<PAGE> 1
223,500 SHARES
-------------------------
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
COMMON STOCK
($0.01 PER VALUE PER SHARE)
This Prospectus relates to public offering of up to 223,500 shares
(the "Shares") of Common Stock, par value $.01 (the "Common Stock"), of
Universal Automotive Industries, Inc. (the "Company"). All of the Shares
offered hereby may be sold from time to time by the selling stockholders
described herein (each a "Selling Stockholder," collectively the "Selling
Stockholders").
The Common Stock is included for quotation on the Nasdaq SmallCap
Market under the symbol UVSL and is listed for trading on the Chicago Stock
Exchange under the symbol UVS. On July 11, 1996, the last reported bid price
for the Common Stock on the Nasdaq SmallCap Market was $10.25.
The Selling Stockholders and certain persons who purchase Common Stock
from the Selling Stockholders may be deemed "Underwriters," as that term is
defined in the Securities Act of 1933, as amended (the "Securities Act"). The
Shares may be offered by the Selling Stockholders in one or more transactions
on the Nasdaq SmallCap Market, the Chicago Stock Exchange, or in negotiated
transactions or a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Shares may be sold by the Selling
Stockholders either: (i) to a broker or dealer as principal for resale by such
broker or dealer for its account pursuant to this Prospectus (e.g., in
transactions with a "market maker"); or (ii) in brokerage transactions,
including transactions in which the broker solicits purchasers.
Brokers/dealers may receive commissions or discounts from the Selling
Stockholders in amounts to be negotiated immediately prior to the sale. The
Company will pay substantially all other expenses of this offering (including
the expense of preparing and duplicating this Prospectus and the Registration
Statement of which it is a part).
PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH
UNDER THE CAPTION "RISK FACTORS" LOCATED ON PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is August 1, 1996.
<PAGE> 2
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement (of which
this Prospectus is a part) on Form S-3 under the Securities Act with respect to
the Shares offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. The
Registration Statement and any amendments thereto, including exhibits filed as
a part thereof, are available for inspection and copying as set forth below.
The Company is subject to the informational requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission. These reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; New
York Regional Office, Public Reference Room, Seven World Trade Center, 13th
Floor, New York, New York 10048; and Chicago Regional Office, Suite 1400, 500
West Madison Street, Chicago, Illinois 60661. Copies of this material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Common Stock
and Public Warrants are included for quotation on the Nasdaq SmallCap Market
and listed on The Chicago Stock Exchange and these reports, proxy statements
and other information concerning the Company may be inspected at the office of
the Nasdaq SmallCap Market, 1735 K Street, N.W., Washington, D.C. 20006 and The
Chicago Stock Exchange, Inc., 440 South LaSalle Street, Chicago, Illinois
60605.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K and Form 10-K/A for the year
ended December 31, 1995 ("Form 10-K") and Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996 ("Form 10-Q") and all documents filed by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act,
after the date of this Prospectus and prior to the termination of the offer
made by this Prospectus, shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing these
documents. Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in any subsequently filed document which is also deemed to be incorporated
by reference herein) modifies or supersedes such statements. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute part of this Prospectus.
All information appearing in this Prospectus is qualified in its
entirety by the information and financial statements (including notes thereto)
appearing in the documents incorporated herein by reference.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS
THERETO) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST BY ANY
PERSON TO WHOM THIS PROSPECTUS HAS BEEN DELIVERED, FROM THE COMPANY. REQUESTS
SHOULD BE DIRECTED TO KATHRYN MARSIK, UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.,
3350 NORTH KEDZIE AVENUE, CHICAGO, ILLINOIS 60618-5722 (TELEPHONE
312-478-2323).
2
<PAGE> 3
THE COMPANY
Universal Automotive Industries, Inc. (the "Company") is a distributor
and manufacturer of brake rotors and other brake parts which it markets under
its private label, "UBP Universal Brake Parts." The Company also distributes
through its "Universal Automotive" division a wide variety of automotive
aftermarket replacement parts for domestic and imported cars, vans and light
trucks.
The Company commenced operations in 1981 as a warehouse distributor of
automotive aftermarket replacement parts, maintenance items and accessories to
jobbers, located in and around Chicago, Illinois. The Company currently stocks
more than 40,000 stock keeping units ("SKUs") and distributes these products,
including automotive "hard parts" such as brake rotors and drums, spark plugs
and wiper blades, maintenance products such as oil and antifreeze fluids, and
accessories such as floor mats and antennas to more than 300 jobbers generally
located within a 100-mile radius of Chicago, Illinois. The jobbers sell
automotive products to independent mechanics and "do-it-yourself" ("DIY")
customers. The Company also conducts a wholesale "commodities" operation from
its headquarters in Chicago, Illinois, purchasing certain automotive
replacement parts and maintenance items in large volume, at below market
prices, and reselling such products at slightly higher prices.
The Company believes that the fastest growing sector in the automotive
aftermarket replacement parts industry is the brake parts sector. In each of
the past four years, the Company has experienced a greater than 30% increase in
net sales of brake rotors and other brake parts. The Company's gross margins
from sales of brake rotors and other brake parts have been, and the Company
believes will continue to be, substantially higher than its gross margins from
sales of other automotive replacement parts, maintenance items and accessories.
To take advantage of this growth and the higher gross margins, the Company has
shifted its focus in the past several years to specialize in the manufacture of
brake rotors and friction parts and the distribution of brake parts throughout
the United States and Canada. The Company is presently negotiating the sale of
its Chicago-area "Universal Automotive" warehouse distribution business, which
would enable the Company to focus all of its resources and efforts on its
growing brake parts manufacturing and distribution business. The Company is
engaged in preliminary negotiations with several potential buyers of the
Chicago-based warehouse distribution business; however, the Company has not
entered into a letter of intent or any other form of agreement for the sale of
such business and there can be no assurance that the Company will be able to
find a suitable buyer for the warehouse distribution business or sell such
business on terms acceptable to the Company.
The Company currently markets its UBP Universal Brake Parts line to
warehouse distributors, mass market retailers (e.g. Hi-Lo Auto Supply, Discount
Autoparts, AutoWorks, APS, ISW), specialty, "under-the-car" distributors, and
national franchise and chain installers (e.g. Meineke, Midas) located
throughout the United States and Canada, principally through independent sales
representatives and telemarketing. The Company has recently been named the
private label brake rotor and drum supplier to the national buying groups
Pronto, AAAD, and the Independent Auto Parts Association.
Net sales of brake rotors and other brake parts account for an
increasingly significant portion of the Company's total net sales and gross
profits. The following table sets forth, for the three years ended December
31, 1993, 1994 and 1995, net sales attributable to brake parts and all other
Company operations as a percentage of total net sales, and gross profits
attributable to sales of brake parts and sales from all other Company
operations as a percentage of total gross profits.
3
<PAGE> 4
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1993 1994 1995
------------------ ----------------- -----------------
% OF % OF % OF % OF % OF % OF
TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL
NET GROSS NET GROSS NET GROSS
PRODUCTS SALES PROFITS SALES PROFITS SALES PROFITS
-------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Brake Parts(1) . . 46% 63% 58% 70% 64% 79%
All other
operations(2) . . . 54% 37% 42% 30% 36% 21%
---- ---- ---- ---- ---- ----
Total . . . . 100% 100% 100% 100% 100% 100%
==== ==== ==== ==== ==== ====
</TABLE>
- ---------------------
(1) Includes sales of brake rotors and drums, wheel cylinders and brake
friction products.
(2) Includes sales of automotive hard parts, maintenance products and
accessories on a warehouse distribution and wholesale basis, and for
the period from October 2, 1995 through December 31, 1995, revenues
from the Company's Hungarian foundry operations
In October 1995, the Company acquired the assets of Csepel Iron
Foundry Works, a producer of high quality gray iron and ductile iron casting
products, located in Budapest, Hungary. The Company manufactures iron casting
products at its Hungarian foundry primarily for the European automotive and
machine tool industries. The foundry is not presently equipped to manufacture
high volume, smaller-sized items such as brake rotors. The Company may at
some time in the future upgrade the foundry to produce iron castings for brake
rotors, although the Company has no present plans to make any such upgrades.
All of the foundry's sales are in Europe.
The Company's strategy is to capitalize on the increasing demand for
brake rotors and other brake parts and the higher gross margins on sales of
such brake parts by expanding its brake parts manufacturing operations and its
specialty brake parts distribution business. The Company intends to use its
increased liquidity from the net proceeds from its current private placement of
Common Stock, in substantial part, to finance this expansion. The Company will
seek to implement its expansion strategy by: (i) purchasing additional
machinery and brake rotor patterns to increase the number of brake rotor SKUs
the Company manufactures; (ii) possibly acquiring other specialty brake parts
distributors; and (iii) increasing its marketing activities relative to new
brake parts product lines.
As part of the Company's strategy to expand its specialty brake parts
distribution business, the Company has purchased the following brake parts
distributors and manufacturers:
(i) April 1995 - the Company purchased the brake rotor and drum
inventory and customer list of the passenger car division of
MHD Automotive, an Illinois-based distributor of brake parts;
(ii) June 1995 - the Company acquired the inventory and customer
list of North American Rotor, Inc., a distributor of brake
drums and rotors;
(iii) January 1996 - the Company, which owned 50% of the outstanding
stock of UBP Friction, Inc., a Canadian-based specialty
manufacturer of brake friction parts, acquired the remaining
50% of the outstanding capital stock of UBP Friction, Inc.;
4
<PAGE> 5
(iv) March 1996 - the Company acquired the brake parts inventory
and customer list of MPW Brake Supply of Cambridge,
Massachusetts, an aftermarket brake parts distributor on the
east coast; and
(v) June 1996 - the Company acquired the assets and goodwill of
North American Friction Inc., a Canadian manufacturer of a
brake friction component used in the Company's brake friction
manufacturing process.
The Company was incorporated in Delaware in January 1994 to act as a
holding company for its direct and indirect subsidiaries including: (i)
Universal Automotive, Inc., an Illinois corporation and the predecessor of the
Company ("Universal"); (ii) UBP Canholdings, Inc., an Ontario, Canada
corporation (which changed its name from 547647 Ontario Limited) which is the
parent of Universal Brake Parts, Inc., an Ontario, Canada corporation (which
changed its name from Aaron Automotive Industries, Inc.) (together "UBP
Canholdings") and International Discus Corporation, an Ontario, Canada
corporation ("IDC"); and (iii) UBP Hungary Inc., a Delaware corporation, which
is the parent company of UBP-Csepel Iron Foundry Kft., a Hungarian limited
liability company ("UBP Hungary"). The Company conducts all of its operations
through its subsidiaries. The Company's principal executive offices are
located at 3350 North Kedzie, Chicago, Illinois 60618-5722, and its telephone
number is (312) 478-2323.
Unless the context otherwise requires, the term the "Company" includes
Universal Automotive Industries, Inc. and its direct and indirect subsidiaries,
including its predecessor, Universal Automotive, Inc.
5
<PAGE> 6
RISK FACTORS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Actual results could differ materially from those projected in the
forward-looking statements based, among other things, upon the risk factors set
forth below and elsewhere in this Prospectus. In addition to other information
contained and incorporated by reference in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the Shares offered hereby:
EXPANSION; POSSIBLE NEED FOR ADDITIONAL FINANCING
The continued growth and financial performance of the Company will
depend in part on the Company's ability to continue to expand its business
though (i) the purchase of additional manufacturing machinery and brake rotor
patterns to increase the number of brake rotor SKUs the Company manufactures,
(ii) the possible acquisition of other brake parts manufacturers or
distributors on favorable terms, and (iii) the successful operation of the
Company's Hungarian foundry facility. While the Company regularly evaluates
and discusses possible acquisitions, it has not entered into any commitment,
agreement or understanding with any potential acquisition candidates, and there
can be no assurance that it will be successful in locating suitable acquisition
candidates or that any additional acquisitions will be consummated in the
future. See "Business--Manufacturing." In addition, there can be no assurance
that any operations that may be acquired can be effectively and profitably
integrated into the Company. The Company's future results will be affected by
its ability to manage its operations and growth effectively and to continue to
obtain an adequate supply of quality brake parts on a timely and cost-effective
basis to meet the growing demand for the Company's UBP Universal Brake Parts
products. The Company can offer no assurance that any future expansion of its
operations or acquisitions will not have an adverse effect on the Company's
operating results, particularly during the periods immediately following any
such expansion or acquisition. The Company will be required to seek additional
financing to fund its expansion through acquisitions or the upgrade of existing
facilities. The Company has no current commitments or arrangements for
additional financing and there can be no assurance that additional financing
will be available on acceptable terms, or at all. The Company may also issue
Common Stock or other securities in connection with future acquisitions,
resulting in additional dilution to existing stockholders.
COMPETITION
The Company's markets are highly competitive. As a brake parts
manufacturer and distributor, the Company competes directly with other brake
parts manufacturers and distributors. As a warehouse distributor of automotive
replacement parts to jobbers in the Chicago area, the Company competes directly
with other local warehouse distributors and national warehouse distributors
marketing products to jobbers in the Chicago-area through direct mail and
catalog offerings. The Company competes indirectly with mass market retailers
of automotive replacement parts that compete directly with the Company's jobber
customers.
The Company competes primarily on the basis of price, inventory
availability, delivery time and service. Many of the Company's competitors in
both the specialty brake parts distribution and jobber markets are larger and
have greater capital and management resources than the Company. No assurance
can be given that the Company will continue to compete successfully with such
other competitors.
6
<PAGE> 7
INDEBTEDNESS
The Company has incurred significant indebtedness, to date, in
connection with its operations. As of March 31, 1996 the Company's total
consolidated indebtedness was approximately $13.3 million. A substantial
portion of this indebtedness is secured by substantially all of the Company's
assets and by a pledge of all of the outstanding capital stock of the Company's
subsidiaries. As a result of such indebtedness, the Company (i) is prohibited
from paying cash dividends pursuant to certain covenants and restrictions
contained in the loan agreements governing such indebtedness, (ii) could be
hindered in its efforts to obtain additional financing in the future for
working capital, capital expenditures, acquisitions or general corporate or
other purposes, and (iii) would be vulnerable to increases in interest rates
since substantially all of the Company's borrowings are at floating rates of
interest.
The Company, pursuant to its credit agreement with NBD Bank, the
Company's primary lender, agreed to satisfy certain financial covenants,
including, without limitation, ratios of current assets to current liabilities,
cash flow to fixed charges ratios and minimum tangible net worth. As of the
date of this Prospectus, the Company was in violation of several of these
financial covenants. In May 1996, NBD Bank entered into a waiver agreement
with the Company whereby NBD Bank waived the events of default with respect to
certain of these provisions as of and for the quarter ended March 31, 1996.
However, as of the date of this Prospectus the Company is in violation of
financial covenants with respect to dates subsequent to March 31, 1996. To
date, the Company has not obtained a waiver from NBD Bank with respect to these
violations. The Company is currently negotiating such a waiver with NBD Bank
and anticipates that a waiver will be granted, but can offer no assurance
thereof. Failure to obtain a waiver could result in the acceleration of the
Company's indebtedness to NBD Bank which would have a material adverse effect
on the Company's operations.
DEPENDENCE UPON KEY PERSONNEL
The Company's continued success will depend to a significant degree
upon the efforts and abilities of its senior management, in particular, Yehuda
Tzur, Arvin Scott and Eric Goodman, its Chairman of the Board, President and
Chief Executive Officer, and Executive Vice President-Canadian Operations,
respectively. The loss of the services of Mr. Tzur, Mr. Scott or Mr. Goodman
could have a material adverse effect on the Company. The Company has
employment agreements with each of these individuals. The Company maintains,
and intends to continue to maintain, key man term life insurance policies
covering the life of each of Mr. Tzur, Mr. Scott and Mr. Goodman in the amount
of $1,000,000, $1,000,000, and $1,300,000-CDN, respectively, the proceeds of
which would be payable to the Company.
DEPENDENCE UPON SUPPLIERS
The primary components used in the Company's brake rotor manufacturing
operations are raw iron castings. Most of the raw iron castings used in the
Company's manufacturing operations are produced by, and purchased from, two
foundries located in Canada and Mexico. Pursuant to an agreement between the
Company and the Canadian foundry, such foundry has agreed to provide the
Company at least six months' notice prior to ceasing to supply raw iron
castings to the Company. The Company also has a supply agreement with Rassini
International, Inc. ("Rassini"), a Mexican brake parts supplier and foundry,
which entitles the Company, so long as it meets specified purchase
requirements, to certain volume discounts on its purchase of raw iron castings
and finished brake rotors and drums. The Rassini agreement, which expires in
December 2000, is terminable by the Company on 60 days notice, subject to
certain penalties. The Company currently obtains the balance of its raw iron
castings from approximately three foundries.
7
<PAGE> 8
The Company duplicates certain raw iron casting patterns used for the
production of its better selling brake rotors, and places such patterns at
different foundries to assure a supply of the raw iron castings produced from
such patterns. Although the Company believes that it has developed good
relationships with the foundries that supply the Company's raw iron castings,
any of such foundries could discontinue producing such castings for the Company
at any time. The Company believes that the number of foundries equipped to
produce raw iron castings such as the ones used by the Company in its
manufacturing operations is limited. The loss of either the Canadian or the
Mexican foundry as a supplier of raw iron castings and an inability of the
Company to identify new foundries for the production of raw iron castings in a
timely manner could have a material adverse effect on the Company's business.
In addition there can be no assurance that the foundries currently producing
the Company's raw iron castings will be able to accommodate the anticipated
expansion of the Company's manufacturing capabilities.
The Hungarian foundry acquired by the Company in September 1995
produces non-rotor products for other customers. The foundry is not presently
equipped to produce raw iron castings for use in the manufacture of brake
rotors. The Company may in the future upgrade the foundry to enable it to
produce internally certain of the raw iron castings used by the Company in the
manufacture of brake rotors. The Company would need additional financing for
these upgrades which the Company estimates would cost approximately $4,000,000.
At present, the Company has no plans to upgrade the foundry for this purpose.
A variety of factors, including demand for non-rotor products in Europe, the
desire to continue supplying existing foundry customers, and the expense of
required upgrades could limit the desirability or ability of the Hungarian
foundry to manufacture brake rotor castings for the Company. See "Acquisition
of Hungarian Foundry."
The Company purchases the brake part SKUs that it does not manufacture
from a variety of suppliers. Currently, the Company purchases approximately
20% of its brake part inventories from suppliers located in the United States,
and approximately 20%, 40% and 20% of its brake parts inventories from foreign
suppliers located in the People's Republic of China, Mexico, and Canada,
respectively. The Company's supply agreement with Rassini also entitles the
Company to certain volume discounts on its purchase of finished brake rotors
and drums.
On March 7, 1996, a petition was filed before the United States
Department of Commerce and International Trade Commission seeking the
imposition of "anti-dumping" duties on certain brake drums and rotors imported
from the People's Republic of China. Should any such duties be enacted, the
price of finished brake rotors and drums manufactured in the People's Republic
of China could substantially increase. The Company believes that it has
adequate alternative sources of supply for finished brake rotors and drums from
which to obtain rotors and drums previously provided by suppliers located in
the People's Republic of China.
LITIGATION
During 1995, a lawsuit was filed against the Company in the United
States Bankruptcy Court by the Trustee of a bankrupt entity (the "Debtor") from
and to which the Company had purchased and sold certain automotive parts in
1992 and 1993. The Trustee is seeking a total of $4.1 million in damages under
two claims, the largest of which (approximately $3.7 million) concerns
transfers of automotive parts by the Debtor to the Company without receiving
"reasonably equivalent values." Although the Company, which is presently
defending such action, believes that no significant liability will result, it
can offer no assurance thereof. These legal proceedings would have a material
adverse effect on the Company's
8
<PAGE> 9
business, financial condition and results of operations if judgment was entered
against the Company and the Company was ordered to pay a significant portion of
the damages sought.
ACQUISITION OF HUNGARIAN FOUNDRY
In September 1995 the Company acquired the assets of Csepel Iron
Foundry Works, a producer of high quality gray iron and ductile iron casting
products, located in Budapest, Hungary. Csepel Iron Foundry Works has been a
supplier of gray iron and ductile castings to the machine tool, transport and
automotive industries in Europe for over 50 years. The Company is operating
the foundry facility in its existing location and retained the existing
management and manufacturing staff. The Company is in the process of
renovating the foundry to improve its existing manufacturing facilities. The
Company can offer no assurance that its foundry operations will be successful.
The Company's investment in the Hungarian foundry facility involves
certain special risks not usually associated with an investment in a U.S.
company, including risks related to: (a) greater social, economic and political
uncertainty; (b) certain restrictions on foreign investment and repatriation of
capital; (c) exchange control regulations; (d) currency exchange rate
fluctuations, which may increase the costs associated with conversion of the
investment principal and income from one currency to another; (e) higher rates
of inflation; (f) greater governmental involvement in the economy; and (g) the
application of certain environmental regulations to the foundry property. The
Company has been approved for insurance from the Multilateral Investment
Guarantee Agency, an affiliate of the World Bank, to protect the Company
against risks associated with currency transfer, expropriation and war and
civil disturbances.
INSURANCE
Although the Company currently has general liability insurance for all
its operations, prior to September 1994 the Company did not have general or
products liability insurance for its brake rotor manufacturing operations. The
Company would be adversely affected if it should incur liability for a general
or products liability claim relating to an incident which occurred prior to the
time the Company obtained general and products liability coverage for its
manufacturing operations. To date, no such claim has been asserted against the
Company. In addition, the Company would be adversely affected by the
incurrence of liability which is not covered by insurance or is in excess of
policy limits.
CONTROL BY INSIDERS
Certain executive officers of the Company and members of the Company's
Board of Directors own 4,848,000 shares of the Company's issued and outstanding
shares of Common Stock. Consequently, such persons control 72% of the total
voting power of the Company. By virtue of such ownership, such persons, voting
as a group are able to exercise control over certain Company matters,
including, without limitation: (i) the election of all of the directors, (ii)
increases in authorized capital stock, (iii) the dissolution or merger of the
Company or the sale of the Company's assets, and (iv) discretion over the
day-to-day affairs of the Company.
NO DIVIDENDS
The Company does not currently intend to declare or pay any cash
dividends on the Common Stock in the foreseeable future and anticipates that
earnings, if any, will be used to finance the development and expansion of its
business. Moreover, the Company's bank lines of credit prohibit the
9
<PAGE> 10
declaration and payment of cash dividends. Prospective investors should not
expect the Company to pay dividends on its Common Stock until such time, if
any, that the Company is able, if at all, to obtain a release of the
prohibition on the payments of dividends imposed by the terms of its credit
facilities. Any payment of future dividends and the amounts thereof will be
dependent upon the Company's earnings, financial requirements, and other
factors deemed relevant by the Company's Board of Directors, including the
Company's contractual obligations.
EXERCISE OF WARRANTS
The 1,495,000 Units sold by the Company in connection with its initial
public offering (the "IPO") in December 1994 were comprised of one share of
Common Stock and one Redeemable Common Stock Purchase Warrant (the "Warrants")
entitling the holder thereof to purchase one share of Common Stock at an
exercise price of $7.00 per Share, subject to certain adjustments, at any time
until December 15, 1999, unless previously redeemed. In connection with the
IPO, the Company issued warrants (the "Underwriter's Warrants") entitling
Kensington Wells Incorporated ("Kensington") to purchase from the Company, at
an exercise price per Underwriter's Warrant of $7.25, up to 130,000 Units
comprised of one share of Common Stock and one Warrant. Kensington and its
assignees exercised the Underwriter's Warrants and currently hold an aggregate
of 130,000 Warrants, each of which entitle Kensington or its assignee to
purchase one share of Common Stock at an exercise price of $11.25 per share,
subject to certain adjustments, at any time until December 15, 1999, unless
previously redeemed. For the life of the Warrants, the holders thereof are
given the opportunity to profit from a rise in the market price for the
Company's securities without assuming the risk of ownership, with a resulting
dilution in the interest of other security holders. As long as such Warrants
remain unexercised, the terms under which the Company could obtain additional
capital may be adversely affected. Moreover, the holders of such Warrants may
be expected to exercise them at a time when the Company would, in all
likelihood, be able to obtain any needed capital by a new offering of its
securities on terms more favorable than those provided by such Warrants.
AUTHORIZATION OF PREFERRED STOCK
The Company's Amended and Restated Certificate of Incorporation
authorizes the issuance of "blank check" preferred stock with such
designations, rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect
the voting power or other rights of the holders of the Company's Common Stock.
In the event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. The possible impact on takeover attempts could
adversely affect the price of the Common Stock. Although the Company has no
present intention to issue any shares of its preferred stock, there can be no
assurance that the Company will do so in the future. See "Description of
Securities."
SHARES ELIGIBLE FOR FUTURE SALE
5,005,000 shares of Common Stock currently outstanding are "restricted
securities" under Rule 144 promulgated under the Securities Act and may not be
resold except pursuant to a registration statement effective under the
Securities Act or pursuant to an exemption therefrom, including the exemption
provided by Rule 144. In general, under Rule 144 as currently in effect,
subject to the satisfaction of certain other conditions, a person who has owned
restricted shares of Common Stock for
10
<PAGE> 11
at least two years is entitled to sell such shares subject to the volume
limitations prescribed by Rule 144. Such shares, all of which are owned by
officers and directors of the Company, are presently eligible for sale under
Rule 144. Future sales of shares of Common Stock by such officers and
directors of the Company under Rule 144 could adversely affect the market price
of the Common Stock. In connection with the Company's initial public offering
completed in December 1994 (the "IPO"), the Company and certain of its
officers and directors, agreed not to offer, pledge, sell, contract to sell,
grant any option for the sale of, or otherwise dispose of, directly or
indirectly, any securities of the Company (the "lock-up") before June 15, 1996,
subject to certain exceptions, without the prior written consent of Kensington.
In connection with a private placement of 700,000 shares of Common Stock
commenced in June 1996 (the "Offering"), the Company and certain of its
officers and directors agreed to extend the lock-up period to June 15, 1997,
except that such officers and directors may presently offer, pledge, sell,
grant any option for the sale of, or otherwise dispose of collectively (and not
individually) up to an aggregate of 50,000 shares of Common Stock. The Company
issued 130,000 shares to North American Friction Inc. or its designees in
connection with the purchase of the assets and goodwill of North American
Friction Inc. The holders of these shares have certain registration rights.
The Registration Rights Agreement between the Company and North American
Friction Inc. provides that, of the 130,000 shares of Common Stock issued,
10,000 shares may be sold after June 1996, an additional 10,000 shares may be
sold after November 1996, an additional 10,000 shares may be sold after May
1997 and the remaining 100,000 shares may be sold after November 1997. The
Company issued 39,500 shares to North American Rotor, Inc. in consideration of
the termination of (i) the cash component of the Non-Compete Compensation under
the Agreement of Purchase and Sale of Assets between the Company and North
American Rotor, Inc., and (ii) the cash component of the Consulting
Compensation provided for in the Consulting Agreement between the Company and
North American Rotor, Inc. The holders of these shares have certain
registration rights. The Amendment Agreement between the Company and North
American Rotor, Inc. provides that, of the 39,500 shares of Common Stock
issued, without the prior written consent of the Company, North American Rotor
will not sell more than 5,000 of the Shares during any 30 day period subsequent
to June 26, 1996. The Company also issued 54,000 shares to Mr. Jack Berger on
June 24, 1996 as to which he has certain registration rights. The Stock
Purchase Agreement between the Company and Mr. Berger provided that Mr. Berger
will not sell any of his shares prior to June 24, 1997.
11
<PAGE> 12
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common
Stock by the Selling Stockholders.
SELLING STOCKHOLDERS
An aggregate of up to 223,500 Shares may be offered by the Selling
Stockholders. The following table sets forth certain information with respect
to the Selling Stockholders. The Company will not receive any of the proceeds
from the sale of these Shares. Based on information provided by the Selling
Stockholders, the Selling Stockholders own the amount of the Company's
outstanding Common Stock indicated below. Beneficial ownership after any sale
of the Shares will depend on the number of Shares sold by the Selling
Stockholders.
<TABLE>
<CAPTION>
Shares to be
Shares Beneficially Beneficially
Owned Prior Shares Owned After
to Offering Being Offered Offering
---------------------- ------------- --------------------
Selling Stockholder Number Percent Number Percent
- ------------------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
North American Friction Inc. 130,000 1.95% 130,000 - -
340 Wildcat Road
Downsview, Ontario M3J 2N5
North American Rotor, Inc. 39,500 0.59% 39,500 - -
6460 South Quebec Street
Building 5
Englewood, Colorado 80111
Jack Berger 54,000 0.81% 54,000 - -
901 West Huron
Chicago, Illinois 60622
Total 223,500 3.35% 223,500 - -
</TABLE>
The number of Shares which may actually be sold by the Selling
Stockholders will be determined from time to time by each Selling Stockholder
and will depend upon a number of factors, including the price of the Shares
from time to time. Because the Selling Stockholders may offer all or none of
the Shares that they hold and because the offering contemplated by this
Prospectus is not being underwritten, no estimate can be given as to the number
of Shares that will be held by the Selling Stockholders.
12
<PAGE> 13
PLAN OF DISTRIBUTION
This Prospectus, as appropriately amended or supplemented, may be used
from time to time by the Selling Stockholders, or their transferees, to offer
and sell the Shares in transactions in which the Selling Stockholders and any
broker-dealer through whom any of the Shares are sold may be deemed to be
underwriters within the meaning of the Securities Act. The Company will
receive none of the proceeds from any such sales. There presently are no
arrangements or understandings, formal or informal, pertaining to the
distribution of the Shares.
The Company anticipates that resales of the Shares by the Selling
Stockholders will be effected from time to time on the open market in ordinary
brokerage transactions in the Nasdaq SmallCap Market ("Nasdaq Small Cap"), on
which the Common Stock is included for quotation, in the over-the-counter
market, or in private transactions (which may involve crosses and block
transactions). The Shares will be offered for sale at market prices prevailing
at the time of sale or at negotiated prices and on terms to be determined when
the agreement to sell is made or at the time of sale, as the case may be. The
Shares may be offered directly, through agents designated from time to time, or
through brokers or dealers. A member firm of the National Association of
Securities Dealers, Inc. ("NASD") may be engaged to act as the Selling
Stockholders' agent in the sale of the Shares by the Selling Stockholders
and/or may acquire Shares as principal. Member firms participating in such
transactions as agent may receive commissions from the Selling Stockholders
(and, if they act as agent for the purchaser of such Shares, from such
purchaser), such commissions computed in appropriate cases in accordance with
the applicable rates of the NASD, which commissions may be negotiated rates
where permissible. Sales of the Shares by the member firm may be made on the
Nasdaq SmallCap from time to time at prices related to prices then prevailing.
Any such sales may be by block trade.
Participating broker-dealers may agree with a Selling Stockholder to
sell a specified number of shares at a stipulated price per share and, to the
extent such broker dealer is unable to do so acting as agent for a Selling
Stockholder to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer's commitment to a Selling Stockholder. In addition
or alternatively, shares may be sold by a Selling Stockholder, and/or by or
through the broker-dealers in special offerings, exchange distributions, or
secondary distributions pursuant to and in compliance with the governing rules
of the NASD, and in connection therewith commissions in excess of the customary
commission prescribed by the rules of such securities association may be paid
to participating broker-dealers, or, in the case of certain secondary
distributions, a discount or concession from the offering price may be allowed
to participating broker-dealers in excess of such customary commission.
Broker-dealers who acquire shares as principal may thereafter resell such
Shares from time to time in transactions (which may involve cross and block
transactions and which may involve sales to and through other broker-dealers,
including transactions of the nature described in the preceding two sentences)
on the Nasdaq SmallCap, in negotiated transactions, or otherwise, at market
prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive commissions from the
purchasers of such shares.
Upon the Company's being notified by a Selling Stockholder that a
particular offer to sell the Shares is made, a material arrangement has been
entered into with a broker-dealer for the sale of shares through a block trade,
special offering, exchange distribution, or secondary distribution, or any
block trade has taken place, to the extent required, a supplement to this
Prospectus will be delivered together with this Prospectus and filed pursuant
to Rule 424(b) under the Securities Act setting forth with respect to such
offer or trade the terms of the offer or trade; including (i) the number of
Shares involved, (ii) the price at which the Shares were sold, (iii) any
participating brokers, dealers, agents or member firm involved,
13
<PAGE> 14
(iv) any discounts, commissions and other items paid as compensation from, and
the resulting net proceeds to, the Selling Stockholder, (v) that such
broker-dealers did not conduct any investigation to verify the information set
out in this Prospectus, and (vi) other facts material to the transaction.
Shares may be sold directly by a Selling Stockholder or through agents
designated by a Selling Stockholder from time to time. Unless otherwise
indicated in the supplement to this Prospectus, any such agent will be acting
on a best efforts basis for the period of its appointment.
The Selling Stockholders and any brokers, dealers, agents, member firm
or others that participate with the Selling Stockholders in the distribution of
the Shares may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions or fees received by such persons and any
profit on the resale of the Shares purchased by such person may be deemed to be
underwriting commissions or discounts under the Securities Act.
The Selling Stockholders will be subject to the applicable provisions
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, including without limitation Rules 10b-2, 10b-6, and
10b-7, which provisions may limit the timing of purchases and sales of any of
the Shares by the Selling Stockholders. All of the foregoing may affect the
marketability of the Shares.
The Company will pay substantially all the expenses incident to this
offering of the Shares by the Selling Stockholders to the public other than
brokerage fees, commissions and discounts of underwriters, dealers or agents.
In order to comply with certain states' securities laws, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless the Shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is
available and the Company or Selling Stockholders comply with the applicable
requirements.
14
<PAGE> 15
DESCRIPTION OF SECURITIES
The Company is authorized to issue 15,000,000 shares of Common Stock,
$.01 par value per share, and 1,000,000 shares of Preferred Stock, $.01 par
value per share (the "Preferred Stock"). As of the date of this Prospectus,
6,681,325 shares of Common Stock are outstanding and no shares of Preferred
Stock are outstanding.
The following description of the capital stock of the Company is a
summary and is qualified in its entirety by the provisions of the Company's
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") and Bylaws, copies of which were filed as exhibits to the
Registration Statement filed in connection with the Company's IPO.
COMMON STOCK
Holders of Common Stock are entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. The Common Stock does not
have cumulative voting rights, which means that the holders of a majority of
voting shares voting for the election of directors can elect all of the members
of the Board of Directors. The Common Stock has no preemptive rights and no
redemption or conversion privileges. Subject to any preferences of any
outstanding Preferred Stock, the holders of the outstanding shares of Common
Stock are entitled to receive dividends out of assets legally available at such
times and in such amounts as the Board of Directors may, from time to time,
determine, and upon liquidation and dissolution are entitled to receive all
assets available for distribution to the stockholders. A majority vote of
shares represented at a meting at which a quorum is present is sufficient for
all actions that require the vote of stockholders. All of the outstanding
shares of Common Stock are fully-paid and nonassessable.
PREFERRED STOCK
Pursuant to the Certificate of Incorporation, the Company will be
authorized to issue "blank check" Preferred Stock, which may be issued from
time to time in one or more series upon authorization by the Company's Board of
Directors. The Board of Directors, without further approval of the
stockholders, will be authorized to fix the dividend rights and terms,
conversion rights, voting rights, redemption rights and terms, liquidation
preferences, and any other rights, preferences, privileges and restrictions
applicable to each series of the Preferred Stock. The issuance of Preferred
Stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes could, among other things, adversely affect the
voting power of the holders of Common Stock and, in certain circumstances, make
it more difficult for a third party to gain control of the Company, discourage
bids for the Company's Common Stock at a premium or otherwise adversely affect
the market price of the Common Stock.
WARRANTS
Currently, there are outstanding 1,625,000 Warrants to purchase
1,625,000 shares of Common Stock. The Warrants were issued pursuant to an
agreement, dated December 15, 1994 (the "Warrant Agreement") between the
Company and Continental Stock Transfer & Trust Company as warrant agent (the
"Warrant Agent"). The following discussion of the material terms and
provisions of the Warrants is qualified in its entirety by reference to the
detailed provisions of the Warrant Agreement, the form of which was filed as an
exhibit to the Registration Statement for the Company's IPO.
15
<PAGE> 16
Each Warrant entitles the holder to purchase, at any time until
December 15, 1999 (the "Expiration Date"), one share of Common Stock at an
exercise price of $7.00 per share, subject to certain adjustments based upon
anti-dilution protections. The Warrants may be exercised in whole or in part.
Unless exercised, the Warrants will automatically expire on the Expiration
Date, unless extended by the Company.
The exercise price of the Warrants and the number of shares of Common
Stock issuable upon exercise of the Warrants are subject to adjustment in
certain circumstances, including in the event of a stock dividend, subdivision
or combination of the Common Stock and the issuance of Common Stock or rights,
options or warrants to subscribe for Common Stock at a price per share less
than the exercise price of the Warrants in effect immediately prior to such
issuance.
The Company may at any time redeem the Warrants, in whole or in part,
at the option of the Company, upon not less than 30 days' notice, at a price of
$.20 per Warrant, provided that (i) the then current market price of the Common
Stock is at least 175% of the then current exercise price of the Redeemable
Warrants for 20 consecutive business days ending within 30 days of the date of
the notice of redemption, and (ii) the Company is in compliance with its
obligations to register under the Securities Act the shares of Common Stock
issuable on exercise of the Warrants. If the Company exercises its right to
redeem the Warrants, such Warrants will be exercisable until the close of
business on the date fixed for redemption in such notice. If any Warrant
called for redemption is not exercised by such time, it will cease to be
exercisable and the holder thereof will be entitled to the redemption price.
Pursuant to the Warrant Agreement, the Company, by notice to the
Warrant Agent, may reduce the exercise price permanently or for such period as
it may determine, or extend the expiration of the date of the Warrants. The
Warrant Agent is required to send a notice of any such change to each
registered holder of Warrants.
For a holder to exercise the Warrants there must be a current
registration statement in effect with the Commission and qualification with or
approval from various state securities agencies with respect to the shares or
other securities underlying the Warrants, or an opinion of counsel for the
Company that there is an effective exemption from registration. As long as the
Warrants remain outstanding and exercisable, the Company may be required to
file a registration statement with the Commission and have such registration
statement declared effective. There can be no assurance, however, that such
registration statement can be kept current. If a registration statement
covering such Common Stock is not kept current for any reason, or if the Common
Stock underlying the Warrants is not registered in the state in which a holder
resides, the Warrants will not be exercisable and will be deprived of any
value.
The exercise price of the Warrants underlying the Units that were
issued to Kensington on its exercise of the Underwriter's Warrants is $11.20
per share. Such Warrants are identical in all other respects to the Warrants
issued to the public in connection with the IPO.
LIMITATION OF DIRECTOR LIABILITY
The Certificate of Incorporation includes a provision which eliminates
the personal liability of the Company's directors for monetary damages
resulting from breaches of their fiduciary duty of care (provided that such
provision does not eliminate liability for breaches of the duty of loyalty,
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, violations of Section 174 of the Delaware General
Corporation Law, or for any transactions from which the director derived an
improper personal benefit). This provision does not limit or eliminate the
right
16
<PAGE> 17
of the Company or any stockholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a director's duty of care.
The Certificate of Incorporation also provides that the Company shall indemnify
its directors and officers to the fullest extent permitted by Section 145 of
the Delaware General Corporation Law, including circumstances in which
indemnification is otherwise discretionary. The Company believes that these
provisions are necessary to attract and retain qualified persons as directors
and officers.
TRANSFER AGENT AND REGISTRAR
Continental Stock Transfer & Trust Company is the Transfer Agent and
Registrar for the Common Stock and Warrants.
DELAWARE ANTI-TAKEOVER LAW
Under Section 203 of the Delaware Corporation Law (the "Delaware
anti-takeover law"), certain "business combinations" are prohibited between a
Delaware corporation, the stock of which is generally publicly traded or held
of record by more than 2,000 stockholders, and an "interested stockholder" of
such corporation for a three-year period following the date that such
stockholder became an interested stockholder, unless: (i) the corporation has
elected in its certificate of incorporation not to be governed by the Delaware
anti-takeover law (the Company has not made such an election); (ii) the
business combination was approved by the board of directors of the corporation
before the other party to the business combination became an interested
stockholder; (iii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
commencement of the transaction (excluding voting stock owned by directors who
are also officers or held in employee benefit plans in which the employees do
not have a confidential right to tender or vote stock held by the plan); or
(iv) the business combination was approved by the board of directors of the
corporation and ratified by 66 2/3% of the voting stock which the interested
stockholder did not own. The three-year prohibition also does not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of certain extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of a majority of the corporation's directors.
The term "business combination" is defined, generally, to include mergers or
consolidations between a Delaware corporation and an interested stockholder,
transactions with an interested stockholder involving the assets or stock of
the corporation or its majority-owned subsidiaries, and transactions which
increase an interested stockholder's percentage ownership of stock. The term
"interested stockholder" is defined generally as those stockholders who become
beneficial owners of 15% or more of a Delaware corporation's voting stock.
These provisions could delay or frustrate the removal of incumbent
directors or a change of control of the Company. The provisions also could
discourage, impede, or prevent a merger, tender offer or proxy contest, even is
such event would be favorable to the interests of stockholders.
17
<PAGE> 18
LEGAL MATTERS
The validity of the issuance of the Shares offered hereby has been
passed on for the Company by Shefsky Froelich & Devine Ltd., Chicago, Illinois.
EXPERTS
The financial statements of the Company as of and for the years ended
December 31, 1993, 1994 and 1995 have been audited by Altschuler, Melvoin and
Glasser LLP, independent auditors, as stated in their report with respect
thereto and are incorporated by reference herein in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
The consolidated balance sheet of UBP Canholdings Inc. as at December 31, 1994
and 1995 and the consolidated statements of operations and retained earnings
and cash flows of UBP Canholdings Inc. for the periods then ended have been
audited by BDO Dunwoody, chartered accountants, as stated in their reports with
respect thereto and are incorporated by reference herein in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing. The balance sheet of UBP-Csepel Iron Foundry Kft. as of September
30, 1995 has been audited by Arthur Andersen & Co. Kft., independent auditors,
as stated in their report with respect thereto and are incorporated by
reference herein upon the reports of such firm given upon their authority as
experts in accounting and auditing.
18
<PAGE> 19
===================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . 2
DOCUMENTS INCORPORATED BY
REFERENCE . . . . . . . . . . . . . . . . 2
THE COMPANY . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . 6
USE OF PROCEEDS . . . . . . . . . . . . . . . 12
SELLING STOCKHOLDERS . . . . . . . . . . . . 12
PLAN OF DISTRIBUTION . . . . . . . . . . . . 13
DESCRIPTION OF SECURITIES . . . . . . . . . . 15
LEGAL MATTERS . . . . . . . . . . . . . . . . 17
EXPERTS . . . . . . . . . . . . . . . . . . . 18
</TABLE>
===================================================
223,500 Shares of Common Stock
UNIVERSAL AUTOMOTIVE
INDUSTRIES, INC.
-------------------
PROSPECTUS
-------------------
August 1, 1996
===================================================
