-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AZ1wGwpDU45mobmWbfO1W0SkcoSRz3BkZhxrXdLZIkq0dw0M8FTnkuzcvfRhVm2a yVgWLQUzqCS93lrwAr6KKQ== 0000905729-98-000169.txt : 19980817 0000905729-98-000169.hdr.sgml : 19980817 ACCESSION NUMBER: 0000905729-98-000169 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: HASTINGS MANUFACTURING CO CENTRAL INDEX KEY: 0000046109 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 380633740 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03574 FILM NUMBER: 98688912 BUSINESS ADDRESS: STREET 1: 325 N HANOVER ST CITY: HASTINGS STATE: MI ZIP: 49058 BUSINESS PHONE: 6169452491 MAIL ADDRESS: STREET 1: 325 NORTH HANOVER STREET STREET 2: 325 NORTH HANOVER STREET CITY: HASTINGS STATE: MI ZIP: 49058 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended Commission File Number JUNE 30, 1998 1-3574 HASTINGS MANUFACTURING COMPANY (Exact name of registrant as specified in its charter) MICHIGAN 38-0633740 (State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 325 NORTH HANOVER STREET HASTINGS, MICHIGAN 49058 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: 616-945-2491 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
OUTSTANDING AT CLASS JULY 24, 1998 ----- ------------- Common stock, $2 par value 783,926 shares
Hastings Manufacturing Company and Subsidiaries Contents =========================== PART I - FINANCIAL INFORMATION PAGE Item 1 - Financial Statements: Report on Review by Independent Certified Public Accountants 3 Condensed Consolidated Balance Sheets - June 30, 1998 and December 31, 1997 4-5 Condensed Consolidated Statements of Operations - Three Months and Six Months Ended June 30, 1998 and 1997 6 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 1998 and 1997 7-8 Notes to Condensed Consolidated Financial Statements 9-11 Review by Independent Certified Public Accountants 12 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 13-18 PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders 19 Item 6 - Exhibits and Reports on Form 8-K 20 -2- Report on Review by Independent Certified Public Accountants Board of Directors Hastings Manufacturing Company Hastings, Michigan We have reviewed the accompanying condensed consolidated balance sheet of Hastings Manufacturing Company and subsidiaries as of June 30, 1998, and the related condensed consolidated statements of operations for the three- month and six-month periods ended June 30, 1998 and 1997, and cash flows for the six-month periods ended June 30, 1998 and 1997, included in the accompanying Securities and Exchange Commission Form 10-Q for the period ended June 30, 1998. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1997, and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended (not presented herein). In our report dated February 27, 1998, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1997, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. /s/BDO Seidman, LLP BDO Seidman, LLP Grand Rapids, Michigan July 24, 1998 -3- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Hastings Manufacturing Company and Subsidiaries Condensed Consolidated Balance Sheets ========================
JUNE 30, DECEMBER 31, ASSETS 1998 1997 ----------- ----------- CURRENT ASSETS Cash $ 318,177 $ 558,172 Accounts receivable, less allowance for possible losses of $150,000 and $215,000 6,515,431 5,148,906 Refundable income taxes 13,102 13,475 Inventories: Finished products 7,361,952 7,460,534 Work in process 547,013 572,307 Raw materials 2,041,259 1,239,657 Prepaid expenses and other assets 60,743 75,669 Future income tax benefits 1,790,687 2,351,687 Other current assets 978,294 958,517 ----------- ----------- TOTAL CURRENT ASSETS 19,626,658 18,378,924 ----------- ----------- PROPERTY AND EQUIPMENT Land and improvements 649,405 658,243 Buildings 4,731,211 4,633,937 Machinery and equipment 18,762,648 18,180,840 ----------- ----------- 24,143,264 23,473,020 Less accumulated depreciation 15,873,887 15,156,120 ----------- ----------- NET PROPERTY AND EQUIPMENT 8,269,377 8,316,900 ----------- ----------- INTANGIBLE PENSION ASSET 815,189 815,189 FUTURE INCOME TAX BENEFITS 5,833,812 5,828,923 -4- OTHER ASSETS 24,866 50,395 ----------- ----------- $34,569,902 $33,390,331 =========== ===========
-5- Hastings Manufacturing Company and Subsidiaries Condensed Consolidated Balance Sheets ===============================
JUNE 30, DECEMBER 31, LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997 ----------- ----------- CURRENT LIABILITIES Notes payable to banks $ 4,600,000 $ 3,400,000 Accounts payable 1,324,480 1,475,098 Accruals: Compensation 663,740 494,781 Pension plan contribution 643,479 608,786 Taxes other than income 222,443 172,854 Income taxes 81,779 - Miscellaneous 358,598 217,731 Current portion of postretirement benefit obligation 1,110,442 1,110,442 Current maturities of long-term debt 1,296,875 1,462,500 ----------- ----------- TOTAL CURRENT LIABILITIES 10,301,836 8,942,192 LONG-TERM DEBT, less current maturities - 565,625 PENSION AND DEFERRED COMPENSATION OBLIGATIONS, less current portion 3,230,006 3,243,618 POSTRETIREMENT BENEFIT OBLIGATION, less current portion 14,883,069 15,318,770 ----------- ----------- TOTAL LIABILITIES 28,414,911 28,070,205 ----------- ----------- STOCKHOLDERS' EQUITY Preferred stock, $2 par value, authorized and unissued 500,000 shares - - Common stock, $2 par value, 1,750,000 shares authorized; 783,926 and 780,626 shares issued and outstanding 1,567,852 1,561,252 -6- Additional paid-in capital 245,532 145,788 Retained earnings 6,611,701 5,793,219 Accumulated other comprehensive income (Note 5): Cumulative foreign currency translation adjustment (840,616) (750,655) Pension liability adjustment (1,429,478) (1,429,478) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 6,154,991 5,320,126 ----------- ----------- $34,569,902 $33,390,331 =========== ===========
See accompanying independent accountants' review report and notes to condensed consolidated financial statements. -7- Hastings Manufacturing Company and Subsidiaries Condensed Consolidated Statements of Operations ==============================
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- June 30, 1998 1997 1998 1997 ---- ---- ---- ---- NET SALES $10,628,170 $9,602,232 $20,574,188 $18,354,389 COST OF SALES 7,263,221 6,599,540 14,035,201 12,528,797 ----------- ---------- ----------- ----------- Gross profit 3,364,949 3,002,692 6,538,987 5,825,592 ----------- ---------- ----------- ----------- OPERATING EXPENSES Advertising 92,488 92,124 190,054 199,142 Selling 833,782 733,722 1,593,818 1,532,897 General and administrative 1,444,108 1,486,263 2,948,232 2,932,744 ----------- ---------- ----------- ----------- 2,370,378 2,312,109 4,732,104 4,664,783 ----------- ---------- ----------- ----------- Operating income 994,571 690,583 1,806,883 1,160,809 ----------- ---------- ----------- ----------- OTHER EXPENSE (INCOME) Interest expense 113,440 134,020 222,570 257,123 Interest income (11,660) (13,658) (19,777) (22,779) Other, net (1,225) (5,545) (201) (4,376) ----------- ---------- ----------- ----------- 100,555 114,817 202,592 229,968 ----------- ---------- ----------- ----------- Income before income tax expense 894,016 575,766 1,604,291 930,841 INCOME TAX EXPENSE 369,000 231,000 661,000 373,000 ----------- ---------- ----------- ----------- NET INCOME $ 525,016 $ 344,766 $ 943,291 $ 557,841 =========== ========== =========== =========== -8- BASIC AND DILUTED NET INCOME PER SHARE OF COMMON STOCK (Notes 4 and 6) $.68 $.45 $1.22 $.73 DIVIDENDS PER SHARE OF COMMON STOCK (Note 6) $.08 $.05 $.155 $.10
See accompanying independent accountants' review report and notes to condensed consolidated financial statements. -9- Hastings Manufacturing Company and Subsidiaries Condensed Consolidated Statements of Cash Flows ============================
Six months ended June 30, 1998 1997 ----------- ----------- OPERATING ACTIVITIES Net income $ 943,291 $ 557,841 Adjustments to reconcile net income to net cash from operating activities: Depreciation 760,888 678,194 Deferred income taxes 561,000 296,000 Gain on sale of property and equipment (8,045) (5,003) Change in postretirement benefit obligation (435,701) (413,450) Changes in operating assets and liabilities: Accounts receivable (1,384,485) (742,629) Refundable income taxes - 19,435 Inventories (719,426) 406,925 Prepaid expenses and other current assets (4,917) 68,313 Other assets 25,529 (62,199) Accounts payable and accruals 422,160 (395,302) ----------- ----------- Net cash from operating activities 160,294 408,125 ----------- ----------- INVESTING ACTIVITIES Capital expenditures (757,948) (976,258) Proceeds from sale of property and equipment 18,268 6,316 ----------- ----------- Net cash for investing activities (739,680) (969,942) ----------- ----------- -10- FINANCING ACTIVITIES Proceeds from issuance of notes payable to banks 3,800,000 3,600,000 Principal payments on notes payable to banks (2,600,000) (3,500,000) Principal payments on long-term debt (731,250) (731,250) Dividends paid (121,509) (78,122) ----------- ----------- Net cash from (for) financing activities 347,241 (709,372) ----------- ----------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (7,850) (2,636) ----------- ----------- NET DECREASE IN CASH (239,995) (1,273,825) CASH, beginning of period 558,172 1,457,783 ----------- ----------- CASH, end of period $ 318,177 $ 183,958 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 236,165 $ 261,647 Income taxes, net of refunds 11,068 14,268
See accompanying independent accountants' review report and notes to condensed consolidated financial statements. -11- Hastings Manufacturing Company and Subsidiaries Notes to Condensed Consolidated Financial Statements ========================== NOTE 1 In the opinion of the management of Hastings Manufacturing Company and subsidiaries (the "Company"), the accompanying unaudited condensed consolidated financial statements include all normal recurring adjustments considered necessary to present fairly the financial position as of June 30, 1998, and the results of operations for the three months and six months ended June 30, 1998 and 1997, and cash flows for the six months ended June 30, 1998 and 1997. NOTE 2 The results of operations for the six months June 30, 1998, are not necessarily indicative of the results for all of 1998. NOTE 3 The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances, transactions and stockholdings have been eliminated. The accompanying consolidated financial statements are condensed and do not contain all of the information and footnote disclosures required by generally accepted accounting principles in a complete set of financial statements. NOTE 4 In February 1997, Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," was issued. SFAS No. 128 simplifies the standards for computing earnings per share (EPS) and makes them comparable to international EPS standards. It requires the presentation of both "basic" and "diluted" EPS on the face of the income statement with a supplementary reconciliation of the numerators and denominators used in the calculations. SFAS No. 128 was effective for financial statements issued for periods after December 15, 1997, including interim periods. A reconciliation of the numerators and denominators used in the "basic" and "diluted" EPS calculations follows: -12-
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- June 30, 1998 1997 1998 1997 ---- ---- ---- ---- Numerator: Net income used for both "basic" and "diluted" EPS calculation $525,016 $344,766 $943,291 $557,841 ======== ======== ======== ======== Denominator: Weighted average shares outstanding for the period - used for "basic" EPS calculation 771,496 768,516 771,496 768,516 Dilutive effect of stock options 1,566 - 1,222 - -------- -------- -------- -------- Weighted average shares outstanding for the period - used for "diluted" EPS calculation 773,062 768,516 772,718 768,516 ======== ======== ======== ========
NOTE 5 SFAS No. 128 had no effect on EPS for the three-month and six- month periods ended June 30, 1997. All outstanding shares have been adjusted for the two-for-one stock split discussed in Note 6. SFAS No. 130, "Reporting Comprehensive Income," issued in June 1997, was adopted by the Company during the first quarter of 1998. SFAS No. 130 requires that all components of comprehensive income and total comprehensive income be reported in one of the following: a statement of income and comprehensive income, a statement of comprehensive income or a statement of stockholders' equity. The Company has elected to report comprehensive income in its consolidated statement of stockholders' income (which is not presented for interim reporting purposes). Comprehensive income is comprised of net income and all changes to stockholders' equity, except those due to investments by owners and distributions to owners. For interim reporting purposes, SFAS No. 130 requires disclosures of total comprehensive income. -13- Comprehensive income and its components consist of the following:
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- June 30, 1998 1997 1998 1997 ---- ---- ---- ---- Net income $525,016 $344,766 $943,291 $557,841 Other comprehensive income, net of tax: Foreign currency translation adjustments (105,722) (2,992) (89,961) (28,114) Minimum pension liability adjustment - - - - -------- -------- -------- -------- Other comprehensive income (105,722) (2,992) (89,961) (28,114) -------- -------- -------- -------- Comprehensive income $419,294 $341,774 $853,330 $529,727 ======== ======== ======== ========
Accumulated comprehensive income totaled $2,270,094 and $2,180,133 at June 30, 1998 and December 31, 1997, respectively. NOTE 6 On February 17, 1998, the Board of Directors authorized a two- for-one stock split, effected in the form of a stock dividend, effective March 23, 1998, payable to shareholders of record on March 2, 1998. All references to number of common shares, except shares authorized, and to all per share information have been adjusted to reflect the stock split on a retroactive basis. -14- Hastings Manufacturing Company and Subsidiaries Review by Independent Certified Public Accountants ========================== The June 30, 1998 and 1997, condensed consolidated financial statements included in this filing on Form 10-Q have been reviewed by BDO Seidman, LLP, Independent Certified Public Accountants, in accordance with established professional standards and procedures for such a review. -15- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations As noted in the Company's 1997 Annual Report, 1997 reflected four quarters of post-filter operating results. As such, no 1998 versus 1997 comparisons are impacted by that event. Certain comparisons between 1997 and 1996, however, continued to be impacted by the transition period following the filter assets and operations sale. While most of the transition effects were phased out by the third quarter of 1996, certain items, as detailed in previous filings, carried through the 1996 year end. RESULTS OF OPERATIONS NET SALES Net sales in the second quarter of 1998 increased $1,025,938, or 10.7%, from $9,602,232 in the second quarter of 1997 to $10,628,170. Net sales for the first half of 1998 have increased $2,219,799, or 12.1%, from $18,354,389 in the first half of 1997 to $20,574,188. This growth was fueled by increased piston ring sales volume in the domestic aftermarket, private brand and export areas. The growth in the domestic aftermarket reflects the continued success of the Company's increased focus in this aspect of the piston ring market. The growth in the private brand area is the result of increased volume to several major customers. The increase in the export area is the result of the on-going development and growth of the Company's direct export efforts, as detailed in previous reports. Net sales in the second quarter of 1997 declined $1,175,391, or 10.9%, from the second quarter of 1996. For the first half of 1997, net sales declined $3,787,646, or 17.1%, from the first half of 1996. Filter operations accounted for $2,178,000 in net sales volume for the second quarter of 1996, and $4,906,000 through the first half of that same year, whereas no filter volume is included in the 1997 results. As such, net sales from the remaining products in 1997 increased by $1,002,000, or 11.7%, and $1,118,000, or 6.5%, for the comparative second quarter and first half periods, respectively. COST OF SALES AND GROSS PROFIT Cost of sales in the second quarter of 1998 increased $663,681, or 10.1%, from $6,599,540 in the second quarter of 1997, to $7,263,221. For the first half of 1998, cost of sales increased $1,506,404, or 12.0%, from $12,528,797 in the first half of 1997, to $14,035,201. The increased cost of sales reflects the corresponding increase in net sales. The gross profit margins increased slightly for the second quarter of 1998, from 31.3% for the second quarter of 1997, to 31.7%. For the first half of 1998, gross profit margins also increased, from 31.7% for the first half of 1997, to 31.8%. The increases in the gross profit margins are the result -16- of a sales mix change, with higher relative domestic aftermarket activity for both the second quarter and the first half of 1998, in comparison to the corresponding periods in 1997. In addition, there was a decrease in certain product-driven distribution and support operating costs that are included in cost of sales. The gross profit margin declined to 31.7% in the second quarter of 1998 from 31.9% in the first quarter due to a sales mix change, with a higher relative portion of private brand sales activity in the second quarter. The private brand piston ring sales market has traditionally generated a lower gross profit margin than domestic sales, due to the lower level of operating expenses that are required to service its sales volume. Through the first half of 1998, the individual product cost factors (material, labor and overhead) have changed somewhat from 1997. While material costs have remained quite steady, labor rates increased by 3% in early 1998. Overhead rates applied to these labor rates, however, have declined, resulting in a minimal total cost per unit change. Cost of sales during the second quarter of 1997 decreased $1,354,421, or 17.0%, from the second quarter of 1996, to $6,599,540. For the first half of 1997, cost of sales decreased $3,728,078, or 22.9%, from the first half of 1996. The reduced cost of sales totals primarily reflect the absence of any filter related activity in 1997. The gross profit margin for the first half of 1997 improved to 31.7% from 26.6% in the first half of 1996. The 1996 results were affected by the transition agreement that the Company had with the acquirer of the filter operations. This agreement resulted in minimal gross profit being generated on filter products in 1996. In addition to the specific filter production costs that are included in the 1996 results, certain product-driven distribution and support operating costs are included in cost of sales. Following the 1996 relocation from the Knoxville facility, these operating costs decreased from $2,144,000 in the first half of 1996, to $1,413,000 in the first half of 1997. OPERATING EXPENSES Total operating expenses for the second quarter of 1998 increased $58,269, or 2.5%, from $2,312,109 in the second quarter of 1997, to $2,370,378. For the first half of 1998, these expenses increased by $67,321, or 1.4%, from $4,664,783 in the first half of 1997, to $4,732,104. Advertising costs for the second quarter of 1998 mirrored those of the second quarter of 1997. For the first half or 1998 advertising costs declined slightly, reflecting the inclusion of a biannual product catalog expense in 1997. Selling costs for the second quarter of 1998 increased $100,060, of 13.6%, from the second quarter of 1997. Selling costs for the first half of 1998 increased $60,921, or 4.0%, from the first half of 1997. These increases are primarily associated with volume-driven costs such as agency commissions and various sales personnel expenses. There was also a moderate increase in sales promotion expense in the second quarter of 1998. General and administrative costs decreased $42,155, or 2.8%, from the second quarter of -17- 1997. This decrease is due to cost savings attained in 1998 from the amendment to the postretirement benefit plan in the second quarter of 1997, combined with reduced employee education expenses. Education expenses were unusually high in 1997, reflecting both internal and external costs associated with the Company's successful QS9000 registration. For the first half of 1998, the general and administrative expenses have increased $15,488, or 0.5%, from the first half of 1997. This slight increase is the result of the expense decreases noted above, offset by an increase in various personnel support costs. The personnel costs include approximately $50,000 of severance related to staffing reductions in early 1998. Total operating expenses for both the second quarter and first half of 1997 decreased significantly from the comparative periods in 1996. These reductions reflect the full elimination of any filter sensitive expenses by the Company in 1997, as well as the favorable results of the restructuring plan as reported in the Company's 1996 Annual Report. OTHER EXPENSES (INCOME) Other expenses netted to $100,555 for the second quarter of 1998, compared to $114,817 for the second quarter of 1997. For the first half of 1998, these expenses netted to $202,592, versus a net expense of $229,968 for the first half of 1997. Short-term borrowings have increased for both periods noted in 1998, reflecting increased working capital requirements as driven by the net sales increase. Increased interest costs associated with these short-term borrowings, however, were offset by the lower interest costs realized from the declining long-term debt obligations. The net effect is a reduction in interest expense in both the second quarter and first half of 1998, in comparison to the corresponding periods in 1997. The 1998 and 1997 interest income amounts are derived from the funds generated by the filter operations sale which are to be held in escrow through September of this year. Other expenses for both the second quarter and first half of 1997 increased from the comparative periods in 1996. The net interest position reflects both lower expense and income in the 1997 comparative periods. This reflects a slight reduction in the Company's net borrowed position combined with the elimination of interest income from funds that were previously held for capital equipment acquisition. TAXES ON INCOME The 1998 and 1997 effective tax rates of 41.2% and 40.1%, respectively, are higher than the domestic statutory rate, primarily due to the impact of various state income taxes and the impact of a higher statutory rate applicable to the Company's Canadian subsidiary. As of June 30, 1998, the Company recorded net deferred income tax assets of $7,624,499. The major components of those assets remain the tax effects of -18- net operating loss carryforwards and accrued retirement and postretirement benefit obligations. The realization of this recorded benefit is dependent upon the generation of future taxable income. Management believes it is likely that adequate levels of future taxable income will be generated to absorb the net operating loss carryforwards, the deductible amounts related to the retirement and postretirement benefit obligations and the remaining net deductible temporary differences. YEAR 2000 During 1997, the Company utilized the services of an outside consultant to assist in converting its computer systems to be Year 2000 compliant. Management believes the Company's core mainframe operating system and applications, its personal computer (PC) operating systems and the majority of its PC applications are compliant. The remaining PC applications are expected to be compliant in early 1999 with the next software release or upgrade. Manufacturing equipment testing for Year 2000 compliance has been substantially completed, with the remainder to be completed by year end. The Company's primary customers and vendors have been contacted requesting assurances regarding their Year 2000 compliance. Responses are in the process of being received and reviewed. Costs related to the Year 2000 project during 1997, which approximated $110,000 for the entire year, were expensed as incurred. Future costs to be incurred to complete the Year 2000 project are not expected to be material. LIQUIDITY AND CAPITAL RESOURCES The Company's primary cash requirements continue to be for operating expenses such as labor costs and raw materials, and for funding accounts receivable, capital expenditures and long-term debt service. Historically, the Company's primary sources of cash have been from operations and bank borrowings. As a result of the full transition out of filter operations, and the favorable impact of the subsequent restructuring effort, the Company expects to generate sufficient future funds from operations and bank borrowings to fund its growth and operating needs. The short-term lines available to the Company as of June 30, 1998 totaled $7.2 million, of which $2.6 million was unused. This capacity was increased by $1.0 million during the second quarter of 1998 to its current level. That capacity is available to fund any additional inventory and accounts receivable needs that result from the sales increase thus far this year. During the first half of 1998, the Company generated $160,294 of net cash for operating activities. The realized net income, depreciation, deferred income taxes and increased accounts payable and accruals were largely offset by increases in accounts receivable and inventories. The increased accounts receivable and inventory totals reflect the additional working capital requirements that are necessary to support the higher sales level. -19- The decline in the net deferred income tax asset is the result of the partial utilization of the tax net operating loss carryforward, which reflects the Company's favorable first half performance. The capital expenditures for the first half of 1998 are at $757,948, which represents a decrease in comparison to expenditures of $976,258 in the first half of 1997. While second quarter capital expenditures slowed to $304,180 from $453,768 in the first quarter of 1998, total capital expenditures for 1998 may yet approach the yearly 1997 total of $1,770,302, as several significant capital projects are currently under consideration. The financing activities for the first half of 1998 reflect the continued amortization of the Company's long-term debt obligations, as well as the increased reliance upon short-term borrowings that have been necessary to satisfy increased working capital needs. Dividends paid increased in the first half of 1998 as a result of the Company's March 23, 1998 two-for-one stock split effected in the form of a stock dividend, which required an upward adjustment of $0.005 dividend per share on the number of shares outstanding after the stock split. During the first half of 1997, the Company generated net cash from operating activities of $408,125. The realized net income and absorbed depreciation, combined with the reductions in the deferred income tax asset, inventories and prepaid assets, generated enough cash to absorb the net increase in accounts receivable and the net decline in accounts payable and accruals. The investing activities were quite high for the first half of 1997, reflecting the timing of several major capital expenditures. The financing activities for the first half of 1997 reflect the normal amortization of the Company's long-term debt obligation, as well as a reduced reliance on the Company's short-term debt subsequent to the filter operations transition. As noted throughout the above discussion, the Company has realized increased activity thus far in 1998. That growth has resulted in an increased net income level combined with increased working capital demands. The Company will continue to monitor its working capital needs to balance its cash and growth demands. At this point, the Company anticipates that operations (which should be subject to minimal current cash outflows for U.S. income taxes due to the utilization of the net operating loss carryforwards), in combination with the balancing of available short-term lines with our operations, will generate cash flows that will be sufficient to fund its working capital, capital outlays and dividend requirements through 1998. NEW ACCOUNTING STANDARDS Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information," which was issued in June 1997 and supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise," establishes standards for the way that -20- public companies report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements issued to the public. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. SFAS No. 131 defines operating segments as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," issued in February 1998, revises employers' disclosures about pension and other postretirement benefit plans. It does not change the measurement or recognition of those plans. SFAS No. 132 standardizes the disclosure requirements to the extent practicable, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis and eliminates certain disclosures that are no longer as useful as when they were first required to be presented. SFAS No. 131 and 132 are effective for the Company's 1998 year-end financial statements and require restatement of prior year comparative information. The implementation of these new Statements will not affect results of operations and financial position, but may have an impact on future financial statement disclosures. With respect to SFAS No. 131, the Company does not expect to change its operating segment groupings. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," issued in June 1998, requires companies to recognize all derivatives contracts as either assets or liabilities in the balance sheet and to measure them at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Historically, the Company has not entered into derivatives contracts for speculative purposes. The Company does periodically enter into interest rate swap and collar agreements to reduce the impact of changes in interest rates on its floating rate borrowings. However, the fair value of such derivatives are not significant. Accordingly, the Company does not expect adoption of the new Statement on January 1, 2000 to materially affect its financial statements. -21- FORWARD LOOKING STATEMENTS With the exception of historical matters, the matters discussed in this commentary include certain predictions and projections that may be considered forward-looking statements under securities laws, including, but not limited to, those statements under the captions "Results of Operations" and "Liquidity and Capital Resources." These statements are subject to a number of important risks and uncertainties that could cause actual results to differ materially, including but not limited to economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services and prices. The Company undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise. -22- PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of shareholders of Hastings Manufacturing Company was held on May 5, 1998. The purposes of the meeting were to elect directors, to approve the Hastings Manufacturing Company Stock Option and Restricted Stock Plan of 1997 and to transact any other business that may have properly come before the meeting. The name of each director elected at the meeting (along with the number of votes cast for, against or authority withheld and broker non-votes) and the name of each other director whose term of office as a director continued after the meeting follows:
AUTHORITY BROKER ELECTED DIRECTOR FOR AGAINST WITHHELD NON-VOTES ------------------------------------------------------------------------------ Neil A. Gardner 383,077 -- 120 --
DIRECTORS WHO CONTINUE TO SERVE Mark R.S. Johnson Andrew F. Johnson Dale W. Koop Monty C. Bennett Douglas A. DeCamp William R. Cook Richard L. Foster The number of votes cast for, against or authority withheld and broker non-votes for approval of the Hastings Manufacturing Company Stock Option and Restricted Stock Plan of 1997 follows:
AUTHORITY BROKER FOR AGAINST WITHHELD NON-VOTES -------------------------------------------------------------------- Approval of the 381,776 3,924 420 -- Hastings Manufacturing Company Stock Option and and Restricted Stock Plan of 1997
-23- The numbers of shares set forth above do not take into account the two-for-one stock split discussed in Note 6 to the financial statements contained in this Form 10-Q, as the record date for determining the shareholders entitled to vote at the meeting was prior to the payment date of the stock split. Item 6. Exhibits and Reports on Form 8-K (a) EXHIBITS. The following documents are filed as exhibits to this report on Form 10-Q: EXHIBIT NUMBER DOCUMENT 3(a) Articles of Incorporation of Hastings Manufacturing Company, as amended to date. 3(b) Bylaws of Hastings Manufacturing Company, as amended to date. 4(a) Articles of Incorporation of Hastings Manufacturing Company, as amended to date. See Exhibit 3(a). 4(b) Bylaws of Hastings Manufacturing Company, as amended to date. See Exhibit 3(b). 4(c) Instruments defining the rights of security holders, including indentures filed as an exhibit to the Form 10-K Annual Report for the year ended December 31, 1983, are incorporated herein by reference. 4(d) NBD Bank, N.A. $3,312,500 Term Loan Agreement and Term Note, filed as an exhibit to the Form 10-K Annual Report for the year-ended December 31, 1993, is incorporated herein by reference. 4(e) NBD Bank, N.A. $4,000,000 Term Loan Agreement and Term Note, filed as an exhibit to the Form 10-K Annual Report for the year-ended December 31, 1994, is incorporated herein by reference. 4(f) NBD Bank, N.A. $6,000,000 Credit Authorization and Master Promissory Note, dated May 31, 1994, filed as an exhibit to the Form 10-K Annual Report for the year-ended December 31, 1994, is incorporated herein by reference. 4(g) First Amendment, dated May 2, 1995, to the NBD Bank, N.A. $6,000,000 Credit Authorization and Master Promissory Note, dated May 31, 1994, filed as an exhibit to the Form 10-K Annual Report for the year-ended December 31, 1995, is incorporated herein by reference. -24- EXHIBIT NUMBER DOCUMENT 4(h) Second Amendment, dated September 30, 1995, to the NBD Bank, N.A. $6,000,000 Credit Authorization and Master Promissory Note, dated May 31, 1994, filed as an exhibit to the Form 10-K Annual Report for the year-ended December 31, 1995, is incorporated herein by reference. 4(i) Third Amendment, dated as of May 31, 1996, to the NBD Bank, N.A. $6,000,000 Credit Authorization and Master Promissory Note, dated May 31, 1994, filed as an exhibit to the Form 10-K Annual Report for the year-ended December 31, 1996, is incorporated herein by reference. 4(j) Fourth Amendment, dated as of May 31, 1997, to the NBD Bank, N.A., $4,000,000 Credit Authorization and Master Promissory Note, dated May 31, 1994, filed as an exhibit to the Form 10-Q Quarterly Report for the period ended June 30, 1997, is incorporated herein by reference. 4(k) Fifth Amendment, dated as of May 31, 1998, to the NBD Bank, N.A., $5,000,000 Credit Authorization and Master Promissory Note, dated May 31, 1994. 4(l) Preferred Stock Purchase Rights, filed as an exhibit to Form 8-K filed with the Securities and Exchange Commission on February 15, 1996, is incorporated herein by reference. 4(m) Confirmation, dated as of March 12, 1996, regarding an interest rate collar transaction between Hastings Manufacturing Company and NBD Bank, filed as an exhibit to the Form 10-K Annual Report for the year-ended December 31, 1996, is incorporated herein by reference. 4(n) Commercial Line of Credit Agreement and Note, dated as of January 23, 1998, between Hastings Manufacturing Company and Hastings City Bank. 10(a) Hastings Manufacturing Company Stock Option and Restricted Stock Plan of 1997, filed as Appendix A to the Company's Definitive Proxy Statement with respect to the Company's Annual Meeting of Shareholders held on May 5, 1998, is here incorporated by reference. 27 Financial Data Schedule (b) REPORTS ON FORM 8-K. No reports on Form 8-K have been filed during the quarter for which this report is filed. -25- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on his behalf by the undersigned thereunto duly authorized. HASTINGS MANUFACTURING COMPANY Date: August 14, 1998 /S/MONTY C. BENNETT Monty C. Bennett Its Vice-President, Employee Relations, Secretary and Director Date: August 14, 1998 /S/THOMAS J. BELLGRAPH Thomas J. Bellgraph Its Vice-President, Finance -26- EXHIBIT INDEX EXHIBIT NUMBER DOCUMENT 3(a) Articles of Incorporation of Hastings Manufacturing Company, as amended to date. 3(b) Bylaws of Hastings Manufacturing Company, as amended to date. 4(a) Articles of Incorporation of Hastings Manufacturing Company, as amended to date. See Exhibit 3(a). 4(b) Bylaws of Hastings Manufacturing Company, as amended to date. See Exhibit 3(b). 4(c) Instruments defining the rights of security holders, including indentures filed as an exhibit to the Form 10-K Annual Report for the year ended December 31, 1983, are incorporated herein by reference. 4(d) NBD Bank, N.A. $3,312,500 Term Loan Agreement and Term Note, filed as an exhibit to the Form 10-K Annual Report for the year-ended December 31, 1993, is incorporated herein by reference. 4(e) NBD Bank, N.A. $4,000,000 Term Loan Agreement and Term Note, filed as an exhibit to the Form 10-K Annual Report for the year-ended December 31, 1994, is incorporated herein by reference. 4(f) NBD Bank, N.A. $6,000,000 Credit Authorization and Master Promissory Note, dated May 31, 1994, filed as an exhibit to the Form 10-K Annual Report for the year-ended December 31, 1994, is incorporated herein by reference. 4(g) First Amendment, dated May 2, 1995, to the NBD Bank, N.A. $6,000,000 Credit Authorization and Master Promissory Note, dated May 31, 1994, filed as an exhibit to the Form 10-K Annual Report for the year-ended December 31, 1995, is incorporated herein by reference. EXHIBIT NUMBER DOCUMENT 4(h) Second Amendment, dated September 30, 1995, to the NBD Bank, N.A. $6,000,000 Credit Authorization and Master Promissory Note, dated May 31, 1994, filed as an exhibit to the Form 10-K Annual Report for the year-ended December 31, 1995, is incorporated herein by reference. 4(i) Third Amendment, dated as of May 31, 1996, to the NBD Bank, N.A. $6,000,000 Credit Authorization and Master Promissory Note, dated May 31, 1994, filed as an exhibit to the Form 10-K Annual Report for the year-ended December 31, 1996, is incorporated herein by reference. 4(j) Fourth Amendment, dated as of May 31, 1997, to the NBD Bank, N.A., $4,000,000 Credit Authorization and Master Promissory Note, dated May 31, 1994, filed as an exhibit to the Form 10-Q Quarterly Report for the period ended June 30, 1997, is incorporated herein by reference. 4(k) Fifth Amendment, dated as of May 31, 1998, to the NBD Bank, N.A., $5,000,000 Credit Authorization and Master Promissory Note, dated May 31, 1994. 4(l) Preferred Stock Purchase Rights, filed as an exhibit to Form 8-K filed with the Securities and Exchange Commission on February 15, 1996, is incorporated herein by reference. 4(m) Confirmation, dated as of March 12, 1996, regarding an interest rate collar transaction between Hastings Manufacturing Company and NBD Bank, filed as an exhibit to the Form 10-K Annual Report for the year-ended December 31, 1996, is incorporated herein by reference. 4(n) Commercial Line of Credit Agreement and Note, dated as of January 23, 1998, between Hastings Manufacturing Company and Hastings City Bank. 10(a) Hastings Manufacturing Company Stock Option and Restricted Stock Plan of 1997, filed as Appendix A to the Company's Definitive Proxy Statement with respect to the Company's Annual Meeting of Shareholders held on May 5, 1998, is here incorporated by reference. 27 Financial Data Schedule EX-3 2 EXHIBIT 3(a) RESTATED ARTICLES OF INCORPORATION OF HASTINGS MANUFACTURING COMPANY ARTICLE I The name assumed by this corporation and by which it shall be known in law is HASTINGS MANUFACTURING COMPANY ARTICLE II This corporation intends to proceed under Sec. 1, Chapter 1, Part 1, of the above act. ARTICLE III The purpose or purposes of this corporation are as follows: The manufacture, purchase, distribution, sale, dealing with and dealing in machinery, mechanical appliances, devices, equipment, parts, tools and accessories. ARTICLE IV Principal place where company will operate is Hastings, in the County of Barry, State of Michigan. Address of main office in Michigan is Hastings. Address of main office outside of Michigan is none. ARTICLE V 1. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 2,250,000 shares, of which 500,000 shares Preferred Stock issuable in series, par value $2 per share, are to be of a class to be designated "Series Preferred Stock", and 1,750,000 shares of Common Stock, par value $2 per share, are to be designated "Common Stock". The designations, preferences and relative, participating, optional or other special rights of each class of stock of the Corporation and the qualifications, limitations, or restrictions thereon are as follows: The shares of Series Preferred Stock may from time to time be divided into one or more series, each such series to be so designated as to distinguish the shares thereof from the shares of other series and classes as shall hereafter be determined in the resolution or resolutions providing for the issue of such Series Preferred Stock from time to time adopted by the Board of Directors pursuant to authority so to do which is hereby vested by the Board of Directors. (a) Each series of Series Preferred Stock (i) may have such number of shares; (ii) may have such voting powers, full or limited, or may be without voting powers; (iii) may be subject to redemption at the option of the Corporation at such time or times and at such prices; (iv) may be entitled to receive dividends (which may be cumulative or non-cumulative) at such rate or rates, or such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or series of stock; (v) may have such rights upon voluntary or involuntary liquidation, dissolution or winding-up of, or upon any distribution of the assets, of the Corporation; (vi) may be made convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the Corporation; (vii) may be entitled to the benefit of a sinking fund or purchase fund to be applied to the purchase or redemption of shares of such series in such amount or amounts; (viii) may be entitled to the benefit of conditions and restrictions upon the creation of indebtedness of the Corporation or any subsidiary, upon the issue of any additional stock (including additional shares of such series or of any other series) and upon the payment of dividends or the making of other distributions on, and the purchase, redemption or other acquisitions by the Corporation or any subsidiary of any outstanding stock of the Corporation; and (ix) may have such other relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof: as shall be stated in said resolution or resolutions providing for the issue of such Series Preferred Stock and any such series may vary from any other series with respect to one or more of the above matters. Except where otherwise set forth in the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of Series Preferred Stock, the number of shares comprising such series may be increased or decreased (but not below the number of shares then outstanding) from time to time by like action of the Board of Directors and by the filing of a certificate as required by statute. (b) Shares of any series of Series Preferred Stock which have been redeemed (whether through the operation of a sinking fund or otherwise) or purchased by the Corporation, or which, if convertible or exchangeable, have been converted into or exchanged for shares of stock of any other class or classes shall have the status of authorized and unissued shares of Series Preferred Stock and may be reissued as a part of the series of which they were originally a part or may be reclassified and reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors or as part of any other series of Series Preferred Stock, all subject to the conditions or restrictions on issuance set forth in the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of Series Preferred Stock and to any filing required by law. 2. The Board of Directors is authorized to issue bonds or shares convertible into shares of the Corporation and the Board of Directors may amend the Articles of Incorporation to increase the authorized shares of any class or series to such number as will be sufficient, when added to the previously authorized but unissued shares of such class or series, to satisfy the conversion privileges of any such bonds or shares convertible into shares of such class or series. 3. (a) Except as otherwise provided by law or by the resolution or resolutions of the Board of Directors providing for the issue of any series of the Preferred Stock, the Common Stock shall have the exclusive right to vote for the election of Directors and for all other purposes, each holder of the Common Stock being entitled to one vote for each share held. (b) Subject to all of the rights of the Preferred Stock or any series thereof, the holders of the Common Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, dividends payable in cash, stock or otherwise. 4. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, and after the holders of the Preferred Stock of each series shall have been paid in full the amounts to which they respectively shall be entitled, or a sum sufficient for such payment in full shall have been set aside, the remaining net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock in accordance with their respective rights and interests, to the exclusion of the holders of the Preferred Stock. ARTICLE VI The term of existence of this corporation shall be perpetual. ARTICLE VII The names of the stockholders, their respective residences and the number of shares of the several classes of stock of this corporation subscribed by each are as follows:
NAME RESIDENCE NO. OF SHARES CLASS A CLASS B CLASS C STOCK STOCK STOCK Emil Tyden 301 S. Park Street 3,500 1,040 3,750 Hastings, Michigan A.K. Johnson 309 S. Park Street 2,500 5,800 3,750 Hastings, Michigan W.R. Cook 525 W. Green Street 1,000 1,560 1,250 Hastings, Michigan H.W. Frost 435 W. Grand Street 1,000 320 1,250 Hastings, Michigan L.H. Taffee 314 W. State Road 1,000 320 1,250 Hastings, Michigan C.W. Dolan 429 S. Park Street 1,000 320 1,250 Hastings, Michigan Oscar Tyden 427 S. Broadway 500 320 1,250 Hastings, Michigan Evelyn Thomas 418 S. Market Street 500 320 1,250 Hastings, Michigan J. W. Redford 426 W. Walnut Street 1,000 Hastings, Michigan C.W. Crawford 429 S. Washington St. 1,000 Hastings, Michigan C. Jacobson 310 S. Hanover Street 1,000 Hastings, Michigan Hubert D. Cook 118 S. Hanover Street 1,000 Hastings, Michigan M.L. Cook 127 S. Hanover Street 250 Hastings, Michigan H.J. Newton 811 S. Jefferson St. 1,000 Hastings, Michigan George Crakes 630 W. Michigan Ave. 500 Hastings, Michigan Maybelle Hart Shultz, Michigan 250 James A. Batson 417 W. Mill Street 500 Hastings, Michigan Swan Anderson 227 E. High Street 500 Hastings, Michigan Roy J. Taffee 303 W. Church Street 500 Hastings, Michigan Fred'k K. Hill 126 W. Walnut Street 500 Hastings, Michigan John K. Tyden 425 W. Center Street 500 Hastings, Michigan M.A. Lambie 528 S. Park Street 500 Hastings, Michigan ------ ------ ------ Total 20,000 10,000 15,000
ARTICLE VIII The names and addresses of the officers and directors (or an attorney in fact) for the first year of the corporation's existence are as follows:
NAME OFFICE ADDRESS E. Tyden President and director Hastings, Michigan A.E. Johnson Vice-president and director Hastings, Michigan C.W. Dolan Secretary and director Hastings, Michigan A.K. Johnson Treasurer and director Hastings, Michigan C.W. Crawford Director Hastings, Michigan H.D. Cook Director Hastings, Michigan
ARTICLE IX The holders of shares of Preferred Stock or of Common Stock shall have as preemptive rights to subscribe for or purchase any additional number of shares of the capital stock of the Company of any class now or hereafter authorized or any Preferred Stock, bonds, debentures, or other obligations or rights or options convertible into or exchangeable for, or entitling the holder or owner to subscribe for or purchase any shares of capital stock, or any rights to exchange shares issued for shares to be issued. ARTICLE X A director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for a breach of fiduciary duty as a director, except for liability: (1) For any breach of the director's duty of loyalty to the corporation or its shareholders; (2) For acts or omissions not in good faith or that involve intentional misconduct or knowing violation of law; (3) For a violation of Section 551(1) of the Michigan Business Corporation Act; and (4) For any transaction from which the director derived an improper personal benefit. If, after the effective date of this Article, the Michigan Business Corporation Act is amended to further eliminate or limit the liability of a director, then a director of the corporation (in addition to the circumstances in which a director is not personally liable as set forth in the preceding paragraph) shall not be liable to the corporation or its shareholders to the fullest extent permitted by the Michigan Business Corporation Act, as so amended. No amendment to or alteration, modification or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment, alteration, modification or repeal. EX-3 3 EXHIBIT 3(b) HASTINGS MANUFACTURING COMPANY (A Michigan Corporation) BYLAWS HASTINGS MANUFACTURING COMPANY (A Michigan Corporation) BYLAWS TABLE OF CONTENTS PAGE ARTICLE I - OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II - MEETINGS OF SHAREHOLDERS. . . . . . . . . . . . . . . . . . 1 Section 1. Times and Places of Meetings. . . . . . . . . . . . . 1 Section 2. Annual Meetings . . . . . . . . . . . . . . . . . . . 1 Section 3. Notice of Annual Meeting. . . . . . . . . . . . . . . 1 Section 4. Shareholder List. . . . . . . . . . . . . . . . . . . 1 Section 5. Special Meetings. . . . . . . . . . . . . . . . . . . 2 Section 6. Notice of Special Meetings. . . . . . . . . . . . . . 2 Section 7. Quorum. . . . . . . . . . . . . . . . . . . . . . . . 2 Section 8. Vote Required . . . . . . . . . . . . . . . . . . . . 2 Section 9. Voting Rights . . . . . . . . . . . . . . . . . . . . 2 Section 10. Conduct of Meetings . . . . . . . . . . . . . . . . . 3 Section 11. Inspectors of Election . . . . . . . . . . . . . . . 3 ARTICLE III - DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 1. Number and Term of Directors. . . . . . . . . . . . . 4 (a) Number of Directors . . . . . . . . . . . . . . . . . 4 (b) Classification. . . . . . . . . . . . . . . . . . . . 4 (c) Vacancies and Newly Created Directorships . . . . . . . . . . . . . . . . . . . . 4 (d) Amendment . . . . . . . . . . . . . . . . . . . . . . 4 Section 2. Qualifications of Directors . . . . . . . . . . . . . 5 Section 3. Powers. . . . . . . . . . . . . . . . . . . . . . . . 5 Section 4. Resignation . . . . . . . . . . . . . . . . . . . . . 5 Section 5. Removal . . . . . . . . . . . . . . . . . . . . . . . 5 Section 6. Nominations of Director Candidates. . . . . . . . . . 6 Section 7. Compensation of Directors . . . . . . . . . . . . . . 7 Section 8. Places of Meetings. . . . . . . . . . . . . . . . . . 7 Section 9. First Meeting of Newly Elected Board. . . . . . . . . 7 Section 10. Regular Meetings. . . . . . . . . . . . . . . . . . . 7 Section 11. Special Meetings. . . . . . . . . . . . . . . . . . . 7 Section 12. Purpose Need Not be Stated. . . . . . . . . . . . . . 8 Section 13. Quorum. . . . . . . . . . . . . . . . . . . . . . . . 8 Section 14. Action Without a Meeting. . . . . . . . . . . . . . . 8 Section 15. Meeting by Telephone or Similar Equipment . . . . . . . . . . . . . . . . . . . . . . 8 -i- PAGE Section 16. Written Notice. . . . . . . . . . . . . . . . . . . . 8 Section 17. Waiver of Notice. . . . . . . . . . . . . . . . . . . 8 ARTICLE IV - COMMITTEES OF DIRECTORS . . . . . . . . . . . . . . . . . . 9 Section 1. Executive Committee . . . . . . . . . . . . . . . . . 8 Section 2. Audit Committee . . . . . . . . . . . . . . . . . . . 9 Section 3. Compensation Committee. . . . . . . . . . . . . . . . 9 Section 4. Nominating Committee. . . . . . . . . . . . . . . . . 9 Section 5. Other Committees. . . . . . . . . . . . . . . . . . . 9 Section 6. Committee Meetings. . . . . . . . . . . . . . . . . . 10 ARTICLE V - OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 1.(a) Central Staff . . . . . . . . . . . . . . . . . . . . 10 (b) Divisional Officers . . . . . . . . . . . . . . . . . 10 Section 2. Qualifications of Officers. . . . . . . . . . . . . . 11 Section 3. Chairman of the Board . . . . . . . . . . . . . . . . 11 Section 4. President or Presidents . . . . . . . . . . . . . . . 11 Section 5. Chief Executive Officer or Officers . . . . . . . . . 11 Section 6. Chief Operating Officer . . . . . . . . . . . . . . . 12 Section 7. Vice Presidents . . . . . . . . . . . . . . . . . . . 12 Section 8. Secretary . . . . . . . . . . . . . . . . . . . . . . 12 Section 9. Treasurer . . . . . . . . . . . . . . . . . . . . . . 13 Section 10. Assistant Secretary and Assistant Treasurer . . . . . . . . . . . . . . . . . . . . . . 13 Section 11. Other Officers. . . . . . . . . . . . . . . . . . . . 13 ARTICLE VI - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 13 Section 1. Indemnification Other Than in Actions by or in the Right of the Corporation . . . . . . . . . . . . . . . . . . . . . 13 Section 2. Indemnification in Actions by or in the Right of the Corporation. . . . . . . . . . . . . 14 Section 3. Expenses. . . . . . . . . . . . . . . . . . . . . . . 15 Section 4. Authorization of Indemnification. . . . . . . . . . . 15 Section 5. Advancing of Expenses . . . . . . . . . . . . . . . . 15 Section 6. Partial Indemnification . . . . . . . . . . . . . . . 16 Section 7. Indemnification Hereunder Not Exclusive . . . . . . . . . . . . . . . . . . . . . . 16 Section 8. Insurance . . . . . . . . . . . . . . . . . . . . . . 17 Section 9. Mergers . . . . . . . . . . . . . . . . . . . . . . . 17 Section 10. Savings Clause. . . . . . . . . . . . . . . . . . . . 17 Section 11. Definitions . . . . . . . . . . . . . . . . . . . . . 17 Section 12. Construction. . . . . . . . . . . . . . . . . . . . . 18 -ii- PAGE ARTICLE VII - SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . 18 Section 1. Subsidiaries. . . . . . . . . . . . . . . . . . . . . 18 Section 2. Subsidiary Officers Not Executive Officers. . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE VIII - CERTIFICATES OF STOCK . . . . . . . . . . . . . . . . . . 19 Section 1. Form. . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2. Facsimile Signature . . . . . . . . . . . . . . . . . 19 Section 3. Lost Certificates . . . . . . . . . . . . . . . . . . 19 Section 4. Transfers of Stock. . . . . . . . . . . . . . . . . . 19 Section 5. Fixing of Record Date by Board. . . . . . . . . . . . 20 Section 6. Provision for Record Date in the Absence of Board Action . . . . . . . . . . . . . . . 20 Section 7. Adjournments. . . . . . . . . . . . . . . . . . . . . 20 Section 8. Registered Shareholders . . . . . . . . . . . . . . . 20 ARTICLE IX - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . 21 Section 1. Dividends . . . . . . . . . . . . . . . . . . . . . . 21 Section 2. Reserves. . . . . . . . . . . . . . . . . . . . . . . 21 Section 3. Checks. . . . . . . . . . . . . . . . . . . . . . . . 21 Section 4. Fiscal Year . . . . . . . . . . . . . . . . . . . . . 21 Section 5. Seal. . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 6. Written Waiver of Notice. . . . . . . . . . . . . . . 21 ARTICLE X - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 21 -iii- B Y L A W S OF HASTINGS MANUFACTURING COMPANY ARTICLE I OFFICES The corporation may have offices at such places, both within and without the State of Michigan as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS SECTION 1. TIMES AND PLACES OF MEETINGS. All meetings of the shareholders shall be held, except as otherwise provided by statute or these Bylaws, at such time and place as may be fixed from time to time by the Board of Directors. SECTION 2. ANNUAL MEETINGS. Annual meetings of the shareholders shall be held at the principal office of the corporation in the City of Hastings, State of Michigan, at a date designated by the Board of Directors from time to time, between February 1 and June 1 of each year. SECTION 3. NOTICE OF ANNUAL MEETING. Written notice of the annual meeting shall be given personally or by mail to each shareholder entitled to vote thereat at least twenty (20) days before the date of the meeting. Attendance of a shareholder at a meeting shall constitute a waiver of notice, except when the shareholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. SECTION 4. SHAREHOLDER LIST. The officer or agent who has charge of the stock ledger of the corporation shall prepare and make before every meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged by class or series in alphabetical order, showing the address of and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during the whole time thereof, and may be inspected by any shareholder who is present. SECTION 5. SPECIAL MEETINGS. Special meetings of the shareholders may be called by an executive officer whenever directed by the Board of Directors, or by the Chief Executive Officer. Such request shall state the purpose of the proposed meeting. Special meetings of shareholders may be held within or without the State of Michigan as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. SECTION 6. NOTICE OF SPECIAL MEETINGS. Written notice of a special meeting of shareholders, stating the time, place and object thereof, shall be given personally or by mail to each shareholder entitled to vote thereat, at least ten (10) days before the date fixed for the meeting. SECTION 7. QUORUM. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business, except as otherwise provided by statute or by the Articles of Incorporation. The shareholders present in person or by proxy at such meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Whether or not a quorum is present, the meeting may be adjourned by a vote of the shares present. Except when the holders of a class or series of shares are entitled to vote separately on an item of business, shares of all classes and series entitled to vote shall be combined as a single class and series for the purpose of determining a quorum. When the holders of a class or series of shares are entitled to vote separately on an item of business, shares of that class or series entitled to cast a majority of the votes of that class or series at a meeting constitute a quorum of that class or series at that meeting, unless a greater or lesser quorum is provided by statute or the Articles of Incorporation. SECTION 8. VOTE REQUIRED. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the Articles of Incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question. SECTION 9. VOTING RIGHTS. Except as otherwise provided by the Articles of Incorporation or the resolution or resolutions of the Board of Directors creating any class of stock, each shareholder shall at every meeting of shareholders be entitled to one (1) vote in person or by proxy for each share of the capital stock having voting power held by such shareholder. In all elections for directors the vote shall be taken by -2- ballot. A proxy shall be valid only with respect to the particular meeting, or any adjournment or adjournments thereof, to which it specifically pertains. SECTION 10. CONDUCT OF MEETINGS. Meetings of shareholders generally shall follow accepted rules of parliamentary procedure, subject to the following: (a) The chairman of the meeting shall have absolute authority over matters of procedure, and there shall be no appeal from the ruling of the chairman. If, in his absolute discretion, the chairman deems it advisable to dispense with the rules of parliamentary procedure as to any one (1) meeting of shareholders or part thereof, he shall so state and shall clearly state the rules under which the meeting or appropriate part thereof shall be conducted. (b) If disorder should arise which prevents the continuation of the legitimate business of the meeting, the chairman may quit the chair and announce the adjournment of the meeting; and upon his so doing, the meeting is immediately adjourned. (c) The chairman may ask or require that anyone not a bona fide shareholder or proxy leave the meeting. (d) A resolution or motion shall be considered for vote only if proposed by a shareholder or a duly authorized proxy and seconded by an individual who is a shareholder or a duly authorized proxy other than the individual who proposed the resolution or motion. SECTION 11. INSPECTORS OF ELECTION. The Board of Directors or, if they shall not have so acted, the Chief Executive Officer, may appoint, at or prior to any meeting of shareholders, one or more persons (who may be employees of the corporation) to serve as inspectors of election. The inspectors so appointed shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes or ballots, hear and determine challenges and questions arising in connection with the right to vote, count and tabulate votes or ballots, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. -3- ARTICLE III DIRECTORS SECTION 1. NUMBER AND TERM OF DIRECTORS. Members of the Board of Directors of the corporation shall be selected, replaced and removed as follows: (a) NUMBER OF DIRECTORS. The number of the directors of the corporation shall be fixed from time to time by resolution adopted by the affirmative vote of at least eighty percent (80%) of the entire Board of Directors but shall not be less than nine (9) nor more than twelve (12). (b) CLASSIFICATION. The Board of Directors, other than those who may be elected by the holders of any class or series of stock having a preference over the common stock as to dividend or upon liquidation, shall be divided into three classes as nearly equal in number as possible, with the term of office of one class expiring each year. At each annual meeting of the shareholders, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election. (c) VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Subject to the rights of the holders of any series of preferred stock then outstanding, any vacancy occurring in the Board of Directors caused by resignation, removal, death, disqualification or other incapacity, and any newly created directorships resulting from an increase in the number of directors, shall be filled by a majority vote of directors then in office, whether or not a quorum. Each director chosen to fill a vacancy or a newly created directorship shall hold office until the next election of directors by the shareholders. When the number of directors is changed, any newly created or eliminated directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as possible. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. (d) AMENDMENT. Notwithstanding Article X or any other provision of these Bylaws, the provisions of this Section 1 of Article III of the Bylaws of this corporation shall not be amended, altered, modified or repealed except upon the affirmative vote of a majority of the outstanding shares of stock of the corporation entitled to vote in elections of directors; -4- provided, however, that the foregoing provisions regarding shareholder approval of any amendment to or alteration, modification or repeal of this Section 1 of Article III of the Bylaws shall not apply to any amendment, alteration, modification or repeal which has been approved by the affirmative vote of eighty percent (80%) of the entire Board of Directors, which shall include the affirmative vote of at least one (1) director of each class of the Board of Directors. SECTION 2. QUALIFICATIONS OF DIRECTORS. All directors of this corporation shall be and remain at all times shareholders thereof. A director shall cease to be qualified as such upon sale or transfer of all of his holdings in the corporation. SECTION 3. POWERS. The business of the corporation shall be managed by its Board of Directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the shareholders. SECTION 4. RESIGNATION. Any director may resign at any time and such resignation shall take effect upon receipt of written notice thereof by the corporation, or at such subsequent time as set forth in the notice of resignation. SECTION 5. REMOVAL. Any director may be removed from office at any time, but only for cause, and only if removal is approved as set forth below. Except as may be provided otherwise by law, cause for removal shall be construed to exist only if: (i) the director whose removal is proposed has been convicted of a felony by a court of competent jurisdiction and such conviction is no longer subject to direct appeal; (ii) such director has been adjudicated by a court of competent jurisdiction to be liable for negligence, or misconduct, in the performance of his duty to the corporation in a matter of substantial importance to the corporation and such adjudication is no longer subject to a direct appeal; (iii) such director has become mentally incompetent, whether or not so adjudicated, which mental incompetency directly affects his ability as a director of the corporation; or (iv) the director's actions or failure to act are deemed by the Board of Directors to be in derogation of the director's duties. -5- Removal for cause, as cause is defined in (i) and (ii) above, must be approved by at least a majority of the total number of directors or by at least a majority vote of the shares of the corporation then entitled to be voted at an election for that director, and the action for removal must be brought within one year of such conviction or adjudication. Removal for cause, as cause is defined in (iii) and (iv) above, must be approved by at least two-thirds (2/3) of the total number of directors. For purposes of this paragraph, the total number of directors will not include the director who is the subject of the removal determination, nor will such director be entitled to vote thereon. SECTION 6. NOMINATIONS OF DIRECTOR CANDIDATES. (a) Nominations of candidates for election for directors of the corporation at any meeting of shareholders called for election of directors (an "Election Meeting") may be made by the Board of Directors or by any shareholders entitled to vote at such Election Meeting. (b) Nominations made by the Board of Directors shall be made at a meeting of the Board of Directors, or by written consent of directors in lieu of a meeting, not less than thirty (30) days prior to the date of the Election Meeting, and such nominations shall be reflected in the minute books of the corporation as of the date made. At the request of the Secretary of the corporation, each proposed nominee shall provide the corporation with such information concerning himself as is required under the rules of the Securities and Exchange Commission, to be included in the corporation's proxy statements soliciting proxies for his election as a director. (c) Any shareholder who intends to make a nomination at the Election Meeting shall deliver, not less than one hundred twenty (120) days prior to the date of notice of the Election Meeting in the case of an annual meeting, and not more than seven (7) days following the date of notice of the meeting in the case of a special meeting, a notice to the Secretary of the corporation setting forth: (i) the name, age, business address and residence address of each nominee proposed in such notice; (ii) the principal occupation or employment of each such nominee; (iii) the number of shares of capital stock of the corporation which are beneficially owned by each such nominee; (iv) a statement that the nominee is willing to be nominated; and (v) such other information concerning each such nominee as would be required under the rules of the Securities and Exchange Commission in a -6- proxy statement soliciting proxies for the election of such nominees. (d) If the chairman of the Election Meeting determines that a nomination was not made in accordance with the foregoing procedures, such nomination shall be void. SECTION 7. COMPENSATION OF DIRECTORS. Each director who is not a salaried officer of the corporation may receive as compensation for his services in that capacity such sums and such benefits as shall from time to time be determined by the Board of Directors, plus traveling expenses and other expenses necessary for attendance at regular or special meetings of the Board of Directors and committees of the board. Members of special or standing committees may be allowed like compensation for attending committee meetings. Nothing herein shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. SECTION 8. PLACES OF MEETINGS. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Michigan. SECTION 9. FIRST MEETING OF NEWLY ELECTED BOARD. The first meeting of each newly elected Board of Directors shall be held following the annual meeting of shareholders, and no notice of such meeting shall be necessary to the newly elected directors in order to legally constitute the meeting, provided a quorum shall be present. In the event such meeting is not held immediately following the annual meeting of shareholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors. SECTION 10. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the board. SECTION 11. SPECIAL MEETINGS. Subject to the provisions of Section 16 of this Article III, special meetings of the Board of Directors may be called by the Chairman, Chief Executive Officer, or Secretary or by any two (2) directors on one (1) days' notice to each director. -7- SECTION 12. PURPOSE NEED NOT BE STATED. Neither the business to be transacted at nor the purpose of any regular or special meeting of the Board of Directors need be specified in the notice of such meeting. SECTION 13. QUORUM. At all meetings of the board a majority of the directors shall constitute a quorum for the transaction of business, and the acts of a majority of the directors present at any meeting at which there is a quorum shall be acts of the Board of Directors except as may be otherwise specifically provided by statute or by the Articles of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 14. ACTION WITHOUT A MEETING. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if, before or after the action, all members of the board or of such committee, as the case may be, consent thereto in writing and such written consent is filed with the minutes or proceedings of the board or committee. SECTION 15. MEETING BY TELEPHONE OR SIMILAR EQUIPMENT. The Board of Directors or any committee designated by the Board of Directors may participate in a meeting of such board or committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting. SECTION 16. WRITTEN NOTICE. Notices to directors shall be in writing and delivered personally or mailed to the directors at their addresses appearing on the books of the corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by telegram. Notwithstanding the foregoing, notice shall also be given by telegram if the date of the meeting to which such notice relates is within three (3) days of the date that such notice is given. SECTION 17. WAIVER OF NOTICE. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting has not been lawfully called or convened. -8- ARTICLE IV COMMITTEES OF DIRECTORS SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors may appoint an Executive Committee whose membership shall consist of such members of the Board of Directors as it may deem advisable from time to time to serve during the pleasure of the board. The Board of Directors may also appoint directors to serve as alternates for members of the committee in the absence or disability of regular members. The Board of Directors may fill any vacancies as they occur. The Executive Committee shall have and may exercise the powers of the Board of Directors in the management of the business affairs and property of the corporation during the intervals between meetings of the Board of Directors, subject to law and to such limitations and control as the Board of Directors may impose from time to time. SECTION 2. AUDIT COMMITTEE. The Audit Committee, if there be one, shall cause a suitable examination of the financial records and operations of the corporation and its subsidiaries to be made by the corporation. The Audit Committee shall also recommend to the Board of Directors the employment of independent certified public accountants to examine the financial statements of the corporation and its subsidiaries; and report to the Board of Directors at least once each calendar year. SECTION 3. COMPENSATION COMMITTEE. The Compensation Committee, if there be one, shall review the personnel policies, plans and programs of the corporation, including individual salaries of executive officers, and submit recommendations to the Board of Directors. The Compensation Committee shall also recommend to the Board of Directors the retainer and attendance fee for nonemployee directors. SECTION 4. NOMINATING COMMITTEE. The Nominating Committee, if there be one, shall develop and recommend to the Board of Directors criteria for the selection of candidates for director, to seek out and receive suggestions concerning possible candidates, to review and evaluate the qualifications of possible candidates and to recommend to the Board of Directors candidates for vacancies occurring from time to time and for the slate of directors to be proposed on behalf of the Board of Directors at the annual meeting of shareholders. The Nominating Committee will consider nominees recommended by the shareholders, as properly submitted to the Secretary of the corporation. SECTION 5. OTHER COMMITTEES. The Board of Directors may designate such other committees as it may deem appropriate, and such committees shall exercise the authority delegated to them. -9- SECTION 6. COMMITTEE MEETINGS. Each committee provided for above shall meet as often as its business may require and may fix a day and time each week or at other intervals for regular meetings, notice of which shall not be required. Whenever the day fixed for a meeting shall fall on a holiday, the meeting shall be held on the business day following or on such other day as the committee may determine. Special meetings of the committees may be called by the chairman of the committee or any two (2) members other than the chairman, and notice thereof may be given to the members by telephone, telegram or letter. A majority of its members shall constitute a quorum for the transaction of the business of any of the committees. A record of the proceedings of each committee shall be kept and presented to the Board of Directors. ARTICLE V OFFICERS SECTION 1. (a) CENTRAL STAFF. The executive officers of the corporation shall be a President, one or more Vice Presidents, a Secretary and a Treasurer who shall be appointed by the Board of Directors at its first meeting after each regular annual meeting of shareholders. The Board of Directors may also appoint such other officers as they may deem necessary. The dismissal of an officer, the appointment of an officer to fill the place of one who has been dismissed or has ceased for any reason to be an officer, the appointment of any additional officers, and the change of an officer to a different office may be made by the Board of Directors at any later meeting. Each officer shall hold office for one year and until their respective successor shall have been elected and qualified. Any two (2) of the above offices, except those of the President and Vice President may be held by the same person. (b) DIVISIONAL OFFICERS. The Board of Directors or the Chief Executive Officer may, as they shall deem necessary, designate certain individuals as divisional officers. Any titles so given to divisional officers may be withdrawn at any time with or without cause by the Board of Directors or the Chief Executive Officer. -10- SECTION 2. QUALIFICATIONS OF OFFICERS. All officers shall be and remain at all times shareholders of the corporation. An officer shall cease to be qualified as such upon sale or transfer of all of his holdings in the corporation. SECTION 3. CHAIRMAN OF THE BOARD. There may be elected a Chairman of the Board, who shall be chosen from among the directors, but who need not be an officer or an executive employee of the corporation. The Chairman of the Board shall preside at all meetings of the shareholders and at all meetings of the Board of Directors, and shall have such other duties and powers as may be imposed or given by the Board of Directors. SECTION 4. PRESIDENT OR PRESIDENTS. The Board of Directors shall elect one or not more than two Presidents of the corporation. Each President shall have the power to see that all orders and resolutions of the Board of Directors are carried into effect, and shall perform all other duties necessary or appropriate to his office, subject, however, to his right and the right of the directors to delegate any specific powers to any other officer or officers of the corporation. If two Presidents shall be elected, the Board of Directors at any time may delegate specific powers of the office of President to each President to be exercised individually as the Board of Directors may deem appropriate or the Board of Directors may delegate all powers of the office of President to both Presidents to be exercised jointly. If ever two Presidents shall be elected and shall disagree as to any matter concerning the corporation or subject to the exercise of joint powers, then such matter shall be finally determined by the Board of Directors. In the absence of the Chairman of the Board or if no Chairman is elected, the President or Presidents shall preside at all meetings of the shareholders and at all meetings of the Board of Directors, unless otherwise directed by the Board of Directors. The President or Presidents shall be ex officio voting members of all standing committees designated by the Board of Directors except the Audit Committee, unless otherwise directed by the Board of Directors. SECTION 5. CHIEF EXECUTIVE OFFICER OR OFFICERS. The Board of Directors may appoint one or not more than two Chief Executive Officers of the corporation. The Chief Executive Officer or Officers shall be the Chairman of the Board, the President or Presidents of the corporation, or any combination thereof as appointed by the Board of Directors. The Chief Executive Officer or Officers, in addition to duties as Chairman of the Board or President as the case may be, shall have final authority, subject to the control of the Board of Directors, over the general policy and business of the corporation and shall have the general control and management of the business and affairs of the corporation. The Chief Executive Officer or Officers shall have the power, subject to the control -11- of the Board of Directors, to appoint, suspend, or discharge and prescribe the duties and to fix the compensation of such agents and employees of the corporation, other than the officers appointed by the Board of Directors, as the Chief Executive Officer or Officers may deem necessary. If two Chief Executive Officers shall be appointed, the Board of Directors at any time may delegate specific powers of the position of Chief Executive Officer to each Chief Executive Officer to be exercised individually as the Board of Directors may deem appropriate or the Board of Directors may delegate all powers of the position of Chief Executive Officer to both Chief Executive Officers to be exercised jointly. If ever two Chief Executive Officers shall be appointed and shall disagree as to any matter concerning the corporation or subject to the exercise of joint powers, then such matter shall be finally determined by the Board of Directors. SECTION 6. CHIEF OPERATING OFFICER. There may be elected a Chief Operating Officer who shall, if elected, have general charge, control and supervision over the administration and operations of the corporation and shall have such other duties and powers as may be imposed or given by the Board of Directors. If no Chief Operating Officer is elected, the duties and powers of the Chief Operating Officer shall be performed by the Chief Executive Officer. SECTION 7. VICE PRESIDENTS. The Vice President or Vice Presidents shall perform such duties and have such powers as the Chief Executive Officer or the Board of Directors may from time to time prescribe. The Vice President shall perform all duties of the President in case of the absence or disqualification of the President. There may be not more than six (6) Vice Presidents who shall act in the order of their appointment. The Board of Directors may at its discretion designate one or more of the Vice Presidents as Executive Vice Presidents or Senior Vice Presidents. Any Vice President so designated shall have such duties and responsibilities as the board shall prescribe. SECTION 8. SECRETARY. The Secretary shall attend all meetings of the shareholders, and of the Board of Directors and of the Executive Committee, and shall preserve in the books of the corporation true minutes of the proceedings of all such meetings. He shall safely keep in his custody the seal of the corporation and shall have authority to affix the same to all instruments where its use is required or appropriate. He shall give all notices required or appropriate pursuant to statute, bylaws, or resolution. He shall perform such other duties as may be delegated to him by the Board of Directors or by the Executive Committee. -12- SECTION 9. TREASURER. The Treasurer shall have custody of all corporate funds and securities and shall keep in books belonging to the corporation full and accurate accounts of all receipts and disbursements; he shall deposit all moneys, securities and other valuable effects in the name of the corporation in depositories as may be designated for that purpose by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and directors at the regular meetings of the board, and whenever requested by them, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors he shall deliver to the Chief Executive Officer of the corporation, and shall keep in force a bond in form, amount and with a surety or sureties satisfactory to the Board of Directors, conditioned for faithful performance of the duties of his office, and for restoration to the corporation in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and property of whatever kind in his possession or under his control belonging to the corporation. SECTION 10. ASSISTANT SECRETARY AND ASSISTANT TREASURER. There may be elected an Assistant Secretary and Assistant Treasurer who shall, in the absence, disability or nonfeasance of the Secretary or Treasurer, perform the duties and exercise the powers of such persons respectively. SECTION 11. OTHER OFFICERS. All other officers, as may from time to time be appointed by the Board of Directors pursuant to Paragraph (a) of Section 1 of this Article V, shall perform such duties and exercise such authority as the Board of Directors shall prescribe. All divisional officers, as may from time to time be appointed by the Board of Directors or the Chief Executive Officer pursuant to Paragraph (b) of Section 1 of this Article V, shall perform such duties and exercise such authority as the Board of Directors or the Chief Executive Officer shall prescribe. ARTICLE VI INDEMNIFICATION SECTION 1. INDEMNIFICATION OTHER THAN IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. Any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and whether formal or informal, other than an action by or in the right of the corporation, by reason of the fact that he is or was a director or executive officer of the corporation, or, while serving as such a director -13- or executive officer, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise, whether for profit or not, shall be indemnified by the corporation against expenses, including attorneys' fees, judgments, penalties, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the corporation or its shareholders, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create any presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation or its shareholders, or, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful. Persons who are not directors or executive officers of the corporation may be indemnified in respect of such service to the extent authorized at any time by the Board of Directors, except as otherwise provided by statute or the Articles of Incorporation. SECTION 2. INDEMNIFICATION IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. Any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director or executive officer of the corporation, or, while serving as such a director or executive officer, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise, whether for profit or not, shall be indemnified by the corporation against expenses, including actual and reasonable attorneys' fees and amounts paid in settlement incurred by him in connection with the defense or settlement of such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, or its shareholders, except that no indemnification shall be made in respect of any claim, issue, or matter as to which such person shall have been found liable to the corporation unless and only to the extent that the court in which such action, suit, or proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. Persons who are not directors -14- or executive officers of the corporation may be indemnified in respect of such service to the extent authorized at any time by the Board of Directors, except as otherwise provided by statute or the Articles of Incorporation. SECTION 3. EXPENSES. To the extent that a director, executive officer, or other person whose indemnification is authorized by the Board of Directors, has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue, or matter in the action, suit, or proceeding, he shall be indemnified against expenses, including actual and reasonable attorneys' fees incurred by him in connection with the action, suit, or proceeding and in any action, suit or proceeding brought to enforce the mandatory indemnification provided in this Section 3. SECTION 4. AUTHORIZATION OF INDEMNIFICATION. Any indemnification of a director, executive officer, or other person under Sections 1 or 2 of this Article, unless ordered by a court, shall be made by the corporation promptly, and in any event within ninety days, upon the written request of the director, executive officer, or other person, unless with respect to such application a determination is reasonably made that the director, executive officer, or other person failed to satisfy the applicable standard of conduct set forth in such Sections. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit, or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested directors so directs, by a majority vote of a committee designated by the Board of Directors consisting of two or more directors not parties to the action, suit or proceeding, or (3) by independent legal counsel (who may be the regular counsel of the corporation) in a written opinion, or (4) by the shareholders. The right to indemnification or advances granted by this Article shall be enforceable by the director, executive officer, or other person in any court of competent jurisdiction, if the Board or independent legal counsel denies the claim, in whole or in part, or if no disposition of such claim is made within ninety days. His expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the corporation. SECTION 5. ADVANCING OF EXPENSES. Expenses incurred in defending a civil or criminal action, suit, or proceeding described in Sections 1 or 2 of this Article shall be paid by the corporation in advance of the final disposition of such action, suit, or proceeding as authorized by the Board of Directors pursuant to these Bylaws upon receipt of an undertaking by or on behalf of the director, executive officer, or other person to repay such amount unless it shall ultimately be determined that he is entitled to be -15- indemnified by the corporation as authorized in this Article. The undertaking shall be by unlimited general obligation of the person on whose behalf advances are made but need not be secured. Notwithstanding the foregoing, no advance shall be made by the corporation if a determination is reasonably and promptly made by the Board of Directors by a majority vote of a quorum of disinterested directors, or, if such a quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that, based upon the facts known to the Board or counsel at the time such determination is made, such person acted in bad faith and in a manner that he did not believe to be in or not opposed to the best interest of the corporation, or, with respect to any criminal proceeding, that he believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Board or independent legal counsel reasonably determines that such person deliberately breached his duty to the corporation or its shareholders. SECTION 6. PARTIAL INDEMNIFICATION. If a person is entitled to indemnification under Sections 1 or 2 of this Article for a portion of expenses, including attorneys' fees, judgments, penalties, fines, and amounts paid in settlement, but not for the total amount thereof, the corporation may indemnify the person for the portion of the expenses, judgments, penalties, fines, or amounts paid in settlement for which the person is entitled to be indemnified. SECTION 7. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise. The indemnification provided in this Article shall continue as to a person who ceases to be a director or executive officer or service in any other capacity, and shall inure to the benefit of the heirs, executors, and administrators of such a person. All rights to indemnification under this Article shall be deemed to be provided by a contract between the corporation and the director, executive officer, or other person whose indemnification is authorized by the Board of Directors who serve in such capacities at any time while these Bylaws and other relevant provisions of the Michigan Business Corporation Act and other applicable law, if any, are in effect. Any repeal or modification thereof shall not affect any rights or obligations then existing. Notwithstanding the foregoing, the total amount of actual expenses advanced or indemnified from all sources combined shall not exceed the amount of actual expenses incurred by the person seeking indemnification or advancement of expenses. -16- SECTION 8. INSURANCE. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise, whether for profit or not, against any liability asserted against him and incurred by him in any such capacity, or arising out of his other status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article. SECTION 9. MERGERS. For the purposes of this Article, references to the "corporation" include all constituent corporations absorbed in a consolidation or merger, as well as the resulting or surviving corporation, so that any person who is or was a director, officer, employee, or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise, whether for profit or not, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation in the same capacity. SECTION 10. SAVINGS CLAUSE. If this Article or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, the corporation shall nevertheless indemnify each director, executive officer or other person whose indemnification is authorized by the Board of Directors as to expenses, including attorneys' fees, judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including a grand jury proceeding and an action by the corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated or by any other applicable law. SECTION 11. DEFINITIONS. For the purposes of this Article, "other enterprises" shall include employee benefit plans; "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and "serving at the request of the corporation" shall include any service as a director, officer, partner, trustee, employee, or agent of the corporation, which imposes duties on, or involves services by the director, officer, employee, or agent with respect to any employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be considered to have acted in a manner "not opposed to the best interest of the corporation or its shareholders" as referred to in Sections 1 and 2 of this Article. -17- SECTION 12. CONSTRUCTION. It is the intent of this Article VI to grant to the directors and executive officers of the corporation (and such other persons as the Board of Directors may designate) the broadest indemnification permitted under the laws of the State of Michigan, as the same may be amended from time to time, and this Article shall be liberally construed to give effect to such intent. The corporation further intends, acknowledges, and agrees that all of the corporation's directors and executive officers have undertaken and will undertake the performance of their duties and obligations in reliance upon the indemnification provided for in this Article VI, and accordingly, such rights of indemnification may not be retroactively reduced or abolished as to any such director or executive officer with the written consent of such person. ARTICLE VII SUBSIDIARIES SECTION 1. SUBSIDIARIES. The Board of Directors, the Chief Executive Officer, or any executive officer designated by the Board of Directors may vote the shares of stock owned by the corporation in any subsidiary, whether wholly or partly owned by the corporation, in such manner as they may deem in the best interests of the corporation, including, without limitation, for the election of directors of any subsidiary corporation, or for any amendments to the charter or bylaws of any such subsidiary corporation, or for the liquidation, merger, or sale of assets of any such subsidiary corporation. The Board of Directors, the Chief Executive Officer or any executive officer designated by the Board of Directors may cause to be elected to the Board of Directors of any such subsidiary corporation such persons as they shall designate, any of whom may, but need not be, directors, executive officers, or other employees or agents of the corporation. The Board of Directors, the Chief Executive Officer, or any executive officer designated by the Board of Directors may instruct the directors of any such subsidiary corporation as to the manner in which they are to vote upon any issue properly coming before them as the directors of such subsidiary corporation, and such directors shall have no liability to the corporation as the result of any action taken in accordance with such instructions. SECTION 2. SUBSIDIARY OFFICERS NOT EXECUTIVE OFFICERS. The officers of any subsidiary corporation, shall not, by virtue of holding such title and position, be deemed to be executive officers of the corporation, nor shall any such officer of a subsidiary corporation, unless he shall also be a director or executive officer of the corporation, be entitled to have access to any files, records or other information relating or pertaining to -18- the corporation, its business and finances, or to attend or receive the minutes of any meetings of the Board of Directors or any committee of the corporation, except as and to the extent expressly authorized and permitted by the Board of Directors or the Chief Executive Officer. ARTICLE VIII CERTIFICATES OF STOCK SECTION 1. FORM. Every holder of stock in the corporation shall be entitled to have a certificate in the name of the corporation, signed by the Chairman of the Board or the President or a Vice President and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation, certifying the number of shares owned by him in the corporation. SECTION 2. FACSIMILE SIGNATURE. Where a certificate is signed (1) by a transfer agent or an assistant transfer agent, or (2) by a transfer clerk acting on behalf of the corporation and a registrar, the signature of any such Chairman, President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be a facsimile. In case any officer, transfer agent, or registrar who has signed, or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. SECTION 4. TRANSFERS OF STOCK. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. -19- SECTION 5. FIXING OF RECORD DATE BY BOARD. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders, or any adjournment thereof, or to express consent to or dissent from any corporate action in writing without a meeting, or for the purpose of determining shareholders entitled to receive payments of any dividend or the distribution or allotment of any rights or evidences of interests arising out of any change, conversion or exchange of capital stock, or for the purpose of any other action, the Board of Directors may fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting, nor more than sixty (60) days prior to any other action. Only shareholders of record on a record date so fixed shall be entitled to notice of, and to vote at, such meeting or to receive payment of any dividend or the distribution or allotment of any rights or evidences of interests arising out of any change, conversion or exchange of capital stock. SECTION 6. PROVISION FOR RECORD DATE IN THE ABSENCE OF BOARD ACTION. If a record date is not fixed by the Board of Directors: (a) the record date for determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be the close of business on the day next preceding the day on which notice is given, or, if no notice is given, the day next preceding the day on which the meeting is held; and (b) the record date for determining shareholders entitled to express consent to corporate action in writing, without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed; and (c) the record date for determining shareholders for any other purpose shall be the close of business on the day on which the resolution of the board relating thereto is adopted. SECTION 7. ADJOURNMENTS. When a determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders has been made as provided in this Article, the determination applies to any adjournment of the meeting, unless the board fixes a new record date for the adjourned meeting. SECTION 8. REGISTERED SHAREHOLDERS. The corporation shall be entitled to recognize the exclusive rights of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Michigan. -20- ARTICLE IX GENERAL PROVISIONS SECTION 1. DIVIDENDS. Dividends upon the capital stock of the corporation, subject to the provisions of the Articles of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting pursuant to law. Dividends may be paid in cash, in property, or in shares of capital stock, subject to the provisions of the Articles of Incorporation. SECTION 2. RESERVES. Before payment of any dividends, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. SECTION 3. CHECKS. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. SECTION 4. FISCAL YEAR. The fiscal year of the corporation shall end on the 31st day of December in each year, unless otherwise fixed by resolution of the Board of Directors. SECTION 5. SEAL. The corporate seal shall have inscribed thereon the name of the corporation, and the words "Corporate Seal, Michigan". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. SECTION 6. WRITTEN WAIVER OF NOTICE. Whenever any notice is required to be given under the provisions of the statutes or of the Articles of Incorporation or of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE X AMENDMENTS These Bylaws may be altered or repealed at any regular or special meeting of the shareholders or of the Board of Directors, provided that the Board of Directors shall not make or alter any bylaws fixing their number, -21- qualifications, classifications, or terms of office. Except as otherwise required by law or the Articles of Incorporation, the vote of a majority of the shares present or represented by proxy and entitled to vote at a meeting of shareholders or the vote of not less than a majority of the members of the Board of Directors then in office shall be required to amend or repeal the Bylaws or to adopt new Bylaws. -22- EX-4 4 EXHIBIT 4(k) FIFTH AMENDMENT TO LETTER AGREEMENT THIS FIFTH AMENDMENT TO LETTER AGREEMENT, dated as of May 31, 1998 (this "Amendment"), is between HASTINGS MANUFACTURING COMPANY, a Michigan corporation (the "Company"), and NBD BANK, a Michigan banking corporation, formerly known as NBD Bank, N.A. (the "Bank"). RECITALS A. The Company and the Bank are parties to a letter agreement dated May 31, 1994, as amended by a First Amendment to Letter Agreement dated as of May 2, 1995, a Second Amendment to Letter Agreement dated as of September 30, 1995, a Third Amendment to Letter Agreement dated as of May 31, 1994 and a Fourth Amendment to Credit Agreement dated as of May 31, 1997 (as amended, the "Letter Agreement") pursuant to which the Bank agreed, subject to the terms and conditions thereof, to extend credit to the Company in a maximum principal amount of $4,000,000. B. The parties now desire to amend certain terms and provisions of the Letter Agreement as set forth herein. TERMS In consideration of the premises and of the mutual agreements herein contained, the parties agree as follows: ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth in Article III hereof, the Letter Agreement shall be amended as follows: 1.1 The reference to "$4,000,000 Credit Authorization" in the heading of the Letter Agreement shall be deemed a reference to "$5,000,000 Credit Authorization". 1.2 The definition of "Maximum Amount" in Section 1 of the Letter Agreement shall be amended by deleting the reference to "$4,000,000, as such amount may be amended from time to time" and inserting "$5,000,000, as such amount may be amended from time to time" in place thereof. 1.3 The reference to "May 31, 1998" in the definition of "Termination Date" in Section 1 of the Letter Agreement shall be deemed to refer to "May 31, 1999". 1.4 The reference to "May 31, 1998" in Section 2 of the Letter Agreement shall be deemed to refer to "May 31, 1999". 1.5 Exhibit A to the Letter Agreement is hereby deleted in its entirety and Exhibit A attached hereto is hereby substituted in place of Exhibit A thereof. ARTICLE II. REPRESENTATIONS. The Company represents and warrants to the Bank that: 2.1 The execution, delivery and performance of this Amendment are within its powers, have been duly authorized and are not in contravention with any law, of the terms of its Articles of Incorporation or By-laws, or any material undertaking to which it is a party or by which it is bound. 2.2 This Amendment is the legal, valid and binding obligations of the Company enforceable against it in accordance with the respective terms hereof. 2.3 After giving effect to the amendments herein contained, the representations and warranties contained in Section 11 of the Letter Agreement are true on and as of the date hereof with the same force and effect as if made on and as of the date hereof, PROVIDED, THAT, the representations and warranties contained in Section 11(f) of the Letter Agreement shall be deemed to have been made with respect to the financial statements most recently delivered pursuant to Section 9(d) of the Letter Agreement. 2.4 No Event of Default or event or condition which, with notice or lapse of time or both could become such an Event of Default exists or has occurred and is continuing on the date hereof ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall not become effective until each of the following has been satisfied: 3.1 Copies of resolutions adopted by the Board of Directors of the Company, certified by an officer of the Company, as being true and correct and in full force and effect without amendment as of the date hereof, authorizing the Company to enter into this Amendment and any other documents or agreements executed pursuant hereto, if any, shall have been delivered to the Bank. 3.2 This Amendment shall be signed by the Company and the Bank. 3.3 The Company shall deliver a duly executed copy of a new promissory note in the principal amount of $5,000,000 in the form of Exhibit A attached hereto. -2- ARTICLE IV. MISCELLANEOUS. 4.1 References in the Letter Agreement to "this Agreement" and references in any note, certificate, instrument or other document to the "Letter Agreement" or "Authorization Agreement" shall be deemed to be references to the Letter Agreement as amended hereby and as further amended from time to time. 4.2 The Company agrees to pay and to save the Bank harmless for the payment of all costs and expenses arising in connection with this Amendment, including the reasonable fees of counsel to the Bank in connection with preparing this Amendment and the related documents. 4.3 The Company acknowledges and agrees that the Bank has fully performed all of its obligations under all documents executed in connection with the Letter Agreement and all actions taken by the Bank is reasonable and appropriate under the circumstances and within its rights under the Letter Agreement and all other documents executed in connection therewith and otherwise available. The Company represents and warrants that it is not aware of any claims or causes of action against the Bank, or any of its successors or assigns. Notwithstanding this representation and as further consideration for the agreements and understandings herein, the Company and its heirs, successors and assigns, hereby release the Bank and its heirs, successors and assigns from any liability, claim, right or cause of action which now exists or hereafter arises, whether known or unknown, arising from or in any way related to facts in existence as of the date hereof to any agreements or transactions between the Bank and the Company or to any acts or omissions of the Bank in connection therewith or otherwise. 4.4. Except as expressly amended hereby, the Company agrees that the Letter Agreement, the promissory note and all other documents and agreements executed by the Company in connection with the Letter Agreement in favor of the Bank are ratified and confirmed and shall remain in full force and effect and that it has no set off, counterclaim or defense with respect to any of the foregoing. Terms used but not defined herein shall have the respective meanings ascribed thereto in the Letter Agreement. 4.5 This Amendment shall be governed by and construed in accordance with the laws of the State of Michigan. 4.6 This Amendment may be signed upon any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. -3- IN WITNESS WHEREOF, the parties signing this Amendment have caused this Amendment to be executed and delivered as of the date first above written. HASTINGS MANUFACTURING COMPANY By: /S/ THOMAS J. BELLGRAPH Its: V.P. - FINANCE NBD BANK By: /S/ THOMAS A. GAMM Its: VICE PRESIDENT -4- EXHIBIT A MASTER PROMISSORY NOTE $5,000,000.00 Detroit, Michigan May 31, 1998 For value received, and in any event no later than May 31, 1999, HASTINGS MANUFACTURING COMPANY (the "Borrower") promises to pay to the order of NBD BANK (the "Bank"), at the Bank's principal office in the State of Michigan, in lawful money of the United States of America and in immediately available funds, the principal sum of Five Million and 00/100 Dollars ($5,000,000.00), or such lesser amount as is indicated on the Bank's records, together with interest computed on the balance from time to time unpaid on the basis of the actual number of days elapsed in a year of 360 days at the rate(s) per annum determined from time to time pursuant to the "Letter Agreement", as defined below, and reflected on the Bank's records, which interest shall be payable in accordance with the terms set forth in the Letter Agreement, and to pay interest on overdue principal from the date of demand or default until paid at the Overdue Rate (as defined in the Letter Agreement). In no event shall the interest rate exceed the maximum rate allowed by law. Any interest which would for any reason be deemed unlawful under applicable law shall be applied to principal. WAIVER: The Borrower and each endorser of this note and any other party liable for the debt evidenced by this note severally waives demand, presentment, notice of dishonor and protest of this note, and consents to any extension or postponement of time of its payment without limit as to number or period, to the addition of any party, and to the release, discharge, or suspension of any rights and remedies against any person who may be liable for the payment of this note. No delay on the part of the holder in the exercise of any right or remedy shall operate as a waiver. No single or partial exercise by the holder of any right or remedy shall preclude any future exercise of that right or remedy or the exercise of any other right or remedy. No waiver or indulgence by the holder of any default shall be effective unless it is in writing and signed by the holder, nor shall a waiver on one occasion be construed as a bar to or waiver of any right on any future occasion. This note is issued in substitution for and replacement of, but not in satisfaction of, a Master Promissory Note dated May 31, 1997, in the maximum principal amount of $4,000,000 and evidences a debt under the terms of a certain letter agreement between the Bank and the Borrower dated May 31, 1994, as amended by a First Amendment to Letter Agreement dated as of May 2, 1995, by a Second Amendment to Letter Agreement dated as of September 30, 1995, by a Third Amendment to Letter Agreement dated as of May 31, 1996, by a Fourth Amendment to Letter Agreement dated as of May 31, 1997, and by a Fifth Amendment to Letter Agreement dated as of May 31, 1998, and as further amended from time to time (the "Letter Agreement"), which is incorporated by reference for additional terms and conditions, including default and acceleration provisions. WAIVER OF JURY TRIAL: The Bank and the Borrower, after consulting or having had the opportunity to consult with counsel, knowingly, voluntarily and intentionally waive any right either of them may have to a trial by jury in any litigation based upon or arising out of this note, or any related instrument or agreement or any of the transactions contemplated by this note, or any course of conduct, dealing, statements (whether oral or written), or actions of either of them. Neither the Bank nor the Borrower shall seek to consolidate, by counterclaim or otherwise, any such action in which a jury trial has been waived with any other action in which a jury trial cannot be or has not been waived. These provisions shall not be deemed to have been modified in any respect or relinquished by either the Bank or the Borrower except by a written instrument executed by both of them. Address: HASTINGS MANUFACTURING COMPANY 325 North Hanover Hastings, Michigan 49058 Attention: Treasurer By: /S/ THOMAS J. BELLGRAPH Its: V.P. - FINANCE -2- EX-4 5 EXHIBIT 4(n) COMMERCIAL LINE OF CREDIT AGREEMENT AND NOTE - ------------------------------------------------------------------------------ NAME(S)/ADDRESS(ES) OF BORROWER(S) NAME/ADDRESS OF LENDER (CREDITOR) ("Borrower, I, My, or Me") ("Lender, You, or Your") Hastings Manufacturing Company, Hastings City Bank 325 N. Hanover 150 W. Court St. Hastings, MI 49058 Hastings, MI 49058 - ------------------------------------------------------------------------------ NOTE NUMBER DATE OF TRANSACTION MATURITY DATE OFFICE 1-23-98 1-23-99 001 - ------------------------------------------------------------------------------ For value received, on or before the Maturity Date, the undersigned Borrower promises to pay the principal amount or such lesser sum as shall have been advanced by Lender to Borrower under the line of credit hereinafter described, together with interest, and any other charges, including service charges, to the order of Lender at its address noted above or holder, all in lawful money of the United States of America. The undersigned further agrees to the terms below and on page two of this Note. Words, numbers or phrases preceded by a box are applicable only if box is checked. - ------------------------------------------------------------------------------ LINE OF CREDIT AMOUNT One Million Five Hundred Thousand and 00/100 DOLLARS $1,500,000.00 - ------------------------------------------------------------------------------ PAYMENT SCHEDULE: Payments on this Line of Credit will be due as follows: [ x ] interest only starting and payable [ x ] monthly [ ] quarterly [ ] [ x ] interest, principal and other charges due on Maturity Date. [ ] other payment schedule INTEREST RATE: This Line of Credit is subject to [ ] A fixed interest rate of % per annum. [ x ] A variable simple interest rate, which is [ ] % greater than: [ ] equal to: [ x ] 1/2 % less than: the following Index: Wall Street Journal Prime Rate ============================================================================== Initial Simple Interest Rate Present Variable Index Rate 8.00% 8.5% Minimum Interest Rate Maximum Interest Rate N/A 25.00% Interest Rate Changes May Occur Every: As Index Changes ============================================================================== INTEREST CALCULATED: [ x ] on a 365 Day Basis, [ ] on a 360 Day Basis, on the unpaid principal balance for the actual days outstanding. DEFAULT RATE: If in default the interest rate shall be: [ ] % per annum [ x ] 1 1/2 % in excess of the Index. LATE CHARGE: If Borrower is more than 10 days late in making any payment, in addition to such payment, Borrower will pay a late charge of: [ ] the lesser of [ ] the greater of [ x ] an amount equal to [ x ] $25.00 or [ ] % of the payment in default PAYABLE ON DEMAND: [ ] Payment is due upon demand [ ] Payment is due upon demand, but in any event, not later than Maturity Date. - ------------------------------------------------------------------------------ TERMS/ADVANCES: This Line of Credit is: [ x ] OBLIGATORY: Lender will continue to make advances under this Line of Credit unless: (a) the maximum amount on this Line of Credit is outstanding; (b) the undersigned has breached any of the promises contained in this agreement or any other agreement noted below; (c) the undersigned makes a request for an advance after the Maturity Date noted above; (d) other: [ ] DISCRETIONARY: Lender may refuse to make additional advances under this Line of Credit for the following reasons: (a) the aggregated advances under this Line of Credit exceeds $ (b) other - ------------------------------------------------------------------------------ [ x ] ADDITIONAL NOTE PROVISIONS: Annual Report Due Within 105 Days of Year-End - ------------------------------------------------------------------------------ Security for this Line of Credit Agreement and Note, if any, By Way of Description but not By Way of Limitation, is as follows: Unsecured - ------------------------------------------------------------------------------ The Borrower expressly agrees to all the provisions hereof and signifies assent thereto by the signature below. IN WITNESS WHEREOF, THE BORROWER HAS EXECUTED THIS AGREEMENT ON THE DATE AND YEAR SHOWN BELOW. By: x /S/THOMAS J. BELLGRAPH Date: 1-23-98 By: x_____________ Date:________ Thomas J. Bellgraph Its V.P. & Treasurer Its By: x________________________ Date:_______ By: x_____________ Date:________ Its Its EX-27 6 ART. 5 FDS FOR 2ND QUARTER FORM 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE HASTINGS MANUFACTURING COMPANY AND SUBSIDIARIES FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 318,177 0 6,515,431 150,000 9,950,224 19,626,658 24,143,264 (15,873,887) 34,569,902 10,301,836 1,296,875 1,567,852 0 0 4,587,139 34,569,902 20,574,188 20,574,188 14,035,201 14,035,201 0 75,000 222,570 1,604,291 661,000 943,291 0 0 0 943,291 1.22 1.22
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