Transaction"), shall be entitled to receive (at the aggregate
option price in effect for all Common Shares issuable upon such exercise
immediately prior to such consummation and as adjusted to the time of such
Transaction), in lieu of Common Shares issuable upon such exercise prior to
such consummation, the stock and other securities, cash and assets to which
such Participant would have been entitled upon such consummation if such
Participant had so exercised such stock option in full immediately prior
thereto (subject to adjustments subsequent to such Transaction provided for in
Paragraph 5).
Notwithstanding anything in the Plan to the contrary, in connection
with any Transaction and effective as of a date selected by the Committee,
which date shall, in the Committee's judgment, be far enough in advance of the
Transaction to permit Participants holding stock options to exercise their
options and participate in the Transaction as a holder of Common Shares, the
Committee, acting in its Discretion without the consent of any Participant, may
effect one or more of the following alternatives with respect to all of the
outstanding stock options (which alternatives may be made conditional on the
occurrence of the applicable Transaction and which may, if permitted by law,
vary among individual Participants): (a) accelerate the time at which stock
options then outstanding may be exercised so that such stock options may be
exercised in full for a limited period of time on or before a specified date
fixed by the Committee after which specified date all unexercised stock options
and all rights of Participants thereunder shall terminate; (b) accelerate the
time at which stock options then outstanding may be exercised so that such
stock options may be exercised in full for their then remaining term; or (c)
require the mandatory surrender to the Company of outstanding stock options
held by such Participants
-8-
<PAGE> 9
(irrespective of whether such stock options are then exercisable) as of a date,
before or not later than sixty days after such Transaction, specified by the
Committee, and in such event the Company shall thereupon cancel such stock
options and shall pay to each Participant an amount of cash equal to the excess
of the fair market value of the aggregate Common Shares subject to such stock
option, determined as of the date such Transaction is effective, over the
aggregate option price of such shares, less any applicable withholding taxes;
provided, however, the Committee shall not select an alternative (unless
consented to by the Participant) such that, if a Participant exercised his or
her accelerated stock option pursuant to alternative (a) or (b) and
participated in the Transaction or received cash pursuant to alternative (c),
the alternative would result in the Participant's owing any money by virtue of
the operation of Section 16(b) of the Exchange Act. If all such alternatives
have such a result, the Committee shall, in its Discretion, take such action to
put such Participant in as close to the same position as such Participant would
have been in had alternative (a), (b) or (c) been selected but without
resulting in any payment by such Participant pursuant to Section 16(b) of the
Exchange Act. Notwithstanding the foregoing, with the consent of affected
Participants, each with respect to such Participant's option only, the
Committee may in lieu of the foregoing make such provision with respect to any
Transaction as it deems appropriate.
17. Effectiveness of Plan: This Plan shall be effective on the
date the Board of Directors of the Company adopts this Plan, provided that the
shareholders of the Company approve the Plan within 12 months before or after
its adoption by the Board of Directors. Options may be granted before
shareholder approval of this Plan, but each such option shall be subject to
shareholder approval of this Plan. No option granted under this Plan shall be
exercisable unless and until this Plan shall have been approved by the
Company's shareholders.
18. Termination, Duration and Amendments to the Plan: The Plan
may be abandoned or terminated at any time by the Board of Directors of the
Company. Unless sooner terminated, the Plan shall terminate on the date ten
years after the earlier of its adoption by the Board of Directors or its
approval by the shareholders of the Company, and no stock options may be
granted under the Plan thereafter. The termination of the Plan shall not
affect the validity of any option which is outstanding on the date of
termination.
For the purpose of conforming to any changes in applicable law or
governmental regulations, or for any other lawful purpose, the Board of
Directors shall have the right, with or without approval of the shareholders of
the Company, to amend or revise the terms of this Plan or any option agreement
under this Plan at any time; provided, however, that (i) to the extent required
by Section 162(m) of the Code and related regulations, or any successor rule,
but only with respect to amendments or revisions affecting Participants whose
compensation is subject to Section 162(m) of the Code, and to the extent
required by Section 422 of the Code, or any successor section, but only with
respect to Incentive Options, no such amendment or revision shall increase the
maximum number of shares in the aggregate which are subject to this Plan
(subject, however, to the provisions of Paragraphs 5 and 16) without the
approval or ratification of the shareholders of the Company, and (ii) no such
amendment or revision shall change the option price (except as contemplated by
Paragraphs 5 and 16) or alter or impair any option which
-9-
<PAGE> 10
shall have been previously granted under this Plan, in a manner adverse to a
Participant, without the consent of such Participant.
As adopted by the Board of Directors on May 21, 1996.
-10-
<PAGE> 1
EXHIBIT 10.38
NONQUALIFIED STOCK OPTION AGREEMENT
TO: Thomas A. Galas Dated as of: May 16, 1995
Pursuant to and subject to the Durakon Industries, Inc. 1988
Nonqualified Stock Option Plan, as amended (the "Plan"), and to resolutions of
the Compensation Committee of the Board of Directors of Durakon Industries,
Inc., a Michigan corporation (the "Corporation"), the Corporation hereby grants
to you an option (the "Option") to purchase up to thirty thousand (30,000)
shares of the Corporation's Common Stock, no par value (the "Shares"), at a
price of sixteen and 00/100 Dollars ($16.00) per Share, upon the terms and
conditions contained herein.
1. This Option may not be transferred or assigned by you during your
lifetime.
2. (a) Subject to the terms of this Paragraph 2, you may exercise
this Option as follows:
(i) you may exercise this Option as to 10,000 of the Shares
immediately;
(ii) you may exercise this Option as to an additional 10,000 of
the Shares beginning on May 16, 1996; and
(iii) you may exercise this Option as to the final 10,000 of the
Shares beginning on May 16, 1997.
(b) This Option shall expire (to the extent not previously exercised)
on the earlier of (i) the tenth anniversary of the date hereof or (ii) the date
you cease to be employed by the Corporation for any cause other than death or
permanent disability; provided, however, that if your employment by the
Corporation is terminated for any reason other than death or permanent
disability, or if you resign, you shall have the right for a period not to
exceed three months following such termination or resignation, but in no event
subsequent to the expiration date of this Option, to exercise that portion of
this Option, if any, which is exercisable by you at the date of termination of
your employment by the Corporation.
(c) If your employment by the Corporation is terminated due to
your death, your personal representatives shall have the right, on your behalf,
for a period of one year following such termination, but in no event subsequent
to the expiration date of this Option, to exercise that portion of this Option,
if any, which is exercisable by you at the date of termination of your
employment by the Corporation.
(d) If your employment by the Corporation is terminated due to
your permanent disability, you shall have the right for a period of three
months following such termination, but in no event subsequent to the expiration
date of this Option, to exercise that portion of this Option, if any, which is
exercisable by you at the date of termination of your employment by the
Corporation.
<PAGE> 2
3. This Option may be exercised by giving a written notice of
exercise to the Treasurer of the Corporation. Such notice shall specify the
number of Shares to be purchased and shall be accompanied by payment in full of
the aggregate Option price for the number of Shares purchased and, unless a
current Registration Statement is in effect covering the resale of Shares
acquired upon exercise of this Option, by a representation that the Shares are
being acquired for your own account, for investment purposes and not with a
view to the resale or distribution of the Shares and that any subsequent offer
for sale or sale of such Shares shall be made either pursuant to (a) a
Registration Statement on an appropriate form under the Securities Act of 1933,
as amended (the "Securities Act"), which Registration Statement has become
effective and is current with respect to the Shares being offered and sold, or
(b) a specific exemption from the registration requirements of the Securities
Act, but in claiming such exemption you shall, prior to any offer for sale of
such Shares, obtain a favorable written opinion from counsel for or approved by
the Corporation as to the availability of such exemption. The Corporation
shall endorse an appropriate legend referring to the foregoing restriction upon
the certificate or certificates representing any Shares issued or transferred
upon exercise of this Option. Such exercise shall be effective only upon the
actual receipt of such written notice, of the aggregate Option price and of the
representation described above, and no rights or privileges of a shareholder of
the Corporation in respect of any of the Shares issuable upon the exercise of
any part of this Option shall inure to you, or to any other person entitled to
exercise this Option, unless and until certificates representing such Shares
shall have been issued.
4. It is understood and agreed that nothing contained in this Option
shall confer upon you any right with respect to the continuation of your
employment by the Corporation, nor interfere in any way with the right of the
Board of Directors to terminate such employment at any time.
5. If upon the exercise of this Option there shall be payable by the
Corporation any amount for income tax withholding, either you shall pay such
amount to the Corporation, or the amount of Common Stock delivered by the
Corporation upon exercise of this Option shall be appropriately reduced, to
reimburse the Corporation for such payment.
Very truly yours,
DURAKON INDUSTRIES, INC.,
a Michigan corporation
By: /s/ James P. Kelly
----------------------------------
James P. Kelly, President
AGREED TO AND ACCEPTED:
/s/ Thomas A. Galas
- ---------------------------------
Thomas A. Galas
Dated: May 16, 1995
-2-
<PAGE> 1
EXHIBIT 10.39
NONQUALIFIED STOCK OPTION AGREEMENT
TO: James P. Kelly Dated as of: May 16, 1995
Pursuant to and subject to the Durakon Industries, Inc. 1988
Nonqualified Stock Option Plan, as amended (the "Plan"), and to resolutions of
the Compensation Committee of the Board of Directors of Durakon Industries,
Inc., a Michigan corporation (the "Corporation"), the Corporation hereby grants
to you an option (the "Option") to purchase up to one hundred fifty thousand
(150,000) shares of the Corporation's Common Stock, no par value (the
"Shares"), at a price of sixteen and 00/100 Dollars ($16.00) per Share, upon
the terms and conditions contained herein.
1. This Option may not be transferred or assigned by you during your
lifetime.
2. (a) Subject to the terms of this Paragraph 2, you may exercise
this Option as follows:
(i) you may exercise this Option as to 37,500 of the Shares
beginning on May 16, 1996;
(ii) you may exercise this Option as to an additional 37,500 of
the Shares beginning on May 16, 1997;
(iii) you may exercise this Option as to an additional 37,500 of
the Shares beginning on May 16, 1998; and
(iv) you may exercise this Option as to the final 37,500 of the
Shares beginning on May 16, 1999.
(b) This Option shall expire (to the extent not previously exercised)
on the earlier of (i) the tenth anniversary of the date hereof or (ii) the date
you cease to be employed by the Corporation for any cause other than death or
permanent disability; provided, however, that if your employment by the
Corporation is terminated for any reason other than death or permanent
disability, or if you resign, you shall have the right for a period not to
exceed three months following such termination or resignation, but in no event
subsequent to the expiration date of this Option, to exercise that portion of
this Option, if any, which is exercisable by you at the date of termination of
your employment by the Corporation.
(c) If your employment by the Corporation is terminated due to
your death, your personal representatives shall have the right, on your behalf,
for a period of one year following such termination, but in no event subsequent
to the expiration date of this Option, to exercise that portion of this Option,
if any, which is exercisable by you at the date of termination of your
employment by the Corporation.
(d) If your employment by the Corporation is terminated due to
your permanent disability, you shall have the right for a period of three
months following such termination, but in no event subsequent to the expiration
date of this Option, to exercise that portion of this Option, if any, which is
exercisable by you at the date of termination of your employment by the
Corporation.
<PAGE> 2
3. This Option may be exercised by giving a written notice of
exercise to the Treasurer of the Corporation. Such notice shall specify the
number of Shares to be purchased and shall be accompanied by payment in full of
the aggregate Option price for the number of Shares purchased and, unless a
current Registration Statement is in effect covering the resale of Shares
acquired upon exercise of this Option, by a representation that the Shares are
being acquired for your own account, for investment purposes and not with a
view to the resale or distribution of the Shares and that any subsequent offer
for sale or sale of such Shares shall be made either pursuant to (a) a
Registration Statement on an appropriate form under the Securities Act of 1933,
as amended (the "Securities Act"), which Registration Statement has become
effective and is current with respect to the Shares being offered and sold, or
(b) a specific exemption from the registration requirements of the Securities
Act, but in claiming such exemption you shall, prior to any offer for sale of
such Shares, obtain a favorable written opinion from counsel for or approved by
the Corporation as to the availability of such exemption. The Corporation
shall endorse an appropriate legend referring to the foregoing restriction upon
the certificate or certificates representing any Shares issued or transferred
upon exercise of this Option. Such exercise shall be effective only upon the
actual receipt of such written notice, of the aggregate Option price and of the
representation described above, and no rights or privileges of a shareholder of
the Corporation in respect of any of the Shares issuable upon the exercise of
any part of this Option shall inure to you, or to any other person entitled to
exercise this Option, unless and until certificates representing such Shares
shall have been issued.
4. It is understood and agreed that nothing contained in this Option
shall confer upon you any right with respect to the continuation of your
employment by the Corporation, nor interfere in any way with the right of the
Board of Directors to terminate such employment at any time.
5. If upon the exercise of this Option there shall be payable by the
Corporation any amount for income tax withholding, either you shall pay such
amount to the Corporation, or the amount of Common Stock delivered by the
Corporation upon exercise of this Option shall be appropriately reduced, to
reimburse the Corporation for such payment.
Very truly yours,
DURAKON INDUSTRIES, INC.,
a Michigan corporation
By: /s/ William Webster
----------------------------------
William Webster, Chairman
AGREED TO AND ACCEPTED:
/s/ James P. Kelly
- ------------------------------
James P. Kelly
Dated: May 16, 1995
-2-
<PAGE> 1
EXHIBIT 10.40
NONQUALIFIED STOCK OPTION AGREEMENT
TO: David W. Wright Dated as of: April 1, 1996
Pursuant to and subject to the Durakon Industries, Inc. 1988
Nonqualified Stock Option Plan, as amended (the "Plan"), and to resolutions of
the Compensation Committee of the Board of Directors of Durakon Industries,
Inc., a Michigan corporation (the "Corporation"), the Corporation hereby grants
to you an option (the "Option") to purchase up to fifty thousand (50,000)
shares of the Corporation's Common Stock, no par value (the "Shares"), at a
price of twelve and 50/100 Dollars ($12.50) per Share, upon the terms and
conditions contained herein.
1. This Option is granted in replacement of the option granted to
you as of May 16, 1995, and this Stock Option Agreement supersedes the May 16,
1995 Stock Option Agreement entered into between you and the Corporation, which
shall be of no further force or effect.
2. This Option may not be transferred or assigned by you during your
lifetime.
3. (a) Subject to the terms of this Paragraph 3, you may exercise
this Option as follows:
(i) you may exercise this Option as to 10,000 of the
Shares beginning on May 16, 1996;
(ii) you may exercise this Option as to an additional
10,000 of the Shares beginning on May 16, 1997;
(iii) you may exercise this Option as to an additional
10,000 of the Shares beginning on May 16, 1998;
(iv) you may exercise this Option as to an additional
10,000 of the Shares beginning on May 16, 1999; and
(v) you may exercise this Option as to the final 10,000
of the Shares beginning on May 16, 2000.
(b) This Option shall expire (to the extent not previously
exercised) on the earlier of (i) May 16, 2005 or (ii) the date you cease to be
employed by the Corporation for any cause other than death or permanent
disability; provided, however, that if your employment by the Corporation is
terminated for any reason other than death or permanent disability, or if you
resign, you shall have the right for a period not to exceed three months
following such termination or resignation, but in no event subsequent to the
expiration date of this Option, to exercise that portion of this Option, if
any, which is exercisable by you at the date of termination of your employment
by the Corporation.
<PAGE> 2
(c) If your employment by the Corporation is terminated due to
your death, your personal representatives shall have the right, on your behalf,
for a period of one year following such termination, but in no event subsequent
to the expiration date of this Option, to exercise thatportion of this Option,
if any, which is exercisable by you at the date of termination of your
employment by the Corporation.
(d) If your employment by the Corporation is terminated due to
your permanent disability, you shall have the right for a period of three
months following such termination, but in no event subsequent to the expiration
date of this Option, to exercise that portion of this Option, if any, which is
exercisable by you at the date of termination of your employment by the
Corporation.
4. This Option may be exercised by giving a written notice of
exercise to the Treasurer of the Corporation. Such notice shall specify the
number of Shares to be purchased and shall be accompanied by payment in full of
the aggregate Option price for the number of Shares purchased and, unless a
current Registration Statement is in effect covering the resale of Shares
acquired upon exercise of this Option, by a representation that the Shares are
being acquired for your own account, for investment purposes and not with a
view to the resale or distribution of the Shares and that any subsequent offer
for sale or sale of such Shares shall be made either pursuant to (a) a
Registration Statement on an appropriate form under the Securities Act of 1933,
as amended (the "Securities Act"), which Registration Statement has become
effective and is current with respect to the Shares being offered and sold, or
(b) a specific exemption from the registration requirements of the Securities
Act, but in claiming such exemption you shall, prior to any offer for sale of
such Shares, obtain a favorable written opinion from counsel for or approved by
the Corporation as to the availability of such exemption. The Corporation
shall endorse an appropriate legend referring to the foregoing restriction upon
the certificate or certificates representing any Shares issued or transferred
upon exercise of this Option. Such exercise shall be effective only upon the
actual receipt of such written notice, of the aggregate Option price and of the
representation described above, and no rights or privileges of a shareholder of
the Corporation in respect of any of the Shares issuable upon the exercise of
any part of this Option shall inure to you, or to any other person entitled to
exercise this Option, unless and until certificates representing such Shares
shall have been issued.
5. It is understood and agreed that nothing contained in this Option
shall confer upon you any right with respect to the continuation of your
employment by the Corporation, nor interfere in any way with the right of the
Board of Directors to terminate such employment at any time.
<PAGE> 3
6. If upon the exercise of this Option there shall be payable by the
Corporation any amount for income tax withholding, either you shall pay such
amount to the Corporation, or theamount of Common Stock delivered by the
Corporation upon exercise of this Option shall be appropriately reduced, to
reimburse the Corporation for such payment.
Very truly yours,
DURAKON INDUSTRIES, INC.,
a Michigan corporation
By: /s/ Phillip Wm. Fisher
-----------------------------------
Phillip Wm. Fisher, Chairman of
the Board of Directors
AGREED TO AND ACCEPTED:
/s/ David W. Wright
- ------------------------------
David W. Wright
Dated: April 1, 1996
<PAGE> 1
EXHIBIT 11
DURAKON INDUSTRIES, INC.
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
(In thousands, except per
share amounts)
YEAR ENDED DECEMBER 31,
----------------------
1996 1995
---- ----
<S> <C> <C>
Net earnings available to common stockholders $8,904 $2,299
====== ======
PRIMARY
Average number of shares oustanding 6,540 6,687
Add: Dilutive effect of stock options based
upon treasury stock method 107 --
------ ------
Total 6,647 6,687
====== ======
Per share amount $ 1.34 $ 0.34
====== ======
FULLY DILUTED
Average number of shares outstanding 6,540 6,687
Add: Dilutive effect of stock options based
upon treasury stock method 107 --
------ ------
Total 6,647 6,687
====== ======
Per share amount $ 1.34 $ 0.34
====== ======
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF DURAKON INDUSTRIES, INC.
NAME JURISDICTION
------------------------------ -------------------
Jerr-Dan Corporation Pennsylvania
Durakon FSC, Inc. U.S. Virgin Islands
Durakon Mexicana, S.A. de C.V. Mexico
Benton Plastics, Inc. Tennessee
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Durakon Industries, Inc. on Form S-8 (File No. 33-50146), of our report dated
February 21, 1997, on our audits of the consolidated financial statements and
financial statement schedule of Durakon Industries, Inc. as of December 31,
1996 and 1995, and for the years ended December 31, 1996, 1995 and 1994 which
report is included in the Annual Report on Form 10-K.
Coopers & Lybrand, L.L.P.
Detroit, Michigan
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,597
<SECURITIES> 0
<RECEIVABLES> 20,812
<ALLOWANCES> 637
<INVENTORY> 18,427
<CURRENT-ASSETS> 51,449
<PP&E> 45,410
<DEPRECIATION> 24,656
<TOTAL-ASSETS> 84,079
<CURRENT-LIABILITIES> 16,299
<BONDS> 2,020
0
0
<COMMON> 21,820
<OTHER-SE> 43,940
<TOTAL-LIABILITY-AND-EQUITY> 84,079
<SALES> 183,628
<TOTAL-REVENUES> 183,628
<CGS> 143,950
<TOTAL-COSTS> 170,495
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 637
<INTEREST-EXPENSE> 149
<INCOME-PRETAX> 13,697
<INCOME-TAX> 4,793
<INCOME-CONTINUING> 8,904
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,904
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.34
</TABLE>
