<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1996.
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3973627
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3350 NORTH KEDZIE AVENUE
CHICAGO, ILLINOIS 60618-5722
(312) 478-2323
(ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-----------------------------------------
YEHUDA TZUR
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
3350 NORTH KEDZIE AVENUE
CHICAGO, ILLINOIS 60618-5722
(312) 478-2323
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
WITH A COPY TO:
MITCHELL D. GOLDSMITH, ESQ.
SHEFSKY FROELICH & DEVINE LTD.
444 NORTH MICHIGAN AVENUE, SUITE 2500
CHICAGO, ILLINOIS 60611
(312) 527-4000
-----------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT HAS BECOME EFFECTIVE.
-----------------------------------------
If the only securities being registered on this Form are
being offered pursuant to dividend or interest reinvestment plans,
please check the following box: / /
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than securities offered
only in connection with dividend or interest reinvestment plans,
check the following box: /x/
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities, Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering: / / _________
If this Form is a post-effective amendment filed pursuant to
Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering:
/ / _________
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
COMMON STOCK, $.01 PAR VALUE 223,500(1) $10.25(2) $2,290,875(2) $789.96
</TABLE>
(1) TO BE SOLD BY THE SELLING SHAREHOLDERS.
(2) ESTIMATED ON THE BASIS OF THE AVERAGE OF THE BID AND ASKED PRICES ON JULY
11, 1996 ON THE NASDAQ SMALLCAP MARKET OF THE COMMON STOCK PURSUANT TO
RULE 457(c).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
NUMBER FORM S-3 CAPTION LOCATION IN REGISTRATION STATEMENT
- ------ ---------------- ----------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Facing page of registration statement;
Outside Front Cover Page of Prospectus cross reference sheet; and outside front
cover page of prospectus
2. Inside Front and Outside Back Cover Pages of Inside front and outside back cover
Prospectus pages of prospectus
3. Summary Information, Risk Factors and The Company; and Risk Factors
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds; and Selling Stockholders
5. Determination of Offering Price Front cover page of prospectus
6. Dilution Not applicable
7. Selling Security Holders Selling Stockholder
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Registered Description of Securities
10. Interest of Named Experts and Counsel Legal Matters; Experts
11. Material Changes The Company
12. Incorporation of Certain Information by
Reference Documents Incorporated by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities Part II - Undertakings
</TABLE>
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JULY 29, 1996
PRELIMINARY PROSPECTUS
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 July ___, 1996.
<PAGE> 4
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> 5
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> 6
<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> 7
(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> 8
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> 9
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> 10
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 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.
8
<PAGE> 11
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 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
9
<PAGE> 12
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 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
10
<PAGE> 13
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> 14
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> 15
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, (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
13
<PAGE> 16
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> 17
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.
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
15
<PAGE> 18
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 form which the director derived an
improper personal benefit). This provision does not limit or eliminate the
right 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
16
<PAGE> 19
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_% 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.
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.
17
<PAGE> 20
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> 21
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
PAGE
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
223,500 SHARES OF COMMON STOCK
UNIVERSAL AUTOMOTIVE
INDUSTRIES, INC.
PROSPECTUS
July __, 1996
<PAGE> 22
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a schedule of the estimated expenses to be incurred by
the Company in connection with the issuance and sale of the securities being
registered hereby.
<TABLE>
<S> <C>
Registration Fee ....................................................... $ 789.96
Blue Sky Fees and Expenses ............................................. 1,000.00*
Accounting Fees and Expenses ........................................... 1,000.00*
Legal Fees and Expenses ................................................ 5,000.00*
Nasdaq Stock Exchange fees for Qualification of Additional Securities .. 1,000.00
Miscellaneous .......................................................... 1,000.00
--------
Total .................................................................. $9,789.96
=========
</TABLE>
- ------------------------------
(*) Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes
indemnification of directors, officers, employees, and agents of the Company;
allows the advancement of costs of defending against litigation; and permits
companies incorporated in Delaware to purchase insurance on behalf of
directors, officers, employees, and agents against liabilities whether or not
in the circumstances such companies would have the power to indemnify against
such liabilities under the provisions of the statute.
The Company's Certificate of Incorporation provides for indemnification of
the Company's officers and directors to the fullest extent permitted by Section
145 of the Delaware General Corporation Law. The Company maintains directors
and officers insurance covering its executive officers and directors.
The Delaware General Corporation Law authorizes corporations to limit or
eliminate the personal liability of directors and officers to corporations and
their stockholders for monetary damages for breach of directors' fiduciary duty
of care. The duty of care requires that, when acting on behalf of the
corporation, directors must exercise an informed business judgment based on all
material information reasonably available to them. Absent the limitations
authorized by the Delaware statute, directors could be accountable to
corporations and their stockholders for monetary damages for conduct that does
not satisfy their duty of care. Although the statute does not change directors'
duty of care, it enables corporations to limit available relief to equitable
remedies such as injunction or rescission. The Company's Certificate of
Incorporation limits the liability of the Company's directors and officers to
the Company or its stockholders to the fullest extent permitted by the Delaware
statute. The inclusion of this provision in the Certificate of Incorporation
may have the effect of reducing the likelihood of derivative litigation against
directors and may discourage or deter stockholders or management from bringing a
lawsuit against directors for breach of their duty of care, even though such an
action, if successful, might otherwise have benefitted the Company and its
stockholders.
I-I
<PAGE> 23
ITEM 16. EXHIBITS
EXHIBIT NO.
- -----------
5 Opinion of Shefsky Froelich & Devine Ltd. regarding legality.
23.1 Consent of Altschuler, Melvoin and Glasser LLP
23.2 Consent of BDO Dunwoody
23.3 Consent of Arthur Andersen & Co. Kft.
23.4 Consent of Shefsky Froelich & Devine Ltd. (included in Exhibit 5
above).
ITEM 17. UNDERTAKINGS
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply
if the information required to the included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the
I-II
<PAGE> 24
Exchange Act) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
I-III
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on
July 29, 1996.
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
By: /s/ Arvin Scott
----------------------------------
Arvin Scott, President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Arvin Scott and Dan Maeir, jointly and
severally, his attorneys-in-fact, each with power of substitution for him in
any and all capacities, to sign any future amendments to the Registration
Statement, and to file the same, with the exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------ ---------------------------------- ----------------------
<S> <C> <C>
/s/ YEHUDA TZUR Chairman of the Board of Directors July 29, 1996
- -----------------------------------
Yehuda Tzur
/s/ ARVIN SCOTT Chief Executive Officer, President, July 29, 1996
- ----------------------------------- Acting Chief Financial Officer and
Arvin Scott Director (Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
/s/ ARVIN SCOTT Director July 29, 1996
- -----------------------------------
Arvin Scott
/s/ ERIC GOODMAN Director July 29, 1996
- -----------------------------------
Eric Goodman
/s/ REUBEN GABAY Director July 29, 1996
- -----------------------------------
Reuben Gabay
/s/ SAMI ISRAEL Director July 29, 1996
- ----------------------------------
Sami Israel
/s/ SHELDON ROBINSON Director July 29, 1996
- ----------------------------------
Sheldon Robinson
/s/ SOL WEINER Director July 29, 1996
- ----------------------------------
Sol Weiner
</TABLE>
<PAGE> 1
EXHIBIT 5
9188-08-A
July 29, 1996
Universal Automotive Industries, Inc.
3350 North Kedzie Avenue
Chicago, Illinois 60618-5722
Re: Universal Automotive Industries, Inc.
Registration Statement on Form S-3
-------------------------------------
Ladies and Gentlemen:
We have acted as special securities counsel to Universal Automotive
Industries, Inc., a Delaware corporation (the "Company"), in connection with
the preparation and filing of the registration statement on Form S-3 (the
"Registration Statement"), with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act") and the
prospectus contained therein with respect to the public offering of up to
223,500 shares of the Company's common stock, par value $0.01 (the "Shares").
All of the Shares are being offered on behalf of certain selling stockholders
(the "Selling Stockholders"). In connection with the registration of the
Shares, you have requested our opinion with respect to the matters set forth
below.
For purposes of this opinion, we have reviewed the Registration Statement.
In addition, we have examined the originals or copies certified or otherwise
identified to our satisfaction of: (i) the Company's Certificate of
Incorporation, as amended to date; (ii) the By-laws of the Company, as amended
to date; (iii) records of the corporate proceedings of the Company as we deemed
necessary or appropriate as a basis for the opinions set forth herein; and (iv)
those matters of law as we have deemed necessary or appropriate as a basis for
the opinions set forth herein. We have not made any independent review or
investigation of the organization, existence, good standing, assets, business
or affairs of the Company, or of any other matters. In rendering our opinion,
we have assumed without inquiry the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of these documents submitted to us as copies.
<PAGE> 2
Universal Automotive Industries, Inc.
July 29, 1996
Page 2
We have not undertaken any independent investigation to determine facts
bearing on this opinion, and no inference as to the best of our knowledge of
facts based on an independent investigation should be drawn from this
representation. Further, our opinions, as hereinafter expressed, are subject
to the following exceptions, limitations and qualifications: (i) the effect of
bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights and remedies of creditors; and (ii) the effect of general
principles of equity whether enforcement is considered in a proceeding in
equity or at law and the discretion of the court before which any proceeding
therefore may be brought.
We are admitted to the practice of law only in the State of Illinois and,
accordingly, we do not purport to be experts on the laws of any other
jurisdiction nor do we express an opinion as to the laws of jurisdictions other
than the laws of the State of Illinois and the General Corporation Law of the
State of Delaware, as currently in effect.
On the basis of, and in reliance upon, the foregoing, and subject to the
qualifications contained herein, we are of the opinion that the Shares are
validly issued, fully-paid and nonassessable.
We hereby consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters."
This opinion is rendered only to you and is solely for your benefit in
connection with the transactions covered hereby. This opinion may not be
relied upon by you for any other purpose or furnished, or quoted to, or relied
upon by any other person, firm or corporation for any purpose without our prior
express written consent.
Respectfully submitted,
/s/ SHEFSKY FROELICH & DEVINE LTD.
SHEFSKY FROELICH & DEVINE LTD.
<PAGE> 1
[ALTSCHULER, MELVOIN AND GLASSER LLP LETTERHEAD]
CONSENT OF ALTSCHULER, MELVOIN AND GLASSER LLP
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference of our report dated March 15, 1996 relating to the
consolidated financial statements and financial statement schedules of
Universal Automotive Industries, Inc. as of December 31, 1995 and for the year
then ended in the Registration Statement on Form S-3 to be filed with the
Securities and Exchange Commission concerning the registration of 223,500
shares of common stock.
ALTSCHULER, MELVOIN AND GLASSER LLP
ALTSCHULER, MELVOIN AND GLASSER LLP
Certified Public Accountants
Chicago, Illinois
July 26, 1996
<PAGE> 1
EXHIBIT 23.2
[BDO DUNWOODY LETTERHEAD]
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference of our report dated February 12, 1996 with respect
to the financial statements of UBP Canholdings Inc. in the Registration
Statement on Form S-3 and related Prospectus of Universal Automotive
Industries, Inc.
BDO DUNWOODY
Chartered Accountants
BDO Dunwoody
Hamilton, Ontario, Canada
July 26, 1996
<PAGE> 1
CONSENT OF ARTHUR ANDERSEN & CO. KFT.
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference of our report dated 9 January 1996 relating to the
balance sheet of UBP-Csepel Iron Foundry Kft. as of 30 September 1995 in the
Registration Statement on Form S-3 and related Prospectus of Universal
Automotive Industries, Inc.
Arthur Andersen & Co. Kft.
ARTHUR ANDERSEN & CO. KFT.
Budapest, Hungary
24 July 1996
