<PAGE> 1
FORM 10 - K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended JUNE 30, 1995
-------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 0-14044
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DEFIANCE, INC.
--------------
(Exact name of registrant as specified in its charter)
Delaware 34-1526359
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1111 Chester Ave., Suite 750, Cleveland, Ohio 44114-3516
--------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 861-6300
--------------
Securities registered pursuant to Section 12(b) of the Securities Exchange Act
of 1934:
None
----
(Title of class and name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934:
Common Stock, par value $.05 per share
--------------------------------------
(Title of class)
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 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 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 ]
As of July 31, 1995, 6,546,950 shares of Common Stock of Defiance, Inc. were
outstanding and the aggregate market value of such Common Stock held by
non-affiliates (based upon the closing sale price on such date as reported on
the NASDAQ National Market System) was approximately $41,703,000.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the Proxy Statement for Defiance, Inc.'s 1995 Annual Meeting of
Shareholders are incorporated by reference to Part III of this Form 10-K Report.
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<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Defiance, Inc. (the "Company"), incorporated in Delaware as a holding company
in 1985, is a world-class supplier of precision machined metal components,
tooling systems, testing services, and molded and painted plastic products
primarily to original equipment manufacturers ("OEMs") and their suppliers in
the United States transportation industry. The Company offers its customers
quality products and services, ranging from engineering and design of a part or
assembly, through analysis, prototype and physical testing, to tooling and
production.
The Company's subsidiaries operate through the following strategic business
units:
Precision Machined Components
-----------------------------
Defiance Precision Products, Inc. ("Precision Products") manufactures cam
follower rollers and other hardened and precision machined metal engine and
drive-train components, primarily for the domestic automobile, light truck, and
heavy-duty truck markets. Precision Products' principal product, the cam
follower roller ("CFR"), is a component used in the valve lifter assemblies of
gasoline and diesel engines that replaces the sliding surface between the valve
lifter and the camshaft with a roller element, reducing valve train friction
and increasing engine efficiency and durability in roller equipped engines.
Because of their application, CFRs must be manufactured to extremely precise
specifications.
Tooling Systems
---------------
Hy-Form Products, Inc. ("Hy-Form"), Binderline Development, Inc.
("Binderline"), and Draftline Engineering Company ("Draftline"), provide full
prototype and production tooling systems primarily to the domestic automotive
industry. A full "turn-key" project management service is offered to
customers, taking a conceptual design from soft tooling and prototype dies
through to the tryout of the production hard tooling dies. Together, these
companies design and produce models, patterns, fixtures, soft prototype
tooling, hard production tooling, and aids to hard tooling and supply
computerized machine tool cutter paths, laser processing, CNC (computer
numerical control) machining, and CMM (coordinate measuring machine)
certification. Typical parts for which prototypes and production tooling are
made are stamped from sheet metal, and include exterior body panels such as
hoods, roofs, doors, and fenders, interior seating components and brackets, and
structural, suspension, and frame components.
Testing Services
----------------
SMTC Corporation ("SMTC") provides of a full range of product design,
engineering analysis, and experimental testing and simulation services of
structural and mechanical systems, ranging from single components to complete
vehicle development projects, primarily for the U.S. transportation industry.
Physical testing services include product durability testing, experimental
stress analysis, product validation testing, environmental testing, noise and
vibration testing, and road simulation. Testing is performed on a wide range of
components from bumpers, seating, and seat belt assemblies to entire vehicle
environmental and road simulation. Engineering consulting services include new
product design, finite element modeling and analysis, kinematics analysis,
experimental dynamics, variation simulation analysis, and vehicle development
programs for parts such as vehicle bodies, suspensions, and engine components.
Computer aided engineering techniques such as computerized simulated testing of
prototypes are used to help in the design process of new products at an early
stage in the product development cycle.
Molded and Painted Plastic Products
-----------------------------------
Vaungarde, Incorporated ("Vaungarde") molds plastic parts produced by reaction
injection molding ("RIM") processes, and paints plastic parts of various
polymers produced internally or provided by other molders, primarily serving
the domestic automotive, heavy truck, agricultural, and recreational vehicle
industries. RIM processing involves the impingement and mixing of two or more
liquid polymer components, followed by injection under relatively low pressure
into a mold cavity. The chemical reaction of the polymers causes them to
solidify in the shape of the mold, forming a thermoset plastic material. An
advantage of RIM processed plastic parts is that they are an economical
alternative to many other types of materials. In addition, the design
flexibility of RIM allows the production of large, complex parts, incorporating
a multitude of assemblies in one design. Typical parts produced or painted by
Vaungarde include vehicle bumpers, spoilers, and facias, snowmobile hoods, and
bus grilles.
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<PAGE> 3
Sales by strategic business unit as a percentage of the Company's total sales
are as follows:
<TABLE>
<CAPTION>
Year ended June 30,
1995 1994 1993
--------------------------------------------------------------
<S> <C> <C> <C>
Precision Machined Components 38% 37% 34%
Tooling Systems 27% 25% 23%
Testing Services 23% 25% 21%
Molded and Painted Plastic Products 12% 13% 22%
--------------------------------------------------------------
100% 100% 100%
==============================================================
</TABLE>
CURRENT YEAR DEVELOPMENTS
Precision Machined Components
-----------------------------
Sales under a new contract to supply additional CFRs to Eaton Corporation began
during fiscal 1995, adding approximately $1.7 million in sales during the year.
In addition, a new contract to supply additional CFRs to a division of General
Motors in support of its light truck roller program is expected to add over $7
million per year in sales beginning in fiscal 1996. Both of these contracts
were announced during fiscal 1994. These agreements also extended Precision
Products' current contracts with these customers for this type of business on a
long-term basis. During fiscal 1995 the Company also opened a third production
facility in Upper Sandusky, Ohio to provide added capacity for CFR production
and to produce other precision engine parts, such as the axles upon which CFRs
are mounted. The new facility, incorporating approximately $10 million in new
equipment, is expected to be fully operational in early fiscal 1996. Capital
spending during the year, which included the new equipment for the Upper
Sandusky facility, was focused on expanded capacity for gasoline engine CFR
production, upgrades of existing grinding equipment and manufacturing process
improvements.
Tooling Systems
---------------
Hy-Form, Binderline, and Draftline are an integrated full-service automotive
Tooling Systems unit, having added hard tooling to the Company's die-making
capabilities during fiscal 1994. This expanded capability led to a $9.5
million contract with General Motors to design and build prototype and
production tools to form quarter and body side frame panels for a 1997 model
year automobile during fiscal 1995 and 1996. In addition, the Company was
added to Ford's preferred supplier list in fiscal 1995 to quote hard die
tryouts for production dies and other tooling work. Capital spending during
the year enhanced existing press, milling, CMM and laser trimming capacity,
added hardware and software to continue to support customers' proprietary CAD
software requirements, and updated and remodeled the binder development and die
design facilities.
Testing Services
----------------
SMTC continued to benefit in fiscal 1995 from increased automotive product
improvement and development projects by its customers. Domestic automakers
continue to shift greater responsibility for component design, engineering,
and testing to their suppliers, as they focus more upon their core competency
in the assembly of vehicles. In addition, demand continued to grow for testing
due to safety and quality issues, as well as ongoing pressure by the
marketplace to shorten the product development cycle. During fiscal 1995 the
Company received a long-term blanket purchase order from Jeep Truck Engineering
to perform full-vehicle road simulation testing on light trucks. Full-vehicle
simulation systems, used in conjunction with traditional proving ground
testing, allow an automaker to dramatically reduce the cost and time required
to test a vehicle, as well as enhance the quality of data acquired in the
process. Also during the year, SMTC reached an agreement with Ford to act as
its purchasing representative for Engineering Testing and Computer Modeling
requirements on purchase orders up to $50,000. Capital spending during the
year added capacity and enhanced capabilities in the areas of full-vehicle road
simulation, data acquisition, and noise, vibration, and harshness ("NVH")
testing.
Molded and Painted Plastic Products
-----------------------------------
During fiscal 1995 Vaungarde's operations continued to improve, owing to new
management put in place during fiscal 1994 and improved information systems,
cost controls and process improvements. Following the loss of a major contract
at the end of fiscal 1993, marketing efforts in fiscal 1994 and
1995 have focused on new automotive and non-automotive RIM and painting
business. New business obtained during the past two years, which has
replaced a portion of the volume lost from fiscal 1993, was primarily from
non-automotive customers. During fiscal
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<PAGE> 4
1995, Vaungarde received purchase orders from three new customers to paint
plastic parts amounting to approximately $3 million in sales on an annualized
basis. Capital spending during the year was in support of new business and
manufacturing process improvements.
MARKETING
Substantially all the Company's sales are to domestic OEMs and their suppliers.
Each of the Company's subsidiaries maintains an internal sales force and
engages independent sales representatives who work closely with existing
customers and solicit new customers. Sales are made under various types of
long and short term arrangements, generally under purchase orders received from
customers, which include fixed price contracts, cost plus fixed fee contracts,
and time and material contracts.
PATENTS, TRADEMARKS AND LICENSES
Patents, trademarks and licenses are not generally significant for the Company
or the industry in which it competes.
RAW MATERIALS
Raw materials used in the Company's operations are generally available from
several sources and in the quantities needed. Multiple vendor sources for
critical raw materials and supplies have been established over the past several
years.
COMPETITION
The U.S. transportation industry, the principal market for the Company's
products and services, is highly competitive, and suppliers to OEMs and others
in the U.S. transportation industry operate under highly competitive conditions.
Competition is based on quality, price, service, and other factors, with the
relative importance of such factors varying among the Company's products and
services. In particular, the Company and its subsidiaries compete with many
suppliers to the automobile and truck manufacturers, including several U.S. and
Japanese suppliers that are larger and have substantially greater resources
than the Company.
SEASONALITY AND BACKLOG
Sales of the Company's products and services are not seasonal. The Company
believes its backlog, because of the nature of the business, is not indicative
of the level of its present or future business.
WORKING CAPITAL PRACTICES
Owing to the nature of its business, the Company is not required to carry
significant amounts of inventories to meet rapid delivery requirements of its
precision machined components or plastic products customers, or assure itself
of a continuous allotment of goods from suppliers. The Company's manufacturing
processes in these business units are generally performed with a short
turnaround time, and the scheduling of manufacturing activities from customer
orders generally includes enough lead time to assure delivery of adequate
supplies of raw materials. Inventories related to tooling contracts tend to be
longer term in nature, in that a tooling job can take several months to
complete, though the scheduling of production activities generally allows
sufficient lead time to assure delivery of adequate supplies of raw materials.
The Company does not generally provide extended payment terms to its customers;
however, like many of its competitors, the Company sells a substantial amount
of goods and services to other OEM suppliers. It is common for these other OEM
suppliers to delay payment for goods and services to their suppliers until
payment is received by them from the OEMs. Progress payments are generally
made for tooling work covering several months, and are negotiated at the time
of order. The Company generally allows its customers to return merchandise for
failure to meet certain pre-agreed quality standards; however, the Company
employs quality assurance practices that minimize such returns. Customers
returns have not been a significant problem.
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<PAGE> 5
PRINCIPAL CUSTOMERS
The Company's principal customers for its products and services are General
Motors Corporation, Ford Motor Company, Chrysler Corporation (the "Big Three")
and their respective suppliers. Direct sales to principal customers as a
percentage of the Company's total sales are as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
1995 1994 1993
---------------------------
<S> <C> <C> <C>
Big Three:
----------
General Motors Corporation 22% 17% 17%
Ford Motor Company 17% 25% 21%
Chrysler Corporation 5% 4% 4%
---------------------------
44% 46% 42%
Others over 10% of consolidated sales:
--------------------------------------
Eaton Corporation 13% 11% 13%
American Sunroof Company --- --- 13%
</TABLE>
EMPLOYEES
As of June 30, 1995, the Company employed 902 persons, of which 144 production
personnel of Precision Products were represented by the United Auto Workers.
The current contract between Precision Products and the UAW was signed in May
1994, and expires in November 1998. Production personnel at Vaungarde voted to
be represented by the United Auto Workers but no contract has been negotiated
as of this date, though cooperative bargaining efforts continue. The Company's
other subsidiaries are not unionized.
GOVERNMENT REGULATION
Management of the Company believes that compliance with applicable Federal,
state, and local environmental laws and regulations has not had nor should have
any material effect upon the capital expenditures, net income, or competitive
position of the Company.
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<PAGE> 6
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Thomas H. Roulston II 62 Chairman of the Board and Director (1)
Jerry A. Cooper 56 President, Chief Executive Officer and Director (2)
Michael J. Meier 41 VP-Finance, Chief Financial Officer, Secretary and Treasurer
James L. Treece 57 Chief Accounting Officer and Assistant Treasurer
Leonard V. Matlock, Jr. 48 Corporate Controller and Assistant Secretary
<FN>
(1) Term as director expires in 1996
(2) Term as director expires in 1995
</TABLE>
Thomas H. Roulston has served as Chairman of the Board since 1990. Mr.
Roulston has been the chairman of the board of Roulston & Company, Inc. of
Cleveland, Ohio since 1990, and served as president of Roulston & Company, Inc.
from 1963 until 1990. Roulston & Company, Inc. is a registered investment
advisor.
Jerry A. Cooper joined the Company in 1992 as President and Chief Executive
Officer. From 1990 until joining the Company, Mr. Cooper was president and
chief executive officer of Bettcher Manufacturing Corporation. Bettcher is a
metal forming company serving various industries, located in Cleveland, Ohio.
From 1977 to 1990 he was president and general manager of Mather Seal Company,
a subsidiary of Federal-Mogul Corporation. Mather Seal is a manufacturer of
Teflon(tm) seals and specialty products for industry, located in Milan,
Michigan.
Michael J. Meier joined the Company in 1988 as Corporate Controller, and in
1990 was named VP-Finance, Chief Financial Officer, Secretary, and Treasurer.
Prior to joining the Company, Mr. Meier held various positions in both public
accounting and private industry accounting and finance.
James L. Treece joined the Company in 1990 as Corporate Controller and in 1992
was named Chief Accounting Officer and Assistant Treasurer. Prior to joining
the Company, Mr. Treece was assistant treasurer of HCR Corporation, a
publicly-held health care company, from 1981 until 1989, and from 1977 until
1981 was controller of Wolfe Industries Construction Company, which became part
of HCR Corporation.
Leonard V. Matlock, Jr. has served as Corporate Controller and Assistant
Secretary of the Company since December 1993. From 1985 until joining the
Company, Mr. Matlock was controller of Teledyne Hyson, a division of Teledyne,
Inc. Teledyne Hyson is a manufacturer of metal stamping die controls. Prior
to 1980, Mr. Matlock held various accounting related positions in private
industry.
No executive officer has any family relationship to any other executive officer
or director of the Company, except Thomas H. Roulston who is the father of
Scott D. Roulston, a director of the Company. Each executive officer holds
office until the first meeting of the Board of Directors of the Company
following the next annual meeting of stockholders of the Company and his
successor shall have been elected and qualified, or until his earlier
resignation or removal from office.
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<PAGE> 7
ITEM 2. PROPERTIES
The following are the principal properties of the Company as of June 30, 1995:
<TABLE>
<CAPTION>
Area in Owned /
Location Square Feet Leased Primary use
-------- ----------- ------- -----------
<S> <C> <C> <C>
Defiance, Inc.
1111 Chester Ave., Cleveland, OH 2,800 Leased Corporate offices
Defiance Precision Products, Inc.
1125 Precision Way, Defiance, OH 90,000 Owned Manufacturing plant and offices
1190 Precision Way, Defiance, OH 40,000 Owned Manufacturing plant
1815 Baltimore Rd., Defiance, OH 6,000 Leased Product development facility
250 Commerce Way, Upper Sandusky, OH 78,000 Leased Manufacturing plant
Hy-Form Products, Inc.
35588 Veronica Drive, Livonia, MI 19,200 Owned Production facility and offices
35572 Veronica Drive, Livonia, MI 12,400 Leased Production facility
35569 Industrial Drive, Livonia, MI 12,400 Leased Production facility
35684 Veronica Drive, Livonia, MI 12,400 Leased Production facility
12800 East Ten Mile Rd., Warren, MI 80,000 Leased Production facility
SMTC Corporation
1960 Ring Drive, Troy, MI 42,000 Leased Offices and testing facilities
5859 Executive Drive, Westland, MI 29,000 Leased Offices and testing facilities
5950 Executive Drive, Westland, MI 7,800 Leased Offices and testing facilities
5717 Executive Drive, Westland, MI 9,663 Leased Offices and testing facilities
5727 Executive Drive, Westland, MI 20,000 Leased Offices and testing facilities
5770 Hix Road, Westland, MI 24,600 Leased Offices and testing facilities
Vaungarde, Inc.
1000 Bradley Street, Owosso, MI 100,000 Owned Manufacturing plant and offices
630 South Chestnut Street, Owosso, MI 28,000 Leased Manufacturing plant
1040 Aiken Road, Owosso, MI 20,000 Leased Manufacturing plant
Binderline Development, Inc.
Draftline Engineering Company
33100 Freeway Dr., St. Clair Shores, MI 42,500 Owned Production facility and offices
</TABLE>
The Company considers its properties to be suitable and adequate for its
present needs. The properties are being fully utilized, though utilization
can vary with production levels.
ITEM 3. LEGAL PROCEEDINGS
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
Not applicable
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<PAGE> 8
PART II
ITEM 5. MARKET FOR REGISTRANT'S CAPITAL STOCK AND RELATED STOCKHOLDER MATTERS
The principal market on which the Company's Common Stock is traded is the
NASDAQ National Market System (NASDAQ Symbol DEFI). The following table
indicates the high and low sales prices of the Company's Common Stock reported
on the NASDAQ National Market System Summary of Activity and the cash dividends
declared per share for each full quarterly period within the two most recent
fiscal years:
<TABLE>
<CAPTION> Market Price
------------------ Dividends
High Low Declared
------- ------- --------
<S> <C> <C> <C>
Fiscal 1995
-----------
First quarter (July 1, 1994 - September 30, 1994) $7.5625 $5.5000 ---
Second quarter (October 1, 1994 - December 31, 1994) 7.5000 6.0000 ---
Third quarter (January 1, 1995 - March 31, 1995) 7.6250 6.2500 $0.04
Fourth quarter (April 1, 1995 - June 30, 1995) 7.0000 6.1250 0.04
-----
Total $0.08
=====
Fiscal 1994
-----------
First quarter (July 1, 1993 - September 30, 1993) $8.1250 $6.0000 ---
Second quarter (October 1, 1993 - December 31, 1993) 9.2500 7.3750 ---
Third quarter (January 1, 1994 - March 31, 1994) 10.1250 6.7500 ---
Fourth quarter (April 1, 1994 - June 30, 1994) 8.2500 6.1250 ---
-----
Total ---
=====
</TABLE>
As of July 31, 1995 the Company had 327 stockholders of record. This figure
does not include those persons who hold the Company's stock through nominee
accounts, otherwise known as "street name" shareholders. Including
street name shareholders, the Company estimates it has 2,750 stockholders.
The Company expects its practice of paying quarterly dividends on its Common
stock will continue, although future dividends will continue to depend upon
the Company's earnings, capital requirements, financial condition and other
factors.
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<PAGE> 9
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
DEFIANCE, INC. AND SUBSIDIARIES
FIVE YEAR SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
<CAPTION>
Year Ended June 30,
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales $92,532 $81,645 $79,217 $69,559 $59,132
Earnings (loss) before cumulative effect of
accounting change $6,594 $5,437 $3,432 $909 ($940)
Cumulative effect of accounting change --- 564 --- --- ---
-------------------------------------------------------
Net earnings (loss) $6,594 $6,001 $3,432 $909 ($940)
=======================================================
Per share:
Earnings (loss) before cumulative effect of
accounting change $0.98 $0.81 $0.54 $0.15 ($0.16)
Cumulative effect of accounting change --- 0.09 --- --- ---
-------------------------------------------------------
Net earnings (loss) per common share $0.98 $0.90 $0.54 $0.15 ($0.16)
=======================================================
Working capital (deficiency) $11,816 $10,112 $9,569 ($341) ($1,747)
Cost in excess of net assets of acquired
companies (goodwill) -- net of amortization $6,769 $7,085 $7,400 $7,715 $7,913
Total assets $77,008 $54,535 $51,737 $50,073 $49,558
Short-term interest bearing obligations $4,299 $2,933 $2,343 $10,941 $9,544
Long-term interest bearing obligations $17,182 $9,346 $13,685 $9,995 $12,691
Stockholders' equity $36,296 $30,174 $24,081 $20,157 $19,037
Dividends paid $523 --- --- --- ---
</TABLE>
<TABLE>
--------------------------------------------------------------------------------------
DEFIANCE, INC. AND SUBSIDIARIES
UNAUDITED QUARTERLY INFORMATION
(Amounts in thousands, except per share amounts)
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Fiscal 1995
-----------
Net sales $21,574 $20,977 $23,085 $26,896 $92,532
Gross profit $5,677 $5,408 $6,158 $6,674 $23,917
Net earnings $1,501 $1,426 $1,743 $1,924 $6,594
Earnings per share $0.22 $0.22 $0.26 $0.28 $0.98
Fiscal 1994
-----------
Net sales $19,235 $19,677 $19,971 $22,762 $81,645
Gross profit $4,434 $4,900 $5,216 $5,970 $20,520
Earnings before cumulative effect of accounting change $1,003 $1,070 $1,542 $1,822 $5,437
Cumulative effect of accounting change 564 --- --- --- 564
-------------------------------------------------------
Net earnings $1,567 $1,070 $1,542 $1,822 $6,001
=======================================================
Per share:
Earnings before cumulative effect of accounting change $0.15 $0.16 $0.23 $0.27 $0.81
Cumulative effect of accounting change 0.09 --- --- --- 0.09
-------------------------------------------------------
Net earnings per common share $0.24 $0.16 $0.23 $0.27 $0.90
======================================================
</TABLE>
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<PAGE> 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain items from Defiance, Inc.'s Consolidated
Statement of Operations as a percentage of net sales for the fiscal years ended
June 30, 1995 ("1995"), June 30, 1994 ("1994") and June 30, 1993 ("1993"):
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------
<S> <C> <C> <C>
Net sales 100.0 100.0 100.0
Cost of goods sold 74.2 74.9 77.9
---------------------------------
Gross profit 25.8 25.1 22.1
Selling, general and administrative expenses 13.7 13.6 12.9
---------------------------------
Operating earnings 12.1 11.5 9.2
Interest (expense) - net (1.1) (1.6) (2.1)
Other income (expense) 0.1 (0.1)
---------------------------------
Earnings before income tax provision and cumulative
effect of accounting change 11.0 10.0 7.0
Income tax provision 3.9 3.3 2.7
---------------------------------
Earnings before cumulative effect of accounting change 7.1 6.7 4.3
Cumulative effect of accounting change - income taxes 0.7
---------------------------------
Net earnings 7.1 7.4 4.3
=================================
</TABLE>
Net sales
----------
Net sales for 1995 were up by $10,887,000, or 13.3% from 1994. Sales of cam
follower rollers and other precision machined metal components were up 17% due
to continued strong engine build rates at the Company's automotive and diesel
customers, combined with new business for Eaton Corporation under a contract
announced in 1994. Sales of testing services also increased 4% due to the
continued new model development activity by domestic automakers and the
continuing trend toward outsourcing to preferred suppliers. Tooling revenues
increased 24% primarily due to new work started in 1995 for General Motors to
provide hard tooling for the 1997 Chevrolet Corsica and Beretta. Sales of
molded and painted plastic parts were essentially unchanged from the prior
year.
Net sales for 1994 were up by $2,428,000, or 3.1% from 1993. This increase
was moderated considerably by the loss of a major contract at Vaungarde as of
the end of the prior fiscal year. The loss of revenue from this contract
contributed to a decrease in sales at Vaungarde of $6.9 million, or 38% from
1993. Sales at the other subsidiaries were up a total of $9.3 million, or 15%
over the prior year. Sales of cam follower rollers and other precision
machined metal components were up 11% in response to strong engine build rates
at automotive and diesel customers, along with the growing use of cam follower
rollers in gasoline engines. Revenues from testing services were up 23% over
the prior year, due to continuing increases in testing support and outsourcing
by the Big Three, and the full year effect of testing capacity added in the
prior year. Revenues from tooling services were up 15% due to a higher level
of tooling and prototyping activity associated with increased new model
programs by the Big Three.
Gross profit percentage
-----------------------
Gross profit for 1995, as a percentage of net sales, increased to 25.8% from
25.1% in the prior year, which represents a $3,397,000 increase from 1994, the
fourth straight year of improvement in gross profit percentage. The increase
was due to a mix of higher sales in the Company's core business units,
comprised of tooling systems, testing services and precision machined
components, which generally experience higher margins, coupled with
productivity improvements and increased capacity utilization.
Gross profit for 1994, as a percentage of net sales, increased to 25.1% from
22.1% in the prior year, which represents a $2,989,000 increase from 1993. The
increase is a result of continued growth in sales of precision machined metal
components and revenues from testing and tooling services, along with continued
success in cost containment, process improvement, and productivity improvement
programs.
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<PAGE> 11
Selling, general and administrative (SG&A) expenses
---------------------------------------------------
SG&A expenses for 1995, as a percentage of sales, increased to 13.7% from
13.6%, representing a $1,603,000 increase from 1994. This increase is due to a
one-time charge of $250,000 relative to the curtailment of a defined benefit
pension plan, increased compensation costs associated with improved earnings,
and increased costs associated with higher sales levels. Excluding the pension
charge, SG&A expenses represented 13.5% of sales, down from 1994.
SG&A expenses for 1994, as a percentage of sales, increased to 13.6% from
12.9%, representing an $842,000 increase from 1993. This increase resulted
primarily from company contributions to a 401(k) plan which was established
July 1, 1993 (see Note F to the Consolidated Financial Statements), increased
profit sharing and incentive plan costs under programs that cover virtually all
employees and are tied to profitability, and increases in franchise taxes and
product development costs.
Interest income and expense
---------------------------
Interest expense, net of interest income, for 1995 decreased $311,000 or 24%
from 1994, and for 1994 decreased $394,000 or 23% from 1993. These decreases
were due to lower average net borrowings at lower effective interest rates, a
result of the Company's continued improvement in the terms of its credit
facility. In addition, $264,000 of interest was capitalized during 1995 under
the equipment purchase facility.
Income taxes
------------
The effective income tax rate for 1995 was 35.6%, as compared to 33.2% in 1994
and 38.0% in 1993. The difference in effective rates is due to future taxable
amounts that must be considered in the computation of income taxes for the
current year as required by Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109).
Effective July 1, 1993, the Company changed its method of accounting for income
taxes from the deferred method to the liability method required by SFAS 109.
As permitted by the rules, prior years' financial statements were not restated,
and the cumulative effect of adopting SFAS 109 as of July 1, 1993 was to
increase 1994 net income by $564,000, or $0.09 per share. For an analysis of
income taxes, see Note G to the Consolidated Financial Statements.
Trends in operations
--------------------
The domestic automobile and light truck industry experienced steady growth from
1992 through 1994, with total vehicle sales increasing from 13.1 million in
1992 to 14.2 million in 1993 and 15.5 million in 1994. Total vehicle sales for
1995 are currently estimated by industry analysts at 14.7 million units.
Although sales have slowed in 1995, total volume remains at relatively high
levels, with strong sales and earnings for the domestic auto and light truck
industry over the past two years.
Trends in the domestic auto industry are driven by automakers' needs, causing
the actions of their suppliers to be reactive to automakers' demands, rather
than proactive. Increased outsourcing by the Big Three is occurring as they
focus on being assemblers of vehicles as compared to manufacturers of vehicles.
In addition, consolidation of the supplier base is causing increased customer
selectivity among a more limited supplier group by the automakers to simplify
purchasing and improve quality. In response to these trends, suppliers are
finding it necessary to distinguish themselves from others by providing higher
quality products and services at lower prices.
Management expects Defiance to continue to benefit from these industry trends.
Automobile and truck producers are increasingly outsourcing design and testing
work previously done in-house. Shorter production cycles and the need to
improve quality has created increased demand for design and testing services.
As automotive companies reduce the number of suppliers they use, established
suppliers such as Defiance will have opportunities for additional work.
- 11 -
<PAGE> 12
The Company's core subsidiaries are organized into three strategic business
units: Tooling Systems, Testing Services and Precision Machined Components.
Each of these units seeks to create a competitive advantage through
technological and manufacturing niches utilizing research, development,
engineering and design capabilities to differentiate it from its competitors.
In addition, each business unit stresses systems capabilities as compared to
supplying only individual components, to save its customers time and money. The
strategy in fiscal 1996 is to expand the Company's already strong position in
these niche markets through capital investments focused on increased capacity
and improvements in process and manufacturing capabilities. Longer term, the
Company expects to evaluate acquisitions that fit this strategic direction.
The Company's fourth unit, Vaungarde, has been in a turnaround mode during the
past two fiscal years, and current efforts by Vaungarde management are focused
on obtaining additional business and continuing the progress made to date in
cost control and process improvement.
The upward trend in Defiance's operating results in 1995 is indicative of the
Company's future plans. Sales and operating profits are expected to continue
to grow at a strong pace in fiscal 1996 if the domestic automobile and
heavy-duty truck markets remain reasonably strong. Defiance will begin
production in fiscal 1996 at its new production facility in Upper Sandusky,
Ohio to meet the growing demand for cam follower rollers and axles. The cam
follower roller and axle market is expected to grow faster than the overall
automotive industry for the next several years.
Inflation over the past three years has affected the Company's cost of raw
materials while selling prices have remained relatively constant under pricing
pressures from the Big Three. Most of these cost increases have been offset,
however, through process improvements, gains in productivity and arrangements
with some customers to share cost increases.
All production personnel of Precision Products are represented by the United
Auto Workers. The current contract between Precision Products and the UAW was
signed in May 1994, and expires in November 1998. Production personnel at
Vaungarde voted to be represented by the United Auto Workers but no contract
has been negotiated as of this date, though cooperative bargaining efforts
continue. The Company's other subsidiaries are not unionized.
- 12 -
<PAGE> 13
FINANCIAL CONDITION (LIQUIDITY AND CAPITAL RESOURCES)
The following includes certain items and analyses derived from Defiance, Inc.'s
Consolidated Statement of Cash Flows and Consolidated Balance Sheet for fiscal
years 1995, 1994 and 1993:
<TABLE>
<CAPTION>
Operating activities and working capital
---------------------------------------- (All dollar amounts in thousands)
1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
Net earnings $ 6,594 $ 6,001 $ 3,432
Items not affecting cash 4,467 3,543 5,488
Changes in working capital components (3,027) (58) (1,432)
---------------------------------------------
Cash provided by operating activities 8,034 9,486 7,488
Increase (decrease) over prior year (1,452) 1,998 4,000
Current assets $33,148 $22,779 $21,157
Current liabilities 21,332 12,667 11,588
---------------------------------------------
Working capital 11,816 10,112 9,569
Current ratio 1.56 1.80 1.83
</TABLE>
Cash provided by operating activities was $8,034,000 in 1995, compared to
operating cash flows of $9,486,000 in 1994 and $7,488,000 in 1993. Net cash
used for changes in working capital components in 1995 of $3,027,000 was
primarily due to increased work in process inventory levels related to a major
hard tooling contract, increased accounts receivable in response to higher
sales levels and increased prepaid expenses from the recording of preoperating
costs, partially offset by increases in payables and accruals related to
increased production levels, incentive bonus accruals, Federal income tax
accruals and amounts owed for fixed assets purchased in June of 1995. Net cash
used for changes in working capital components in 1994 of $58,000 was due to
modest increases in inventories, offset by modest decreases in receivables and
increases in payables and accruals. Net cash used for changes in working
capital components in 1993 of $1,432,000 was due to increases in accounts
receivable related to increased sales levels, partially offset by increases in
payables and accruals. Working capital at the end of 1995 stood at $11,816,000,
a current ratio of 1.56 to 1. At the end of 1994 and 1993, the current ratio
was 1.80 and 1.83 to 1, respectively. Though the current ratio declined in
1995, working capital increased by $1,704,000. Days' sales outstanding in
accounts receivable have averaged over 60 days the past three years, which is
indicative of the industry in which the Company operates. Many of Defiance's
customers are suppliers to the major automotive companies, and these suppliers
are often not in a position to pay Defiance until they have received payment
from their customers. Inventory turnover for 1995 was substantially lower than
it has been the past two years. This is related to new contracts in 1995 for
hard tooling, which tend to be longer term in nature since a tooling job can
take several months to complete.
<TABLE>
<CAPTION>
Financing activities and banking facility
----------------------------------------- (All dollar amounts in thousands)
1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
Total short and long term obligations $21,481 $12,279 $16,028
Increase (decrease) from prior year 9,202 (3,749) (4,908)
Total capitalization (debt above plus equity) $57,777 $42,453 $40,109
Debt to total capitalization ratio 37.2% 28.9% 40.0%
Cash generated from exercise of employee stock options $51 $92 $492
Dividends paid $523 --- ---
Year end unused borrowing capacity under lines of credit $4,000 $6,962 $5,032
</TABLE>
Total interest-bearing debt increased $9,202,000 in 1995 due to borrowings for
the purchase of equipment. Total debt dropped $8,657,000 during 1993 and 1994,
when higher interest rate loans were identified and paid off early to reduce
debt and interest expense. As a result of these efforts, debt to total
capitalization has been reduced from
- 13 -
<PAGE> 14
over 50% at the end of 1992 to 37% at the end of 1995. The Company generated
$635,000 over the past three years through the sale of common stock from the
exercise of employee stock options, and paid a total of $523,000 in dividends
during 1995.
The Company's current banking arrangement with its primary lender, effective
August 1995, includes a $6,000,000 two year revolving line of credit to support
working capital needs and a $6,000,000 equipment purchase line of credit to
help fund its capital spending plans for 1996. The equipment purchase line
expires August 1996, at which time the balance will be converted to a five or
seven year term loan. All borrowings under these facilities are at rates below
prime. At June 30, 1995, the Company had $4,000,000 in additional borrowing
capacity under the previous revolving credit agreement, which was replaced by
the new $6,000,000 revolver discussed above.
In July 1994, the Company renegotiated its banking arrangement with its primary
lender. Under this arrangement, all borrowings with the bank became unsecured
and the Company was no longer restricted from paying dividends. This facility
included a $4,000,000 two year revolving line of credit and a $10,000,000
equipment purchase line of credit. During 1995, the equipment purchase
facility was increased to $12,000,000, all of which was borrowed during the
year, and these borrowings were converted to a seven year term note in July
1995.
In August 1993, the Company renegotiated its previous banking arrangement on a
long term basis. This arrangement consisted of a two year revolving credit
facility and a $7,000,000 five year term loan at a fixed rate of 7%. The five
year term loan was used to retire existing term loans and line of credit
balances. This arrangement also removed fund transfer restrictions that
existed between the Company and its subsidiaries.
<TABLE>
<CAPTION>
Investing activities
-------------------- (All dollar amounts in thousands)
1995 1994 1993
----------------------------------
<S> <C> <C> <C>
Capital expenditures, including assets acquired under capitalized leases $16,295 $6,155 $3,242
Depreciation and amortization of property, plant and equipment 4,126 3,831 3,807
</TABLE>
Capital expenditures in 1995 totaled $16,295,000, of which $10 million was
related to equipment for a new production facility for expanded capacity for
gasoline engine CFR and axle production and $3 million was related to the
purchase and installation of equipment supporting expanded capacity in
full-vehicle road simulation testing. The remainder of the capital spending
was for upgrades to existing equipment, manufacturing process improvements
and asset replacements. Approximately half of the capital expenditures in 1994
were in support of new or increased sales, while the remaining capital spending
in 1994 and 1993 focused largely on asset replacement, cost reduction and
productivity improvement programs.
Trends in liquidity and capital resources
-----------------------------------------
With the Company's entry into the hard tooling business, which has greater
working capital demands than the company's other lines of business, it is
anticipated that working capital requirements in fiscal 1996 will be similar to
those of fiscal 1995. Liquidity in fiscal 1996 is expected to continue to be
adequate to meet operating needs through profitability and resulting cash
flows, along with borrowing capacity under the revolving line of credit.
Liquidity is defined as the ability of an enterprise to mobilize cash to
support operating needs.
Based on currently expected levels of business, the Company plans to spend
approximately $5 million in capital expenditures in fiscal 1996 relative to
asset replacements, cost reduction, and productivity improvement programs.
Additional capital expenditures relating to new or increased sales are
currently estimated at $7 million. Of this amount, the Company plans to spend
approximately $5 million on equipment to support expanded capacity to
manufacture cam follower rollers and other precision machined metal components
to meet increased demand for these products.
At June 30, 1995, the Company has noncancelable outstanding commitments for
capital expenditures of approximately $3.5 million. The Company has secured
the necessary financing to fund these commitments, and expects to fund its
remaining planned fiscal 1996 capital expenditures through operating cash flow
and the equipment purchase facility from its primary lender. In addition, the
Company's status as an unsecured borrower from its primary lender and
relatively low debt to total capitalization ratio reflects favorably on the
Company's ability to
- 14 -
<PAGE> 15
generate additional sources of capital in the future, should they be required.
In January 1995, the Company declared its first cash dividend to holders of its
common stock since it became publicly owned in 1985. A quarterly cash dividend
of four cents per share was paid in the first and second calendar quarters of
1995. The Company anticipates future quarterly dividends, and does not expect
its liquidity or capital resources to be materially affected by the payment of
dividends.
Certain credit agreements of the Company contain various warranties and
covenants. As of June 30, 1995, the Company is in compliance with all of these
covenants, and expects to be in compliance with these covenants in fiscal 1996.
- 15 -
<PAGE> 16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Index to Financial Statements of Defiance, Inc. and Subsidiaries Page
---------------------------------------------------------------- ----
<S> <C>
Report of Independent Auditors -- Ernst & Young LLP 17
Report of Independent Accountants -- Coopers & Lybrand L.L.P. 18
Consolidated Balance Sheet at June 30, 1995 and 1994 19
Consolidated Statement of Operations for the years ended June 30, 1995, 1994 and 1993 21
Consolidated Statement of Stockholders' Equity for the years ended June 30, 1995, 1994 and 1993 22
Consolidated Statement of Cash Flows for the years ended June 30, 1995, 1994 and 1993 23
Notes to Consolidated Financial Statements 24
</TABLE>
- 16 -
<PAGE> 17
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Defiance, Inc.
We have audited the accompanying consolidated balance sheets of Defiance, Inc.
as of June 30, 1995 and 1994 and the related consolidated statements of
operations, shareholders' equity, and cash flows for the years then ended. Our
audits also included the financial statement schedule for the years ended June
30, 1995 and 1994, listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audit. The consolidated financial statements and
financial statement schedules of Defiance, Inc. for the year ended June 30,
1993 were audited by other auditors whose report dated August 25, 1993
expressed an unqualified opinion on those statements and schedules.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the 1995 and 1994 financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Defiance, Inc. at June 30, 1995 and 1994 and the consolidated results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
As discussed in Note G to the consolidated financial statements, in fiscal
1994, the Company changed its method of accounting for income taxes.
/s/ ERNST & YOUNG LLP
Cleveland, Ohio
July 27, 1995
- 17 -
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors,
Defiance, Inc.
We have audited the consolidated financial statements and the financial
statement schedules of Defiance, Inc. and Subsidiaries as of June 30, 1993, and
for the year then ended, listed in Item 14(a) of this Form 10-K. These
financial statements and financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and financial statement schedules based on our
audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Defiance, Inc.
and Subsidiaries as of June 30, 1993, and the consolidated results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
related financial statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole, present fairly, in
all material respects, the information required to be included therein.
/s/ COOPERS & LYBRAND L.L.P.
Cleveland, Ohio
August 25, 1993
- 18 -
<PAGE> 19
DEFIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(All dollar amounts in thousands)
ASSETS
<TABLE>
<CAPTION>
June 30, June 30,
1995 1994
---------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash $1,166 $941
Accounts receivable, less allowance for doubtful accounts
of $316 - 1995 and $357 - 1994 19,835 15,872
Inventories 8,210 3,977
Deferred income taxes 621 572
Prepaid expenses and other current assets 3,316 1,417
---------------------------------------
Total current assets 33,148 22,779
PLANT AND EQUIPMENT, at cost:
Land 404 404
Buildings and leasehold improvements 11,062 10,707
Machinery and equipment 36,523 35,322
Office equipment 1,899 1,855
Construction in process 15,481 1,965
---------------------------------------
65,369 50,253
Accumulated depreciation and amortization (29,375) (26,428)
---------------------------------------
35,994 23,825
ASSETS:
Cost in excess of net assets of acquired companies, less accumulated
amortization of $2,524 - 1995 and $2,208 - 1994 6,769 7,085
Other 1,097 846
---------------------------------------
7,866 7,931
---------------------------------------
Total assets $77,008 $54,535
=======================================
</TABLE>
- 19 -
<PAGE> 20
DEFIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(All dollar amounts in thousands except par value )
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, June 30,
1995 1994
----------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long term obligations $4,299 $2,933
Accounts payable 6,570 2,811
Accrued payroll and employee benefits 4,385 4,044
Accrued expenses 6,078 2,879
----------------------------------------
Total current liabilities 21,332 12,667
TERM OBLIGATIONS 17,182 9,346
DEFERRED INCOME TAXES 2,198 2,348
CONTINGENCIES - Note K
STOCKHOLDERS' EQUITY:
Preferred shares, par value $.05, 2,000,000 shares authorized, no shares outstanding
Common shares, par value $.05, 15,000,000 shares authorized at June 30, 1995 and
10,000,000 shares authorized at June 30, 1994, shares issued and
outstanding of 6,543,950 - 1995 and 6,516,038 - 1994 327 326
Additional paid-in capital 21,977 21,927
Retained earnings 13,992 7,921
----------------------------------------
36,296 30,174
----------------------------------------
Total liabilities and stockholders' equity $77,008 $54,535
========================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 20 -
<PAGE> 21
DEFIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(All amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended June 30,
1995 1994 1993
---------------------------------------
<S> <C> <C> <C>
Net sales:
Product $69,544 $59,378 $61,531
Services 22,988 22,267 17,686
---------------------------------------
92,532 81,645 79,217
---------------------------------------
Cost of goods sold:
Products 52,985 45,927 48,996
Services 15,630 15,198 12,690
---------------------------------------
68,615 61,125 61,686
---------------------------------------
Gross profit 23,917 20,520 17,531
Selling, general and administrative expenses 12,708 11,105 10,263
---------------------------------------
Operating earnings 11,209 9,415 7,268
Interest (expense) - net (988) (1,299) (1,693)
Other income (expense) 19 26 (40)
---------------------------------------
Earnings before income tax provision and cumulative
effect of accounting change 10,240 8,142 5,535
Income tax provision 3,646 2,705 2,103
---------------------------------------
Earnings before cumulative effect of accounting change 6,594 5,437 3,432
Cumulative effect of accounting change - income taxes 564
---------------------------------------
Net earnings $6,594 $6,001 $3,432
=======================================
Net earnings per common share:
Earnings before cumulative effect of accounting change $0.98 $0.81 $0.54
Cumulative effect of accounting change - income taxes 0.09
---------------------------------------
Net earnings $0.98 $0.90 $0.54
=======================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 21 -
<PAGE> 22
DEFIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(All amounts in thousands)
<TABLE>
<CAPTION>
Common Shares
----------------------------
Additional Retained
Number Paid-in Earnings
of Shares Amount Capital (Deficit)
------------------------------------------------------------
<S> <C> <C> <C> <C>
June 30, 1992 6,071 $304 $21,365 ($1,512)
Options exercised 351 17 475
Net earnings 3,432
------------------------------------------------------------
June 30, 1993 6,422 321 21,840 1,920
Options exercised 94 5 87
Net earnings 6,001
------------------------------------------------------------
June 30, 1994 6,516 326 21,927 7,921
Options exercised 28 1 50
Net earnings 6,594
Dividends (523)
------------------------------------------------------------
June 30, 1995 6,544 $327 $21,977 $13,992
============================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 22 -
<PAGE> 23
DEFIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(All amounts in thousands)
<TABLE>
<CAPTION>
Year Ended June 30,
1995 1994 1993
------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $6,594 $6,001 $3,432
Adjustments to reconcile net earnings to cash provided by
operating activities:
Depreciation and amortization of property, plant and equipment 4,126 3,831 3,807
Amortization of other assets 315 315 325
Cumulative effect of accounting change (564)
Loss (gain) on sale of assets (5) 4 58
Deferred income taxes 31 (43) 1,298
Changes in assets and liabilities:
Accounts receivable (3,963) 429 (3,141)
Inventories (4,233) (757) 642
Accounts payable and accrued expenses 6,916 489 1,364
Income taxes 154 249 (229)
Prepaid expenses and other (1,901) (468) (68)
------------------------------------------
Cash provided by operating activities 8,034 9,486 7,488
------------------------------------------
FINANCING ACTIVITIES:
Short term borrowings - net (decrease) (1,838)
Payments of long term obligations (3,037) (11,285) (6,745)
Additions to long term obligations 12,000 7,471 2,675
Issuance of common shares 51 92 492
Dividends paid (523)
------------------------------------------
Cash provided by (used for) financing activities 8,491 (3,722) (5,416)
------------------------------------------
INVESTING ACTIVITIES:
Capital expenditures (16,055) (5,362) (2,243)
Other - net (245) 89 36
------------------------------------------
Cash used for investing activities (16,300) (5,273) (2,207)
------------------------------------------
CASH:
Increase (decrease) 225 491 (135)
Beginning of year 941 450 585
------------------------------------------
End of year $1,166 $941 $450
==========================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 23 -
<PAGE> 24
DEFIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1995 ("1995"), JUNE 30, 1994 ("1994"),
AND JUNE 30, 1993 ("1993")
(All dollar amounts in thousands, except share and per share amounts)
A - ACCOUNTING POLICIES
Description
-----------
The Company operates in a single industry segment as an integrated supplier of
precision machined metal components, testing services, tooling systems, and
molded and painted plastic products, primarily to the United States
transportation industry.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the Company and
all its subsidiaries. All significant intercompany transactions and balances
have been eliminated.
Inventories
-----------
Inventories are valued at the lower of cost (first in, first out method) or
market.
Depreciation and Amortization
-----------------------------
Depreciation is calculated using the straight line method over the estimated
useful lives of the assets. Leasehold improvements and capital lease property
are amortized over the lesser of the lease life or useful lives of these items.
Capitalized Interest
--------------------
Interest costs of $264 were capitalized in construction in process in 1995. No
interest costs were capitalized in 1994 or 1993.
Intangible Assets
-----------------
Cost in excess of net assets of acquired companies (or goodwill) is amortized
using the straight line method over 30 years. The carrying value of goodwill
will be reviewed if the facts and circumstances suggest that it may be
impaired. If this review indicates that goodwill will not be recoverable, as
determined based on the undiscounted cash flows of the entities acquired over
the remaining amortization period, the Company's carrying value of the goodwill
will be adjusted accordingly.
Preoperating Costs
------------------
Certain preoperating costs of a new plant at one of the Company's subsidiaries
have been deferred at June 30, 1995 until the plant is in operation in fiscal
1996. These costs totaled $960 at June 30, 1995 and will be amortized over a
24 month period beginning in fiscal 1996. There were no preoperating costs in
1994 and 1993.
Revenue Recognition
-------------------
Sales of products are recognized when goods are shipped. Revenues from fixed
price contracts are recognized on the percentage of completion method.
Revenues from cost plus fixed fee and time and material contracts are
recognized on the basis of direct labor hours at a predetermined rate or
markup. Accounts receivable include $4,227 and $2,791 of unbilled costs
related to contracts at June 30, 1995 and 1994, respectively. Changes in
estimated job profitability are recognized in the period in which the revisions
are determined. Provisions are made for the full amount of anticipated future
losses on contracts when they are identified.
- 24 -
<PAGE> 25
Net Earnings Per Common Share
-----------------------------
Net earnings per common share is computed by dividing net earnings by the
weighted average number of common shares outstanding during the year,
adjusted for the dilutive effect, if any, of outstanding stock options,
warrants and contingently issuable shares.
Reclassifications
-----------------
The Company has reclassified certain prior year financial information to
conform with the current year's presentation.
B - CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------
<S> <C> <C> <C>
Noncash transactions excluded from the consolidated statement of cash flows:
Assets acquired under capital lease $ 239 $ 793 $ 999
Cash payments:
Interest $ 1,258 $ 1,317 $1,729
Federal income taxes 3,461 2,500 1,034
</TABLE>
C - INVENTORIES
<TABLE>
<CAPTION>
June 30, June 30,
1995 1994
--------------------
<S> <C> <C>
Raw materials $1,293 $1,319
Work in process 5,586 1,622
Finished goods 598 376
Stores and supplies 734 660
------ ------
Total inventories $8,211 $3,977
====== ======
</TABLE>
D - LONG TERM OBLIGATIONS
<TABLE>
<CAPTION>
June 30, June 30,
1995 1994
--------------------
<S> <C> <C>
Revolving credit borrowings due 1997 $38
Variable rate term loan to bank due 2003 $12,000
7% term loan to bank due 1999 4,564 5,956
9.5% Industrial Development Revenue Refunding Bond Series 1991 due 1999 1,341 1,785
7.35% Urban Development Action Grant due 2002 767 810
7.5% Ohio Development term loan due 1998 414 590
------- -------
Total long term debt 19,086 9,179
Capitalized lease obligations (Note H) 2,395 3,100
------- -------
Total long term obligations 21,481 12,279
Less current maturities of long term obligations (4,299) (2,933)
------- -------
Total long term obligations less current maturities $17,182 $ 9,346
======= =======
</TABLE>
June 30, 1995, the Company had $4,000 in additional borrowing capacity under a
revolving credit agreement expiring October 1996. Subsequent to year end, the
Company negotiated a new $6,000 revolving credit agreement, expiring October
1997, replacing the $4,000 revolving credit agreement discussed above.
Borrowings under this new facility are at either the prime interest rate less
100 basis points or at the Euro dollar rate plus 100 basis points, at the
Company's option. The Company is required to pay a fee of 1/8% on the unused
portion of the facility. The effective interest rate for revolving credit
borrowings as of June 30, 1994 was 7.25%. No revolving credit borrowings were
outstanding on June 30, 1995. The prime interest rate at June 30, 1995 was 9%.
The variable rate term loan to bank due 2003 carries interest at the prime
interest rate less 85 basis points or at the Euro dollar rate plus 115 basis
points at the Company's option. The effective interest rate for the variable
rate term loan as of June 30, 1995 was 7.21%.
- 25 -
<PAGE> 26
As of July 1994, all borrowings from the Company's primary lender, Comerica
Bank, including the revolving credit borrowings, variable rate term loan, 7%
term loan and 9.5% Industrial Revenue Bonds became unsecured. The Company is
no longer restricted from paying dividends, though it remains restricted from
repurchasing stock or pledging any of its assets without the prior consent of
the bank.
The Urban Development Action Grant and Ohio Development term loan remain
secured by certain assets of one of the Company's subsidiaries with a net book
value of $7,813 at June 30, 1995. Capitalized lease obligations are secured by
the specific assets to which the leases apply.
The Company's financing arrangements also contain various warranties and
covenants. As of June 30, 1995 and 1994 the Company was in compliance with
these warranties and covenants.
Scheduled maturities of long term debt are as follows: 1996 -- $3,643, 1997 --
$3,805, 1998 -- $3,627, 1999 -- $2,170, 2000 -- $1,777, and $4,064 thereafter.
E - STOCKHOLDERS' EQUITY
The 1985 Stock Option Plan, adopted by the shareholders in August 1985, and the
1989 Stock Option Plan, adopted by the shareholders in February 1989 and
amended in November 1992, provide for the grant of options to employees of the
Company to purchase up to 300,000 and 800,000 shares of common stock,
respectively. Grants of options are made at no lower than the market price on
date of grant, are exercisable after one year, and expire after from five to
ten years. Option activity during 1994 and 1995 was as follows:
<TABLE>
<CAPTION>
Number of shares Average
------------------------------ Option
1985 Plan 1989 Plan Total Price
-------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at June 30, 1993 91,000 339,500 430,500 $2.90
Activity during 1994:
Options issued 25,000 86,355 111,355 $6.38
Options exercised (46,000) (11,500) (57,500) $1.72
Options canceled (8,500) (1,500) (10,000) $1.73
------------------------------------------
Options outstanding at June 30, 1994 61,500 412,855 474,355 $3.88
Activity during 1995:
Options issued 9,000 99,459 108,459 $6.50
Options exercised (21,300) (7,000) (28,300) $1.91
Options canceled (4,000) (4,000) $4.69
------------------------------------------
Options outstanding at June 30, 1995 45,200 505,314 550,514 $4.49
==========================================
Available for future years 4,000 219,186 223,186
================================
</TABLE>
In addition to options granted to employees under the Company's 1985 and 1989
Stock Option Plans, the following options, granted to members of the board of
directors under stock option plans approved by the shareholders, were
outstanding at June 30, 1995:
<TABLE>
<CAPTION>
Date
--------------------------------
Number Option Exer-
Name of plan of shares price Issued cisable Expires
------------ -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1987 Qualified Stock Option Plan 40,000 $5.38 02/06/87 02/06/88 02/06/97
1988 Nonqualified Stock Option Plan 25,000 $1.75 11/16/88 11/16/89 11/16/98
1994 Nonemployee Directors Stock Option Plan 12,000 $7.13 11/16/94 11/16/95 11/16/04
</TABLE>
F - BENEFIT PLANS
One of the Company's subsidiaries has two defined benefit pension plans
covering substantially all its employees. Pension benefits for collective
bargaining employees are based on years of credited service. Benefits for
salaried, office and clerical employees are based on years of service and
average final earnings. It is the Company's policy to fund its plans to meet
the projected benefit obligation and the requirements of ERISA.
- 26 -
<PAGE> 27
The components of pension expense were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------
<S> <C> <C> <C>
Service cost, benefits earned during the year $139 $217 $193
Interest cost on projected benefit obligation 516 531 501
Loss (gain) on plan assets (497) 36 (619)
Net amortization and deferral 50 (451) 248
--------------------------
Net pension expense $208 $333 $323
==========================
</TABLE>
The expected long term rate of return on plan assets was 9.0% for 1995, 8.5% for
1994 and 8.5% for 1993. The increase in the long term rate of return in 1995
did not have a material impact on the financial statements. Each new prior
service cost is amortized over the average remaining service period of
employees using the straight line method.
Assets of the plans at June 30, 1995 consisted primarily of cash equivalents,
corporate stocks and corporate bonds, including common stock of the Company with
a market value of approximately $433.
The following reconciles the funded status of the plans to amounts included in
the Company's balance sheet:
<TABLE>
<CAPTION>
June 30, June 30,
1995 1994
--------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, $6,175 vested in 1995, $6,162 vested in 1994 $6,410 $6,453
Estimated effect of future pay increases 635
------------------
Projected benefit obligation 6,410 7,088
Market value of plan assets 6,762 6,015
------------------
Excess (shortfall) of plan assets compared to projected benefit obligation 352 (1,073)
Unrecognized net obligation 532 1,008
Prior service cost not recognized in net periodic pension cost (133) 102
Unrecognized net loss 86 552
------------------
Prepaid pension cost $837 $589
==================
</TABLE>
In determining the projected benefit obligation, the weighted average assumed
discount rate was 8.0% for 1995, 8.0% for 1994 and 8.5% for 1993. The assumed
rate of increase in future compensation levels was 4.5% for 1994 and 5.5% for
1993. The decrease in the discount rate and rate of increase in future
compensation levels in 1994 did not have a material impact on the financial
statements.
Effective October 1, 1994, future benefits under one of the above plans covering
approximately fifty salaried employees were curtailed. A one time charge
against income of $250 was recorded in the first fiscal quarter of 1995 in
accordance with Statement of Financial Accounting Standards No. 88, "Employers'
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination Benefits." The Company anticipates the settlement of
obligations will occur during the second or third quarter of fiscal 1996, and
will require an additional charge against income of approximately $200 in fiscal
1996. As the salaried pension plan was the only plan including provisions
relating to estimated future pay increases, effective June 30, 1995 no estimated
effect of future pay increases was taken into account for purposes of computing
the projected benefit obligation.
On July 1, 1993 the Company adopted a voluntary deferred compensation plan under
Section 401(k) of the Internal Revenue Code (the "401(k) Plan") for all
employees who are not subject to a collective bargaining agreement and satisfy
the age and service requirements under the 401(k) Plan. Each participant may
elect to contribute up to the maximum permitted under federal law, and the
Company is obligated to contribute annually an amount equal to 50% of the
participant's contribution up to 2% of that participant's annual compensation.
Additionally, the Company can make discretionary contributions based on the
profitability of the Company. The Company recorded compensation expense for
discretionary contributions of $464 in 1995 and $334 in 1994. Employees
contributed $1,121 in 1995 and $1,134 in 1994 to the 401(k) Plan. In accordance
with the provisions of the 401(k) Plan, the Company matched employee
contributions in the amount of $320 during 1995 and $328 during 1994.
- 27 -
<PAGE> 28
G - INCOME TAXES
Effective July 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109), which changed the
Company's method of accounting for income taxes from the deferred method (APB
11) to the liability method. Under SFAS 109, deferred tax liabilities and
assets are recognized for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based upon the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The cumulative effect of adopting SFAS
109 was a $564 increase in income as of July 1, 1993, which represents the net
decrease to the net deferred tax liability at the date of adoption. Previously,
the provision for income taxes was based on income and expenses included in the
accompanying consolidated statement of operations, and differences between
taxes so computed and taxes payable were classified as deferred taxes arising
from timing differences.
Income taxes, with amounts for 1995 and 1994 derived under SFAS 109 and 1993
under APB 11, are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------
<S> <C> <C> <C>
Current expense - Federal $3,615 $2,748 $ 812
Deferred expense - Federal 31 (43) 1,291
--------------------------
Income tax provision $3,646 $2,705 $2,103
==========================
</TABLE>
Net operating loss carryforwards of $3,167 and tax credit carryforwards of $431
have been deducted in the computation of the current 1993 provision above.
Significant components of deferred tax liabilities and assets as of June 30,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
----------------
<S> <C> <C>
Deferred tax assets:
Accruals and reserves:
Accounts receivable $ 108 $ 121
Employee benefits 532 438
Inventories 45 107
Preoperating costs (333)
Capital loss carryforward 376
Other 269 113
----------------
621 1,155
Valuation allowance for deferred tax assets (376)
----------------
Total deferred tax assets 621 779
Deferred tax liabilities:
Depreciation 2,057 2,348
Employee benefits 228 144
Other 142 63
----------------
Total deferred tax liabilities 2,427 2,555
----------------
Net deferred tax liability $1,806 $1,776
================
</TABLE>
All tax carryforwards which had a valuation allowance at June 30, 1994 expired
in 1995.
A reconciliation of income taxes at the United States statutory rate to the
effective income tax rate, with amounts for 1995 and 1994 derived under
SFAS 109 and 1993 under APB 11, is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------
<S> <C> <C> <C>
Federal statutory tax rate 34.0% 34.0% 34.0%
Depreciation of purchase price allocation 1.8%
Amortization of cost in excess of net assets of acquired companies 1.3% 1.3% 1.9%
Other 0.3% (2.1%) 0.3%
------------------------
Effective tax rate 35.6% 33.2% 38.0%
========================
</TABLE>
- 28 -
<PAGE> 29
H - LEASES
The Company leases machinery and equipment used in its manufacturing operations
under capital leases with terms extending to the year 2000. The Company also
leases buildings and equipment under operating leases with terms ranging from
one to nine years. Some of the operating leases have renewal options for
additional years and purchase options, both at fair market value.
At June 30, 1995, future minimum lease payments under noncancelable lease
obligations are as follows:
<TABLE>
<CAPTION>
Capital Operating
Fiscal Year Leases Leases
----------- -------------------
<S> <C> <C>
1996 $ 866 $3,007
1997 693 2,571
1998 456 1,794
1999 407 1,186
2000 406 552
Future years 169 246
----------------
Total minimum lease payments 2,997 $9,356
Amount representing interest 602 ======
------
Present value of net minimum lease payments 2,395
Less current maturities 656
------
Long term obligations under capital leases $1,739
======
</TABLE>
Property, plant and equipment includes the following property under capital
leases:
<TABLE>
<CAPTION>
June 30, June 30,
1995 1994
------------------
<S> <C> <C>
Machinery and equipment $5,147 $5,110
Accumulated amortization (2,340) (1,830)
----------------
Net book value of assets under capital leases $2,807 $3,280
================
</TABLE>
Rent expense under operating leases was $3,514, $2,328 and $2,099 in 1995,
1994 and 1993, respectively.
I - SIGNIFICANT CUSTOMERS
Sales to General Motors Corp. aggregated 22%, 17% and 17% of consolidated sales
in 1995, 1994 and 1993, respectively. Sales to Ford Motor Company were 17%, 25%
and 21% in 1995, 1994 and 1993, respectively. Sales to Chrysler Corporation
were 5%, 4% and 4% in 1995, 1994 and 1993, respectively. Sales to Eaton
Corporation were 12%, 11% and 13% in 1995, 1994 and 1993, respectively. Sales
to American Sunroof Company were 13% in 1993.
As substantially all the Company's sales are to domestic original equipment
manufacturers (OEMs) and their suppliers, the Company's trade accounts
receivable are largely with firms in the United States transportation industry.
J - COMMITMENTS
The Company has made commitments to purchase approximately $3,537 of equipment
as of June 30, 1995, and has sufficient financing available to fund these
commitments.
- 29 -
<PAGE> 30
K - CONTINGENCIES
The Company is involved in various litigation arising in the normal course of
business. It is not possible to determine the ultimate liability, if any, in
these matters. In the opinion of management, such litigation will not have a
material adverse effect on the consolidated financial position of the Company.
L - RELATED PARTY TRANSACTIONS
One director and one former director of the Company each own a one-third
interest in a partnership that leased a facility to a subsidiary of the
Company. The lease was dated March 1990 for a term of five years, and monthly
lease payments were $10. At the end of the lease term in March 1995, the
subsidiary continued to lease the facility from the partnership on a month to
month basis at the same monthly rate. The subsidiary signed an agreement in
August 1995 with the partnership to purchase this facility for $500. The
transaction is expected to close in September 1995. In addition, four employees
of a subsidiary of the Company each own a one-sixth interest in a partnership
which leases a facility to a subsidiary of the Company. The lease, renewing a
lease originally entered into prior to the Company's ownership of the
subsidiary, was dated March 1990 for a term of seven years, and monthly lease
payments are $23.
- 30 -
<PAGE> 31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Registrant filed a report on Form 8-K on November 22, 1993 to report under Item
4 "Changes in Registrant's Certifying Accountants" a change in the Company's
certifying accountants, from the firm of Coopers & Lybrand L.L.P. to the firm
of Ernst & Young LLP, effective November 17, 1993. There were no reportable
disagreements with Coopers & Lybrand L.L.P. on any matter of accounting
principles or practices, financial statement disclosure, auditing scope or
procedure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information required under this Item is included in a separate item
captioned "Executive Officers of the Registrant" contained in Item 1 of Part I
of this report. There is hereby incorporated by reference the information
contained in the Company's Proxy Statement for the 1995 Annual Meeting of
Stockholders under the caption "Election of Directors".
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information contained in the
Company's Proxy Statement for the 1995 Annual Meeting of Stockholders under the
caption "Executive Compensation".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information contained in the
Company's Proxy Statement for the 1995 Annual Meeting of Stockholders under the
caption "Common Stock Ownership".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information contained in the
Company's Proxy Statement for the 1995 Annual Meeting of Stockholders under the
caption "Certain Relationships and Transactions".
-31-
<PAGE> 32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
------------------------
The following financial statements are filed as part of this report
under Item 8:
Report of Independent Auditors -- Ernst & Young LLP
Report of Independent Accountants -- Coopers & Lybrand L.L.P.
Consolidated Balance Sheet at June 30, 1995 and 1994
Consolidated Statement of Operations for the years ended June 30,
1995, 1994 and 1993
Consolidated Statement of Stockholders' Equity for the years ended
June 30, 1995, 1994 and 1993
Consolidated Statement of Cash Flows for the years
ended June 30, 1995, 1994 and 1993 Notes to
Consolidated Financial Statements
2. Financial Statement Schedule
--------------------------------
The following financial statement schedule is filed as part of this
report at the page indicated:
Page
----
Schedule II - Valuation and Qualifying Accounts 34
All financial statement schedules other than that listed above have
been omitted because they are not required or the information
required to be set forth therein is included in the Consolidated
Financial Statements or Notes thereto.
3. Exhibits
------------
The Exhibits listed on the accompanying Index to Exhibits
immediately following the financial statement schedules on pages 35
and 36 are filed as a part of, or incorporated by reference into,
this Report.
(b) Reports on Form 8-K
-------------------
During the quarter ended June 30, 1995, no reports on Form 8-K were
filed with the Securities Exchange Commission.
-32-
<PAGE> 33
<TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DEFIANCE, INC.
By: /s/ Jerry A. Cooper
-------------------------------
Jerry A. Cooper, President
Date: August 16, 1995
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.
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Thomas H. Roulston II Chairman of the Board and Director August 16, 1995
--------------------------------
Thomas H. Roulston II
/s/ Jerry Cooper President, Chief Executive Officer and Director August 16, 1995
-------------------------------- (Principal Executive Officer)
Jerry A. Cooper
/s/ Michael J. Meier Vice President-Finance and Chief Financial Officer August 16, 1995
-------------------------------- (Principal Financial Officer)
Michael J. Meier
/s/ James L. Treece Chief Accounting Officer August 16, 1995
-------------------------------- (Principal Accounting Officer)
James L. Treece
/s/ James E. Heighway Director August 16, 1995
--------------------------------
James E. Heighway
/s/ George H. Lewis III Director August 16, 1995
--------------------------------
George H. Lewis III
/s/ Richard W. Lock Director August 16, 1995
--------------------------------
Richard W. Lock
/s/ Hector R. Ortino Director August 16, 1995
--------------------------------
Hector R. Ortino
/s/ Scott D. Roulston Director August 16, 1995
--------------------------------
Scott D. Roulston
/s/ Michael D. Shea Director August 16, 1995
--------------------------------
Michael D. Shea
</TABLE>
-33-
<PAGE> 34
<TABLE>
DEFIANCE, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(All dollar amounts in thousands)
<CAPTION>
Column A Column B Column C Column D Column E
-------- ------------------------------------------------------------------------
Balance at Additions Retire- Balance at
beginning charged to ments end of
Description of period expense (1) period
----------- ---------- ---------- -------- -----------
<S> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1995
Allowance for doubtful accounts $357 $ 6 $ 47 $316
YEAR ENDED JUNE 30, 1994
Allowance for doubtful accounts $350 $ 37 $ 30 $357
YEAR ENDED JUNE 30, 1993
Allowance for doubtful accounts $334 $226 $210 $350
<FN>
(1) Uncollectible accounts charged against the reserve, net of recoveries
</TABLE>
-34-
<PAGE> 35
DEFIANCE, INC. AND SUBSIDIARIES
Annual Report on Form 10-K
Fiscal Year Ended June 30, 1995
Index to Exhibits - Item 14(a)(3)
<TABLE>
<CAPTION>
Exhibit no. Description
----------- -----------
<S> <C>
3(d) By-Laws of the Company, as amended July 26, 1989 (1)
3(e) Certificate of Incorporation of the Company, as amended December 15, 1994
10(v) Defiance, Inc. 1989 Stock Option Plan, as amended January 20, 1993 (2)
10(ac) Defiance, Inc. Executive Incentive Plan, effective July 1, 1992 (3)
10(ad) Letter of employment for Jerry A. Cooper, President and CEO, dated February
28, 1992 (3)
10(ae) Revolving Credit Note, Term Note, and Equipment Note by and between
Defiance, Inc. and Comerica Bank dated August 25, 1993 (3)
10(af) Defiance, Inc. Retirement Savings Plan, effective July 1, 1993 (4)
10(ag) Amendment #1 to Defiance, Inc. Executive Incentive Plan, effective May 19, 1994
(4)
10(ah) Second Amended and Restated Loan Agreement by and between Defiance, Inc.
and Comerica Bank dated July 29, 1994 (4)
10(ai) Revolving Credit Note, Term Note, and Equipment Note by and between
Defiance, Inc. and Comerica Bank dated July 29, 1994(4)
10(aj) Defiance, Inc. Directors' Deferral Plan, effective September 21, 1994
10(ak) Defiance, Inc. Change of Control Policy, effective September 22, 1994
10(al) Defiance, Inc. 1994 Nonemployee Director Stock Option Plan, effective
November 16, 1994 (5)
10(am) Defiance, Inc. Supplemental Savings and Deferred Compensation Plan, effective
July 1, 1994
10(an) Defiance, Inc. Supplemental Executive Retirement Plan, effective July 1, 1995
10(ao) Defiance, Inc. Limited Supplemental Executive Retirement Plan, effective July 1,
1995
10(ap) First Amendment to Amended and Restated Loan Agreement by and between
Defiance, Inc. and Comerica Bank dated May 31, 1995
10(aq) Equipment Note by and between Defiance, Inc. and Comerica Bank dated May
31, 1995
</TABLE>
-35-
<PAGE> 36
<TABLE>
<S> <C>
10(ar) Term Note-B by and between Defiance, Inc. and Comerica Bank dated July 12,
1995
10(as) Second Amendment to Amended and Restated Loan Agreement by and
between Defiance, Inc. and Comerica Bank dated August 2, 1995
10(at) Revolving Credit Note and Equipment Note by and between Defiance, Inc. and
Comerica Bank dated August 2, 1995
11 Statement re computation of per share earnings
21 Subsidiaries of the registrant
23 Consent of Independent Certified Public Accountants
27 Financial Data Schedule
<FN>
(1) Last filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1989 and re-filed
herein pursuant to requirement that no exhibit may be incorporated by reference later than five years from the date of
original filing
(2) Originally filed as an exhibit to the Company's Proxy Statement for the February 1, 1990 Annual Meeting of Shareholders, with
amendment filed as an exhibit to the Company's Proxy Statement for the November 18, 1992 Annual Meeting of Shareholders, both
of which are incorporated herein by reference
(3) Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference
(4) Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1994 and incorporated
herein by reference
(5) Filed as an exhibit to the Company's Proxy Statement for the November 16, 1994 Annual Meeting of Shareholders and incorporated
herein by reference
</TABLE>
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Included in the preceding list of exhibits are the following management
contracts or compensatory plans or arrangements:
<TABLE>
<S> <C>
10(v) Defiance, Inc. 1989 Stock Option Plan
10(ac) Defiance, Inc. Executive Incentive Plan, effective July 1, 1992
10(ad) Letter of employment for Jerry A. Cooper, President and CEO, dated February 28, 1992
10(af) Defiance, Inc. Retirement Savings Plan, effective July 1, 1993
10(ag) Amendment #1 to Defiance, Inc. Executive Incentive Plan, effective May 19, 1994
10(ak) Defiance, Inc. Change of Control Policy, effective September 22, 1994
10(am) Defiance, Inc. Supplemental Savings and Deferred Compensation Plan, effective July 1, 1994
10(an) Defiance, Inc. Supplemental Executive Retirement Plan, effective July 1, 1995
10(ao) Defiance, Inc. Limited Supplemental Executive Retirement Plan, effective July 1, 1995
</TABLE>
-36-
<PAGE> 1
Exhibit 3(d)
DEFIANCE, INC.
By-Laws
ARTICLE I
---------
Meetings of Stockholders
------------------------
Section 1.1 ANNUAL MEETINGS. The annual meeting
of the stockholders for the election of directors and for
the transaction of such other business as properly may come
before such meeting shall be held each year on such date,
and at such time and place within or without the State of
Delaware, as may be designated by the Board of Directors.
Section 1.2 SPECIAL MEETINGS. Special meetings
of the stockholders, for any proper purpose or purposes,
unless otherwise prescribed by statute or by the Certificate
of Incorporation of the Corporation, may be called at any
time by the Board of Directors, the Chairman of the Board,
the President or any Vice President, to be held on such
date, and at such time and place within or without the State
of Delaware, as the Board of Directors, the Chairman of the
Board, the President or any Vice President, whichever has
called the meeting, shall direct.
Section 1.3 NOTICE OF MEETING. Written notice,
signed by the Chairman of the Board, the President, any Vice
President, the Secretary or an Assistant Secretary, of every
meeting of stockholders stating the date and time when, and
the place where, it is to be held shall be delivered either
personally or by mail to each stockholder entitled to vote
at such meeting not less than ten nor more than sixty days
<PAGE> 2
before the meeting, except as otherwise provided by law.
The purpose or purposes for which the meeting is called may
in the case of an annual meeting, and shall in the case of a
special meeting, also be stated. If mailed, such notice
shall be directed to a stockholder at his address as it
shall appear on the stock books of the Corporation, unless
he shall have filed with the Secretary a written request
that notices intended for him be mailed to some other ad-
dress, in which case it shall be mailed to the address des-
ignated in such request. Whenever any notice is required to
be given under the provisions of the Delaware General Cor-
poration Law, the Certificate of Incorporation or these By-
laws, a waiver thereof, signed by the stockholder entitled
to such notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. Attendance of
a stockholder at the meeting shall be deemed equivalent to a
written waiver of notice of such meeting.
Section 1.4 QUORUM. The presence at any meeting,
in person or by proxy, of the holders of record of a major-
ity of the shares then issued and outstanding and entitled
to vote shall be necessary and sufficient to constitute a
quorum for the transaction of business, except as otherwise
provided by law.
Section 1.5 ADJOURNMENTS. In the absence of a
quorum, a majority in interest of the stockholders entitled
to vote, present in person or by proxy, or, if no stock-
holder entitled to vote is present in person or by proxy,
2
<PAGE> 3
any officer entitled to preside at or act as secretary of
such meeting, may adjourn the meeting from time to time
until a quorum shall be present.
Section 1.6 VOTING. Directors shall be chosen by
a plurality of the votes cast at the election, and, except
as otherwise provided by law or by the Certificate of Incor-
poration, all other questions shall be determined by a ma-
jority of the votes cast on such question.
Section 1.7 PROXIES. Any stockholder entitled to
vote may vote by proxy, provided that the instrument au-
thorizing such proxy to act shall have been executed in
writing (which shall include telegraphing or cabling) by the
stockholder himself or by his duly authorized attorney.
Section 1.8 JUDGES OF ELECTION. The Board of
Directors may appoint judges of election to serve at any
election of directors and at balloting on any other matter
that may properly come before a meeting of stockholders. If
no such appointment shall be made, or if any of the judges
so appointed shall fail to attend, or refuse or be unable to
serve, then such appointment may be made by the presiding
officer at the meeting.
ARTICLE II
----------
Board of Directors
------------------
Section 2.1 NUMBER. The number of directors
which shall constitute the whole Board of Directors shall be
determined as provided in the Certificate of Incorporation.
The initial Board of Directors and subsequent Boards of
3
<PAGE> 4
Directors shall consist of four directors until changed as
provided in the Certificate of Incorporation.
Section 2.2 ELECTION AND TERM OF OFFICE. Direc-
tors shall be elected at the annual meeting of the stock-
holders, except as provided in Section 2.3. Each director
(whether elected at an annual meeting or to fill a vacancy
or otherwise) shall continue in office until his successor
shall have been elected and qualified or until his earlier
death, resignation or removal in the manner hereinafter
provided.
Section 2.3 VACANCIES AND ADDITIONAL DIRECTOR-
SHIPS. If any vacancy shall occur among the directors by
reason of death, resignation or removal, or as the result of
an increase in the number of directorships, a majority of
the directors then in office, or a sole remaining director,
though less than a quorum, may fill any such vacancy.
Section 2.4 REGULAR MEETINGS. A regular meeting
of the Board of Directors shall be held for organization,
for the election of officers and for the transaction of such
other business as may properly come before the meeting,
within thirty days after each annual election of directors.
The Board of Directors by resolution may provide
for the holding of other regular meetings and may fix the
times and places at which such meetings shall be held. No-
tice of regular meetings shall not be required to be given,
provided that whenever the time or place of regular meetings
shall be fixed or changed, notice of such action shall be
4
<PAGE> 5
mailed promptly to each director who shall not have been
present at the meeting at which such action was taken, ad-
dressed to him at his residence or usual place of business.
Section 2.5 SPECIAL MEETINGS. Special meetings
of the Board of Directors shall be held upon call by or at
the direction of the Chairman of the Board, the President,
any Vice President or any two directors, except that when
the Board of Directors consists of one director, then one
director may call a special meeting. Except as otherwise
required by law, notice of each special meeting shall be
mailed to each director, addressed to him at his residence
or usual place of business, at least two days before the day
on which the meeting is to be held, or shall be sent to him
at such place by telex, telecopy, telegram, radio or cable,
or telephoned or delivered to him personally, not later than
the day before the day on which the meeting is to be held.
Such notice shall state the time and place of such meeting,
but need not state the purposes thereof, unless otherwise
required by law, the Certificate of Incorporation of the
Corporation or these By-laws.
Section 2.6 WAIVER OF NOTICE. Whenever any no-
tice is required to be given under the provisions of the
Delaware General Corporation Law, the Certificate of Incor-
poration or these By-laws, a waiver thereof, signed by the
director entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
5
<PAGE> 6
Attendance of a director at the meeting shall be deemed
equivalent to a written waiver of notice of such meeting.
Section 2.7 QUORUM AND MANNER OF ACTING. At each
meeting of the Board of Directors the presence of a majority
of the total number of members of the Board of Directors as
constituted from time to time, shall be necessary and suffi-
cient to constitute a quorum for the transaction of busi-
ness, except that when the Board of Directors consists of
one director, then the one director shall constitute a quo-
rum. In the absence of a quorum, a majority of those
present at the time and place of any meeting may adjourn the
meeting from time to time until a quorum shall be present
and the meeting may be held as adjourned without further
notice or waiver. A majority of those present at any meet-
ing at which a quorum is present may decide any question
brought before such meeting, except as otherwise provided by
law, the Certificate of Incorporation of the Corporation or
these By-laws.
Section 2.8 RESIGNATION OF DIRECTORS. Any direc-
tor may resign at any time by giving written notice of such
resignation to the Board of Directors, the Chairman of the
Board, the President, any Vice President or the Secretary.
Unless otherwise specified in such notice, such resignation
shall take effect upon receipt thereof by the Board of Di-
rectors or any such officer, and the acceptance of such
resignation shall not be necessary to make it effective.
6
<PAGE> 7
Section 2.9 REMOVAL OF DIRECTORS. At any special
meeting of the stockholders, duly called as provided in
these By-laws, any director or directors may be removed from
office, either with or without cause, as provided by law.
At such meeting a successor or successors may be elected by
a plurality of the votes cast, or if any such vacancy is not
so filled, it may be filled by the directors as provided in
Section 2.3.
Section 2.10 COMPENSATION OF DIRECTORS. Direc-
tors shall receive such reasonable compensation for their
services as such, whether in the form of salary or a fixed
fee for attendance at meetings, with expenses, if any, as
the Board of Directors may from time to time determine.
Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity
and receiving compensation therefor.
ARTICLE III
-----------
Committees of the Board
-----------------------
Section 3.1 DESIGNATION, POWER, ALTERNATE MEMBERS
AND TERM OF OFFICE. The Board of Directors may, by resolu-
tion passed by a majority of the whole Board of Directors,
designate one or more committees, each committee to consist
of one or more of the directors of the Corporation. Any
such committee, to the extent provided in such resolution
and permitted by law, shall have and may exercise all the
powers and authority of the Board of Directors in the man-
agement of the business and affairs of the Corporation, and
7
<PAGE> 8
may authorize the seal of the Corporation or a facsimile
thereof to be affixed to or reproduced on all such papers as
said committee shall designate. The Board of Directors may
designate one or more directors as alternate members of any
committee who, in the order specified by the Board of Direc-
tors, may replace any absent or disqualified member at any
meeting of the committee. If at a meeting of any committee
one or more of the members thereof should be absent or dis-
qualified, and if either the Board of Directors has not so
designated any alternate member or members, or the number of
absent or disqualified members exceeds the number of alter-
nate members who are present at such meeting, then the mem-
ber or members of such committee (including alternates)
present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unani-
mously appoint another director to act at the meeting in the
place of any such absent or disqualified member. The term
of office of the members of each committee shall be as fixed
from time to time by the Board of Directors, subject to
these By-laws; provided, however, that any committee member
who ceases to be a member of the Board of Directors shall
IPSO FACTO cease to be a committee member. Each committee
shall appoint a secretary, who may be the Secretary of the
Corporation or an Assistant Secretary thereof.
Section 3.2 EXECUTIVE COMMITTEE. The Executive
Committee shall have and may exercise all the powers and
authority of the Board of Directors in the management of the
8
<PAGE> 9
business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers
which may require it; but said Executive Committee shall not
have the power or authority in reference to amending the
Corporation's certificate of incorporation, adopting an
agreement of merger of consolidation, recommending to the
stockholders the sale, lease or exchange of all or substan-
tially all of the Corporation's property and assets, recom-
mending to the stockholders a dissolution of the Corporation
or a revocation of a dissolution, or amending the By-laws of
the Corporation; and further, the Executive Committee shall
not have the power or authority to declare a dividend or to
authorize the issuance of stock. The provisions of Article
III of these By-laws shall apply to the Executive Committee.
Section 3.3 MEETINGS, NOTICES AND RECORDS. Each
committee may provide for the holding of regular meetings,
with or without notice, and may fix the times and places at
which such meetings shall be held. Special meetings of each
committee shall be held upon call by or at the direction of
its chairman or, if there be no chairman, by or at the di-
rection of any one of its members. Except as otherwise
provided by law, notice of each special meeting of a commit-
tee shall be mailed to each member of such committee, ad-
dressed to him at his residence or usual place of business,
at least two days before the day on which the meeting is to
be held, or shall be sent to him at such place by telegram,
radio or cable, or telephoned or delivered to him person-
9
<PAGE> 10
ally, not later than the day before the day on which the
meeting is to be held. Such notice shall state the time and
place of such meeting, but need not state the purposes
thereof, unless otherwise required by law, the Certificate
of Incorporation of the Corporation or these By-laws.
Notice of any meeting of a committee need not be
given to any member thereof who shall attend such meeting in
person or who shall waive notice thereof, before or after
such meeting, in a signed writing. Each committee shall
keep a record of its proceedings.
Section 3.4 QUORUM AND MANNER OF ACTING. At each
meeting of any committee, the presence of a majority of its
members then in office shall be necessary and sufficient to
constitute a quorum for the transaction of business, except
that when a committee consists of one member, then the one
member shall constitute a quorum. In the absence of a quo-
rum, a majority of the members present at the time and place
of any meeting may adjourn the meeting from time to time
until a quorum shall be present and the meeting may be held
as adjourned without further notice or waiver. The act of a
majority of the members present at any meeting at which a
quorum is present shall be the act of such committee. Sub-
ject to the foregoing and other provisions of these By-laws
and except as otherwise determined by the Board of Direc-
tors, each committee may make rules for the conduct of its
business.
10
<PAGE> 11
Section 3.5 RESIGNATIONS. Any member of a com-
mittee may resign at any time by giving written notice of
such resignation to the Board of Directors, the President,
any Vice President or the Secretary. Unless otherwise spec-
ified in such notice, such resignation shall take effect
upon receipt thereof by the Board of Directors or any such
officer, and the acceptance of such resignation shall not be
necessary to make it effective.
Section 3.6 REMOVAL. Any member of any committee
may be removed at any time with or without cause by the
Board of Directors.
Section 3.7 VACANCIES. If any vacancy shall
occur in any committee by reason of death, resignation,
disqualification, removal or otherwise, the remaining member
or members of such committee, so long as a quorum is
present, may continue to act until such vacancy is filled by
the Board of Directors.
Section 3.8 COMPENSATION. Committee members
shall receive such reasonable compensation for their ser-
vices as such, whether in the form of salary or a fixed fee
for attendance at meetings, with expenses, if any, as the
Board of Directors may from time to time determine. Nothing
herein contained shall be construed to preclude any commit-
tee member from serving the Corporation in any other capac-
ity and receiving compensation therefor.
11
<PAGE> 12
ARTICLE IV
----------
Officers
--------
Section 4.1 OFFICERS. The officers of the Cor-
poration shall be a Chairman of the Board, a President, one
or more Vice Presidents, a Secretary, a Treasurer, and such
other officers as may be appointed in accordance with the
provisions of Section 4.3.
Section 4.2 ELECTION, TERM OF OFFICE AND QUALI-
FICATIONS. Each officer (except such officers as may be
appointed in accordance with the provisions of Section 4.3)
shall be elected by the Board of Directors. Each such offi-
cer (whether elected at the first meeting of the Board of
Directors after the annual meeting of stockholders or to
fill a vacancy or otherwise) shall hold his office until the
first meeting of the Board of Directors after the next an-
nual meeting of stockholders and until his successor shall
have been elected, or until his death, or until he shall
have resigned in the manner provided in Section 4.4 or shall
have been removed in the manner provided in Section 4.5.
Section 4.3 SUBORDINATE OFFICERS AND AGENTS. The
Board of Directors from time to time may appoint other offi-
cers or agents (including one or more Assistant Vice Presi-
dents, one or more Assistant Secretaries and one or more
Assistant Treasurers), to hold office for such period, have
such authority and perform such duties as are provided in
these By-laws or as may be provided in the resolutions ap-
pointing them. The Board of Directors may delegate to any
12
<PAGE> 13
officer or agent the power to appoint any such subordinate
officers or agents and to prescribe their respective terms
of office, authorities and duties.
Section 4.4 RESIGNATIONS. Any officer may resign
at any time by giving written notice of such resignation to
the Board of Directors, the President, a Vice President or
the Secretary. Unless otherwise specified in such written
notice, such resignation shall take effect upon receipt
thereof by the Board of Directors or any such officer, and
the acceptance of such resignation shall not be necessary to
make it effective.
Section 4.5 REMOVAL. Any officer specifically
designated in Section 4.1 may be removed with or without
cause at any meeting of the Board of Directors by affirma-
tive vote of a majority of the directors then in office.
Any officer or agent appointed in accordance with the provi-
sions of Section 4.3 may be removed with or without cause at
any meeting of the Board of Directors by affirmative vote of
a majority of the directors present at such meeting, or at
any time by any superior officer or agent upon whom such
power of removal shall have been conferred by the Board of
Directors.
Section 4.6 VACANCIES. A vacancy in any office
by reason of death, resignation, removal, disqualification
or any other cause shall be filled for the unexpired portion
of the term in the manner prescribed by these By-laws for
regular election or appointment to such office.
13
<PAGE> 14
Section 4.7 THE CHAIRMAN OF THE BOARD. The
Chairman of the Board shall preside at all meetings of the
Board of Directors and of the stockholders of the Corpora-
tion. In the absence of the President, or in the event of
his inability or refusal to act, the Chairman of the Board
shall perform the duties and exercise the powers of the
President until such vacancy shall be filled in the manner
prescribed by these By-laws or by law. He may sign, with
any other officer thereunto duly authorized, certificates
representing stock of the Corporation the issuance of which
shall have been duly authorized (the signature to which may
be a facsimile signature), and may sign and execute in the
name of the Corporation deeds, mortgages, bonds, contracts,
agreements or other instruments duly authorized by the Board
of Directors, except in cases where the signing and execu-
tion thereof shall be expressly delegated by the Board of
Directors to some other officer or agent, or shall be re-
quired by law to be otherwise executed. He shall have such
other powers and perform such other duties as may from time
to time be prescribed by the Board of Directors or these By-
laws.
Section 4.8 THE PRESIDENT. The President shall
be the Chief Executive Officer and, subject to the direction
of the Board of Directors and the Chairman of the Board, he
shall have general charge of the business, affairs and prop-
erty of the Corporation and general supervision over its
officers and agents. At the request of the Chairman of the
14
<PAGE> 15
Board or in his absence or disability, the President shall
perform all the duties of the Chairman of the Board and,
when so acting, shall have all the powers of and be subject
to all restrictions upon the Chairman of the Board. He
shall see that all orders and resolutions of the Board of
Directors are carried into effect. He may sign, with any
other officer thereunto duly authorized, certificates repre-
senting stock of the Corporation the issuance of which shall
have been duly authorized (the signature to which may be a
facsimile signature), and may sign and execute in the name
of the Corporation deeds, mortgages, bonds, contracts,
agreements or other instruments duly authorized by the Board
of Directors, except in cases where the signing and execu-
tion thereof shall be expressly delegated by the Board of
Directors to some other officer or agent, or shall be re-
quired by law to be otherwise executed. From time to time
he shall report to the Board of Directors all matters within
his knowledge which the interests of the Corporation may
require to be brought to their attention. He shall have
such other powers and perform such other duties as may from
time to time be prescribed by the Board of Directors, the
Chairman of the Board or these By-laws. If no Treasurer
shall have been appointed by the Board of Directors the
President shall have in addition to and not in limitation of
the foregoing the powers afforded the Treasurer pursuant to
Section 4.12.
15
<PAGE> 16
Section 4.9 THE VICE PRESIDENTS. At the request
of the President or in his absence or disability, the Vice
President designated by the Board of Directors shall perform
all the duties of the President and, when so acting, shall
have all the powers of and be subject to all restrictions
upon the President. Any Vice President may also sign, with
any other officer thereunto duly authorized, certificates
representing stock of the Corporation the issuance of which
shall have been duly authorized (the signature to which may
be a facsimile signature), and may sign and execute in the
name of the Corporation deeds, mortgages, bonds, contracts,
agreements or other instruments duly authorized by the Board
of Directors, except in cases where the signing and execu-
tion thereof shall be expressly delegated by the Board of
Directors to some other officer or agent, or shall be re-
quired by law to be otherwise executed. Each Vice President
shall have such other powers and perform such other duties
as may from time to time be prescribed by the Board of Di-
rectors, the Chairman of the Board, the President or these
By-laws.
Section 4.10 THE SECRETARY. The Secretary shall:
(a) record all the proceedings of the meet-
ings of the stockholders, the Board of Directors,
and any committees in a book or books to be kept
for that purpose;
(b) cause all notices to be duly given in
accordance with the provisions of these By-laws
and as required by law;
(c) whenever any committee shall be ap-
pointed in pursuance of a resolution of the Board
16
<PAGE> 17
of Directors, furnish the chairman of such commit-
tee with a copy of such resolution;
(d) be custodian of the records and of the
seal of the Corporation, and cause such seal to be
affixed to or a facsimile to be reproduced on all
certificates representing stock of the Corporation
prior to the issuance thereof and to all instru-
ments the execution of which on behalf of the
Corporation under its seal shall have been duly
authorized;
(e) see that the lists, books, reports,
statements, certificates and other documents and
records required by law are properly kept and
filed;
(f) have charge of the stock and transfer
books of the Corporation, and exhibit such stock
book at all reasonable times to such persons as
are entitled by law to have access thereto;
(g) sign (unless the Treasurer or an Assist-
ant Secretary or an Assistant Treasurer shall
sign) certificates representing stock of the Cor-
poration the issuance of which shall have been
duly authorized (the signature to which may be a
facsimile signature); and
(h) in general, perform all duties incident
to the office of Secretary and have such other
powers and perform such other duties as may from
time to time be prescribed by the Board of Direc-
tors, the Chairman of the Board, the President or
these By-laws.
Section 4.11 ASSISTANT SECRETARIES. At the re-
quest of the Secretary or in his absence or disability, the
Assistant Secretary designated by him (or in the absence of
such designation, the Assistant Secretary designated by the
Board of Directors, the Chairman of the Board or the Presi-
dent) shall perform all the duties of the Secretary and,
when so acting, shall have all the powers of and be subject
to all restrictions upon the Secretary. Each Assistant
Secretary shall have such other powers and perform such
17
<PAGE> 18
other duties as may from time to time be prescribed by the
Board of Directors, the Chairman of the Board, the Presi-
dent, the Secretary or these By-laws.
Section 4.12 THE TREASURER. The Treasurer shall:
(a) have charge of and supervision over and
be responsible for the funds, securities, receipts
and disbursements of the Corporation;
(b) cause the moneys and other valuable
effects of the Corporation to be deposited in the
name and to the credit of the Corporation in such
banks or trust companies or with such bankers or
other depositaries as shall be selected or to be
otherwise dealt with in such manner as the Board
of Directors may direct;
(c) cause the funds of the Corporation to be
disbursed by checks or drafts upon the authorized
depositaries of the Corporation, and cause to be
taken and preserved proper vouchers for all moneys
disbursed;
(d) render to the Board of Directors or the
Chairman of the Board or the President, whenever
requested, a statement of the financial condition
of the Corporation and of all his transactions as
Treasurer;
(e) cause to be kept at the Corporation's
principal office correct books of account of all
its business and transactions and such duplicate
books of account as he shall determine and upon
application cause such books or duplicates thereof
to be exhibited to any director;
(f) be empowered, from time to time, to
require from the officers or agents of the Cor-
poration reports or statements giving such in-
formation as he may desire with respect to any and
all financial transactions of the Corporation;
(g) sign (unless the Secretary or an Assist-
ant Secretary or an Assistant Treasurer shall
sign) certificates representing stock of the Cor-
poration the issuance of which shall have been
duly authorized (the signature to which may be a
facsimile signature); and
(h) in general, perform all duties incident
to the office of Treasurer and have such other
18
<PAGE> 19
powers and perform such other duties as may from
time to time be prescribed by the Board of Direc-
tors, the Chairman of the Board, the President or
these By-laws.
Section 4.13 ASSISTANT TREASURERS. At the re-
quest of the Treasurer or in his absence or disability, the
Assistant Treasurer designated by him (or in the absence of
such designation, the Assistant Treasurer designated by the
Board of Directors, the Chairman of the Board or the Presi-
dent) shall perform all the duties of the Treasurer and,
when so acting, shall have all the powers of and be subject
to all restrictions upon the Treasurer. Each Assistant
Treasurer shall have such other powers and perform such
other duties as may from time to time be prescribed by the
Board of Directors, the Chairman of the Board, the Presi-
dent, the Treasurer or these By-laws.
Section 4.14 SALARIES. The salaries of the offi-
cers of the Corporation shall be fixed from time to time by
the Board of Directors, except that the Board of Directors
may delegate to any person the power to fix the salaries or
other compensation of any officers or agents appointed in
accordance with the provisions of Section 4.3. No officer
shall be prevented from receiving such salary by reason of
the fact that he is also a director of the Corporation.
ARTICLE V
---------
Execution of Instruments;
-------------------------
Borrowing; Proxies
------------------
Section 5.1 EXECUTION OF INSTRUMENTS GENERALLY.
The Chairman of the Board, the President, any Vice Presi-
19
<PAGE> 20
dent, the Secretary or the Treasurer, subject to the ap-
proval of the Board of Directors, may enter into any con-
tract or execute and deliver any instrument in the name and
on behalf of the Corporation. The Board of Directors may
authorize any officer or officers, or agent or agents, to
enter into any contract or execute and deliver any instru-
ment in the name and on behalf of the Corporation, and such
authorization may be general or confined to specific in-
stances.
Section 5.2 BORROWING. No loans or advances
shall be obtained or contracted for, by or on behalf of the
Corporation and no negotiable paper shall be issued in its
name, unless and except as authorized by the Board of Direc-
tors. Such authorization may be general or confined to
specific instances. Any officer or agent of the Corporation
thereunto so authorized may obtain loans and advances for
the Corporation, and for such loans and advances may make,
execute and deliver promissory notes, bonds, or other evi-
dences of indebtedness of the Corporation. Any officer or
agent of the Corporation thereunto so authorized may pledge,
hypothecate or transfer as security for the payment of any
and all loans, advances, indebtedness and liabilities of the
Corporation, any and all stocks, bonds, other securities and
other personal property at any time held by the Corporation,
and to that end may endorse, assign and deliver the same and
do every act and thing necessary or proper in connection
therewith.
20
<PAGE> 21
Section 5.3 CHECKS, DRAFTS, ETC. All checks,
drafts or other orders for the payment of money, and all
notes or other evidences of indebtedness issued in the name
of the Corporation, shall be signed by such officer or offi-
cers or agent or agents of the Corporation, and in such
manner, as from time to time shall be determined by the
Board of Directors.
Section 5.4 PROXIES. Proxies to vote with re-
spect to shares of stock of other corporations owned by or
standing in the name of the Corporation may be executed and
delivered from time to time on behalf of the Corporation by
the Chiarman of the Board, the President or any Vice Presi-
dent or by any other person or persons thereunto authorized
by the Board of Directors.
ARTICLE VI
----------
Record Dates
------------
Section 6.1 In order that the Corporation may
determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without
a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record
date, which shall be not more than sixty nor less than ten
days before the date of such meeting, nor more than sixty
21
<PAGE> 22
days prior to any other action. Only those stockholders of
record on the date so fixed shall be entitled to any of the
foregoing rights, notwithstanding the transfer of any such
stock on the books of the Corporation after any such record
date fixed by the Board of Directors.
ARTICLE VII
-----------
Corporate Seal
--------------
Section 7.1 The corporate seal shall be circular
in form and shall bear the name of the Corporation and words
and figures denoting its organization under the laws of the
State of Delaware and the year thereof and otherwise shall
be in such form as shall be approved from time to time by
the Board of Directors.
ARTICLE VIII
------------
Fiscal Year
-----------
Section 8.1 The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
ARTICLE IX
----------
Amendments
----------
Section 9.1 Any or all By-laws of the Corporation
may be amended or repealed, and new By-laws may be made, by
an affirmative vote of a majority of the directors present
at any organizational, regular, or special meeting of the
Board of Directors.
22
<PAGE> 23
ARTICLE X
---------
Action Without A Meeting
------------------------
Section 10.1 Any action which might have been
taken under these By-laws by a vote of the stockholders at a
meeting thereof may be taken without a meeting, without
prior notice and without a vote, if a consent in writing
setting forth the action so taken, shall be signed by the
holders of outstanding shares of stock of the Corporation
having not less than the maximum number of votes that would
be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present
and voted, PROVIDED that prompt notice shall be given to
those stockholders who have not so consented if less than
unanimous written consent is obtained. Any action which
might have been taken under these By-laws by vote of the
directors at any meeting of the Board of Directors or any
committee thereof may be taken without a meeting if all the
members of the Board of Directors or such committee, as the
case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of the Board of Direc-
tors or such committee.
ARTICLE XI
----------
Indemnification
---------------
Section 11.1 The Corporation shall indemnify, in
the manner and to the full extent permitted by law, any
person (or the estate of any person) who was or is a party
to, or is threatened to be made a party to, any threatened,
23
<PAGE> 24
pending or completed action, suit or proceeding, whether or
not by or in the right of the Corporation, and whether
civil, criminal, administrative, investigative or otherwise,
by reason of the fact that such person is or was a director,
officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partner-
ship, joint venture, trust or other enterprise. Where re-
quired by law, the indemnification provided for herein shall
be made only as authorized in the specific case upon a
determination, in the manner provided by law, that indemni-
fication of the director, officer, employee or agent is
proper under such circumstances. The Corporation may, to
the full extent permitted by law, purchase and maintain
insurance on behalf of any such person against any liability
which may be asserted against him. To the full extent per-
mitted by law, the indemnification provided herein shall
include expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, and, in the manner
provided by law, any such expenses may be paid by the Cor-
poration in advance of the final disposition of such action,
suit or proceeding. The indemnification provided herein
shall not be deemed to limit the right of the Corporation to
indemnify any other person for any such expenses to the full
extent permitted by law, nor shall it be deemed exclusive of
any other rights to which any person seeking indemnification
from the Corporation may be entitled under any agreement,
24
<PAGE> 25
vote of stockholders or disinterested directors or other-
wise, both as to action in his official capacity and as to
action in another capacity while holding such office.
25
<PAGE> 1
Exhibit 3(e)
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CERTIFICATE OF AMENDMENT OF "DEFIANCE, INC.", FILED
IN THIS OFFICE ON THE FIFTEENTH DAY OF DECEMBER, A.D. 1994, AT
1:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO
THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL] /s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
2069193 8100 AUTHENTICATION: 7341053
944245637 DATE: 12-16-94
<PAGE> 2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DEFIANCE, INC.
DEFIANCE, INC a corporation organized and existing under
and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That the following amendment to the Certificate of
Incorporation of DEFIANCE, INC. has been duly adopted in
accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware:
RESOLVED: That the first paragraph of Article IV of
the Certificate of Incorporation of DEFIANCE, INC. be
amended to read as follows:
ARTICLE IV
----------
The total number of shares of all classes of stock
which the Corporation shall have authority to issue is
seventeen million (17,000,000) shares, of which fifteen
million (15,000,000) shall be shares of Common Stock
with a par value of five cents ($.05) per share and two
million (2,000,000) shall be shares of Preferred Stock
with a par value of five cents ($.05) per share.
IN WITNESS WHEREOF, said DEFIANCE, INC. has caused this
certificate to be signed by Jerry A. Cooper, its President, and
attested by Michael J. Meier, its Secretary, this day of
December, 1994.
DEFIANCE, INC.
By /s/ Jerry A. Cooper
----------------------------------
Jerry A. Cooper, President
ATTEST:
By /s/ Michael J. Meier, Secretary
--------------------------------
Michael J. Meier, Secretary
<PAGE> 3
BOOK 899 PAGE 998
PAGE 1
STATE OF DELAWARE
21765 DOCUMENTARY
[COAT OF ARMS] SURCHARGE
PAID $3.00
OFFICE OF SECRETARY OF STATE
----------------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF
DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CERTIFICATE OF AMENDMENT OF DEFIANCE PRECISION
PRODUCTS, INC. FILED IN THIS OFFICE ON THE TWENTY-SEVENTH DAY OF
JULY, A.D. 1989, AT 10 O'CLOCK A.M.
[SEAL] /S/ Michael Harkins
729208087 ------------------------------------------
Michael Harkins, Secretary of State
AUTHENTICATION: :2278156
DATE: 07/27/1989
<PAGE> 4
BOOK 899 PAGE 999
FILED
729208087 JUL 27 1989
/S/
DEFIANCE PRECISION PRODUCTS, INC. -------------------
SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
(Pursuant to Section 242 of the
General Corporation Law of the
State of Delaware)
Defiance Precision Products, Inc., a corporation
organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That at a meeting of the Board of
Directors of Defiance Precision Products, Inc. (the
"Corporation") resolutions were duly adopted setting forth a
proposed amendment to the Certificate of Incorporation of
the Corporation, declaring said amendment to be advisable
and directing that said amendment be considered by the
holders of all of the outstanding shares of stock of the
Corporation. The resolution setting forth the proposed
amendment is as follows:
Change of the Corporation's Name to Defiance, Inc.
--------------------------------------------------
WHEREAS, in the last few years the Corporation
significantly has expanded its products,
businesses and markets; and
WHEREAS, the Board of Directors carefully has
reviewed the appropriateness of the
Corporation's name in light of the
expansion into new lines of business and
has concluded that Defiance, Inc. is a
more appropriate name for the
Corporation. It hereby is
<PAGE> 5
BOOK 899 PAGE 1000
RESOLVED, that the Board of Directors deems it
advisable and in the best interests of
the Corporation and recommends to its
shareholders to approve the amendment of
Article I of the Corporation's
Certificate of Incorporation to change
the Corporation's name to Defiance, Inc.
so that new Article I will read as
follows:
"ARTICLE I
----------
The name of the Corporation is Defiance,
Inc.,"
RESOLVED FURTHER, that the stockholders of the
Corporation be requested to approve the
amendment of Article I of the
Corporation's Certificate of
Incorporation to change the
Corporation's name to Defiance, Inc. at
the 1989 Annual Meeting of
stockholders;
SECOND: That at the Annual Meeting of the
Stockholders of the Corporation on June 15, 1989 a majority
of the outstanding stock was voted in favor of the
amendment.
THIRD: That the amendment was duly adopted in
accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
2
<PAGE> 6
BOOK 899 PAGE 1001
IN WITNESS WHEREOF, Defiance Precision Products, Inc.,
has caused this Certificate to be signed by James W. Gillis,
its President, and attested by Michael D. Shea, its Vice
President-Finance, Treasurer and Secretary, this 26th day
July, 1989.
DEFIANCE PRECISION PRODUCTS, INC.
By: /s/
------------------------------
President
ATTEST:
By: /s/
-----------------------------------------------
Vice President-Finance, Treasurer and Secretary
RECEIVED FOR RECORD
JUL 31 1989
William M. Honey, Recorde.
July 18, 1989
27467793
3
<PAGE> 7
PAGE 1
STATE OF DELAWARE
[COAT OF ARMS]
OFFICE OF SECRETARY OF STATE
----------------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF
DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CERTIFICATE OF AMENDMENT OF DEFIANCE PRECISION
PRODUCTS, INC. FILED IN THIS OFFICE ON THE TWENTY-EIGHTH DAY OF
JULY, A.D. 1987, AT 10 O'CLOCK A.M.
[SEAL] /S/ Michael Harkins
727209110 ------------------------------------------
Michael Harkins, Secretary of State
AUTHENTICATION: :1340863
DATE: 07/29/1987
<PAGE> 8
DEFIANCE PRECISION PRODUCTS, INC.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
(Pursuant to Section 242 of the
General Corporation Law of the
State of Delaware)
Defiance Precision Products, Inc., a corporation
Organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, DOES HEREBY CER-
TIFY:
FIRST: That at a meeting of the Board of Direc-
tors of Defiance Precision Products, Inc. (the "Corpora-
tion") resolutions were duly adopted setting forth a pro-
posed amendment to the Certificate of Incorporation of said
corporation, declaring said amendment to be advisable and
directing that said amendment be considered by the holders
of all of the outstanding shares of stock of said corpora-
tion. The resolution setting forth the proposed amendment
is as follows:
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO LIMIT DIRECTORS LIABILITY
---------------------------------------------
RESOLVED, that the Board of Directors deems it advis-
able and in the best interests of the Corporation and
its shareholders to eliminate, to the extent permitted by
recent amendments in Delawate law, the liability of
directors in certain legal proceedings alleging a breach
of the director's duty by amending the Corporation's
Certificate of Incorporation so that, new Article XII will
read as follows:
<PAGE> 9
"ARTICLE XII
------------
A director of the Corporation shall not be person-
ally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a
director except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which the director
derived an improper personal benefit.
If the General Corporation Law of the State of
Delaware is amended hereafter to authorize the further
elimination or limitation of the liability of direc-
tors, then the liability of a director of the Corpora-
tion shall be eliminated or limited to the fullest
extent authorized by the General Corporation Law of the
State of Delaware, as so amended.
Any repeal or modification of this Article shall
not adversely affect any right or protection of a di-
rector of the Corporation existing hereunder with re-
spect to any act or omission occurring prior to or at
the time of such repeal or modification."
SECOND: That at the Annual Meeting of the Stock-
holders of the Company on June 11, 1987 a majority of the
outstanding stock was voted in favor of the amendment.
THIRD: That the amendment was duly adopted in
accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
2
<PAGE> 10
IT WITNESS WHEREOF, Defiance Precision Products,
Inc., has caused this certificate to be signed by James W.
Gillis, its President, and attested by Michael D. Shea, its
Vice President-Finance and Secretary, this 12th day of June,
1987.
DEFIANCE PRECISION PRODUCTS, INC.
By: /s/ James W. Gillis
--------------------------------------
President
ATTEST:
By: /s/ Michael D. Shea
-------------------------------
Vice President-Finance and Secretary
3
<PAGE> 11
PAGE 1
STATE OF DELAWARE
[COAT OF ARMS]
OFFICE OF SECRETARY OF STATE
----------------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF
DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CERTIFICATE OF AMENDMENT OF DEFIANCE PRECISION
PRODUCTS, INC. FILED IN THIS OFFICE ON THE NINETEENTH DAY OF
AUGUST, A.D. 1985, AT 10 O'CLOCK A.M.
/S/ Michael Harkins
725231034 ------------------------------------------
Michael Harkins, Secretary of State
AUTHENTICATION: :0591470
DATE: 08/19/1985
<PAGE> 12
CERTIFICATE OF INCORPORATION
OF
DEFIANCE PRECISION PRODUCTS, INC.
---------------------------------
The undersigned, for the purposes of forming a
corporation under and pursuant to the provisions of the
General Corporation Law of the State of Delaware, does
hereby certify as follows:
ARTICLE I
---------
The name of the Corporation is Defiance Precision
Products, Inc.
ARTICLE II
----------
The address of the Corporation's registered office
in the State of Delaware is Corporation Trust Center, 1209
Orange Street, in the City of Wilmington, County of New
Castle. The name of the Corporation's registered agent at
such address is The Corporation Trust Company.
ARTICLE III
-----------
The nature of the business or purposes to be con-
ducted or promoted is:
To engage in any lawful act or activity
for which corporations may be organized
under the General Corporation Law of the
State of Delaware.
ARTICLE IV
----------
The total number of shares of all classes of stock
which the Corporation shall have authority to issue is
twelve million (12,000,000) shares, of which ten million
(10,000,000) shall be shares of Common Stock with a par
value of five cents ($.05) per share and two million
(2,000,000) shall be shares of Preferred Stock with a par
value of five cents ($.05) per share.
The Board of Directors is hereby expressly granted
authority to authorize in accordance with law from time to
time the issue of one or more series of Preferred Stock and
with respect to any such series to fix by resolution or
resolutions the numbers, powers, designations, preferences
and relative, participating, optional or other special
rights of such series and the qualifications, limitations or
restrictions thereof, including but without limiting the
generality of the foregoing, the following:
<PAGE> 13
(i) entitling the holders thereof to cumu-
lative, non-cumulative or partially cumulative divi-
dends, or to no dividends;
(ii) entitling the holders thereof to receive
dividends payable on a parity with, junior to, or in
preference to, the dividends payable on any other class
or series of capital stock of the Corporation;
(iii) entitling the holders thereof to rights
upon the liquidation of, or upon any distribution of
the assets of, the Corporation, on a parity with, ju-
nior to or in preference to, the rights of any other
class or series of capital stock of the Corporation;
(iv) providing for the conversion, at the option
of the holder or of the Corporation or both, of the
shares of Preferred Stock into shares of any other
class or classes of capital stock of the Corporation or
of any series of the same or any other class or classes
or into property of the Corporation or into the securi-
ties or properties of any other corporation or person,
or providing for no conversion;
(v) providing for the redemption, in whole or
in part, of the shares of Preferred Stock at the option
of the Corporation, in cash, bonds or other property,
at such price or prices, within such period or periods,
and under such conditions as the Board of Directors
shall so provide, including provision for the creation
of a sinking fund for the redemption thereof, or pro-
viding for no redemption; and
(vi) lacking voting rights or having limited
voting rights or enjoying general, special or multiple
voting rights.
The Board of Directors may change the powers,
designation, preferences, rights, qualifications, limi-
tations and restrictions of, and number of shares in,
any series of Preferred Stock as to which no shares
have theretofore been issued.
All shares of any one series of Preferred Stock
shall be identical in all respects with all the other
shares of such series, except that shares of any one
series of Preferred Stock issued at different times may
differ as to the dates from which dividends thereon
shall be cumulative.
2
<PAGE> 14
ARTICLE V
---------
Elections of directors need not be by written
ballot unless the by-laws of the Corporation shall so pro-
vide.
ARTICLE VI
----------
The number of directors to constitute the whole
Board of Directors shall be initially such number as shall
be set forth in the initial by-laws of the Corporation and
thereafter such number as shall be fixed from time to time
by resolution of the Board of Directors. The Board of Di-
rectors shall be divided into three classes as nearly equal
in number as may be, with the term of office of one class
expiring each year. At the organization meeting of the sole
incorporator or by action taken by the sole incorporator
without a meeting, directors of the first class shall be
elected to hold office for a term expiring at the first
annual meeting of stockholders, directors of the second
class shall be elected to hold office for a term expiring at
the second annual meeting of stockholders, and directors of
the third class shall be elected to hold office for a term
expiring at the third annual meeting of stockholders. At
each annual meeting of stockholders, successors to the di-
rectors whose terms shall then expire shall be elected to
hold office for terms expiring at the third succeeding an-
nual meeting of stockholders. In case of any vacancies, by
reason of an increase in the number of directors or other-
wise, each additional director may be elected by the Board
of Directors until the end of the term he is elected to fill
and until his successor shall have been elected and quali-
fied in the class to which such director is assigned and for
the term or remainder of the term of such class. Directors
shall continue in office until others are chosen and quali-
fied in their stead. When the number of directors is
changed, any newly created directorships or any decrease in
directorships shall be so assigned among the classes by a
majority of the directors then in office, though less than a
quorum, as to make all classes as nearly equal in number as
may be feasible. No decrease in the number of directors
shall shorten the term of any incumbent director.
Notwithstanding the foregoing, whenever the hold-
ers of any one or more series of Preferred Stock issued by
the Corporation shall have the right, voting separately by
class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, fill-
ing of vacancies and other features of such directorships
shall be governed by the terms of this Certificate of Incor-
poration applicable thereto, and such directors selected
shall not be divided into classes pursuant to this Article
VI unless expressly provided by such terms.
3
<PAGE> 15
ARTICLE VII
-----------
1. Any Business Combination (as defined in para-
graph (c) of Section 4 of this Article VII) shall require
only such affirmative vote as is required by law and any
other provision of this Certificate of Incorporation if all
of the following conditions have been satisfied:
(i) The consideration to be received by holders
of Common Stock shall be cash or in the same form as
previously has been paid by or on behalf of the Inter-
ested Stockholder (as defined in paragraph (c) of Sec-
tion 4 of this Article VII) in connection with its
direct or indirect acquisition of beneficial ownership
of any shares of Common Stock. If the consideration
paid by or on behalf of the Interested Stockholder for
shares of Common Stock varied as to form, the form of
consideration to be received by holders of Common Stock
shall be either cash or the form used to acquire bene-
ficial ownership of the largest number of shares of
Common Stock previously acquired by the Interested
Stockholder;
(ii) The aggregate amount of the cash and the
Fair Market Value (as defined in paragraph (i) of Sec-
tion 4 of this Article VII) of consideration other than
cash to be received per share by holders of Common
Stock in any Business Combination shall be at least
equal to the greater of (a) the Fair Market Value per
share of Common Stock on the date of the first public
announcement of the proposal of a Business Combination
(the "Announcement Date") or on the date on which the
Interested Stockholder became an Interested Stock-
holder, whichever is higher, multiplied by the ratio of
(1) the highest per share price (including any broker-
age commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares
of Common Stock acquired by it within the two-year
period immediately prior to the Announcement Date to
(2) the Fair Market Value per share of Common Stock on
the first day in such two-year period on which the
Interested Stockholder acquired any shares of Common
Stock or (b) the highest per share price (including
brokerage commissions, transfer taxes, and soliciting
dealers' fees) paid by such Interested Stockholder in
acquiring any of the Corporation's Common Stock;
(iii) After becoming an Interested Stockholder
and prior to the consummation of any Business Combina-
tion, (A) such Interested Stockholder shall not have
acquired any newly issued shares of capital stock,
directly or indirectly, from the Corporation (except
upon conversion of convertible securities acquired by
it prior to becoming an Interested Stockholder or upon
4
<PAGE> 16
compliance with the provisions of this Article VII or
as a result of a pro rata stock dividend or stock
split) and (B) such Interested Stockholder shall not
have received the benefit, directly or indirectly (ex-
cept proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial as-
sistance or tax credits provided by the Corporation, or
made any major changes in the Corporation's business or
equity capital structure; and
(iv) A proxy statement responsive to the re-
quirements of the Securities Exchange Act of 1934,
whether or not the Corporation is then subject to such
requirements, shall be mailed to the stockholders of
the Corporation for the purpose of soliciting stock-
holder approval of any Business Combination and shall
contain at the front thereof in a prominent place any
recommendations as to the advisability (or inadvisabil-
ity) of the Business Combination which the Continuing
Directors (as defined in paragraph (h) of Section 4 of
this Article VII) may choose to state, and if deemed
advisable by a majority of the Continuing Directors, an
opinion of a reputable investment banking firm as to
the fairness (or lack of fairness) of the terms of such
Business Combination from the point of view of the
holders of Voting Shares (as defined in paragraph (e)
of Section 4 of this Article VII) other than the Inter-
ested Stockholder (such investment banking firm to be
selected by a majority of the Continuing Directors, to
be furnished with all information it reasonably re-
quests, and to be paid a reasonable fee for its ser-
vices upon receipt by the Corporation of such opinion).
2. If the provisions of Section 1 of this Article
VII have not been satisfied, any Business Combination shall
require the affirmative vote, in person or by proxy, at any
meeting called as provided in the by-laws, of the holders of
80% in interest of the Voting Shares of the Corporation
issued and outstanding including a majority in interest of
the holders of issued and outstanding Voting Shares of the
Corporation held by persons other than an Interested Stock-
holder or any Affiliate (as defined in paragraph (f) of
Section 4 of this Article VII) or Associate (as defined in
paragraph (f) of Section 4 of this Article VII) of any In-
terested Stockholder. Such affirmative vote shall be re-
quired notwithstanding the fact that no vote may be re-
quired, or that some lesser percentage may be specified by
law or in any agreement with any national securities ex-
change or otherwise.
3. The provisions of Sections 1 and 2 of this
Article VII shall not be applicable to any particular Busi-
ness Combination, and such Business Combination shall re-
quire only such affirmative vote, if any, as is required by
5
<PAGE> 17
law and any other provision of this Certificate of Incorpo-
ration, if such Business Combination (i) has been approved
prior to its consummation by a majority of the Continuing
Directors or (ii) constitutes a merger or consolidation of
the Corporation with, or any sale or lease to the Corpora-
tion or any Subsidiary (as defined in paragraph (g) of Sec-
tion 4 of this Article VII) of any assets of, or any sale or
lease by the Corporation or any Subsidiary of any of its
assets to, any corporation of which a majority of the out-
standing shares of all classes of stock entitled to vote in
elections of directors is owned of record or beneficially by
the Corporation or its Subsidiaries, provided that this
clause (ii) shall not apply to any transaction to which any
Affiliate of any Interested Stockholder is a party.
4. For the purposes of this Article VII and Arti-
cle VIII hereof:
(a) The term "Business Combination" as used
in this Article VII shall mean any transaction which is
referred to in any one or more of clauses (i) through
(vi) of this paragraph (a):
(i) any merger or consolidation of the
Corporation or any Subsidiary with or into (A) any
Interested Stockholder or (B) any other corpora-
tion (whether or not itself an Interested Stock-
holder) which immediately before is, or after such
merger or consolidation would be, an Affiliate of
an Interested Stockholder, or
(ii) any sale, lease, exchange, mort-
gage, pledge, transfer or other disposition (in
one transaction or a series of related transac-
tions) to or with any Interested Stockholder or
any Affiliate of any Interested Stockholder of any
assets of the Corporation or any Subsidiary when
such assets have an aggregate fair market value of
$2,500,000 or more, or
(iii) the issuance or transfer to any
Interested Stockholder or any Affiliate of any
Interested Stockholder by the Corporation or any
Subsidiary (in one transaction or a series of
related transactions) of any equity securities of
the Corporation or any Subsidiary where such eq-
uity securities have an aggregate fair market
value of $1,000,000 or more, or
(iv) the adoption of any plan or pro-
posal for the liquidation or dissolution of the
Corporation, or
6
<PAGE> 18
(v) any reclassification of securities
(including any reverse stock split), or recapital-
ization of the Corporation, or any merger or con-
solidation of the Corporation with any of its
Subsidiaries or any similar transaction (whether
or not with or into or otherwise involving an
Interested Stockholder) which has the effect,
directly or indirectly, of increasing the percent-
age of the outstanding shares of any class of
equity or convertible securities of the Corpora-
tion or any Subsidiary which is directly or indi-
rectly owned by any Interested Stockholder or any
Affiliate of any Interested Stockholder, or
(vi) any agreement, contract or other
arrangement providing for any of the transactions
described in this definition of "Business Combina-
tion".
(b) A "person" shall mean any individual,
firm, corporation or other entity.
(c) "Interested Stockholder" shall mean any
person (other than the Corporation or any Subsidiary or
any person who was a stockholder of the Corporation on
or before September 1, 1985) who or which, along with
its Affiliates and Associates as of the record date for
the determination of stockholders entitled to notice of
and to vote on any Business Combination or any proposed
amendment, alteration or repeal of any provision of
this Certificate of Incorporation or any by-law of the
Corporation, or immediately prior to the consummation
of any such Business Combination:
(i) is the beneficial owner (as defined
in paragraph (d) of this Section 4), directly or
indirectly, of more than 20% of the Voting Shares
of the Corporation or a Subsidiary, or
(ii) is an assignee of or has otherwise
succeeded to any share of capital stock of the
Corporation or a Subsidiary which was at any time
within two years prior thereto beneficially owned
by any Interested Stockholder, and such assignment
or succession shall have occurred in the course of
a transaction or series of transactions not in-
volving a public offering within the meaning of
the Securities Act of 1933.
(d) A person shall be the "beneficial owner"
of any Voting Shares:
7
<PAGE> 19
(i) which such person or any of its
Affiliates and Associates beneficially own, di-
rectly or indirectly, or
(ii) which such person or any of its
Affiliates or Associates has (A) the right to
acquire (whether such right is exercisable immedi-
ately or only after the passage of time), pursuant
to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise or (B)
the right to vote pursuant to any agreement, ar-
rangement or understanding, or
(iii) which are beneficially owned,
directly or indirectly, by any other person with
which such first-mentioned person or any of its
Affiliates or Associates has any agreement, ar-
rangement or understanding for the purpose of
acquiring, holding, voting or disposing of any
shares of capital stock of the Corporation or a
Subsidiary, as the case may be.
(e) "Voting Shares" when used with respect
to the Corporation or a Subsidiary shall mean shares of
such corporation having general voting power. For the
purpose of determining whether a person is an Inter-
ested Stockholder pursuant to paragraph (c) of this
Section 4, the outstanding Voting Shares shall include
shares deemed owned by a beneficial owner through
application of paragraph (d) of this Section 4 but
shall not include any other Voting Shares which may be
issuable to any other person pursuant to any agreement,
or upon exercise of conversion rights, warrants or
options, or otherwise.
(f) "Affiliate" and "Associate" shall have
the respective meanings given those terms in Rule 12b-2
of the General Rules and Regulations under the Securi-
ties Exchange Act of 1934, as in effect on June 30,
1985.
(g) "Subsidiary" shall mean any corporation
of which a majority of any class of equity security (as
defined in Rule 3a11-1 of the General Rules and Regula-
tions under the Securities Exchange Act of 1934, as in
effect on June 30, 1985) is owned, directly or indi-
rectly, by the Corporation; PROVIDED, HOWEVER, that for
the purposes of the definition of Interested Stock-
holder set forth in paragraph (c) of this Section 4,
the term "Subsidiary" shall mean only a corporation of
which a majority of each class of equity security is
owned, directly or indirectly, by the Corporation.
8
<PAGE> 20
(h) "Continuing Director" shall mean a mem-
ber of the initial Board of Directors of the Corpora-
tion, or a person who was a member of the Board of
Directors of the Corporation elected by the stockhold-
ers prior to the date as of which an Interested Stock-
holder acquired in excess of 10% of the Voting Shares
of the Corporation or a Subsidiary, or a director who
has been recommended to directly succeed a Continuing
Director or to join the Board of Directors by a major-
ity of the remaining Continuing Directors, or a direc-
tor who was elected by a majority of the remaining
Continuing Directors.
(i) "Fair Market Value" shall mean (i) in
the case of stock, the highest closing sale price dur-
ing the 30-day period immediately preceding the date in
question of a share of such stock on the principal
United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with re-
spect to a share of such stock during the 30-day period
preceding the date in question on the National Associa-
tion of Securities Dealers, Inc. Automated Quotations
Systems or any system then in use, or, if no such quo-
tations are available, the fair market value on the
date in question of a share of such stock as determined
in good faith by a majority of Continuing Directors,
and (ii) in the case of property other than cash or
stock, the fair market value of such property on the
date in question as determined in good faith by a ma-
jority of Continuing Directors.
5. The Continuing Directors, by majority vote,
shall have the power and duty to determine for the purposes
of this Article VII on the basis of information known to
them (a) the number of Voting Shares beneficially owned by
any person, (b) whether a person is an Affiliate or Asso-
ciate of another, (c) whether a person has an agreement,
arrangement or understanding with another as to the matters
referred to in paragraph (d) of Section 4 of this Article
VII, (d) whether the assets of the Corporation or any Sub-
sidiary have an aggregate fair market value of $2,500,000 or
more, or (e) whether the consideration received for the
issuance or transfer of securities by the Corporation or any
Subsidiary has an aggregate fair market value of $1,000,000
or more.
6. Nothing contained in this Article VII shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
9
<PAGE> 21
ARTICLE VIII
------------
Except as otherwise provided in this Certificate
of Incorporation (and in addition to any other vote that may
be required by law, this Certificate of Incorporation or the
by-laws), the affirmative vote, in person or by proxy, at
any meeting called as provided in the by-laws, of the hold-
ers of 80% in interest of the Voting Shares (as defined in
paragraph (e) of Section 4 of Article VII hereof) of the
Corporation issued and outstanding including a majority in
interest of the holders of the issued and outstanding Voting
Shares of the Corporation held by persons other than an
Interested Stockholder (as defined in paragraph (c) of Sec-
tion 4 of Article VII hereof) shall be required for the
stockholders to amend, alter or repeal Articles VI, VII and
VIII of this Certificate of Incorporation or to adopt any
new provision inconsistent with such Articles, PROVIDED,
HOWEVER, that if at the time of any such proposed amendment,
alteration, repeal or adoption, (i) there shall exist one or
more Interested Stockholders, and a majority of the Continu-
ing Directors (as defined in paragraph (h) of Section 4 of
Article VII) approve such proposed amendment, alteration,
repeal or adoption, or (ii) no such Interested Stockholder
exists, and a majority of the members of the Board of Direc-
tors approve such proposed amendment, alteration, repeal or
adoption, then the affirmative vote, in person or by proxy,
at any meeting called as provided in the by-laws, of the
holders of a majority in interest of the issued and out-
standing Voting Shares of the Corporation shall be required
to approve such amendment, alteration, repeal or adoption.
ARTICLE IX
----------
The name of the incorporator of the Corporation is
Fredric Keith Bass, whose mailing address is Room 4500, 140
Broadway, New York, New York 10005.
ARTICLE X
---------
In furtherance and not in limitation of the power
conferred upon the Board of Directors by law, the Board of
Directors shall have power to adopt, amend, alter and repeal
from time to time the by-laws of the Corporation.
ARTICLE XI
----------
The Corporation reserves the right to amend, al-
ter, change or repeal any provision contained in this Cer-
tificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred herein upon
stockholders are granted subject to this reservation.
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<PAGE> 22
IN WITNESS WHEREOF, I have hereunto set my hand
this 19th day of August, 1985.
/s/ Fredric Keith Bass
------------------------------
Fredric Keith Bass
Incorporator
In the Presence of:
/s/ Ellen Dicks
-----------------------------
Ellen Dicks
11
<PAGE> 23
STATEMENT OF SOLE INCORPORATOR
IN LIEU OF ORGANIZATION MEETING
OF THE INCORPORATOR OF
DEFIANCE PRECISION PRODUCTS, INC.
The Certificate of Incorporation of Defiance Pre-
cision Products, Inc. (the "Corporation") having been filed
in the office of the Secretary of State of the State of
Delaware on August 19, 1985, the undersigned, being the sole
incorporator named in said Certificate of Incorporation,
does hereby state that the following actions were taken on
this day for the purpose of organizing the Corporation:
1. A copy of the Certificate of Incorporation of
the Corporation was ordered to be filed in the minute book
of the Corporation.
2. By-laws in the form attached hereto as Exhibit
A were adopted by the undersigned incorporator as the By-
laws of the Corporation and were ordered inserted in the
minute book immediately following the copy of Certificate of
Incorporation and before this instrument.
3. The following persons were elected members of
the Board of Directors of the Corporation to hold office for
the term stated below or until their respective successors
are elected and qualified:
<PAGE> 24
Donald A. Fee and Michael D. Shea, whose terms
will expire at the Corporation's first annual
meeting of stockholders;
Allen J. Portnoy, whose term will expire at the
Corporation's second annual meeting of stockhold-
ers;
James W. Gillis, whose term will expire at the
Corporation's third annual meeting of stockhold-
ers.
Dated: August 20, 1985.
/s/ Fredric Keith Bass
------------------------------
Fredric Keith Bass
Incorporator
<PAGE> 1
EXHIBIT 10(aj)
DEFIANCE, INC.
DIRECTORS' DEFERRAL PLAN
1. Purposes of this Plan.
This Directors' Deferral Plan of Defiance, Inc., adopted on this 21st
day of September, 1994, is intended to attract and retain qualified Directors
and to provide incentives to these Directors through the ability to defer their
receipt of Directors' fees and to participate in the Company's growth.
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Cash Account" means an account for deferred Fees established
by the Company for a Director which is valued on the basis of cash as provided
in Paragraph 5.
(c) "Common Shares" means units equivalent in value and dividend
rights to Common Stock, $.05 par value per share, of the Company.
(d) "Company" means Defiance, Inc.
(e) "Deferred Account" means the account established by the Company
for each Director who elects to defer the fees payable to him as a Director.
A Director's Deferred Account shall consist of either a Cash Account or a
Stock Account, or both.
(f) "Director" means any Director of the Company who is not an
employee of the Company.
(g) "Election Agreement" means the written election to defer Director
fees signed by the Director and in the form provided by the Chief Financial
Officer (or person performing similar functions) of the Company.
3
<PAGE> 2
(h) "Fees" means that amount of the fees payable to a Director by
reasons of his serving on the Board either (i) as a retainer (without regard to
attendance at meetings); (ii) on a per meeting basis; or (iii) otherwise.
(i) "Market Price" for any day shall be the closing price quoted for
a share of Common Stock of the Company on the NASDAQ National Market System or
on such national securities exchange as the Common Stock may be traded and, if
not so traded, then as the Board in its discretion may determine.
(j) "Member" means any Director who has at any time deferred the
receipt of Director fees in accordance with this Plan.
(k) "Plan" means the Directors Deferral Plan.
(l) "Stock Account" means an account for deferred Fees established by
the Company for a Director which is valued on the basis of the Company's Common
Stock.
(m) "Term" means the duration of the term for which a Director is
elected.
(n) "Full Term" means a term of three (3) years.
(o) "Year" means the calendar year.
(p) Whenever appropriate, words used herein in the singular may be
read as the plural and the plural may be read as the singular.
(q) Masculine pronouns used herein shall be deemed to refer to both
women and men.
3. Election to Defer Directors' Fees.
(a) Eligibility.
A Director may elect to defer receipt of all or a portion of his fees
for any Year in accordance with Paragraph 3(b) hereof.
2
4
<PAGE> 3
(b) Time of Election.
A Director desiring to defer all or a portion of his Fees for the
upcoming Year must submit an Election Agreement to the Chief Financial Officer
(or person performing similar functions) of the Company no later than the last
day of the Year prior to the Year for which the election is to be effective.
Any Director who was not a Director during the previous Year may make
an election to defer all or a portion of the Fees for the Year in which the
Director is elected to the Board of Directors by delivering an Election
Agreement to the Chief Financial Officer (or person performing similar
functions) of the Company within thirty (30) days after such election to the
Board. A Director fulfilling the above requirements shall be considered a
"Member" for purposes of this Plan.
(c) Duration of Election.
A Member's election to defer Fees shall be effective from Year to Year
unless modified or revoked by the Member through written notice to the Chief
Financial Officer (or person performing similar functions) of the Company prior
to the beginning of the Year for which the revocation or modification is to
apply.
(d) Election Irrevocable.
Subject to the provision of Paragraph 3(e), the terms set forth in an
Election Agreement for any particular Year are irrevocable once the Year has
commenced.
(e) Modification of Election.
Notwithstanding the provisions of Paragraph 3(d) a Member may modify or
amend an Election Agreement for a prior Year to modify the payment schedule of
distributions covered by such Election Agreement if such Director's membership
on the Board has been terminated, and he is not otherwise a reporting person
under Section 16 of the Securities Exchange Act of 1934, as amended, ("Exchange
Act") at the time of such modification or amendment, and he files a new
Election Agreement with the
3
5
<PAGE> 4
revised distribution schedule at least one year in advance of the date
such distributions were originally scheduled to commence.
4. The Amount and Date of Deferral.
The Election Agreement of the Member shall indicate the amount of Fees
to be deferred and the date to which the Fees are to be deferred. Deferral
shall be to the earlier to occur of (1) the date indicated by the Member;
provided, however, distributions of deferred fees from Stock Accounts may be no
sooner than six months after the Year for which such deferred fees relate, or
(2) the date of the death of the Member. In the case of the death of the
Member, distribution of the deferred fees shall be made in accordance with
Paragraph 7. A Member may (i) select a lump-sum distribution or a series of
distributions or installments and (ii) choose the date on which the lump sum
shall be paid or the installments shall commence. The installments may not be
more frequent than annually and may not consist of more than ten (10) annual
installments.
5. Deferral Accounts.
(a) Accounts
The Company shall establish and preserve one or more accounts for each
Director. A Member shall designate on the Election Agreement with respect to
each Year's deferred Fees whether to have the account attributable to such
Year's deferred Fees valued on the basis of the Common Shares of the Company in
accordance with Paragraph 5(b) hereof or on the basis of cash in accordance
with Paragraph 5(c) hereof. A Member may defer a portion of his fees into each
type of account. A Member may not transfer fees from one account to another
after he has made an election for any Year, except that at the time such Member
executes an Election Agreement with respect to a Year's Fees he may elect to
have all amounts attributable to such Year's Fees in his Stock Account,
automatically transfer into his Cash Account upon the termination of his
membership on the Board as long as such Member is not at
4
6
<PAGE> 5
that time otherwise subject to the provision of Section 16 of the
Exchange Act. The Company may establish separate accounts for a Member to
properly account for amounts deferred under the two alternatives or during
different Years.
(b) Stock Account.
There shall be credited to a Member's Stock Account, on the last day of
each quarter, the number of Common Shares (whole or fractional, rounded to the
nearest thousandth of a share) equal to the quotient obtained by dividing (i)
the sum of the Fees he elects to defer to his Stock Account which otherwise
would have been paid to him during the quarter and the dividends payable during
such quarter on the Common Shares held in the Stock Account on the first day of
such quarter, by (ii) the Market Price of the Common Stock on the last business
day of such quarter.
(c) Cash Account.
If a Member elects to have a portion of his Fees deferred into a Cash
Account, there will be credited to his Cash Account, on the last day of each
quarter, an amount equal to the sum of (i) the Fees he elects to defer to his
Cash Account which otherwise would have been paid to him during the quarter and
(ii) interest on the balance in the Cash Account on the first day of such
quarter at a rate based on the rate of interest paid by the Company on its
senior revolving credit facility (the "Interest Rate"). The Interest Rate
applicable to any Year will be set on the first business day of such Year.
(d) Claims of General Creditors.
All compensation deferred and amounts credited to the Cash and Stock
Accounts under this Plan shall remain a part of the general assets of the
Company. Accordingly, the compensation deferred under this Plan shall be an
unsecured claim against the general assets of the Company and shall be subject
to the claims of the Company's general creditors.
5
7
<PAGE> 6
6. Payment of Accounts.
The accounts established and maintained for each Director shall be
distributed in a lump sum or installments. The selection of the distribution
date(s) and the method of distribution are to be indicated on the Election
Agreement to be submitted by the Member. The election as to the method of and
time for payment of the amount of an account relating to Fees deferred for a
particular Year may not hereafter be altered with respect to that particular
Year once the Year has commenced except as provided in Paragraph 3(e). Changes
in the method of and time for payment of the amount of an account may be
effected for future Years by notifying the Chief Financial Officer (or person
performing similar functions) in writing prior to the beginning of the Year for
which the modification is to apply in accordance with Paragraph 3 above.
With respect to all distributions to be made under the Plan, the
following rules shall apply:
(i) All distributions whether from a Stock Account or a Cash
Account shall be paid in cash subject to withholding or deduction by
the Company of any taxes, contributions, payments and assessments
which the Company is now or may hereafter be required or authorized by
law to withhold or deduct from distributions;
(ii) The amount of the distribution from the Stock Account
shall be valued based on the Market Price of the Common Stock on the
last business day of the calendar quarter immediately preceding the
distribution date; and
(iii) The amount of the distribution from the Cash Account
shall be valued based on the value of the Cash Account on the last
business day of the quarter immediately preceding the distribution
date. In the event a Member elects to receive installment payments,
the following rules shall apply:
(i) The balance of the Stock Account shall be credited,
pursuant to
6
8
<PAGE> 7
Paragraph 5(b) above, with additional Common Shares upon the
payment of dividends until the Stock Account is completely
distributed;
(ii) The balance of the Cash Account shall be credited,
pursuant to Paragraph 5(c) above, with interest quarterly until the
Cash Account is completely distributed; and
(iii) The amount of each installment shall be determined by
dividing the value of the Stock Account, the Cash Account, or both, by
the number of installments remaining to be paid to the Member.
7. Death of Member.
A Member may, in the Election Agreement provided in Paragraph 3 above,
provide that, in the event of his death prior to the expiration of the period
during which his account balance is distributable, the account balance shall be
distributed to his estate or designated beneficiary in a single distribution or
in the installments contemplated by Paragraph 6 above. This election shall be
made at the time of the election contemplated by Paragraph 3 above. If no such
election is made the account balance shall be distributed in a single
distribution six months after the Member's death to his surviving spouse, or if
there be no surviving spouse, then to his estate.
8. Valuation of Accounts.
Each account shall be valued as of the last day of each calendar
quarter until payment of the account in full to the Member in accordance with
Paragraph 6. Each Member shall receive a statement of his accounts not less
than annually.
9. Adjustment Upon Changes in Capitalization.
In the event of changes in the outstanding Common Shares of the Company
by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or
7
9
<PAGE> 8
exchange of shares or a similar corporate change, the Board of
Directors shall, in its sole discretion, equitably adjust the number of Common
Shares held in the Stock Accounts and such adjustment shall be made by the
Company and shall be conclusive and binding on all Members of the Plan.
10. Vesting in Deferred Directors' Fees.
All amounts deferred by a Director pursuant to the Plan shall be
immediately and fully vested. Notwithstanding the foregoing, all amounts
deferred under the Plan shall be subject to Paragraph 5(b).
11. Administration.
This Plan shall be administered by the Compensation Committee of the
Board of Directors. The Compensation Committee shall have the sole right and
authority to interpret and construe the provision of this Plan, and its
decisions on disputes arising from the Plan shall be binding and conclusive
upon the Members. If a Member is part of the Compensation Committee that
administers this Plan, he shall not participate in any deliberations or actions
of the Compensation Committee relating exclusively to his membership in this
Plan.
12. Termination or Modification of Plan.
This Plan may be terminated, modified, or amended at the sole
discretion of the Board of Directors; provided, that no amendment of the Plan
shall impair any of the rights of any Member, without the Member's consent, in
his Deferred Account balance. If this Plan is terminated, the remaining
Deferred Account balances will be distributed pursuant to the terms of this
Plan and no additional deferrals will be permitted.
13. Nontransferability of Accounts.
Neither any account maintained for a Director under this Plan nor the
Director's right to receive any payment specified herein with respect to any
such account shall be subject in any manner to anticipation, alienation, sale,
transfer (other than by will or the laws of descent or distribution),
8
10
<PAGE> 9
assignment, pledge, encumbrance or charge, either voluntary or
involuntary, and any attempt to so alienate, anticipate, sell, transfer,
assign, pledge, encumber or charge the same shall be null and void. No amount
payable under this Plan shall be liable for or be subject to the debts,
contracts, liabilities, engagements or torts of any person to whom such payment
is or may be payable, except as required under applicable law.
14. Claims of Other Persons.
The provisions of the Plan shall in no event be construed as giving any
person, firm or corporation any legal or equitable right as against the Company
or any subsidiary, or the officers, employees, or Directors of the Company or
any subsidiary, except any such rights as are specifically provided for in the
Plan or are hereafter created in accordance with the terms and provisions of
the Plan.
15. Severability.
The invalidity and unenforceability of any particular provision of the
Plan shall not affect any other provision hereof, and the Plan shall be
construed in all respects as if such invalid or unenforceable provisions were
omitted herefrom.
16. Captions.
The captions used in the Plan are for convenience only and shall not
affect the meaning of any provision hereof.
17. Governing Law.
The provisions of the Plan shall be governed and construed in
accordance with the laws of the State of Ohio.
9
11
<PAGE> 10
In witness thereof, Defiance, Inc. has caused this Defiance, Inc.
Directors' Deferral Plan to be executed on its behalf by an individual duly
authorized this 21st day of September, 1994.
By:
Jerry A. Cooper, President and C.E.O.
Attest:
By:
Michael J. Meier, Secretary
[Corporate Seal]
10
12
<PAGE> 1
EXHIBIT 10(ak)
DEFIANCE, INC.
CHANGE OF CONTROL POLICY
This policy is set forth by the Board of Directors to ensure certain key
executives of Defiance, Inc. (the "Company") are afforded a continuing income
to facilitate the change in their lives resulting from termination from the
Company due to a Change of Control. This policy obligates the Company
accordingly to these executives subject to changes in applicable law and
further actions of the Board of Directors. The Board of Directors reserves the
right, at its discretion, to alter, amend or even terminate this policy,
however, any such change in the policy shall only take effect two (2) years
after the date upon which the Board of Directors institutes said change of the
policy.
If an executive is terminated due to a Change of Control, the executive's
base salary (immediately before said termination), incentive bonuses (which
bonuses shall be the average of the incentive bonuses paid to the executive for
the two years preceding said termination), all insurance, medical benefits and
company car or car allowance (provided to the executive immediately prior to
said termination), will be continued for a period of two years from date of
termination, and all options outstanding will be immediately vested as well as
401(k) contributions..
A "Change of Control" shall be deemed to have taken place if, as the
result of a tender offer, exchange offer, merger, consolidation, sale of
assets, contested election, or any combination of the foregoing or other
similar extraordinary transactions, the persons, who are directors one year
prior to the first of any such events to occur, shall cease to constitute a
majority of the board of directors of the Company or any parent or successor to
the Company.
Termination due to a Change in Control is deemed to occur if, within two
years after the Change of Control, without the executive's written approval:
(1) the executive's employment is terminated; (2) the executive experiences any
reduction in aggregate direct remuneration, position, responsibility or duties
from those enjoyed by the executive immediately prior to the Change of Control;
(3) the executive experiences any reduction in the aggregate of employee
benefits, prerequisites, or fringe benefits from those enjoyed by the executive
immediately prior to the Change of Control; (4) The Company requires that the
executive's principal place of work is more than 25 miles from executive's
principal place of work immediately prior to the Change of Control or executive
is required to travel in connection with executive's employment to a greater
degree than was customary during the year prior to the Change of Control; or
(5) there is a liquidation, dissolution, consolidation or merger of the
Company, or transfer or all or a significant portion of its assets unless the
successor(s) assume all the duties and obligations to the executive set forth
in this policy.
The key executives which this policy applies as of September 22, 1994 are
as follows:
Michael J. Meier - Chief Financial Officer, Defiance, Inc.
Michael D. Shea - President, Defiance Precision Products, Inc.
Stephen E. Nash - President, Hy-Form Products, Inc. and Binderline
Development, Inc.
Michael B. Madden - President, SMTC Corporation
13
<PAGE> 1
EXHIBIT 10(am)
DEFIANCE, INC.
SUPPLEMENTAL SAVINGS AND DEFERRED COMPENSATION PLAN
WHEREAS, Defiance, Inc. (the "Employer") desires to establish,
effective July 1, 1994, the Defiance, Inc. Supplemental Savings and Deferred
Compensation Plan (the "Plan") to provide to certain employees of the Company
benefits lost by participants under the Defiance, Inc. Retirement Savings Plan
(the "Savings Plan") as a result of restrictions imposed upon such plan by
Sections 401(a)(17), 401(m), 402(g), 410(b) and 415 of the Internal Revenue
Code of 1986, as amended, and to incorporate the current Deferred Compensation
program of the Company for administrative purposes.
NOW, THEREFORE, the Company hereby adopts the Plan effective July 1, 1994.
ARTICLE I
PURPOSE
1.1 The purpose of this Plan is to provide for the payment of
supplemental benefits to select management and highly compensated
employees of the Company whose benefits payable under the Savings Plan
are subject to certain benefit limitations imposed by Sections
401(a)(17), 401(m), 402(g), 410(b) and 415 of the Internal Revenue Code,
and to provide for deferral of other compensation. The Company intends
and desires that this Plan, together with the other elements of the
Company's compensation program, will attract, retain and motivate
eligible employees.
1.2 The substantive provisions of the Savings Plan with any
amendments thereto in effect as of June 30, 1994, and the current
Deferred Compensation Program as of June 30, 1994 are hereby incorporated
by reference into and shall be a part of this Plan as fully as if set
forth herein. Any amendments made to said substantive provisions shall
also be incorporated by reference into, and form a part of, this Plan
effective as of the effective date of such amendments.
Def SSDCP 10/04/94 -1-
14
<PAGE> 2
ARTICLE II
DEFINITIONS
All terms with initial capital letters which are used in the Savings
Plan shall have the meanings assigned to them under the provisions of the
Savings Plan unless otherwise specified herein or as otherwise qualified by the
context in which the term is used herein.
2.1 For the purposes of this Plan, the following words and phrases
shall have the meanings indicated unless a different meaning is clearly
required by the context. Any terms used herein in the masculine shall be
read and construed in the feminine where they would so apply, and any terms
used in the singular shall be read and construed in the plural if
appropriate:
(a) A "Change of Control" shall be deemed to have taken place if, as
the result of a tender offer, exchange offer, merger, consolidation, sale
of assets, contested election, or any combination of the foregoing or
other similar extraordinary transactions, the persons, who are directors
one year prior to the first of any such events to occur, shall cease to
constitute a majority of the board of directors of the Company or any
parent or successor to the Company.
Termination due to a Change of Control is deemed to occur if, within
two years after the Change of Control, without the executive's written
approval: (1) the executive's employment is terminated; (2) the
executive experiences any reduction in aggregate direct remuneration,
position, responsibility or duties from those enjoyed by the executive
immediately prior to the Change of Control; (3) the executive experiences
any reduction in the aggregate of employee benefits, prerequisites, or
fringe benefits from those enjoyed by the executive immediately prior to
the Change of Control; (4) the Company requires that the executive's
principal place of work is more than 25 miles from executive's principal
place of work immediately prior to the Change of Control or executive is
required to travel in connection with executive's employment to a greater
degree than was customary
-2-
Def SSDCP 10/04/94
15
<PAGE> 3
during the year prior to the Change of Control; or (5) there is a
liquidation, dissolution, consolidation or merger of the Company, or
transfer of all or a significant portion of its assets unless the
successor(s) assumes all of the duties and obligations to the executive
set forth in this policy.
(b) "Committee" shall mean the Committee charged with the administration
of the Plan under Article VII herein.
(c) "Company" shall mean Defiance, Inc. or any successor by merger, purchase
or otherwise.
(d) "Compensation" shall mean a Participant's total annual compensation
including base salary and bonuses whether paid in cash or deferred.
(e) "Compensation Limitation" shall mean, for any fiscal year beginning on
and after July 1, 1994, $150,000, as adjusted to and including such
given year of determination in the manner provided under Code Section
401(a)(17).
(f) "Contribution Limitation" shall mean for any calendar year, a limitation
on the amount of salary deferral of a Participant in the Savings Plan as a
result of the operation of Code Section 401(m), 402(g) or 415.
(g) "Employee" shall mean any common law Employee of an Employer.
(b) "Employer" shall mean Defiance, Inc. or any successor thereto by merger,
purchase or otherwise, and any designated subsidiaries.
(i) "Participant" shall mean an Employee who has become a Participant in
accordance with Section 3.2.
(i) "Participating Employer" shall mean any subsidiary of the Company as
defined in the Savings Plan.
(k) "Plan" shall mean the Defiance, Inc. Supplemental Savings Plan, as the
same may be amended from time to time.
(l) "Plan Benefit" shall mean, to the extent applicable to any given
Participant the benefit determined under the provisions of Article IV.
(m) "Retirement" shall mean the later of the first day of the month on or
after attainment of age 59-1/2 or the date of termination of employment.
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Def SSDCP 10/04/94
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<PAGE> 4
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Any Employee who is an officer or key executive with compensation in
excess of $125,000 may become eligible to participate in the Plan. Such
Employee shall become a Participant hereunder only as provided under
Section 3.2.
3.2 An Employee eligible to participate in the Plan under Section 3.1 and who
is selected by the Committee for participation shall become a
Participant in the Plan at the earlier of:
(a) his election to defer a portion of his Compensation;
(b) the first day of the Plan Year in which his benefit under the
Savings Plan is affected either by the Compensation Limitation
or the Contribution Limitation; or
(c) at such time any of the discretionary payments to be made by the
Company or Participating Employer cannot be made to the Savings
Plan.
3.3 Upon becoming a Participant under the Plan, he shall make an irrevocable
election to begin to receive his benefits under the Plan at:
(a) a specific age, or
(b) at retirement from the Company but not later than age 65 if the
Participant terminates employment prior to eligibility for
retirement.
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Def SSDCP 10/04/94
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<PAGE> 5
ARTICLE IV
PLAN BENEFITS
4.1 The Participant may defer any portion of his Compensation. Deferral is
not limited to amounts that cannot be deferred under the Savings Plan.
4.2 The Company shall contribute to the account of a Participant eligible
therefor under Section 3.2 (or to his surviving spouse or beneficiary or
beneficiaries), 50% of the first four percent of Compensation deferred
under the Plan, but will not duplicate contributions made under the
Savings Plan. Amounts in excess of the first four percent of the
Participant's Compensation shall not be matched by the Company.
4.3 The Company or Participating Employer shall contribute any of the
discretionary contributions that a Participant is eligible to receive
but which cannot be made to the Savings Plan because of the application
of Code Sections 401(a)(17) or 401(m) or 410(b).
4.4 Notwithstanding any provision of this Plan to the contrary, the annual
Plan Benefits set forth under Article IV shall be determined and
coordinated by the Committee so as to prevent any duplication of Plan
and Savings Plan benefits.
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Def SSDCP 10/04/94
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<PAGE> 6
ARTICLE V
INDIVIDUAL ACCOUNTS, INVESTMENTS AND VALUATIONS
5.1 The provisions of the Savings Plan concerning the creation of individual
accounts and the investment elections made by Participants thereunder,
as incorporated into this Plan under Section 1.2, are hereby specifically
recognized and shall be used herein for their stated purposes.
5.2 Participant accounts will be valued annually. A Participant's account
will be credited annually at the end of the fiscal year with interest of
the Company's incremental cost of borrowing above the equivalent annual
yield of Treasury Notes maturing in fifteen (15) years.
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Def SSDCP 10/04/94
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<PAGE> 7
ARTICLE VI
VESTING, COMMENCEMENT AND FORM OF PLAN BENEFIT
6.1 Plan Benefits based on a Participant's deferrals and the earnings
credited thereon shall be fully vested at the time of deferral or
crediting. Plan Benefits based on Company or Participating Employer
contributions shall be fully vested at the earliest of death, retirement,
Change of Control, or, if earlier, according to the following schedule:
<TABLE>
Years of Nonforfeitable
Service Interest
<C> <C>
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
</TABLE>
6.2 Vested Plan Benefits hereunder shall become payable to a Participant as
of the date specified under the provisions of Section 3.3. Plan Benefits,
including the balance of the Participant's deferred compensation account
shall be payable in annual installments of the lesser of:
(a) the Participant's annual base salary at the time of termination,
or
(b) the remainder of the participant's account balance, unless the
Participant elects in writing no less than one year before
termination to take such amount as annual payments (not to
exceed 10).
6.3 In the event of a Change of Control, the Company shall pay to each
Participant, a lump sum consisting of the value of the Participant's
accounts under the Plan as if he were
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fully vested, and the amount shall be paid at the time of termination
following the Change of Control.
6.4 Notwithstanding any Plan provision to the contrary, no Company or
Participating Employer contributions made under this Plan and interest
earnings credited on Participant accounts shall be paid with respect to
a Participant (or beneficiary thereof) who is terminated for "Cause".
For purposes of the Plan, Cause means (a) action by the Participant
involving willful and wanton malfeasance and including any wrongful and
unlawful act, or (b) the Participant being convicted of a felony directly
or indirectly involving the Company. Nothing contained herein shall
prevent the payment of benefits to a vested Participant who is
involuntarily terminated for reasons other than Cause.
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<PAGE> 9
ARTICLE VII
ADMINISTRATION
7.1 The Compensation Committee of the Board of Directors shall be charged
with the administration of the Plan. The Committee shall have all such
powers as may be necessary to discharge its duties relative to the
administration of the Plan, including by way of illustration and not
limitation, discretionary authority to interpret and construe the Plan,
to decide any dispute arising hereunder, to determine the right of any
Employee with respect to participation herein, to determine the right of
any Participant with respect to benefits payable under the Plan and to
adopt, alter and repeal such administrative rules, regulations and
practices governing the operation of the Plan as it, in its sole
discretion, may from time to time deem advisable. No member of the
Committee shall be liable to any person for any action taken or omitted
in connection with the interpretation and administration of the Plan
unless attributable to willful misconduct or lack of good faith. The
Committee shall be entitled to conclusively rely upon all tables,
valuations, certificates, opinions and reports furnished by any actuary,
accountant, controller, counsel or other person employed or engaged by
the Committee or the Company with respect to the Plan.
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<PAGE> 10
ARTICLE VIII
AMENDMENT AND TERMINATION
8.1 The Company expects to continue the Plan indefinitely, but reserves the
right to amend or terminate it at any time, if, in its sole judgment,
such amendment or termination is necessary or desirable. Any such
amendment or termination shall be made in writing by the Board of
Directors of the Company or its designee, if applicable, and shall be
effective as of the date specified in such document. No amendment or
termination of the Plan shall directly or indirectly deprive any
Participant, surviving spouse or beneficiary of all or any portion of the
Plan Benefits earned by the Participant as of the date of amendment or
Plan benefits will be fully vested and the Company (or any transferee,
purchaser or successor entity) shall be obligated to pay Plan Benefits to
Participants, surviving spouses and beneficiaries at such time or times
as provided under the terms of the Plan.
8.2 The Plan shall not be automatically terminated by a transfer or sale of
the Company or by the merger or consolidation of the Company into or with
any other corporation or other entity, but it shall be continued after
such sale, merger or consolidation only if and to the extent that the
transferee, purchaser or successor entity agrees to continue the Plan.
In the event the Plan is not continued by the transferee, purchaser or
successor entity, then it shall terminate subject to the provisions of
Section 8.1.
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<PAGE> 11
ARTICLE IX
MISCELLANEOUS
9.1 No Effect on Employment Rights. Nothing contained herein will confer
upon any Participant the right to be retained in the service of the
Company nor limit the right of the Company to discharge or otherwise deal
with Participants without regard to the existence of the Plan.
9.2 Plan Unfunded. Notwithstanding any provision herein to the contrary, the
benefits offered hereunder shall constitute nothing more than an unfunded,
unsecured promise by the Company to pay benefits determined hereunder
which are accrued by Participants while such Participants are employed by
the Company. No provision shall at any time be made with respect to
segregating any assets of the Company for payment of any benefits
hereunder. No Participant, Beneficiary or any other person shall have any
interest in any particular assets of the Company by reason of the right
to receive a benefit under the Plan and any such Participant, Beneficiary
or other person shall have only the rights of a general unsecured
creditor of the Company with respect to any rights under the Plan.
Nothing contained in the Plan shall constitute a guaranty by the Company
or any other entity or person that the assets of the Company will be
sufficient to pay any benefit hereunder. All expenses and fees incurred
in the administration of the Plan shall be paid by the Company.
9.3 Binding on Company, Employees and Their Successors. The Plan
shall be binding upon and inure to the benefit of the Company, its
successors and assigns and the employee and his heirs, executors,
administrators and legal representatives. In the event of the merger or
consolidation of the Company with or into any other corporation, or in
the event substantially all of the assets of the Company shall be
transferred to another corporation, the successor corporation resulting
from the merger or consolidation, or the transferee of such assets, as
the case may be, shall, as a condition to the consummation of the merger,
consolidation or sale, assume the obligations of the Company hereunder
and shall be substituted for the Company hereunder.
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9.4 Spendthrift Provisions. No benefit payable under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge prior to actual receipt
thereof by the payee; and any attempt so to anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge prior to such receipt shall
be void; and the Company shall not be liable in any manner for or subject
to the debts, contracts, liabilities, torts or engagements of any person
entitled to any benefit under the Plan.
9.5 Disclosure. Each Participant shall receive a copy of the Plan.
9.6 State Law. The Plan is established under and will be construed according
to the laws of the State of Ohio to the extent that such laws are not
pre-empted by the Employee Retirement Income Security Act of 1974, as
amended, and regulations promulgated thereunder.
9.7 Incapacity of Recipient. In the event a Participant, surviving spouse or
beneficiary is declared incompetent and a guardian, conservator or
other person legally charged with the care of his person or of his estate
is appointed, any benefits under the Plan to which such Participant,
spouse or beneficiary is entitled shall be paid to such guardian,
conservator or other person legally charged with the care of his person
or his estate. Except as provided herein, when the Committee, in its sole
discretion, determines that a Participant, surviving spouse or
beneficiary is unable to manage his financial affairs, the Committee may
direct the Company to make distributions to any person for the benefit of
such Participant, spouse or beneficiary.
9.8 Unclaimed Benefit. Each Participant shall keep the Committee informed of
his current address. The Committee shall not be obligated to search
for the whereabouts of any person. If the location of a Participant is
not made known to the Committee within three years after the date on
which any payment of the Participant's benefit hereunder may be made,
payment may be made as though the Participant had died at the end of the
three-
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<PAGE> 13
year period. If, within one additional year after such three-year
period has elapsed, or, within three years after the actual death of a
Participant, whichever occurs first, the Committee is unable to locate
the spouse or any beneficiary of the Participant, any Plan Benefits held
for a Participant, surviving spouse or beneficiary shall be forfeited.
9.9 Elections, Applications. Notices. Every direction, revocation or
notice authorized or required hereunder shall be deemed delivered to the
Company or the Committee as the case may be: (a) on the date it is
personally delivered to the Secretary of the Committee (with a copy to
the Company's General Counsel) at the Company's executive offices at
Cleveland, Ohio or (b) three business days after it is sent by registered
or certified mail, postage prepaid, addressed to the Secretary of the
Committee (with a copy to the Company's General Counsel) at the offices
indicated above, and shall be deemed delivered to a Participant,
surviving spouse or beneficiary: (a) on the date it is personally
delivered to such individual, or (b) three business days after it is sent
by registered or certified mail, postage prepaid, addressed to such
individual at the last address shown for him on the records of the
Company. Any notice required hereunder may be waived by the person
entitled thereto.
9.10 Counterparts. This Plan may be executed in any number of
counterparts, each of which shall be considered as an original, and no
other counterparts need be produced.
9.11 Severability. In the event any provision of this Plan shall be
held illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining provisions of the Plan. This Plan shall be
construed and enforced as if such illegal or invalid provision had never
been contained herein.
9.12 Headings. The headings of Sections of this Plan are for
convenience of reference only and shall have no substantive effect on the
provisions of this Plan.
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<PAGE> 14
Executed at Cleveland, Ohio this day of , effective as of July 1, 1994.
ATTEST: DEFIANCE, INC.
By:
Title:
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<PAGE> 1
EXHIBIT 10(an)
DEFIANCE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective July 1, 1995)
28
<PAGE> 2
DEFIANCE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Defiance, Inc. (the "Company") provides certain qualified
retirement and other deferred compensation plans for the benefit of certain of
its executive employees; and
WHEREAS, the Company recognizes that such plans and programs may not
adequately provide sufficient retirement income to such executive employees;
and
WHEREAS, the Company recognizes the unique qualifications of its
executive employees and the valuable services that they have provided to or for
the Company; and
WHEREAS, the Company now desires to establish a plan to provide
additional retirement benefits as a method of attracting and retaining such
executive employees;
NOW, THEREFORE, the Company does hereby establish the Defiance, Inc.
Supplemental Executive Retirement Plan (the "Plan"), effective July 1, 1995, as
herein set forth:
29
<PAGE> 3
ARTICLE I
PURPOSE
1.1 The purpose of the Plan is to provide for the payment of supplemental
retirement benefits to eligible executive employees of the Company. The
Company intends and desires that this Plan, together with the other
elements of the Company's compensation program, will attract, retain and
motivate eligible executive employees.
1.2 The Plan is intended to be an unfunded plan which provides benefits to a
select group of management and highly compensated employees as such
group is described under Sections 201(2), 301(a)(3), and 401(a)(1) of
the Employee Retirement Security Act of 1974, as amended. The Plan is
not intended to be a plan described in Section 401(a) of the Internal
Revenue Code of 1986 as amended.
30
<PAGE> 4
ARTICLE II
DEFINITIONS
2.1 For the purposes of this Plan, the following words and phrases shall
have the meanings indicated unless a different meaning is clearly
required by the context. Any terms used herein in the masculine shall be
read and construed in the feminine where they would so apply, and any
terms used in the singular shall be read and construed in the plural if
appropriate:
(a) "Benefit" means the benefit payable to a Participant as determined
under Article IV of this Plan.
(b) A "Change of Control" shall be deemed to have taken place if, as
the result of a tender offer, exchange offer, merger,
consolidation, sale of assets, contested election, or any
combination of the foregoing or other similar extraordinary
transactions, the persons, who are directors one year prior to the
first of any such events to occur, shall cease to constitute a
majority of the board of directors of the Company or any parent or
successor to the Company.
(c) "Cause" shall mean termination of employment due to any act which,
in the Committee's discretion, is deemed to be inimical to the
best interests of the Company, including, but not limited to: (1)
a serious, willful misconduct in respect of his duties for the
Company; (2) conviction of a felony or perpetration of a common
law fraud; (3) willful failure to comply with applicable laws with
respect to the execution of the Company's business operations; (4)
theft, fraud, embezzlement, dishonesty or other conduct which has
resulted in material economic damage to the Company, or any of
their affiliates or subsidiaries.
(d) "Committee" shall mean the Committee charged with the
administration of the Plan under Article VI herein.
(e) "Company" shall mean Defiance, Inc. or any successor by merger,
purchase or otherwise.
(f) "Compensation" shall mean a Participant's total annual
compensation earned including base salary and bonuses whether
paid in cash or deferred.
2
31
<PAGE> 5
(g) "Disability" shall mean a physical or mental condition of a Participant
resulting from a bodily injury, disease, or mental disorder which
renders him incapable of continuing in the employment of the Company.
Such Disability shall be determined by the Committee, in its discretion,
based upon appropriate medical advice and examination.
(h) "Employee" shall mean any common law Employee of the Company.
(i) "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
(j) "Participant" shall mean an Employee who has become a Participant in
accordance with Section 3.2.
(k) "Plan" shall mean the Defiance, Inc. Supplemental Executive Retirement
Plan, as the same may be amended from time to time.
(l) "Termination Due to Change of Control" is deemed to occur if, within two
years after the Change of Control, without the executive's written
approval: (1) the executive's employment is terminated; (2) the
executive experiences any reduction in aggregate direct remuneration,
position, responsibility or duties from those enjoyed by the executive
immediately prior to the Change of Control; (3) the executive
experiences any reduction in the aggregate of employee benefits,
prerequisites, or fringe benefits from those enjoyed by the executive
immediately prior to the Change of Control; (4) the Company requires
that the executive's principal place of work is more than 25 miles from
the executive's principal place of work immediately prior to the Change
of Control or the executive is required to travel in connection with the
executive's employment to a greater degree than was customary during the
year prior to the Change of Control; or (5) there is a liquidation,
dissolution, consolidation or merger of the Company, or transfer of all
or a significant portion of its assets unless the successor(s) assumes
all of the duties and obligations to the executive set forth in this
policy.
(m) "Threshold Performance" shall mean the financial performance of the
Company or a subsidiary as applicable, as determined by the Committee
and the Chief Executive Officer on an annual basis.
3
32
<PAGE> 6
(n) "Year of Service" shall mean the 12-month period beginning on the
employee's date of hire by Defiance Inc. The Committee, in its
discretion, may grant a Participant additional Years of Vesting Service.
4
33
<PAGE> 7
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. Any Employee shall be eligible to participate in the Plan
at such time and for such period as designated by the Committee as set
forth in Appendix A hereto, provided however, that such Employee is a
member of a select group of management or highly compensated employees
as such group is described in Sections 201(2), 301(a)(3) and 401(a)(1)
of ERISA.
3.2 Participation. Each Employee shall become a Participant by having
amounts credited to his Account pursuant to Article IV.
5
34
<PAGE> 8
ARTICLE IV
PLAN BENEFITS
4.1 Benefits. A Participant's Benefit shall be equal to the total amount
credited to the Participant's Account under this Article IV, and such
Benefit shall become nonforfeitable and payable to the Participant as
provided under Article V.
4.2 Accounts. The Company shall establish and maintain, pursuant to the
terms of the Plan, an Account for each Participant consisting of
amounts credited to such Account pursuant to Sections 4.3 and 4.4 below.
All amounts which are credited to the Account shall be credited solely
for purposes of accounting and computation, and shall remain assets of
the Company subject to the claims of the Company's general creditors.
4.3 Contributions. Upon the determination that Threshold Performance has
been attained for any given fiscal year beginning with the fiscal year
ended June 30, 1996, an amount relating to such fiscal year shall be
credited to the Account of each Participant employed by the Company on
the last day of such fiscal year, in accordance with the schedule of
contributions set forth in Appendix B hereto. If Threshold Performance
is not attained for a given fiscal year, no amount shall be allocated
under this Section 4.3 to the Accounts of Participants.
4.4 Interest. A Participant's Account shall be annually credited with
interest. Such crediting of interest will occur prior to any
contributions being credited to the Participant's Account for a
particular fiscal year pursuant to Section 4.3. The rate of interest
shall be equal to the increase in the Consumer Price Index for All Urban
Consumers, U.S. City Average ("CPI-U") measured by reference to the June
index.
In the event of a Participant's retirement or termination of employment
other than for Cause, such Participant's Account shall be credited with
a partial year's interest at the CPI-U rate determined for the period
beginning with the June of the fiscal year prior to the Participant's
termination of employment occurs and ending with the month of the
Participant's termination of employment.
6
35
<PAGE> 9
ARTICLE V
VESTING, COMMENCEMENT AND FORM OF PLAN BENEFIT
5.1 Plan Benefits shall be fully vested in accordance with the following
schedule:
<TABLE>
Years of Service Percentage Vested
<C> <C>
5 20
6 36
7 52
8 68
9 84
10 100
</TABLE>
In addition, Plan Benefits shall be fully vested upon the Participant's
retirement, as determined by the Committee.
5.2 Vested Plan Benefits hereunder shall be payable to a Participant in a
single lump sum or in ten (10) annual installments at the election of
the Participant. If a Participant elects to receive his benefit in a
lump sum, the payment will be made within sixty (60) days following the
date the Participant terminates employment with the Company. If a
Participant elects to receive his benefit in ten (10) annual
installments, the first payment will be made within sixty (60) days
following the date the Participant terminates employment with the
Company. Each subsequent installment payment will be made on the
anniversary date of the first payment.
5.3 In the event that a Participant dies or becomes Disabled, the value of
the Participant's Account under the Plan shall be fully vested and
payable hereunder. The Company shall pay to the Participant's
beneficiary the Plan Benefit in either a lump sum or in ten (10) annual
installments at the election of the Participant's beneficiary. If the
Participant's beneficiary elects to receive the vested benefit in a lump
sum, the payment will be made within sixty (60) days following the date
on which the Committee is notified or otherwise determines that such an
event has occurred. If the Participant's beneficiary elects to receive
the vested benefit in ten (10) annual installments, the first payment
will be made within sixty (60) days following the date on which the
Committee is notified or otherwise determines that such an event has
occurred. Each subsequent payment will be made on the anniversary date
of the first payment.
7
36
<PAGE> 10
5.4 In the event a Participant experiences a Termination Due to Change of
Control, the Company shall, at such time, pay to such Participant, a
lump sum consisting of the value of the Participant's accounts under the
Plan as if he were fully vested.
5.5 Notwithstanding any Plan provision to the contrary, no benefit under
this Plan nor any interest earnings credited on Participant accounts
shall be paid with respect to a Participant (or beneficiary thereof) who
is terminated for "Cause." Nothing contained herein shall prevent the
payment of benefits to a vested Participant who is involuntarily
terminated for reasons other than Cause.
5.6 Notwithstanding any other Plan provision to the contrary, in the event
it is determined by the Company's independent accountant that any
payment made hereunder would result in a nondeductible payment by the
Company, the Company reserves the right to alter the schedule of
payments such that each payment does not exceed the Company's maximum
allowable deduction. Any modification to a Participant's payment
schedule made pursuant to this Section 5.6, will be made in a manner
which most closely resembles the affected Participant's chosen
distribution option without exceeding the limit on deductibility.
8
37
<PAGE> 11
ARTICLE VI
ADMINISTRATION
6.1 The Compensation Committee of the Board of Directors shall be charged
with the administration of the Plan. The Committee shall have all such
powers as may be necessary to discharge its duties relative to the
administration of the Plan, including by way of illustration and not
limitation, discretionary authority to interpret and construe the Plan,
to decide any dispute arising hereunder, to determine the right of any
Employee with respect to participation herein, to determine the right of
any Participant with respect to benefits payable under the Plan and to
adopt, alter and repeal such administrative rules, regulations and
practices governing the operation of the Plan as it, in its sole
discretion, may from time to time deem advisable. No member of the
Committee shall be liable to any person for any action taken or omitted
in connection with the interpretation and administration of the Plan
unless attributable to willful misconduct or lack of good faith. The
Committee shall be entitled to conclusively rely upon all tables,
valuations, certificates, opinions and reports furnished by any actuary,
accountant, controller, counsel or other person employed or engaged by
the Committee or the Company with respect to the Plan.
9
38
<PAGE> 12
ARTICLE VII
PLAN TERMINATION
7.1 The Company expects to continue the Plan indefinitely, but reserves the
right to amend or terminate it at any time, if, in its sole judgment,
such amendment or termination is necessary or desirable. Any such
amendment or termination shall be made in writing by the Board of
Directors of the Company or its designee, if applicable, and shall be
effective as of the date specified in such document. No amendment or
termination of the Plan shall directly or indirectly deprive any
Participant, surviving spouse of beneficiary of all or any portion of
the Plan Benefits earned by the Participant as of the date of amendment
or termination. Plan benefits will be fully vested and the Company (or
any transferee, purchaser or successor entity) shall be obligated to pay
Plan Benefits to Participants, surviving spouses and beneficiaries at
such time or times as provided under the terms of the Plan.
7.2 The Plan shall not be automatically terminated by a transfer or sale of
the Company or by the merger or consolidation of the Company into or
with any other corporation or other entity, but it shall be continued
after such sale, merger or consolidation only if and to the extent that
the transferee, purchaser or successor entity agrees to continue the
Plan. In the event the Plan is not continued by the transferee,
purchaser or successor entity, then it shall terminate subject to the
provisions of Section 7.1.
10
39
<PAGE> 13
ARTICLE VIII
MISCELLANEOUS
8.1 No Effect on Employment Rights. The Company offers employment on an
at-will basis. By participating in the Plan, a Participant recognizes
and is deemed to accept his or her employment with the Company on an
at-will basis. Nothing contained herein will confer upon any
Participant the right to be retained in the service of the Company nor
limit the right of the Company to discharge or otherwise deal with
Participants without regard to the existence of the Plan.
8.2 Plan Unfunded. Notwithstanding any provision herein to the contrary,
the benefits offered hereunder shall constitute nothing more than an
unfunded, unsecured promise by the Company to pay benefits determined
hereunder which are accrued by Participants while such Participants are
employed by the Company. No provision shall at any time be made with
respect to segregating any assets of the Company for payment of any
benefits hereunder. No Participant, Beneficiary or any other person
shall have any interest in any particular assets of the Company by
reason of the right to receive a benefit under the Plan and any such
Participant, Beneficiary or other person shall have only the rights of a
general unsecured creditor of the Company with respect to any rights
under the Plan. Nothing contained in the Plan shall constitute a
guaranty by the Company or any other entity or person that the assets of
the Company will be sufficient to pay any benefit hereunder. All
expenses and fees incurred in the administration of the Plan shall be
paid by the Company.
8.3 Binding on Company Employees and Their Successors. The Plan shall be
binding upon and inure to the benefit of the Company, its successors
and assigns and the employee and his heirs, executors, administrators
and legal representatives. In the event of the merger or consolidation
of the Company with or into any other corporation, or in the event
substantially all of the assets of the Company shall be transferred to
another corporation, the successor corporation resulting from the merger
or consolidation, or the transferee of such assets, as the case may be,
shall, as a condition to the consummation of the merger, consolidation
or sale, assume the obligations of the Company hereunder and shall be
substituted for the Company hereunder.
11
40
<PAGE> 14
8.4 Spendthrift Provisions. No benefit payable under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge prior to actual receipt
thereof by the payee; and any attempt so to anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge prior to such receipt shall
be void; and the Company shall not be liable in any manner for or
subject to the debts, contracts, liabilities, torts or engagements of
any person entitled to any benefit under the Plan.
8.5 Disclosure. Each Participant shall receive a copy of the Plan.
8.6 State Law. The Plan is established under and will be construed
according to the laws of the State of Ohio to the extent that such laws
are not pre-empted by ERISA, and regulations promulgated thereunder.
8.7 Incapacity of Recipient. In the event a Participant, surviving
spouse or beneficiary is declared incompetent and a guardian,
conservator or other person legally charged with the care of his person
or of his estate is appointed, any benefits under the Plan to which such
Participant, spouse or beneficiary is entitled shall be paid to such
guardian, conservator or other person legally charged with the care of
his person or his estate. Except as provided herein, when the Committee,
in its sole discretion, determines that a Participant, surviving spouse
or beneficiary is unable to manage his financial affairs, the Committee
may direct the Company to make distributions to any person for the
benefit of such Participant, spouse or beneficiary.
8.8 Unclaimed Benefit. Each Participant shall keep the Committee informed
of his current address. The Committee shall not be obligated to search
for the whereabouts of any person. If the location of a Participant is
not made known to the Committee within three years after the date on
which any payment of the Participant's benefit hereunder may be made,
payment may be made as though the Participant had died at the end of the
three-year period. If, within one additional year after such three-year
period has elapsed, or, within three years after the actual death of a
Participant, whichever occurs first, the Committee is unable to locate
the spouse of any beneficiary of the Participant, any Plan Benefits held
for a Participant, surviving spouse or beneficiary shall be forfeited.
12
41
<PAGE> 15
8.9 Elections, Applications, Notices. Every direction, revocation or
notice authorized or required hereunder shall be deemed delivered to
the Company or the Committee as the case may be: (a) on the date it is
personally delivered to the Secretary of the Committee (with a copy to
the Company's General Counsel) at the Company's executive offices at
Cleveland, Ohio or (b) three business days after it is sent by
registered or certified mail, postage prepaid, addressed to the
Secretary of the Committee (with a copy to the Company's General
Counsel) at the offices indicated above, and shall be deemed delivered
to a Participant, surviving spouse or beneficiary: (a) on the date it is
personally delivered to such individual, or (b) three business days
after it is sent by registered or certified mail, postage prepaid,
addressed to such individual at the last address shown for him on the
records of the Company. Any notice required hereunder may be waived by
the person entitled thereto.
8.10 Counterparts. This Plan may be executed in any number of counterparts,
each of which shall be considered as an original, and no other
counterparts need be produced.
8.11 Severability. In the event any provision of this Plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall
not affect the remaining provisions of the Plan. This Plan shall be
construed and enforced as if such illegal or invalid provision had never
been contained herein.
8.12 Headings. The headings of Sections of this Plan are for convenience
of reference only and shall have no substantive effect on the
provisions of this Plan.
13
42
<PAGE> 16
Executed at Cleveland, Ohio this day of , 1995, effective
as of July 1, 1995. ----- ---------------
ATTEST: DEFIANCE, INC.
By
--------------------
Title:
------------------------------
14
43
<PAGE> 17
DEFIANCE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
APPENDIX A
Pursuant to Section 3.1 of the Plan, the following Employees are Participants
in the Plan:
Michael B. Madden, President
SMTC Corporation
1960 Ring Drive
Troy, Michigan 48083
Michael J. Meier, Vice President, Finance, CFO
Defiance, Inc.
1111 Chester Avenue
Suite 750
Cleveland, Ohio 44113-3516
Stephen E. Nash, President, Defiance Tooling Services
Binderline Development, Inc.
33100 Freeway Drive
St. Clair Shores, Michigan 48082
Michael D. Shea, President
Defiance Precision Products
1125 Precision Way
Defiance, Ohio 43512
44
<PAGE> 18
DEFIANCE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
APPENDIX B
Pursuant to Section 4.3 of the Plan, the amount of the annual
contribution for a Participant shall be based on the Compensation of the
Participant multiplied by a percentage as determined using the chart below:
<TABLE>
Attained Age VP-Finance/CFO and
at End of Fiscal Year Subsidiary Presidents
<S> <C>
under 45 6%
45-54 7%
55 and over 8%
</TABLE>
45
<PAGE> 19
DEFIANCE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
BENEFICIARY DESIGNATION FORM
Any supplemental retirement benefit which is payable under the Defiance, Inc.
Supplemental Executive
Retirement Plan and which remains unpaid at my death shall be paid to the
following primary
beneficiaries in the percentages or dollar amounts indicated:
Primary Beneficiary
Name and Address Relationship % or $
1.
2.
3.
Any supplemental retirement benefit which is payable to a named primary
beneficiary who predeceases
me, shall be payable to the named primary beneficiaries who survive me, in
proportion to their relative
percentages or dollar amounts indicated above. If all primary beneficiaries
predecease me, any unpaid
supplemental retirement benefit shall be paid to the following contingent
beneficiaries in the percentage
or dollar amount indicated.
Contingent Beneficiary
Name and Address Relationship % or $
1.
2.
3.
This Beneficiary Designation Form supersedes any previous beneficiary
designation made by me with
respect to the Plan, and shall continue in effect until I complete a new
Beneficiary Designation Form in
accordance with the terms of the Plan.
Date Employee Signature
(Printed Name)
46
<PAGE> 1
EXHIBIT 10 (ao)
DEFIANCE, INC.
LIMITED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective July 1, 1995)
47
<PAGE> 2
DEFIANCE, INC.
LIMITED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Defiance, Inc. (the "Company") provides certain qualified
retirement and other deferred compensation plans for the benefit of certain of
its executive employees; and
WHEREAS, the Company recognizes that such plans and programs may not
adequately provide sufficient retirement income to such executive employees;
and
WHEREAS, the Company recognizes the unique qualifications of its
executive employees and the valuable services that they have provided to or for
the Company; and
WHEREAS, the Company now desires to establish a plan to provide
additional retirement benefits as a method of attracting and retaining such
executive employees;
NOW, THEREFORE, the Company does hereby establish the Defiance, Inc.
Supplemental Limited Executive Retirement Plan (the "Plan"), effective July 1,
1995, as herein set forth:
48
<PAGE> 3
ARTICLE I
PURPOSE
1.1 The purpose of the Plan is to provide for the payment of supplemental
retirement benefits to eligible executive employees of the Company.
The Company intends and desires that this Plan, together with the other
elements of the Company's compensation program, will attract, retain
and motivate eligible executive employees.
1.2 The Plan is intended to be an unfunded plan which provides benefits to a
select group of management and highly compensated employees as such
group is described under Sections 201(2), 301(a)(3), and 401(a)(i) of
the Employee Retirement Security Act of 1974, as amended. The Plan is
not intended to be a plan described in Section 401(a) of the Internal
Revenue Code of 1986 as amended.
1
49
<PAGE> 4
ARTICLE II
DEFINITIONS
2.1 For the purposes of this Plan, the following words and phrases shall
have the meanings indicated unless a different meaning is clearly
required by the context. Any terms used herein in the masculine shall
be read and construed in the feminine where they would so apply, and
any terms used in the singular shall be read and construed in the
plural if appropriate:
(a) "Benefit" means the benefit payable to a Participant as determined
under Article IV of this Plan.
(b) A "Change of Control" shall be deemed to have taken place if, as
the result of a tender offer, exchange offer, merger,
consolidation, sale of assets, contested election, or any
combination of the foregoing or other similar extraordinary
transactions, the persons, who are directors one year prior to the
first of any such events to occur, shall cease to constitute a
majority of the board of directors of the Company or any parent or
successor to the Company.
(c) "Cause" shall mean termination of employment due to any act which,
in the Committee's discretion, is deemed to be inimical to the best
interests of the Company, including, but not limited to: (1) a
serious, willful misconduct in respect of his duties for the
Company; (2) conviction of a felony or perpetration of a common
law fraud; (3) willful failure to comply with applicable laws with
respect to the execution of the Company's business operations; (4)
theft, fraud, embezzlement, dishonesty or other conduct which has
resulted in material economic damage to the Company, or any of
their affiliates or subsidiaries.
(d) "Committee" shall mean the Committee charged with the
administration of the Plan under Article VI herein.
(e) "Company" shall mean Defiance, Inc. or any successor by merger,
purchase or otherwise.
(f) "Compensation" shall mean a Participant's total annual
compensation earned including base salary and bonuses whether paid
in cash or deferred.
2
50
<PAGE> 5
(g) "Disability" shall mean a physical or mental condition of a Participant
resulting from a bodily injury, disease, or mental disorder which
renders him incapable of continuing in the employment of the Company.
Such Disability shall be determined by the Committee, in its
discretion, based upon appropriate medical advice and examination.
(h) "Employee" shall mean any common law Employee of the Company.
(i) "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
(j) "Participant" shall mean an Employee who has become a Participant in
accordance with Section 3.2.
(k) "Plan" shall mean the Defiance, Inc. Limited Supplemental
Executive Retirement Plan, as the same may be amended from time to time.
(l) "Termination Due to Change of Control" is deemed to occur if, within two
years after the Change of Control, without the executive's written
approval: (1) the executive's employment is terminated; (2) the
executive experiences any reduction in aggregate direct remuneration,
position, responsibility or duties from those enjoyed by the executive
immediately prior to the Change of Control; (3) the executive
experiences any reduction in the aggregate of employee benefits,
prerequisites, or fringe benefits from those enjoyed by the executive
immediately prior to the Change of Control; (4) the Company requires
that the executive's principal place of work is more than 25 miles from
the executive's principal place of work immediately prior to the Change
of Control or the executive is required to travel in connection with the
executive's employment to a greater degree than was customary during
the year prior to the Change of Control; or (5) there is a liquidation,
dissolution, consolidation or merger of the Company, or transfer of all
or a significant portion of its assets unless the successor(s) assumes
all of the duties and obligations to the executive set forth in this
policy.
(m) "Threshold Performance" shall mean the financial performance of the
Company or a subsidiary as applicable, as determined by the Committee
and the Chief Executive Officer on an annual basis.
3
51
<PAGE> 6
(n) "Year of Service" shall mean the 12-month period beginning on the
employee's date of hire by Defiance Inc. The Committee, in its
discretion, may grant a Participant additional Years of Vesting Service.
4
52
<PAGE> 7
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. Any Employee shall be eligible to participate in the Plan
at such time and for such period as designated by the Committee as set
forth in Appendix A hereto, provided however, that such Employee is a
member of a select group of management or highly compensated employees
as such group is described in Sections 201(2), 301(a)(3) and 401(a)(1)
of ERISA.
3.2 Participation. Each Employee shall become a Participant by having
amounts credited to his Account pursuant to Article IV.
5
53
<PAGE> 8
ARTICLE IV
PLAN BENEFITS
4.1 Benefits. A Participant's Benefit shall be equal to the total amount
credited to the Participant's Account under this Article IV, and such
Benefit shall become nonforfeitable and payable to the Participant as
provided under Article V.
4.2 Accounts. The Company shall establish and maintain, pursuant to the
terms of the Plan, an Account for each Participant consisting of
amounts credited to such Account pursuant to Sections 4.3 and 4.4
below. All amounts which are credited to the Account shall be credited
solely for purposes of accounting and computation, and shall remain
assets of the Company subject to the claims of the Company's general
creditors.
4.3 Contributions. Upon the determination that Threshold Performance has
been attained for any given fiscal year beginning with the fiscal year
ended June 30, 1992, an amount relating to such fiscal year shall be
credited to the Account of each Participant employed by the Company on
the last day of such fiscal year, in accordance with the schedule of
contributions set forth in Appendix B hereto. If Threshold Performance
is not attained for a given fiscal year, no amount shall be allocated
under this Section 4.3 to the Accounts of Participants.
4.4 Interest. A Participant's Account shall be annually credited with
interest. Such crediting of interest will occur prior to any
contributions being credited to the Participants Account for a
particular fiscal year pursuant to Section 4.3. The rate of interest
shall be equal to the increase in the Consumer Price Index for All Urban
Consumers, U.S. City Average ("CPI-U") measured by reference to the June
index.
In the event of a Participant's retirement or termination of employment
other than for Cause, such Participant's Account shall be credited with
a partial year's interest at the CPI-U rate determined for the period
beginning with the June of the fiscal year prior to the Participant's
termination of employment occurs and ending with the month of the
Participant's termination of employment.
6
54
<PAGE> 9
ARTICLE V
VESTING, COMMENCEMENT AND FORM OF PLAN BENEFIT
5.1 Plan Benefits shall be fully vested in accordance with the following
schedule:
Years of Service Percentage Vested
5 20
6 36
7 52
8 68
9 84
10 100
In addition, Plan Benefits shall be fully vested upon the Participant's
retirement, as determined by the Committee.
5.2 Vested Plan Benefits hereunder shall be payable to a Participant in a
single lump sum or in ten (10) annual installments at the election of
the Participant. If a Participant elects to receive his benefit in a
lump sum, the payment will be made within sixty (60) days following the
date the Participant terminates employment with the Company. If a
Participant elects to receive his benefit in ten (10) annual
installments, the first payment will be made within sixty (60) days
following the date the Participant terminates employment with the
Company. Each subsequent installment payment will be made on the
anniversary date of the first payment.
5.3 In the event that a Participant dies or becomes Disabled, the value of
the Participants Account under the Plan shall be fully vested and
payable hereunder. The Company shall pay to the Participants
beneficiary the Plan Benefit in either a lump sum or in ten (10) annual
installments at the election of the Participant's beneficiary. If the
Participant's beneficiary elects to receive the vested benefit in a lump
sum, the payment will be made within sixty (60) days following the date
on which the Committee is notified or otherwise determines that such
an event has occurred. If the Participant's beneficiary elects to
receive the vested benefit in ten (10) annual installments, the first
payment will be made within sixty (60) days following the date on which
the Committee is notified or otherwise determines that such an event has
occurred. Each subsequent payment will be made on the anniversary date
of the first payment.
7
55
<PAGE> 10
5.4 In the event a Participant experiences a Termination Due to Change of
Control, the Company shall, at such time, pay to such Participant, a
lump sum consisting of the value of the Participants accounts under the
Plan as if he were fully vested.
5.5 Notwithstanding any Plan provision to the contrary, no benefit under
this Plan nor any interest earnings credited on Participant accounts
shall be paid with respect to a Participant (or beneficiary thereof)
who is terminated for "Cause." Nothing contained herein shall prevent
the payment of benefits to a vested Participant who is involuntarily
terminated for reasons other than Cause.
5.6 Notwithstanding any other Plan provision to the contrary, in the event
it is determined by the Company's independent accountant that any
payment made hereunder would result in a nondeductible payment by the
Company, the Company reserves the right to alter the schedule of
payments such that each payment does not exceed the Company's maximum
allowable deduction. Any modification to a Participant's payment
schedule made pursuant to this Section 5.6, will be made in a manner
which most closely resembles the affected Participant's chosen
distribution option without exceeding the limit on deductibility.
8
56
<PAGE> 11
ARTICLE VI
ADMINISTRATION
6.1 The Compensation Committee of the Board of Directors shall be charged
with the administration of the Plan. The Committee shall have all such
powers as may be necessary to discharge its duties relative to the
administration of the Plan, including by way of illustration and not
limitation, discretionary authority to interpret and construe the Plan,
to decide any dispute arising hereunder, to determine the right of any
Employee with respect to participation herein, to determine the right of
any Participant with respect to benefits payable under the Plan and to
adopt, alter and repeal such administrative rules, regulations and
practices governing the operation of the Plan as it, in its sole
discretion, may from time to time deem advisable. No member of the
Committee shall be liable to any person for any action taken or omitted
in connection with the interpretation and administration of the Plan
unless attributable to willful misconduct or lack of good faith. The
Committee shall be entitled to conclusively rely upon all tables,
valuations, certificates, opinions and reports furnished by any actuary,
accountant, controller, counsel or other person employed or engaged by
the Committee or the Company with respect to the Plan.
9
57
<PAGE> 12
ARTICLE VII
PLAN TERMINATION
7.1 The Company expects to continue the Plan indefinitely, but reserves the
right to amend or terminate it at any time, if, in its sole judgment,
such amendment or termination is necessary or desirable. Any such
amendment or termination shall be made in writing by the Board of
Directors of the Company or its designee, if applicable, and shall be
effective as of the date specified in such document. No amendment or
termination of the Plan shall directly or indirectly deprive any
Participant, surviving spouse of beneficiary of all or any portion of
the Plan Benefits earned by the Participant as of the date of amendment
or termination. Plan benefits will be fully vested and the Company (or
any transferee, purchaser or successor entity) shall be obligated to
pay Plan Benefits to Participants, surviving spouses and beneficiaries
at such time or times as provided under the terms of the Plan.
7.2 The Plan shall not be automatically terminated by a transfer or sale of
the Company or by the merger or consolidation of the Company into or
with any other corporation or other entity, but it shall be continued
after such sale, merger or consolidation only if and to the extent that
the transferee, purchaser or successor entity agrees to continue the
Plan. In the event the Plan is not continued by the transferee,
purchaser or successor entity, then it shall terminate subject to the
provisions of Section 7.1.
10
58
<PAGE> 13
ARTICLE VIII
MISCELLANEOUS
8.1 No Effect on Employment Rights. The Company offers employment on an
at-will basis. By participating in the Plan, a Participant recognizes
and is deemed to accept his or her employment with the Company on an
at-will basis. Nothing contained herein will confer upon any
Participant the right to be retained in the service of the Company nor
limit the right of the Company to discharge or otherwise deal with
Participants without regard to the existence of the Plan.
8.2 Plan Unfunded. Notwithstanding any provision herein to the contrary,
the benefits offered hereunder shall constitute nothing more than an
unfunded, unsecured promise by the Company to pay benefits determined
hereunder which are accrued by Participants while such Participants are
employed by the Company. No provision shall at any time be made with
respect to segregating any assets of the Company for payment of any
benefits hereunder. No Participant, Beneficiary or any other person
shall have any interest in any particular assets of the Company by
reason of the right to receive a benefit under the Plan and any such
Participant, Beneficiary or other person shall have only the rights of
a general unsecured creditor of the Company with respect to any rights
under the Plan. Nothing contained in the Plan shall constitute a
guaranty by the Company or any other entity or person that the assets
of the Company will be sufficient to pay any benefit hereunder. All
expenses and fees incurred in the administration of the Plan shall be
paid by the Company.
8.3 Binding on Company Employees and Their Successors. The Plan shall be
binding upon and inure to the benefit of the Company, its successors
and assigns and the employee and his heirs, executors, administrators
and legal representatives. In the event of the merger or consolidation
of the Company with or into any other corporation, or in the event
substantially all of the assets of the Company shall be transferred to
another corporation, the successor corporation resulting from the merger
or consolidation, or the transferee of such assets, as the case may be,
shall, as a condition to the consummation of the merger, consolidation
or sale, assume the obligations of the Company hereunder and shall be
substituted for the Company hereunder.
11
59
<PAGE> 14
8.4 Spendthrift Provisions. No benefit payable under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge prior to actual receipt
thereof by the payee; and any attempt so to anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge prior to such receipt
shall be void; and the Company shall not be liable in any manner for or
subject to the debts, contracts, liabilities, torts or engagements of
any person entitled to any benefit under the Plan.
8.5 Disclosure. Each Participant shall receive a copy of the Plan.
8.6 State Law. The Plan is established under and will be construed
according to the laws of the State of Ohio to the extent that such laws
are not pre-empted by ERISA, and regulations promulgated thereunder.
8.7 Incapacity of Recipient. In the event a Participant, surviving
spouse or beneficiary is declared incompetent and a guardian,
conservator or other person legally charged with the care of his person
or of his estate is appointed, any benefits under the Plan to which
such Participant, spouse or beneficiary is entitled shall be paid to
such guardian, conservator or other person legally charged with the
care of his person or his estate. Except as provided herein, when the
Committee, in its sole discretion, determines that a Participant,
surviving spouse or beneficiary is unable to manage his financial
affairs, the Committee may direct the Company to make distributions to
any person for the benefit of such Participant, spouse or beneficiary.
8.8 Unclaimed Benefit. Each Participant shall keep the Committee informed
of his current address. The Committee shall not be obligated to search
for the whereabouts of any person. If the location of a Participant is
not made known to the Committee within three years after the date on
which any payment of the Participants benefit hereunder may be made,
payment may be made as though the Participant had died at the end of
the three-year period. If, within one additional year after such
three-year period has elapsed, or, within three years after the actual
death of a Participant, whichever occurs first, the Committee is unable
to locate the spouse of any beneficiary of the Participant, any Plan
Benefits held for a Participant, surviving spouse or beneficiary shall
be forfeited.
12
60
<PAGE> 15
8.9 Elections, Applications, Notices. Every direction, revocation or
notice authorized or required hereunder shall be deemed delivered to
the Company or the Committee as the case may be: (a) on the date it is
personally delivered to the Secretary of the Committee (with a copy to
the Company's General Counsel) at the Company's executive offices at
Cleveland, Ohio or (b) three business days after it is sent by
registered or certified mail, postage prepaid, addressed to the
Secretary of the Committee (with a copy to the Company's General
Counsel) at the offices indicated above, and shall be deemed delivered
to a Participant, surviving spouse or beneficiary: (a) on the date it
is personally delivered to such individual, or (b) three business days
after it is sent by registered or certified mail, postage prepaid,
addressed to such individual at the last address shown for him on the
records of the Company. Any notice required hereunder may be waived by
the person entitled thereto.
8.10 Counterparts. This Plan may be executed in any number of counterparts,
each of which shall be considered as an original, and no other
counterparts need be produced.
8.11 Severability. In the event any provision of this Plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall
not affect the remaining provisions of the Plan. This Plan shall be
construed and enforced as if such illegal or invalid provision had
never been contained herein.
8.12 Headings. The headings of Sections of this Plan are for convenience
of reference only and shall have no substantive effect on the
provisions of this Plan.
13
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<PAGE> 16
Executed at Cleveland, Ohio this ____ day of ______________, 1995, effective as
of July 1, 1995.
ATTEST: DEFIANCE, INC.
___________________ By ________________________
Title: ________________________
14
62
<PAGE> 17
DEFIANCE, INC.
LIMITED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
APPENDIX A
Pursuant to Section 3.1 of the Plan, the following Employees are Participants
in the Plan:
Jerry A. Cooper, President, CEO
Defiance, Inc.
1111 Chester Avenue
Suite 750
Cleveland, Ohio 44113-3516
63
<PAGE> 18
DEFIANCE, INC.
LIMITED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
APPENDIX B
Pursuant to Section 4.3 of the Plan, the amount of the annual contribution for
a Participant shall be based on the Compensation of the Participant multiplied
by a percentage as determined using the chart below:
Attained Age
at End of Fiscal Year President/CEO
under 45 9%
45-54 10.5%
55 and over 12%
64
<PAGE> 19
DEFIANCE, INC.
LIMITED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
BENEFICIARY DESIGNATION FORM
Any supplemental retirement benefit which is payable under the Defiance, Inc.
Limited Supplemental Executive Retirement Plan and which remains unpaid at my
death shall be paid to the following primary beneficiaries in the percentages
or dollar amounts indicated:
Primary Beneficiary
Name and Address Relationship % or $
1.
2.
3.
Any supplemental retirement benefit which is payable to a named primary
beneficiary who predeceases me, shall be payable to the named primary
beneficiaries who survive me, in proportion to their relative percentages or
dollar amounts indicated above. If all primary beneficiaries predecease me, any
unpaid supplemental retirement benefit shall be paid to the following contingent
beneficiaries in the percentage or dollar amount indicated.
Contingent Beneficiary
Name and Address Relationship or $
1.
2.
3.
This Beneficiary Designation Form supersedes any previous beneficiary
designation made by me with respect to the Plan, and shall continue in effect
until I complete a new Beneficiary Designation Form in accordance with the
terms of the Plan.
Date Employee Signature
(Printed Name)
65
<PAGE> 1
EXHIBIT 10(ap)
FIRST AMENDMENT TO AMENDED
AND RESTATED LOAN AGREEMENT
This Amendment dated as of May 31, 1995, between Defiance, Inc.,
a Delaware corporation, ("Company"), and Comerica Bank, a Michigan
banking corporation, successor in interest by reason of merger to
Manufacturers Bank, N.A. ("Bank").
RECITALS
A. Company and Bank entered into an Amended and Restated Loan
Agreement dated July 29, 1994 ("Agreement").
B. Company and Bank desire to amend the Agreement.
NOW, THEREFORE, the parties agree as follows:
1. The definitions of "Eurodollar Margin" and "Prime Margin"
in Section 1 of the Agreement are amended to read in their entirety
as follows:
"`Eurodollar Margin' shall mean with respect to the
Advances under the Revolving Credit Note one percent (1%)
and with respect to Term Note-B and Advances under the
Equipment Note, one and 15/100ths percent (1.15%).
"`Prime Margin' shall mean one percent (1%) with
respect to Advances under the Revolving Credit Note and
shall mean eighty five one hundredths percent (.85%) with
respect to Advances under the Equipment Note and with
respect to Term Note-B."
2. Section 4.1 of the Agreement is amended to delete the
reference therein to "Ten Million Dollars ($10,000,000)" and to
substitute therefor "Twelve Million Dollars ($12,000,000)".
3. Exhibit "A" to the Agreement is deleted and the attached
Exhibit "A" substituted therefor.
4. The above amendment shall be effective upon execution hereof
by Company and Bank, delivery by Company to Bank of an executed
Equipment Note in the form of attached Exhibit "A" and execution of
the Acknowledgment below by each of the Guarantors (as defined in the
Agreement).
5. Company hereby represents and warrants that, after giving
effect to the amendment and waiver contained herein, (a) execution,
delivery and performance of this Amendment and any other documents and
instruments required under this Amendment or the Agreement are within
Company's corporate powers, have been duly authorized, are not in
contravention of law or the terms of Company's Certificate of
Incorporation or Bylaws, and do not require the consent or approval
66
<PAGE> 2
of any governmental body, agency, or authority, and this Amendment and
any other documents and instruments required under this Amendment or
the Agreement, will be valid and binding in accordance with their
terms; (b) the continuing representations and warranties of Company
set forth in Sections 8.1 through 8.5 and 8.7 through 8.14 of the
Agreement are true and correct on and as of the date hereof with the
same force and effect as made on and as of the date hereof; (c) the
continuing representations and warranties of Company set forth in
Section 8.6 of the Agreement are true and correct as of the date
hereof with respect to the most recent financial statements furnished
to the Bank by Company in accordance with Section 9.1 of the
Agreement; and (d) no event of default, or condition or event which,
with the giving of notice or the running of time, or both, would
constitute an event of default under the Agreement, has occurred and
is continuing as of the date hereof.
6. Except as expressly modified hereby all of the terms and
conditions of the Agreement remain in full force and effect.
WITNESS the due execution hereof on the day and year first
written above.
COMERICA BANK DEFIANCE, INC.
By: By:
Its: Its:
Acknowledgement
The undersigned guarantors acknowledge and consent to the
foregoing Amendment and waiver and ratify and confirm their respective
obligations under the Guaranty Agreements dated February 5, 1993,
which Guaranty Agreements remain in full force and effect.
SMTC CORPORATION DEFIANCE PRECISION PRODUCTS, INC.
By: By:
Its: Its:
2
67
<PAGE> 3
DRAFTLINE ENGINEERING COMPANY VAUNGARDE, INCORPORATED
By: By:
Its: Its:
BINDERLINE DEVELOPMENT, INC. HY-FORM PRODUCTS, INC.
By: By:
Its: Its:
3
68
<PAGE> 1
EXHIBIT 10(aq)
EQUIPMENT NOTE
Detroit, Michigan
$12,000,000 May 31, 1995
On or before July 1, 1995 FOR VALUE RECEIVED, Defiance, Inc., a
Delaware corporation (herein called "Company") promises to pay to the
order of COMERICA BANK, a Michigan banking corporation (herein called
"Bank") at its Main Office at 500 Woodward Avenue, Detroit, Michigan,
in lawful money of the United States of America the indebtedness or
so much of the sum of Twelve Million Dollars ($12,000,000) as may from
time to time have been advanced and then be outstanding hereunder
pursuant to the Second Amended and Restated Loan Agreement dated as
of July 29, 1994, made by and between Company and Bank (as amended
from time to time, herein called "Agreement"), together with interest
thereon as hereinafter set forth.
Each of the Advances hereunder shall bear interest at the
Applicable Interest Rate from time to time applicable thereto under
the Agreement or as otherwise determined thereunder, and interest
shall be computed, assessed and payable as set forth in the Agreement.
This Note is a note under which advances, repayments and
readvances may be made from time to time, subject to the terms and
conditions of the Agreement. This Note evidences borrowing under, is
subject to, is secured in accordance with, and may be matured under,
the terms of the Agreement, to which reference is hereby made. As
additional security for this Note, Company grants Bank a lien on all
property and assets including deposits and other credits of the
Company, at any time in possession or control of or owing by Bank for
any purpose.
Company hereby waives presentment for payment, demand, protest
and notice of dishonor and nonpayment of this Note and agrees that no
obligation hereunder shall be discharged by reason of any extension,
indulgence, release, or forbearance granted by any holder of this Note
to any party now or hereafter liable hereon or any present or
subsequent owner of any property, real or personal, which is now or
hereafter security for this Note. Any transferees of, or endorser,
guarantor or surety paying this Note in full shall succeed to all
rights of Bank, and Bank shall be under no further responsibility for
the exercise thereof or the loan evidenced hereby. Nothing herein
shall limit any right granted Bank by other instrument or by law.
This Note is a replacement and increase for an Equipment Note
dated July 29, 1994 in the principal amount of $10,000,000 by Company
payable to Bank.
All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Agreement.
69
<PAGE> 2
All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Agreement.
DEFIANCE, INC.
By:
Its:
70
<PAGE> 1
EXHIBIT 10(ar)
TERM NOTE-B
Detroit, Michigan
$12,000,000 July 12, 1995
ON OR BEFORE July 1, 2002, FOR VALUE RECEIVED, Defiance,
Inc., a Delaware corporation (herein individually called
"Company" and collectively called "Companies") promises to pay to
the order of COMERICA BANK, a Michigan banking corporation
(herein called "Bank"), at its Main Office at 500 Woodward
Avenue, Detroit, Michigan, or at such other place as the holder
of this Note may designate in writing from time to time, the
principal sum of Twelve Million Dollars ($12,000,000) in lawful
money of the United States of America, together with interest as
set forth below.
The indebtedness represented by this Note shall be repaid in
eighty-four monthly installments of principal each equal to One
Hundred Forty Two Thousand Eight Hundred Fifty Seven Dollars
($142,857) commencing on the first day of August, 1995 and on the
same day of each month thereafter until July 1, 2002 when the
entire unpaid balance of principal and interest thereon shall be
due and payable.
The principal balance from time to time outstanding
hereunder shall bear interest at the Applicable Interest Rate
from time to time applicable thereto under the Agreement (as
defined below) or as otherwise determined thereunder, and
interest shall be computed, assessed and payable as set forth in
the Agreement.
This Note evidences borrowing under, is subject to, is
secured in accordance with, may be prepaid in accordance with,
and may be matured under the terms of the Second Amended and
Restated Loan Agreement dated as of July 29, 1994 by and between
Company and Bank ("Agreement") to which reference is hereby made.
As additional security for this Note, Company grants Bank a lien
on all property and assets, including deposits and other credits,
of the Company, at any time in possession or control of or owing
by Bank for any purpose.
Company hereby waives presentment for payment, demand,
protest and notice of protest and notice of dishonor and
nonpayment of this Note and agrees that no obligation hereunder
shall be discharged by reason of any extension, indulgence,
release or forbearance granted by any holder of this Note to any
party now or hereafter liable hereon or any present or subsequent
owner of any property, real or personal, which is now or
hereafter security for this Note. Any transferees of, or
endorser, guarantor or surety paying this Note in full shall
succeed to all rights of Bank, and Bank shall be under no further
responsibility for the exercise thereof or the loan evidenced
71
<PAGE> 2
hereby. Nothing herein shall limit any right granted by other
instrument or by law.
All capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Agreement.
DEFIANCE, INC.
By:
Its:
2
72
<PAGE> 1
EXHIBIT 10(as)
SECOND AMENDMENT TO AMENDED
AND RESTATED LOAN AGREEMENT
This Amendment dated as of August 3, 1995, between Defiance,
Inc., a Delaware corporation, ("Company"), and Comerica Bank, a
Michigan banking corporation, successor in interest by reason of
merger to Manufacturers Bank, N.A. ("Bank").
RECITALS:
A. Company and Bank entered into an Amended and Restated
Loan Agreement dated July 29, 1994, which was amended by a First
Amendment to Amended and Restated Loan Agreement dated May 31, 1995
("Agreement").
B. Company and Bank desire further to amend the Agreement.
NOW, THEREFORE, the parties agree as follows:
1. The following defined terms in Section 1 of the Agreement
are amended to read in their entirety as follows:
"`Eurodollar Margin' shall mean with respect to the
Advances under the Revolving Credit Note one percent (1%)
and with respect to Term Note-B, Term Note-C and Advances
under the Equipment Note, one and 15/100ths percent
(1.15%).
"Equipment Line Maturity Date" shall mean August 1, 1996.
"Interest Period" shall mean a period as selected by
Company pursuant to the provisions of this Agreement
commencing on the day a Eurodollar-based Advance is made, or
on the effective date of an election of the Eurodollar-based
Rate made under Section 5 or Section 5.A.
"Note" shall mean the Revolving Credit Note, the
Equipment Note, the Term Note-A, the Term Note-B and the Term
Note-C, as the case may be, and "Notes" shall refer to all of
them.
"`Prime Margin' shall mean one percent (1%) with
respect to Advances under the Revolving Credit Note and
shall mean eighty five one hundredths percent (.85%) with
respect to Advances under the Equipment Note and with
respect to Term Note-B and Term Note-C."
"Revolving Credit Maturity Date" shall mean October 1,
1997.
73
<PAGE> 2
"Term Loan" shall mean the term loan requested by Company
and made by Bank under Section 5 or Section 5.A of this
Agreement, as applicable.
2. The following definition of "Term Note-C" is hereby added
to Section 1 in alphabetical order:
"Term Note-C" shall mean the term note issued by Company
under Section 5.A.1 of this Agreement in the form annexed to
this Agreement as Exhibit "G-1".
3. Section 2.1 of the Agreement is amended to read in its
entirety as follows:
"2.1 Bank agrees to make Advances to Company at any time
and from time to time from the effective date hereof until the
Revolving Credit Maturity Date, not to exceed Six Million
Dollars ($6,000,000) ("Commitment Amount") in aggregate
principal amount at any one time outstanding. All of the
Advances under this Section 2 shall be evidenced by the
Revolving Credit Note under which advances, repayments and
readvances may be made, subject to the terms and conditions of
this Agreement."
4. Section 4.1 of the Agreement is amended to read in its
entirety as follows:
"4.1 Bank agrees to make Advances to Company at any time
and from time to time from the effective date hereof until the
Equipment Line Maturity Date, not to exceed Six Million
Dollars ($6,000,000) in aggregate principal amount at any one
time outstanding. All of the Advances under this Section 4
shall be evidenced by the Equipment Note under which advances,
repayments but not readvances may be made, subject to the
terms and conditions of this Agreement."
5. The Agreement is amended to add the following Section
5.A:
5.A.THE INDEBTEDNESS: Equipment Term Loan
5.A.1. Bank agrees to loan to Company and Company agrees to
borrow, on or before October 1, 1996, a sum in such amount as
determined by Company; however, such sum shall not exceed the
outstanding principal balance of the Equipment Note. At the time of
borrowing, Company agrees to execute Term Note-C as evidence of the
indebtedness under this Section 5.A. The Term Loan under this
Section 5.A. shall be subject to the terms and conditions of this
Agreement.
2
74
<PAGE> 3
5.A.2. The Term Loan under this Section 5.A. shall be
evidenced by Term Note-C. Term Note-C shall mature five years or
seven years from the date thereof, as elected by Company at the
time of borrowing (as so elected, the "Term Note Maturity Date").
The principal indebtedness outstanding under Term Note-C shall be
repaid in equal monthly principal installments in the amount
required to fully amortize Term Note-C over its term, commencing on
the first day of the month next succeeding the date of Term Note-C
until the Term Note Maturity Date, when the entire unpaid balance
of principal and interest thereon, as set forth below, shall be due
and payable.
5.A.3. The proceeds of Term Note-C are to be applied solely
to repay the indebtedness of Company to Bank under the Equipment
Note, whereupon Bank's commitment, if any, to make Advances
pursuant to Section 4 hereof shall automatically terminate.
5.A.4. (a) Term Note-C and the Term Loan hereunder shall
bear interest from the date thereof on the unpaid principal balance
thereof from time to time outstanding, at a rate per annum equal to
the Prime-based Rate, the Eurodollar-based Rate or the Fixed Rate,
as the Company may elect subject to the provisions of this
Agreement. Whenever the Applicable Interest Rate on Term Note-C is
the Fixed Rate and with respect to any portion of the Term Loan to
which the Applicable Interest Rate is the Prime-based Rate,
interest shall be payable monthly on the first Business Day of each
calendar month and at maturity (whether by acceleration or
otherwise). With respect to any portion of the Term Loan to which
the Applicable Interest Rate is the Eurodollar-based Rate, interest
shall be payable on the last day of each Interest Period applicable
thereto, provided, however, if such Interest Period is longer than
three months, interest shall be payable three months following the
first day of such Interest Period and on the last day of such
Interest Period. Notwithstanding the foregoing from and after the
occurrence of an Event of Default and during the continuation
thereof, the principal outstanding under Term Note-C shall bear
interest payable on demand, at a rate per annum equal to: (i) in
the case of the portion of the Term Loan with respect to which the
Applicable Interest Rate is the Prime-based Rate, three percent
(3%) above the rate which would otherwise be applicable under this
Section 5.A.4; (ii) in the case of the portion of the Term Loan
with respect to which the Applicable Interest Rate is the
Eurodollar-based Rate, three percent (3%) above the rate which
would otherwise be applicable under this Section 5.A.4 until the
end of the then current Interest Period, and thereafter at the rate
provided for in clause (i) of this Section 5.A.4; and (iii)
whenever the Applicable Interest Rate on Term Note-C is the Fixed
Rate, the greater of (x) three percent (3%) above the Prime-based
Rate or (y) three percent (3%) above the Fixed Rate. Interest on
the Term Loan shall be calculated on the basis of a 360 day year
for the actual number of days elapsed. The interest rate with
respect to any portion of the Term Loan with respect to which the
3
75
<PAGE> 4
Applicable Interest Rate is the Prime-based Rate shall change on
the effective date of any change in the Prime-based Rate.
(b) On the date the Term Loan is made, Company shall
designate the initial Applicable Interest Rate with respect to such
Term Loan. In the event Company selects the Fixed Rate, such Fixed
Rate shall be the Applicable Interest Rate for the entire Term Loan
until the maturity date of the Term Loan. If the Company initially
selects the Prime-based Rate or the Eurodollar-based Rate as the
Applicable Interest Rate for the Term Loan, then provided no Event
of Default shall have occurred and be continuing, the Company
shall, subject to and in accordance with the provisions of Section
5.A.6, have the right to convert the Applicable Interest Rate with
respect to the entire Term Loan to the Fixed Rate. Following any
such conversion to the Fixed Rate, the Fixed Rate shall be the
Applicable Interest Rate on the entire Term Loan until the maturity
date of the Term Loan.
5.A.5. Each Interest Period for the Term Loan with respect
to which the Applicable Interest Rate is the Eurodollar-based Rate
shall commence on the date such rate is selected pursuant to
Section 5.A.6 hereof or on the last day of the immediately
preceding Interest Period and shall end on the date one, two, three
or six months thereafter as the Company may elect as set forth
below, subject to the following:
(i) no Interest Period shall extend beyond the Term Loan
Maturity Date;
(ii) any Interest Period which would otherwise end on a
day which is not a Business Day shall be extended to the next
succeeding Business Day unless the next succeeding Business
Day falls in another calendar month, in which case, such
Interest Period shall end on the immediately preceding
Business Day and when an Interest Period begins on a day which
has no numerically corresponding day in the calendar month
during which such Interest Period is to end, it shall end on
the last Business Day of such calendar month; and
(iii) no Interest Period with respect to the portion of
the principal of the Term Loan payable on the next succeeding
principal installment date shall end past the date on which
such installment of principal is due with respect to the Term
Loan.
The Company shall elect the initial Interest Period(s) applicable
to the Term Loan or any portion thereof with respect to which the
Applicable Interest Rate is the Eurodollar-based Rate by its Notice
of Term Rate given to the Bank pursuant to Section 5.A.6 and
subsequent Interest Periods by its Not ice of Term Rate given to the
Bank pursuant to Section 5.A.6, as the case may be. Provided that
no Event of Default shall have occurred and be continuing, the
4
76
<PAGE> 5
Company may elect to continue the port ion of the Term Loan with
respect to which the Applicable Interest Rate is the Eurodollar-
based Rate by giving irrevocable written notice thereof to the Bank
by its Notice of Term Rate, not less than three (3) Business Days
prior to the last day of the then current Interest Period
applicable to such portion of the Term Loan, specifying the
duration of the succeeding Interest Period therefor. If the Bank
does not receive timely notice of the election and the Interest
Period elected by the Company, the Company shall be deemed to have
elected to convert such Applicable Interest Rate to the Prime-based
Rate at the end of the then current Interest Period, subject to the
Company's right to elect the Fixed Rate. Subject to the terms
hereof, no more than two (2) Applicable Interest Rates and Interest
Periods shall be in effect at any one time with respect to the Term
Loan.
5.A.6. Subject to the provisions of Section 5.A.4(b),
provided that no Event of Default shall have occurred and be
continuing, the Company may, on any Business Day, convert the
Applicable Interest Rate with respect to the Term Loan to another
Applicable Interest Rate, provided that any conversion while the
Applicable Interest Rate is the Eurodollar-based Rate shall be made
only on the last Business Day of the then current Interest Period.
If the Company desires to convert an Applicable Interest Rate, it
shall give the Bank irrevocable written notice thereof not less
than three (3) Business Days' prior to the effective date of any
such change specifying the date of such conversion, the Applicable
Interest Rate elected and, if the conversion is to the Eurodollar-
based Rate, the duration of the first Interest Period therefor.
5.A.7. (a) At its option and upon three (3) Business Days'
prior written, telephonic or telegraphic notice to the Bank, the
Company may prepay any portion of the Term Loan with respect to
which the Applicable Interest Rate is the Prime-based Rate or the
Eurodollar-based Rate in whole at any time or in part from time to
time, without premium or penalty but with accrued interest on the
principal being prepaid to the date of such prepayment, provided
that: (i) in the case of the portion of the Term Loan bearing
interest at the Prime-based Rate each partial prepayment shall be
in an amount not less than $100,000 or an integral multiple
thereof; (ii) in the case of the portion of the Term Loan bearing
interest at the Eurodollar-based Rate, each partial prepayment
shall be in an amount not less than $500,000, and such portion of
the Term Loan may only be prepaid on the last Business Day of the
then current Interest Period with respect thereto.
(b) At its option and upon three (3) Business Days'
prior written, telephonic or telegraphic notice to the Bank, the
Company may prepay the Term Loan when the Applicable Interest Rate
is the Fixed Rate, in whole or in part (in amounts at least
$250,000), upon payment to the Bank of the sum of $500 plus the sum
of the discounted net present values of the interest payments that
5
77
<PAGE> 6
would otherwise be payable on the principal amount being prepaid,
after reducing each such interest payment by the amount of the
interest that would be payable on each interest payment due date if
the principal amount being prepaid were reinvested at the Current
Market Rate therefor. For these purposes, "Current Market Rate"
shall mean a per annum interest rate equal to one-half of one
percent (1/2%) above the rate reasonably determined by the Bank
(based on quotations from established dealers) to be in effect two
days prior to the repayment date in the secondary market for United
States Treasury securities of a comparable amount and with a
comparable term to maturity as the principal amount being prepaid.
For the purposes of computation, the discount rate for each
computation will be the Current Market Rate for the relevant
principal installment. Upon any involuntary prepayment of the Term
Loan when the Applicable Interest Rate is the Fixed Rate, the
Company shall pay to the Bank a prepayment premium equal to the
prepayment premium which would be due and payable hereunder if the
Company had voluntarily elected to prepay the Term Loan (in an
amount equal to such involuntary prepayment) on such date of
involuntary prepayment.
(c) Each partial prepayment of the Term Loan shall be
applied to the principal payments due thereunder in the inverse
order of their maturities.
6. Section 6 of the Agreement is amended to provide that all
references therein to Term Note-B shall be deemed to include Term
Note-C.
7. Exhibits "A", "C-2", "D", and "E" to the Agreement are
hereby deleted and attached Exhibits "A", "C-2", "D" and "E" are
substituted thereafter.
8. The attached Exhibit "G-1" is hereby added to the
Agreement.
9. Section 9.12 of the Agreement is amended to read in its
entirety as follows:
"9.12 Maintain at all times a Consolidated Current
Ratio of not less than 1.0 to 1.0."
10. Section 9.15 of the Agreement is amended to read in its
entirety as follows:
"9.15 Maintain at all times a Consolidated Tangible
Net Worth of not less than the following amounts during the
periods specified below:
Present through June 29, 1996 ................. $26,000,000
and $29,000,000 at all times thereafter."
6
78
<PAGE> 7
11. The above amendment shall be effective upon execution
hereof by Company and Bank, delivery by Company to Bank of executed
Notes in the form of attached Exhibits "A" and "E", execution of
the Acknowledgment below by each of the Guarantors (as defined in
the Agreement) and payment by Company to Bank of a non-refundable
amendment fee in the amount of $7,500.
12. Company hereby represents and warrants that, after giving
effect to the amendment and waiver contained herein, (a) execution,
delivery and performance of this Amendment and any other documents
and instruments required under this Amendment or the Agreement are
within Company's corporate powers, have been duly authorized, are
not in contravention of law or the terms of Company's Certificate
of Incorporation or Bylaws, and do not require the consent or
approval of any governmental body, agency, or authority, and this
Amendment and any other documents and instruments required under
this Amendment or the Agreement, will be valid and binding in
accordance with their terms; (b) the continuing representations and
warranties of Company set forth in Sections 8.1 through 8.5 and 8.7
through 8.14 of the Agreement are true and correct on and as of the
date hereof with the same force and effect as made on and as of the
date hereof; (c) the continuing representations and warranties of
Company set forth in Section 8.6 of the Agreement are true and
correct as of the date hereof with respect to the most recent
financial statements furnished to the Bank by Company in accordance
with Section 9.1 of the Agreement; and (d) no event of default, or
condition or event which, with the giving of notice or the running
of time, or both, would constitute an event of default under the
Agreement, has occurred and is continuing as of the date hereof.
13. Except as expressly modified hereby all of the terms and
conditions of the Agreement remain in full force and effect.
WITNESS the due execution hereof on the day and year first
written above.
COMERICA BANK DEFIANCE, INC.
By: By:
Its: Its:
Acknowledgement
The undersigned guarantors acknowledge and consent to the
foregoing Amendment and waiver and ratify and confirm their
respective obligations under the Guaranty Agreements dated February
5, 1993, which Guaranty Agreements remain in full force and effect.
7
79
<PAGE> 8
SMTC CORPORATION DEFIANCE PRECISION PRODUCTS,
INC.
By: By:
Its: Its:
DRAFTLINE ENGINEERING COMPANY VAUNGARDE, INCORPORATED
By: By:
Its: Its:
BINDERLINE DEVELOPMENT, INC. HY-FORM PRODUCTS, INC.
By: By:
Its: Its:
8
80
<PAGE> 1
EXHIBIT 10(at)
REVOLVING CREDIT NOTE
Detroit, Michigan
$6,000,000 August 2, 1995
On or before October 1, 1997 FOR VALUE RECEIVED, Defiance,
Inc., a Delaware corporation (herein called "Company") promises to
pay to the order of COMERICA BANK, a Michigan banking corporation
(herein called "Bank") at its Main Office at 500 Woodward Avenue,
Detroit, Michigan, in lawful money of the United States of America
the indebtedness or so much of the sum of Six Million Dollars
($6,000,000) as may from time to time have been advanced and then
be outstanding hereunder pursuant to the Second Amended and
Restated Loan Agreement dated as of July 29, 1994, made by and
between Company and Bank (herein called "Agreement"), together with
interest thereon as hereinafter set forth.
Each of the Advances hereunder shall bear interest at the
Applicable Interest Rate from time to time applicable thereto under
the Agreement or as otherwise determined thereunder, and interest
shall be computed, assessed and payable as set forth in the
Agreement.
This Note is a note under which advances, repayments and
readvances may be made from time to time, subject to the terms and
conditions of the Agreement. This Note evidences borrowing under,
is subject to, is secured in accordance with, and may be matured
under, the terms of the Agreement, to which reference is hereby
made. As additional security for this Note, Company grants Bank a
lien on all property and assets including deposits and other
credits of the Company, at any time in possession or control of or
owing by Bank for any purpose.
Company hereby waives presentment for payment, demand, protest
and notice of dishonor and nonpayment of this Note and agrees that
no obligation hereunder shall be discharged by reason of any
extension, indulgence, release, or forbearance granted by any
holder of this Note to any party now or hereafter liable hereon or
any present or subsequent owner of any property, real or personal,
which is now or hereafter security for this Note. Any transferees
of, or endorser, guarantor or surety paying this Note in full shall
succeed to all rights of Bank, and Bank shall be under no further
responsibility for the exercise thereof or the loan evidenced
hereby. Nothing herein shall limit any right granted Bank by other
instrument or by law.
This Note is an extension, renewal and increase of a Revolving
Credit Note dated July 29, 1994 in the principal amount of
$4,000,000 by Company payable to Bank.
81
<PAGE> 2
All capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Agreement.
DEFIANCE, INC.
By:________________________
Its:_________________________
2
82
<PAGE> 3
EQUIPMENT NOTE
Detroit, Michigan
$6,000,000 August 2, 1995
On or before October 1, 1996 FOR VALUE RECEIVED, Defiance,
Inc., a Delaware corporation (herein called "Company") promises to
pay to the order of COMERICA BANK, a Michigan banking corporation
(herein called "Bank") at its Main Office at 500 Woodward Avenue,
Detroit, Michigan, in lawful money of the United States of America
the indebtedness or so much of the sum of Six Million Dollars
($6,000,000) as may from time to time have been advanced and then
be outstanding hereunder pursuant to the Second Amended and
Restated Loan Agreement dated as of July 29, 1994, made by and
between Company and Bank (as amended from time to time, herein
called "Agreement"), together with interest thereon as hereinafter
set forth.
Each of the Advances hereunder shall bear interest at the
Applicable Interest Rate from time to time applicable thereto under
the Agreement or as otherwise determined thereunder, and interest
shall be computed, assessed and payable as set forth in the
Agreement.
This Note is a note under which advances, repayments and
readvances may be made from time to time, subject to the terms and
conditions of the Agreement. This Note evidences borrowing under,
is subject to, is secured in accordance with, and may be matured
under, the terms of the Agreement, to which reference is hereby
made. As additional security for this Note, Company grants Bank a
lien on all property and assets including deposits and other
credits of the Company, at any time in possession or control of or
owing by Bank for any purpose.
Company hereby waives presentment for payment, demand, protest
and notice of dishonor and nonpayment of this Note and agrees that
no obligation hereunder shall be discharged by reason of any
extension, indulgence, release, or forbearance granted by any
holder of this Note to any party now or hereafter liable hereon or
any present or subsequent owner of any property, real or personal,
which is now or hereafter security for this Note. Any transferees
of, or endorser, guarantor or surety paying this Note in full shall
succeed to all rights of Bank, and Bank shall be under no further
responsibility for the exercise thereof or the loan evidenced
hereby. Nothing herein shall limit any right granted Bank by other
instrument or by law.
83
<PAGE> 4
All capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Agreement.
DEFIANCE, INC.
By:
Its:
2
84
<PAGE> 1
Exhibit 11. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
Defiance, Inc. and Subsidiaries
(All dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended June 30,
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
Common shares:
Shares outstanding - beginning of period 6,516,038 6,422,270 6,071,168
Shares issued during period 27,912 93,768 351,102
-----------------------------------------------
Shares outstanding - end of period 6,543,950 6,516,038 6,422,270
===============================================
Average shares outstanding per above 6,533,156 6,482,213 6,152,754
Average common share equivalents:
Outstanding options and warrants 175,465 173,787 227,687
-----------------------------------------------
Weighted average common shares outstanding 6,708,621 6,656,000 6,380,441
===============================================
Net earnings $6,594 $6,001 $3,432
===============================================
Primary and fully diluted net earnings per common share $0.98 $0.90 $0.54
===============================================
</TABLE>
<PAGE> 1
Exhibit 21. SUBSIDIARIES OF THE REGISTRANT
Defiance, Inc.
June 30, 1995
<TABLE>
<CAPTION>
Percentage of
State in which voting securities
Name incorporated owned by Company
---- ------------ ----------------
<S> <C> <C>
Defiance Precision Products, Inc. Ohio 100%
Hy-Form Products, Inc. Michigan 100%
SMTC Corporation Michigan 100%
Vaungarde, Inc. Michigan 100%
Binderline Development, Inc. Michigan 100%
Draftline Engineering Company Delaware 100%
</TABLE>
All the subsidiaries listed above are included in the Consolidated Financial
Statements of the Company.
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-92504, No. 33-44505 and No. 33-25753) pertaining to the 1994
Nonemployee Director Stock Option Plan, the 1989 Stock Option Plan and the 1985
Stock Option Plan, respectively, of Defiance, Inc. of our report dated July 27,
1995, with respect to the consolidated financial statements and schedule of
Defiance, Inc. for the year ended June 30, 1995, included in the Annual Report
(Form 10-K) for the year ended June 30, 1995.
/s/ ERNST & YOUNG LLP
Cleveland, Ohio
August 16, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 1,166
<SECURITIES> 0
<RECEIVABLES> 20,151
<ALLOWANCES> (316)
<INVENTORY> 8,210
<CURRENT-ASSETS> 33,148
<PP&E> 35,994
<DEPRECIATION> (29,375)
<TOTAL-ASSETS> 77,008
<CURRENT-LIABILITIES> 21,332
<BONDS> 0
<COMMON> 327
0
0
<OTHER-SE> 21,977
<TOTAL-LIABILITY-AND-EQUITY> 77,008
<SALES> 92,532
<TOTAL-REVENUES> 92,532
<CGS> 68,615
<TOTAL-COSTS> 68,615
<OTHER-EXPENSES> 12,689
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 988
<INCOME-PRETAX> 10,240
<INCOME-TAX> 3,646
<INCOME-CONTINUING> 6,594
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,594
<EPS-PRIMARY> .98
<EPS-DILUTED> .98
</TABLE>
