<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the quarterly period
ended March 31, 1999
Commission file number 0-22924
HILITE INDUSTRIES, INC.
(Exact name of registrant specified in its charter)
Delaware 75-2147742
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
1671 S. Broadway
Carrollton, Texas 75006
(Address of principal (Zip code)
executive offices)
(972) 466-0475
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of May 3, 1999, the Company had 4,900,000 shares of Common
Stock outstanding.
<PAGE>
HILITE INDUSTRIES, INC.
FORM 10-Q FOR THE QUARTER AND NINE MONTHS ENDED MARCH 31, 1999
INDEX
Page
Part I FINANCIAL STATEMENTS
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as
of March 31, 1999 and
June 30, 1998 3
Consolidated Statements of
Operations for the Three and
Nine Months Ended
March 31, 1999 and 1998 4
Consolidated Statements of
Cash Flows for the Nine
Months Ended March 31, 1999
and 1998 5
Notes to Interim Consolidated
Financial Statements 6
Item 2. Management's Discussion and
Analysis of Financial
Condition and Results of
Operations 9
Part II. OTHER INFORMATION 14
<PAGE>
<TABLE>
HILITE INDUSTRIES, INC.
Consolidated Balance Sheets
March 31, June 30,
<S> 1999 1998
ASSETS <C> <C>
Current assets:
Cash and cash equivalents $ - $ -
Accounts receivable, less allowance
for doubtful accounts of
$250,620 and $193,015 at March 31, 1999
and June 30, 1998 respectively 16,347,027 11,289,779
Tooling receivable 591,700 716,700
Inventories 10,025,765 9,927,849
Income tax receivable - 542,188
Deferred income taxes 1,817,012 1,817,012
Assets held for disposal - 532,533
Prepaid expenses and other current assets 474,956 1,015,764
Total current assets 29,256,460 25,841,825
Property, plant and equipment 46,398,659 43,538,367
Less accumulated depreciation and
amortization (18,556,512) (15,921,909)
Property, plant and equipment, net 27,842,147 27,616,458
Goodwill, net of accumulated
amortization 3,727,068 3,898,209
TOTAL ASSETS $60,825,675 $ 57,356,492
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $10,672,772 $ 12,849,981
Long-term debt - current portion 2,542,945 2,422,945
Income taxes payable 1,380,531 -
Total current liabilities 14,596,248 15,272,926
Long-term debt 13,170,014 12,956,896
Deferred income taxes 2,978,761 2,978,761
Total non-current liabilities 16,148,775 15,935,657
Stockholders' equity:
Preferred Stock, $.01 par value;
5,000,000 shares authorized, none
issued and outstanding. Common stock,
$.01 par value; 15,000,000 shares
authorized, 4,900,000 issued and
outstanding at March 31, 1999 and
June 30, 1998 49,000 49,000
Additional paid-in capital. 9,105,674 9,105,674
Retained earnings 20,925,978 16,993,235
Total stockholders' equity 30,080,652 26,147,909
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $60,825,675 $57,356,492
<FN>
The accompanying notes are an integral part of these interim
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
HILITE INDUSTRIES, INC.
Consolidated Statements of Operations
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales $ 25,630,565 $ 22,106,855 $ 68,213,758 $ 63,763,644
Cost of sales 19,935,407 17,592,124 53,594,629 50,962,220
Gross Profit 5,695,158 4,514,731 14,619,129 12,801,424
Selling, general and
administrative expenses 2,325,166 2,067,652 6,774,452 6,778,701
Operating income 3,369,992 2,447,079 7,844,677 6,022,723
Interest expense 280,461 186,759 970,272 986,777
Income before income
taxes 3,089,531 2,260,320 6,874,405 5,035,946
Income tax provision 1,147,684 797,393 2,576,407 1,842,315
Net income $ 1,941,847 $ 1,462,927 $ 4,297,998 $ 3,193,631
Per share data:
Basic earnings per share $ .40 $ .30 $ .88 $ .65
Diluted earnings per
share $ .39 $ .30 $ .87 $ .65
Shares used in computing
earnings per share:
Basic 4,900,000 4,900,000 4,900,000 4,900,000
Diluted 4,929,807 4,913,198 4,921,251 4,909,295
</TABLE>
<PAGE>
<TABLE>
HILITE INDUSTRIES, INC.
Consolidated Statements of Cash Flows
Nine Months Ended
March 31
<S> 1999 1998
Cash flows from operations: <C> <C>
Net income $ 4,297,998 $ 3,193,631
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation 2,692,283 2,530,898
Amortization 171,140 227,972
Cash provided from operations before
changes in operating assets and liabilities 7,161,421 5,952,501
Changes in operating assets and liabilities:
Increase in accounts receivable (5,057,248) (2,554,150)
(Increase) decrease in tooling receivable 125,000 (613,131)
Increase in inventories (97,916) (838,951)
(Increase) decrease in prepaid expenses
and other current assets 540,808 (76,966)
Increase (decrease) in accounts payable
and accrued expenses (2,352,933) 654,568
Increase in income taxes payable 1,922,719 376,049
Total changes in operating assets and
liabilities (4,919,570) (3,052,581)
Net cash provided by operations 2,241,851 2,899,920
Cash flows used in investing activities:
Additions to property, plant and equipment (2,532,469) (2,190,852)
Proceeds from sale of assets 325,000 -
Net cash used in investing activities (2,207,469) (2,190,852)
Cash flows from financing activities:
Payment of cash dividend (367,500) (245,000)
Proceeds from long-term debt 600,000 -
Repayment of long-term debt (1,857,209) (1,817,204)
Net increase in note payable 1,590,327 1,353,136
Net cash used in financing activities (34,382) (709,068)
Net change in cash and cash equivalents - -
Cash and cash equivalents at beginning of
period. - -
Cash and cash equivalents at end of period $ - $ -
<FN>
The accompanying notes are an integral part of these interim
consolidated financial statements.
</TABLE>
<PAGE>
HILITE INDUSTRIES, INC.
Notes to Consolidated Interim Financial Statements
1. BUSINESS AND BASIS OF PRESENTATION
The interim consolidated financial statements of Hilite
Industries, Inc. ("Hilite") at March 31, 1999 and for the
three and nine-month period ended March 31, 1999, are
unaudited, but include all adjustments (consisting of normal
recurring adjustments) which the Company considers necessary
for a fair presentation. The June 30, 1998 consolidated
balance sheet was derived from the balance sheet included in
the Company's audited Consolidated Financial Statements as
included in the Company's Annual Report on Form 10-K. As used
herein, unless the context otherwise requires, the term the
"Company" refers collectively to Hilite and Hilite's directly
and indirectly wholly-owned subsidiaries Hilite Industries -
Texas, Inc., North American Spring and Stamping Corp.
("NASS"), Hilite Industries - Delaware, Inc., Hilite Industries
Worldwide, Ltd. and Hilite Industries Automotive, LP, the
Company's principal operating entity in Texas.
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes, and should be read in conjunction
with the Company's audited Consolidated Financial Statements.
Operating results for the three and nine-month period ended
March 31, 1999 are not necessarily indicative of the results
that may be expected for the fiscal year ending June 30, 1999.
2. INVENTORIES
Inventories at March 31, 1999 and June 30, 1998 consisted of
the following:
<TABLE>
March 31 June 30
<S> <C> <C>
Raw materials $ 4,196,083 $ 4,401,069
Work in process 2,282,592 2,244,363
Finished goods 3,547,090 3,282,417
$10,025,765 $ 9,927,849
</TABLE>
<PAGE>
3. RESTRUCTURING CHARGE
As a result of operating problems and inefficiencies, which
existed at the NASS division, the Company's Board of Directors
approved a plan, in June 1997, to substantially restructure
the NASS operations. In connection with this plan, the
Company recorded a charge to pre-tax earnings in fiscal 1997
totaling approximately $2,700,000. The charge is comprised of
a reduction (approximately $900,000) in the net book value of
certain assets, primarily machinery, equipment and tooling, to
their estimated fair value, net of estimated selling costs;
accrual of certain costs which the Company expects to incur in
terminating contractual obligations, but for which no future
economic benefit will be received (approximately $1,600,000)
and other costs (approximately $200,000). For the nine months
ended March 31, 1999, approximately $407,000 had been charged
against the accrual for terminating contractual obligations
and approximately $61,000 had been charged against the accrual
for other costs. As of March 31, 1999, approximately
$362,000 of the restructuring accrual for terminated contracts
and other costs remained and is expected to be paid during the
remainder of fiscal 1999.
4. DEBT
Effective October 1, 1998, the Company executed an amendment
to its existing loan agreement ("the Agreement") with a bank
to extend the expiration date to July 21, 2000 on the
Company's credit facilities. Under the new terms, the credit
facilities consist of the following:
1) A revolving line of credit of up to $12,000,000 subject to
availability requirements. As of March 31, 1999,
$6,984,000 had been used on the line of credit and
$5,016,000 was available. The interest rate on the line of
credit is either LIBOR plus 1 1/2% or prime rate less 1/2%
which resulted in an interest rate ranging from 7.00% to
7.75% at March 31, 1999. The revolving line of credit
expires on July 21, 2000. An annual commitment fee of 1/4%
is payable quarterly on the average unused portion of the
revolving line of credit,
2) Term loans with an original principal balance of
$13,700,000 and a balance at March 31, 1999 of $6,595,000.
Principal payments on the term loan of approximately
$161,000 together with interest are payable monthly. The
maturity date of the term loans is August 1, 2002. The
interest rate on the term loans, LIBOR plus 1 1/2% was
7.31% at March 31, 1999,
3) An equipment acquisition facility of $3,000,000 for the
financing of equipment purchases. Any term loans issued
under this facility will bear interest, at the Company's
option, at either prime rate or LIBOR plus 1 1/2%. As of
March 31, 1999, no amounts were outstanding under this
facility;
<PAGE>
In addition to the above credit facility, the Company also has
a fifteen-year real estate note and three five-year equipment
term notes with the same bank. The real estate note, which
has an original principal amount of $960,000 and a $555,000
outstanding balance at March 31, 1999, is payable in monthly
installments of $5,333 plus interest at the prime rate (7.75%
at March 31, 1999) and expires on November 1, 2007. The
equipment term notes which have original principal amounts of
$1,497,000, $645,000 and $600,000, respectively, and
outstanding balances of $599,057, $420,000 and $560,000,
respectively, at March 31, 1999, are payable in monthly
installments of $24,961, $10,757 and $10,000, respectively at
LIBOR plus 1 /% (6.69%, 7.72% and 6.44%, respectively, at
December 30, 1998) and expire on May 31, 2001, May 31, 2002
and November 30, 2003, respectively. Both the real estate and
equipment notes' due date can be accelerated, at the bank's
option, to July 21, 2000.
All of the notes and line of credit are collateralized by
accounts receivable, inventory, equipment and real estate of
the Company.
5. PENDING TRANSACTION
On April 27, 1999, the Company announced that it had entered
into an agreement with an investment group led by Cleveland-
based Carreras, Kestner & Co., LLC, whereby an offer will be
made to acquire all of the outstanding common stock of the
Company at $14.25 per share. The transaction will take the
form of a tender offer by Hilite for all of its shares at a
net cash price to shareholders of $14.25 per share which will
be funded by a simultaneous purchase of shares by the
investment group as well as financing arranged by the
investment group. This transaction will be followed by a
merger in which the remaining public shareholders of Hilite
will receive the same per share cash consideration that
participants in the initial tender offer will receive. The
total consideration to be offered for Hilite shares is
approximately $71.5 million and when the payment of existing
debt and transaction cost are considered the total value of the
transaction is approximately $95 million. As part of the
closing of the transaction certain directors, officers and
other key management personnel will be paid severance or
incentive bonuses of approximately $3.9 million. The tender
offer and subsequent merger are subject to customary terms
and conditions.
Certain shareholders and management personnel of Hilite have
agreed to retain approximately 143,000 shares, representing
approximately a 7.8% post-closing interest in Hilite. Such
shareholders and management personnel have agreed to tender
the balance of their respective shares, representing
approximately 73% of Hilite's outstanding shares, at the time
of the offer. After completion of the transaction referred to
above, the new investors will own approximately 92.2% of
Hilite and Hilite's shares will no longer be publicly traded.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Quarter Ended March 31, 1999 Compared to Quarter Ended March 31,
1998
Net sales for the quarter ended March 31, 1999 were $25,631,000
compared to $22,107,000 for the quarter ended March 31, 1998,
representing an increase of $3,524,000 (15.9%). Brake valve net
sales increased 21.5% to $8,869,000 in the third fiscal quarter
of 1999 from $7,298,000 in the same quarter of the prior year.
The increase resulted primarily from net sales of brake valves
for use on new GM and Chrysler models which commenced production
since the third quarter of the prior fiscal year and due to
higher customer production volumes on most car models which the
Company provides brake valves. Power transmission component net
sales increased 64.6% to $9,814,000 for the quarter ended March
31, 1999 from $5,961,000 in the same period of fiscal 1998.
Approximately $1,600,000 of the increase is due to a new transfer
case component application which commenced production in the
third quarter of fiscal 1998. The remaining increase is
primarily due to a significant volume increase of heavy truck air
conditioning clutches. The volume increase is due to higher
production volumes from a certain customer and to increases in
service clutches to the related after-market. Third quarter 1999
net sales were $6,948,000 for the specialty components and
assemblies division, a decrease of 21.5% from last year's third
quarter net sales of $8,848,000. This decrease in net sales is
primarily related to the elimination of numerous unprofitable
parts in conjunction with the restructuring of the division in
the prior year and to a one-time sales opportunity of certain
assemblies to Motorola, Inc. which occurred in fiscal 1998.
Additionally, the specialty components and assemblies division
benefited from approximately $600,000 of price increases in
fiscal 1998 on the products eliminated as part of the
restructuring. The impact of price changes in the current
quarter, other than those mentioned for the specialty components
and assemblies division, was not significant.
The Company's gross profit was $5,695,000 (22.2% of net sales)
for the third quarter of the 1999 fiscal year compared to gross
profit of $4,515,000 (20.4% of net sales) for the third quarter
of the 1998 fiscal year. Increased sales volume in the brake
valve and power transmission components division were the primary
contributors to the increased gross profit as these divisions
have higher average gross margins than the specialty components
and assemblies division. In addition, the gross margin increase
is due to fixed costs, such as building expenses, equipment
depreciation and supervisory salaries, not increasing at the same
rate as the increase in sales.
<PAGE>
Selling, general and administrative expenses were $2,325,000
(9.1% of net sales) in the third quarter of the 1999 fiscal year
as compared to $2,068,000 (9.4% of net sales) in the third
quarter of the 1998 fiscal year. The increase of $257,000 in
selling, general and administrative expenses is primarily due to
a $144,000 favorable adjustment to legal costs associated
with the settlement of the lawsuit against the former owners of
NASS in the third quarter of the prior year.
Interest expense was $280,000 for the three months ended March
31, 1999 compared to $187,000 for the three months ended March
31, 1998. The increase is primarily due to the settlement of the
lawsuit against the former owners of NASS, which occurred in the
third quarter of the prior year in which a note and interest was
cancelled resulting in a favorable adjustment of $190,000. The
impact of changes in interest rates was not significant.
Net income was $1,942,000 (7.6% of net sales) for the third
quarter of the 1999 fiscal year compared to net income of
$1,463,000 (6.6% of net sales) for the same period of the prior
fiscal year, representing an increase of $479,000.
Nine Months Ended March 31, 1999 Compared to Nine Months Ended
March 31, 1998
Net sales for the nine months ended March 31, 1999 were
$68,214,000 compared to $63,764,000 for the nine months ended
March 31, 1998, representing a increase of $4,450,000 (7.0%).
Brake valve net sales increased 27.5% to $25,310,000 for the
first nine months of fiscal 1999 from $19,857,000 for the same
period of the prior year. The increase resulted primarily from
net sales of brake valves sold to Chrysler and GM for new models
which commenced production since the prior fiscal year and to
increased customer production on most car models. Power
transmission component net sales increased 39.5% to $23,099,000
for the nine months ended March 31, 1999 from $16,559,000 for the
same period of fiscal 1998. Approximately $4,600,000 of the
increase is due to a new transfer case component application
which commenced production in the third quarter of fiscal 1998.
The remaining increase is primarily due to a significant volume
increase of heavy truck air conditioning clutches. The volume
increase is due to a higher production volumes from a certain
customer and to increases in service clutches to the related
after-market. Net sales for the first nine months of fiscal 1999
were $19,805,000 for the specialty components and assemblies
division, a decrease of 27.6% from net sales of $27,346,000 in
the first nine months of fiscal 1998. This decrease in net sales
<PAGE>
is primarily related to a one-time sales opportunity of certain
assemblies to Motorola, Inc. and due to the elimination of
numerous unprofitable parts in conjunction with the restructuring
of the division, both of which occurred in fiscal 1998.
Additionally, the specialty components and assemblies division
benefited from approximately $1,900,000 of price increases in
fiscal 1998 on the products eliminated as part of the
restructuring. The impact of price changes during the period,
other than those mentioned for the specialty components and
assemblies division, was not significant.
The Company's gross profit was $14,619,000 (21.4% of net sales)
for the first nine months of fiscal 1999 compared to gross profit
of $12,801,000 (20.1% of net sales) for the first nine months of
fiscal 1998. Increased sales volume in the brake valve and power
transmission components division were the primary contributors to
the increased gross profit as these divisions have higher average
gross margins than the specialty components and assemblies
division. In addition, the gross margin increase is due to fixed
costs, such as building expenses, equipment depreciation and
supervisory salaries, not increasing at the same rate as the
increase in sales. The margin increases were partially offset by
significant start-up costs in the specialty components and
assemblies division on a new automotive assembly for Visteon.
Selling, general and administrative expenses were $6,774,000
(9.9% of net sales) in the first nine months of fiscal 1999 as
compared to $6,779,000 (10.6% of net sales) in the first nine
months of fiscal 1998. The decrease in commission expense
related to the decrease in sales at the specialty components and
assemblies division were offset by higher R & D expenses and
consulting costs.
Interest expense was $970,000 for the nine months ended March 31,
1999 compared to $987,000 for the nine months ended March 31,
1998. The decrease is due to lower average debt balances over
the prior year. The impact of changes in interest rates was not
significant.
Net income was $4,298,000 (6.3% of net sales) for the first nine
months of fiscal 1999 compared to net income of $3,194,000 (5.0%
of net sales) for the same period of the prior fiscal year,
representing an increase of $1,104,000.
<PAGE>
Liquidity and Capital Resources
During the nine-month period ended March 31, 1999, the Company's
net cash provided from operations before changes in operating
assets and liabilities was $7,161,000 compared to $5,953,000 in
the same period of the prior year, primarily due to the increase
in net income over the prior year. At March 31, 1999 the
Company's working capital was $14,660,000 compared to working
capital of $10,569,000 at June 30, 1998. The current ratio was
2.0 to 1 at March 31, 1999 and 1.7 to 1.0 at June 30, 1998. The
book value per share increased to $6.14 at March 31, 1999 from
$5.34 per share at June 30, 1998.
Cash from operations was used for changes in operating assets and
liabilities of $4,920,000 through the first nine months of the
current year compared to $3,053,000 during the same period of the
prior year. The increase is primarily due to a $5,057,000
increase in accounts receivable that is due to higher sales
volume and due to an increase in the average number of days sales
outstanding for receivables to 55 days at March 31, 1999 from 44
days at June 30, 1998. The increase in the average number of
days sales outstanding is primarily due to the expiration on June
30, 1998 of a one-year temporary acceleration in payment by a
significant customer. As of March 31, 1999, no significant
amounts were considered uncollectible.
Also, contributing to the increase in operating assets and
liabilities was a $2,353,000 decrease in accounts payable and
accrued expenses. The decrease is primarily due to timing of
payments of accounts payable balances as well as payments of
year-end accrued bonuses, employer 401(k) contributions, payments
to satisfy the asset distribution of a terminated defined benefit
plan at NASS and payments on terminated contractual obligations
associated with the NASS restructuring reserve.
The Company's capital expenditures were $2,532,000 for the nine
months ended March 31, 1999. The Company presently estimates
capital expenditures for the year ending June 30, 1999 will be
approximately $3,000,000, unless new business opportunities
require additional capital commitments. As of March 31, 1999,
commitments, net of progress payments, were $565,000 for capital
expenditures and $2,553,000 for tooling which is expected to be
reimbursed by customers.
<PAGE>
The Company has a general credit facility of up to $12,000,000
and an equipment acquisition facility of $3,000,000 (collectively
the "Credit Facilities") for working capital and capital
equipment needs. The Credit Facilities mature on July 21, 2000.
As of March 31, 1999, $6,984,000 was outstanding and $5,016,000
was available under the general credit facility and $3,000,000
was available under the equipment acquisition facility. An
annual fee of one quarter of one percent is payable monthly on
the unused portion of the Credit Facilities. The bank has the
right to accelerate each of the maturity dates of the
consolidated term note and real estate note to coincide with the
maturity date of the Credit Facilities.
The Company distributed $367,500 in cash dividends during the
first nine months of fiscal 1999 as part of a previously
announced quarterly cash dividend program. On April 27, 1999,
the Company announced a third quarter, 2 1/2 cent dividend that
will be distributed in May 1999 for stockholders of record on
May 11, 1999.
On January 28, 1998, the Company announced that it had been
notified by Visteon, a subsidiary of Ford Motor Company, that a
part manufactured by the Company's specialty components and
assemblies division may be involved in an Owner Notification
Program regarding a fuel gauge accuracy problem with certain 1997
model year vehicles. In December 1998, a favorable resolution
was reached on this matter with Visteon. The Company was
released of any legal responsibility and the matter was mutually
resolved in a manner not materially adverse to the Company.
Year 2000
Until recently, computer programs were written to store only two
digits of date-related information in order to more efficiently
handle and store data. As a result, these programs were unable
to properly distinguish between the year 1900 and the year 2000.
This is frequently referred to as the "Year 2000 Problem." The
Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. The Company
began addressing Year 2000 compliance during fiscal 1998 and has
determined that all significant software and machinery are
expected to be Year 2000 ready. However, certain personal
computers will need to be replaced and ancillary software will be
upgraded for an estimated cost of $110,000. For the nine months
ended March 31, 1999, approximately $80,000 has been spent on
this project with the remainder to be spent either in the fourth
quarter or in early fiscal year 2000.
<PAGE>
During fiscal 1998, the Company began the process of surveying
all suppliers of raw materials and supplies to determine their
readiness for the Year 2000 problem and attempt to measure what
impact, if any, it will have on the Company. The survey will be
completed during fiscal 1999 so it is uncertain at this time
what impact supplier problems will have on the Company's
operations. The Company expects to use manual processing in the
event of any system failure. It is not expected that manual
processing will cause significant disruption to the Company's
operations.
The Company does not expect the Year 2000 compliance to have a
significant effect on operations, nor does it expect the cost to
be material to the Company's consolidated results of operations
or financial position. The costs of Year 2000 modifications and
the date of completion will be closely monitored and are based on
management's best estimates. Actual results, however, could
differ from those anticipated.
Seasonality
Net sales and operating results do not follow a predictable
seasonal pattern from quarter to quarter because the development,
initial production and sales of new products may occur at
different times of the year. Generally, in these periods certain
inefficiencies are experienced which result in higher costs to
the Company. In addition, the Company usually experiences
somewhat lower sales in the quarters ended December 31 and
September 30 as automobile manufacturers traditionally close
their plants for vacations or model changeovers during these
periods resulting in lower demand for the Company's products.
Inflation
The Company believes that the relatively moderate rate of
inflation has not had a significant impact on the Company's
revenues or profitability.
Safe Harbor for Forward-looking Statements
Except for historical information contained herein, certain
statements in this Management's Discussion and Analysis of
results of operation and financial condition and other sections
of this document contain forward-looking statements that are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks,"_
"estimates," or variations of such words and similar expressions
<PAGE>
are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve
unknown risks and uncertainties which may cause the Company's
actual results in future periods to differ materially from
forecasted results. Those risks include, among others, risks
associated with automotive and non-automotive build rates,
customer sourcing decisions, manufacturing process efficiencies,
cost and timing of start-up of new products and risks related to
technological changes in components which affect the life of the
product. Further, there can be no assurance that the Company
will regain its Q1 status at the Ford Visteon division. These
and other risks are described in the Company's Form 10-K for the
year ended June 30, 1998 filed with the Securities and Exchange
Commission ("SEC") and Forms 10-Q filed quarterly with the SEC,
copies of which are available from the SEC or may be obtained
upon request from the Company.
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
Cash Dividend
On April 27, 1999, the Company announced a 2 1/2 cent cash
dividend that will be distributed in May 1999 to stockholders of
record on May 11, 1999. During the first nine months of fiscal
1999, $367,500 has been distributed.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Change in Control Retention Bonus, NonCompetition and
Severance Agreement, dated as of December 18, 1998, by
and among the Company, Hilite Industries Automotive, LP
and Samuel M. Berry.
10.2 Change in Control Retention Bonus, NonCompetition and
Severance Agreement, dated as of December 18, 1998, by
and between the Company, Hilite Industries Automotive, LP
and Daniel W. Brady.
10.3 Change in Control Retention Bonus, NonCompetition and
Severance Agreement, dated as of January 6, 1999, by and
between the Company, Hilite Industries Automotive, LP and
Donald M. Maher.
10.4 Change in Control Retention Bonus, NonCompetition and
Severance Agreement, dated as of January 5, 1999, by and
between the Company, Hilite Industries Automotive, LP and
Roy Wiegmann.
10.5 Change in Control Retention Bonus, NonCompetition and
Severance Agreement, dated as of January 5, 1999, by and
between the Company, Hilite Industries Automotive, LP and
Ron Reinke.
10.6 Change in Control Retention Bonus, NonCompetition and
Severance Agreement, dated as of January 6, 1999, by and
between the Company, Hilite Industries Automotive, LP and
Arthur D. Johnson.
10.7 Change in Control Retention Bonus, NonCompetition and
Severance Agreement, dated as of December 18, 1998, by
and between the Company and Lineberger & Co., LLC.
(b) There were no reports on Form 8-K filed during the quarter
for which this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
HILITE INDUSTRIES, INC.
Date: May 3, 1999 /s/ Daniel W. Brady
Daniel W. Brady
Chief Executive Officer
Date: May 3, 1999 /s/ Roy Wiegmann
Roy Wiegmann
Chief Financial Officer
<PAGE>
Exhibit 10.1
CHANGE IN CONTROL RETENTION BONUS,
NONCOMPETITION AND SEVERANCE AGREEMENT
THIS AGREEMENT is made as of December 18, 1998, by and between
Hilite Industries, Inc., a Delaware corporation (the "Company"), Hilite
Industries Automotive, LP, a Texas limited partnership (the "Partnership"),
and Samuel M. Berry ("Executive").
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with publicly held corporations, the
possibility of a change in control may exist and that such possibility
and the uncertainty and questions it may raise among management, may result
in the departure or distraction of management personnel to the detriment of
the Company and its stockholders;
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication
of key management personnel, including Executive, to their assigned
duties without distraction in the face of potentially disturbing
circumstances arising from any possible change in control of the Company;
WHEREAS, the Company is relying on Executive continuing with
the Company and/or the Partnership prior to any Change In Control (as
hereinafter defined) and willingness to stay with the Company under certain
conditions for a period of time after any Change In Control; and
WHEREAS, the Board desires to pursue alternative strategies to
improve shareholder value and the Company is relying on Executive to assist
in the presentation of the Company to potential buyers in addition to his
current responsibilities.
NOW THEREFORE, the parties hereto agree as follows:
SECTION 1. TERM OF AGREEMENT. This Agreement shall be effective as of
the date hereof and shall continue in effect through December 31, 2000;
provided that on January 1, 2000 and each January 1st thereafter, the
term of this Agreement shall automatically be extended for an additional year
unless the Company or Executive shall have given at least ninety (90) days'
prior notice not to extend this Agreement or a Change In Control shall have
occurred prior to such January 1; provided further that if a Change In
Control shall have occurred during the term of this Agreement, this Agreement
shall continue in effect for a period of not less than twenty-four (24) months
beyond the date on which such Change In Control occurred. The termination of
this Agreement, however, shall not affect any rights Executive may have to
payments that have accrued prior thereto.
SECTION 2. CHANGE IN CONTROL. For purposes of this Agreement, a
"Change in Control" shall occur when (and only when): (i) there has occurred
a change in control as the term "control" is defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934 as in effect on the date hereof (the
"1934 Act"); (ii) when any "person" (as such term is defined in Sections
<PAGE>
3(a)(9) and 13(d)(3) of the 1934 Act), other than the Company, any of
its subsidiaries or an employee stock ownership trust of the Company, becomes a
beneficial owner, directly or indirectly, of securities of the Company
representing twenty-five (25%) percent or more of the securities having the
right to vote on the election of directors ("voting securities") of the
Company then outstanding; (iii) during any period of two (2) consecutive years
(not including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described in clauses
(i), (ii), (iv), (v), (vi) or (vii) of this Section 2) whose election by the
Board or nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors then still in office who
were either directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least seventy-five (75%) percent of the entire Board; (iv) when
a majority of the directors elected at any annual or special meeting of
stockholders (or by written consent in lieu of a meeting) are not individuals
nominated by the Company's incumbent Board; (v) if the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
holders of voting securities of the Company outstanding immediately prior
thereto being the holders of at least eighty (80%) percent of the voting
securities of the surviving entity outstanding immediately after such merger
or consolidation; (vi) if the shareholders of the Company approve a plan
of complete liquidation of the Company; or (vii) if the shareholders of the
Company approve an agreement for the sale or disposition of all or
substantially all of the Company's assets.
SECTION 3. CHANGE IN CONTROL BONUS. Subject to the provisions
below, upon the occurrence of a Change In Control under this Agreement, the
Company shall pay Executive in cash a bonus equal to 200% of Executive's
annual compensation from the Company and any entity in which the Company
directly or indirectly owns a majority of the voting interest for the
calendar year immediately preceding the year in which the Change In Control
occurs, as reflected on Executive's Form W-2 or 1099 for such period
(excluding deductions for 401(k) and medical plan contributions) ("Base
Amount"). Notwithstanding the foregoing, in no event may a bonus be paid
hereunder unless in connection with a Change in Control, the price of the
Company's Common Stock at the time of or in connection with the transaction
giving rise to a Change in Control is equal to the lesser of (a) 15% above
the closing bid price on Nasdaq (or other exchange as appropriate) of the
Company's Common Stock on November 16, 1998 or (b) 15% above the "average
market price" of the Company's Common Stock on the date of the approval by
the Board of the Change in Control. For purposes hereof, the average market
price shall mean the average of the closing bid prices of the Company's
Common Stock on Nasdaq (or other exchange as appropriate) for the 30
trading days immediately prior to the date which is 60 days immediately prior
to the date of approval by the Board of the Change in Control.
-2-
<PAGE>
SECTION 4. EMPLOYMENT WITH PARTNERSHIP.
(a) The Employment Agreement by and between the Partnership and
Executive effective as of January 30,1998 (the "Employment Agreement") is
hereby amended to provide that from and after a Change In Control under this
Agreement, Executive's employment with the Partnership shall be at will.
Except as otherwise provided in this Agreement, upon termination of such
employment at will, Executive shall have no further obligation to the
Partnership except as provided in Section 1.7 of the Employment Agreement
(other than the second paragraph of 1.7(c) which shall not continue) and the
Partnership shall have no further obligation to Executive except to pay
Executive (or his estate) any unpaid amount which relates to any period
before such termination of employment.
(b) Executive covenants that upon a Change In Control under this
Agreement for a period of one year after the expiration of Executive's
covenant not to compete pursuant to the Employment Agreement, Executive will
not engage in or participate in any business whose product lines are in
direct competition to the product lines of the Partnership. In consideration
therefore, upon the occurrence of a Change In Control, the Company and/or the
Partnership shall pay Executive in cash an amount equal to 100% of the Base
Amount.
(c) The Company and/or the Partnership shall continue to provide
(or cause to be provide) for a period of three years (including any
applicable COBRA period) after the termination of Executive's employment
following a Change In Control under this Agreement, the welfare benefits
provided by the Company and/or the Partnership to Executive immediately prior
to such termination, but in no event less than any welfare benefit provided
immediately prior to the Change In Control, including but not limited to
health and dental plans, life insurance or other death benefit programs.
These welfare benefits shall be paid solely by the Company and/or the
Partnership and shall either be provided to Executive on a non-taxable basis
or Executive shall be entitled to an additional payment to offset any income
tax obligations incurred with respect to such benefits.
SECTION 5. REDUCTION IN PAYMENT. In the event that any payment
hereunder would, in the opinion of the Company's independent accounting firm,
if not reduced, cause an excise tax under Section 4999 of the Internal Revenue
Code of 1986, as amended on Executive, the amount of such payment shall be
reduced by the minimum amount, if any, that in the opinion of such accounting
firm, is necessary to avoid such excise tax. The determination of the
accounting firm shall be conclusive and binding on the parties.
SECTION 6. MITIGATION. Executive shall not be required to mitigate
the amount of an payment provided for hereunder by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided
for hereunder be reduced by any compensation earned by Executive as the
result of employment by another employer or by retirement benefits.
-3-
<PAGE>
SECTION 7. NOTICES. All notices or other communications that are
required or permitted hereunder shall be in writing deemed to have been
given on the date delivered personally or on the date sent by certified or
registered mail, overnight delivery or by facsimile transmission. Notice to
the Company or the Partnership shall be given at the Company's then existing
corporate headquarters and shall be directed to the Secretary (or such other
location or person as the Company subsequently shall designate in writing to
Executive). Notice to Executive shall be given at the address set forth on the
signature page hereof (or such other address as Executive subsequently shall
designate in writing to the Company).
SECTION 8. WAIVER. Failure to insist upon strict compliance with any
of the terms, covenants, or conditions hereof shall not be deemed a waiver
of such term, covenant, or condition, nor shall any waive or relinquishment
of such right or power hereunder at any one or more times be deemed a waiver
or relinquishment of such right or power at any other time or times.
SECTION 9. SEVERABILITY. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of
any other provision. In the event that any part of a covenant contained
herein is determined by a court of law to be invalid, a judicially enforceable
provision shall be substituted in its place,. Any covenant so modified shall
be binding upon the parties and shall have the same force and effect as if
originally set forth in this Agreement.
SECTION 10. MODIFICATION. This Agreement may be amended only in writing,
signed by each of the parties hereto.
SECTION 11. HEADINGS. The headings in this Agreement are inserted for
convenience only and are not to be considered a construction of the
provisions thereof.
SECTION 12. SUCCESSORS, BINDING AGREEMENT.
(a) The Company and the Partnership will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company or the
Partnership, as the case may be, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company or the
Partnership would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as herein
before defined and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation of law, or
otherwise. Similarly, "Partnership" shall mean the Partnership as herein
before defined and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation of law, or
otherwise. Prior to a Change In Control, the term "Partnership" shall also
mean any affiliate of the Company to which Executive may be transferred and
the Company and the Partnership shall cause such successor employer to be
considered the "Partnership" bound by the terms of this Agreement and
-4-
<PAGE>
this Agreement shall be amended to so provide. Following a Change In Control
neither the term "Company" nor "Partnership" shall not mean any affiliate of
the Company or the Partnership, as the case may be, to which Executive may be
transferred unless Executive shall have previously approved of such transfer
in writing, in which case the Company and the Partnership shall cause such
successor employer to be considered the "Company" bound by the terms of this
Agreement and this Agreement shall be amended to so provide.
(b) This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should
die while any amount would still be payable to Executive hereunder if
Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to Executive's devisees, legates or other designee or, if there is no such
designee, to Executive's estate
SECTION 13. RESOLUTION OF DISPUTE, CHOICE OF FORM. Except as
otherwise expressly provided herein, the parties agree that any dispute,
controversy or claim arising out of or relating to this Agreement shall, at
the election of Executive, be resolved by final and binding arbitration,
enforceable under the Federal Arbitration Act, administered by the American
Arbitration Association under is Commercial Arbitration Rules, and judgment
on the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. All such disputes, controversies or claims shall be
determined by a panel or three arbitrators selected in accordance with the
rules of the American Arbitration Association and the arbitration shall be
conducted in the City of Dallas, State of Texas. In the event that within
sixty (60) days after the Company or the Partnership commences litigation in
connection with this Agreement Executive commences an arbitration proceeding
concerning the same issue or issues, the Company or the Partnership, as the
case may be, shall promptly terminate such litigation and submit to the
jurisdiction of the arbitration proceeding to the extent that it involves
such issue or issues. This Section shall survive the termination of this
Agreement for any reason.
SECTION 14. PAYMENT OF EXPENSES. In the event that any proceeding is
brought by Executive to enforce or interpret Executive's rights hereunder,
Executive shall be entitled to be paid all expenses incurred by Executive
with respect to such proceeding, unless as a part of such proceeding,
the arbitration panel or court of competent jurisdiction determines that the
material assertions made by Executive as a basis for such proceeding were not
made in good faith or were frivolous, in which case each party to the
proceeding shall bear its own costs.
SECTION 15. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the laws of the State of Texas, without regard
to conflict of law provisions that would defer to the substantive laws of
another jurisdiction.
-5-
<PAGE>
SECTION 16. COUNTERPARTS. This Agreement may be signed in any
number of counterparts, each of which shall be deemed an original, with the
same effect as if the signatures thereto and hereto were upon a single
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
HILITE INDUSTRIES, INC.
By:/s/ Daniel W. Brady
-----------------------------------------
HILITE INDUSTRIES AUTOMOTIVE, LP
By: HILITE INDUSTRIES (TEXAS), INC.,
its General Partner
By:/s/ Daniel W. Brady
-----------------------------------------
/s/ Samuel M. Berry
-----------------------------------------
Samuel M. Berry
-6-
<PAGE>
Exhibit 10.2
CHANGE IN CONTROL RETENTION BONUS,
NONCOMPETITION AND SEVERANCE AGREEMENT
THIS AGREEMENT is made as of December 18, 1998, by and between
Hilite Industries, Inc., a Delaware corporation (the "Company") and Daniel W.
Brady ("Executive").
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with publicly held corporations, the
possibility of a change in control may exist and that such possibility and the
uncertainty and questions it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the
Company and its stockholders;
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication
of key management personnel, including Executive, to their assigned
duties without distraction in the face of potentially disturbing
circumstances arising from any possible change in control of the Company;
WHEREAS, the Company is relying on Executive continuing with
the Company prior to any Change In Control (as hereinafter defined) and
willingness to stay with the Company under certain conditions for a period of
time after any Change In Control; and
WHEREAS, the Board desires to pursue alternative strategies to
improve shareholder value and the Company is relying on Executive to assist
in the presentation of the Company to potential buyers in addition to his
current responsibilities.
NOW THEREFORE, the parties hereto agree as follows:
SECTION 1. TERM OF AGREEMENT. This Agreement shall be effective as of
the date hereof and shall continue in effect through December 31, 2000;
provided that on January 1, 2000 and each January 1st thereafter, the
term of this Agreement shall automatically be extended for an additional year
unless the Company or Executive shall have given at least ninety (90) days'
prior notice not to extend this Agreement or a Change In Control shall have
occurred prior to such January 1; provided further that if a Change In Control
shall have occurred during the term of this Agreement, this Agreement shall
continue in effect for a period of not less than twenty-four (24) months
beyond the date on which such Change In Control occurred. The termination of
this Agreement, however, shall not affect any rights Executive may have to
payments that have accrued prior thereto.
SECTION 2. CHANGE IN CONTROL. For purposes of this Agreement, a
"Change in Control" shall occur when (and only when): (i) there has occurred
a change in control as the term "control" is defined in Rule 12b-2
<PAGE>
promulgated under the Securities Exchange Act of 1934 as in effect on the
date hereof (the "1934 Act"); (ii) when any "person" (as such term is defined
in Sections 3(a)(9) and 13(d)(3) of the 1934 Act), other than the Company,
any of its subsidiaries or an employee stock ownership trust of the Company,
becomes a beneficial owner, directly or indirectly, of securities of the
Company representing twenty-five (25%) percent or more of the securities
having the right to vote on the election of directors ("voting securities") of
the Company then outstanding; (iii) during any period of two (2) consecutive
years (not including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described in
clauses (i), (ii), (iv), (v), (vi) or (vii) of this Section 2) whose election
by the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in
office who were either directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute at least seventy-five (75%) percent of the entire Board;
(iv) when a majority of the directors elected at any annual or special meeting
of stockholders (or by written consent in lieu of a meeting) are not i
ndividuals nominated by the Company's incumbent Board; (v) if the stockholders
of the Company approve a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in
the holders of voting securities of the Company outstanding immediately prior
thereto being the holders of at least eighty (80%) percent of the voting
securities of the surviving entity outstanding immediately after such merger
or consolidation; (vi) if the shareholders of the Company approve a plan of
complete liquidation of the Company; or (vii) if the shareholders of the
Company approve an agreement for the sale or disposition of all or
substantially all of the Company's assets.
SECTION 3. CHANGE IN CONTROL BONUS. Subject to the provisions
below, upon the occurrence of a Change In Control under this Agreement, the
Company shall pay Executive in cash a bonus equal to 200% of Executive's
annual compensation from the Company (and any entity in which the Company
directly or indirectly owns a majority of the voting interest) for the
calendar year immediately preceding the year in which the Change In Control
occurs, as reflected on Executive's Form W-2 or 1099 for such period
(excluding deductions for 401(k) and medical plan contributions) ("Base
Amount"). Notwithstanding the foregoing, in no event may a bonus be paid
hereunder unless in connection with a Change in Control, the price of the
Company's Common Stock at the time of or in connection with the transaction
giving rise to a Change in Control is equal to the lesser of (a) 15% above
the closing bid price on Nasdaq (or other exchange as appropriate) of the
Company's Common Stock on November 16, 1998 or (b) 15% above the "average
market price" of the Company's Common Stock on the date of the approval by
the Board of the Change in Control. For purposes hereof, the average market
price shall mean the average of the closing bid prices of the Company's
Common Stock on Nasdaq (or other exchange as appropriate) for the 30
trading days immediately prior to the date which is 60 days immediately prior
to the date of approval by the Board of the Change in Control.
SECTION 4. EMPLOYMENT WITH THE COMPANY.
-2-
<PAGE>
(a) Executive's employment with the Company is at will. Except
as otherwise provided in this Agreement, upon termination of such employment
at will, Executive shall have no further obligation to the Company and the
Company shall have no further obligation to Executive except to pay Executive
(or his estate) any unpaid amount which relates to any period before such
termination of employment.
(b) Executive covenants that for a period of one year after
the termination of his employment with the Company following a Change In
Control under this Agreement, Executive will not engage in or participate in
any business whose product lines are in direct competition to the product
lines of the Company. In consideration therefore, upon the occurrence of a
Change In Control, the Company shall pay Executive in cash an amount equal to
100% of the Base Amount.
(c) The Company shall continue to provide (or cause to be
provide) for a period of three years (including any applicable COBRA period)
after the termination of Executive's employment following a Change In Control
under this Agreement, the welfare benefits provided by the Company to
Executive immediately prior to such termination, but in no event less than any
welfare benefit provided immediately prior to the Change In Control, including
but not limited to health and dental plans, life insurance or other death
benefit programs. These welfare benefits shall be paid solely by the Company
and shall either be provided to Executive on a non-taxable basis or Executive
shall be entitled to an additional payment to offset any income tax obligations
incurred with respect to such benefits.
SECTION 5. REDUCTION IN PAYMENT. In the event that any payment
hereunder would, in the opinion of the Company's independent accounting firm,
if not reduced, cause an excise tax under Section 4999 of the Internal
Revenue Code of 1986, as amended on Executive, the amount of such payment
shall be reduced by the minimum amount, if any, that in the opinion of such
accounting firm, is necessary to avoid such excise tax. The determination of
the accounting firm shall be conclusive and binding on the parties.
SECTION 6. MITIGATION. Executive shall not be required to mitigate the
amount of an payment provided for hereunder by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for
hereunder be reduced by any compensation earned by Executive as the result
of employment by another employer or by retirement benefits.
SECTION 7. NOTICES. All notices or other communications that
are required or permitted hereunder shall be in writing deemed to have been
given on the date delivered personally or on the date sent by certified or
registered mail, overnight delivery or by facsimile transmission. Notice to
the Company shall be given to the Company at its then existing corporate
headquarters and shall be directed to the Secretary (or such other location
or person as the Company subsequently shall designate in writing to Executive).
Notice to Executive shall be given at the address set forth on the signature
page hereof (or such other address as Executive subsequently shall designate
in writing to the Company).
-3-
<PAGE>
SECTION 8. WAIVER. Failure to insist upon strict compliance
with any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waive or
relinquishment of such right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times.
SECTION 9. SEVERABILITY. The invalidity or unenforceability of
any provision hereof shall in no way affect the validity or enforceability of
any other provision. In the event that any part of a covenant contained herein
is determined by a court of law to be invalid, a judicially enforceable
provision shall be substituted in its place,. Any covenant so modified shall
be binding upon the parties and shall have the same force and effect as if
originally set forth in this Agreement.
SECTION 10. MODIFICATION. This Agreement may be amended only
in writing, signed by both parties hereto.
SECTION 11. HEADINGS. The headings in this Agreement are inserted for
convenience only and are not to be considered a construction of the
provisions thereof.
SECTION 12. SUCCESSORS, BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company
as herein before defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. Prior to a Change In Control, the term "Company" shall also
mean any affiliate of the Company to which Executive may be transferred and the
Company shall cause such successor employer to be considered the "Company"
bound by the terms of this Agreement and this Agreement shall be amended to
so provide. Following a Change In Control the term "Company" shall not mean
any affiliate of the Company to which Executive may be transferred unless
Executive shall have previously approved of such transfer in writing, in which
case the Company shall cause such successor employer to be considered the
"Company" bound by the terms of this Agreement and this Agreement shall be
amended to so provide.
(b) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount would still be payable to Executive
hereunder if Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisees, legates or other designee or, if there is
-4-
<PAGE>
no such designee, to Executive's estate.
SECTION 13. RESOLUTION OF DISPUTE, CHOICE OF FORM. Except as
otherwise expressly provided herein, the parties agree that any dispute,
controversy or claim arising out of or relating to this Agreement shall, at
the election of Executive, be resolved by final and binding arbitration,
enforceable under the Federal Arbitration Act, administered by the American
Arbitration Association under is Commercial Arbitration Rules, and judgment
on the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. All such disputes, controversies or claims shall be
determined by a panel or three arbitrators selected in accordance with the
rules of the American Arbitration Association and the arbitration shall be
conducted in the City of Dallas, State of Texas. In the event that within
sixty (60) days after the Company commences litigation in connection with
this Agreement Executive commences an arbitration proceeding concerning the
same issue or issues, the Company shall promptly terminate such litigation
and submit to the jurisdiction of the arbitration proceeding to the extent
that it involves such issue or issues. This Section shall survive the
termination of this Agreement for any reason.
SECTION 14. PAYMENT OF EXPENSES. In the event that any proceeding
is brought by Executive to enforce or interpret Executive's rights
hereunder, Executive shall be entitled to be paid all expenses incurred by
Executive with respect to such proceeding, unless as a part of such proceeding,
the arbitration panel or court of competent jurisdiction determines that the
material assertions made by Executive as a basis for such proceeding were not
made in good faith or were frivolous, in which case each party to the
proceeding shall bear its own costs.
SECTION 15. GOVERNING LAW. This Agreement shall be construed
and enforced in accordance with the laws of the State of Texas, without regard
to conflict of law provisions that would defer to the substantive laws of
another jurisdiction.
SECTION 16. COUNTERPARTS. This Agreement may be signed in any
number of counterparts, each of which shall be deemed an original, with the
same effect as if the signatures thereto and hereto were upon a single
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
HILITE INDUSTRIES, INC.
By: /s/ Samuel M. Berry
-------------------------------
Samuel M. Berry
/s/ Daniel W. Brady
-------------------------------
Daniel W. Brady
-5-
<PAGE>
Exhibit 10.3
CHANGE IN CONTROL RETENTION BONUS
AND EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of January 6, 1999, by and between
Hilite Industries, Inc., a Delaware corporation (the "Company"), Hilite
Industries Automotive, LP, a Texas limited partnership (the "Partnership"),
and Donald M. Maher ("Executive").
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with publicly held corporations, the
possibility of a change in control may exist and that such possibility and
the uncertainty and questions it may raise among management, may result in
the departure or distraction of management personnel to the detriment of the
Company and its stockholders;
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of key management personnel, including Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from any possible change in control of the Company;
WHEREAS, the Company is relying on Executive continuing with
the Company and/or the Partnership prior to any Change In Control (as
hereinafter defined) and willingness to stay with the Company under certain
conditions for a period of time after any Change In Control; and
WHEREAS, the Board desires to pursue alternative strategies to
improve shareholder value and the Company is relying on Executive to assist in
the presentation of the Company to potential buyers in addition to his
current responsibilities.
NOW THEREFORE, the parties hereto agree as follows:
SECTION 1. TERM OF AGREEMENT. This Agreement shall be effective as of
the date hereof and shall continue in effect through December 31, 2000;
provided that on January 1, 2000 and each January 1st thereafter, the
term of this Agreement shall automatically be extended for an additional year
unless the Company or Executive shall have given at least ninety (90) days'
prior notice not to extend this Agreement or a Change In Control shall have
occurred prior to such January 1; provided further that if a Change In Control
shall have occurred during the term of this Agreement, this Agreement shall
continue in effect for a period of not less than twenty-four (24) months
beyond the date on which such Change In Control occurred. The termination of
this Agreement, however, shall not affect any rights Executive may have to
payments that have accrued prior thereto.
<PAGE>
SECTION 2. CHANGE IN CONTROL. For purposes of this Agreement,
a "Change in Control" shall occur when (and only when): (i) there has occurred
a change in control as the term "control" is defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934 as in effect on the date hereof (the
"1934 Act"); (ii) when any "person" (as such term is defined in Sections 3(a)
(9) and 13(d)(3) of the 1934 Act), other than the Company, any of its
subsidiaries or an employee stock ownership trust of the Company, becomes a
beneficial owner, directly or indirectly, of securities of the Company
representing twenty-five (25%) percent or more of the securities having the
right to vote on the election of directors ("voting securities") of the
Company then outstanding; (iii) during any period of two (2) consecutive
years (not including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board, and
any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction described
in clauses (i), (ii), (iv), (v), (vi) or (vii) of this Section 2) whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then
still in office who were either directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease
for any reason to constitute at least seventy-five (75%) percent of the entire
Board; (iv) when a majority of the directors elected at any annual or special
meeting of stockholders (or by written consent in lieu of a meeting)
are not individuals nominated by the Company's incumbent Board; (v) if the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the holders of voting securities of the Company outstanding
immediately prior thereto being the holders of at least eighty (80%) percent
of the voting securities of the surviving entity outstanding immediately
after such merger or consolidation; (vi) if the shareholders of the Company
approve a plan of complete liquidation of the Company; or (vii) if the
shareholders of the Company approve an agreement for the sale or disposition
of all or substantially all of the Company's assets.
SECTION 3. CHANGE IN CONTROL BONUS. Subject to the provisions
below, upon the occurrence of a Change In Control under this Agreement, the
Company shall pay Executive in cash a bonus equal to Executive's annual
compensation from the Company (and any entity in which the Company directly or
indirectly owns a majority of the voting interest) for the calendar year
immediately preceding the year in which the Change In Control occurs, as
reflected on Executive's forms W-2 or 1099 for such period (excluding
deductions for 401(k) and medical plan contributions) (the "Base Amount").
Notwithstanding the foregoing, in no event may a bonus be paid hereunder
unless in connection with a Change in Control, the price of the Company's
Common Stock at the time of or in connection with the transaction giving rise
to a Change in Control is equal to the lesser of (a) 15% above the closing
bid price on Nasdaq (or other exchange as appropriate) of the Company's
Common Stock on November 16, 1998 or (b) 15% above the "average market price"
of the Company's Common Stock on the date of the approval by the Board of the
Change in Control. For purposes hereof, the average market price shall mean
the average of the closing bid prices of the Company's Common Stock on Nasdaq
(or other exchange as appropriate) for the 30 trading days immediately prior
to the date which is 60 days immediately prior to the date of approval by the
Board of the Change in Control.
-2-
<PAGE>
SECTION 4. EMPLOYMENT FOLLOWING CHANGE IN CONTROL. The Partnership
agrees to employ Executive for a period of two (2) years following a
Change In Control under this Agreement upon the same terms and conditions as
in effect immediately prior to the Change In Control. Upon termination of
Executive's employment within such two-year period for any reason other than
by the Company for Cause or by Executive without Good Reason, the Company
and/or the Partnership shall pay Executive an amount equal to the Base Amount.
For purposes of this Section, termination of employment shall
be considered to be for "Cause", whether it occurred by resignation or
discharge, if the reason for the termination of employment was Executive's
embezzlement, dishonesty, fraud, conviction of a felonious or other charge
involving moral turpitude.
For purposes of this Section, termination of employment shall be
considered to be "Good Reason" if (1) without the express written consent of
Executive, Executive is assigned material duties substantially inconsistent
with Executive's positions, duties, responsibilities or status with the
Partnership as in effect before the Change In Control, or Executive's titles
or offices as in effect immediately prior to the Change In Control are
substantially diminished or any other action is taken by the Partnership or
any of its affiliates which results in a diminution in Executive's position,
authority, or principal duties or responsibilities other than an
insubstantial and inadvertent act that is remedied by the Partnership
promptly after receipt of notice given thereof by Executive, except any such
assignment, action or change resulting from Executive's termination of
employment for Cause, or from Executive's disability as reasonably determined
by the Company or death; PROVIDED, HOWEVER, that notwithstanding the
foregoing, in no event shall a termination of employment under this clause
(1) be considered to be for "Good Reason" if, at the time of the termination,
Executive shall have had a position with a title, level of duties and
responsibilities substantially similar to Executive's title, duties and
responsibilities immediately prior to the Change In Control; (2) the base
compensation of Executive is reduced or the benefit entitlement or bonus
opportunity of Executive as in effect immediately prior to the Change In
Control is substantially reduced; (3) the Partnership requires Executive
without Executive's express written consent to be based anywhere other than
the Partnership's location where Executive is principally employed or another
location that is not more than fifty (50) miles from the location where
Executive is principally employed immediately prior to the Change In Control,
with Executive's business travel obligations being no greater than in effect
immediately prior to the Change In Control; or (4) any failure by the Company
or the Partnership to obtain an express written assumption of this Agreement
from any successor to or assign of the Company or the Partnership, as the
case may be.
SECTION 5. REDUCTION IN PAYMENT. In the event that any payment
hereunder would, in the opinion of the Company's independent accounting firm,
if not reduced, cause an excise tax under Section 4999 of the Internal Revenue
Code of 1986, as amended on Executive, the amount of such payment shall be
reduced by the minimum amount, if any, that in the opinion of such accounting
firm, is necessary to avoid such excise tax. The determination of the
accounting firm shall be conclusive and binding on the parties.
-3-
<PAGE>
SECTION 6. MITIGATION. Executive shall not be required to
mitigate the amount of an payment provided for hereunder by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for hereunder be reduced by any compensation earned by Executive as
the result of employment by another employer or by retirement benefits.
SECTION 7. COVENANT NOT TO COMPETE. Executive covenants that,
while he is an employee of the Partnership and for a period of one year after
termination of his employment, however caused, he shall not engage in, or
participate in, any business whose product lines are in direct competition to
the product lines of the Partnership.
SECTION 8. NOTICES. All notices or other communications that
are required or permitted hereunder shall be in writing deemed to have been
given on the date delivered personally or on the date sent by certified or
registered mail, overnight delivery or by facsimile transmission. Notice to
the Company or the Partnership shall be given at the Company's then existing
corporate headquarters and shall be directed to the Secretary (or such other
location or person as the Company subsequently shall designate in writing to
Executive). Notice to Executive shall be given at the address set forth on the
signature page hereof (or such other address as Executive subsequently shall
designate in writing to the Company).
SECTION 9. WAIVER. Failure to insist upon strict compliance
with any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waive or
relinquishment of such right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times.
SECTION 10. SEVERABILITY. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability
of any other provision. In the event that any part of a covenant contained
herein is determined by a court of law to be invalid, a judicially
enforceable provision shall be substituted in its place,. Any covenant so
modified shall be binding upon the parties and shall have the same force and
effect as if originally set forth in this Agreement.
SECTION 11. MODIFICATION. This Agreement may be amended only
in writing, signed by each of the parties hereto.
SECTION 12. HEADINGS. The headings in this Agreement are
inserted for convenience only and are not to be considered a construction of
the provisions thereof.
SECTION 13. SUCCESSORS, BINDING AGREEMENT.
(a) The Company and the Partnership will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of
-4-
<PAGE>
the business and/or assets of the Company or the Partnership, as the case may
be, to expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Company or the Partnership would be required
to perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as herein before defined and any successor to
its business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise. Similarly, "Partnership"
shall mean the Partnership as herein before defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise. Prior to a Change In Control,
the term "Partnership" shall also mean any affiliate of the Company to which
Executive may be transferred and the Company and the Partnership shall cause
such successor employer to be considered the "Partnership" bound by the terms
of this Agreement and this Agreement shall be amended to so provide.
Following a Change In Control neither the term "Company" nor "Partnership"
shall not mean any affiliate of the Company or the Partnership, as the case
may be, to which Executive may be transferred unless Executive shall have
previously approved of such transfer in writing, in which case the Company
and the Partnership shall cause such successor employer to be considered the
"Company" bound by the terms of this Agreement and this Agreement shall be
amended to so provide.
(b) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount would still be payable to Executive
hereunder if Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Executive's devisees, legates or other designee or, if
there is no such designee, to Executive's estate.
SECTION 14. RESOLUTION OF DISPUTE, CHOICE OF FORM. Except as
otherwise expressly provided herein, the parties agree that any dispute,
controversy or claim arising out of or relating to this Agreement shall, at
the election of Executive, be resolved by final and binding arbitration,
enforceable under the Federal Arbitration Act, administered by the American
Arbitration Association under is Commercial Arbitration Rules, and judgment
on the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. All such disputes, controversies or claims shall be
determined by a panel or three arbitrators selected in accordance with the
rules of the American Arbitration Association and the arbitration shall be
conducted in the City of Dallas, State of Texas. In the event that within
sixty (60) days after the Company or the Partnership commences litigation in
connection with this Agreement Executive commences an arbitration proceeding
concerning the same issue or issues, the Company or the Partnership, as the
case may be, shall promptly terminate such litigation and submit to the
jurisdiction of the arbitration proceeding to the extent that it involves
such issue or issues. This Section shall survive the termination of this
Agreement for any reason.
SECTION 15. PAYMENT OF EXPENSES. In the event that any
proceeding is brought by Executive to enforce or interpret Executive's rights
hereunder, Executive shall be entitled to
-5-
<PAGE>
be paid all expenses incurred by Executive with respect to such proceeding,
unless as a part of such proceeding, the arbitration panel or court of
competent jurisdiction determines that the material assertions made by
Executive as a basis for such proceeding were not made in good faith or were
frivolous, in which case each party to the proceeding shall bear its own
costs.
SECTION 16. GOVERNING LAW. This Agreement shall be construed
and enforced in accordance with the laws of the State of Texas, without
regard to conflict of law provisions that would defer to the substantive laws
of another jurisdiction.
SECTION 17. COUNTERPARTS. This Agreement may be signed in any
number of counterparts, each of which shall be deemed an original, with the
same effect as if the signatures thereto and hereto were upon a single
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
HILITE INDUSTRIES, INC.
By: /s/ Samuel M. Berry
----------------------------------
HILITE INDUSTRIES AUTOMOTIVE, LP
By: HILITE INDUSTRIES (TEXAS), INC.,
its General Partner
By: /s/ Samuel M. Berry
----------------------------------
/s/ Donald M. Maher
----------------------------------
Executive
-6-
<PAGE>
Exhibit 10.4
CHANGE IN CONTROL RETENTION BONUS
AND EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of January 5, 1999, by and between
Hilite Industries, Inc., a Delaware corporation (the "Company"), Hilite
Industries Automotive, LP, a Texas limited partnership (the "Partnership"),
and Roy Wiegmann ("Executive").
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with publicly held corporations, the
possibility of a change in control may exist and that such possibility and
the uncertainty and questions it may raise among management, may result in
the departure or distraction of management personnel to the detriment of the
Company and its stockholders;
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of key management personnel, including Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from any possible change in control of the Company;
WHEREAS, the Company is relying on Executive continuing with
the Company and/or the Partnership prior to any Change In Control (as
hereinafter defined) and willingness to stay with the Company under certain
conditions for a period of time after any Change In Control; and
WHEREAS, the Board desires to pursue alternative strategies to
improve shareholder value and the Company is relying on Executive to assist in
the presentation of the Company to potential buyers in addition to his current
responsibilities.
NOW THEREFORE, the parties hereto agree as follows:
SECTION 1. TERM OF AGREEMENT. This Agreement shall be effective as of
the date hereof and shall continue in effect through December 31, 2000;
provided that on January 1, 2000 and each January 1st thereafter, the
term of this Agreement shall automatically be extended for an additional year
unless the Company or Executive shall have given at least ninety (90) days'
prior notice not to extend this Agreement or a Change In Control shall have
occurred prior to such January 1; provided further that if a Change In Control
shall have occurred during the term of this Agreement, this Agreement shall
continue in effect for a period of not less than twenty-four (24) months
beyond the date on which such Change In Control occurred. The termination of
this Agreement, however, shall not affect any rights Executive may have to
payments that have accrued prior thereto.
<PAGE>
SECTION 2. CHANGE IN CONTROL. For purposes of this Agreement,
a "Change in Control" shall occur when (and only when): (i) there has occurred
a change in control as the term "control" is defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934 as in effect on the date hereof (the
"1934 Act"); (ii) when any "person" (as such term is defined in Sections 3(a)
(9) and 13(d)(3) of the 1934 Act), other than the Company, any of its
subsidiaries or an employee stock ownership trust of the Company, becomes a
beneficial owner, directly or indirectly, of securities of the Company
representing twenty-five (25%) percent or more of the securities having the
right to vote on the election of directors ("voting securities") of the
Company then outstanding; (iii) during any period of two (2) consecutive years
(not including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described in clauses
(i), (ii), (iv), (v), (vi) or (vii) of this Section 2) whose election by the
Board or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office
who were either directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least seventy-five (75%) percent of the entire Board; (iv) when
a majority of the directors elected at any annual or special meeting of
stockholders (or by written consent in lieu of a meeting) are not individuals
nominated by the Company's incumbent Board; (v) if the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
holders of voting securities of the Company outstanding immediately prior
thereto being the holders of at least eighty (80%) percent of the voting
securities of the surviving entity outstanding immediately after such
merger or consolidation; (vi) if the shareholders of the Company approve a
plan of complete liquidation of the Company; or (vii) if the shareholders of
the Company approve an agreement for the sale or disposition of all or
substantially all of the Company's assets.
SECTION 3. CHANGE IN CONTROL BONUS. Subject to the provisions
below, upon the occurrence of a Change In Control under this Agreement, the
Company shall pay Executive in cash a bonus equal to Executive's annual
compensation from the Company (and any entity in which the Company directly or
indirectly owns a majority of the voting interest) for the calendar year
immediately preceding the year in which the Change In Control occurs, as
reflected on Executive's forms W-2 or 1099 for such period (excluding
deductions for 401(k) and medical plan contributions) (the "Base Amount").
Notwithstanding the foregoing, in no event may a bonus be paid hereunder
unless in connection with a Change in Control, the price of the Company's
Common Stock at the time of or in connection with the transaction giving rise
to a Change in Control is equal to the lesser of (a) 15% above the closing
bid price on Nasdaq (or other exchange as appropriate) of the Company's
Common Stock on November 16, 1998 or (b) 15% above the "average market price"
of the Company's Common Stock on the date of the approval by the Board of the
Change in Control. For purposes here of, the average market price shall mean
the average of the closing bid prices of the Company's Common Stock on Nasdaq
(or other exchange as appropriate) for the 30 trading days immediately prior
to the date which is 60 days immediately prior to the date of approval by the
Board of the Change in Control.
-2-
<PAGE>
SECTION 4. EMPLOYMENT FOLLOWING CHANGE IN CONTROL. The
Partnership agrees to employ Executive for a period of two (2) years following
a Change In Control under this Agreement upon the same terms and conditions as
in effect immediately prior to the Change In Control. Upon termination of
Executive's employment within such two-year period for any reason other than
by the Company for Cause or by Executive without Good Reason, the Company
and/or the Partnership shall pay Executive an amount equal to the Base Amount.
For purposes of this Section, termination of employment shall
be considered to be for "Cause", whether it occurred by resignation or
discharge, if the reason for the termination of employment was Executive's
embezzlement, dishonesty, fraud, conviction of a felonious or other charge
involving moral turpitude.
For purposes of this Section, termination of employment shall
be considered to be "Good Reason" if (1) without the express written consent
of Executive, Executive is assigned material duties substantially inconsistent
with Executive's positions, duties, responsibilities or status with the
Partnership as in effect before the Change In Control, or Executive's titles
or offices as in effect immediately prior to the Change In Control are
substantially diminished or any other action is taken by the Partnership or
any of its affiliates which results in a diminution in Executive's position,
authority, or principal duties or responsibilities other than an
insubstantial and inadvertent act that is remedied by the Partnership promptly
after receipt of notice given thereof by Executive, except any such assignment
action or change resulting from Executive's termination of employment for
Cause, or from Executive's disability as reasonably determined by the Company
or death; PROVIDED, HOWEVER, that notwithstanding the foregoing, in no event
shall a termination of employment under this clause (1) be considered to be
for "Good Reason" if, at the time of the termination, Executive shall have
had a position with a title, level of duties and responsibilities
substantially similar to Executive's title, duties and responsibilities
immediately prior to the Change In Control; (2) the base compensation of
Executive is reduced or the benefit entitlement or bonus opportunity of
Executive as in effect immediately prior to the Change In Control
is substantially reduced; (3) the Partnership requires Executive without
Executive's express written consent to be based anywhere other than the
Partnership's location where Executive is principally employed or another
location that is not more than fifty (50) miles from the location where
Executive is principally employed immediately prior to the Change In Control,
with Executive's business travel obligations being no greater than in effect
immediately prior to the Change In Control; or (4) any failure by the Company
or the Partnership to obtain an express written assumption of this Agreement
from any successor to or assign of the Company or the Partnership, as the
case may be.
SECTION 5. REDUCTION IN PAYMENT. In the event that any payment
hereunder would, in the opinion of the Company's independent accounting firm,
if not reduced, cause an excise tax under Section 4999 of the Internal Revenue
Code of 1986, as amended on Executive, the amount of such payment shall be
reduced by the minimum amount, if any, that in the opinion of such accounting
firm, is necessary to avoid such excise tax. The determination of the
accounting firm shall be conclusive and binding on the parties.
-3-
<PAGE>
SECTION 6. MITIGATION. Executive shall not be required to
mitigate the amount of an payment provided for hereunder by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for hereunder be reduced by any compensation earned by Executive as
the result of employment by another employer or by retirement benefits.
SECTION 7. COVENANT NOT TO COMPETE. Executive covenants that,
while he is an employee of the Partnership and for a period of one year after
termination of his employment, however caused, he shall not engage in, or
participate in, any business whose product lines are in direct competition to
the product lines of the Partnership.
SECTION 8. NOTICES. All notices or other communications that
are required or permitted hereunder shall be in writing deemed to have been
given on the date delivered personally or on the date sent by certified or
registered mail, overnight delivery or by facsimile transmission. Notice to
the Company or the Partnership shall be given at the Company's then existing
corporate headquarters and shall be directed to the Secretary (or such other
location or person as the Company subsequently shall designate in writing to
Executive). Notice to Executive shall be given at the address set forth on the
signature page hereof (or such other address as Executive subsequently shall
designate in writing to the Company).
SECTION 9. WAIVER. Failure to insist upon strict compliance
with any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waive or
relinquishment of such right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times.
SECTION 10. SEVERABILITY. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability
of any other provision. In the event that any part of a covenant contained
herein is determined by a court of law to be invalid, a judicially
enforceable provision shall be substituted in its place,. Any covenant so
modified shall be binding upon the parties and shall have the same force and
effect as if originally set forth in this Agreement.
SECTION 11. MODIFICATION. This Agreement may be amended only
in writing, signed by each of the parties hereto.
SECTION 12. HEADINGS. The headings in this Agreement are
inserted for convenience only and are not to be considered a construction of
the provisions thereof.
SECTION 13. SUCCESSORS, BINDING AGREEMENT.
(a) The Company and the Partnership will require any successor
(direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company
-4-
<PAGE>
or the Partnership, as the case may be, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company or the Partnership would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as herein before defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise. Similarly, "Partnership" shall mean the
Partnership as herein before defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise. Prior to a Change In Control, the term
"Partnership" shall also mean any affiliate of the Company to which Executive
may be transferred and the Company and the Partnership shall cause such
successor employer to be considered the "Partnership" bound by the terms of
this Agreement and this Agreement shall be amended to so provide. Following a
Change In Control neither the term "Company" nor "Partnership" shall not mean
any affiliate of the Company or the Partnership, as the case may be, to which
Executive may be transferred unless Executive shall have previously approved
of such transfer in writing, in which case the Company and the Partnership
shall cause such successor employer to be considered the "Company" bound by
the terms of this Agreement and this Agreement shall be amended to so provide.
(b) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount would still be payable to Executive
hereunder if Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisees, legates or other designee or, if there is
no such designee, to Executive's estate.
SECTION 14. RESOLUTION OF DISPUTE, CHOICE OF FORM. Except as
otherwise expressly provided herein, the parties agree that any dispute,
controversy or claim arising out of or relating to this Agreement shall, at
the election of Executive, be resolved by final and binding arbitration,
enforceable under the Federal Arbitration Act, administered by the American
Arbitration Association under is Commercial Arbitration Rules, and judgment
on the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. All such disputes, controversies or claims shall be
determined by a panel or three arbitrators selected in accordance with the
rules of the American Arbitration Association and the arbitration shall be
conducted in the City of Dallas, State of Texas. In the event that within
sixty (60) days after the Company or the Partnership commences litigation in
connection with this Agreement Executive commences an arbitration proceeding
concerning the same issue or issues, the Company or the Partnership, as the
case may be, shall promptly terminate such litigation and submit to the
jurisdiction of the arbitration proceeding to the extent that it involves
such issue or issues. This Section shall survive the termination of this
Agreement for any reason.
SECTION 15. PAYMENT OF EXPENSES. In the event that any
proceeding is brought by Executive to enforce or interpret Executive's rights
hereunder, Executive shall be entitled to
-5-
<PAGE>
be paid all expenses incurred by Executive with respect to such proceeding,
unless as a part of such proceeding, the arbitration panel or court of
competent jurisdiction determines that the material assertions made by
Executive as a basis for such proceeding were not made in good faith or were
frivolous, in which case each party to the proceeding shall bear its own
costs.
SECTION 16. GOVERNING LAW. This Agreement shall be construed
and enforced in accordance with the laws of the State of Texas, without regard
to conflict of law provisions that would defer to the substantive laws of
another jurisdiction.
SECTION 17. COUNTERPARTS. This Agreement may be signed in any
number of counterparts, each of which shall be deemed an original, with the
same effect as if the signatures thereto and hereto were upon a single
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
HILITE INDUSTRIES, INC.
By: /s/ Samuel M. Berry
----------------------------------
HILITE INDUSTRIES AUTOMOTIVE, LP
By: HILITE INDUSTRIES (TEXAS), INC.,
its General Partner
By: /s/ Samuel M. Berry
----------------------------------
/s/ Roy Wiegmann
----------------------------------
Executive
-6-
<PAGE>
Exhibit 10.5
CHANGE IN CONTROL RETENTION BONUS
AND EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of January 5, 1999, by and between
Hilite Industries, Inc., a Delaware corporation (the "Company"), Hilite
Industries Automotive, LP, a Texas limited partnership (the "Partnership"),
and Ron Reinke ("Executive").
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with publicly held corporations, the
possibility of a change in control may exist and that such possibility and
the uncertainty and questions it may raise among management, may result in
the departure or distraction of management personnel to the detriment of the
Company and its stockholders;
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of key management personnel, including Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from any possible change in control of the Company;
WHEREAS, the Company is relying on Executive continuing with
the Company and/or the Partnership prior to any Change In Control (as
hereinafter defined) and willingness to stay with the Company under certain
conditions for a period of time after any Change In Control; and
WHEREAS, the Board desires to pursue alternative strategies to
improve shareholder value and the Company is relying on Executive to assist in
the presentation of the Company to potential buyers in addition to his current
responsibilities.
NOW THEREFORE, the parties hereto agree as follows:
SECTION 1. TERM OF AGREEMENT. This Agreement shall be
effective as of the date hereof and shall continue in effect through December
31, 2000; provided that on January 1, 2000 and each January 1st thereafter,
the term of this Agreement shall automatically be extended for an additional
year unless the Company or Executive shall have given at least ninety (90)
days' prior notice not to extend this Agreement or a Change In Control shall
have occurred prior to such January 1; provided further that if a Change In
Control shall have occurred during the term of this Agreement, this Agreement
shall continue in effect for a period of not less than twenty-four (24) months
beyond the date on which such Change In Control occurred. The termination of
this Agreement, however, shall not affect any rights Executive may have to
payments that have accrued prior thereto.
<PAGE>
SECTION 2. CHANGE IN CONTROL. For purposes of this Agreement,
a "Change in Control" shall occur when (and only when): (i) there has occurred
a change in control as the term "control" is defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934 as in effect on the date hereof (the
"1934 Act"); (ii) when any "person" (as such term is defined in Sections 3(a)
(9) and 13(d)(3) of the 1934 Act), other than the Company, any of its
subsidiaries or an employee stock ownership trust of the Company, becomes a
beneficial owner, directly or indirectly, of securities of the Company
representing twenty-five (25%) percent or more of the securities having the
right to vote on the election of directors ("voting securities") of the
Company then outstanding; (iii) during any period of two (2) consecutive years
(not including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board, and
any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction described
in clauses (i), (ii), (iv), (v), (vi) or (vii) of this Section 2) whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then
still in office who were either directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease
for any reason to constitute at least seventy-five (75%) percent of the
entire Board; (iv) when a majority of the directors elected at any annual
or special meeting of stockholders (or by written consent in lieu of a meeting)
are not individuals nominated by the Company's incumbent Board; (v) if the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the holders of voting securities of the Company outstanding
immediately prior thereto being the holders of at least eighty (80%) percent
of the voting securities of the surviving entity outstanding immediately
after such merger or consolidation; (vi) if the shareholders of the Company
approve a plan of complete liquidation of the Company; or (vii) if the
shareholders of the Company approve an agreement for the sale or disposition
of all or substantially all of the Company's assets.
SECTION 3. CHANGE IN CONTROL BONUS. Subject to the provisions
below, upon the occurrence of a Change In Control under this Agreement, the
Company shall pay Executive in cash a bonus equal to Executive's annual
compensation from the Company (and any entity in which the Company directly or
indirectly owns a majority of the voting interest) for the calendar year
immediately preceding the year in which the Change In Control occurs, as
reflected on Executive's forms W-2 or 1099 for such period (excluding
deductions for 401(k) and medical plan contributions) (the "Base Amount").
Notwithstanding the foregoing, in no event may a bonus be paid hereunder
unless in connection with a Change in Control, the price of the Company's
Common Stock at the time of or in connection with the transaction giving rise
to a Change in Control is equal to the lesser of (a) 15% above the closing
bid price on Nasdaq (or other exchange as appropriate) of the Company's
Common Stock on November 16, 1998 or (b) 15% above the "average market price"
of the Company's Common Stock on the date of the approval by the Board of the
Change in Control. For purposes hereof, the average market price shall mean
the average of the closing bid prices of the Company's Common Stock on Nasdaq
(or other exchange as appropriate) for the 30 trading days immediately prior
to the date which is 60 days immediately prior to the date of approval by the
Board of the Change in Control.
-2-
<PAGE>
SECTION 4. EMPLOYMENT FOLLOWING CHANGE IN CONTROL. The
Partnership agrees to employ Executive for a period of two (2) years following
a Change In Control under this Agreement upon the same terms and conditions
as in effect immediately prior to the Change In Control. Upon termination of
Executive's employment within such two-year period for any reason other than
by the Company for Cause or by Executive without Good Reason, the Company
and/or the Partnership shall pay Executive an amount equal to the Base Amount.
For purposes of this Section, termination of employment shall
be considered to be for "Cause", whether it occurred by resignation or
discharge, if the reason for the termination of employment was Executive's
embezzlement, dishonesty, fraud, conviction of a felonious or other charge
involving moral turpitude.
For purposes of this Section, termination of employment shall
be considered to be "Good Reason" if (1) without the express written consent
of Executive, Executive is assigned material duties substantially inconsistent
with Executive's positions, duties, responsibilities or status with the
Partnership as in effect before the Change In Control, or Executive's titles
or offices as in effect immediately prior to the Change In Control are
substantially diminished or any other action is taken by the Partnership or
any of its affiliates which results in a diminution in Executive's position,
authority, or principal duties or responsibilities other than an insubstantial
and inadvertent act that is remedied by the Partnership promptly after receipt
of notice given thereof by Executive, except any such assignment, action or
change resulting from Executive's termination of employment for Cause, or
from Executive's disability as reasonably determined by the Company or death;
PROVIDED, HOWEVER, that notwithstanding the foregoing, in no event shall a
termination of employment under this clause (1) be considered to be for "Good
Reason" if, at the time of the termination, Executive shall have had a
position with a title, level of duties and responsibilities substantially
similar to Executive's title, duties and responsibilities immediately prior
to the Change In Control; (2) the base compensation of Executive is reduced
or the benefit entitlement or bonus opportunity of Executive as in effect
immediately prior to the Change In Control is substantially reduced; (3) the
Partnership requires Executive without Executive's express written consent to
be based anywhere other than the Partnership's location where Executive is
principally employed or another location that is not more than fifty (50)
miles from the location where Executive is principally employed immediately
prior to the Change In Control, with Executive's business travel obligations
being no greater than in effect immediately prior to the Change In Control;
or (4) any failure by the Company or the Partnership to obtain an express
written assumption of this Agreement from any successor to or assign of the
Company or the Partnership, as the case may be.
SECTION 5. REDUCTION IN PAYMENT. In the event that any payment
hereunder would, in the opinion of the Company's independent accounting firm,
if not reduced, cause an excise tax under Section 4999 of the Internal Revenue
Code of 1986, as amended on Executive, the amount of such payment shall be
reduced by the minimum amount, if any, that in the opinion of such accounting
firm, is necessary to avoid such excise tax. The determination of the
accounting firm shall be conclusive and binding on the parties.
-3-
<PAGE>
SECTION 6. MITIGATION. Executive shall not be required to
mitigate the amount of an payment provided for hereunder by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for hereunder be reduced by any compensation earned by Executive as
the result of employment by another employer or by retirement benefits.
SECTION 7. COVENANT NOT TO COMPETE. Executive covenants that,
while he is an employee of the Partnership and for a period of one year after
termination of his employment, however caused, he shall not engage in, or
participate in, any business whose product lines are in direct competition to
the product lines of the Partnership.
SECTION 8. NOTICES. All notices or other communications that
are required or permitted hereunder shall be in writing deemed to have been
given on the date delivered personally or on the date sent by certified or
registered mail, overnight delivery or by facsimile transmission. Notice to
the Company or the Partnership shall be given at the Company's then existing
corporate headquarters and shall be directed to the Secretary (or such other
location or person as the Company subsequently shall designate in writing to
Executive). Notice to Executive shall be given at the address set forth on the
signature page hereof (or such other address as Executive subsequently shall
designate in writing to the Company).
SECTION 9. WAIVER. Failure to insist upon strict compliance
with any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waive or
relinquishment of such right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times.
SECTION 10. SEVERABILITY. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability
of any other provision. In the event that any part of a covenant contained
herein is determined by a court of law to be invalid, a judicially
enforceable provision shall be substituted in its place,. Any covenant so
modified shall be binding upon the parties and shall have the same force and
effect as if originally set forth in this Agreement.
SECTION 11. MODIFICATION. This Agreement may be amended only
in writing, signed by each of the parties hereto.
SECTION 12. HEADINGS. The headings in this Agreement are
inserted for convenience only and are not to be considered a construction of
the provisions thereof.
SECTION 13. SUCCESSORS, BINDING AGREEMENT.
(a) The Company and the Partnership will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company or
-4-
<PAGE>
the Partnership, as the case may be, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company or
the Partnership would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the Company as
herein before defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. Similarly, "Partnership" shall mean the Partnership as
herein before defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. Prior to a Change In Control, the term "Partnership" shall
also mean any affiliate of the Company to which Executive may be transferred
and the Company and the Partnership shall cause such successor employer to be
considered the "Partnership" bound by the terms of this Agreement and this
Agreement shall be amended to so provide. Following a Change In Control
neither the term "Company" nor "Partnership" shall not mean any
affiliate of the Company or the Partnership, as the case may be, to which
Executive may be transferred unless Executive shall have previously approved
of such transfer in writing, in which case the Company and the Partnership
shall cause such successor employer to be considered the "Company" bound by
the terms of this Agreement and this Agreement shall be amended to so provide.
(b) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount would still be payable to Executive
hereunder if Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisees, legates or other designee or, if there is
no such designee, to Executive's estate.
SECTION 14. RESOLUTION OF DISPUTE, CHOICE OF FORM. Except as
otherwise expressly provided herein, the parties agree that any dispute,
controversy or claim arising out of or relating to this Agreement shall, at
the election of Executive, be resolved by final and binding arbitration,
enforceable under the Federal Arbitration Act, administered by the American
Arbitration Association under is Commercial Arbitration Rules, and judgment
on the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. All such disputes, controversies or claims shall be
determined by a panel or three arbitrators selected in accordance with the
rules of the American Arbitration Association and the arbitration shall be
conducted in the City of Dallas, State of Texas. In the event that within
sixty (60) days after the Company or the Partnership commences litigation in
connection with this Agreement Executive commences an arbitration proceeding
concerning the same issue or issues, the Company or the Partnership, as the
case may be, shall promptly terminate such litigation and submit to the
jurisdiction of the arbitration proceeding to the extent that it involves
such issue or issues. This Section shall survive the termination of this
Agreement for any reason.
SECTION 15. PAYMENT OF EXPENSES. In the event that any
proceeding is brought by Executive to enforce or interpret Executive's rights
hereunder, Executive shall be entitled to
-5-
<PAGE>
be paid all expenses incurred by Executive with respect to such proceeding,
unless as a part of such proceeding, the arbitration panel or court of
competent jurisdiction determines that the material assertions made by
Executive as a basis for such proceeding were not made in good faith or
were frivolous, in which case each party to the proceeding shall bear its
own costs.
SECTION 16. GOVERNING LAW. This Agreement shall be construed
and enforced in accordance with the laws of the State of Texas, without regard
to conflict of law provisions that would defer to the substantive laws of
another jurisdiction.
SECTION 17. COUNTERPARTS. This Agreement may be signed in any
number of counterparts, each of which shall be deemed an original, with the
same effect as if the signatures thereto and hereto were upon a single
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
HILITE INDUSTRIES, INC.
By: /s/ Samuel M. Berry
----------------------------------
HILITE INDUSTRIES AUTOMOTIVE, LP
By: HILITE INDUSTRIES (TEXAS), INC.,
its General Partner
By: /s/ Samuel M. Berry
----------------------------------
/s/ Ronald E. Reinke
----------------------------------
Executive
-6-
<PAGE>
Exhibit 10.6
CHANGE IN CONTROL RETENTION BONUS
AND EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of January 5, 1999, by and between
Hilite Industries, Inc., a Delaware corporation (the "Company"), Hilite
Industries Automotive, LP, a Texas limited partnership (the "Partnership"),
and Arthur D. Johnson ("Executive").
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with publicly held corporations, the
possibility of a change in control may exist and that such possibility and
the uncertainty and questions it may raise among management, may result in
the departure or distraction of management personnel to the detriment of the
Company and its stockholders;
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of key management personnel, including Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from any possible change in control of the Company;
WHEREAS, the Company is relying on Executive continuing with
the Company and/or the Partnership prior to any Change In Control (as
hereinafter defined) and willingness to stay with the Company under certain
conditions for a period of time after any Change In Control; and
WHEREAS, the Board desires to pursue alternative strategies to
improve shareholder value and the Company is relying on Executive to assist in
the presentation of the Company to potential buyers in addition to his current
responsibilities.
NOW THEREFORE, the parties hereto agree as follows:
SECTION 1. TERM OF AGREEMENT. This Agreement shall be
effective as of the date hereof and shall continue in effect through December
31, 2000; provided that on January 1, 2000 and each January 1st thereafter,
the term of this Agreement shall automatically be extended for an additional
year unless the Company or Executive shall have given at least ninety (90) days'
prior notice not to extend this Agreement or a Change In Control shall have
occurred prior to such January 1; provided further that if a Change In Control
shall have occurred during the term of this Agreement, this Agreement shall
continue in effect for a period of not less than twenty-four (24) months beyond
the date on which such Change In Control occurred. The termination of this
Agreement, however, shall not affect any rights Executive may have to payments
that have accrued prior thereto.
<PAGE>
SECTION 2. CHANGE IN CONTROL. For purposes of this Agreement,
a "Change in Control" shall occur when (and only when): (i) there has occurred
a change in control as the term "control" is defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934 as in effect on the date hereof (the
"1934 Act"); (ii) when any "person" (as such term is defined in Sections 3(a)
(9) and 13(d)(3) of the 1934 Act), other than the Company, any of its
subsidiaries or an employee stock ownership trust of the Company, becomes a
beneficial owner, directly or indirectly, of securities of the Company
representing twenty-five (25%) percent or more of the securities having the
right to vote on the election of directors ("voting securities") of the
Company then outstanding; (iii) during any period of two (2) consecutive
years (not including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board, and
any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction described
in clauses (i), (ii), (iv), (v), (vi) or (vii) of this Section 2) whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then
still in office who were either directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease
for any reason to constitute at least seventy-five (75%) percent of the
entire Board; (iv) when a majority of the directors elected at any annual or
special meeting of stockholders (or by written consent in lieu of a meeting)
are not individuals nominated by the Company's incumbent Board; (v) if the
stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the holders of voting securities of the Company
outstanding immediately prior thereto being the holders of at least eighty
(80%) percent of the voting securities of the surviving entity outstanding
immediately after such merger or consolidation; (vi) if the shareholders of
the Company approve a plan of complete liquidation of the Company; or (vii)
if the shareholders of the Company approve an agreement for the sale or
disposition of all or substantially all of the Company's assets.
SECTION 3. CHANGE IN CONTROL BONUS. Subject to the provisions
below, upon the occurrence of a Change In Control under this Agreement, the
Company shall pay Executive in cash a bonus equal to Executive's annual
compensation from the Company (and any entity in which the Company directly or
indirectly owns a majority of the voting interest) for the calendar year
immediately preceding the year in which the Change In Control occurs, as
reflected on Executive's forms W-2 or 1099 for such period (excluding
deductions for 401(k) and medical plan contributions) (the "Base Amount").
Notwithstanding the foregoing, in no event may a bonus be paid hereunder
unless in connection with a Change in Control, the price of the Company's
Common Stock at the time of or in connection with the transaction giving rise
to a Change in Control is equal to the lesser of (a) 15% above the closing
bid price on Nasdaq (or other exchange as appropriate) of the Company's
Common Stock on November 16, 1998 or (b) 15% above the "average market price"
of the Company's Common Stock on the date of the approval by the Board of the
Change in Control. For purposes hereof, the average market price shall mean
the average of the closing bid prices of the Company's Common Stock on Nasdaq
(or other exchange as appropriate) for the 30 trading days immediately prior
to the date which is 60 days immediately prior to the date of approval by the
Board of the Change in Control.
-2-
<PAGE>
SECTION 4. EMPLOYMENT FOLLOWING CHANGE IN CONTROL. The
Partnership agrees to employ Executive for a period of two (2) years following
a Change In Control under this Agreement upon the same terms and conditions as
in effect immediately prior to the Change In Control. Upon termination of
Executive's employment within such two-year period for any reason other than by
the Company for Cause or by Executive without Good Reason, the Company and/or
the Partnership shall pay Executive an amount equal to the Base Amount.
For purposes of this Section, termination of employment shall
be considered to be for "Cause", whether it occurred by resignation or
discharge, if the reason for the termination of employment was Executive's
embezzlement, dishonesty, fraud, conviction of a felonious or other charge
involving moral turpitude.
For purposes of this Section, termination of employment shall
be considered to be "Good Reason" if (1) without the express written consent of
Executive, Executive is assigned material duties substantially inconsistent
with Executive's positions, duties, responsibilities or status with the
Partnership as in effect before the Change In Control, or Executive's titles
or offices as in effect immediately prior to the Change In Control are
substantially diminished or any other action is taken by the Partnership or
any of its affiliates which results in a diminution in Executive's position,
authority, or principal duties or responsibilities other than an insubstantial
and inadvertent act that is remedied by the Partnership promptly after
receipt of notice given thereof by Executive, except any such assignment,
action or change resulting from Executive's termination of employment for
Cause, or from Executive's disability as reasonably determined by the
Company or death; PROVIDED, HOWEVER, that notwithstanding the foregoing, in
no event shall a termination of employment under this clause (1) be considered
to be for "Good Reason" if, at the time of the termination, Executive shall
have had a position with a title, level of duties and responsibilities
substantially similar to Executive's title, duties and responsibilities
immediately prior to the Change In Control; (2) the base compensation of
Executive is reduced or the benefit entitlement or bonus opportunity of
Executive as in effect immediately prior to the Change In Control is
substantially reduced; (3) the Partnership requires Executive without
Executive's express written consent to be based anywhere other than the
Partnership's location where Executive is principally employed or another
location that is not more than fifty (50) miles from the location where
Executive is principally employed immediately prior to the Change In Control,
with Executive's business travel obligations being no greater than in effect
immediately prior to the Change In Control; or (4) any failure by the Company
or the Partnership to obtain an express written assumption of this Agreement
from any successor to or assign of the Company or the Partnership, as the
case may be.
SECTION 5. REDUCTION IN PAYMENT. In the event that any payment
hereunder would, in the opinion of the Company's independent accounting firm,
if not reduced, cause an excise tax under Section 4999 of the Internal Revenue
Code of 1986, as amended on Executive, the amount of such payment shall be
reduced by the minimum amount, if any, that in the opinion of such accounting
firm, is necessary to avoid such excise tax. The determination of the
accounting firm shall be conclusive and binding on the parties.
-3-
<PAGE>
SECTION 6. MITIGATION. Executive shall not be required to
mitigate the amount of an payment provided for hereunder by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for hereunder be reduced by any compensation earned by Executive as the result
of employment by another employer or by retirement benefits.
SECTION 7. COVENANT NOT TO COMPETE. Executive covenants that,
while he is an employee of the Partnership and for a period of one year after
termination of his employment, however caused, he shall not engage in, or
participate in, any business whose product lines are in direct competition to
the product lines of the Partnership.
SECTION 8. NOTICES. All notices or other communications that
are required or permitted hereunder shall be in writing deemed to have been
given on the date delivered personally or on the date sent by certified or
registered mail, overnight delivery or by facsimile transmission. Notice to the
Company or the Partnership shall be given at the Company's then existing
corporate headquarters and shall be directed to the Secretary (or such other
location or person as the Company subsequently shall designate in writing to
Executive). Notice to Executive shall be given at the address set forth on the
signature page hereof (or such other address as Executive subsequently shall
designate in writing to the Company).
SECTION 9. WAIVER. Failure to insist upon strict compliance
with any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waive or
relinquishment of such right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times.
SECTION 10. SEVERABILITY. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability
of any other provision. In the event that any part of a covenant contained
herein is determined by a court of law to be invalid, a judicially enforceable
provision shall be substituted in its place,. Any covenant so modified shall be
binding upon the parties and shall have the same force and effect as if
originally set forth in this Agreement.
SECTION 11. MODIFICATION. This Agreement may be amended only
in writing, signed by each of the parties hereto.
SECTION 12. HEADINGS. The headings in this Agreement are
inserted for convenience only and are not to be considered a construction of
the provisions thereof.
SECTION 13. SUCCESSORS, BINDING AGREEMENT.
(a) The Company and the Partnership will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of
-4-
<PAGE>
the business and/or assets of the Company or the Partnership, as the case may
be, to expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Company or the Partnership would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as herein before defined and any successor to
its business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise. Similarly, "Partnership"
shall mean the Partnership as herein before defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise. Prior to a Change In Control,
the term "Partnership" shall also mean any affiliate of the Company to which
Executive may be transferred and the Company and the Partnership shall cause
such successor employer to be considered the "Partnership" bound by the terms
of this Agreement and this Agreement shall be amended to so provide. Following
a Change In Control neither the term "Company" nor "Partnership" shall not
mean any affiliate of the Company or the Partnership, as the case may be, to
which Executive may be transferred unless Executive shall have previously
approved of such transfer in writing, in which case the Company and the
Partnership shall cause such successor employer to be considered the "Company"
bound by the terms of this Agreement and this Agreement shall be amended to
so provide.
(b) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount would still be payable to Executive
hereunder if Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisees, legates or other designee or, if there is
no such designee, to Executive's estate.
SECTION 14. RESOLUTION OF DISPUTE, CHOICE OF FORM. Except as
otherwise expressly provided herein, the parties agree that any dispute,
controversy or claim arising out of or relating to this Agreement shall, at the
election of Executive, be resolved by final and binding arbitration,
enforceable under the Federal Arbitration Act, administered by the American
Arbitration Association under is Commercial Arbitration Rules, and judgment
on the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. All such disputes, controversies or claims shall be
determined by a panel or three arbitrators selected in accordance with the
rules of the American Arbitration Association and the arbitration shall be
conducted in the City of Dallas, State of Texas. In the event that within
sixty (60) days after the Company or the Partnership commences litigation in
connection with this Agreement Executive commences an arbitration proceeding
concerning the same issue or issues, the Company or the Partnership, as the
case may be, shall promptly terminate such litigation and submit to the
jurisdiction of the arbitration proceeding to the extent that it involves
such issue or issues. This Section shall survive the termination of this
Agreement for any reason.
SECTION 15. PAYMENT OF EXPENSES. In the event that any
proceeding is brought by Executive to enforce or interpret Executive's rights
hereunder, Executive shall be entitled to
-5-
<PAGE>
be paid all expenses incurred by Executive with respect to such proceeding,
unless as a part of such proceeding, the arbitration panel or court of competent
jurisdiction determines that the material assertions made by Executive as a
basis for such proceeding were not made in good faith or were frivolous, in
which case each party to the proceeding shall bear its own costs.
SECTION 16. GOVERNING LAW. This Agreement shall be construed
and enforced in accordance with the laws of the State of Texas, without regard
to conflict of law provisions that would defer to the substantive laws of
another jurisdiction.
SECTION 17. COUNTERPARTS. This Agreement may be signed in any
number of counterparts, each of which shall be deemed an original, with the
same effect as if the signatures thereto and hereto were upon a single
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
HILITE INDUSTRIES, INC.
By: /s/ Samuel M. Berry
----------------------------------
HILITE INDUSTRIES AUTOMOTIVE, LP
By: HILITE INDUSTRIES (TEXAS), INC.,
its General Partner
By: /s/ Samuel M. Berry
----------------------------------
/s/ Arthur D. Johnson
----------------------------------
Executive
-6-
<PAGE>
Exhibit 10.7
CHANGE IN CONTROL RETENTION BONUS
AND EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of December 18, 1998, by and between
Hilite Industries, Inc., a Delaware corporation (the "Company") and Lineberger &
Co., LLC, a Connecticut limited liability company ("Consultant").
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with publicly held corporations, the
possibility of a change in control may exist and that such possibility and
the uncertainty and questions it may raise among management, may result in
the departure or distraction of management personnel to the detriment of the
Company and its stockholders;
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of key management personnel, including Consultant, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from any possible change in control of the Company;
WHEREAS, the Company is relying on Consultant continuing relationship
with the Company and/or the Partnership prior to any Change In Control (as
hereinafter defined) and willingness to consult with the Company under certain
conditions for a period of time after any Change In Control; and
WHEREAS, the Board desires to pursue alternative strategies to
improve shareholder value and the Company is relying on Consultant to assist in
the presentation of the Company to potential buyers in addition to his current
responsibilities.
NOW THEREFORE, the parties hereto agree as follows:
SECTION 1. TERM OF AGREEMENT. This Agreement shall be
effective as of the date hereof and shall continue in effect through December
31, 2000; provided that on January 1, 2000 and each January 1st thereafter, the
term of this Agreement shall automatically be extended for an additional year
unless the Company or Consultant shall have given at least ninety (90) days'
prior notice not to extend this Agreement or a Change In Control shall have
occurred prior to such January 1; provided further that if a Change In Control
shall have occurred during the term of this Agreement, this Agreement shall
continue in effect for a period of not less than twenty-four (24) months beyond
the date on which such Change In Control occurred. The termination of this
Agreement, however, shall not affect any rights Consultant may have to payments
that have accrued prior thereto.
<PAGE>
SECTION 2. CHANGE IN CONTROL. For purposes of this Agreement,
a "Change in Control" shall occur when (and only when): (i) there has occurred a
change in control as the term "control" is defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934 as in effect on the date hereof (the
"1934 Act"); (ii) when any "person" (as such term is defined in Sections 3(a)(9)
and 13(d)(3) of the 1934 Act), other than the Company, any of its subsidiaries
or an employee stock ownership trust of the Company, becomes a beneficial owner,
directly or indirectly, of securities of the Company representing twenty-five
(25%) percent or more of the securities having the right to vote on the
election of directors ("voting securities") of the Company then outstanding;
(iii) during any period of two (2) consecutive years (not including any period
prior to the execution of this Agreement), individuals who at the beginning
of such period constitute the Board, and any new director (other than a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clauses (i), (ii), (iv), (v),
(vi) or (vii) of this Section 2) whose election by the Board or nomination
for election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who were either
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at
least seventy-five (75%) percent of the entire Board; (iv) when a majority of
the directors elected at any annual or special meeting of stockholders (or by
written consent in lieu of a meeting) are not individuals nominated by the
Company's incumbent Board; (v) if the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the holders of voting
securities of the Company outstanding immediately prior thereto being the
holders of at least eighty (80%) percent of the voting securities of the
surviving entity outstanding immediately after such merger or consolidation;
(vi) if the shareholders of the Company approve a plan of complete liquidation
of the Company; or (vii) if the shareholders of the Company approve an
agreement for the sale or disposition of all or substantially all of the
Company's assets.
SECTION 3. CHANGE IN CONTROL BONUS. Subject to the provisions
below, upon the occurrence of a Change In Control under this Agreement, the
Company shall pay Consultant in cash a bonus equal to 200% of Consultant's
annual consulting fees from the Company (and any entity in which the Company
directly or indirectly owns a majority of the voting interest) for the
calendar year immediately preceding the year in which the Change In Control
occurs, as reflected on Consultant's Form 10999 for such period (the "Base
Amount"). Notwithstanding the foregoing, in no event may a bonus be paid
hereunder unless in connection with a Change in Control, the price of the
Company's Common Stock at the time of or in connection with the transaction
giving rise to a Change in Control is equal to the lesser of (a) 15% above
the closing bid price on Nasdaq (or other exchange as appropriate) of the
Company's Common Stock on November 16, 1998 or (b) 15% above the "average
market price" of the Company's Common Stock on the date of the approval by
the Board of the Change in Control. For purposes hereof, the average market
price shall mean the average of the closing bid prices of the Company's
Common Stock on Nasdaq (or other exchange as appropriate) for the 30
trading days immediately prior to the date which is 60 days immediately prior to
the date of approval by the Board of the Change in Control.
-2-
<PAGE>
SECTION 4. RELATIONSHIP WITH THE COMPANY
a) From and after a Change In Control under this Agreement, the management
agreement by and between the Company and Consultant is hereby amended to
provide that Consultant shall continue to provide consulting services to the
Company as a consultant at will. Except as otherwise provided in this
Agreement, upon termination of such relationship following a Change In
Control, Consultant shall have no further obligation to the Company and the
Company shall have no further obligation to Consultant except to pay
Consultant any unpaid amount which relates to any period before such
termination of the consulting agreement.
b) Consultant covenants that upon a Change In Control under this Agreement
for a period of one year after the termination of Consultant's consulting
agreement with the Company, Consultant will not engage in or participate in
any business whose product lines are in direct competition to the product
lines of the Company. In consideration therefore, upon the occurrence of a
Change In Control, the Company shall pay Consultant in cash an amount equal
to 100% of the Base Amount.
SECTION 5. REDUCTION IN PAYMENT. In the event that any payment
hereunder would, in the opinion of the Company's independent accounting firm, if
not reduced, cause an excise tax under Section 4999 of the Internal Revenue
Code of 1986, as amended on Consultant, the amount of such payment shall be
reduced by the minimum amount, if any, that in the opinion of such accounting
firm, is necessary to avoid such excise tax. The determination of the
accounting firm shall be conclusive and binding on the parties.
-3-
<PAGE>
SECTION 6. MITIGATION. Consultant shall not be required to
mitigate the amount of an payment provided for hereunder by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for hereunder be reduced by any compensation earned by Consultant as
the result of employment by another employer or by retirement benefits.
SECTION 7. NOTICES. All notices or other communications that
are required or permitted hereunder shall be in writing deemed to have been
given on the date delivered personally or on the date sent by certified or
registered mail, overnight delivery or by facsimile transmission. Notice to
the Company shall be given at the Company's then existing corporate
headquarters and shall be directed to the Secretary (or such other location
or person as the Company subsequently shall designate in writing to
Consultant). Notice to Consultant shall be given at the address set forth
on the signature page hereof (or such other address as Consultant
subsequently shall designate in writing to the Company).
SECTION 8. WAIVER. Failure to insist upon strict compliance
with any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waive or
relinquishment of such right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times.
SECTION 9. SEVERABILITY. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision. In the event that any part of a covenant contained herein
is determined by a court of law to be invalid, a judicially enforceable
provision shall be substituted in its place,. Any covenant so modified shall be
binding upon the parties and shall have the same force and effect as if
originally set forth in this Agreement.
SECTION 10. MODIFICATION. This Agreement may be amended only
in writing, signed by each of the parties hereto.
SECTION 11. HEADINGS. The headings in this Agreement are
inserted for convenience only and are not to be considered a construction of
the provisions thereof.
SECTION 12. SUCCESSORS, BINDING AGREEMENT.
(a) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, as the case may
-4-
<PAGE>
be, to expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession had taken place. As used in this Agreement, "Company" shall
mean the Company as herein before defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise. Prior to a Change In Control, the
term term "Company" shall also mean any affiliate of the Company to which
Consultant may be transferred and the Company shall cause such successor
employer to be considered the "Company" bound by the terms of this Agreement
and this Agreement shall be amended to so provide. Following a Change
In Control the term "Company" shall not mean any affiliate of the Company
to which Consultant may be transferred unless Consultant shall have previously
approved of such transfer in writing, in which case the Company shall
cause such successor employer to be considered the "Company" bound by the terms
of this Agreement and this Agreement shall be amended to so provide.
(b) This Agreement shall inure to the benefit of and be
enforceable by Consultant's successors and permitted designs.
SECTION 13. RESOLUTION OF DISPUTE, CHOICE OF FORM. Except as
otherwise expressly provided herein, the parties agree that any dispute,
controversy or claim arising out of or relating to this Agreement shall, at the
election of Consultant, be resolved by final and binding arbitration,
enforceable under the Federal Arbitration Act, administered by the American
Arbitration Association under is Commercial Arbitration Rules, and judgment
on the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. All such disputes, controversies or claims shall be
determined by a panel or three arbitrators selected in accordance with the
rules of the American Arbitration Association and the arbitration shall be
conducted in the City of Dallas, State of Texas. In the event that within
sixty (60) days after the Company or the Partnership commences litigation in
connection with this Agreement Consultant commences an arbitration proceeding
concerning the same issue or issues, the Company shall promptly terminate
such litigation and submit to the jurisdiction of the arbitration proceeding
to the extent that it involves such issue or issues. This Section shall
survive the termination of this Agreement for any reason.
SECTION 14. PAYMENT OF EXPENSES. In the event that any
proceeding is brought by Consultant to enforce or interpret Consultant's rights
hereunder, Consultant shall be entitled to be paid all expenses incurred by
-5-
<PAGE>
Consultant with respect to such proceeding, unless as a part of such
proceeding, the arbitration panel or court of competent jurisdiction
determines that the material assertions made by Consultant as a
basis for such proceeding were not made in good faith or were frivolous, in
which case each party to the proceeding shall bear its own costs.
SECTION 15. GOVERNING LAW. This Agreement shall be construed
and enforced in accordance with the laws of the State of Texas, without regard
to conflict of law provisions that would defer to the substantive laws of
another jurisdiction.
SECTION 16. COUNTERPARTS. This Agreement may be signed in any
number of counterparts, each of which shall be deemed an original, with the same
effect as if the signatures thereto and hereto were upon a single instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
HILITE INDUSTRIES, INC.
By: /s/ Samuel M. Berry
----------------------------------
LINEBERGER & CO., LLC
By: /s/ James E. Lineberger
----------------------------------
-6-
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