-----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, IB7E37JoAnSYLzQ//QiuTqPTlvXwXeeftGZ8uVdBf6xjkWjxcg1cb+YxAsDnFIGy 34LnBIsUAybJV+jZZrbkeg== 0000935799-98-000005.txt : 19980327 0000935799-98-000005.hdr.sgml : 19980327 ACCESSION NUMBER: 0000935799-98-000005 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980326 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIMPSON INDUSTRIES INC CENTRAL INDEX KEY: 0000090588 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 381225111 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-06611 FILM NUMBER: 98573464 BUSINESS ADDRESS: STREET 1: 47603 HALYARD DR CITY: PLYMOUTH STATE: MI ZIP: 48170 BUSINESS PHONE: 3132076200 MAIL ADDRESS: STREET 1: 47603 HALYARD DR CITY: PLYMOUTH STATE: MI ZIP: 48170 10-K405 1 ANNUAL REPORT ON FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (X) Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1997 Commission File Number 0-6611 SIMPSON INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Michigan 38-1225111 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 47603 Halyard Drive, Plymouth, Michigan 48170 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (734) 207-6200 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $ 1.00 par value (Title of Class) Common Stock Purchase Rights (Title of Class) Indicate by check mark whether the Registrant (1) has filed all annual, quarterly and other reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant has been required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the registrant's voting stock held by non-affiliates of the registrant as of February 20, 1998, computed by reference to the last sale price for such stock on that date as reported on the NASDAQ National Market System, was $226,395,000. At February 20, 1998, there were outstanding 18,173,582 shares of the registrant's common stock, $1.00 par value each. Portions of the Proxy Statement for 1998 Annual Meeting of Shareholders have been incorporated by reference in this Annual Report on Form 10-K (Part III). PAGE PART I Item 1. BUSINESS Introduction Simpson Industries, Inc. (the "Company") was organized under Michigan law in 1945. The Company's executive offices are located in Plymouth, Michigan, and the fifteen plants at which its manufacturing operations are conducted are located in Michigan, Ohio, Indiana, North Carolina, Ontario (Canada), Federal District of Mexico (Mexico), Halifax (United Kingdom), Lyon (France), Barcelona (Spain), Seoul (Korea) and Sao Paulo (Brazil). The Company also has an interest in a joint venture in Pune (India). Reference in this report to the Company includes Simpson Industries, Inc., and its predecessors, divisions and subsidiaries, unless otherwise indicated by the context. General On December 8, 1997, by action of the Board of Directors, the Company became subject to the provisions of Chapter 7A of the Michigan Business Corporation Act. Chapter 7A provides, with certain exceptions, that business combinations between a Michigan corporation and an "interested shareholder" generally require the approval of 90% of the votes of each class of stock entitled to be cast by the shareholders of the corporation, and not less than 2/3 of the votes of each class of stock entitled to be cast by the shareholders of the corporation other than voting shares owned by such interested shareholder. An "interested shareholder" is a person directly or indirectly owning 10% or more of the corporation's outstanding voting power, or an affiliate of the corporation who at any time within two years prior to the date in question directly or indirectly owned 10% or more of such voting power. Principal Products and Markets The Company manufactures vibration control and other products for automobile, light-truck and diesel engines, air conditioning compressor components, wheel-end and suspension components and assemblies, oil pumps, water pumps and other modular engine assemblies and transmission and driveline components which are machined from castings and forgings. These products are produced principally for original equipment manufacturers of automobiles, light trucks, diesel engines and heavy duty equipment in North America and Europe. The Company's operations are organized into four management groups - --- Noise, Vibration and Harshness Group, Transmission & Chassis Group, Heavy Duty Group and Europe/Asia Group. The Company maintains product design and process development staffs which work with customers' engineers, principally in the design, testing and development of new products, as well as in the on-going refinement of existing products. The Company also conducts its own research and development activities which are separate from the product development activities conducted in cooperation with its customers. The Company expended $3,668,000 in 1997, $2,944,000 in 1996 and $2,309,000 in 1995 for its research and development. Competition in the sale of all of the Company's products is primarily based on engineering, product design, process capability, quality, cost, delivery and responsiveness. The Company believes that its performance record in these respects places it in a strong competitive position. The Company believes that, in the manufacture of its products, it competes with numerous supplier companies, some of which are larger and have greater financial resources than the Company. In addition, many of the Company's larger customers are capable of performing their own machining work. The Company's customers to which sales exceeded 10% of total net sales include General Motors Corporation, Ford Motor Company and Chrysler Corporation. Substantially all of the Company's sales are based on competitive proposals on requests from customers. Sales of all products to General Motors Corporation, Ford Motor Company and Chrysler Corporation during the years ended December 31, 1997, 1996 and 1995 accounted for 60.1%, 63.5%, and 65.1%, respectively, of the Company's total sales during those periods. In recent years, sales to other significant customers, in particular Consolidated Diesel Corporation, Caterpillar Incorporated, Peugeot and Renault have grown in importance as the Company has broadened its customer base and more narrowly focused its product direction. However, the loss of all or a substantial portion of sales to major customers could have a detrimental effect on the Company's business. The Company believes that such a loss is unlikely because the Company's products, which generally have a life of five to ten years, require a substantial initial investment in engineering, equipment and tooling. Moreover, sales to automotive customers consist of a large number of different products as well as different types of the same products, which are sold to separate divisions and operating groups within each customer's organization. These customer operating units generally act independently when making their purchasing decisions. Because the Company principally ships to its customers' scheduled needs, information concerning its backlog is not meaningful to an understanding of its business. Purchase orders for machined products that do not necessarily represent firm contracts are generally received from larger customers. Customers issue short-term releases against the purchase orders from time to time during the year and these releases are firm orders that typically remain open for acceptance by the Company for a period of 30 days or less. The basic raw materials for the Company's products include aluminum and ferrous castings, steel forgings, steel bar stock and rubber, all of which are available from a large number of sources. The Company has been purchasing such materials from several sources. The Company holds various patents and, from time to time, in the ordinary course of its business, files patent applications. However, the Company does not consider any individual patent or patent application to be material to the operation of its business. The Company's operations, in common with those of manufacturers generally, are subject to numerous federal, state and local laws and regulations pertaining to the discharge of materials into the environment or otherwise relating to the protection of the environment. Compliance with such laws and regulations has not had and is not anticipated to have a material effect on the capital expenditures, earnings or competitive position of the Company. At December 31, 1997, the Company employed 2,355 people on an active basis. Since most of the Company's machined products are for engines, transmissions and drive trains, they are generally not affected by style changes and their production and delivery continue at a relatively uniform rate. However, the Company's operations are affected by the cyclical nature of the United States and European automobile, light-truck and heavy-duty vehicle markets. The Company's operations are conducted within one business segment and sales attributable to customers outside the United States from U.S. operations were $63,400,000 in 1997, $57,800,000 in 1996 and $56,200,000 in 1995. Item 2. PROPERTIES The Company's facilities are principally involved in the manufacture of the Company's products and are owned by the Company and its subsidiaries free of encumbrances, with the exception of the facilities located in Korea and Brazil, which are leased by the Company. All of these properties, as well as the related machinery and equipment are considered to be well-maintained, suitable and adequate for their intended purpose. The following table sets forth the location and approximate size of the Company's facilities. PROPERTIES IN ACTIVE USE Approximate Approximate Location Land Area Floor Space Gladwin, Michigan........... 5.0 Acres 71,000 Square Feet Litchfield, Michigan........ 22.8 230,000 Plymouth, Michigan.......... 5.5 68,000 Middleville, Michigan....... 3.5 82,500 Fremont, Indiana............ 13.7 99,000 Bluffton, Indiana........... 12.5 170,000 Edon, Ohio.................. 15.2 134,000 Troy, Ohio.................. 12.2 100,000 Greenville, North Carolina.. 12.6 113,000 Thamesville, Ontario........ 6.0 59,000 Lyon, France................ 3.8 83,000 Halifax, England............ 1.7 54,000 Barcelona, Spain............ 2.2 39,000 Iztapalapa, Mexico.......... 2.8 86,000 Seoul, Korea ............... n/a 23,000 Sao Paulo, Brazil .......... n/a 73,000 TOTAL IN ACTIVE USE 119.5 1,484,500 Item 3. LEGAL PROCEEDINGS No material legal proceeding is pending to which the Company or any of its subsidiaries is a party, or of which any of their property is subject. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted by the Company to a vote of security holders through the solicitation of proxies or otherwise, during the fourth quarter of 1997. PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS STOCK PRICE AND DIVIDEND INFORMATION The Company's common stock is traded on the Nasdaq National Market under the symbol SMPS. Stock prices are quoted in the automated quotation system operated by the National Association of Securities Dealers Automated Quotation System. The quarterly range of bid prices per share, as reported by Nasdaq, and the dividends paid thereon during the years ended December 31, 1997 and 1996 are shown in the accompanying table. Such prices may represent interdealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. At December 31, 1997 there were 4,352 individual shareholders of record of Simpson common stock. Other Simpson common shares outstanding were held in bank, money management, company and brokerage house "nominee" accounts for an estimated 5,500 additional shareholders as beneficial owners. Bid Price Per Share Dividend Quarter Ended High Low Paid Per Share March 31, 1996 10 1/8 8 3/8 .10 June 30, 1996 10 1/4 8 5/8 .10 September 30, 1996 10 1/2 8 1/2 .10 December 31, 1996 11 1/8 9 1/2 .10 March 31, 1997 11 1/8 9 1/2 .10 June 30, 1997 11 1/4 9 1/8 .10 September 30, 1997 12 3/4 10 1/8 .10 December 31, 1997 12 1/4 10 7/8 .10 PAGE Item 6. SELECTED FINANCIAL DATA Five Year Summary (Dollar amounts in millions, except per share and per employee) 1997 1996 1995 1994 1993 Operating Data Net sales $ 451.5 $ 408.0 $ 395.1 $ 356.6 $ 262.5 Cost of products sold 406.5 365.3 354.4 319.6 234.2 Gross profit 45.0 42.7 40.7 37.0 28.3 as a % of sales 10.0% 10.5% 10.3% 10.4% 10.8% Operating earnings before provisions for plant closings $ 30.9 $ 29.6 $ 28.8 $ 26.8 $ 19.4 as a % of sales 6.8% 7.3% 7.3% 7.5% 7.4% Net earnings $ 10.1(1) $ 17.6(2) $ 15.3 $ 14.4 $ 6.4(3) as a % of sales 2.2% 4.3% 3.9% 4.0% 2.5% Net earnings per share (diluted) $ 0.55 $ 0.97 $ 0.85 $ 0.80 $ 0.36 Dividend per share 0.40 0.40 0.40 0.38 0.37 Weighted average shares (millions) 18.1 18.1 18.0 18.1 18.0 At Year End Working capital $ 36.4 $ 45.0 $ 40.3 $ 31.7 $ 34.5 Total assets 341.5 249.0 232.5 207.0 186.8 Long-term debt 118.6 58.6 62.3 50.4 39.0 Shareholders' equity 117.9 116.0 105.1 98.0 91.5 Book value per share 6.50 6.42 5.84 5.47 5.12 %Debt/equity 101% 51% 59% 51% 43% %Debt/total capital 51 35 38 35 31 Additional Statistics New program launches 13 6 10 23 20 Content per N.A. light vehicle $ 22 $ 22 $ 22 $ 20 $ 16 EBITDA (4) 54.3(5) 50.1 47.7 43.1 33.6 Depreciation and amortization expense 23.4 20.5 18.9 16.3 14.2 Capital investment 29.0 26.3 31.5 38.2 37.5 % return on average equity 8.6% 15.9% 15.1% 15.2% 7.0% Sales per employee $ 197,687 $ 190,654 $ 186,706 $ 182,240 $163,034 Operating earnings per employee 13,537(5) 13,832 13,594 13,704 12,041 Number of employees, year end 2,355 2,115 2,050 2,135 1,768 Stock Activity Price Range 9 1/8 - 8 3/8 - 8 - 7 7/8 - 10 1/2 - 12 3/4 11 1/8 12 1/8 15 21/32 14 21/32 Price at year end 11 3/4 10 57/64 9 9 1/4 14 3/32
(1) Includes $5.7 million for provision for net plant closing costs. (2) Includes $1.1 million for federal tax credits. (3) Includes $3 million net charge for accounting changes. (4) EBITDA includes operating income plus depreciation and amortization. (5) Before provision for plant closings of $8.8 million. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Overview Simpson Industries acquired the Vibration Attenuation Business of Holset Engineering Company, Ltd. from Cummins Engine Company, in June of 1997, for an aggregate purchase price, net of cash acquired, of $75,393,000. The acquisition of the Vibration Attenuation (VA) Business was accounted for as a purchase, and the results of the VA business have been included in the accompanying consolidated statements of the Company since the date of acquisition. This acquisition offers the Company the best potential to build on our North American leadership position in Noise, Vibration and Harshness products. It will add European-, Asian-, and South American-based capabilities and expand our customer base and technological processes. This acquisition also extends our product line to include viscous dampers for larger diesel engines, increasing our available product offerings to our North American customers and provides a manufacturing infrastructure for all our products. The acquisition of VA provided 67.6% of the revenue growth in 1997 over 1996. Results of Operations The following table summarizes the Company's results of operations as a percentage of net sales for the years 1995 through 1997 ending December 31. 1997 1996 1995 Net sales 100.0% 100.0% 100.0% Cost of products sold 90.0 89.5 89.7 Administrative and selling 2.9 3.2 3.0 Amortization .2 -- -- Plant closing costs 1.9 -- -- Operating income 5.0 7.3 7.3 Investment and other income, net (.1) (.3) (.3) Interest expense 1.7 1.3 1.4 Earnings before income taxes 3.4 6.3 6.2 Income taxes 1.2 2.0 2.3 Net earnings 2.2% 4.3% 3.9% 1997 Compared to 1996 The Company's net sales reached a new record level in 1997 at $451,518,000, 11% over the previous record of $407,999,000 set in 1996. The increase in sales was due largely to revenues from the Company's recent acquisition along with internal growth stemming from new program launches. North American light vehicle production was up 3% from 1996 fueled by growth in the light truck segments. The Company continued to see strong shipments in its mid-range and heavy-duty diesel engine products to CDC, Detroit Diesel and Mack Truck. During 1997 the Company announced the consolidation of its Jackson and Gladwin, Michigan plants with other North American operations and recorded a provision for plant closing costs of $8,769,000 against earnings. These closures are anticipated to provide annualized savings of approximately $5,500,000 a year before taxes beginning in 1998. Cost of products sold as a percent of sales for 1997 was 90.0% as compared to 89.5%. This increase was due to higher start-up costs with thirteen new programs launched in 1997 versus six in 1996 and additional equipment moving and consolidation expenses not allowed to be included with the aforementioned provision for plant closing costs. Administrative and selling expenses decreased as a percentage of sales from 3.2% in 1996 to 2.9% in 1997 due to better control over expenses and leverage from increased sales volume. Lastly, the Company incurred expenses for amortization of goodwill and intangibles from the acquisition over the last half of the year. Operating earnings, excluding the provision for the plant closings, reached $30,919,000 in 1997, $1,346,000 or 4.6% higher than 1996. Investment and other income was $524,000 in 1997, down $901,000 from 1996, primarily due to lower average invested cash balances. Interest expense increased $2,097,000 as a result of additional debt incurred to fund the VA acquisition. Income tax expense for 1997 reflects an effective rate of 33.8% compared to 31.3% for 1996. 1996 benefited from federal tax credits totaling $1,100,000 relating to prior years. 1996 Compared to 1995 Net sales for 1996, at $407,999,000 were 3% above the $395,069,000 level of 1995. The major reason for the sales increase from 1995 was the volume on several significant new products in addition to an increase in production for medium-duty engines. This was offset by automobile production being down at the Big Three by 6% from 1995, primarily due to the work stoppages at GM in the first and fourth calendar quarters. Operating earnings increased 2.8% from $28,764,000 to $29,573,000 for 1996. The operating margin, at 7.3% remained comparable to 1995 as our Mexican operation was profitable all year and we experienced improvements in certain key operations. This was offset by the effect of the work stoppages and lower passenger car and heavy-duty diesel engine production levels at customers. Investment and other income was $1,425,000 in 1996, up $278,000 from 1995, due to higher average invested balances and interest on tax refunds. Interest expense decreased $160,000 from 1995 as a result of lower average debt balances. Income tax expense for 1996 represented an effective rate of 31.3% compared to 37.3% for 1995, which was lower due to the recognition of federal tax credits totaling $1,100,000 relating to prior years. Liquidity and Capital Resources The Company's capital requirements relate primarily to capital expenditures, debt service and the cost of acquisitions. Historically, the Company's primary sources of financing have been cash from operations, borrowings under its revolving line of credit and the issuance of long-term debt and equity. Net cash generated from operations was $30,115,000 in 1997 compared to $50,794,000 in 1996 and $35,781,000 in 1995. The cash flows were primarily provided from earnings and depreciation expense and in 1997 decreased because of increased working capital needs. At December 31, 1997, working capital was $36,366,000, compared to $45,038,000 at December 31, 1996. The decrease in working capital was primarily attributable to lower cash balances which were utilized to fund the acquisition. During 1997 the Company invested $28,977,000 in capital equipment and plant expansions compared to $26,296,000 in 1996. Capital expenditures for 1998 are expected to approximate $28 million and will principally support new business and infrastructure enhancements both domestically and internationally. The Company has paid uninterrupted cash dividends each year since becoming publicly-owned in 1972. Dividends paid in 1997 were $7,252,000 compared to $7,229,000 in 1996 and $7,192,000 in 1995. The dividend rate for all three years was $ .40 per share. In June 1997, the Company entered into revolving credit agreements to allow for borrowings of up to $100 million which in August 1997 were permanently reduced to $50 million. At December 31, 1997, borrowings outstanding under the agreements were $15 million at an interest rate of 6.4%. The borrowings are classified as long-term based on management's intent and ability to maintain this level of borrowing for a period in excess of one year. The Company has letters of credit committed of $1,052,000 under these facilities. At December 31, 1997 the Company has $34 million of the $50 million revolving credit facilities available. In August 1997, the Company issued and sold $35 million of its 7.03% unsecured Senior Notes, Series A and $15 million of its 6.96% unsecured Senior Notes, Series B. Notes of both series are due August 1, 2012. Prepayment of $1,500,000 of higher-cost debt was made in 1997. The Company maintains unsecured short-term credit lines with banks under which it may borrow $12,597,000, of which $500,000 was committed as letters of credit at December 31, 1997. The Company had no short-term borrowings at December 31, 1997. The Company believes its liquidity, capital resources and cash flows from operations are sufficient to fund planned capital expenditures, working capital requirements and debt service in the absence of additional significant acquisitions. The Company intends to fund future acquisitions with cash, securities or a combination of cash and securities. To the extent the Company uses cash for all or part of any such acquisitions, it expects to raise such cash primarily from cash generated from operations, borrowings under the revolving credit agreements or, if feasible and attractive, issuance of long-term debt or additional Common Stock. Impact of Inflation The Company does not expect that it will be significantly affected by inflation in 1998. Impact of FASB Statements The Company has not yet adopted Statement of Financial Accounting Standard No. 130 "Reporting Comprehensive Income" or Statement of Financial Accounting Standard No. 131 "Disclosures About Segments of an Enterprise and Related Information", which become effective in 1998. As both statements are disclosure requirements neither statement will have a material effect upon future financial statements. "Safe Harbor" Provisions This annual report contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. Investors are cautioned that any forward-looking statements, including statements regarding the intent, belief, or current expectations of the Company or its management are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in forward-looking statements as a result of various factors including, but not limited to, (i) general economic conditions in the markets in which the Company operates, (ii) fluctuation in demand for the Company's product, and (iii) other actions taken by the Company. The Company does not intend to update these forward-looking statements. PAGE Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Statements Of Operations (In thousands, except per share amounts) Year Ended December 31 1997 1996 1995 Net sales $451,518 $407,999 $395,069 Costs and expenses: Cost of products sold 406,513 365,253 354,436 Administrative and selling 13,152 13,173 11,869 Amortization of intangible assets 934 -- -- Provision for plant closings 8,769 -- -- 429,368 378,426 366,305 Operating Earnings 22,150 29,573 28,764 Investment and other income, net 524 1,425 1,147 Interest expense (7,451) (5,354) (5,514) Earnings Before Income Taxes 15,223 25,644 24,397 Income taxes 5,144 8,037 9,095 Net Earnings $ 10,079 $ 17,607 $ 15,302 Basic Earnings Per Share $ .56 $ .97 $ .85 Diluted Earnings Per Share $ .55 $ .97 $ .85 See accompanying notes to consolidated financial statements. Consolidated Statements Of Cash Flows (In thousands) Year Ended December 31 1997 1996 1995 OPERATING ACTIVITIES Net earnings $ 10,079 $ 17,607 $ 15,302 Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation and amortization 23,427 20,497 18,921 Provision for plant closings 6,424 -- -- Provision for deferred income taxes (828) (102) 1,234 Amortization of restricted stock 356 363 330 Loss (gain) on disposition of assets 249 217 (113) Changes in operating assets and liabilities: Accounts receivable (12,118) 6,186 985 Inventories (2,466) (1,153) (1,660) Other assets (6,381) (655) (4,052) Accounts payable and accrued expenses 11,373 7,834 4,834 Cash Provided by Operating Activities 30,115 50,794 35,781 INVESTING ACTIVITIES Acquisition of business, net of cash acquired (75,293) -- -- Sale of marketable securities -- -- 2,491 Capital expenditures (28,977) (26,296) (31,510) Proceeds from disposal of property and equipment 2,105 171 1,069 Cash Used in Investing Activities (102,165) (26,125) (27,950) FINANCING ACTIVITIES Cash dividends paid (7,252) (7,229) (7,192) Principal repayments of long-term debt (55,079) (2,078) (12,250) Proceeds from long-term borrowings 115,000 -- 24,050 Cash provided by stock transactions, net -- 243 42 Cash (Used in) Provided by Financing Activities 52,669 (9,064) 4,650 Effect of foreign currency exchange rate changes (1,286) (193) (1,312) Increase (Decrease) In Cash and Cash Equivalents(20,667) 15,412 11,169 Cash and cash equivalents at beginning of year 28,902 13,490 2,321 Cash and Cash Equivalents at End of Year $ 8,235 $ 28,902 $ 13,490 Supplemental Disclosures: Cash paid during the year for: Interest $ 5,625 $ 5,354 $ 5,514 Income Taxes 8,538 7,995 7,650 See accompanying notes to consolidated financial statements. Consolidated Balance Sheets (In thousands, except share and per share amounts) December 31 1997 1996 ASSETS Current Assets Cash and cash equivalents $ 8,235 $ 28,902 Accounts receivable 66,055 41,032 Inventories 19,827 14,034 Customer tooling in process 7,888 4,002 Prepaid expenses and other current assets 12,689 6,256 Total Current Assets 114,694 94,226 Property, Plant and Equipment, at cost Land 4,867 3,116 Buildings and improvements 55,536 49,058 Machinery and equipment 253,096 226,055 313,499 278,229 Less accumulated depreciation 139,353 126,152 Net Property, Plant and Equipment 174,146 152,077 Intangible Assets - net 49,951 -- Other Assets 2,757 2,653 $341,548 $ 248,956 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current installments of long-term debt $ 3,579 $ 3,579 Accounts payable 45,803 28,455 Compensation and amounts withheld 11,350 10,203 Taxes, other than income taxes 3,072 2,597 Other current liabilities 14,524 4,354 Total Current Liabilities 78,328 49,188 Long-Term Debt, excluding current installments 118,564 58,643 Accrued Retirement Benefits and Other 14,663 14,015 Deferred Income Taxes 12,121 11,118 Shareholders' Equity Common stock, par value $1 per share: Authorized - 55,000,000 shares Outstanding - 18,129,202 shares (1996 - 18,080,002 shares) 18,129 18,080 Additional paid-in capital 24,792 24,366 Retained earnings 82,101 79,274 Unamortized value of restricted stock (2,147) (2,028) Cumulative foreign currency translation adjustments (4,978) (3,692) Excess pension cost (25) (8) Total Shareholders' Equity 117,872 115,992 $341,548 $248,956 See accompanying notes to consolidated financial statements. Consolidated Statements Of Shareholders' Equity (In thousands, except share and per share amounts) Cumulative Unamortized Foreign Additional Value Of Currency Excess Common Paid-In Retained Restricted Translation Pension Stock Capital Earnings Stock Adjustments Cost Total Balance at January 1, 1995 $17,929 $23,201 $60,786 $(1,690) $(2,187) $ -- $ 98,039 Net earnings for 1995 15,302 15,302 Cash dividends - $.40 per share (7,192) (7,192) Exercise of stock options, net 7 35 42 Restricted stock awards, net 45 410 (455) --- Amortization of restricted stock 330 330 Translation adjustment for the year (1,312) (1,312) Excess pension cost adjustment (132) (132) Balance at December 31, 1995 7,981 23,646 68,896 (1,815) (3,499) (132) 105,077 Net earnings for 1996 17,607 17,607 Cash dividends - $.40 per share (7,229) (7,229) Exercise of stock options, net 35 208 243 Restricted stock awards, net 64 512 (576) --- Amortization of restricted stock 363 363 Translation adjustment for the year (193) (193) Excess pension cost adjustment 124 124 Balance at December 31, 1996 18,080 24,366 79,274 (2,028) (3,692) (8) 115,992 Net earnings for 1997 10,079 10,079 Cash dividends - $.40 per share (7,252) (7,252) Restricted stock awards, net 49 426 (475) --- Amortization of restricted stock 356 356 Translation adjustment for the year (1,286) (1,286) Excess pension cost adjustment (17) (17) Balance at December 31, 1997 $18,129 $24,792 $82,101 $(2,147) $(4,978) $(25) $117,872 See accompanying notes to consolidated financial statements.
PAGE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note A -- Significant Accounting Policies Description of the Business: The Company is a supplier of precision-machined powertrain and chassis products to the global automotive and heavy-duty diesel engine markets, supplying in excess of 700 different components and assemblies to original equipment manufacturers located principally in North America and Europe. Principles of Consolidation: The consolidated financial statements include the accounts of the Company and all subsidiaries after elimination of intercompany accounts and transactions. Foreign Currency Translation: Translation adjustments from foreign subsidiaries are reflected in the financial statements as a separate component of shareholders' equity. Foreign currency gains and losses resulting from transactions are included in determining net earnings. Cash Equivalents: Cash equivalents include all liquid investments purchased with a maturity of three months or less. Financial Instruments: Financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. At December 31, 1997, the fair value of these financial instruments approximates the carrying amount with the exception of long-term debt as discussed in Note F. Inventories: Inventories are stated at the lower of cost or market. Costs are determined by the last-in, first-out (LIFO) method for domestic inventories and by the first-in, first-out (FIFO) method for foreign inventories. Depreciation: Depreciation is computed using the straight-line method at annual rates which are sufficient to amortize the cost over the estimated useful lives. Amortization: Cost in excess of fair-market value of net assets acquired (goodwill), arising from the acquisition of the Vibration Attenuation division (see Note B), is amortized on a straight-line basis over 40 years. Specific intangibles including a supply, a non-compete and various license agreements and various patents are amortized on a straight-line basis over the estimated periods benefited with periods ranging from 2.5 to 40 years. The carrying value of intangible assets is to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment would be recognized when the expected undiscounted future operating cash flow derived from such intangible assets is less than their carrying value. The Company believes that no impairment exists at December 31, 1997. Customer Tooling: Costs incurred for customer-owned tooling in excess of amounts billed to date are recorded as customer tooling in process. Costs for customer-owned tooling which will be recovered as parts are shipped are included with other assets. Income Taxes: Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. No deferred income taxes have been provided for the income tax liability of approximately $350,000 which would be incurred on repatriation of the permanently reinvested portion of unremitted earnings of the foreign subsidiaries. Net Earnings Per Share: Effective December 31, 1997, the Company adopted SFAS No. 128 "Earnings Per Share." Basic earnings per share are computed based upon the weighted average shares of common stock outstanding during the year. Diluted earnings per share are calculated to give effect to common stock equivalents (stock options) outstanding during the year. All prior periods have been restated. Stock Based Compensation: Effective January 1, 1996, the Company adopted SFAS No. 123 "Accounting for Stock-Based Compensation". The Company adopted this standard by making the required disclosures only. The adoption of this standard did not have an effect on the Company's financial position or results of operations. Use Of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make reasonable estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported net earnings for the period. Ultimate resolution of uncertainties could cause actual results to differ from these estimates. Note B -- Holset VA Acquisition On June 27, 1997, the Company, through a wholly owned subsidiary, purchased the Vibration Attenuation division of Holset Engineering Company Limited ("VA Business") from Cummins Engine Company. The aggregate purchase cost for the acquisition of the VA Business was $76.4 million. Funds for the VA Business acquisition, net of cash received, were provided by cash and borrowings of $60 million. The VA Business has operations in the United Kingdom, France, Spain, Mexico, Korea, Brazil and the United States. The VA Business is also a minority partner in a joint venture in India. The VA Business manufactures rubber and viscous dampers and supplies three main markets including heavy truck, light truck and automotive and industrial. The acquisition was accounted for as a purchase transaction and accordingly, the results of the VA Business' operations are included in the consolidated financial statements since the date of acquisition. The purchase cost of $76.4 million has been allocated to assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date. The excess of the purchase price over net assets acquired (goodwill) approximated $38.7 million and is being amortized over 40 years. The following pro forma unaudited financial data is presented to illustrate the estimated effects of (i) the VA Business acquisition and (ii) the completion of the new credit agreements (Note F) as if the transactions had occurred as of January 1 of each year presented (in thousands, except per share data). (Unaudited) (Unaudited) Three Months Ended Twelve Months Ended Dec 31 Dec 31 Dec 31 Dec 31 1997 1996 1997 1996 Net sales $123,043 $114,653 $487,505 $472,798 Net income 3,611 4,799 8,496 18,330 Net earnings per share: Basic $ .20 $ .27 $ .47 $ 1.01 Diluted $ .20 $ .26 $ .47 $ 1.01 The pro forma information above does not purport to be indicative of the results that actually would have been achieved if the transactions had occurred at the beginning of the periods presented, and is not intended to be a projection of future results or trends. Note C -- Provision for Plant Closings In the third quarter of 1997, in connection with management's efforts to reduce costs and improve operating efficiencies, the Company recorded a provision for plant closings of approximately $8.8 million. The principal actions in the plant closing plan involve the closure of two manufacturing facilities. This plan is expected to result in the elimination of approximately 300 positions. Approximately 200 of these terminations had occurred as of December 31, 1997. The shut-down of one facility was completed during 1997 and the shut-down of the remaining facility is expected to be completed during the second quarter of 1998. The major components of the plant closing charge are as follows: (In thousands) Severance and related costs $4,965 Write-down of property, plant and equipment 2,191 Other 1,613 Total Provision for Plant Closings $8,769 These charges were recorded in the appropriate period in accordance with the requirements of Emerging Issues Task Force Pronouncement 94-3. At December 31, 1997, approximately $5.7 million of accruals are available for remaining costs. Note D -- Inventories The components of inventories are summarized as follows: (In thousands) 1997 1996 Finished and in-process products $11,294 $ 9,881 Raw materials 8,533 4,153 $19,827 $14,034 The LIFO inventories comprise approximately 84% and 94% of total inventories at December 31, 1997 and 1996, respectively. The replacement cost of inventories exceeded the balance sheet carrying amounts by approximately $5,900,000 and $5,600,000 at December 31, 1997 and 1996, respectively. Note E -- Intangible Assets At December 31, 1997 intangible assets consisted of the following: Goodwill $38,728 Supply, non-compete, and license agreements and various patents 12,200 50,928 Less accumulated amortization 977 Net Intangible Assets 49,951 Note F -- Debt Long-term debt at December 31 consisted of the following obligations: (In thousands) 1997 1996 8.8% Note payable due 1999 $ 2,250 $ 3,750 9.98% Note payable due 2005 12,000 15,000 6.75% Bank term note due 2008 20,000 20,000 8.45% Bank term note due 2005 20,000 20,000 8.82% Bank term note due 2003 2,893 3,472 7.03% Series A Notes 35,000 --- 6.96% Series B Notes 15,000 --- Revolving Credit Agreement 15,000 --- 122,143 62,222 Less current installments 3,579 3,579 Long-term debt, excluding current installments $118,564 $58,643 As of December 31, 1997, the estimated fair value of long-term debt, discounted at current interest rates, was $131,000,000. In June 1997, the Company entered into revolving credit agreements to allow for borrowings of up to $50 million under a five-year agreement and up to $50 million under a 364-day agreement. In August 1997, these agreements were permanently reduced to $ 25 million each. Borrowings under the credit agreements bear interest, at the election of the Company, at a floating rate of interest equal to (a) the higher of ABN AMRO's prime lending rate and the federal funds rate plus .5% or (b) the Eurodollar rate plus the applicable borrowing margin. At December 31, 1997, the outstanding borrowings under these agreements are at an interest rate of approximately 6.4% and there was $1,052,000 committed as letters of credit. On August 1, 1997 the Company issued and sold $35 million of its 7.03% Senior Notes, Series A and $15 million of its 6.96% Senior Notes, Series B. Notes of both series are due August 1, 2012. The proceeds of the Notes were used to pay down and permanently reduce the 364-Day and five-year Revolving Credit Agreements. Under the terms of its loan agreements, the Company is subject to restrictions concerning additional borrowings and maintenance of minimum net worth. At December 31, 1997, under the most restrictive covenant retained earnings of approximately $18,358,000 were unrestricted. The Company was in compliance with all such covenants at December 31, 1997. The Company also has uncommitted short-term credit lines with banks under which it may borrow up to $12,597,000, of which $500,000 was committed as letters of credit at December 31,1997. The contract amount of the letters of credit approximate their fair value. The lines do not have termination dates, but are reviewed periodically. No compensating balances are required by any of the loan agreements. Principal maturities of long-term debt during the four years following 1998 are as follows: 1999 - $4,829,000; 2000 - $6,079,000; 2001 - $8,079,000; and 2002 - $24,442,000. Note G -- Income Taxes The components of earnings before income taxes were as follows: (In thousands) 1997 1996 1995 Domestic $ 9,963 $23,047 $21,772 Foreign 5,260 2,597 2,625 $15,223 $25,644 $24,397 The provisions for income tax expense were as follows: (In thousands) 1997 1996 1995 Current: Federal $4,976 $ 6,730 $ 6,439 Foreign 691 822 1,109 State 305 587 313 5,972 8,139 7,861 Deferred: Federal (1,647) 66 1,078 Foreign 947 (330) 73 State (128) 162 83 (828) (102) 1,234 $5,144 $ 8,037 $ 9,095 A reconciliation of income tax expense to the amount computed by applying the statutory federal income tax rate to earnings before income taxes follows: (In thousands) 1997 1996 1995 Income taxes at federal statutory rate $5,235 $ 8,975 $ 8,539 State income tax, net of federal benefit 116 487 257 Foreign operating loss 84 (310) 196 Federal tax credits (100) (1,100) -- Differences between domestic and effective foreign tax rates (254) (107) 67 Other, net 63 92 36 $5,144 $ 8,037 $ 9,095 The tax effects of temporary differences that give rise to significant deferred tax assets and liabilities at December 31 are as follows: 1997 1996 Deferred Deferred Deferred Deferred Tax Tax Tax Tax (In thousands) Assets Liabilities Assets Liabilities Plant and equipment $ -- $17,133 $ -- $15,880 Accrued retirement benefits 5,398 -- 4,412 -- Other accrued expenses 4,028 -- 2,948 -- Foreign net operating loss carryforward 468 -- 390 -- Federal tax credits 1,066 -- 1,066 -- Other items 530 929 391 804 11,490 18,062 9,207 16,684 Valuation allowance (468) -- (390) -- $11,022 $18,062 $ 8,817 $16,684 As of December 31,1997, the Company has unrecognized foreign net operating loss carryforwards of approximately $1,400,000 that begin expiring in 2003. Deferred income tax assets of $5,081,000 and $3,251,000 are included in other current assets at December 31, 1997, and 1996, respectively. Note H -- Pension Plans The Company has non-contributory defined benefit pension plans covering substantially all employees, subject to eligibility requirements. Benefits are based upon a percentage of compensation or monthly rates times years of service. Plan assets are held by a trustee and invested in marketable debt and equity securities and short-term investments. Benefits for certain employees are provided through multi-employer defined benefit plans. The Company also has an unfunded supplemental executive retirement plan for senior management with benefits based on compensation and years of service. Contributions to pension plans are sufficient to provide for both current service costs and amortization of past service costs over a reasonable period. Net pension expense for 1997, 1996 and 1995 included the following components: 1997 1996 1995 Assumptions used were: Discount rate 8% 7.75% 8.5% Rate of increase in compensation levels 5% 5% 5% Expected annual long-term rate of return on assets 10% 9% 9% (In thousands) 1997 1996 1995 Benefits earned during the year $2,210 $ 2,114 $1,548 Interest cost on projected benefit obligation 2,613 2,307 2,142 Actual return on assets (2,174) (3,046) (2,591) Net amortization and deferral 62 1,391 804 Multi-employer plans 510 544 574 $3,221 $ 3,310 $2,477 The following table sets forth the plan's funded status at September 30: 1997 1996 Assumptions used were the same as above, except: Discount rate 7.5% 8% Rate of increase in compensation levels 4.5% Plans in Which Plans in Which Assets Accum. Assets Accum. Exceed Benefits Exceed Benefits Accum. Exceed Accum. Exceed Benefits Assets Benefits Assets Actuarial present value of: Vested benefit obligation $22,033 $ 3,773 $ 6,849 $ 15,561 Accumulated benefit obligation $25,061 $ 4,475 $ 7,640 $ 16,821 Projected benefit obligation $32,431 $ 6,040 $ 10,360 $ 22,146 Plan assets at fair value 26,237 2,692 9,181 14,468 Deficiency of assets under projected benefit obligation (6,194) (3,348) (1,179) (7,678) Unrecognized net loss 3,612 451 235 3,180 Unrecognized net asset (824) 501 (309) (46) Unrecognized prior service cost 846 351 527 482 Additional minimum liability -- (232) -- (290) Accrued pension liability included in the balance sheets $ (2,560) $(2,277) $ (726) $ (4,352)
The Company has recorded an additional minimum liability at December 31, 1997 and 1996, representing the excess of the unfunded accumulated benefit obligations over the fair value of plan assets and accrued pension liabilities. The additional liability has been offset by intangible assets to the extent of previously unrecognized prior service cost. Certain employees participate in Company-sponsored 401(k) savings plans. Under the plans, the Company contributes a defined amount to individual employee accounts based on the respective employee's contribution. Contributions approximated $1,330,000, $1,490,000 and $1,340,000 in 1997, 1996 and 1995, respectively. Note I -- Retiree Medical Benefits The Company provides medical benefits to certain retired employees, their covered dependents, and beneficiaries. Generally, employees who have attained age 55 and who have rendered 10 years of service are eligible for these benefits. Certain medical plans are contributory and other medical plans are noncontributory. The retiree medical benefit cost for 1997, 1996 and 1995 consisted of the following: 1997 1996 1995 Assumed discount rate 8% 7.75% 8.5% (In thousands) Benefits earned during the year $ 598 $ 612 $ 464 Interest cost on accumulated retiree medical benefits 759 693 770 Net amortization 3 5 12 $1,360 $ 1,310 $ 1,246 The Company's retiree medical benefits are not funded. The following table presents the actuarial present value of the obligation at September 30 reconciled with amounts recognized in the balance sheet: 1997 1996 Assumed discount rate 7.5% 8% (In thousands) Accumulated retiree medical benefits obligation: Retirees $ 3,699 $ 2,924 Fully-eligible, active plan participants 1,134 1,390 Other active employees 5,744 5,387 10,577 9,701 Unrecognized net gain (loss) (344) 612 Unamortized prior service cost (60) (69) $10,173 $10,244 Other actuarial assumptions used for the Company's retiree health care plans include: (Dollars in thousands) 1997 1996 1995 Medical cost trend rate (a) 7.5% 8% 11% Effect of a 1% point increase in the medical cost trend rate on the accumulated retiree medical benefit obligation $1,946 $ 1,574 1,761 Effect of a 1% point increase in the medical cost trend rate on the aggregate of the service and interest cost $ 336 $ 270 $ 245 (a) Beginning in 1996, the medical cost trend rate was assumed to be 8% and to decrease .5% per year to 5.5% in 2001 and remaining at that level thereafter. In 1995, the medical cost trend rate was set at 11% and assumed to decrease 1% per year to 6% in 2000 and remaining at that level thereafter. During 1997, the Company reduced its obligation for retiree medical benefits by $770,000 related to the closing of two plants. Note J -- Long-Term Incentive Plans The Company has long-term incentive plans under which employees or directors may be granted stock options or other long-term incentives. The 1984 Plan, which allowed for options to be granted for up to 1,687,500 common shares, was terminated in 1993. Options and restricted shares previously granted under the 1984 Plan remain outstanding for up to 10 years. Stock appreciation rights (SARs), which provide that optionees may receive cash in lieu of shares, were also granted in conjunction with stock option grants. In 1993, the Company adopted the 1993 Executive Long-Term Incentive Plan for employees. The 1993 Plan permits the grant of stock options, restricted stock, stock appreciation rights, performance shares and performance units. The authorized share pool for making grants under the 1993 Plan is 1,350,000 common shares. Also in 1993, the Company adopted the 1993 Non-Employee Director Stock Option Plan. Under this plan, nonqualified stock options may be granted to non-employee directors for up to 150,000 common shares. Options granted have varying exercise dates within five years after grant date and generally expire after ten years. At December 31, 1997 there were 1,361,940 of common stock reserved for issuance under the plans of which 830,550 are available for future grants. The Company applies APB Opinion No. 25 in accounting for its stock compensation plans. Accordingly, no compensation cost has been recognized for the stock options granted in 1997 or 1996. Had compensation cost for these options been determined on the basis of fair value pursuant to SFAS No. 123, The Company's pro forma net income and earnings per share would have been as indicated below: 1997 1996 Net income As reported $10,079 $17,607 Pro forma $ 9,874 $17,413 Basic Earnings per share As reported $ .56 $ .97 Pro forma $ .54 $ .96 Diluted earnings per share As reported $ .55 $ .97 Pro forma $ .54 $ .96 The fair value of each option grant is estimated on the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions used for grants in 1997 and 1996, respectively: dividend yield of 3.8% for both years; expected volatility of 37% and 40%; risk-free interest rates of 6.5% and 6.1%; and an expected life of 7.0 and 6.8 years. Incentive plan activity is summarized as follows: Stock Option Plans Weighted Option Average Restricted Shares Exercise Price Shares 1996: Outstanding January 1, 1996 392,645 $ 9.27 185,591 Granted/awarded 107,240 9.24 74,980 Exercised (37,050) 5.61 -- Restrictions lapsed -- -- (34,726) Canceled/forfeited (20,720) 12.11 (11,502) Outstanding 442,115 9.44 214,343 Exercisable 226,143 -- Weighted-average fair value of options granted during the year $ 9.25 1997: Granted/awarded 100,760 $9.76 64,020 Exercised (1,485) 6.67 -- Restrictions lapsed -- -- (33,039) Canceled/forfeited (10,000) 9.94 (14,986) Outstanding 531,390 9.50 230,338 Exercisable 287,774 -- Weighted-average fair value of options granted during the year $ 9.76 Note K -- Shareholder Rights Plan In 1997, the Company adopted a new Shareholder Rights Plan with substantially the same terms as the prior shareholder rights plan which expired in 1997. The Plan is designed to discourage partial or two-tier tender offers which could result in unequal treatment of shareholders. Under the Plan, the right to purchase one share of common stock was distributed for each outstanding share of the Company's common stock. The Plan provides that the Rights become exercisable if a person or group acquires, in a transaction not approved by the Board of Directors, 20% or more of the Company's common stock or commences a tender or exchange offer which would result in a person or group acquiring 20% or more of the Company's common stock. In addition, the Plan permits the Board of Directors to declare a person or group owning 10% or more of the Company's common stock an "Adverse Person," under certain circumstances, which also causes the Rights to become exercisable. When exercisable, each Right entitles shareholders to purchase one share of the Company's common stock at a specified exercise price. The Company will be entitled to redeem the Rights at $.005 per Right until a person or group has been declared an "Adverse Person" or the close of business on the tenth business day after a public announcement that a 20% position has been acquired. If a 20% position is acquired, a person or group is declared an "Adverse Person," the Company is acquired or certain other events occur after the Rights become exercisable, each Right will entitle its holder to purchase, for the exercise price, a number of the Company's or acquiring company's common shares having a market value of twice the exercise price. Rights were issued in 1997 to shareholders and will be attached to each share issued thereafter until the Rights become exercisable, expire or are redeemed. Rights expire May 9, 2007, unless extended by the Board of Directors. Note L -- Earnings Per Share In thousands, except per share amounts 1997 1996 1995 Net earnings applicable to common stock and common stock equivalents $10,079 $17,607 $15,302 Basic Earnings per Share Weighted average shares outstanding 18,123 18,067 17,971 Earnings Per Share $ .56 $ .97 $ .85 Diluted Earnings per Share Weighted average shares outstanding 18,123 18,067 17,971 Net effect of dilutive stock options 79 48 70 18,202 18,115 18,041 Earnings Per Share $ .55 $ .97 $ .85 Options to purchase 43,020, 75,480 and 52,740 shares of common stock were outstanding during 1997 through 1995 respectively, at prices ranging from $11.00 to $14.67. These shares were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the common shares. Note M -- Geographic Areas and Major Customers The Company operated entirely in North America prior to 1997. With the acquisition of the Holset VA business during 1997, the Company expanded its operations to Europe. The Company's geographic data for the year ended December 31, 1997 is as follows: (In thousands) Revenue: North America $425,466 Europe 30,401 Eliminations (4,349) Total $451,518 Operating income North America $ 20,705 Europe 1,445 Eliminations Total $ 22,150 Identifiable Assets North America $256,300 Europe 87,335 Eliminations (2,087) Total $341,548 Sales between geographic areas are accounted for at prices that provide a profit and are in accordance with the rules and regulations of the respective governing authorities. The Company's operations are conducted within one business segment. Export sales to customers from the United States were $63,409,000. Net sales to major customers were: (In thousands) 1997 1996 1995 General Motors Corporation $126,500 $108,800 $109,200 Ford Motor Company 88,500 86,700 92,900 Chrysler Corporation 56,500 63,400 55,000 Consolidated Diesel Company and its parent companies, Cummins Engine Company Inc. and Case Corporation 47,000 38,800 36,500 Caterpillar Inc. 36,100 35,900 25,900 Aggregate receivables for these customers at December 31, 1997 and 1996 approximate the same percent of total receivables as aggregate sales to these customers bear to total sales. Note N -- Commitments and Contingencies The Company has been identified as a potentially responsible party under federal environmental regulations to share in the cost of cleanups at two waste disposal sites along with many other companies. While management believes the Company's responsibility in these matters is minimal, it has established reserves which it believes are adequate to cover potential liabilities. Independent Auditors' Report The Board of Directors and Shareholders Simpson Industries, Inc. We have audited the accompanying consolidated balance sheets of Simpson Industries, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Simpson Industries, Inc. and subsidiaries at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997 in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Detroit, Michigan January 27, 1998 Summary of Quarterly Results of Operations (In thousands, except per share amounts) Quarter Ended Mar.31 Jun.30 Sep.30 Dec.31 1997 Net sales $105,874 $110,274 $112,327 $123,043 Gross profit 10,816 13,040 9,472 11,677 Net earnings 4,387 5,418 (3,337) 3,611 Net earnings per share Basic .24 .30 (.18) .20 Diluted .24 .30 (.18) .20 1996 Net sales $101,421 $110,049 $ 98,228 $ 98,301 Gross profit 10,383 14,266 8,919 9,178 Net earnings 3,957 5,971 3,443 4,236 Net earnings per share Basic .22 .33 .19 .23 Diluted .22 .33 .19 .23 Net earnings for the quarter ended September 30, 1997 were decreased by $5,700 ($.31 per share for both basic and diluted) for the provision for plant closing. Net earnings for the quarter ended December 31, 1996 were increased by $1,100 ($.06 per share for both basic and diluted) from federal tax credits. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE NONE PART III The information called for by the items within this part is included in the Company's Proxy Statement for the 1998 Annual Meeting of Shareholder's, and is incorporated herein by reference, as follows: Pages in 1998 Proxy Statement Item 10. Directors and Executive Officers of the Company 1-3,13 (includes information set forth in the 1998 Proxy Statement under "Further Information - Compliance with Section 16(a) of the Exchange Act") Item 11. Executive Compensation 5-11 Item 12. Security Ownership of Certain Beneficial Owners and Management 12 Item 13. Certain Relationships and Related Transactions N/A PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) The Consolidated financial statements of the Company and its subsidiaries, included in Item 8 herein by reference: Consolidated Balance Sheets - December 31, 1997 and 1996 Consolidated Statements of Shareholders' Equity - years ended December 31, 1997, 1996 and 1995 Consolidated Statements of Operations - years ended December 31, 1997, 1996 and 1995 Consolidated Statements of Cash Flows - years ended December 31, 1997, 1996 and 1995 Notes to Consolidated Financial Statements - December 31, 1997 (2) All financial statement schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions. (3) Exhibits. The following exhibits designated with a "+" symbol represent the Company's management contracts or compensatory plans or arrangements for executive officers: 3.1 * Restated Articles of Incorporation, as amended 3.2 * Bylaws, as amended 4.2 Rights Agreement, dated as of February 28, 1997, between Simpson Industries, Inc. and Harris Trust and Savings Bank, as Rights Agent (previously filed as Exhibit 4.2 to the Company's Current Report on Form 8-K, dated April 22, 1997 and incorporated herein by reference) 10.3 Note Agreement with Aetna Life Insurance Company, dated June 12, 1986 (previously filed as Exhibit 10.3 to the Company's Current Report on Form 8-K, dated June 12, 1986 and incorporated herein by reference) Amendment to Note Agreement with Aetna Life Insurance Company, dated November 17, 1994 (previously filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Note Agreement with Aetna Life Insurance Company, dated as of June 17, 1997 (previously filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.4 + 1984 Stock Option Plan, as amended (previously filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988 and incorporated herein by reference) 10.8 + Supplemental Executive Retirement Plan (previously filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, and incorporated herein by reference) 10.10+ Letter Agreement, dated September 12, 1989, with Roy E. Parrott (previously filed as Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989 and incorporated herein by reference) + Amendment to Letter Agreement with Roy E. Parrott, dated March 15, 1994 (previously filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.11 Note Agreement with Massachusetts Mutual Life Insurance Company, dated August 15, 1991 (previously filed as Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991 and incorporated herein by reference) Amendment No. 1 to Note Agreement with Massachusetts Mutual Life Insurance Company, dated as of June 17, 1997 (previously filed as Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.13+ Simpson Industries, Inc. 1993 Executive Long-Term Incentive Plan (previously filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference) 10.14+ Simpson Industries, Inc. 1993 Non-Employee Director Stock Option Plan (previously filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference) 10.15 Term Loan Agreement with Comerica Bank, dated as of December 17, 1993 (previously filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 and incorporated herein by reference) Amendment to Term Loan Agreement with Comerica Bank, dated as of November 1, 1994 (previously filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as of June 17, 1997 (previously filed as Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.19+ Letter Agreement, dated December 16, 1994, with James A. Hug (previously filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the Fiscal year ended December 31, 1994, and incorporated herein by reference) 10.20 Term Note Agreement with Comerica Bank, dated as of January 25, 1995 (previously filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as of June 17, 1997 (previously filed as Exhibit 10.20 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.21 Term Note Agreement with Comerica Bank, dated as of February 7, 1995 (previously filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as of June 17, 1997 (previously filed as Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.23+ Letter Agreement, dated March 1, 1996, with James B.Painter (previously filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and incorporated herein by reference) 10.24 Credit Agreement, dated June 17, 1997, among Simpson Industries and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) * Amendment to Credit Agreement, dated August 22, 1997 among Simpson Industries, Inc. and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank 10.25 Credit Agreement, dated June 17, 1997, among Simpson Industries and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) * Amendment to Credit Agreement, dated August 22, 1997 among Simpson Industries, Inc. and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank 10.26 Note Agreement, dated August 1, 1997 with Northwestern Mutual Life Insurance Company, Chubb Life Insurance Company of America, Chubb Colonial Life Insurance Company, Allstate Life Insurance Company and United of Omaha Life Insurance Company (previously filed as Exhibit 10.26 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 and incorporated herein by reference) 10.27+* Letter Agreement, dated September 1, 1997, with Vinod M. Khilnani 11 * Statement regarding Computation of per share earnings 21 * Subsidiaries of registrant 23 * Consent of independent public accountants 27.1 * Financial Data Schedule * Filed with this report (b) No reports on Form 8-K were filed during the last quarter of the Company's fiscal year ended December 31, 1997. SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SIMPSON INDUSTRIES, INC. By: /s/ Roy E. Parrott Roy E. Parrott, Chairman and Chief Executive Officer Date: February 21, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 21, 1998. Signature Title /s/ Roy E. Parrott Chairman and Chief Executive Roy E. Parrott Officer and Director (principal executive officer) /s/ Vinod M. Khilnani Vice President, Chief Financial Vinod M. Khilnani Officer and Treasurer (principal financial officer) (principal accounting officer) /s/ Michael E. Batten Director Michael E. Batten /s/ Susan F. Haka Director Susan F. Haka /s/ George R. Kempton Director George R. Kempton /s/ Walter J. Kirchberger Director Walter J. Kirchberger /s/ Robert W. Navarre Director Robert W. Navarre /s/ Ronald L. Roudebush Director Ronald L. Roudebush /s/ F. Lee Weaver Director F. Lee Weaver /s/ Frank K. Zinn Director and Secretary Frank K. Zinn INDEX TO EXHIBITS 3.1 * Restated Articles of Incorporation, as amended 3.2 * Bylaws, as amended 4.2 Rights Agreement, dated as of February 28, 1997, between Simpson Industries, Inc. and Harris Trust and Savings Bank, as Rights Agent (previously filed as Exhibit 4.2 to the Company's Current Report on Form 8-K, dated April 22, 1997 and incorporated herein by reference) 10.3 Note Agreement with Aetna Life Insurance Company, dated June 12, 1986 (previously filed as Exhibit 10.3 to the Company's Current Report on Form 8-K, dated June 12, 1986 and incorporated herein by reference) Amendment to Note Agreement with Aetna Life Insurance Company, dated November 17, 1994 (previously filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Note Agreement with Aetna Life Insurance Company, dated as of June 17, 1997 (previously filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.4 + 1984 Stock Option Plan, as amended (previously filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988 and incorporated herein by reference) 10.8 + Supplemental Executive Retirement Plan (previously filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, and incorporated herein by reference) 10.10+ Letter Agreement, dated September 12, 1989, with Roy E. Parrott (previously filed as Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989 and incorporated herein by reference) + Amendment to Letter Agreement with Roy E. Parrott, dated March 15, 1994 (previously filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.11 Note Agreement with Massachusetts Mutual Life Insurance Company, dated August 15, 1991 (previously filed as Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991 and incorporated herein by reference) Amendment No. 1 to Note Agreement with Massachusetts Mutual Life Insurance Company, dated as of June 17, 1997 (previously filed as Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.13+ Simpson Industries, Inc. 1993 Executive Long-Term Incentive Plan (previously filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference) 10.14+ Simpson Industries, Inc. 1993 Non-Employee Director Stock Option Plan (previously filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference) 10.15 Term Loan Agreement with Comerica Bank, dated as of December 17, 1993 (previously filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 and incorporated herein by reference) Amendment to Term Loan Agreement with Comerica Bank, dated as of November 1, 1994 (previously filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as of June 17, 1997 (previously filed as Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.19+ Letter Agreement, dated December 16, 1994, with James A. Hug (previously filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the Fiscal year ended December 31, 1994, and incorporated herein by reference) 10.20 Term Note Agreement with Comerica Bank, dated as of January 25, 1995 (previously filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as of June 17, 1997 (previously filed as Exhibit 10.20 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.21 Term Note Agreement with Comerica Bank, dated as of February 7, 1995 (previously filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as of June 17, 1997 (previously filed as Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.23+ Letter Agreement, dated March 1, 1996, with James B. Painter (previously filed as Exhibit Exhibit 10.23 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and incorporated herein by reference) 10.24 Credit Agreement, dated June 17, 1997, among Simpson Industries and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) * Amendment to Credit Agreement, dated August 22, 1997 among Simpson Industries, Inc. and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank 10.25 Credit Agreement, dated June 17, 1997, among Simpson Industries and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) * Amendment to Credit Agreement, dated August 22, 1997 among Simpson Industries, Inc. and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank 10.26 Note Agreement, dated August 1, 1997 with Northwestern Mutual Life Insurance Company, Chubb Life Insurance Company of America, Chubb Colonial Life Insurance Company, Allstate Life Insurance Company and United of Omaha Life Insurance Company (previously filed as Exhibit 10.26 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 and incorporated herein by reference) 10.27+* Letter Agreement, dated September 1, 1997, with Vinod M. Khilnani 11 * Statement regarding Computation of per share earnings 21 * Subsidiaries of registrant 23 * Consent of independent public accountants 27.1 * Financial Data Schedule * Filed with this report EX-3.1 2 RESTATED ARTICLES OF INCORPORATION, AS AMENDED RESTATED ARTICLES OF INCORPORATION of SIMPSON INDUSTRIES, INC. (a Michigan Corporation) 1. These Restated Articles of Incorporation are executed pursuant to the provisions of Sections 641 - 651, Act 284, Public Acts of 1972. 2. The present name of the corporation is Simpson Industries, Inc. 3. All of the former names of the corporation are as follows: Simpson Company, Simpson Manufacturing Company. 4. The date of filing the original articles of incorporation was July 9, 1945. 5. The following Restated Articles of Incorporation supersede the original Articles of Incorporation as amended and shall be the Articles of Incorporation of the corporation: ARTICLE I The name of this corporation is Simpson Industries, Inc. ARTICLE II The purpose or purposes for which the corporation is organized is to engage in any activity within the purposes for which corporations may be organized under the Business Corporation Act of Michigan. ARTICLE III The location of the corporation is 917 Anderson Road, Litchfield, Hillsdale County, Michigan 49252. The address of the registered office in Michigan is 917 Anderson Road, Litchfield, Hillsdale County, Michigan 49252. The current resident agent of the corporation is Robert W. Navarre. ARTICLE IV The total authorized capital stock is 8,500,000 shares of common stock with a par value of $1.00 per share. Holders of common stock shall have equal voting rights and other rights and shall be entitled to one vote per share. No holder of capital stock of the corporation shall be entitled as such as a matter of right to subscribe for, or to purchase, any part of a new or additional issue of stock or any other reacquired shares of stock of any class whatsoever or of any securities convertible into stock of any class whatsoever, whether now or hereafter authorized and whether issued for cash or other consideration. ARTICLE V The term of this corporation is perpetual. ARTICLE VI Whenever a compromise or arrangement or any plan of reorganization of this corporation is proposed between this corporation and its creditors or any class of them and/or between this corporation and its shareholders or any class of them, any court of equity jurisdiction within the state of Michigan may, on the application of this corporation or of any creditor or any shareholder thereof, or on the application of any receiver or receivers appointed for this corporation, order a meeting of the creditors or class of creditors, and/or of the shareholders or class of shareholders, as the case may be, to be affected by the proposed compromise or arrangement or reorganization, to be summoned in such manner as said court directs. If a majority in number, representing three-fourths in value of the creditors or class of creditors, and/or of the shareholders or class of shareholders, as the case may be, to be affected by the proposed compromise or arrangement or reorganization, agrees to any compromise or arrangement or to any reorganization of this corporation as a consequence of such compromise or arrangement, said compromise or arrangement and said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the shareholders or class shareholders, as the case may be, and also on this corporation. ARTICLE VII The Board of Directors may from time to time adopt, alter, amend supplement or repeal the By-Laws of the Corporation, provided that any By-Laws adopted, altered, amended, supplemented or repealed by the Board may be thereafter repealed, altered, amended supplemented, or readopted by the shareholders of the Corporation, and provided further that Section 2, 4, 5 and 6 of Article IV and Article XI of the By-Laws shall not be altered, amended supplemented or repealed, and no provisions shall be adopted, except by affirmative vote of the holders of at least 66 2/3% of the outstanding shares of common stock of the Corporation entitled to vote generally in the election of directors. This Article VII shall not be altered, amended, supplemented or repealed except by affirmative vote of the holders of at least 66 2/3% of the outstanding shares of common stock of the Corporation entitled to vote generally in the election of directors. ARTICLE VIII (A) Except as set forth in paragraph (B) of this Article, the affirmative vote or consent of the holders of not less than two-thirds (66 2/3%) of the outstanding shares of stock of this Corporation entitled to vote for election of directors, voting for purposes of this Article as one class, shall be required: (1) to adopt any agreement for, or to approve, the merger or consolidation of the Corporation or any subsidiary (as hereinafter defined) with or into any other person (as hereinafter defined), (2) to authorize any sale, lease, transfer, exchange, mortgage, pledge or other disposition to any other person of all or substantially all of the assets of the Corporation or any subsidiary, or (3) to authorize the issuance or transfer by the Corporation or any subsidiary of any voting securities or the Corporation or any subsidiary in exchange or payment for the securities or assets of any other person, if such authorization is otherwise required by law or by any agreement between the Corporation and any national securities exchange or by any other agreement to which the Corporation or any subsidiary is a party, if, in any such case, as of the record date for the determination of shareholders entitled to notice thereof and to vote thereon or consent thereto, such other person is, or at any time within the preceding twelve months has been, the beneficial owner (as hereinafter defined) of 5 percent of more of the outstanding shares of stock of the Corporation entitled to vote in elections of directors. If such other person is not, and has not been, a 5 percent beneficial owner, the provisions of this paragraph (A) shall not apply, and the provisions of Michigan law shall apply. (B) The provisions of paragraph (A) of this Article shall not apply, and the provisions of Michigan law shall apply, to (1) any transaction described therein if the Board of Directors by resolution shall have approved a memorandum of understanding with such other person setting forth the principal terms of such transaction and such transaction is substantially consistent therewith, provided that a majority of those members of the Board of Directors, voting in favor of such resolution were duly elected and acting members of the Board of Directors prior to the time such other person became the beneficial owner of 5 percent or more of the outstanding shares of stock of the Corporation entitled to vote for election of directors; or (2) any transaction described therein if such other person is a corporation of which a majority of the outstanding shares of all classes of stock entitled to vote in elections of directors is owned of record or beneficially by the Corporation or its subsidiaries. (C) The affirmative vote or consent of the holders of not less than two-thirds (66 2/3%) of the outstanding shares of stock of the Corporation entitled to vote for election of directors, voting for purposes of this Article as one class, shall be required for the adoption of any plan for the dissolution of the Corporation if the Board of Directors shall not have, by resolution, recommended to the shareholders the adoption of such plan for dissolution of the corporation. If the Board of Directors shall have so recommended to the shareholders such plan for dissolution of the Corporation, the provisions of Michigan law shall apply. (D) For purposes of this Article, (1) any specified person shall be deemed to be the beneficial owner' of shares of stock of the Corporation (a) which such specified person or any of its affiliates or associates (as such terms are hereinafter defined) owns, directly or indirectly, whether of record or not, (b) which such specified person or any of its affiliates or associates has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, or (c) which are beneficially owned, directly or indirectly (including shares deemed owned through application of clauses (a) and (b) above), by any other person with which such specified person or any of its affiliates or associates has any agreement, arrangement, or understanding for the purpose of acquiring, holding, voting or disposing of stock of the Corporation; (2) a subsidiary' is any corporation more than 49 percent of the voting securities of which are owned, directly or indirectly,, by the Corporation; (3) a person' is any individual, corporation, partnership, joint venture, or other entity; (4) an affiliate' of a specified person is any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the specified person, and (5) an associate' of a specified person is (a) any person of which such specified person is an officer or partner or is, directly, or indirectly, the beneficial owner of 10 percent or more of any class of equity securities, (b) any trust or other estate in which such specified person has a substantial beneficial interest or as to which such specified person serves as trustee or in a similar capacity, (c) any relative or spouse of such specified person, or any relative of such spouse, who has the same home as such specified person or who is a director or officer of such specified person or any corporation which controls or is controlled by such specified person of (d) any other member or partner in a partnership, limited partnership, syndicate or other group of which the specified person is a member or partner and which is acting together for the purpose of acquiring, holding or disposing of any interest in the Corporation or any of its subsidiaries. (E) For purposes of determining whether a person owns beneficially 5 percent or more of the outstanding shares of stock of the Corporation entitled to vote in elections of directors, the outstanding shares of stock of the Corporation shall include shares deemed owned through application of clauses (a), (b) or (c) of paragraph (D)(1) above but shall not include any other shares which may be issuable, pursuant to any agreement or upon exercise of conversion rights, warrants or options, or otherwise. (F) The Board of Directors shall have the power and duty to determine, for purposes of this Article, on the basis of information known to such Board, (1) whether any person referred to in paragraph (A) of this Article own beneficially 5 percent or more of the outstanding shares of stock of the Corporation entitled to vote in elections of directors; and (2) whether a proposed transaction is substantially consistent with any memorandum of understanding of the character referred to in paragraph (B) of this Article. Any such determination shall be conclusive and binding for all purposes of this Article. (G) This Article VIII shall not be altered, amended, supplemented or repealed, and no provision of these Articles of Incorporation inconsistent herewith shall be adopted, except by the affirmative vote of the holders of at least two-thirds (66 2/3%) of the outstanding shares of stock of this Corporation entitled to vote generally in the election of directors, considered for this purpose as one class. 1. These Restated Articles of Incorporation were duly adopted by the Board of Directors on the seventh day of February, 1981, in accordance with the provisions of Section 642, Act 284, Public Acts of 1972. 2. These Restated Articles of Incorporation only restate and integrate and do not further amend the provisions of the Articles of Incorporation as heretofore amended and there is no material discrepancy between those provisions and the provisions of these Restated Articles. Signed this 3 day of March, 1981. SIMPSON INDUSTRIES, INC. By: /S/ Robert W. Navarre Robert W. Navarre, President PAGE CERTIFICATE OF MERGER Filed by SIMPSON INDUSTRIES, INC. Pursuant to Section 712 of the Michigan Business Corporation Act, Simpson Industries, Inc. executes the following Certificate of Merger. 1. The name of the corporation is Simpson Industries, Inc., a Michigan corporation (the "Company"). The location of the Company's registered office is 917 Anderson Road, Litchfield, Michigan 49252. 2. The following Plan of Merger was adopted by the Board of Directors of the Company in accordance with Section 711(1), Act 284, P.A. 1972, on June 1, 1982: Simpson Industries, Inc., a Michigan corporation (the "Company"), owning all of the issued and outstanding shares of Teer, Wickwire & Company and Marben Corporation, both Michigan corporations (the "Subsidiaries"), hereby adopts this Plan of Merger to merge the Subsidiaries into the Company pursuant to Section 711(1), Act 284, P.A. 1972, on the following terms and conditions: (a) The Company has authorized capital stock consisting of 8,500,000 shares of common stock, par value $1.00 per share, of which 3,418,924 shares are issued and outstanding and will be issued and outstanding on the effective date of the merger; pursuant to Section 711(1), Act 284, P.A. 1972, such shares are not entitled to vote on the merger. (b) Teer, Wickwire & Company has authorized capital stock consisting of 50,000 shares of common stock, par value $1.00 per share, of which 100 shares are issued and outstanding on the effective date of the merger; Marben Corporation has authorized capital stock consisting of 25,000 shares of common stock, par value $10.00 per share, of which 16,200 shares are issued and outstanding and will be issued and outstanding on the effective date of the merger; pursuant to Section 711(1), Act 284, P.A. 1972, such shares are not entitled to vote on the merger. (c) On the effective date of the merger, the Subsidiaries shall be merged into the Company. The Company shall be the surviving corporation with its corporate existence unaffected and unimpaired by the merger. The separate existence and corporate organization of the Subsidiaries shall cease upon the effective date of the merger. (d) On the effective date of the merger, each share of the capital stock of the Company issued and outstanding shall continue as an identical share of the Company, as the surviving corporation. (e) On the effective date of the merger, each share of the capital stock of the Subsidiaries issued and outstanding shall be cancelled and shall cease to exist without any action on the part of the holder thereof. (f) If at any time the Company shall determine that additional conveyances, documents, or other action are necessary to carry out the provisions of the Plan of Merger, the officers and directors of the Subsidiaries as of the effective date of this merger shall execute such conveyances or documents or take such action. (g) The effective date of the merger shall be June 30, 1982. Signed this 21st day of June, 1982. SIMPSON INDUSTRIES, INC. By: /S/ R.W. Navarre R.W. Navarre, President PAGE CERTIFICATE OF MERGER Filed by SIMPSON INDUSTRIES, INC. Pursuant to Section 712 of the Michigan Business Corporation Act, Simpson Industries, Inc. executes the following Certificate of Merger. 1. The name of the corporation is Simpson Industries, Inc., a Michigan corporation (the "Company"). The location of the Company's registered office is 917 Anderson Road, Litchfield, Michigan 49252. 2. The following Plan of Merger was adopted by the Board of Directors of the Company in accordance with Section 711(1), Act 284, P.A. 1972, on June 21, 1982: Simpson Industries, Inc., a Michigan corporation (the "Company"), owning all of the issued and outstanding shares of Lee Stamping and Machine, Inc., a Michigan corporation (the "Subsidiary"), hereby adopts this Plan of Merger to merge the Subsidiary into the Company pursuant to Section 711(1), Act 284, P.A. 1972, on the following terms and conditions: (a) The Company has authorized capital stock consisting of 8,500,000 shares of common stock, par value $1.00 per share, of which 4,118,924 shares are issued and outstanding and will be issued and outstanding on the effective date of the merger; pursuant to Section 711(1), Act 284, P.A. 1972, such shares are not entitled to vote on the merger. (b) Lee Stamping and Machine, Inc. has authorized capital stock consisting of 1,000 shares of common stock, par value $100.00 per share of which 135 shares are issued and outstanding and will be issued and outstanding on the effective date of the merger; pursuant to Section 711(1), Act 284, P.A. 1972, such shares are not entitled to vote on the merger. (c) On the effective date of the merger, the Subsidiary shall be merged into the Company. The Company shall be the surviving corporation with its corporate existence unaffected and unimpaired by the merger. The separate existence and corporate organization of the Subsidiary shall cease upon the effective date of the merger. (d) On the effective date of the merger, each share of the capital stock of the Company issued and outstanding shall continue as an identical share of the Company, as the surviving corporation. (e) On the effective date of the merger, each share of the capital stock of the Subsidiary issued and outstanding shall be cancelled and shall cease to exist without any action on the part of the holder thereof. (f) If at any time the Company shall determine that additional conveyances, documents, or other action are necessary to carry out the provisions of the Plan of Merger, the officers and directors of the Subsidiary as of the effective date of this merger shall execute such conveyances or documents or take such action. (g) The effective date of the merger shall be June 30, 1982. Signed this 29th day of June, 1982. SIMPSON INDUSTRIES, INC. By: /S/ K E Berman Kenneth E. Berman Its: Vice President PAGE CERTIFICATE OF ASSUMED NAME Pursuant to the provisions of Section 217, Act 284, Public Acts of 1972, as amended, the undersigned corporation executes the following Certificate: 1. The true name of the corporation is Simpson Industries, Inc. 2. The location of the registered office in Michigan is: 917 Anderson Road, Litchfield, Michigan 49252 3. The assumed name under which the business is to be transacted is: Marben Corporation Signed this 29th day of June, 1982 By: /S/ K E Berman Kenneth E. Berman, Vice President - Finance PAGE CERTIFICATE OF CHANGE OF REGISTERED OFFICE AND/OR CHANGE OF RESIDENT AGENT 1. The name of the corporation is Simpson Industries, Inc. 2. The address of its registered office as currently on file with the Corporation and Securities Bureau is 917 Anderson Road, Litchfield, Michigan 49252 3. The address of the registered office is changed to 615 Griswold, Suite 1414, Detroit, Michigan 48226. 4. The name of the resident agent as currently on file with the Corporation and Securities Bureau is Robert W. Navarre. 5. The name of the successor resident agent is The Corporation Company 6. The corporation further states that the address of its registered office and the address of the business office of its resident agent, as changed, are identical. 7. The changes designated above were authorized by resolution duly adopted by its board of directors or trustees. Signed this 7th day of October, 1982 By: /S/ Frank K. Zinn Frank K. Zinn, Assistant Secretary CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION 1. The present name of the corporation is: Simpson Industries, Inc. 2. The corporation identification number (CID) assigned by the Bureau is 034-302 3. The location of its registered office is: 615 Griswold, (Suite 1414), Detroit, Michigan 48226 4. Article IV of the Articles of Incorporation is hereby amended to read as follows: The total authorized capital stock is 17,000,000 shares of common stock, par value $1.00 per share. Holders of common stock shall have equal voting rights and other rights and shall be entitled to one vote per share. No holder of capital stock of the corporation shall be entitled as such as a matter of right to subscribe for, or to purchase, any part of a new or additional issue of stock or any other reacquired shares of stock of any class whatsoever or of any securities convertible into stock of any class whatsoever, whether now or hereafter authorized and whether issued for cash or other consideration. 5(b) The foregoing amendment to the Articles of Incorporation was duly adopted on the 11th day of November, 1986. The amendment was duly adopted in accordance with Section 611(2) of the Act by the vote of the shareholders if a profit corporation, or by the vote of the shareholders or members if a nonprofit corporation, or by the vote of the directors if a nonprofit corporation organized on a non stock directorship basis. The necessary votes were cast in favor of the amendment. Signed this 11th day of November, 1986 By: /S/ R W Navarre Robert W. Navarre, President PAGE CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION 1. The present name of the corporation is: Simpson Industries, Inc. 2. The corporation identification number (CID) assigned by the Bureau is 034-302 3. The location of its registered office is: 615 Griswold, (Suite 1414), Detroit, Michigan 48226 4. Article IV of the Articles of Incorporation is hereby amended to read as follows: The total authorized capital stock is 35,000,000 shares of common stock, par value $1.00 per share. Holders of common stock shall have equal voting rights and other rights and shall be entitled to one vote per share. No holder of capital stock of the corporation shall be entitled as such as a matter of right to subscribe for, or to purchase, any part of a new or additional issue of stock or any other reacquired shares of stock of any class whatsoever or of any securities convertible into stock of any class whatsoever, whether now or hereafter authorized and whether issued for cash or other consideration. The Articles of Incorporation are hereby further amended by adding a new Article IX as set forth on the attached Exhibit A 5(b) The foregoing amendment to the Articles of Incorporation was duly adopted on the 23rd day of May, 1988. The amendment was duly adopted in accordance with Section 611(2) of the Act by the vote of the shareholders if a profit corporation, or by the vote of the shareholders or members if a nonprofit corporation, or by the vote of the directors if a nonprofit corporation organized on a nonstock directorship basis. The necessary votes were cast in favor of the amendment. Signed this 8th day of July, 1988 By: /S/ R W Navarre Robert W. Navarre, President PAGE EXHIBIT A ARTICLE IX (a) No director of the Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, provided that the foregoing shall not eliminate or limit the liability of a director for any of the following: (i) breach of the director's duty of loyalty to the Corporation or its shareholders; (ii) acts or omissions not in good faith or that involve intentional misconduct or knowing violation of law; (iii) a violation of Section 551(1) of the Michigan Business Corporation Act; (iv) a transaction from which the director derived an improper personal benefit; or (v) an act or omission occurring before the date on which this Article IX became effective. If the Michigan Business Corporation Act hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the corporation, in addition to the limitation on personal liability contained herein, shall be limited to the fullest extent permitted by the amended Michigan Business Corporation Act. No amendment or repeal of this Article IX 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 or repeal. (b)(1) Each individual who was or is made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that such individual, or an individual of whom such individual is the legal representative, (i) is or was a director or officer of the Corporation, or (ii) is or was serving (at such time as such individual is or was a director or officer of the Corporation) at the request of the Corporation as a director, officer, partner, trustee, administrator, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, partner, trustee, administrator, employee or agent or in any other capacity while serving as a director, officer, partner, trustee, administrator, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Michigan Business Corporation Act, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director or officer, and shall inure to the benefit of such indemnitee's heirs, executors and administrators; provided, however, that except as provided in paragraph (b)(2) hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter "advances"); provided, however, that, the payment of such expenses incurred by an indemnitee in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnitee, to repay all advances if it shall ultimately be determined by final judicial decision that such indemnitee is not entitled to be indemnified under this Section or otherwise. The Corporation may, by action of its Board of Directors or by action of any person to whom the Board of Directors has delegated such authority, provide indemnification to other employees and agents of the Corporation with the same scope and effect as the foregoing indemnification. (b)(2) If a claim under paragraph (b)(1) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit or in a suit brought by the Corporation to recover advances, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such claim. In any action brought by the indemnitee to enforce a right hereunder (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking has been tendered to the Corporation) it shall be a defense that, and in any action brought by the Corporation to recover advances the Corporation shall be entitled to recover such advances if, the indemnitee has not met the applicable standard of conduct set forth int eh Michigan Business Corporation Act. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Michigan Business Corporation Act, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its shareholders) that the indemnitee has not met such applicable standard of conduct, shall be a defense to an action brought by the indemnitee or create a presumption that the indemnitee has not met the applicable standard of conduct. In any action brought by the indemnitee to enforce a right hereunder or by the Corporation to recover payments by the Corporation of advances, the burden of proof shall be on the Corporation. (b)(3) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, Bylaw, agreement, vote of shareholders or disinterested directors or otherwise. (b)(4) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Michigan Business Corporation Act. PAGE CERTIFICATE AND PLAN OF MERGER OF SIMPSON INDUSTRIES (North Carolina), INC. INTO SIMPSON INDUSTRIES, INC. Pursuant to the provisions of Act 284, Public Acts of 1972, as amended, Simpson Industries, Inc., a Michigan corporation (the "Parent"), and Simpson Industries (North Carolina), Inc., a North Carolina corporation (the "Subsidiary"), execute the following Certificate: 1. Name of Constituent Corporations. The name of each constituent corporation and its corporation identification number ("CID") are Simpson Industries, Inc., CID 034-302, and Simpson Industries (North Carolina), Inc., a North Carolina corporation, which has no CID. 2. Surviving Corporation. The name of the surviving corporation and its corporation identification number are Simpson Industries, Inc., CID 034-302. 3. Stock of Constituent Corporations. As to each constituent corporation, the designation and number of outstanding shares of each class or series and the voting rights thereof are as follows: Designation and Class or Number of Out- Class or Series standing Shares Series Entitled in Each Class Entitled to Vote Name of Corporation or Series to Vote As a Class Simpson Industries, Inc. Common Stock, Common Common 9,736,001 shares outstanding Simpson Industries (North Carolina), Inc. Common Stock, Common Common $1.00 par value 25,000 shares outstanding The number of shares is not subject to change prior to the effective date of the merger. 4. Manner and Basis of Conversion of Stock. The terms and conditions of the merger, including the manner and basis of converting the shares of each constituent corporaiton into shares of the surviving corporation or other consideration, are as follows: (a) On the effective date of the merger, all shares of the outstanding stock of the Subsidiary shall be virtue of the merger by cancelled and retired and all rights in respect thereof shall cease. (b) Each outstanding share of Parent Common Stock shall remain one share of Common Stock of the surviving corporation, which shall be validly issued and outstanding, fully paid and nonassessable, and shall not be liable to any further call, nor shall the holder thereof be liable for any further payments with respect thereto. 5. Articles of Incorporation. No amendment to the Articles of Incorporation of the surviving corporation shall be effected by the merger. 6. Succession. On the effective date of the merger, the Subsidiary shall merge into a single corporation, which shall be the Parent, as the surviving corporation, and the separate existence of the Subsidiary shall cease. The Parent shall succeed to all of the properties, rights and other assets of the Subsidiary and shall be subject to all the liabilities of the Subsidiary, without further action by any corporation, in accordance with the Michigan Business Corporation Act. 7. Execution of Documents. The board of directors and officers of the Parent and the Subsidiary are authorized and directed to do all things necessary to carry out this Plan of Merger. 8. Adoption of Plan of Merger Under North Carolina Law. The merger is permitted by the laws of the State of North Carolina, the jurisdiction under which the Subsidiary is formed, and this Certificate and Plan of Merger was adopted and approved by the Subsidiary pursuant to and in accordance with the laws of that jurisdiction. 9. Parent's Ownership of Subsidiary. The Parent owns all of the outstanding shares of common stock of the Subsidiary as listed in Paragraph 3 of this Certificate and Plan of Merger. 10. Effective Date. This Plan of Merger shall be effective as of December 31, 1991. 11. Governing Law. This Plan of Merger shall be governed by Michigan law. Dated: December 17, 1991 SIMPSON INDUSTRIES, INC. By: /S/ R W Navarre Title: Chairman of the Board SIMPSON INDUSTRIES (North Carolina), Inc. By: /S/ R W Navarre Title: Chairman of the Board PAGE CT SYSTEM May 5, 1993 Thomas Pierson, Deputy Director Michigan Department of Commerce Corporation & Security Bureau 6546 Mercantile Way Lansing, Michigan 48909 Re: CHANGE OF REGISTERED OFFICE ADDRESS Dear Mr. Pierson: This letter is to certify that The Corporation Company has changed its address from: 615 Griswold Street, Detroit, Michigan 48226 to: 30600 Telegraph Road, Bingham Farms, Michigan 48025. We will notify all active corporations for which The Corporation Company is the resident agent of this change of address. Enclosed is our check for $52,000.00 to cover the filing fee for the 10,294 active profit and non-profit corporations for which your records indicate The Corporation Company is agent. This payment will include the fee for providing us with an alphabetical listing of the names of all the corporations for which the registered office has been changed. Also included in this payment is the fee for a clean-up list which we will request within 30 days of the filing. Please confirm in writing the date that this change was effectuated on your records. Thank you in advance for your cooperation. Very truly yours, /S/ Kenneth J. Uva Kenneth J. Uva Vice President Sworn before me this 5th day of May, 1993. /S/ Theresa Alfrin PAGE CERTIFICATE AND PLAN OF MERGER OF AUTOMATED PRODUCTION SERVICES, INC. INTO SIMPSON INDUSTRIES, INC. Pursuant to the provisions of Act 284, Public Acts of 1972, as amended, Simpson Industries, Inc., a Michigan corporation (the "Parent"), and Automated Production Services, Inc., a Delaware corporation (the "Subsidiary"), execute the following Certificate: 1. Name of Constituent Corporations. The name of each constituent corporation and its corporate identification number ("CID") are Simpson Industries, Inc., CID 034-302, and Automated Production Services, Inc., a Delaware corporation, which has no CID. 2. Surviving Corporation. The name of the surviving corporation and its corporation identification number are Simpson Industries, Inc., CID 034-302. 3. Stock of Constituent Corporations. As to each constituent corporation, the designation and number of outstanding shares of each class or series and the voting rights thereof are as follows: Designation and Class or Number of Out- Class or Series standing Shares Series Entitled in Each Class Entitled to Vote Name of Corporation or Series to Vote As a Class Simpson Industries, Inc. Common Stock, Common Common 11,914,674 Shares outstanding Automated Production Services, Inc. Common Stock, Common Common $1.00 par value 500 Shares outstanding The number of shares is not subject to change prior to the effective date of the merger. 4. Manner and Basis of Conversion of Stock. The terms and conditions of the merger, including the manner and basis of converting the shares of each constituent corporation into shares of the surviving corporation or other consideration, are as follows: (a) On the effective date of the merger, all shares of the outstanding stock of the Subsidiary shall be virtue of the merger by cancelled and retired and all rights in respect thereof shall cease. (b) Each outstanding share of Parent Common Stock shall remain one share of Common Stock of the surviving corporation, which shall be validly issued and outstanding, fully paid and nonassessable, and shall not be liable to any further call, nor shall the holder thereof be liable for any further payments with respect thereto. 5. Articles of Incorporation. No amendment to the Articles of Incorporation of the surviving corporation shall be effected by the merger. 6. Succession. On the effective date of the merger, the Subsidiary shall merge into a single corporation, which shall be the Parent, as the surviving corporation, and the separate existence of the Subsidiary shall cease. The Parent shall succeed to all of the properties, rights and other assets of the Subsidiary and shall be subject to all the liabilities of the Subsidiary, without further action by any corporation, in accordance with the Michigan Business Corporation Act. 7. Execution of Documents. The board of directors and officers of the Parent and the Subsidiary are authorized and directed to do all things necessary to carry out this Plan of Merger. 8. Adoption of Plan of Merger Under Delaware Law. The merger is permitted by the laws of the State of Delaware, the jurisdiction under which the Subsidiary is formed, and this Certificate and Plan of Merger was adopted and approved by the Subsidiary pursuant to and in accordance with the laws of that jurisdiction. 9. Parent's Ownership of Subsidiary. The Parent owns all of the outstanding shares of common stock of the Subsidiary as listed in Paragraph 3 of this Certificate and Plan of Merger. 10. Effective Date. This Plan of Merger shall be effective as of December 31, 1993. 11. Governing Law. This Plan of Merger shall be governed by Michigan law. Dated: December 20, 1993 SIMPSON INDUSTRIES, INC. By: /S/ Roy E. Parrott Title: President AUTOMATED PRODUCTION SERVICES, INC. By: /S/ Roy E. Parrott Title: President PAGE CERTIFICATE OF RENEWAL OF ASSUMED NAME 1. The corporate name, resident agent, and mailing address of its registered office are: Simpson Industries, Inc. The Corporation Company 30600 Telegraph Road Bingham Farms, MI 48025 Identification Number: 034302 2. The assumed name under which business is transacted is: Gladwin Machine Products Co. 3. The registration of the assumed name is extended for a period expiring on December 31 of the fifth full calendar year following the year in which this renewal is filed, unless sooner terminated. Signed this 8th day of October, 1996 By: /S/ James E. Garpow James E. Garpow, Treasurer PAGE CERTIFICATE OF RENEWAL OF ASSUMED NAME 1. The corporate name, resident agent, and mailing address of its registered office are: Simpson Industries, Inc. The Corporation Company 30600 Telegraph Road Bingham Farms, MI 48025 Identification Number: 034302 2. The assumed name under which business is transacted is: Middleville Manufacturing Co. 3. The registration of the assumed name is extended for a period expiring on December 31 of the fifth full calendar year following the year in which this renewal is filed, unless sooner terminated. Signed this 8th day of October, 1996 By: /S/ James E. Garpow James E. Garpow, Treasurer PAGE CERTIFICATE OF RENEWAL OF ASSUMED NAME 1. The corporate name, resident agent, and mailing address of its registered office are: Simpson Industries, Inc. The Corporation Company 30600 Telegraph Road Bingham Farms, MI 48025 Identification Number: 034302 2. The assumed name under which business is transacted is: Simpson Manufacturing Co. 3. The registration of the assumed name is extended for a period expiring on December 31 of the fifth full calendar year following the year in which this renewal is filed, unless sooner terminated. Signed this 8th day of October, 1996 By: /S/ James E. Garpow James E. Garpow, Treasurer PAGE CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION 1. The present name of the corporation is: Simpson Industries, Inc. 2. The identification number assigned by the Bureau is: 034-302. 3. The location of the registered office is: 30600 Telegraph Road, Bingham Farms, Michigan 48025 4. Article III of the Articles of Incorporation is hereby amended to read as follows: The total authorized capital is 55,000,000 shares of common stock, par value $1.00 per share. Holders of the common stock shall have equal voting rights and other rights and shall be entitled to one vote per share. No holder of capital stock of the corporation shall be entitled as such as a matter of right to subscribe for, or to purchase, any part of a new or additional issue of stock or any other reacquired shares of stock of any class whatsoever or of any securities convertible into stock of any class whatsoever, whether now or hereafter authorized and whether issued for cash or other consideration. 5. Not applicable. 6. The foregoing amendment to the Articles of Incorporation was duly adopted on the 22nd day of April, 1997, by the shareholders if a profit corporation, or by the shareholders or members if a nonprofit corporation at a meeting. The necessary votes were cast in favor of the amendment. Signed this 5th day of May, 1997 By: /S/ Roy E. Parrott President and Chief Executive Officer 7. Not applicable. PAGE CERTIFICATE OF RENEWAL OF ASSUMED NAME 1. The corporate name, resident agent, and mailing address of its registered office are: Simpson Industries, Inc. The Corporation Company 30600 Telegraph Road Bingham Farms, MI 48025 Identification Number: 034302 2. The assumed name under which business is transacted is: Marben Corporation 3. The registration of the assumed name is extended for a period expiring on December 31 of the fifth full calendar year following the year in which this renewal is filed, unless sooner terminated. Signed this 4th day of December, 1997 By: /S/ James E. Garpow James E. Garpow, Assistant Treasurer and Assistant Secretary PAGE CERTIFICATE OF CORRECTION Pursuant to the provisions of Act 284, Public Acts of 1972 (profit corporations), Act 162, Public Acts of 1982 (nonprofit corporations), or Act 23, Public Acts of 1993 (limited liability companies), the undersigned corporation or limited liability company executes the following Certificate: 1. The name of the corporation or limited liability company is: Simpson Industries, Inc. 2. The identification number assigned by the Bureau is: 034-302 3. The corporation or limited liability company is formed under the laws of the State of Michigan. 4. That Restated Articles of Incorporation were filed by the Bureau on April 1, 1981 and that said document requires correction. 5. Describe the inaccuracy or defect contained in the above named document: A phrase was inadvertently omitted from the second line on page 3 which should read, after the word "provisions"; "of the Bylaws or of these Articles of Incorporation inconsistent with such Bylaw provisions . . ." 6. The document is corrected as follows: ARTICLE VII The Board of Directors may from time to time adopt, alter, amend, supplement or repeal the By-Laws of the Corporation, provided that any By-Laws adopted, altered, amended, supplemented or repealed by the Board may be thereafter repealed, altered, amended, supplemented, or readopted by the shareholders of the Corporation, and provided further that Sections 2, 4, 5 and 6 of the Article IV and Article XI of the By-Laws shall not be altered, amended, supplemented or repealed, and no provisions of the By-Laws or of these Articles of Incorporation inconsistent with such By-Law provisions shall be adopted, except by affirmative vote of the holders of at least 66 2/3% of the outstanding shares of common stock of the Corporation entitled to vote generally in the election of directors. This Article VII shall not be altered, amended, supplemented or repealed except by affirmative vote of the holders of at least 66 2/3% of the outstanding shares of common stock of the Corporation entitled to vote generally in the election of directors. Signed this 28 day of January, 1998 By: /S/ R. E. Parrott Roy E. Parrott, President EX-3.2 3 BYLAWS, AS AMENDED As amended 12/8/97 BYLAWS OF SIMPSON INDUSTRIES, INC. ARTICLE I OFFICES 1.01 Principal Office. The principal office of the corporation shall be at such place within the State of Michigan as the Board of Directors shall determine from time to time. 1.02 Other Offices. The corporation also may have offices at such other places as the Board of Directors from time to time determines or the business of the corporation requires. ARTICLE II SEAL 2.01 Seal. The corporation may have a seal in such form as the Board of Directors may from time to time determine. The seal may be used by causing it or a facsimile to be impressed, affixed, reproduced or otherwise. ARTICLE III SHAREHOLDERS AND MEETINGS OF SHAREHOLDERS 3.01 Place of Meetings. All meetings of shareholders shall be held at the principal office of the corporation or at such other place as shall be determined by the Board of Directors and stated in the notice of meeting. 3.02 Annual Meeting. The annual meeting of shareholders of the corporation shall be held on such business day during the fourth month after the end of the fiscal year as the Board of Directors may fix. Directors shall be elected at each Annual Meeting and such other business transacted as may properly come before the meeting in accordance with these Bylaws. The Board of Directors acting by resolution may postpone and reschedule any previously scheduled annual meeting of shareholders. Any annual meeting of shareholders may be adjourned by the Chairman of the meeting or pursuant to a resolution of the Board of Directors. 3.03 Special Meetings. Special meetings of the shareholders may be called by the Chairman of the Board, or by the President, or pursuant to resolution of the Board of Directors. Business transacted at a special meeting of shareholders shall be confined to the purpose or purposes of the meeting as stated in the notice of the meeting. The Board of Directors acting by resolution may postpone and reschedule any previously scheduled special meeting of shareholders. Any special meeting of shareholders may be adjourned by the Chairman of the meeting or pursuant to resolution of the Board of Directors. 3.04 Notice of Meetings. Except as otherwise provided by statute, written notice of the time, place and purposes of a meeting of shareholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each shareholder of record entitled to vote at the meeting, either personally or by mailing such notice to his last address as it appears on the books of the corporation. No notice need be given of an adjourned meeting of the shareholders provided the time and place to which such meeting is adjourned are announced at the meeting at which the adjournment is taken and at the adjourned meeting only such business is transacted as might have been transacted at the original meeting. However, if after the adjournment a new record date is fixed for the adjourned meeting a notice of the adjourned meeting shall be given to each shareholder of record on the new record date entitled to notice as provided in this Bylaw. 3.05 Record Dates. The Board of Directors, the Chairman of the Board (if such office is filled) or the President may fix in advance a date as the record date for the purpose of determining shareholders entitled to notice of and to vote at a meeting of shareholders or an adjournment thereof, or to express consent or to dissent from a proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of a dividend or allotment of a right, or for the purpose of any other action. The date fixed shall not be more than 60 nor less than 10 days before the date of the meeting, nor more than 60 days before any other action. In such case only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting or adjournment thereof, or to express consent or to dissent from such proposal, or to receive payment of such dividend or to receive such allotment of rights, or to participate in any other action, as the case may be, notwithstanding any transfer of any stock on the books of the corporation, or otherwise, after any such record date. Nothing in this Bylaw shall affect the rights of a shareholder and his transferee or transferor as between themselves. 3.06 List of Shareholders. The Secretary of the corporation or the agent of the corporation having charge of the stock transfer records for shares of the corporation shall make and certify a complete list of the shareholders entitled to vote at a shareholders' meeting or any adjournment thereof. The list shall be arranged alphabetically within each class and series, with the address of, and the number of shares held by, each shareholder; be produced at the time and place of the meeting; be subject to inspection by any shareholder during the whole time of the meeting; and be prima facie evidence as to who are the shareholders entitled to examine the list or vote at the meeting. 3.07 Quorum. Unless a greater or lesser quorum is required in the Articles of Incorporation or by the laws of the State of Michigan, the shareholders present at a meeting in person or by proxy who, as of the record date for such meeting, were holders of a majority of the outstanding shares of the corporation entitled to vote at the meeting shall constitute a quorum at the meeting. Whether or not a quorum is present, a meeting of shareholders may be adjourned by a vote of the shares present in person or by proxy. When the holders of a class or series of shares are entitled to vote separately on an item of business, this Bylaw applies in determining the presence of a quorum of such class or series for transaction of such item of business. 3.08 Proxies. A shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting may authorize other persons to act for the shareholder by proxy. A proxy shall be signed by the shareholder or the shareholder's authorized agent or representative and shall not be valid after the expiration of three years from its date unless otherwise provided in the proxy. A proxy is revocable at the pleasure of the shareholder executing it except as otherwise provided by the laws of the State of Michigan. 3.09 Inspectors of Election. The Board of Directors, or the chairman presiding at any shareholders' meeting, may appoint one or more inspectors. If appointed, the inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine challenges or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the person presiding at the meeting, the inspectors shall make and execute a written report to the person presiding at the meeting of any of the facts found by them and matters determined by them. The report shall be prima facie evidence of the facts stated and of the vote as certified by the inspectors. 3.10 Voting. Each outstanding share is entitled to one vote on each matter submitted to a vote, unless otherwise provided in the Articles of Incorporation. Votes shall be cast in writing, signed by the shareholder or shareholder's proxy. When an action, other than the election of directors, is to be taken by a vote of the shareholders, it shall be authorized by a majority of the votes cast by the holders of shares entitled to vote thereon, unless a greater vote is required by the Articles of Incorporation or by the laws of the State of Michigan. Except as otherwise provided by the Articles of Incorporation, directors shall be elected by a plurality of the votes cast at any election. 3.11 Meetings of Shareholders. (A) Annual Meetings of Shareholders. (1) Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders (a) pursuant to the corporation's notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any shareholder of the corporation who was a shareholder of record at the time of giving of notice provided for in this Bylaw, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Bylaw. (2) For nominations or other business to be properly brought before an annual meeting by a shareholder pursuant to clause (c) of paragraph (A)( 1) of this Bylaw, the shareholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the corporation not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. Such shareholder's notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; (c) as to the shareholder giving the notice and beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such shareholder, as they appear on the corporation's books, and of such beneficial owner and (ii) the class and number of shares of the corporation which are owned beneficially and of record by such shareholder and such beneficial owner. (3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this Bylaw to the contrary, in the event that the number of directors to be elected to the Board of Directors of the corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation at least 70 days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by this Bylaw shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the corporation. (B) Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the corporation's notice of meeting (a) by or at the direction of the Board of Directors or (b) by any shareholder of the corporation who is a shareholder of record at the time of giving of notice provided hereunder, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Bylaw. Nominations by shareholders of persons for election to the Board of Directors may be made at such a special meeting of shareholders if the shareholder's notice required by paragraph (A)(2) of this Bylaw shall be delivered to the Secretary at the principal executive offices of the corporation not earlier than the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. (C) General. (1) Only such persons who are nominated in accordance with the procedures set forth in this Bylaw shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Bylaw. The Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Bylaw and, if any proposed nomination or business is not in compliance with this Bylaw, to declare that such defective proposal shall be disregarded. (2) For purposes of this Bylaw, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act. (3) Notwithstanding the foregoing provisions of this Bylaw, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights of shareholders to request inclusion of proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. ARTICLE IV DIRECTORS 4.01 (Section 1) Management of the Corporation. The business and affairs of the corporation shall be managed by the Board of Directors. The directors need not be residents of Michigan. 4.02 (Section 2) Number and Classification. The number of directors constituting the entire Board of Directors shall not be less than three nor more than twelve, the exact number of directors to be fixed from time to time only by vote of a majority of the entire Board. No decrease in the number of directors shall shorten the term of any incumbent director. Directors need not be shareholders of the Corporation 4.03 (Section 3) [Reserved]. 4.04 (Section 4) Term of Office. The directors 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 the annual meeting of shareholders held in 1977, directors of the first class shall be elected to hold office for a term expiring at the next annual meeting of shareholders; directors of the second class shall be elected to hold office for a term expiring at the second succeeding meeting of shareholders; and directors of the third class shall be elected to hold office for a term expiring at the third succeeding meeting of shareholders, or, in each case, when their respective successors are elected and have qualified or upon their earlier death, resignation or removal. At each annual election held after classification and the initial election of directors according to classes, the directors chosen to succeed those whose terms then expire shall be elected for a term expiring at the third succeeding annual meeting of shareholders, or when their respective successors are elected and have qualified, or upon their earlier death, resignation or removal. If the number of directors is changed, any increase or decrease in directors shall be apportioned among the classes so as to maintain all classes as nearly equal in number as possible and any individual director elected to any class shall hold office for a term which shall coincide with the term of such class. 4.05 (Section 5) Vacancies. Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board for any reason may be filled by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director, at any meeting of the Board. A director elected to fill a vacancy shall be elected to hold office until the expiration of the term of the class to which he has been elected and until his successor shall be duly elected or qualified or until his earlier death, resignation or removal. 4.06 (Section 6) Removal of Directors. Any or all of the directors may be removed from office at any time, but only for cause, by vote of a majority the shareholders entitled to vote generally in the election of directors or by vote of a majority of the entire Board of Directors, excluding the member whose removal is being voted upon. 4.07 (Section 7) Annual Meeting. The Board of Directors shall meet each year immediately after the annual meeting of the shareholders, or within three (3) days of such time excluding Sundays and legal holidays if such later time is deemed advisable, at the place where such meeting of the shareholders has been held or such other place as the Board may determine, for the purpose of election of officers and consideration of such business that may properly be brought before the meeting; provided, that if less than a majority of the directors appear for an annual meeting of the Board of Directors the holding of such annual meeting shall not be required and the matters which might have been taken up therein may be taken up at any later special or annual meeting, or by consent resolution. 4.08 (Section 8) Regular and Special Meetings. Regular meetings of the Board of Directors may be held at such times and places as the majority of the directors may from time to time determine at a prior meeting or as shall be directed or approved by the vote or written consent of all the directors. Special meetings of the Board may be called by the Chairman of the Board (if such office is filled) or the President and shall be called by the President or Secretary upon the written request of any two directors. 4.09 (Section 9) Notices. No notice shall be required for annual or regular meetings of the Board or for adjourned meetings, whether regular or special. Three days' written notice, or 24-hour telephonic notice, shall be given for special meetings of the Board, and such notice shall state or recite the time, place and purpose or purposes of the meeting. 4.10 (Section 10) Quorum. A majority of the Board of Directors then in office, or of the members of a committee thereof, constitutes a quorum for the transaction of business. The vote of a majority of the directors present at any meeting at which there is a quorum shall be the acts of the Board or of the committee, except as a larger vote may be required by the laws of the State of Michigan. A member of the Board or of a committee designated by the Board may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can communicate with each other. Participation in a meeting in this manner constitutes presence in person at the meeting. 4.11 (Section 11) Executive and Other Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, appoint three or more members of the Board as an executive committee to exercise all powers and authorities of the Board in management of the business and affairs of the corporation, except that the committee shall not have power or authority to: (a) Amend the Articles of Incorporation; (b) Adopt an agreement of merger or plan of share exchange; (c) Recommend to shareholders the sale, lease or exchange of all or substantially all of the corporation's property and assets; (d) Recommend to shareholders a dissolution of the corporation or revocation of a dissolution; (e) Amend these Bylaws; (f) Fill vacancies in the Board; or (g) Unless expressly authorized by the Board, declare a dividend or authorize the issuance of stock. The Board of Directors from time to time may, by like resolution, appoint such other committees of one or more directors to have such authority as shall be specified by the Board in the resolution making such appointments. The Board of Directors may designate one or more directors as alternate members of any committee who may replace an absent or disqualified member at any meeting thereof. 4.12 (Section 12) Dissents. A director who is present at a meeting of the Board of Directors, or a committee thereof of which the director is a member, at which action on a corporate matter is taken is presumed to have concurred in that action unless the director's dissent is entered in the minutes of the meeting or unless the director files a written dissent to the action with the person acting as secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the corporation promptly after the adjournment of the meeting. Such right to dissent does not apply to a director who voted in favor of such action. A director who is absent from a meeting of the Board, or a committee thereof of which he is a member, at which any such action is taken is presumed to have concurred in the action unless he files his written dissent with the Secretary of the corporation within a reasonable time after he has knowledge of the action. 4.13 (Section 13) Compensation. The Board of Directors, by affirmative vote of a majority of directors in office and irrespective of any personal interest of any of them, may establish reasonable compensation of directors for services to the corporation as directors or officers. ARTICLE V CAPITAL STOCK 5.01 Issuance of Shares. The shares of capital stock of the corporation shall be issued in such amounts, at such times, for such consideration and on such terms and conditions as the Board shall deem advisable, subject to the provisions of the Articles of Incorporation of the corporation and the further provisions of these Bylaws, and subject also to any requirements or restrictions imposed by the laws of the State of Michigan. 5.02 Certificates for Shares. The shares of the corporation shall be represented by certificates signed by the Chairman of the Board, President or a Vice President and also may be signed by the Treasurer, Assistant Treasurer, Secretary or Assistant Secretary of the corporation, and may be sealed with the seal of the corporation or a facsimile thereof. The signatures of the officers may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the corporation itself or its employee. In case an officer who has signed or whose facsimile signature has been placed upon a certificate ceases to be such officer before the certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of issuance. A certificate representing shares shall state upon its face that the corporation is formed under the laws of the State of Michigan; the name of the person to whom it is issued; the number and class of shares, and the designation of the series, if any, which the certificate represents; the par value of each share represented by the certificate, or a statement that the shares are without par value; and such other provisions as may be required by the laws of the State of Michigan. 5.03 Transfer of Shares. The shares of the capital stock of the corporation are transferable only on the books of the corporation upon surrender of the certificate therefor, properly endorsed for transfer, and the presentation of such evidences of ownership and validity of the assignment as the corporation may require. 5.04 Registered Shareholders. The corporation shall be entitled to treat the person in whose name any share of stock is registered as the owner thereof for purposes of dividends and other distributions in the course of business, or in the course of recapitalization, merger, plan of share exchange, reorganization, sale of assets, liquidation or otherwise and for the purpose of votes, approvals and consents by shareholders, and for the purpose of notices to shareholders, and for all other purposes whatever, and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not the corporation shall have notice thereof, save as expressly required by the laws of the State of Michigan. 5.05 Lost or Destroyed Certificates. Upon the presentation to the corporation of a proper affidavit attesting the loss, destruction or mutilation of any certificate or certificates for shares of stock of the corporation, the Board of Directors shall direct the issuance of a new certificate or certificates to replace the certificates so alleged to be lost, destroyed or mutilated. The Board of Directors may require as a condition precedent to the issuance of new certificates any or all of the following: (a) Presentation of additional evidence or proof of the loss, destruction or mutilation claimed; (b) Advertisement of loss in such manner as the Board of Directors may direct or approve; (c) A bond or agreement of indemnity, in such form and amount and with such sureties, or without sureties, as the Board of Directors may direct or approve; (d) The order or approval of a court or judge. ARTICLE VI NOTICES, WAIVERS OF NOTICE AND MANNER OF ACTING 6.01 Notices. All notices of meetings required to be given to shareholders, directors or any committee of directors may be given by mail, telecopy, telegram, radiogram or cablegram to any shareholder, director or committee member at his last address as it appears on the books of the corporation. Such notice shall be deemed to be given at the time when the same shall be mailed or otherwise dispatched. Telephonic notice may be given for special meetings of the Board as provided in Section 4.09. 6.02 Waiver of Notice. Notice of the time, place and purpose of any meeting of shareholders, directors or committee of directors may be waived by telecopy, telegram, radiogram, cablegram or other writing, either before or after the meeting, or in such other manner as may be permitted by the laws of the State of Michigan. Attendance of a person at any meeting of shareholders, in person or by proxy, or at any meeting of directors or of a committee of directors, constitutes a waiver of notice of the meeting except as follows: (a) In the case of a shareholder, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, or unless with respect to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, the shareholder objects to considering the matter when it is presented. (b) In the case of a director, unless he or she at the beginning of the meeting, or upon his or her arrival, objects to the meeting or the transacting of business at the meeting and does not thereafter vote for or assent to any action taken at the meeting. 6.03 Action Without a Meeting. Any action required or permitted at any meeting of shareholders or directors or committee of directors may be taken without a meeting, without prior notice and without a vote, if all of the shareholders or directors or committee members entitled to vote thereon consent thereto in writing before or after the action is taken. ARTICLE VII OFFICERS 7.01 Number. The Board of Directors shall elect or appoint a Chairman of the Board, a President, a Secretary and a Treasurer and such Vice Presidents, Assistant Secretaries and/or Assistant Treasurers as the Board of Directors may from time to time determine. The Chairman of the Board and the President shall be members of the Board of Directors. Any two or more of the above offices, except those of President and Vice President, may be held by the same person, but no officer shall execute, acknowledge or verify an instrument in more than one capacity if the instrument is required by law, the Articles of Incorporation or these Bylaws to be executed, acknowledged, or verified by one or more officers. 7.02 Term of Office, Resignation and Removal. An officer shall hold office for the term for which he is elected or appointed and until his successor is elected or appointed and qualified, or until his resignation or removal. An officer may resign by written notice to the corporation. The resignation is effective upon its receipt by the corporation or at a subsequent time specified in the notice of resignation. An officer may be removed by the Board with or without cause. The removal of an officer shall be without prejudice to his contract rights, if any. The election or appointment of an officer does not of itself create contract rights. 7.03 Vacancies. The Board of Directors may fill any vacancies in any office occurring for whatever reason. 7.04 Authority. All officers, employees and agents of the corporation shall have such authority and perform such duties in the conduct and management of the business and affairs of the corporation as may be designated by the Board of Directors and these Bylaws. ARTICLE VIII DUTIES OF OFFICERS 8.01 Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors and shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the Bylaws. The Chairman may also be the Chief Executive Officer of the corporation if so designated by the Board of Directors. 8.02 President. The President shall be the Chief Executive Officer of the corporation unless otherwise designated by the Board of Directors. The Chief Executive Officer shall see that all orders and resolutions of the Board are carried into effect and shall have the general powers of supervision and management over the business and affairs of the corporation customarily vested in the Chief Executive Officer. The President shall perform such other duties as may be prescribed from time to time by the Board of Directors and shall also assume the duties of the Chairman in the absence or disability of the Chairman of the Board. 8.03 Vice Presidents. The Vice Presidents shall have such powers and perform such duties as may be assigned to them by the Chairman of the Board, the President or the Board of Directors. In the absence or disability of the President, the Vice President designated by the Board shall perform his duties and exercise his powers and shall perform such other duties as the Board of Directors may from time to time prescribe. 8.04 Secretary. The Secretary shall attend all meetings of the Board of Directors and of shareholders and shall record all votes and minutes of all proceedings in a book to be kept for that purpose. He shall give or cause to be given notice of all meetings of the shareholders and of the Board of Directors. He shall keep in safe custody the seal of the corporation and, when authorized by the Board, affix the same to any instrument requiring it, and when so affixed it shall be attested by his signature, or by the signature of the Treasurer or an Assistant Secretary. The Secretary may delegate any of his duties, powers and authorities to one or more Assistant Secretaries, unless such delegation is disapproved by the Board. 8.05 Treasurer. The Treasurer shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books of the corporation; and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. He shall render to the Chief Executive Officer and directors, whenever they may require it, an account of his transactions as Treasurer and of the financial condition of the corporation. The Treasurer may delegate any of his duties, powers and authorities to one or more Assistant Treasurers, unless such delegation is disapproved by the Board of Directors. 8.06 Assistant Secretaries and Treasurers. The Assistant Secretaries, in order of their seniority, shall perform the duties and exercise the powers and authorities of the Secretary in case of the Secretary's absence or disability. The Assistant Treasurers, in the order of their seniority, shall perform the duties and exercise the powers and authorities of the Treasurer in case of the Treasurer's absence or disability. The Assistant Secretaries and Assistant Treasurers shall also perform such duties as may be delegated to them by the Secretary and Treasurer, respectively, and also such duties as the Board of Directors may prescribe. ARTICLE IX SPECIAL CORPORATE ACTS 9.01 Orders for Payment of Money. All checks, drafts, notes, bonds, bills of exchange and orders for payment of money 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. 9.02 Contracts and Conveyances. The Board of Directors of the corporation may in any instance designate the officer and or agent who shall have authority to execute any contract, conveyance, mortgage, proxy or other instrument on behalf of the corporation, or may ratify or confirm any execution. When the execution of any instrument has been authorized without specification of the executing officers or agents, the Chairman of the Board, the President or any Vice President, and the Secretary or Assistant Secretary or Treasurer or AssistantTreasurer, may execute the same in the name and on behalf of this corporation and may affix the corporate seal thereto. ARTICLE X BOOKS AND RECORDS 10.01 Maintenance of Books and Records. The proper officers and agents of the corporation shall keep and maintain such books, records and accounts of the corporation's business and affairs, minutes of the proceedings of its shareholders, Board and committees, if any, and such stock ledgers and lists of shareholders, as the Board of Directors shall deem advisable, and as shall be required by the laws of the State of Michigan and other states or jurisdictions empowered to impose such requirements. Books, records and minutes may be kept within or without the State of Michigan in a place which the Board shall determine. 10.02 Reliance on Books and Records. In discharging his duties, a director or an officer of the corporation, when acting in good faith, may rely upon information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by any of the following: (a) One or more directors, officers, or employees of the corporation, or of a business organization under joint control or common control, whom the director or officer reasonably believes to be reliable and competent in the matters presented; (b) Legal counsel, public accountants, engineers, or other persons as to matters the director or officer reasonably believes are within the person's professional or expert competence; or (c) A committee of the board of which he or she is not a member if the director or officer reasonably believes the committee merits confidence. A director or officer is not entitled to rely on the information set forth above if he or she has knowledge concerning the matter in question that makes reliance otherwise permitted unwarranted. ARTICLE XI AMENDMENTS 11.01 Amendments. Except as provided in the Articles of Incorporation of the corporation, these By-Laws may be altered, amended, supplemented or repealed by vote of a majority of the vote of a majority of the votes cast by shareholders entitled to vote for the election of directors, or by the Board of Directors, provided that the Board shall not alter, amend, supplement or repeal any By-Laws fixing or affecting their qualifications, classifications or term of office. Any By-Laws adopted, altered, amended, supplemented or repealed by the Board of Directors may be thereafter altered, amended, supplemented, repealed or readopted by the shareholders. ARTICLE XII INDEMNIFICATION 12.01 Non-Derivative Actions. Subject to all of the other provisions of this Article, the corporation shall indemnify 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 the person is or was a director or officer 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 expenses (including actual and reasonable attorneys' fees), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation or its shareholders, and with respect to any criminal action or proceeding, if the person had no reasonable cause to believe his or her 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 a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation or its shareholders, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. 12.02 Derivative Actions. Subject to all of the provisions of this Article, the corporation shall indemnify any person who was or is a party to or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director or officer 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 expenses (including attorneys' fees) and amounts paid in settlement actually and reasonably incurred by the person in connection with such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation or its shareholders. However, indemnification shall not be made for any claim, issue or matter in which such person has been found liable to the corporation unless and only to the extent that the court in which such action or suit was brought has determined upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnification for the reasonable expenses incurred. 12.03 Expenses of Successful Defense. To the extent that a person has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 12.01 or 12.02 of these Bylaws, or in defense of any claim, issue or matter in the action, suit or proceeding, the person shall be indemnified against actual and reasonable expenses (including attorneys' fees) incurred by such person in connection with the action, suit or proceeding and any action, suit or proceeding brought to enforce the mandatory indemnification provided by this Article XII. 12.04 Definition. For the purposes of Sections 12.01 and 12.02, "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, employee, or agent of the corporation which imposes duties on, or involves services by, the director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner the person 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 interests of the corporation or its shareholders" as referred to in Sections 12.01 and 12.02. 12.05 Contract Right; Limitation on Indemnity. The right to indemnification conferred in this Article XII shall be a contract right, shall apply to services of a director or officer as an employee or agent of the corporation as well as in such person's capacity as a director or officer, from the date he became or becomes such director or officer, and any repeal or modification of this section shall not adversely affect any right or protection existing at the time of such repeal or modification. Except as provided in Section 12.03 of these Bylaws, the corporation shall have no obligations under this Article XII to indemnify any person in connection with any proceeding, or part thereof, initiated by such person without authorization by the Board of Directors. 12.06 Determination That Indemnification is Proper. Any indemnification under Section 12.01 or 12.02 of these Bylaws (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the person is proper in the circumstances because the person has met the applicable standard of conduct set forth in Section 12.01 or 12.02, whichever is applicable, and upon an evaluation of the reasonableness of expenses and amount paid in settlement. Such determination and evaluation shall be made in any of the following ways: (a) By a majority vote of a quorum of the Board consisting of directors who are not parties or threatened to be made parties to such action, suit or proceeding; (b) If the quorum described in clause (a) above is not obtainable, then by a majority vote of a committee of directors duly designated by the Board of Directors and consisting solely of two or more directors who are not at the time parties or threatened to be made parties to the action, suit or proceeding; (c) By independent legal counsel in a written opinion which counsel shall be selected in one of the following ways: (i) by the board or its committee in the manner prescribed in subparagraph (a) or (b); or (ii) if a quorum of the board cannot be obtained under subparagraph (a) and a committee cannot be designated under subparagraph (b), by the board; or (d) By the shareholders, but shares held by directors or officers who are parties or threatened to be made parties to the action, suit or proceeding may not be voted. 12.07 Proportionate Indemnity. If a person is entitled to indemnification under Section 12.01 or 12.02 of these Bylaws 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 shall 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. 12.08 Expense Advance. The corporation shall pay or reimburse the reasonable expenses incurred by a person referred to in Section 12.01 or 12.02 of these bylaws who is a party or threatened to be made a party to an action, suit, or proceeding in advance of final disposition of the proceeding if all of the following apply: (a) The person furnishes the corporation a written affirmation of his or her good faith belief that he or she has met the applicable standard of conduct set forth in Section 12.01 or 12.02; (b) The person furnishes the corporation a written undertaking executed personally, or on his or her behalf, to repay the advance if it is ultimately determined that he or she did not meet the standard of conduct; (c) The authorization of payment is made in the manner specified in Section 12.06; and (d) A determination is made that the facts then known to those making the determination would not preclude indemnification under Section 12.01 or 12.02. The undertaking shall be an unlimited general obligation of the person on whose behalf advances are made but need not be secured. 12.09 Non-Exclusivity of Rights. The indemnification or advancement of expenses provided under this Article XII is not exclusive of other rights to which a person seeking indemnification or advancement of expenses may be entitled under a contractual arrangement with the corporation. However, the total amount of 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. 12.10 Indemnification of Employees and Agents of the Corporation. The corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the corporation to the fullest extent of the provisions of this Article XII with respect to the indemnification and advancement of expenses of directors and officers of the corporation. 12.11 Former Directors and Officers. The indemnification provided in this Article XII continues as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. 12.12 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 corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the corporation would have power to indemnify him against such liability under these Bylaws or the laws of the State of Michigan. 12.13 Changes in Michigan Law. In the event of any change of the Michigan statutory provisions applicable to the corporation relating to the subject matter of Article XII of these Bylaws, then the indemnification to which any person shall be entitled hereunder shall be determined by such changed provisions, but only to the extent that any such change permits the corporation to provide broader indemnification rights than such provisions permitted the corporation to provide prior to any such change. Subject to Section 12.15, the Board of Directors is authorized to amend these Bylaws to conform to any such changed statutory provisions. 12.14 Enforcement of Rights. Any indemnification or payment in advance of final disposition under this Article XII shall be made promptly, and in any event within 30 days, after written request to the corporation by the person seeking such indemnification or payment. The rights granted by this Article XII shall be enforceable by such person in any court of competent jurisdiction. 12.15 Amendment or Repeal of Article XII. No amendment or repeal of this Article XII shall apply to or have any effect on any director or officer of the corporation for or with respect to any acts or omissions of such director or officer occurring prior to such amendment or repeal. EX-10.24 4 August 22, 1997 Ronald R. Richter Group Vice President ABN AMRO Bank N.V. 135 South LaSalle Street Chicago, IL 60674 Dear Ron: As we have discussed per Section 2.2, reduction of Commitment Amounts, we are reducing the Commitment Amount of both Five-Year and 364-Day credit agreements dated June 17, 1997, to $25,000,000 each. This reduction will still leave a total of $50,000,000 between the agreements. Sincerely, James E. Garpow Assistant Treasurer and Assistant Secretary JEG/llc cc: V. Khilnani L. Flom EX-10.25 5 August 22, 1997 Ronald R. Richter Group Vice President ABN AMRO Bank N.V. 135 South LaSalle Street Chicago, IL 60674 Dear Ron: As we have discussed per Section 2.2, reduction of Commitment Amounts, we are reducing the Commitment Amount of both Five-Year and 364-Day credit agreements dated June 17, 1997, to $25,000,000 each. This reduction will still leave a total of $50,000,000 between the agreements. Sincerely, James E. Garpow Assistant Treasurer and Assistant Secretary JEG/llc cc: V. Khilnani L. Flom EX-10.27 6 LETTER AGREEMENT WITH VINOD M. KHILNANI SIMPSON INDUSTRIES, INC. 47603 Halyard Drive Plymouth, Michigan 48170-2429 September 1, 1997 Mr. Vinod M. Khilnani Simpson Industries, Inc. 47603 Halyard Drive Plymouth, Michigan 48170-2429 Dear Vinod: Simpson Industries, Inc. (the "Company") considers a dedicated and vital management team to be essential for protecting and enhancing the best interests of the Company and its shareholders. In this connection, the Company recognizes that the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders. Accordingly, the Board of Directors of the Company (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's senior management, including yourself, to their assigned duties without distraction in the face of the potentially disturbing circumstances arising from the possibility of change in control of the Company. This letter agreement sets forth the severance benefits which the Company agrees will be provided to you in the event your employment with the Company is terminated subsequent to a "Change in Control of the Company" (as defined in Section 3 hereof) under the circumstances described below. 1. Company's Right to Terminate. The Company may terminate your employment at any time, subject to providing the benefits hereinafter specified in accordance with the terms hereof and subject to any other benefits which the Company has agreed in writing to provide you. 2. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect until December 31, 1998; provided, however, that commencing on January 1, 1999 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless at least 30 days prior to such January 1 date, the Company shall have given notice that it does not wish to extend this Agreement; and provided, further, that this Agreement shall continue in effect beyond the term provided herein if a change in control of the Company as defined in Section 3 hereof, shall have occurred during such term. 3. Change in Control. No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below, and your employment by the Company shall thereafter have been terminated in accordance with Section 4 below. For purposes of this Agreement, a "Change in Control of the Company" shall mean a Change in Control of a nature that would be required to be reported in response to the requirements of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act") provided that, without limitation, such a Change in Control shall be deemed to have occurred if (i) any "person" [as such term is used in Sections 13(d) and 14(d) of the Exchange Act] is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25 percent or more of the combined voting power of the Company's then outstanding securities; or (ii) during any period of two consecutive calendar years, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof unless the election or the nomination for election by the Company's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. 4. Termination Following Change in Control. If any of the events described in Section 3 hereof constituting a Change in Control of the Company shall have occurred, you shall be entitled to the benefits provided in Section 5 hereof upon the subsequent termination of your employment within two years from the date of such Change in Control unless such termination is (a) because of your death, (b) by the Company for Cause or Disability or (c) by you other than for Good Reason. (i) Disability. Termination by the Company of your employment based on "Disability" shall mean termination because of your absence from your duties with the Company on a full time basis for 180 consecutive calendar days, as a result of your incapacity due to physical or mental illness, unless within 30 days after Notice of Termination (as hereinafter defined) is given following such absence you shall have returned to the full time performance of your duties. (ii) Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (A) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness), after a demand for substantial performance is delivered to you by the Chief Executive Officer of the Company or by the Chairman of the Board of Directors which specifically identifies the manner in which such executive believes that you have not substantially performed your duties, or (B) the willful engaging by you in misconduct which is materially injurious to the Company, monetarily or otherwise. For purposes of this paragraph, no act, or failure to act, on your part shall be considered "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a Notice of Termination from the Chief Executive Officer of the Company after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Chief Executive Officer, finding that in the good faith option of such executive you were guilty of conduct set forth above in clauses (A) or (B) of the first sentence of this paragraph and specifying the particulars thereof in detail. (iii) Good Reason. Termination by you of your employment for "Good Reason" shall mean termination based on: (A) the assignment to you of any duties inconsistent with your position, duties, responsibilities and status with the Company immediately prior to a Change in Control, or a change in your reporting responsibilities, titles or offices as in effect immediately prior to a Change in Control, or any removal of you from or any failure to re-elect you to any of such positions, except in connection with the termination of your employment for Cause or Disability or as a result of your death or by you other than for Good Reason; (B) a reduction by the Company in your base salary as in effect on the date hereof or as the same may be increased from time to time; (C) a failure by the Company to continue the Company's incentive bonus plans as the same may be modified from time to time but substantially in the form currently in effect (the "Plans"), or a failure by the Company to continue you as a participant in the Plans on at least the present basis or to pay you the amounts which you would be entitled to receive based on the Company's performance in accordance with the Plans; (D) the Company's requiring you to be based anywhere other than your present location or the Company's principal executive offices except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations, or in the event you consent to any such relocation, the failure by the Company to pay (or reimburse you for) all reasonable moving expenses incurred by you or to indemnify you against any loss realized in the sale of your principal residence in connection with any such relocation; (E) the failure by the Company to continue in effect any benefit, retirement or compensation plan, savings and profit sharing plan, stock ownership plan, stock purchase plan, stock option plan, life insurance plan, health- and-accident plan, dental plan or disability plan in which you are participating at the time of a Change in Control of the Company (or plans pro- viding you with no less favorable benefits), the taking of any action by the Company which would adversely affect your participation in or materially reduce your benefits under any of such plans or deprive you of any material fringe benefit enjoyed by you at the time of the Change in Control, or the failure by the Company to provide you with the number of paid vacation days to which you are then entitled in accordance with the Company's normal vacation policy in effect on the date hereof; (F) the failure by the Company to obtain the assumption of the agreement to perform this Agreement by any successor as contemplated in Section 6 hereof; or (G) any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph (iv) below [and, if applicable, paragraph (ii) above]; and for purposes of this Agreement, no such purported termination shall be effective. (iv) Notice of Termination. Any purported termination by the Company pursuant to paragraph (i) or (ii) above or by you pursuant to paragraph (iii) above shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (v) Date of Termination. "Date of Termination" shall mean (A) if your employment is terminated for Disability, 30 days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such 30 day period), (B) if your employment is terminated pursuant to paragraph (ii) above, the date specified in the Notice of Termination, and (C) if your employment is terminated for any other reason, the date on which a Notice of Termination is given; provided if within 30 days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 5. Compensation upon Termination or During Disability. (i) During any period that you fail to perform your duties hereunder as a result of incapacity due to physical or mental illness, you shall continue to receive your full base salary at the rate then in effect and any bonus payments under the Plans paid during such period until this Agreement is terminated pursuant to paragraph 4(i) hereof. Thereafter, your benefits shall be determined in accordance with the Company's long-term disability plan then in effect. (ii) If your employment shall be terminated for Cause, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligation to you under this Agreement. (iii) If your employment by the Company shall be terminated (A) by the Company other than for Cause or Disability or (B) by you for Good Reason, then you shall be entitled to the benefits provided below: (A) the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the amount, if any, with respect to any year then ended which pursuant to the Plans would have accrued to you on the basis of the Company's performance but which has not yet been paid to you; (B) From the date of Termination through a period of 24 months following the Change in Control or until your normal retirement date (whichever first occurs), you shall be entitled to receive as severance pay (i) a monthly payment equal to your monthly salary for the last full month immediately preceding termination, plus 1/12 of the average of the short-term incentive bonus payments paid to you or accrued with respect to each of the two years preceding termination; (ii) continued treatment as an "employee" under any stock option, employee benefit or other compensation arrangement (for the remaining period); (iii) full benefits under each employee welfare benefit plan in which you were entitled to participate immediately prior to date of termination; (iv) the right to immediately exercise in full all outstanding stock options; (v) full credit under the Company's retirement plans for service through the remaining period. (C) The Company shall also pay to you all legal fees and expenses incurred by you as a result of any controversy over this Agreement, to the extent you are successful in legal proceedings against the Company. (iv) Notwithstanding the foregoing, no payments shall be provided under subsection (iii) to the extent that they would (A) constitute an "excess parachute payment" under Section 280G of the Internal Revenue Code, (B) disqualify an employee benefit plan or trust under the Internal Revenue Code, or (C) cause an employee benefit plan or trust to violate the Employee Income Retirement Security Act of 1974, as amended. 6. Successors; Binding Agreement. (i) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be en- titled hereunder if you terminated your employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this paragraph 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (ii) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there be no such designee, to your estate. 7. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, returned receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention to the Chief Executive Officer of the Company with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 8. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board of Directors of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Michigan. 9. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 10. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Oakland County, Michigan in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. To confirm your acceptance, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, SIMPSON INDUSTRIES, INC. By:_________________________ Roy E. Parrott, President Agreed to this _____________ day of September _____, 1997 ____________________________ Vinod M. Khilnani EX-11 7 COMPUTATION OF EARNINGS PER SHARE Year Ended December 31 1997 1996 1995 Basic Average shares outstanding 18,123,475 18,066,552 17,971,417 ========== ========== ========== Net earnings applicable to common stock and common stock equivalents $10,079,000 $17,607,000 $15,302,000 ========== ========== ========== Earnings per share $.56 $.97 $.85 ========== ========== ========== Diluted Average shares outstanding 18,123,475 18,066,552 17,971,417 Net effect of dilutive stock options based on the treasury stock method using the average market price 78,363 48,525 70,059 Average number of common and common equivalent shares 18,201,838 18,115,077 18,041,475 ========== ========== ========== Net earnings applicable to common stock and common stock equivalents $10,079,000 $17,607,000 15,302,000 ========== ========== ========== Earnings per share $.55 $.97 $.85 ========== ========== ========== EX-21 8 SUBSIDIARIES OF REGISTRANT State or Jurisdiction of Percent Name of Subsidiary Incorporation Owned R.J.Simpson Manufacturing Company Ontario, Canada 100% (Canada) Ltd. Simpson Industries, S.A. de C.V. Federal District 99% of Mexico Dampers SAS Lyon, France 100% Simpson International (U.K.) Ltd. Halifax, England 100% EX-23 9 CONSENT OF INDEPENDENT ACCOUNTANTS The Board of Directors and Shareholders Simpson Industries, Inc.: We consent to incorporation by reference in the registration statement (No. 33-39679) on Form S-8 pertaining to the Simpson Industries, Inc. Savings Plan, to incorporation by reference in the registration statement (No. 33-39678) on Form S-8 pertaining to the Simpson Industries, Inc. - Fremont Operation Savings Plan, to incorporation by reference in the registration statement (No. 2-95425) on Form S-8 pertaining to the Simpson Industries, Inc. 1984 Stock Option Plan, to incorporation by reference in the registration statement (No. 33-62806) on Form S-8 pertaining to the 1993 Executive Long-Term Incentive Plan, and to incorporation by reference in the registration statement (No. 33-62802) 1993 Non-Employee Director Stock Option Plan, of our report dated January 27, 1998, relating to the consolidated balance sheets of Simpson Industries, Inc., and subsidiaries as of December 31, 1997, and 1996, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1997, which report appears in the December 31, 1997, annual report on Form 10-K of Simpson Industries, Inc. /S/ KPMG Detroit, Michigan March 24, 1998 EX-27.1 10 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S UNAUDITED FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDING DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1000 JAN-01-1997 12-MOS DEC-31-1997 DEC-31-1997 8,235 0 66,055 0 19,827 114,694 313,499 139,353 341,548 78,328 0 18,129 0 0 99,743 341,548 451,518 452,042 406,513 420,599 8,769 0 7,451 15,223 5,144 10,079 0 0 0 10,079 0.56 0.55
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