As filed with the Securities and Exchange Commission on July 17, 1998
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
WILLIAMS CONTROLS, INC.
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(Exact name of Registrant as specified in charter)
Delaware 3714
--------------------------------- ----------------------------
(State or other jurisdiction (Primary Standard Industrial
of incorporation or organization) Classification Code Number)
14100 SW 72nd Avenue
Portland, Oregon 97224
(303) 790-2990 (503) 684-8600
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(I.R.S. Employer (Address, including zip code,
Identification No.) and telephone number, including
area code, of Registrant's
principal executive offices)
Thomas W. Itin
President, Chairman and Chief Executive Officer
14100 SW 72nd Avenue
Portland, Oregon 97224
(503) 684-8600
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(Name, address and telephone number, including
area code, of agent for service)
--------------------
Copies of communication, including all communication sent to
the agent for service, should be sent to:
Gerald Raskin, Esq.
Seth Weiss, Esq.
Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
1400 Glenarm Place, Suite 300
Denver, Colorado 80202
Telephone Number (303) 571-1400
--------------------
Approximate date of commencement of proposed sale to public:
September ___, 1998
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<PAGE>
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Title of each class Proposed maximum Proposed maximum
of securities to be Amount to be offering price aggregate Amount of
registered registered per share offering price registration fee
- -------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value 6,572,715 $2.78 (2) $18,272,148 $5,390
Common Stock underlying 2,909,091 $2.75 $8,000,000 $2,360
Series A 7 1/2 % Convertible
Redeemable Preferred Stock (1)
Common Stock underlying 203,637 $3.30 $672,002 $198
Placement Agent's Warrants (1)
Common Stock underlying
Other Options and Options 1,200,000 (3) $2,600,065 $768
Total 10,885,443 _____ $29,544,215 $8,716
__________________
</TABLE>
(1) Plus indeterminable number of shares of Common Stock as may be issuable by
reason of the anti-dilution provision for such convertible preferred stock
or Placement Agent's Warrants.
(2) In accordance with 457(c), the fee has been calculated as follows:
6,572,715 shares at $2.78 per share.
(3) Represents shares underlying: (i) 150,000 options each to purchase one
share of Common Stock for $.41; (ii) 50,000 options each to purchase one
share of Common Stock for $2.44; (iii) 25,000 options each to purchase one
share of Common Stock for $2.50; (iv) 25,000 options each to purchase one
share of Common Stock for $3.625; (v) 50,000 options each to purchase one
share of Common Stock for $2.625; (vi) 330,000 options each to purchase one
share of Common Stock for $2.44; (vii) 30,000 options each to purchase one
share of Common Stock for $2.656; (viii) 30,000 options each to purchase
one share of Common Stock for $3.00; (ix) 30,000 options each to purchase
one share of Common Stock for $3.66; (x) 30,000 options each to purchase
one share of Common Stock for $2.937; and (xi) 450,000 options each to
purchase one share of Common Stock for $2.132. The registrant hereby amends
this registration statement on such date or dates as may be necessary to
delay its effective date until the registrant shall file a further
amendment which specifically states that this registration statement shall
thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section
8(a), may determine.
2
<PAGE>
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED JULY 17, 1998
PROSPECTUS
----------
WILLIAMS CONTROLS, INC.
10,885,443 SHARES OF COMMON STOCK INCLUDING 2,909,091 SHARES UNDERLYING
CONVERTIBLE PREFERRED STOCK AND 1,403,637 SHARES UNDERLYING COMMON STOCK
PURCHASE WARRANTS.
This Prospectus relates to the offer and sale of 10,885,443 shares (the
"Shares") of common stock, $.01 par value (the "Common Stock") of Williams
Controls, Inc., a Delaware corporation (the "Company"), being offered by certain
selling securityholders (the "Selling Securityholders"). The Shares include
2,909,091 shares issuable upon the conversion of the Company's outstanding
shares of Series A 7 1/2% Convertible Redeemable Preferred Stock (the
"Convertible Preferred Stock") and 1,403,637 shares of Common Stock issuable
upon the exercise of certain outstanding common stock purchase warrants and
options (collectively, the "Warrants"). The Shares are being registered pursuant
to registration rights previously granted to the Selling Securityholders. None
of the shares of Convertible Preferred Stock or Warrants are being registered.
The 6,572,715 Shares that are not underlying the Warrants or Convertible
Preferred Stock were issued pursuant to the exercise of outstanding options,
warrants or stock acquisition rights, or were issued to various persons in
private placements of the Company's securities.
The Convertible Preferred Stock is comprised of 80,000 shares of Series A 7
1/2% Convertible Redeemable Preferred Stock, each share of which is convertible
into shares of the Company's Common Stock at the conversion rate of $2.75 per
share, subject to certain adjustments (the "Conversion Price"), and is
redeemable by the Company at any time prior to conversion for $100 per share,
plus accrued and unpaid dividends to the date of redemption. If not earlier
redeemed, the Company may force a conversion of the Convertible Preferred Stock
if: (i) the Common Stock issuable upon conversion is the subject of a currently
effective registration statement; and (ii) the average closing bid price of the
Common Stock as listed on the National Association of Securities Dealers
Automated Quotation System, the New York Stock Exchange, the American Stock
Exchange or wherever the Company's Common Stock then trades, is at least 150% of
the Conversion Price for 20 trading days within a 30 consecutive trading day
period ending no more than ten days prior to the date set forth for conversion.
The Warrants are comprised of: (i) 203,637 Placement Agent's Warrants, each
entitling the holder to purchase one share of Common Stock for $3.30, subject to
certain adjustments, exercisable until April 20, 2003; (ii) 150,000 Acrodyne
Options, each entitling the holder to purchase one share of Common Stock for
$.41, exercisable until November 10, 1999; (iii) 50,000 Enercorp Options, each
entitling the holder to purchase one share of Common Stock for $2.44,
exercisable until March 12, 2003; (iv) 25,000 Enercorp Options, each entitling
the holder to purchase one share of Common Stock for $2.50, exercisable until
August 4, 1999; (v) 25,000 Enercorp Options, each entitling the holder to
purchase one share of Common Stock for $3.625, exercisable until May 3, 2000;
(vi) 50,000 Enercorp Options, each entitling the holder to purchase one share of
Common Stock for $2.625, exercisable until September 13, 1999; (vii) 330,000
options each to purchase one share of Common Stock for $2.44; (viii) 30,000
options each to purchase one share of Common Stock for $2.656; (ix) 30,000
options each to purchase one share of Common Stock for $3.00; (x) 30,000 options
each to purchase one share of Common Stock for $3.66; (xi) 30,000 options each
to purchase one share of Common Stock for $2.937; and (xii) 450,000 options each
to purchase one share of Common Stock for $2.132.
This Prospectus may be used by the Selling Securityholders to sell the
Share and for the resale of the Shares received upon exercise of the Warrants.
The Company will not receive any of the proceeds from the sale of the Shares by
the Selling Securityholders. The Company will, however, receive the net proceeds
from any exercise of the Warrants, as described under "Use of Proceeds." See
"Selling Securityholders."
3
<PAGE>
THE DISTRIBUTION
----------------
The distribution of the Shares by the Selling Securityholders may be
effected from time to time in one or more transactions (which may involve block
transactions) on the NASDAQ National market or on any other exchange on which
the Common Stock may be traded, may be effected from time to time in one or more
transactions in the over-the-counter market, in privately-negotiated
transactions, or a combination of such methods of sale. Such sales will be made
at the market prices prevailing at the time of sale, at prices relating to such
prevailing market prices or at negotiated prices. The Selling Securityholders
may effect such transactions by selling the Shares to or through broker/dealers
who may receive compensation in the form of underwriting discounts, concessions
or commissions from the Selling Securityholders or the purchases of the Shares
for whom the broker/dealer acts as agent. Such compensation may be less than or
in excess of customary commissions. The Selling Securityholders and any
brokers/dealers who participate in the distribution of the Shares may be deemed
to be underwriters, and any compensation received by them, including any profit
on their resale of such Shares, may be deemed to be underwriting discount and
commissions under the Securities Act of 1933, as amended (the "Securities Act").
Certain of the Selling Securityholders are market makers in the Common Stock.
The Common Stock is listed on the NASDAQ National Market. On July 14, 1998,
the closing price of the Common Stock on the NASDAQ National Market was $2.78
per share.
Pursuant to agreements between the Company and the Selling Securityholders,
the Company has agreed to pay the expenses incurred in connection with the
registration of the Shares and the Company and certain of the Selling
Securityholders have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.
___________________
SEE "RISK FACTORS" COMMENCING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
__________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSIONER NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
__________________
The date of this Prospectus is July ___, 1998
4
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street N.W., Room
1024, Washington D.C. 20549; at the Commission's New York Regional Office, 7
World Trade Center, Suite 1300, New York, NY 10048; and at the Commission's
Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois
60621. Copies of such material can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the Company files its reports, proxy statements
and certain other information with the Commission electronically through the
EDGAR System. Information filed via EDGAR may be obtained at the Web site
maintained by the Commission at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus the
following documents filed with the Commission:
1. The Company's Annual Report on Form 10-K for the year ended September
30, 1997.
2. The Company's Quarterly Report for the fiscal quarter ended December
31, 1997.
3. The Company's Quarterly Report for the fiscal quarter ended March 31,
1998.
4. The Company's Current Report on Form 8-K filed July 15, 1998.
5. The Company's Proxy Statement for the 1998 Annual Meeting of
Stockholders held on March 27, 1998.
6. The description of the Company's Common Stock contained in a
Registration Statement on Form 8-A, Commission File No. 0-18083, as
filed with the Commission on November 1, 1989.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be deemed incorporated by
reference in this Prospectus to and be a part hereof from the date of the filing
of such documents. See "Additional Information." Any statement contained in a
document incorporated or deemed to be incorporated herein by reference shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
5
<PAGE>
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon request of any such person, a copy of any or all
of the foregoing documents incorporated herein by reference (other than exhibits
to such documents not specifically incorporated by reference). Written or
telephone requests for such documents should be directed to the Chief Financial
Officer of the Company at 14100 SW 72nd Avenue, Portland, Oregon 97224 (503)
684-8600.
PROSPECTUS SUMMARY
------------------
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS. THIS SUMMARY IS NECESSARILY INCOMPLETE AND SELECTIVE AND IS
QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE
IN THIS PROSPECTUS, INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN.
Certain statements contained in this summary, elsewhere in this Prospectus
and in the documents incorporated by reference herein, constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act, as amended, and Section 21E of the Exchange Act, as amended. These
forward-looking statements can be identified by the use of predictive,
future-tense or forward-looking terminology, such as "believes," "anticipates,"
"expects," "estimates," "may," "will" or similar terms. Forward-looking
statements also include projections of financial performance, statements
regarding management's plans and objectives and statements concerning any
assumption relating to the foregoing. Certain important factors regarding the
Company's business, operations and competitive environment which may cause
actual results to vary materially from these forward-looking statements are
discussed below under the caption "Risk Factors."
6
<PAGE>
THE COMPANY
Williams Controls, Inc., is a Delaware corporation formed in 1988. The
Company's vehicle component segment, its primary business segment, was founded
by Norman C. Williams in 1939 and acquired by the Company in 1988. The Company's
operating subsidiaries are divided into the following three industry segments:
--VEHICLE COMPONENTS. The Company's transportation component product lines
include electronic throttle control systems ("ETC"), exhaust brakes and
pneumatic and hydraulic controls. These products are used in applications which
include trucks, utility and off-highway equipment, transit buses and underground
mining machines. Markets for the Company's ETC are developing in smaller classes
of trucks and diesel-powered pick-up trucks. The Company believes that
gasoline-powered automobiles and pick-up trucks may convert to ETC, although
such conversion requires engine redesign by the automotive manufacturers which
is presently ongoing. The Company estimates that it has over 65% market share of
ETC for Class 7 and 8 trucks. The majority of these products are sold directly
to original equipment manufacturers such as Freightliner, Navistar, Volvo,
Isuzu, MotorCoach Industries and Blue Bird Corporation. The Company also sells
these products through a well-established network of independent distributors.
--Electrical Components and GPS. The electrical components product line
includes the design and production of microcircuits, cable assemblies and other
electronic products used in the telecommunication, computer and transportation
industries. The Global Positioning System ("GPS") product line includes commuter
railroad train tracking and agricultural cyber-farming using global positioning
and geographic information systems. Major customers include Tri-Rail, Florida
Department of Transportation and Via Tropical Fruit.
--AGRICULTURAL EQUIPMENT. The agricultural equipment product lines include
rotary cutters, discs, harrows and sprayers. These products are sold to
independent equipment dealers located primarily in the Southeastern United
States.
Set forth below is a list of the Company's operating subsidiaries, all of
which are 100% owned, except as otherwise noted, and a brief description of each
operating subsidiary's business:
VEHICLE COMPONENTS:
WILLIAMS CONTROLS INDUSTRIES, INC. manufactures vehicle components sold
primarily in the transportation industry.
PREMIER PLASTIC TECHNOLOGIES, INC. manufactures plastic components for the
automotive industry and manufactures prototype and production molds using rapid
prototyping processes.
NESC WILLIAMS, INC. installs conversion kits to allow vehicles to use
compressed natural gas and provides natural gas well metering services.
WILLIAMS AUTOMOTIVE, INC. was formed to market the Company's products to
the automotive industry.
7
<PAGE>
ELECTRONIC COMPONENTS and GPS:
APTEK WILLIAMS, INC. develops and produces sensors, microcircuits, cable
assemblies and other electronic products for the telecommunications and
transportation industries, and conducts research and development activities to
develop commercial applications of sensor related products for the subsidiaries
of the Company.
GEOFOCUS, INC. develops train tracking and cyber-farming systems using GPS
and geographical information systems.
AGRICULTURAL EQUIPMENT:
AGROTEC WILLIAMS, INC. manufactures spraying equipment for the professional
lawn care, nursery and pest control industries.
HARDEE WILLIAMS, INC. manufactures equipment used in farming, highway and
park maintenance. This entity is 80% owned by the Company.
WACCAMAW WHEEL WILLIAMS, INC. manufactures solid rubber tail wheels and
other rubber products, used on agricultural equipment, from recycled truck and
bus tires. This entity is 80% owned by the Company.
TECHWOOD WILLIAMS, INC. manufactured and distributed commercial wood
chippers used in landscaping and farming. Techwood ceased operations in fiscal
1997.
OTHER SUBSIDIARIES:
WILLIAMS TECHNOLOGIES, INC. supports all subsidiaries of the Company by
establishing new technologies and developing business relationships to promote
"technology partnering."
WILLIAMS WORLD TRADE, INC. located in Kuala Lumpur, Malaysia. It manages
foreign sourcing for all subsidiaries of the Company, affiliates and third party
customers.
MARKETING and DISTRIBUTION. The Company sells its products to customers in
diversified industries worldwide; however, approximately 77% of its sales from
continuing operations are to customers in the vehicle component segment. For the
fiscal years ended September 30, 1997, 1996 and 1995, Freightliner accounted for
13%, 14% and 17%, respectively, of net sales from continuing operations.
Navistar and Volvo each accounted for 11% of net sales from continuing
operations in 1997 and fiscal 1996 and 11% and 8%, respectively, in fiscal 1995.
Approximately 11%, 15% and 18% of net sales from continuing operations in fiscal
1997, 1996 and 1995, respectively, were to customers outside of the United
States, primarily in Canada, and to a lesser extent, in Europe and Australia.
The Company performs ongoing credit evaluations of its customers' financial
condition and maintains allowances for potential credit losses. Actual
losses/allowances have been within management's expectations.
8
<PAGE>
GOVERNMENT REGULATION. The Company's vehicle component products must comply
with the National Traffic and Motor Vehicle Safety Act of 1966, as amended and
regulations promulgated thereunder which are administered by the National
Highway Traffic Safety Administration ("NHTSA"). If, after an investigation,
NHTSA finds that the Company is not in compliance with any of its standards or
regulations, among other things, it may require the Company to recall its
products which are found not to be in compliance and repair or replace such
products.
PRODUCT RESEARCH DEVELOPMENT. The Company's operating facilities engage in
engineering, research and development and quality control activities to improve
the performance, reliability and cost-effectiveness of the Company's product
lines. The Company's engineering staff works closely with its customers in the
design and development of new products and adapting products for new
applications. During fiscal 1997, 1996 and 1995, the Company spent $1,849,000,
$2,144,000 and $1,445,000, respectively, on these activities for continuing
operations. The Company intends to increase its research and development
expenditures in fiscal 1998 to design ETC products compatible with gasoline
powered vehicles, develop commercial applications for inertia, tilt, Hall effect
and optical sensor products, and further develop train tracking products.
RAW MATERIALS. The Company produces its products from raw materials,
including brass, aluminum, steel, plastic, rubber and zinc, which currently are
widely available at reasonable terms. The Company relies upon, and expects to
continue to rely upon CTS Corporation, Robertshaw and Caterpillar, Inc. as
single source suppliers for critical components and/or products. Although these
suppliers have been able to meet the Company's needs on a timely basis, and
appear to be willing to continue being suppliers to the Company, there is no
assurance that a disruption in a supplier's business, such as a strike, would
not disrupt the supply of a component.
PRODUCT WARRANTY. The Company warrants its products to the first retail
purchaser and subsequent owners against malfunctions occurring during the
warranty period resulting from defects in material or workmanship, subject to
specified limitations. The warranty on vehicle components is limited to a
specified time period, mileage or hours of use, and varies by product and
application. The Company has established a warranty reserve based upon its
estimate of the future cost of warranty and related service costs. The Company
regularly monitors its warranty reserve for adequacy in response to historical
experience and other factors.
EMPLOYEES. As of June 30, 1998, the Company employs approximately 509
employees, including 138 union employees. The non-union employees of the Company
are engaged in sales and marketing, accounting and administration, product
research and development, production and quality control. The union employees
are engaged in manufacturing vehicle components in the Portland, Oregon
facility. Management of the Company believes that its relationships with its
employees and the union are good.
The Company's executive offices are located at 14100 SW 72nd Avenue,
Portland, Oregon 97224. Its telephone number is (503) 684-8600.
9
<PAGE>
The Offering
Common Stock Outstanding
Before the Offering................ 17,932,040 shares (1)
Common Stock Offered by the
Selling Securityholders............ 10,885,443 shares (2)
Common Stock Outstanding after
exercise or Conversion of
Warrants and Convertible
Preferred Stock.................... 22,244,768 shares (3)
Use of Proceeds...................... The net proceeds from the exercise
of the Warrants, if any, may be
used for general working capital
purposes. See "Use of Proceeds."
NASDAQ National Market Symbol........ WMCO
________________
(1) Does not include Common Stock reserved for issuance as follows: (i)
2,325,300 shares issuable upon exercise of currently outstanding options; and
(ii) 874,700 shares reserved for additional options to be granted under the
Company's stock option plans.
(2) Includes 2,909,091 shares issuable upon conversion of Convertible
Preferred Stock and 1,403,637 shares issuable upon exercise of Warrants.
(3) The Company is not aware of any arrangements for the exercise of the
Warrants and there is no assurance that all or any of the outstanding Warrants
will be exercised.
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS,
AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, BEFORE MAKING AN
INVESTMENT IN THE COMPANY.
RISKS OF THE COMPANY'S BUSINESS. The Company's operations are subject to
intense competition from foreign import as well as domestic manufacturers,
dependence on the truck, light truck, utility vehicle and heavy equipment
manufacturing industries and fluctuating costs of raw materials (such as steel
and synthetic products), labor costs and union contracts, as well as the economy
as a whole. The Company has no control over any of these factors.
CHANGES IN DIVERSIFICATION STRATEGY. For the period from fiscal 1994
through fiscal 1996, the Company pursued an acquisition strategy to diversify
its operations during which the Company made several acquisitions of companies
that were involved in unrelated businesses. During fiscal 1997, the Company
discontinued its diversification acquisition strategy in order to focus its
corporate and financial resources on opportunities emerging in the vehicle
components and GPS train tracking markets and also for the development of
commercial applications of sensor related products. No assurance can be given
that the Company will be able to capitalize on opportunities emerging in vehicle
components, GPS train tracking markets and/or the development of commercial
applications of sensor related products, or if the Company is successful in one
or more of its endeavors, that such endeavors will be profitable for the
Company.
10
<PAGE>
COMPETITION. The Company plans to introduce its ETC product into new
markets including international markets, higher-volume small truck markets, and
gasoline engine automotive markets. Although the Company's ETC product has been
successful in the domestic heavy-duty truck market, there is no assurance that
this product will be accepted in these new markets. Introduction of ETC in
gasoline engines will require modification or redesign of engine components that
will depend upon the timing of development by the automotive manufacturers and
their original equipment manufacturers. The Company has no control over the
timing of the introduction of ETC into the automotive or higher-volume truck
markets. The Company will be competing against much larger competitors in these
markets with financial resources much greater than those of the Company.
GOVERNMENT REGULATION. Because many of the products that the Company
manufactures are integral in maintaining the safety of the vehicles using them
while operating on highways, the products are subject to adherence to regulatory
standards and close scrutiny from agencies of the Federal government. The
Company's ETC have been critical to its success and any problems relating to
these products could adversely affect the Company.
CYCLICAL INDUSTRY. The markets for heavy trucks are cyclical. During
periods of economic expansion, when industrial production is increasing, demand
for diesel engines ordinarily increases, and during recessionary times the
diesel engine industry is adversely affected by declines in demand. Recently,
the Company has experienced an increase in sales of its ETC which it believes
is, in part, a result of an economic expansion. Due in part to the maturity of
the heavy-diesel engine industry, there can be no assurance that such an
increase in sales related to economic expansion or other factors will be
sustained.
CONCENTRATION OF SALES. The Company sells its products to customers in
diversified industries worldwide; however, approximately 77% of its sales from
continuing operations are to customers in the vehicle component segment. For the
fiscal years ended September 30, 1997, 1996 and 1995, Freightliner accounted for
13%, 14% and 17%, respectively, of net sales for continuing operations. Navistar
and Volvo each accounted for 11% of net sales from continuing operations in 1997
and fiscal 1996 and 11% and 8%, respectively, in fiscal 1995. Approximately 11%,
15% and 18% of net sales for continuing operations in fiscal 1997, 1996 and
1995, respectively, were to customers outside of the United States, primarily in
Canada, and to a lesser extent, in Europe and Australia. The loss of one or more
of its significant customers or a material decline in sales to one or more of
such customers could have a material adverse effect on the Company.
11
<PAGE>
RELIANCE ON SINGLE SOURCE SUPPLIERS. The Company relies upon, and expects
to continue to rely upon CTS Corporation, Robertshaw and Caterpillar, Inc., as
single source suppliers for critical components and/or products. There can be no
assurance that these suppliers will be able to meet the Company's future needs
on a timely basis, or be willing to continue to be a supplier to the Company, or
that a disruption in a supplier's business, such as a strike, would not disrupt
the supply of a component that could not easily be replaced.
POTENTIAL PRODUCT LIABILITY. Certain of the Company's products are integral
parts of braking and acceleration systems for heavy equipment, buses, and
long-haul trucks, and failure of any part of the system may result in personal
injury to the operator or other persons in the area, for which injured parties
may attempt to hold the Company liable.
PRODUCT WARRANTY. The Company provides a standard limited warranty on
certain of its products. The Company has established a reserve for future
warranty claims based on its estimate of the future cost of warranty and related
service costs. The Company believes that these reserves are reasonable, based on
its experience with products and claims. However, there can be no assurance that
the amount of this reserve will be sufficient to cover future warranty claims
against the Company.
CONTROL BY MANAGEMENT. As of June 30, 1998, Thomas W. Itin, Chairman,
President, Chief Executive Officer and Treasurer of the Company beneficially
owns approximately 28.2% of the Company's Common Stock. Mr. Itin also owns
approximately 18.5% of Enercorp, Inc., an entity that beneficially owns
approximately an additional 10.7% of the Company's Common Stock. H. Samuel
Greenawalt, a director of the Company, who beneficially owns 1.1% of the
Company's Common Stock, also owns approximately 2.4% of Enercorp, Inc. Further,
all executive officers and directors of the Company as a group (ten persons)
beneficially own approximately 40.2% of the Company's Common Stock. As a result,
the Company's management, and Mr. Itin in particular, are in a position to
significantly influence the direction and policies of the Company, the election
of the Board of Directors of the Company and the outcome of any other matters
requiring shareholder approval.
ENVIRONMENTAL. The Company has identified certain contaminants in the soil
and groundwater at and around its Portland, Oregon manufacturing facility which
the Company believes may have been disposed of on the property by the previous
property owner. The Company has conducted tests to determine the levels of
contaminants and the lateral and vertical extent of the contamination.
Concentrations of trichloroethane ("TCE") have been discovered in shallow
groundwater samples in amounts that are greater than the Federal drinking water
maximum contaminant levels. However, the manufacturing facility is located in an
industrial area and the impacted groundwater is not used nor is it anticipated
to be used for drinking water. The Company believes that the contamination is
not a reportable condition under the current Oregon statutes, but there is no
assurance that the Oregon Department of Environmental Quality ("DEQ") would not
take the position that the event is reportable or that state environmental laws
adopted in the future would make this a reportable event. Under Oregon statutes,
the Company and other potentially responsible parties are required to
investigate further and possibly remediate the contamination. The Company
believes that, if required, the remediation would take the form of permanent
monitoring, but could include the treatment or removal of the contamination. The
Company cannot estimate the costs of permanent monitoring, treatment or clean up
at the present time. However, any costs of treatment or cleanup could adversely
affect the Company materially.
12
<PAGE>
Under the terms of the agreement for the sale of the Portland manufacturing
facility, the Company is obligated to provide $3.2 million of debt financing to
the purchaser until the Company receives a no-further-action letter from the DEQ
related to the environmental issue. The Company provided a $3.2 million loan to
the purchaser in April 1998. The Company intends to seek indemnification from
the prior property owner under the terms of the asset purchase agreement with
the prior owner and require the prior owner either to provide such required
financing or to pay for the costs of investigation and remediation that would
result in a no-further-action letter. The prior property owner has advised the
Company that it would dispute any liability for remediation costs. The Company
believes it can enforce available claims against the prior property owner for
any costs of investigation and remediation.
BUILDING REPURCHASE OBLIGATION. The Company sold its Portland manufacturing
facilities under a sale-leaseback for $4.6 million in April 1997. As stated in
Environmental, under the terms of the purchase agreement, the Company was
obligated to provide $3.2 million of debt financing to the purchaser until the
Company receives a no-further-action letter from the DEQ related to the
environmental issue. In addition, the Company may be require to, and also has
the option to, repurchase the building from the purchaser if it does not receive
a no-further-action letter before April 18, 1999.
BANK INDEBTEDNESS. The Company has significant bank indebtedness that bears
interest at rates that fluctuate with the prime rate. The Company's net earnings
would be adversely affected by any significant increase in the prime rate. In
addition, the Company's current bank credit facility secures substantially all
of the Company assets as collateral for the loan, and the Company is required to
maintain minimum tangible net worth and minimum working capital and is limited
as to the amount of capital spending by the Company in any twelve-month period.
HISTORY OF OPERATING LOSSES OF CERTAIN SUBSIDIARIES. Certain subsidiaries
of the Company have a history of operating losses since acquisition. Although
the Company has hired management, adopted business plans, disposed of one
significant subsidiary and instituted operational changes that it believes will
improve operating results, there is no assurance that these subsidiaries will
achieve profitability. The Company has not adopted a formal plan to dispose of
any of such operations. If the Company is unsuccessful in achieving
profitability at these facilities, the Company may decide to sell or otherwise
dispose of them. There is no assurance that the Company would be able to sell
such operations at a price that would not result in a loss upon the sale.
SALE OF KENCO WILLIAMS, INC. On March 16, 1998, the Company completed the
sale of a substantial portion of the assets of Kenco Williams, Inc. ("Kenco")
and entered into warehousing and lease agreements with the purchaser.
Consideration to the Company consisted of $1.1 million cash, a receivable from
the purchaser for inventory sold of $430,000, assumption of $1 million of trade
payables and other liabilities, and $2 million of Series A Preferred Stock of
the purchaser. The purchaser has agreed to purchase from the Company
approximately $2.6 million of remaining inventory on or before September 30,
1998 and has agreed to lease the building from the Company until September 30,
1998. If the purchaser achieves certain financial operating performance targets
before March 31, 1999, the Company anticipates that it would convert the
preferred stock into common shares of the purchaser and dividend such shares in
a spin-off transaction to the Company's stockholders. Holders of the Company's
Series A 7 ?% Convertible Redeemable Preferred Stock would be entitled a pro
rata share of any spin-off.
13
<PAGE>
INVESTMENT IN AJAY SPORTS, INC. ("Ajay"). On June 30, 1998, the Company
entered into an agreement (the "Agreement") with Ajay Sports, Inc. which
restructured the Company's investment in Ajay and allowed the Company to amend
its Credit Agreement with its lender. Under the Agreement, the Company agreed to
invest $2 million into Ajay and convert $5 million of its loans and advances to
Ajay into Ajay convertible preferred stock. As a result of the additional
investment, previously agreed assumption of certain liabilities and payments of
certain Ajay bank indebtedness, the Company's investment in Ajay could increase
to up to $8.6 million. The Chairman of the Company has provided a guaranty to
the Company of the investments in and loans to Ajay.
As a result of the Ajay restructuring, the Company and its lender amended
its Credit Agreement to eliminate Ajay from the Credit Agreement and eliminate
the Company's guarantee of Ajay's debt. Previously, the Company and Ajay had
been joint borrowers under a $34.1 million joint and several liability Credit
Agreement. The amended Credit Agreement provides for total borrowings up to
$16.5 million, reduces the interest rate on the revolving loan to the Bank's
prime rate and increases advance rates against inventory and accounts
receivable.
DEPENDENCE UPON PERSONNEL. The Company is dependent upon the services of
Thomas W. Itin and Gerard H. Herlihy. Mr. Itin is Chairman, President, Chief
Executive Officer and Treasurer of the Company. Mr. Herlihy is Chief
Administrative and Chief Financial Officer and Secretary of the Company. The
Company has an employment agreement with Mr. Itin that expires in August 2002.
The Company does not have an employment agreement with Mr. Herlihy. If either of
such individual's services were to become unavailable to the Company for any
reason, the Company's success could be materially and adversely affected. The
Company does not carry key-man life insurance.
NO DIVIDENDS. The Company has never paid any cash dividends on its Common
Stock and does not anticipate paying cash dividends on the Common Stock in the
foreseeable future. The payment of dividends on the Common Stock by the Company
will depend on its earnings, financial condition and other business and economic
factors including borrowing restrictions affecting the Company at such time as
the Board of Directors may consider relevant.
ANTI-TAKEOVER PROVISIONS OF CHARTER AND BYLAWS. Certain provisions of the
Company's charter and bylaws may delay or frustrate the removal of incumbent
directors and may prevent or delay a merger, tender offer or proxy contest
involving the Company that is not approved by the Board of Directors, even if
such events may be beneficial to the interests of stockholders. For example, the
Company's Board of Directors, without stockholder approval, has the authority
and power to issue all authorized and unissued shares of Common Stock and
preferred stock which have not otherwise been reserved for issuance. Thus, the
Board of Directors could currently issue 26,584,832 shares of Common Stock on
such terms as the Board of Directors determines. The Board of Directors could
currently also issue 49,920,000 shares of preferred stock (assuming that all
80,000 shares of Convertible Preferred Shares are sold) and such preferred stock
could have voting or conversion rights which could adversely affect the voting
power of the holders of Common Stock. Furthermore, the Company's charter
provides for three classes of directors with staggered terms of office. In
addition, the Delaware General Corporation Law contains provisions that may have
the effect of making it more difficult or delaying attempts by other to obtain
control of the Company.
14
<PAGE>
"PENNY STOCK" RULES. The Company's Common Stock is presently traded on the
NASDAQ National Market System. If the Company fails to maintain such listing for
its Common Stock, and no other exclusion from the definition of "penny stock"
under the Exchange Act is available, then any broker engaging in a transaction
in the Company's securities would be required to provide any customer with a
risk disclosure document and the compensation of the broker/dealer in the
transaction and monthly account statements showing the market values of the
Company's securities held in the customers accounts. The bid and offer
quotations and compensation information must be provided prior to effecting the
transaction and must be contained on the customer's confirmation. If brokers
become subject to the "penny stock" rules when engaging in transaction in the
Company's securities, they would become less willing to engage in such
transaction, thereby making it more difficult for holders of shares of Common
Stock to dispose of their shares.
SUBSTANTIAL DILUTION. Dilution may also be incurred upon the exercise of
outstanding options and warrants granted under the Company's stock option plans
and other options, warrants and outstanding convertible securities.
USE OF PROCEEDS
---------------
It is not likely that any outstanding Warrants will be exercised unless the
market price of the Common Stock increases significantly. Alternatively, the
Company may lower the exercise price of the Warrants to below the current market
price, thereby encouraging their exercise. If the Warrants are exercised at
their current prices, which is unlikely at this time, the Company will receive
net proceeds from such exercise of approximately $3,278,317. See "Plan of
Distribution." The proceeds may be used for working capital purposes.
SELLING SECURITYHOLDERS
-----------------------
The following tables set forth the number of Shares and the total number of
Shares assuming the conversion or exercise of all Convertible Preferred Stock
and Warrants owned by each of the Selling Securityholders and registered
hereunder. Except as indicated, the Selling Securityholders are offering all of
the shares of Common Stock owned by them or received by them upon the exercise
or conversion of the Warrants or Convertible Preferred Stock and none of the
Selling Securityholders is the beneficial owner of one percent or more of the
outstanding shares of Common Stock (including the Shares offered hereby).
15
<PAGE>
Because the Selling Securityholders may offer all or part of the Shares or
the shares of Common Stock received upon conversion or exercise of the
Convertible Preferred Stock and/or Warrants, which they hold pursuant to the
Offering contemplated by this Prospectus, and because their offering is not
being underwritten on a firm commitment basis, no estimate can be given as to
the amount of Convertible Preferred Stock and/or Warrants that will be held upon
termination of this Offering. The Shares and the shares of Common Stock received
upon conversion or exercise of the Convertible Preferred Stock and/or Warrants
offered by this Prospectus may be offered from time to time by the Selling
Securityholders named below.
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TABLE: Shares and Shares underlying Convertible Preferred Stock, and Warrants to
be registered and offered by the Selling Securityholders.
Shares
Convertible Placement Owned After
Preferred Agent's Total Completion
Selling Securityholder Shares Stock Warrants Other Options Shares of the Offer
- ---------------------- ------------ ----------- ----------- ------------- ------------ ------------
Acrodyne 1,050,000 150,000 1,200,000 0
Acrodyne Profit Sharing Plan 400,000 400,000 0
Ajay Sports, Inc. 211,641 211,641 0
John F. Alexander, Jr. 42,255 42,255 0
Robert W. and Susan M. Allen 90,909 90,909 0
Jude Aririguzo 3,636 3,636 0
E.H. Arnold 181,819 181,819 0
Gary P. Arnold 18,182 18,182 0
Hamilton T. Bailey 5,455 5,455 0
Russell J. Bernier 1,000 1,000 0
Josephine Besemer 12,000 12,000 0
Bonat FBO Spangler Candy & Related
Companies Retirement Trust 72,727 72,727 0
Alvin R. Bonnette Rev. Trust
dtd 1/31/85 14,545 14,545 0
Bernard Brown Trust A/C #1 IRA
Rollover, Crestar Bank, Custodian 18,182 18,182 0
Bernard Brown Trust A/C #2 IRA
Rollover, Crestar Bank, Custodian 29,091 29,091 0
Michael J. Brunone 1,000 1,000 0
Richard Buchakjian 14,545 14,545 0
Peter M. Burns 15,500 15,500 0
Rosemary C. Butcher 15,000 15,000 0
R. William Caldwell 5,000 50,000 55,000 0
17
<PAGE>
Shares
Convertible Placement Owned After
Preferred Agent's Total Completion
Selling Securityholder Shares Stock Warrants Other Options Shares of the Offer
- ---------------------- ------------ ----------- ----------- ------------- ------------ ------------
David Carr 2,115 2,115 0
Phillip E. and Betty Casey 36,364 36,364 0
William Chaney 3,636 3,636 0
Charles Schwab & Co., Inc. FBO
Dr. Neil Kantor IRA 36,364 36,364 0
Christiana Companies Inc. Employee
Savings & Profit Sharing Plan 9,091 9,091 0
Jeanne Copeland, IRA, Crestar
Bank, Custodian 9,091 9,091 0
Ralph J. Cuomo 2,000 2,000 0
Joseph G. D'Amadeo 29,750 29,750 0
Joseph and Tracy D'Amadeo 7,273 7,273 0
Jack Dangermond 10,560 10,560 0
Dearborn Wheels, Inc. 59,000 59,000 0
Guerino DeLuca 14,545 14,545 0
Dolphin Offshore Partners, L.P. 463,637 463,637 0
Paul Dratel 200 200 0
EBS Micro Cap Partners 54,545 54,545 0
EBS Partners, L.P. 109,091 109,091 0
John W. and Mary Sue Egan 3,636 3,636 0
Emanon Partners, L.P. 127,273 127,273 0
EMJAYCO FBO Theumling Industries
Products PSP 10,909 10,909 0
Enercorp, Inc. 1,852,329 150,000 2,002,329 0
The Equity Group Profit Sharing
Plan and Trust 81,819 81,819 0
18
<PAGE>
Shares
Convertible Placement Owned After
Preferred Agent's Total Completion
Selling Securityholder Shares Stock Warrants Other Options Shares of the Offer
- ---------------------- ------------ ----------- ----------- ------------- ------------ ------------
John C. Ernst Revocable Trust 36,364 36,364 0
Elsa V. Finnel 9,091 9,091 0
Dennis Fortin 36,364 36,364 0
James E. Foy 18,182 18,182 0
Keith M. Ganzer 6,000 6,000 0
Robert D. Goldstein 45,455 45,455 0
Justin Gasarch 9,091 9,091 0
H. Samuel Greenawalt 50,000 50,000 0
Douglas E. Hailey 3,636 35,487 39,123 0
Douglas E. Hailey Profit Sharing
Plan 5,455 5,455 0
Gregory Robert Hebard
Irrevocable Living Trust 103,000 103,000 0
Robert R. Hebard & Dawn E. Hebard
JTWROS 14,000 14,000 0
Whitney Lynn Hebard Irrevocable
Living Trust 103,000 103,000 0
Richard J. Hess 3,636 3,636 0
Hilltop Offshore Limited 10,000 10,000 0
Hilltop Partners, L.P. 24,982 24,982 0
Nina Beardsley Itin Irrevocable
Living Trust 85,000 85,000 0
Shirley B. Itin TTEE Elinor Lee Itin
Irrevocable Living Trust 3,000 3,000 0
Shirley B. Itin TTEE Gregory Robert
Hebard Irrevocable Living Trust 3,000 3,000 0
Shirley B. Itin TTEE Whitney Lynn
Hebard Irrevocable Living Trust 3,000 3,000 0
19
<PAGE>
Shares
Convertible Placement Owned After
Preferred Agent's Total Completion
Selling Securityholder Shares Stock Warrants Other Options Shares of the Offer
- ---------------------- ------------ ----------- ----------- ------------- ------------ ------------
Shirley B. Itin TTEE Wyatt Otto Itin
Irrevocable Living Trust 3,000 3,000 0
Thomas W. Itin 750,000 750,000 0
Timothy S. Itin 5,000 50,000 55,000 0
Timothy S. Itin Irrevocable Living
Trust 85,000 85,000 0
Jemautco, Inc. 90,909 90,909 0
David A. Jonas 3,636 3,636 0
Howard Kalka 9,091 9,091 0
Lawrence Kane 3,636 3,636 0
Cecelia King 10,560 10,560 0
Jeremy Kisner 9,091 9,091 0
Willis V. Kittleman, Jr. DDS PC 15,000 15,000 0
William E. Kuntz 10,910 10,910 0
Brian S. and Debra L. Larson 14,545 14,545 0
Stanley Latimer 10,560 10,560 0
Kenward Lawson 200 200 0
Gustave L. Levinson 18,182 18,182 0
Ronald N. and Elizabeth Magruder 36,364 36,364 0
Robert Main 3,636 3,636 0
William P. Mallone 2,500 2,500 0
Joseph A. Martha 3,636 3,636 0
Robert A. Maurin, III 10,909 10,909 0
Merrill Lynch, Custodian for
Raybourne Thompson, Jr. 36,364 36,364 0
20
<PAGE>
Shares
Convertible Placement Owned After
Preferred Agent's Total Completion
Selling Securityholder Shares Stock Warrants Other Options Shares of the Offer
- ---------------------- ------------ ----------- ----------- ------------- ------------ ------------
Merrill Lynch, Custodian for
Spangler Candy Company Capital 54,545 54,545 0
Microcap Partners, L.P. 69,636 69,636 0
MLPF&S FBO James M. Vickers IRA
FBO James M. Vickers 36,364 36,364 0
Donald V. Moline 1,818 1,818 0
Harrison Mitchell 3,636 3,636 0
John V. Moynes 2,182 2,182 0
Steven J. Mucciolo 300 300 0
Charles F. Nelson 10,909 10,909 0
Northridge Partners, Crestar
Bank, Custodian 72,727 72,727 0
Richard V. Nuttall 3,636 3,636 0
Richard Oh 4,250 4,250 0
John L. and Maria Palazzola 18,182 18,182 0
Vincent Palmieri 2,000 2,000 0
Lynn M. Parry IRA Rollover
Crestar Bank, Custodian 3,636 3,636 0
James Pendulik 3,636 3,636 0
Sandra K. Peruski 6,000 6,000 0
Phronesis Partners, L.P. 139,455 139,455 0
Kenneth Plotkin 9,818 9,818 0
R&D Investment Partnership, L.P. 109,091 109,091 0
Michael E. Recca 35,000 35,000 0
Karl C. Reeves 1,500 1,500 0
Joseph F. Regan 7,273 7,273 0
21
<PAGE>
Shares
Convertible Placement Owned After
Preferred Agent's Total Completion
Selling Securityholder Shares Stock Warrants Other Options Shares of the Offer
- ---------------------- ------------ ----------- ----------- ------------- ------------ ------------
Rush Holdings, Inc. 225,000 225,000 0
Samuel Leonard Trust 3,636 3,636 0
Robert Sanville 3,636 3,636 0
Richard E. and Janet E. Saunders 7,273 7,273 0
Christopher C. Schreiber 7,273 13,250 20,523 0
Robert C. Schroeder 1,500 1,500 0
Shadow Capital, LLC 54,545 54,545 0
SICO - A Michigan Co-Partnership 400,000 400,000 0
Valdemar A. Skov 3,636 3,636 0
Gordon Souaid 7,273 7,273 0
Robert G. Souaid 10,909 10,909 0
Sharon Stauber 3,636 3,636 0
Arthur D. Sterling 36,364 36,364 0
Michael A. Stern 350 350 0
James Tadych 18,182 18,182 0
Michael N. Taglich 47,272 29,750 77,022 0
Robert F. Taglich 54,545 29,750 84,295 0
Technology Licensing Corporation 20,000 20,000 0
Thirteen Pines Partnership 18,182 18,182 0
Christopher J. Thompson 350 350 0
TICO - A Michigan Co-Partnership 1,742,000 1,742,000 0
Morton L. Topfer 72,727 72,727 0
Wafgal Limited 3,636 3,636 0
Wechsler & Co., Inc. 36,364 36,364 0
William and Elizabeth A. Wieck 9,091 9,091 0
James Wilen 36,364 36,364 0
22
<PAGE>
Shares
Convertible Placement Owned After
Preferred Agent's Total Completion
Selling Securityholder Shares Stock Warrants Other Options Shares of the Offer
- ---------------------- ------------ ----------- ----------- ------------- ------------ ------------
James Wilen IRA, Crestar
Bank, Custodian 18,182 18,182 0
Benjamin Williamowsky, IRA,
Crestar Bank, Custodian 9,091 9,091 0
Williams Controls, Inc. Retirement
Income Plan 15,000 15,000 0
Wolfson Equities 19,564 19,564 0
Clarence H. Yahn 30,000 30,000 0
York Road Anesthesia Association
Defined Constitution Plan 3,636 3,636 0
Paul Zwick 31,695 31,695 0
Totals 6,572,715 2,909,091 203,637 1,200,000 10,885,443 0
</TABLE>
23
<PAGE>
PLAN OF DISTRIBUTION
--------------------
The Shares, from time to time, may be offered for sale either directly by the
Selling Securityholders or by their pledgees, donees, transferrees or other
successors in interest. Such sales may be made in the over-the-counter market or
in negotiated transactions. Sales of Shares in the over-the-counter market may
be by means of one or more of the following: (a) a block trade in which a broker
or dealer will attempt to sell the Shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (b) purchase by
a dealer as principal and resale by such dealer for its account pursuant to this
Prospectus; and (c) ordinary brokerage transactions and transactions in which
the broker solicits purchasers. In effecting sales, brokers or dealers engaged
by the Selling Securityholders may arrange for other brokers or dealer to
participate. In addition, any securities covered by this Prospectus which
qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than
pursuant to this Prospectus.
The Selling Securityholders have agreed to proportionately reduce their Shares
offered hereby if an underwriter of the Company's securities determines that the
total amount of Common Stock to be included in the offering exceeds the amount
which the underwriter deems to be appropriate for the Offering. In addition, the
Selling Securityholders have agreed not to sell the Shares offered hereby during
the time of any distribution of the Company's securities or while the Company is
repurchasing its securities if sales by the Selling Securityholders during such
times would violate federal securities laws.
Except as set forth above, the Selling Securityholders have advised the Company
that they have made no arrangement or agreements with any underwriters, brokers
or dealers regarding the resale of the Shares prior to the effective date of
this Prospectus. The Selling Securityholders may pay commissions or allow
discounts to any brokers or dealers participating in the resale of the Shares,
which commissions or discounts may be less than or in excess of the customary
rates of such brokers or dealers for similar transactions. The Shares will be
sold at market prices prevailing at the time of sale or at negotiated prices
which will be not less than prevailing market prices.
The Selling Securityholders that participate in sales of the Shares and any
underwriters, brokers or dealers engaged by them may be deemed underwriters, and
any profits on sales of the Shares by them and any discounts, commissions or
concessions received by any Selling Securityholder or underwriter, broker or
dealer may be deemed to be underwriting discounts or commissions under the
Securities Act.
Upon the Company being notified by a Selling Securityholder that any material
arrangement has been entered into with an underwriter, broker or dealer for the
sale of the Shares through a secondary distribution or a purchase by an
underwriter, broker or dealer, a supplemented prospectus will be filed, if
required, disclosing such of the following information as the Company believes
appropriate: (i) the name of each such Selling Securityholder and of the
participating underwriter, broker or dealer; (ii) the number of Shares involved;
(iii) the price at which such Shares were sold; (iv) the commissions paid or
discounts or concessions allowed to such underwriter, broker or dealer and (v)
other facts material to the transaction.
24
<PAGE>
The Company has agreed to indemnify the Selling Securityholders, and the Selling
Securityholders have agreed to indemnify the Company, against certain civil
liabilities, including liabilities under the Securities Act.
The Company is offering the Shares to the holders of the Warrants and the
Convertible Preferred Stock and will amend or supplement this Prospectus, from
time to time, to reflect the exercise of Warrants and the Convertible Preferred
Stock by the holders thereof and to permit the public sale of the Shares.
The Company is unable to predict the effect which sales of the Shares offered
hereby might have upon the Company's ability to raise further capital.
The Company will pay all of the expenses incident to the offering and sale of
the Shares to the public other than commissions and discounts of underwriters,
dealers or agents.
In order to comply with certain states' securities laws, if applicable, the
Shares will be sold in such jurisdictions only through registered or licensed
brokers or dealers. In addition, in certain states, the Shares may not be sold
unless they have been registered or qualified for sale in such states or an
exemption from registration or qualification is available and complied with.
INDEMNIFICATION PROVIDED IN CONNECTION WITH
THE OFFERING BY THE SELLING SECURITYHOLDERS
-------------------------------------------
The placement agent for and investors in the private placements of the Company's
securities occurring in April 1998, and the Selling Securityholders have agreed
to indemnify, to the extent permitted by law, the Company, its directors, its
officers and each person who controls the Company (within the meaning of the
Securities Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of material fact or any
omission or alleged omission of a material fact required to be stated in a
registration statement, prospectus, private placement memorandum or any
amendment thereof or supplement thereto or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) no misleading, in each case to the extent, but only to the
extent, that any such loss, liability, claim, damage or expense arises out of or
is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity with written
information or affidavits relating to such investors or the placement agent
furnished to the Company for use therein.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Commission, such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
25
<PAGE>
LEGAL MATTERS
-------------
The legality of the shares of Common Stock being offered will be passed on for
the Company by Friedlob Sanderson Raskin Paulson & Tourtillott, LLC, Denver,
Colorado.
EXPERTS
-------
The audited consolidated financial statements and schedule of Williams Controls,
Inc. and subsidiaries incorporated herein by reference have been so incorporated
in reliance upon the report of Horwath Gelfond Hochstadt Pangburn & Co., Denver,
Colorado, independent certified public accountants, given upon their authority
as experts in accounting and auditing.
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS.
ANY INFORMATION OR REPRESENTATIONS NOT HEREIN CONTAINED, IF GIVEN OR MADE, MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN RESPECT TO THESE SECURITIES IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
DELIVERY OF THIS PROSPECTUS SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE OF THIS PROSPECTUS. HOWEVER, IN THE EVENT OF A MATERIAL CHANGE, THIS
PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.
26
<PAGE>
TABLE OF CONTENTS WILLIAMS CONTROLS, INC.
----------------- -----------------------
AVAILABLE INFORMATION.....................
PROSPECTUS SUMMARY........................
10,885,443 SHARES OF COMMON STOCK,
$.01 PAR VALUE, INCLUDING
PROSPECTUS SUMMARY....................... 2,909,091 SHARES UNDERLYING
CONVERTIBLE PREFERRED STOCK, AND
1,403,637 SHARES UNDERLYING
STOCK PURCHASE WARRANTS
AND OPTIONS
RISK FACTORS.............................
USE OF PROCEEDS.......................... July ___, 1998
SELLING SHAREHOLDERS.....................
PLAN OF DISTRIBUTION.....................
_____________________
LEGAL MATTERS............................
PROSPECTUS
EXPERTS.................................. _____________________
27
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
--------------------------------------------
The following is an itemization of all expenses (subject to future
contingencies) incurred or to be incurred by the Company in connection with the
issuance and distribution of the securities being offered. All expenses are
estimated except the registration fee.
Registration and filing fee $ 918
NASD listing fee 7,500
Printing 500
Accounting fees and expenses 3,000
Legal fees and expenses 3,000
Blue sky filing fees and expenses 0
Transfer and Warrant Agent fees 4,000
Miscellaneous 582
--------
Total $ 19,500
========
Item 15. Indemnification of Directors and Officers.
------------------------------------------
Indemnification Provided Under the Company's Articles of Incorporation
Section 145 of the Delaware General Corporation Law and Article Ninth of
the Company's Certificate of Incorporation provides for, under certain
circumstances, the indemnification of the Company's officers, directors,
employees and agents against liabilities which they may incur in such
capacities. A summarization of the circumstances in which such indemnifications
provided for is contained herein, but that description is qualified in its
entirety by reference to Article Ninth of the Company's Certificate of
Incorporation and the relevant Section of the Delaware General Corporation Law.
In general, the statute provides that any director, officer, employee or
agent of a corporation may be indemnified against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and reasonably
incurred in a proceeding (including any civil, criminal, administrative or
investigative proceeding) to which the individual was a party by reason of such
status. Such indemnity may be provided if the indemnified person's actions
resulting in the liabilities: (i) were taken in good faith; (ii) were reasonably
believed to have been in or not opposed to the Company's best interest; and
(iii) with respect to any criminal action, such person had no reasonable cause
to believe the actions were unlawful. Unless ordered by a court, indemnification
generally may be awarded only after a determination of independent members of
the Board of Directors or a committee thereof, by independent legal counsel or
by vote of the stockholders that the applicable standard of conduct was met by
the individual to be indemnified.
II-1
<PAGE>
The statutory provisions further provide that to the extent a director,
officer, employee or agent is wholly successful on the merits or otherwise in
defense of any proceeding to which he was a party, he is entitled to receive
indemnification against expenses, including attorneys' fees, actually and
reasonably incurred in connection with the proceeding.
Indemnification in connection with a proceeding by or in the right of the
Corporation in which the director, officer, employee or agent is successful is
permitted only with respect to expenses, including attorneys' fees actually and
reasonably incurred in connection with the defense. In such actions, the person
to be indemnified must have acted in good faith, in a manner believed to have
been in the Company's best interest and must not have been adjudged liable to
the Company unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability, in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expense which the Court of Chancery or such other court shall deem proper.
Indemnification is otherwise prohibited in connection with a proceeding brought
on behalf of the Company in which a director is adjudged liable to the Company,
or in connection with any proceeding charging improper personal benefit to the
director in which the director is adjudged liable for receipt of an improper
personal benefit.
Delaware law authorizes the Company to reimburse or pay reasonable expenses
incurred by a director, officer, employee or agent in connection with a
proceeding in advance of a final disposition of the matter. Such advances of
expenses are permitted if the person furnishes to the Company a written
agreement to repay such advances if it is determined that he is not entitled to
be indemnified by the Company.
The statutory section cited above further specifies that any provisions for
indemnification of or advances for expenses does not exclude other rights under
the Company's Certificate of Incorporation, Bylaws, resolutions of its
stockholders or disinterested directors, or otherwise. These indemnification
provisions continue for a person who has ceased to be a director, officer,
employee or agent of the corporation and inure to the benefit of the heirs,
executors and administrators of such persons.
The statutory provision cited above also grants the power to the Company to
purchase and maintain insurance policies which protect any director, officer,
employee or agent against any liability asserted against or incurred by him in
such capacity arising out of his status as such. Such policies may provide for
indemnification whether or not the corporation would otherwise have the power to
provide for it. No such policies providing protection against liabilities
imposed under the securities laws have been obtained by the Company.
Article VIII of the Company's Bylaws provides that the Company shall
indemnify its directors, officers, employees and agents to the fullest extent
permitted by the Delaware General Corporation Law. In addition, the Company has
entered into agreements with its directors indemnifying them to the fullest
extent permitted by the Delaware General Corporation Law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
-------------------------------------------
(a) Exhibits. The following is a complete list of exhibits filed
as a part of this Registration Statement:
Exhibit
Number Description
- ------ -----------
3.1 Certificate of Incorporation of the Registrant as amended.
(Incorporated by reference to Exhibit 3.1 to the Registrant's annual
report on Form 10-K for the fiscal year ended September 30, 1995 (the
"1995 Form 10-K"))
3.2 Bylaws of the Registrant. (Incorporated by reference to Exhibit 3.2 to
the Registrant's Registration Statement on Form S-18, Registration No.
33-30601-S, as filed with the Commission on August 18, 1989 (the "1989
Form S-18"))
4.1 Specimen Unit Certificate (including Specimen Certificate for shares
of Common Stock). (Incorporated by reference to Exhibits 1.1 and 1.2
to the Registrant's Registration Statement on Form 8-A, Commission
File No. 0-18083, filed with the Commission on November 1, 1989)
4.2 Form of Placement Agent's Warrant Agreement. FILED HEREWITH.
5.1 Opinion of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC. FILED
HEREWITH.
10.1(a) Indemnification Agreement for Thomas W. Itin ("Itin Indemnification
Agreement"). (Incorporated by reference to Exhibit 10.9 to the 1989
Form S-18)
10.1(b) Amendment No. 1 to Itin Indemnification Agreement. (Incorporated by
reference to Exhibit 10.1(b) to the Registrant's Annual Report on Form
10-K for the fiscal year ended September 30, 1993 (the "1993 Form
10-K"))
10.1(c) Form of Indemnification Agreement for R. William Caldwell, H.
Samuel Greenawalt and Timothy Itin. (Incorporated by reference to
Exhibit 10.1(c) to the Registrant's 1993 Form 10-K)
II-3
<PAGE>
Exhibit
Number Description
- ------ -----------
10.2(a) Credit Agreement dated July 11, 1997 among Registrant and its
subsidiaries and Ajay Sports, Inc. ("Ajay") and its subsidiaries, all
as borrowers, and Wells Fargo Bank, National Association, as lender
(the "Credit Agreement"). (Incorporated by reference to Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q for the period ended
June 30, 1997 (the "June 1997 Form 10-Q"))
10.2(b) First Amendment to the Credit Agreement dated June 30, 1998.
(Incorporated by reference to Exhibit 10.1 to the Registrant's Current
Report on Form 8-K filed July 15, 1998.)
10.2(c) Promissory Notes under the Credit Agreement:
(a) Revolving Credit Loans Promissory Note
(b) Term Loan I Promissory Note
(c) Term Loan II Promissory Note
(d) Real Estate Loan Promissory Note
(All incorporated by reference to Exhibit 10.2 to the
Registrant's June 1997 Form 10-Q)
10.2(d) Mortgage and Security Agreement between Aptek Williams, Inc. and
Wells Fargo Bank. (Incorporated by reference to Exhibit 10.3 to the
Registrant's June 1997 Form 10-Q)
10.2(e) Patent Assignment and Security Agreements for:
(a) Williams Controls Industries, Inc.
(b) Kenco Williams, Inc.
(c) Hardee Williams, Inc.
(d) Aptek Williams, Inc.
(All incorporated by reference to Exhibit 10.4 to the
Registrant's June 1997 Form 10-Q)
10.2(f) Trademark Security Agreements for:
(a) Agrotec Williams, Inc.
(b) Hardee Williams, Inc.
(c) Kenco Williams, Inc.
(All incorporated by reference to Exhibit 10.5 to the
Registrant's June 1997 Form 10-Q)
10.2(g) Continuing Unconditional Guaranty of Thomas W. Itin in favor of
Wells Fargo Bank. (Incorporated by reference to Exhibit 10.6 to the
June 1997 Form 10-Q)
10.3(a) Intercreditor Agreement dated July 11, 1997 among Registrant and
subsidiaries, Ajay Sports, Inc. and subsidiaries, United States
National Bank of Oregon ("US Bank"), Thomas W. Itin and Wells Fargo
Bank, National Association. (Incorporated by reference to Exhibit 10.7
to the Registrant's June 1997 Form 10-Q)
II-4
<PAGE>
Exhibit
Number Description
- ------ -----------
10.3(b) Consent, Reaffirmation and Release Agreement with US Bank.
(Incorporated by reference to Exhibit 10.8 to the Registrant's June
1997 Form 10-Q)
10.3(c) Promissory Note of Ajay for $2,340,000 to US Bank. (Incorporated by
reference to Exhibit 10.9 to the Registrant's June 1997 Form 10-Q)
10.3(d) Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing by Aptek Williams, Inc. in favor of US Bank. (Incorporated by
reference to Exhibit 10.10 to the Registrant's June 1997 Form 10-Q)
10.3(e) Guaranty to US Bank. (Incorporated by reference to Exhibit 10.11 to
the Registrant's June 1997 Form 10-Q)
10.4 The Company's 1995 Stock Option Plan for Non-Employee Directors.
(Incorporated by referenced to Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the period ended March 31, 1995 (the
"March 1995 Form 10-Q")
10.5 Williams/Ajay Loan and Joint Venture Implementation Agreement dated
May 6, 1994, as amended by letter agreement dated April 3, 1995.
(Incorporated by reference to Exhibit 10.4 to the Registrant's March
1995 Form 10-Q)
10.6(a) Mortgage and Security Agreement, dated August 31, 1988, by
Sparkomatic Corporation in favor of MetLife Capital Credit
Corporation. (Incorporated by reference to Exhibit 10.7(a) to the
Registrant's 1993 Form 10-K)
10.6(b) Mortgage Note in the principal amount of $1,700,000, dated August
31, 1988, from Sparkomatic Corporation to MetLife Capital Credit
Corporation. (Incorporated by reference to Exhibit 10.7(b) to the
Registrant's 1993 Form 10-K)
10.6(c) Loan Assumption, Modification and Extension Agreement (the
"Assumption Agreement"), dated August 12, 1993, among Kenco Williams,
Inc., Sparkomatic Corporation and MetLife Capital Corporation and the
Guaranty given by Williams to MetLife to guaranty the obligations of
Kenco Williams, Inc. to MetLife thereunder. (Incorporated by reference
to Exhibit 10.9 to the Registrant's Post-Effective Amendment No. 1, as
filed with the Commission on September 23, 1993, on Form S-3 to the
1989 Form S-18 (the "Post-Effective Amendment"))
10.6(d) Guaranty dated as of March 31, 1994 made by the Registrant in favor
of MetLife Capital Corporation. (Incorporated by reference to Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for the period
ended March 31, 1994)
II-5
<PAGE>
Exhibit
Number Description
- ------ -----------
10.7(a) Guaranty dated as of October 2, 1995 by Thomas W. Itin to the
Registrant (the "Itin Guaranty"). (Incorporated by reference to
Exhibit 10.9 to the Registrant's 1995 Form 10-K)
10.7(b) Amendment One to the Itin Guaranty. (Incorporated by reference to
Exhibit 10.7(b) to the Registrant's Annual Report on Form 10-K for the
period ended September 30, 1997 (the "1997 Form 10-K")
10.7 (c) Amendment Two to the Itin Guaranty. TO BE FILED BY AMENDMENT.
10.8 Security Agreement between Ajay and its subsidiaries, as debtors, and
the Registrant and its subsidiaries, as secured parties. (Incorporated
by reference to Exhibit 10.8 to the 1997 Form 10-K)
21.1 List of Subsidiaries. See Item 1 in this report
23.1 Consent of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC.
See Exhibit 5.1
23.2 Consent of Horwath Gelfond Hochstadt Pangburn & Co. FILED HEREWITH.
24.1 Power of Attorney. See signature page of this Registration Statement
Item 17. Undertakings.
-------------
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration, by means of a post-effective amendment,
any of the securities being registered which remain unsold at the
termination of the offering.
4. That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Company's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to the initial bona
fide offering thereof.
II-6
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of West Bloomfield, State of Michigan, on July 17,
1998.
WILLIAMS CONTROLS, INC.
By /s/ Thomas W. Itin
-----------------------
Thomas W. Itin,
President, Chairman and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and/or
directors of Williams Controls, Inc., by virtue of their signatures appearing
below, hereby constitute and appoint Thomas W. Itin, with full power of
substitution, as attorney-in-fact in their names, places and steads, to execute
any and all amendments to this Registration Statement on Form S-3 in the
capacities set forth opposite their names below and hereby ratify all that said
attorney-in-fact may do by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ Thomas W. Itin Principal Executive July 17, 1998
------------------------ Officer and Director
Thomas W. Itin
/s/ Gerard A. Herlihy Principal Financial July 17, 1998
------------------------ and Administrative
Gerard A. Herlihy Officer
/s/ William N. Holmes Corporate Controller July 17, 1998
------------------------ and Principal
William N. Holmes Accounting Officer
Director July ___, 1998
------------------------
R. William Caldwell
Director July ___, 1998
------------------------
H. Samuel Greenawalt
/s/ Timothy S. Itin Director July 17, 1998
------------------------
Timothy S. Itin
II-7
<PAGE>
EXHIBIT 23.2
CONSENT OF HORWATH GELFOND HOCHSTADT PANGBURN & CO.
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form S-3 of Williams Controls, Inc., of our reports dated December 18, 1997,
relating to the consolidated balance sheets of Williams Controls, Inc. and
subsidiaries as of September 30, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
years in the three-year period ended September 30, 1997, and the related
financial statement schedule, which reports appear in the September 30, 1997
annual report on Form 10-K of Williams Controls, Inc. and to the reference to
our Firm under the caption "Experts" in the Prospectus.
HORWATH GELFOND HOCHSTADT PANGBURN & CO.
Denver, Colorado
July 15, 1998
<PAGE>
July 17, 1998
via EDGAR
Securities and Exchange Commission
ATTN: Filing Desk
450 Fifth Street, NW
Judiciary Plaza
Washington, DC 20549
Re: Williams Controls, Inc. (the "Registrant")
Ladies and Gentlemen:
Transmitted with this letter for filing on behalf of the Registrant is one
conformed copy of a Registration Statement on Form S-3 covering the resale of
certain shares of the Registrant's common stock by certain selling
securityholders (the "Registration Statement"). Manually executed signature
pages and consents have been executed prior to the time of this filing and will
be retained by the Registrant in accordance with Rule 302 of Regulation S-T.
If you have any questions, please call the undersigned or Gerald Raskin at
(303) 571-1400.
Sincerely,
/s/ Seth Weiss
Seth Weiss
For the Firm
Attachments
cc: Thomas W. Itin, Chief Executive Officer, Williams Controls, Inc.
Don Pangburn, Horwath Gelfond Hochstadt Pangburn & Co.
The National Association of Securities Dealers, Inc.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED ("1933 ACT") OR ANY STATE SECURITIES LAWS AND SHALL NOT
BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED, WHETHER OR
NOT FOR CONSIDERATION, BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF
A FAVORABLE OPINION OF ITS COUNSEL OR THE SUBMISSION TO THE COMPANY OF SUCH
OTHER EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL FOR THE COMPANY, IN EITHER
CASE, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE 1933
ACT AND APPLICABLE STATE SECURITIES LAWS.
WILLIAMS CONTROLS, INC.
Common Stock Purchase Warrant
to
Purchase 35,000 Shares
of
Common Stock
This Common Stock Purchase Warrant is issued to:
_______________________
c/o Taglich Brothers, D'Amadeo, Wagner & Company, Incorporated
100 Wall Street
10th Floor
New York, NY 10005
by WILLIAMS CONTROLS, INC., a Delaware corporation (hereinafter called the
"Company", which term shall include its successors and assigns).
FOR VALUE RECEIVED and subject to the terms and conditions hereinafter set
out, the registered holder of this Warrant as set forth on the books and records
of the Company (the "Holder") is entitled upon surrender of this Warrant to
purchase from the Company Thirty-Five Thousand (35,000) fully paid and
nonassessable shares of Common Stock, $.01 par value (the "Common Stock"), at
the Exercise Price (as defined below) per share.
This Warrant shall expire at the close of business on April 20, 2003.
1. (a) The right to purchase shares of Common Stock represented by this
Warrant may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company at 14100 S.W. 72nd Street, Portland, Oregon 97224 (or such other office
or agency of the Company as it may designate by notice in writing to the Holder
at the address of the Holder appearing on the books of the Company), and upon
payment to the Company, by cash or by certified check or bank draft, of the
Exercise Price for such shares. The Company agrees that the shares of Common
Stock so purchased shall be deemed to be issued to the Holder as the record
owner of such shares of Common Stock as of the close of business on the date on
which this Warrant shall have been surrendered and payment made for such shares
of Common Stock as aforesaid. Certificates for the shares of Common Stock so
purchased (together with a cash adjustment in lieu of any fraction of a share)
shall be delivered to the Holder within a reasonable time, not exceeding five
(5) business days, after the rights represented by this Warrant shall have been
so exercised, and, unless this Warrant has expired, a new Warrant representing
the number of shares of Common Stock, if any, with respect to which this Warrant
shall not then have been exercised, in all other respects identical with this
Warrant, shall also be issued and delivered to the Holder within such time, or,
at the request of the Holder, appropriate notation may be made on this Warrant
and the same returned to the Holder.
<PAGE>
(b) This Warrant may be exercised to acquire, from and after the date
hereof, the number of shares of Common Stock set forth on the first page
hereof; provided, however, the right hereunder to purchase such shares of
Common Stock shall expire at the close of business on April 20, 2003.
2. This Warrant is being issued by the Company to Taglich Brothers,
D'Amadeo, Wagner & Company, Incorporated ("Taglich Brothers"), or its designee,
pursuant to a Preferred Stock Placement Agreement between the Company and
Taglich Brothers dated as of April 17, 1998 (the "Placement Agreement"), whereby
the Company agreed to issue a five (5) year warrant exercisable at the Exercise
Price per share to Taglich Brothers, or its designee, equal to seven (7%)
percent of the total number of shares of Common Stock issuable upon the
conversion of the Series A 7-1/2% convertible redeemable preferred stock sold by
Taglich Brothers in a Private Placement pursuant to the Company's Confidential
Private Placement Memorandum dated April 12, 1998 (the "Memorandum").
3. The Company covenants and agrees that all Common Stock upon issuance
against payment in full of the Exercise Price by the Holder pursuant to this
Warrant will be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof; and, without
limiting the generality of the foregoing, the Company covenants and agrees that
it will take from time to time all such action as may be requisite to assure
that the par value per share of the Common Stock is at all times equal to or
less than the then effective Exercise Price. The Company further covenants and
agrees that during the period within which the rights represented by this
Warrant may be exercised, the Company will have at all times authorized, and
reserved for the purpose of issue or transfer upon exercise of the rights
evidenced by this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant, and will
procure at its sole expense upon each such reservation of shares the listing
thereof (subject to issuance or notice of issuance) on all stock exchanges on
which the Common Stock is then listed or inter-dealer trading systems on which
the Common Stock is then traded. The Company will take all such action as may be
necessary to assure that such shares of Common Stock may be so issued without
violation of any applicable law or regulation, or of any requirements of any
national securities exchange upon which the Common Stock may be listed or
inter-dealer trading system on which the Common Stock is then traded. The
Company will not take any action which would result in any adjustment in the
number of shares of Common Stock purchasable hereunder if the total number of
shares of Common Stock issuable pursuant to the terms of this Warrant after such
action upon full exercise of this Warrant and, together with all shares of
Common Stock then outstanding and all shares of Common Stock then issuable upon
exercise of all options and other rights to purchase shares of Common Stock then
outstanding, would exceed the total number of shares of Common Stock then
authorized by the Company's Certificate of Incorporation, as then amended.
2
<PAGE>
4. The Initial Exercise Price is $3.30 per share of Common Stock ("Initial
Exercise Price"). The Initial Exercise Price shall be adjusted as provided for
below in this Section 4 (the Initial Exercise Price, and the Initial Exercise
Price, as thereafter then adjusted, shall be referred to as the "Exercise
Price") and the Exercise Price from time to time shall be further adjusted as
provided for below in this Section 4. Upon each adjustment of the Exercise
Price, the Holder shall thereafter be entitled to receive upon exercise of this
Warrant, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock obtained by (i) multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
purchasable hereunder immediately prior to such adjustment, and (ii) dividing
the product thereof by the Exercise Price resulting from such adjustment. The
Exercise Price shall be adjusted as follows:
(i) In the case of any amendment to the Certificate of Incorporation
of the Company to change the designation of the Common Stock or the rights,
privileges, restrictions or conditions in respect to the Common Stock or
division of the Common Stock, this Warrant shall be adjusted so as to
provide that upon exercise thereof, the Holder shall receive, in lieu of
each Common Stock theretofore issuable upon such exercise, the kind and
amount of shares, other securities, money and property receivable upon such
designation, change or division by the Holder issuable upon such exercise
had the exercise occurred immediately prior to such designation, change or
division. This Warrant shall be deemed thereafter to provide for
adjustments which shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 4. The provisions of this
Subsection 4(i) shall apply in the same manner to successive
reclassifications, changes, consolidations and mergers.
(ii) If the Company shall at any time subdivide its outstanding shares
of Common Stock into a greater number of shares of Common Stock, or declare
a dividend or make any other distribution upon the Common Stock payable in
shares of Common Stock, the Exercise Price in effect immediately prior to
such subdivision or dividend or other distribution shall be proportionately
reduced, and conversely, in case the outstanding shares of Common Stock
shall be combined into a smaller number of shares of Common Stock, the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased.
(iii) In case the Company shall issue or otherwise sell or distribute
shares of Common Stock for a consideration per share in cash or property,
or the Company shall issue options or warrants to purchase Common Stock
(other than options granted pursuant to the Company's stock option plans
existing on the date of the Memorandum) that are exercisable at, or the
Company shall issue or otherwise sell or distribute rights to subscribe for
or securities convertible into or exchangeable for Common Stock, at a price
less than the then effective Exercise Price, the Exercise Price then in
effect shall automatically be reduced by multiplying the then Exercise
Price by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to such issuance, sale or
distribution plus the number of shares of Common Stock which the aggregate
consideration received or to be received by the Company for such issuance,
sale or distribution (such consideration, if other than cash, as determined
by the Board of Directors including a majority of the Directors who are not
officers or employees of the Company or any of its subsidiaries, whose
determination shall be conclusive and described in a resolution of the
Board of Directors) would purchase at the Exercise Price per share, and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately after giving effect to such issuance, sale or
distribution. Notwithstanding anything herein to the contrary, no
adjustment shall be made to the Exercise Price upon: (i) the exercise of
any outstanding options, warrants or other rights to purchase Common Stock
or upon conversion of any securities or other rights convertible into
Common Stock, which options, warrants, securities or other rights were
outstanding prior to April 17, 1998; or (ii) the issuance, sale or
distribution of 500,000 or less shares of Common Stock in any one
transaction or (regardless of price) and 750,000 shares of Common Stock in
the aggregate (regardless of price), after which such totals are reached
the provisions of this subsection (c) relating to the reduction of the
Exercise Price shall apply.
3
<PAGE>
(iv) In case the Company shall issue or otherwise sell or distribute
shares of Common Stock for a consideration per share in cash or property
less than the lesser of the Exercise Price then in effect or the Market
Price (as defined below), the Exercise Price then in effect shall be
reduced by multiplying such Exercise Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance, sale or distribution plus the number of shares of
Common Stock which the aggregate consideration received by the Company for
such issuance, sale or distribution (such consideration, if other than
cash, as reasonably determined by the Board of Directors of the Company
including a majority of the Directors who are not officers or employees of
the Company or any of its Subsidiaries, whose determination shall be
described in a resolution of the Board of Directors) would purchase at the
Exercise Price per share and the denominator shall be the number of shares
of Common Stock outstanding immediately after giving effect to such
issuance, sale or distribution. The term "Market Price" shall mean the
average of the closing bid price for the Common Stock for the five (5)
consecutive trading days ending two (2) trading days prior to the relevant
date that the Company shall issue or otherwise sell or distribute shares of
Common Stock.
(iv) If any capital reorganization or reclassification of the capital
stock of the Company, or any consolidation or merger of the Company with
another corporation or entity, or the sale of all or substantially all of
the Companyss assets to another corporation or other entity shall be
effected in such a way that holders of shares of Common Stock shall be
entitled to receive stocks, securities, other evidence of equity ownership
or assets with respect to or in exchange for shares of Common Stock, then,
as a condition of such reorganization, reclassification, consolidation,
merger or sale (except as otherwise provided below in this Section 4),
lawful and adequate provisions shall be made whereby the Holder shall
thereafter have the right to receive upon the basis and upon the terms and
conditions specified herein, such shares of stock, securities, other
evidence of equity ownership or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the exercise of this Warrant under this
Section 4 had such reorganization, reclassification, consolidation, merger
or sale not taken place, and in any such case appropriate provisions shall
be made with respect to the rights and interests of the Holder to the end
that the provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price and of the number of shares of Common
Stock receivable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock,
securities, other evidence of equity ownership or assets thereafter
deliverable upon the exercise hereof (including an immediate adjustment, by
reason of such consolidation or merger, of the Exercise Price to the value
for the Common Stock reflected by the terms of such consolidation or merger
if the value so reflected is less than the Exercise Price in effect
immediately prior to such consolidation or merger). Subject to the terms of
this Warrant, in the event of a merger or consolidation of the Company with
or into another corporation or other entity as a result of which the number
of shares of common stock of the surviving corporation or other entity
issuable to holders of Common Stock of the Company, is greater or lesser
than the number of shares of Common Stock of the Company outstanding
immediately prior to such merger or consolidation, then the Exercise Price
in effect immediately prior to such merger or consolidation shall be
adjusted in the same manner as though there were a subdivision or
combination of the outstanding shares of Common Stock of the Company. The
Company shall not effect any such consolidation, merger or sale, unless,
prior to the consummation thereof, the successor corporation (if other than
the Company) resulting from such consolidation or merger or the corporation
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purchasing such assets shall assume by written instrument executed and
mailed or delivered to the Holder, the obligation to deliver to the Holder
such shares of stock, securities, other evidence of equity ownership or
assets as, in accordance with the foregoing provisions, the Holder may be
entitled to receive or otherwise acquire. If a purchase, tender or exchange
offer is made to and accepted by the holders of more than fifty (50%)
percent of the outstanding shares of Common Stock of the Company, the
Company shall not effect any consolidation, merger or sale with the Person
having made such offer or with any Affiliate of such Person, unless prior
to the consummation of such consolidation, merger or sale the Holder of
this Warrant shall have been given a reasonable opportunity to then elect
to receive upon the exercise of this Warrant the amount of stock,
securities, other evidence of equity ownership or assets then issuable with
respect to the number of shares of Common Stock of the Corporation in
accordance with such offer.
Whenever the Exercise Price shall be adjusted pursuant to this Section
4, the Company shall issue a certificate signed by its President or Vice
President and by its Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary, setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which
the Board of Directors of the Company made any determination hereunder),
and the Exercise Price after giving effect to such adjustment, and shall
cause copies of such certificates to be mailed (by first-class mail,
postage prepaid) to the Holder of this Warrant.
No fractional Common Stock shall be issued in connection with any
exercise of this Warrant, but in lieu of such fractional shares, the
Company shall make a cash payment therefor equal in amount to the product
of the applicable fraction multiplied by the Exercise Price then in effect.
5. In the event the Company grants rights to all shareholders to
purchase Common Stock, the Holder shall have the same rights as if this
Warrant had been exercised immediately prior to such grant.
6. The Holder shall, with respect to the shares of Common Stock
issuable upon the exercise of this Warrant, have the registration rights
and "piggy back" registration rights set forth in the Placement Agreement.
Such registration rights and "piggy back" registration rights are
incorporated herein by this reference as if such provisions had been set
forth herein in full.
7. This Warrant need not be changed because of any change in the
Exercise Price or in the number of shares of Common Stock purchased
hereunder.
8. The terms defined in this paragraph, whenever used in this Warrant,
shall, unless the context otherwise requires, have the respective meanings
hereinafter specified. The term "Common Stock shall mean and include the
Company's Common Stock, $0.01 par value per share, authorized on the date
of the original issue of this Warrant and shall also include in case of any
reorganization, reclassification, consolidation, merger or sale of assets
of the character referred to in paragraph 4 hereof, the stock, securities
or assets provided for in such paragraph. The term "Company" shall also
include any successor corporation to WILLIAMS CONTROLS, INC. by merger,
consolidation or otherwise. The term "outstanding" when used with reference
to Common Stock shall mean at any date as of which the number of shares
thereof is to be determined, all issued shares of Common Stock, except
shares then owned or held by or for the account of the Company. The term
"1933 Act" shall mean the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Securities
and Exchange Commission, or any other Federal agency then administering
such Securities Act, thereunder, all as the same shall be in effect at the
time.
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9. This Warrant is exchangeable, upon the surrender hereby by the
Holder at the office or agency of the Company, for new Warrants of like
tenor representing in the aggregate the right to subscribe for and purchase
the number of shares of Common Stock which may be subscribed for and
purchased hereunder, each of such new Warrants to represent the right to
subscribe for and purchase such number of shares of Common Stock as shall
be designated by the Holder at the time of such surrender. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant or any such new Warrants and, in the case of any
such loss, theft, or destruction, upon delivery of a bond of indemnity,
reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender or cancellation of this Warrant or such new
Warrants, the Company will issue to the Holder a new Warrant of like tenor,
in lieu of this Warrant or such new Warrants, representing the right to
subscribe for and purchase the number of shares of Common Stock which may
be subscribed for and purchased hereunder.
10. The Company agrees to use its best efforts to file timely all
reports required to be filed by it pursuant to Sections 13 or 15 of the
Securities Exchange Act of 1934, as amended, and to provide such
information as will permit the Holder to sell this Warrant or any shares of
Common Stock acquired upon exercise of this Warrant in accordance with Rule
144 under the 1933 Act.
11. The Company will at no time close its transfer books against the
transfer of this Warrant or of any shares of Common Stock issued or
issuable upon the exercise of this Warrant in any manner which interferes
with the timely exercise of this Warrant. This Warrant shall not entitle
the Holder to any voting rights or any rights as a stockholder of the
Company. The rights and obligations of the Company, of the Holder, and of
any holder of shares of Common Stock issuable hereunder, shall survive the
exercise of this Warrant.
12. This Warrant sets forth the entire agreement of the Company and
the Holder of the Common Stock issuable upon the exercise of this Warrant
with respect to the rights of the Holder and the Common Stock issuable upon
the exercise of this Warrant, notwithstanding the knowledge of such Holder
of any other agreement or the provisions of any agreement, whether or not
known to the Holder and the Company represents that there are no agreements
inconsistent with the terms hereof or which purport in any way to bind the
Holder of this Warrant or the Common Stock.
13. The validity, interpretation and performance of this Warrant and
each of its terms and provisions shall be governed by the laws of the State
of New York.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer under its corporate seal and dated as of
April 21, 1998.
WILLIAMS CONTROLS, INC.
By:_________________________
Gerard A. Herlihy,
Chief Financial Officer
[CORPORATE SEAL]
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July 15, 1998
Williams Controls, Inc.
14100 S.W. 72nd Avenue
Portland, Oregon 97224
RE: Registration Statement on Form S-3
Opinion of Counsel
Gentlemen:
As counsel for Williams Controls, Inc., a Delaware corporation (the
"Corporation"), we have examined the Certificate of Incorporation, as amended,
the Bylaws and Minutes of the Corporation and such other corporate records,
documents, certificates and other instruments as, in our judgment, we deemed
relevant for the purposes of this opinion. We have also, as such counsel,
examined the Registration Statement on Form S-3, Securities and Exchange
Commission File No. 333-_____, as amended to date (the "Registration
Statement"), covering the resale by certain Selling Securityholders named in the
Registration Statement (the "Selling Securityholders") of shares of the
Corporation's Common Stock, par value $.01 per share (the "Common Stock")
included in the Registration Statement and shares of Common Stock which may be
issued to the Selling Securityholders upon the exercise of outstanding options
and warrants or the conversion of outstanding convertible preferred stock (the
"Underlying Shares").
Based upon the foregoing, we are of the opinion that (i) the Common Stock
to be sold by the Selling Securityholders constitutes legally issued, fully paid
and nonassessable shares of Common Stock, (ii) the Underlying Shares, upon
exercise or conversion according to the terms of the respective option or
warrant agreement or certificate of designations, rights and preferences for the
convertible preferred stock, and payment of the applicable exercise or
conversion price, will be legally issued, fully paid and nonassessable shares of
Common Stock.
We know that we are referred to under the caption "Legal Matters" included
in the Prospectus forming a part of the Registration Statement. We hereby
consent to such use of our name in the Registration Statement and to the filing
of this opinion as Exhibit 5.1 thereto. In giving this consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the Rules
and Regulations of the Securities and Exchange Commission promulgated
thereunder.
Very truly yours,
/s/ Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
