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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(Mark One)
<S> <C>
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Fee Required)
For the fiscal year ended December 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(No Fee Required)
For the transition period from _____________ to ____________
COMMISSION FILE NUMBER 333-46607
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WERNER HOLDING CO. (DE), INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 25-1581345
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1105 NORTH MARKET STREET, SUITE 1300
WILMINGTON, DELAWARE 19899
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (302) 478-5732
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the 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]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
(See definition of affiliate in Rule 405, 17 CFR 230.405).
Not applicable
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
As of December 31, 1998, there were 1,000 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE.
NONE
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INDEX TO ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1998
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PAGE NO.
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PART I
Item 1. Business 1
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for Company's Common Equity and Related Stockholder
Matters 7
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Item 8. Financial Statements and Supplementary Data 18
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 52
PART III
Item 10. Directors and Executive Officers of the Company 52
Item 11. Executive Compensation 54
Item 12. Security Ownership of Certain Beneficial Owners and
Management 59
Item 13. Certain Relationships and Related Transactions 61
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K 62
Signatures 67
</TABLE>
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FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain forward-looking statements
which include, among other things, discussions of the Company's (as defined)
business and results of operations, position in its industries, future
operations, liquidity and capital resources, as well as, the impact of the Year
2000 and the Company's plans to address the Year 2000 issue. These
forward-looking statements are based upon estimates and assumptions made by
management of the Company that although believed to be reasonable, are
inherently uncertain. Therefore, undue reliance should not be placed upon such
statements and estimates. No assurance can be given that any of such statements
or estimates will be realized and it is likely that actual results will differ
materially from those contemplated by such forward-looking statements.
------------------------
The information presented in this Annual Report on Form 10-K relates to Werner
Holding Co. (DE), Inc. (the "Registrant"), the Registrant's parent company
Werner Holding Co. (PA), Inc. ("Holding"), and Werner Co., a Pennsylvania
corporation and the Registrant's wholly-owned subsidiary ("Werner"). Holding, a
Pennsylvania corporation, has no substantial operations or assets other than its
investment in the Registrant. As used herein and except as the context otherwise
may require, the "Company" means Holding, the Registrant, Werner and all of
their consolidated subsidiaries.
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PART I
ITEM 1. BUSINESS.
OVERVIEW
Werner Holding Co. (DE), Inc. is a Delaware corporation, incorporated in
1988, that through its subsidiary, Werner Co., is engaged in the manufacture and
sale of climbing products and aluminum extruded products. Management believes
that Werner is the nation's largest manufacturer and marketer of ladders and
other climbing products. Werner's climbing products include aluminum, fiberglass
and wood ladders, scaffolding, stages and planks. The Werner brand name has a
nearly 50-year history, and management believes Werner is the most recognized
name by both professional and consumer end-users of climbing products. The
Company sells its products through a variety of distribution channels, such as
home improvement retailers, hardware dealers, professional supply houses and
specialty wholesale distributors. In addition to climbing products, Werner
manufactures and sells aluminum extruded products and more complex fabricated
components to a number of industries, including the automotive, electronics, and
architectural and construction industries.
The Recapitalization. On October 8, 1997, Holding entered into a
recapitalization agreement, which was amended and restated on October 27, 1997
(the "Recapitalization Agreement") with certain affiliates of INVESTCORP S.A.
("Investcorp") and certain other international investors organized by Investcorp
(such affiliates and investors are collectively referred to as the "Investors").
Pursuant to the Recapitalization Agreement on November 24, 1997 (the
"Recapitalization Closing Date"), Holding amended and restated its Articles of
Incorporation pursuant to which all of Holding's issued and outstanding capital
stock was reclassified. On the Recapitalization Closing Date, Holding then
redeemed certain shares of the reclassified stock (representing approximately
85% of the then outstanding shares of Holding) for cash totaling in the
aggregate approximately $330.7 million and the right to receive upon certain
conditions, an additional, one-time, lump sum payment (the "Market Participation
Right"). In addition, on the Recapitalization Closing Date, Holding sold to the
Investors shares of the newly created Class C, D and E Common Stock of Holding
for approximately $122.7 million (the "Cash Equity Investment"). The foregoing
transactions are collectively referred to herein as the "Recapitalization". As a
result of the Recapitalization, the pre-Recapitalization shareholders continue
to own approximately 33% of the outstanding voting equity of Holding and the
Investors own approximately 67% of the outstanding voting equity of Holding.
Financing for the Recapitalization, together with the repayment of certain
existing indebtedness of the Company was funded by (i) the Cash Equity
Investment, (ii) the offering of $135.0 million principal of 10% Senior
Subordinated Notes due 2007 of the Registrant (the "Notes") and (iii) $186.5
million of borrowings under a $320.0 million secured senior credit facility with
a syndicate of banks and financial institutions which included two term loans, a
revolving credit loan and a receivables line of credit (collectively, the
"Senior Credit Facility").
The MIICA Insurance Transfer. Prior to March 31, 1998, the Company operated
Manufacturers Indemnity and Insurance Company of America ("MIICA") as a Colorado
captive insurance company to provide product liability, workers compensation and
environmental insurance to Holding and its subsidiaries. In the first quarter of
1998, the Company undertook an extensive evaluation of the cost and efficiency
of providing such insurance through MIICA and determined to obtain coverage from
an external commercial insurance company. On March 31, 1998, the Company entered
into an arrangement with a commercial insurance provider under which MIICA
transferred its outstanding product and workers compensation liabilities for
losses incurred on or prior to March 31, 1998 to a commercial insurance provider
in exchange for the payment of approximately $42.4 million (collectively, the
"MIICA Insurance Transfer"). The Company paid this amount from the proceeds of
the liquidation of a substantial portion of MIICA's insurance fund investments.
Under the terms of the agreements governing the MIICA Insurance Transfer, the
commercial insurance provider assumed all MIICA's product and workers
compensation liabilities for losses incurred prior to March 31, 1998 up to an
aggregate limit of $75 million. Holding has agreed to indemnify the commercial
insurance company for losses in excess of this limit.
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In conjunction with the MIICA Insurance Transfer, the Company obtained
product liability and workers compensation insurance coverage for such losses
which occur on or after April 1, 1998 from an external commercial insurance
company. The Company believes that this insurance coverage is adequate for its
current and future anticipated business needs.
As a result of the MIICA Insurance Transfer, on July 8, 1998 the Company
discontinued the operations of and dissolved MIICA.
Subsidiary Consolidation. In the second quarter of 1998, the Company
undertook a review of the desirability and necessity of operating through all of
the Registrant's direct and indirect subsidiaries, including certain of those
subsidiaries who have guaranteed the Notes (the "Subsidiary Guarantors"). As a
result of this review, the Registrant determined to consolidate a number of its
direct and indirect subsidiaries through mergers into the Registrant or Werner.
On May 14, 1998, R.D. Arizona Ladder Corp. was merged with Werner, with Werner
remaining as the surviving corporation. On June 30, 1998, Ardee Investment Co.,
Inc. and Werner Financial Inc. merged with Werner Financial Inc., with Werner
Financial Inc. remaining as the surviving corporation. Werner Financial Inc. was
then merged with the Registrant with the Registrant remaining as the surviving
corporation. In addition, on June 30, 1998, the following subsidiaries of the
Registrant were merged with Werner, with Werner remaining as the surviving
corporation: Phoenix Management Services, Inc.; Werner Management Co.; Florida
Ladder Company; Kentucky Ladder Company and Gold Medal Ladder Company. On
December 31, 1998, Olympus Properties, Inc. was merged with Werner, with Werner
remaining as the surviving corporation. This consolidation of the Registrant's
subsidiaries was permitted under the Senior Credit Facility and the Indenture
governing the Notes and has no impact upon holders of the Notes or the
consolidated results of operations of the Company.
DESCRIPTION OF THE BUSINESS
The Company operates in two business segments, Climbing Products and
Extruded Products.
Climbing Products
Werner manufactures approximately 1,500 stock keeping units of fiberglass,
aluminum, and wood climbing products and accessories primarily under the Werner
brand name. The Company produces five principal categories of climbing
equipment: (i) single and twin stepladders; (ii) extension, straight, and
multipurpose ladders; (iii) attic ladders; (iv) stages, planks, work platforms,
and scaffolds; and (v) assorted ladder accessories. The majority of the
Company's climbing products sales are of either aluminum or fiberglass ladders.
Through its development of proprietary aluminum extrusion and fiberglass
pultrusion technology, the Company is a leader in the climbing products
industry.
The Company's sales and marketing network is directed by an experienced
in-house sales team of national and regional sales managers. The Company's
climbing products are sold directly and through approximately 50 independent,
commissioned manufacturers representative organizations, which sell to three
major distribution channels: (i) retail, (ii) hardware and (iii) professional.
The Company's sales organization is further supported by field merchandisers who
assist customers with product merchandising, point-of-purchase signage and sales
techniques.
Extruded Products
The Company is also a manufacturer of lineal extruded products and
highly-engineered fabricated parts. The Company targets extruded products
customers who require special metallurgy, tight tolerances, unusual shapes,
painting, finishing and fabrication requirements. Werner has implemented
sophisticated quality systems, and has been awarded ISO-9002 and QS-9000
certifications by Underwriters Laboratories.
Werner sells aluminum extrusions to customers in the automotive,
electronics, architectural and construction industries who use them in a broad
range of products including garage door openers,
2
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bicycle frames, pneumatic cylinders, material handling systems, electrical
connectors, curtain walls and office partitions.
The Company's extruded products sales organization is supplemented by
approximately 15 independent manufacturer's representative organizations. The
Company operates on a "make-to-order" basis with most customers.
SEGMENTS
See Note O entitled "Segment Information" in the Notes to Consolidated
Financial Statements which is incorporated herein by reference.
RAW MATERIALS AND SUPPLIERS
The Company is a major consumer of aluminum and has implemented various
hedging strategies to mitigate the impact of raw material price fluctuations.
The Company has contracts to provide most of its estimated aluminum requirements
with six principal suppliers. These contracts include stipulated prices with
provisions for price adjustments based on market prices. Five of these contracts
will be renegotiable in 1999 and one will be renegotiable in 2001. The Company
has several alternative sources for its aluminum requirements and does not
believe that any one of these contracts is material to the Company's operations.
To hedge the risk associated with price fluctuations for a certain
percentage of its forecasted aluminum raw material requirements, the Company
utilizes futures contracts. The Company's practice is not to hold derivative
commodity instruments, including aluminum futures contracts, for trading
purposes. These futures contracts are placed with established metal brokers and
range from three to fifteen months in duration. The Company has several
alternative brokers and does not believe that any one of these contracts is
material to the operations of the Company.
The Company also has contracts to purchase the basic materials required for
fiberglass pultrusion with its principal suppliers, which contracts are
typically one to three years in length. The Company has several alternative
sources for these basic materials and does not believe that any one of these
contracts is material to the operations of the Company.
PATENTS, TRADEMARKS AND LICENSES
The Company has over 50 patents worldwide. Werner's patents have remaining
terms ranging from 1 to 17 years. The Company believes that its patents are
important to its business operations but does not believe that the expiration or
loss of any of its patents would have a material adverse effect on the Company.
The Company also owns a number of trademarks, including Ladder Power(R),
Certified Werner Ladder Sales Expert(R) and Pro-Master Fiberglass Ladders(R).
The Company believes that its trademarks and its licenses are important to its
business operations, but does not believe that the expiration or loss of any
trademark or license would have a material adverse effect on the Company.
SENSITIVITY TO ECONOMIC CYCLES AND WEATHER CONDITIONS
A significant percentage of the Company's sales of climbing products is
attributable to new residential and nonresidential constructions in the United
States, which are affected by such cyclical factors as interest rates,
inflation, consumer spending habits and employment. Similarly, a significant
percentage of the Company's sales of extruded products is attributable to the
new and used automobile and automobile parts markets, which are also affected by
such cyclical factors. Sales of climbing equipment are also sensitive to
prevailing weather conditions. Unusually severe weather can reduce or defer
sales of climbing products by delaying elective home maintenance and
discouraging do-it-yourself projects, which account for a growing portion of the
Company's sales.
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BACKLOG
Due to the Company's ability to quickly meet production orders and its
production forecasting systems, the Company has no significant backlog in
climbing products. Most extruded products are produced on a make-to-order basis.
COMPETITION
Management estimates that, while it is the largest U.S. producer of
climbing products, there are approximately 15 principal competitors in 1998. The
Company competes in its climbing products segment on the basis of the variety
and quality of its climbing products and its customer service.
In its extruded products business, the Company competes with integrated
primary aluminum producers, large independent producers and numerous small
independent producers located throughout the United States. The Company competes
in its extruded products segment on the basis of its specialized extrusion
capabilities, customer service and price.
Some of the Company's competitors in the climbing products and the extruded
products markets have greater financial resources and are less leveraged than
the Company. Some of the Company's extruded products competitors are larger than
the Company.
EMPLOYEES
The Company had approximately 2,700 employees as of December 31, 1998. Of
the hourly employees, approximately 1,400 are covered by six collective
bargaining agreements, five of which expire in 2000 and one of which expires in
2002. The Company plans to renegotiate and renew union contracts as they expire.
The Company believes that its labor relations are good at all of its facilities.
DEPENDENCE ON KEY CUSTOMERS
The Company's 10 largest customers accounted for approximately 50% of the
Company's 1998 total net sales. The Company's two largest climbing products
customers, The Home Depot, and Lowe's accounted for approximately 21% and 11%,
respectively, of the Company's 1998 total net sales. The Company does not have
contractual agreements for the supply of products with most of its climbing
products customers. The loss of certain key customers or a significant decrease
in the volume of products supplied to any of such customers could have a
material adverse effect on the Company. No extruded products customer accounts
for more than 10% of the Company's 1998 total net sales.
ENVIRONMENTAL REGULATION
The Company's operations are subject to a wide variety of federal, state
and local laws and regulations governing, among other things, emissions to air,
discharge to waters, the generation, handling, storage, transportation,
treatment and disposal of hazardous substances and other materials, and employee
health and safety matters. Also, as an owner and/or operator of real property or
a generator of hazardous substances, the Company may be subject to environmental
cleanup liability, regardless of fault, pursuant to the Comprehensive
Environmental Response Compensation and Liability Act or analogous state laws.
The Company believes that its operations and facilities have been and are being
operated in compliance in all material respects with applicable environmental
and health and safety laws and regulations. However, the operation of
manufacturing plants entails risks of financial exposure for environmental
noncompliance and cleanup liabilities. Capital and operating expenditures for
environmental compliance in 1998 were not material. There can be no assurance
that the Company will not incur costs in the future for cleanup and other
remedial activities that will have a material adverse effect on the Company. In
addition, potentially significant expenditures could be required in order to
comply with evolving environmental and health and safety laws, regulations or
requirements that may be adopted or imposed in the future.
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ITEM 2. PROPERTIES.
The Company believes its manufacturing, warehouse and office facilities are
suitable, adequate and have sufficient manufacturing capacity for its current
requirements. The Company also believes that its facilities are being utilized
consistent with the Company's plans and do not have substantial excess capacity.
Werner's corporate headquarters offices are located at 93 Werner Rd.,
Greenville, Pennsylvania 16125. The Company's principal facilities consist of
the following:
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<CAPTION>
OWNED/ APPROX.
LOCATION PRINCIPAL USE LEASE EXPIRATION SQUARE FOOTAGE
-------- ------------- ---------------- --------------
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Greenville, PA.............. Office, Manufacturing, Distribution Owned 640,000
Franklin Park, IL........... Manufacturing, Distribution Owned 672,000
Anniston, AL................ Manufacturing, Distribution Owned 410,000
Carrolton, KY............... Manufacturing, Distribution Owned(1) 200,000
Union City, CA.............. Warehouse 10/31/00 38,600
Bell, CA.................... Warehouse 4/30/01 39,100
Phoenix, AZ................. Warehouse 9/30/00 18,500
Dallas, TX.................. Warehouse 6/30/99 16,480
Houston, TX................. Warehouse 2/28/01 40,000
Jefferson, LA............... Warehouse 4/30/00 7,800
Greensboro, NC.............. Warehouse 4/30/01 15,200
Maryland Hgts., MO.......... Warehouse 9/30/00 8,700
Franklin Park, IL........... Warehouse 7/31/99 100,000
Minneapolis, MN............. Warehouse 8/31/00 11,900
Anniston, AL................ Warehouse 2/28/00 75,000
</TABLE>
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(1) Subject to Variable Rate Industrial Building Revenue Bonds due 2015 issued
by the County of Carroll, Kentucky.
The Company's facilities at Greenville, PA, Franklin Park, IL, and
Anniston, AL serve both the climbing products and extruded products segments of
its business. All other facilities primarily serve the climbing products segment
of the Company's business.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved from time to time in various legal proceedings and
claims incident to the normal conduct of its business. Although it is impossible
to predict the outcome of any pending legal proceeding, the Company believes
that such legal proceedings and claims, individually and in the aggregate, are
either without merit, covered by insurance or adequately reserved for, and will
not have a material adverse effect on its financial condition or results of
operations.
In addition, in March 1998, an action was filed in the United States
District Court for the Western District of Pennsylvania entitled Elizabeth
Werner, et al v. Eric J. Werner, et al (Civil Action No. 98-503). The plaintiffs
of the action are Elizabeth Werner, Jeffrey R. Ackerman, individually and as
trustee under a trust for the benefit of Elizabeth Werner; Matthew W. Weiss (by
his parent Elizabeth Werner); Timothy F. Burke, Jr., as executor of the estate
of Anne L. Werner and as trustee of certain trusts under Anne L. Werner's last
will and testament; Edward A. Pollock; and all of such plaintiffs derivatively
on behalf of Holding. Defendants include the Management Shareholders, former
company officers Richard L. Werner, Robert I. Werner, Marc L. Werner, certain
non-management shareholders, Holding, the Registrant and certain of its
subsidiaries including, Werner Co. The action purports, in part, to be brought
derivatively on behalf of Holding and, in part, to be brought on behalf of
plaintiffs individually against the Company and certain current and former
officers and directors of the Company. The aspect of the case purportedly
brought on behalf of Holding alleges breaches of fiduciary duty by various
members of the Company's management arising out of, among other things, the
issuance of restricted
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stock to management of the Company in 1992 and 1993. Holding's Board of
Directors has referred the matter to a special committee of disinterested
directors to investigate the merits of the claim and to take appropriate actions
on behalf of Holding. After a detailed investigation, the special committee has
recommended that the derivative claims not be pursued by or on behalf of
Holding. Accordingly, all the defendants have made motions to dismiss the
derivative claims. Pursuant to an amendment to the complaint filed by plaintiffs
on March 29, 1999, the only remaining corporate defendant in this action is
Holding. Pursuant to the same amendment, the only remaining derivative claim
asserted by the plaintiffs is a claim for excessive compensation, not relating
to the restricted stock issuances. The aspect of the case purportedly brought on
behalf of plaintiffs individually against the Company appear to arise out of the
1992 and 1993 restricted stock issuances as well as certain alleged
misrepresentations by representatives of the Company. The plaintiffs seek
monetary damages in an unspecified amount. Management believes that the ultimate
resolution of this lawsuit will not have material adverse effect on the
Company's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no established public trading market for the Registrant's common
stock. As of December 31, 1998 all of the issued and outstanding shares of the
Registrant's common stock were held by Holding. Except with respect to the
Recapitalization, no dividends were paid by the Registrant in 1997 and 1998. The
Senior Credit Facility and the Indenture governing the Notes limit the Company's
ability to pay dividends on its capital stock.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial data is that of Holding, the
Registrant's parent company. Holding is a guarantor of the Notes and has no
substantial operations or assets other than its investment in the Registrant. As
a result, the consolidated financial condition and results of operations of
Holding are substantially the same as those of the Registrant. This table
contains selected financial data and is qualified by the more detailed
Consolidated Financial Statements and Notes thereto of Holding. The selected
financial data should be read in conjunction with the Consolidated Financial
Statements and Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere herein.
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FISCAL YEARS ENDED DECEMBER 31
------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
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OPERATING DATA:
Net sales.................................. $436.1 $416.3 $366.9 $336.0 $328.8
Cost of sales 322.5 303.4 268.0 251.4 243.9
------ ------ ------ ------ ------
Gross profit............................ 113.6 112.9 98.9 84.6 84.9
General and administrative expenses(a)..... 31.6 27.6 23.8 22.2 19.4
Selling and distribution expenses.......... 50.2 49.1 47.9 47.2 38.0
Recapitalization expense(b)................ -- 22.7 -- -- --
Non-cash compensation charge(c) -- 78.5 -- -- --
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Operating profit (loss).................... 31.8 (65.0) 27.2 15.2 27.5
MIICA investment gains (losses)(d)......... (1.5) (14.6) 9.5 1.3 (4.0)
Other income (expense), net................ 2.2 (1.2) 0.2 2.7 1.1
------ ------ ------ ------ ------
Income (loss) before interest and taxes.... 32.5 (80.8) 36.9 19.2 24.6
Interest expense(e)........................ 30.6 9.0 7.5 7.2 5.5
------ ------ ------ ------ ------
Income (loss) before provision for income
taxes................................... 1.9 (89.8) 29.4 12.0 19.1
Income taxes............................... 1.8 0.7 10.0 5.1 7.8
------ ------ ------ ------ ------
Income (loss) before extraordinary
charge.................................. 0.1 (90.5) 19.4 6.9 11.3
Extraordinary charge(f).................... -- -- -- 0.6 --
------ ------ ------ ------ ------
Net income (loss).......................... $ 0.1 $(90.5) $ 19.4 $ 6.3 $ 11.3
====== ====== ====== ====== ======
</TABLE>
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<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and equivalents....................... $ 9.4 $ 3.1 $ 1.0 $ 0.6 $ 0.1
Insurance fund investments(g).............. -- 58.6 80.9 68.2 46.1
Working capital............................ 54.0 30.1 49.2 59.4 42.5
Total assets............................... 212.8 288.2 261.2 234.6 199.8
Reserve for product liability and workers'
compensation claims (including
current)(g)............................. 14.3 49.6 45.3 41.5 36.7
Total debt (including current
maturities)............................. 279.9 322.5 83.4 83.5 60.4
Common shareholders' equity (deficit)(h)... (154.4) (153.7) 75.1 62.1 49.8
OTHER FINANCIAL DATA:
Cash flow provided by (used in) operating
activities.............................. $ 51.8 $ 17.2 $ 19.5 $ (1.4) $ 18.3
Cash flows used in investing activities.... (2.6) (3.6) (15.8) (18.9) (11.1)
Cash flows (used in) provided by financing
activities.............................. (42.9) (11.5) (3.3) 20.8 (15.0)
Depreciation and amortization(i)........... 17.5 11.2 9.1 7.7 7.0
Capital expenditures....................... 8.9 11.7 13.0 12.5 8.1
Dividends declared per share............... -- 10.50 11.25 10.20 14.75
EBITDA(j).................................. 51.5 (69.6) 46.0 26.9 31.6
</TABLE>
See Notes to Selected Consolidated Historical Financial Data.
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NOTES TO SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
(DOLLARS IN MILLIONS)
<TABLE>
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(a) General and administrative expenses in 1998 include $6.6 of
amortization of certain non-recurring expenses associated
with the Recapitalization.
(b) Represents Recapitalization expense of $22.7 consisting of
investment banker fees, transaction fees, legal and
accounting fees, transaction bonuses paid to certain Company
employees and other miscellaneous costs incurred in
connection with the Recapitalization.
(c) Reflects the non-recurring non-cash compensation charge (and
a corresponding credit to shareholders' equity) of $78.5
associated with (a) the accelerated vesting, as a result of
the Recapitalization, of outstanding restricted
Pre-Recapitalization Class B Stock previously granted to
certain key management employees; (b) the accelerated
vesting, as a result of the Recapitalization, of outstanding
restricted Pre-Recapitalization Class B Stock previously
granted to a former key management employee upon his
separation from the Company; and (c) changes in the terms of
the plan under which such stock was granted.
(d) 1998 includes three months of MIICA investment losses
(January 1, 1998 through March 31, 1998, the date of the
MIICA Insurance Transfer).
(e) Reflects a full year of interest expense in 1998 on the debt
incurred to finance the Recapitalization.
(f) Reflects expenses incurred in regard to the early
extinguishment of debt, net of income tax benefits of $0.4.
(g) Decreases in 1998 are primarily due to the MIICA Insurance
Transfer which occurred on March 31, 1998.
(h) The shareholders' deficit at December 31, 1997 was the
result of the Recapitalization and the recording of related
expenses, net of income tax benefits. In connection with the
Recapitalization, the Investors made an equity investment of
approximately $122.7, representing approximately 67% of the
outstanding capital stock and voting power of the Company.
(i) Depreciation and amortization is comprised of the following
components in 1998: depreciation of property, plant and
equipment, $8.5; amortization of certain non-recurring
expenses associated with the Recapitalization, $6.6; and
other amortization, $2.4. Depreciation and amortization
excludes amortization of deferred financing fees and
original issue discount.
(j) EBITDA represents earning before interest, income taxes,
depreciation and amortization. EBITDA for 1998 also excludes
$1.5 million of accounts receivable securitization expense.
EBITDA is presented because it is commonly used by certain
investors to analyze and determine a company's ability to
service and/or incur debt. However, EBITDA should not be
considered in isolation or as a substitute for net income,
cash flows or other income or cash flows data prepared in
accordance with generally accepted accounting principles or
as a measure of a company's profitability or liquidity.
EBITDA for 1997 includes: (a) the non-recurring non-cash
compensation charge of $78.5; (b) Recapitalization expense
of $22.7 and other non-recurring adjustments.
</TABLE>
9
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Consolidated Historical Financial Data," and the Consolidated Financial
Statements of the Company and the notes thereto included elsewhere in this
Annual Report on Form 10-K.
GENERAL
Werner is a manufacturer and marketer of ladders and other climbing
products. The Company also manufactures and sells aluminum extruded products and
more complex fabricated components.
The Recapitalization. Pursuant to the Recapitalization Agreement, on
November 24, 1997, the Company (a) amended and restated its Articles of
Incorporation pursuant to which the Company's capital stock was reclassified,
(b) redeemed for cash certain shares of the reclassified stock totaling $330.7
million and (c) sold to the Investors shares of new created Class C, D and E
Common Stock of the Company totaling $122.7 million. As a result of the
Recapitalization, the Pre-Capitalization shareholders continue to own
approximately 33% of the outstanding voting equity of the Company and the
Investors own approximately 67% of the outstanding voting equity of the Company.
Recapitalization Financing. The Recapitalization was funded by (a) $186.5
million of borrowings under the Senior Credit Facility, (b) the issuance of
$135.0 million of Notes and (c) proceeds from the sale of certain shares of the
Company's stock to the Investors.
Recapitalization Accounting. The transaction was accounted for as a
recapitalization and as such, the historical basis of the Company's assets and
liabilities was not affected. Recapitalization related costs totaling $22.7
million were expensed and reflected as a component of operating income in 1997.
The MIICA Insurance Transfer. In the first quarter of 1998, the Company
obtained commercial insurance coverage for its product liability and workers'
compensation claims as opposed to providing insurance for such claims through
MIICA, the Issuer's captive insurance subsidiary. On March 31, 1998 the Company
entered into the MIICA Insurance Transfer pursuant to which a commercial
insurance provider agreed to assume product liability and workers' compensation
losses which occurred on or before March 31, 1998 and to extinguish the
Company's liability in regard to such losses. The Company paid approximately
$42.4 million for this insurance coverage from the proceeds of the liquidation
of certain of MIICA's insurance fund investments. Immediately prior to the MIICA
Insurance Transfer, the Company had a reserve for such losses of approximately
$47.5 million. As a result of the MIICA Insurance Transfer the Company
recognized a gain of approximately $4.5 million, which is included in other
income (expense), net. Such gain is net of costs incurred to discontinue the
operations of MIICA. MIICA was dissolved in the third quarter of 1998. The
Company has also obtained third party insurance coverage, subject to certain
deductible provisions, for product liability and workers' compensation claims
which occur on or after April 1, 1998.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net Sales. Net sales increased $19.8 million, or 4.8%, to $436.1 million
for 1998 from $416.3 million for 1997.
Net sales of climbing products increased $15.8 million, or 5.0%, to $330.0
million in 1998 from $314.2 million in 1997. This increase was primarily due to
increased sales volume in both fiberglass and aluminum climbing products, which
was achieved through the ongoing successful growth of the Com-
10
<PAGE> 13
pany's customer base, new product development and increased marketing efforts,
particularly to large home improvement retailers.
Net sales of extruded products increased $4.0 million, or 3.9%, to $106.1
million for 1998 from $102.1 million for 1997. The increase is due to growth of
extrusions sold to customers in the building products and transportation
sectors.
Gross Profit. Gross profit increased slightly to $113.6 million for 1998
from $112.9 million for 1997. Gross profit margin was 26.1% for 1998 and 27.1%
for 1997, reflecting general market conditions.
General and Administrative Expense. General and administrative expense
increased $4.0 million, or 14.4%, to $31.6 million for 1998 from $27.6 million
for 1997. This increase was primarily due to the amortization of certain
non-recurring costs associated with the Recapitalization of $6.6 million offset
by decreases in certain costs of $2.6 million.
Selling and Distribution Expense. Selling and distribution expense
increased only $1.1 million, or 2.2%, to $50.2 million for 1998 from $49.1
million for 1997.
Non-Cash Compensation Charge. A non-cash compensation charge of $78.5
million, primarily relating to the accelerated vesting of Pre-Recapitalization
Class B Stock in connection with the Recapitalization, was recorded in 1997.
Operating Profit (Loss). Operating profit increased $96.8 million to $31.8
million for 1998 from an operating loss of $65.0 million in 1997. Operating
profit of the Climbing Products segment decreased $1.3 million or 3.5% to $37.1
million in 1998 from $38.4 million in 1997. This decrease was primarily
attributable to increases in sales-based advertising and promotional expense.
Operating profit of the Extruded Products segment increased $0.9 million or
14.9% to $6.9 million from $6.0 million in 1997. This increase was primarily
attributable to the growth of extrusions sold to customers in the building and
transportation sectors. The remaining increase in operating profit of $97.2
million between 1998 and 1997 was primarily the result of the Recapitalization
expense and the non-cash compensation charge incurred in 1997.
Other Income (Expense), Net. Other income (expense), net decreased by
$16.5 million from net expense of $15.8 million for 1997 to net income of $0.7
million in 1998. The decrease in expense is primarily attributable to a decrease
of $13.1 million in MIICA investment losses, between 1998 and 1997, and the gain
of $4.5 million recognized on the MIICA Insurance Transfer offset by provisions
for remaining MIICA assets and other expenses.
Interest Expense. Interest expense increased $21.6 million to $30.6
million for 1998 from $9.0 million for 1997. The increase was primarily due to
the additional interest on the debt resulting from the Recapitalization.
Income Taxes. Income taxes increased $1.1 million to $1.8 million for 1998
from $0.7 million for 1997. This increase was primarily due to: an increase in
taxable income in 1998 as compared to the year ended 1997 due to the inclusion
in 1997 of charges associated with the Recapitalization; the inclusion in 1997
of the non-cash compensation charge of $78.5 million which was not deductible
for income tax purposes; and an increase of $1.7 million in the valuation
allowance in 1998 relating to the realization of certain deferred tax assets.
Net Income. Net income was $0.1 million for 1998 compared to a net loss of
$90.5 million for 1997. The change was due to a combination of the above
factors.
YEAR ENDED DECEMBER 31, 1997 AS COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net Sales. Net sales increased $49.4 million, or 13.5%, to $416.3 million
for the year ended December 31, 1997 from $366.9 million for the year ended
December 31, 1996.
11
<PAGE> 14
Net sales of climbing products increased $36.9 million, or 13.3%, to $314.2
million for the year ended December 31, 1997 from $277.3 million for the year
ended December 31, 1996. The increase in net sales of climbing products was
primarily due to significant growth in the volume of fiberglass and aluminum
step and extension ladders sold, particularly to large home improvement
retailers.
Net sales of extruded products increased $12.5 million, or 14.0%, to $102.1
million for the year ended December 31, 1997 from $89.6 million for the year
ended December 31, 1996. This increase was primarily due to an increase in sales
volume. Sales volume in the year ended December 31, 1996 was adversely impacted
by the Company's strategic repositioning plan initiated in 1995.
Gross Profit. Gross profit increased $14.0 million, or 14.2%, to $112.9
million for the year ended December 31, 1997 from $98.9 million for the year
ended December 31, 1996. This increase was primarily due to increased sales
volume, as described above, partially offset by the higher cost of wood raw
materials. Gross profit margin for the year ended December 31, 1997 and 1996 was
27.1% and 27.0%, respectively.
General and Administrative Expense. General and administrative expense
increased $3.8 million, or 16.0%, to $27.6 million for the year ended December
31, 1997 from $23.8 million for the year ended December 31, 1996. This increase
was primarily due to $2.2 million in non-recurring retirement bonuses.
Selling and Distribution Expense. Selling and distribution expense
increased $1.2 million, or 2.5%, to $49.1 million for the year ended December
31, 1997 from $47.9 million for the year ended December 31, 1996. This increase
was primarily the result higher variable expenses due to increased sales volume.
For the year ended December 31, 1997, selling and distribution expense as a
percentage of net sales decreased to 11.8% from 13.1% for the year ended
December 31, 1996. This decrease was primarily due to reduced costs resulting
from the closing of the Youngstown, OH warehouse as well as lower commissions
paid to the Company's manufacturers' representatives resulting from a change in
the Company's commission plan in the third quarter of 1997.
Operating Profit (Loss). Operating profit decreased $92.2 million from an
operating profit in 1996 of $27.2 million to an operating loss in 1997 of $65.0
million. Operating profit of the Climbing Products segment increased $8.2
million or 27.1% to $38.4 million in 1997 from $30.2 million in 1996. This
increase was primarily attributable to sales volume increases offset by
increases in sales based advertising and promotional expenses. Operating profit
of the Extruded Products segment increased $1.7 million or 38.3% to $6.0 million
in 1997 from $4.3 million in 1996. This increase was primarily attributable to
sales volume increases. Sales volumes in 1996 were adversely impacted by the
Company's strategic repositioning plan initiated in 1995. The remaining decrease
in operating profit of $102.1 million between 1997 and 1996 was primarily the
result of the Recapitalization expense and non-cash compensation charge incurred
in 1997.
Non-Cash Compensation Charge. The non-recurring non-cash compensation
charge (and a corresponding credit to shareholders' equity) of $78.5 million in
1997 represents non-recurring charges in connection with the Recapitalization as
follows: (a) the accelerated vesting, as a result of the Recapitalization, of
outstanding restricted Pre-Recapitalization Class B Stock previously granted to
certain key management employees; (b) the accelerated vesting, as a result of
the Recapitalization, of outstanding restricted Pre-Recapitalization Class B
Stock previously granted to a former key management employee resulting from a
change in terms of such stock upon his separation from the Company; and (c)
changes in the terms of the plan under which such stock was granted.
Other Income (Expense), Net. Other income (expense), net decreased $25.5
million to ($15.8) million for the year ended December 31, 1997 compared to $9.7
million for the year ended December 31, 1996. This change was primarily due to
$14.6 million of investment losses incurred by MIICA during the year ended
December 31, 1997 as compared to MIICA investment income of $9.5 million for the
year ended December 31, 1996. The losses for the year ended December 31, 1997
were
12
<PAGE> 15
primarily due to losses of approximately $8.8 million on special expiration
price options (trading securities) resulting from either selling or exercising
such options or by allowing them to expire and approximately $9.9 million of
losses relating to the write-down for the other than temporary decline in market
value of certain investments classified as available-for-sale.
Interest Expense. Interest expense increased $1.5 million to $9.0 million
for the year ended December 31, 1997 from $7.5 million for the year ended
December 31, 1996. The increase was primarily due to the additional interest on
the debt resulting from the Recapitalization.
Income Taxes. Income taxes decreased $9.3 million to $0.7 million for the
year ended December 31, 1997 from $10.0 million for the year ended December 31,
1996. This decrease was primarily due to lower taxable income for the year ended
December 31, 1997 as compared to the year ended December 31, 1996 due to charges
associated with the Recapitalization and increased interest expense.
Additionally, during the year ended December 31, 1997 the Company recorded a
non-cash compensation charge of $78.5 million which was not deductible for
income tax purposes.
Net Income (Loss). The net loss for 1997 was $90.5 million, a $109.9
million decrease from net income of $19.4 million for 1996. The net loss for
1997 includes (on a pretax basis) a non-cash compensation charge of $78.5
million, Recapitalization expense of $22.7 million and $14.6 million of
investment losses attributable to MIICA, all of which are discussed above. For
1996, net income includes pretax investment income attributable to MIICA of $9.5
million. Excluding the after tax effect of these items, net income increased
$2.9 million or 22.0% to $16.1 million for 1997 from $13.2 million for 1996.
This increase was primarily due to the increase in sales and gross profit
described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company incurred a significant amount of indebtedness in connection
with the Recapitalization. At December 31, 1998, the Company had approximately
$279.9 million of consolidated indebtedness, including $131.4 million of
indebtedness, net of the original issue discount, pursuant to the Notes, and
$143.5 million of borrowings under the Senior Credit Facility. The Senior Credit
Facility provides for $145.0 million of Term Loan Facilities, and a $100.0
million Revolving Facility. At December 31, 1998 $94.2 million was available for
borrowing under the Revolving Facility.
In May 1998, the Company entered into a five-year $50.0 million receivables
purchase agreement with a financial institution and its affiliate (the
"Receivables Purchase Agreement") and refinanced outstanding amounts borrowed
under the receivables portion of the Senior Credit Facility. As of December 31,
1998, the Company sold $66.3 million of accounts receivable in exchange for
$20.0 million in cash and an undivided interest in the accounts receivable of
$46.3 million. As of December 31, 1998, an additional $21.5 million of financing
is available under the Receivables Purchase Agreement.
The Company satisfies its debt service requirements and meets its
operating, working capital and capital expenditure needs through a combination
of operating cash flow and funds available under the Senior Credit Facility and
the Receivables Purchase Agreement.
In connection with the Recapitalization, the Company refinanced all of its
existing debt except for the Variable Rate Demand Industrial Building Revenue
Bonds due 2015 (the "IRBs") with the proceeds from the Notes, and the Senior
Credit Facility.
Net cash flows from operating activities increased $34.6 million to $51.8
million for the year ended December 31, 1998 from $17.2 million for the year
ended 1997. This is primarily attributable to: the decrease in operating working
capital (receivables, inventory, accounts payable and accrued expenses) of $9.3
million; the decrease in the payment of product liability and workers'
compensation claims of $7.3 million; and the net proceeds from the sale of
accounts receivable under the Receivables Purchase Agreement of $20.0 million.
Operating working capital also primarily decreased as a result of this sale of
receivables. The payment of product liability and workers' compensation claims
decreased as a result of the MIICA Insurance Transfer. Net cash flows from
operating activities decreased $2.3 million to
13
<PAGE> 16
$17.2 million for the year ended December 31, 1997 from $19.5 million for the
year ended December 31, 1996. This is primarily attributable to the increase in
operating profit (exclusive of the non-cash compensation charge and
Recapitalization expenses in 1997) from 1996 to 1997, which was more than offset
by the increase in operating working capital of $14.8 million and the 1997
payment of supplemental retirement bonuses of $2.2 million. Operating working
capital generally increased as a result of the growth in sales. Cash flow used
in investing activities decreased $1.0 million to $2.6 million in 1998 from $3.6
million in 1997. This decrease was due primarily to a decrease in capital
expenditures of $1.7 million. Cash flow used in investing activities decreased
$12.2 million to $3.6 million in 1997 from $15.8 million in 1996. This decrease
was due primarily to an increase in the sales of the debt and equity securities
of MIICA in connection with its process of realigning its investment portfolio,
as well as the Company's sale of real estate and a reduction in capital
expenditures.
The Company's ability to make scheduled payments of principal ($1.5 million
for each of the years 1999 through 2001), or to pay interest (expected to range
from $24.7 million to $25.3 million annually for years 1999 to 2001, assuming
current interest rates), if any, on, or to refinance its indebtedness (including
the Notes), or to fund planned capital expenditures or finance acquisitions,
will depend on its future financial and operating performance, which to a
certain extent is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond its control. Based on
the current and anticipated level of operations, management believes that cash
flow from operations and available cash, together with available borrowings
under the Senior Credit Facility and sales of accounts receivable under the
Receivables Purchase Agreement, will be adequate to meet the Company's
anticipated future requirements for working capital, budgeted capital
expenditures, and scheduled payments of principal and interest on its
indebtedness, including the Notes, for the next twelve months. The Company,
however, may need to refinance all or a portion of the principal of the Notes on
or prior to maturity. There can be no assurance that the Company's business will
generate sufficient cash flows from operations or that future borrowings will be
available under the Senior Credit Facility and the Receivable Purchase Agreement
in an amount sufficient to enable the Company to service its indebtedness,
including the Notes, or make anticipated capital expenditures and fund potential
future acquisitions.
In addition, there can be no assurance that the Company will be able to
effect any refinancing on commercially reasonable terms, or at all.
Capital Expenditures
The Company's capital expenditures were $8.9 million, $11.7 million and
$13.0 million, in 1998, 1997 and 1996, respectively. Approximately $3 million to
$5 million of the amount expended in each of such years has been for the renewal
and replacement of existing facilities and equipment; thus in an economic
downturn, the Company believes it will be able to adjust the amount spent on
capital expenditures without compromising the base need of its operations. The
Company expects to spend approximately $20 million in 1999 for various capital
projects, including quality enhancement, cost improvement, efficiency
improvement, and increased capacity.
Seasonality, Working Capital and Cyclicality
Sales of certain products of the Company are subject to seasonal variation.
Demand for the Company's ladder products is affected by residential housing
starts and existing home sales, commercial construction activity, and overall
home improvement expenditures. Due to seasonal factors associated with the
construction industry, sales of products and working capital are typically
higher during the second and third quarters than at other times of the year. The
Company expects to use the Senior Credit Facility and the Receivables Purchase
Agreement to meet any seasonal variations in its working capital requirements.
The residential and commercial construction markets are sensitive to cyclical
changes in the economy.
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<PAGE> 17
Raw Material Costs and Inflation
The rate of inflation over recent years has been relatively low and has not
had a significant effect on the Company's results of operations. The Company
purchases aluminum, glass and other raw materials from various suppliers. While
all such materials are available from numerous independent suppliers, commodity
raw materials are subject to price fluctuations. There have been historical
periods of rapid and significant movements in the price of aluminum, both upward
and downward. Historically, the Company has entered into futures contracts with
respect to its purchases of aluminum to minimize or hedge commodity price
fluctuations. See "Business -- Raw Materials and Suppliers".
YEAR 2000 READINESS PROGRAM
The Year 2000 issue arises because many computer hardware and software
systems use only the last two digits to represent a year. As a result, these
systems may not properly process dates beyond 1999 which could cause errors in
information or system failures. If the Company's computer systems do not
correctly recognize and process date information beyond the year 1999, the Year
2000 issue could have a material adverse impact on the operations of the
Company.
The following discussion of the Company's Year 2000 Readiness Program
contains numerous forward-looking statements based upon inherently uncertain
information. The cost of the Year 2000 project and the date upon which the
Company plans to complete its internal modifications are based upon management's
best estimates, which were derived utilizing a number of assumptions of future
events including the continued availability of internal and external resources,
third party modifications and other factors. Although management believes it
will be able to make the necessary modifications in advance, there can be no
assurance that these estimates and timetable will be achieved and actual results
could differ materially from those anticipated.
In addition, the Company relies upon the computer systems of certain third
parties such as customers, suppliers and financial institutions. Although the
Company is assessing the readiness of these third parties and preparing
contingency plans, there can be no assurance that the failure of these third
parties to modify their systems in advance of December 31, 1999 would not have a
material adverse effect on the Company.
State of Readiness. In 1996, the Company commenced a program intended to
mitigate and prevent the adverse effect of the Year 2000 issue. This program
consists of the following phases:
AWARENESS PHASE -- development of a detailed strategic approach to
address the Year 2000 issue;
ASSESSMENT PHASE -- an assessment of all computer systems, software,
building infrastructure components and equipment with embedded technology
to identify each item that require date code remediation and an assessment
and certification of third parties' Year 2000 compliance;
REMEDIATION PHASE -- implementation of code enhancements, hardware and
software upgrades, system replacements, vendor and customer assurances,
contingency planning and other associated changes; and
VALIDATION PHASE -- testing of systems for Year 2000 readiness.
The Awareness and Assessment Phases have been substantially completed. The
Company expects the Remediation Phase to be substantially completed by the end
of the second quarter of 1999. The Company's Remediation Phase consists of
numerous individual projects that vary in size, materiality and importance.
Approximately two-thirds of the projects currently identified have been
completed while the remaining one-third are in process. With respect to those
projects involving embedded systems (non-information technology processes), the
appropriate end-users are evaluating and modifying those systems as required, in
some instances in conjunction with the vendors of these products. In addition,
the certification of third parties' Year 2000 readiness efforts by the Company
is ongoing with
15
<PAGE> 18
the expectation that this process will also be substantially complete by the end
of the second quarter of 1999. Approximately two-thirds of the Company's
significant suppliers and business partners have responded to the Company's
requests for information that they will be ready for the Year 2000. The Company
will attempt to take appropriate measures to minimize its risk with the
remaining critical suppliers and business partners. However, there can be no
assurance that these measures will prevent any material adverse effect on the
operations and business of the Company if such suppliers and business partners
fail to convert their systems before December 31, 1999.
Costs. The Company primarily utilizes internal resources to reprogram,
replace and test its computer systems, software, equipment and building
infrastructure components for Year 2000 modifications. The Company estimates
that Year 2000 expenditures will be approximately $1.5 million and will be
funded by normal operating cash flow. All Year 2000 expenditures are expensed as
incurred and are not expected to have a material effect on results of
operations, liquidity or capital resources. As of December 31, 1998
approximately $0.9 million of the estimated project costs have been incurred.
The remaining costs are expected to be incurred evenly over the period through
January, 2000. These cost estimates may change as additional remediation and
testing efforts progress.
Risks. The Year 2000 issue presents a number of risks and uncertainties
that could affect the Company, including failure of utilities, competition for
skilled personnel and disruption of Company operations due to system failures or
operational failures of third parties. With respect to risks associated with the
Company's computer systems and equipment, management believes that it will be
able to make the necessary modifications and conversions in advance of the Year
2000. With respect to risks associated with the failure of computer systems or
equipment of third parties, the Company could experience a material adverse
impact on its operations if such third parties fail to make timely conversions
or modifications. The most serious impact on Company operations in this regard
would result if basic services such as telecommunications, electric power and
financial services were disrupted.
Contingency Plans. The Company is in the process of developing business
resumption contingency plans specific to the Year 2000. These plans will address
the actions that would be taken if critical business functions cannot be carried
out in the normal manner upon entering the next century due to systems or third
party failure. Management estimates that these contingency plans will be fully
developed by the end of the second quarter of 1999.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk Disclosures. The following discussion about the Company's
market risk disclosures involves forward looking statements. Actual results
could differ materially from those projected in the forward looking statements.
The Company is exposed to market risk related to changes in interest rates,
foreign currency exchange rates and commodity prices. The Company does not use
derivative financial instruments for speculative or trading purposes.
The Company is exposed to market risk from changes in interest rates on
long-term debt obligations. The Company manages such risk through the use of a
combination of fixed and variable rate debt. Currently, the Company does not use
derivative financial instruments to manage its interest rate risk.
The following table provides information about the Company's debt
obligations and financial instruments that are sensitive to changes in interest
rates. For debt obligations, the table presents principal
16
<PAGE> 19
cash flows and related weighted-average interest rates by expected maturity
dates or applicable floating rate index.
<TABLE>
<CAPTION>
DECEMBER 31, FAIR VALUE
------------------------------------------------------------------- DECEMBER 31,
1999 2000 2001 2002 2003 THEREAFTER TOTAL 1998
------ ------ ------ ------ ------- ---------- -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities
Long-term debt,
including Current
Portion
Fixed Rate........... $135,000 $135,000 $133,650
Average Interest
Rate............... 10.00%
Variable Rate........ $1,450 $1,450 $1,450 $1,450 $30,550 $112,200 $148,550 $148,550
Average Interest
Rate............... LIBOR+ LIBOR+ LIBOR+ LIBOR+ LIBOR+ LIBOR+
2.25% 2.25% 2.25% 2.25% 2.25% 2.25%
to to to to to to
2.50% 2.50% 2.50% 2.50% 2.50% 2.50%
</TABLE>
The Company has no operations in foreign countries. International sales
were not material to the Company's operations for the year ended December 31,
1998. Accordingly, the Company is not subject to material foreign currency
exchange rate risk. To date, the Company has not entered into any foreign
currency forward exchange contracts or other derivative financial instruments
relative to foreign currency exchange rates.
The Company is also exposed to market risk from changes in the price of
aluminum. The Company manages such risk through the use of aluminum futures
contracts. At December 31, 1998, the Company had purchased futures contracts for
the delivery of 64.9 million pounds of aluminum at a weighted average price of
$.6573 per pound which mature in 1999 and contracts for 2.7 million pounds of
aluminum at a weighted average price of $.5990 per pound which mature in 2000.
The fair value of such futures contracts was $38.7 million at December 31, 1998.
17
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. 19
Consolidated Balance Sheets................................. 20
Consolidated Statements of Operations....................... 22
Consolidated Statements of Changes in Shareholders' Equity
(Deficit)................................................. 23
Consolidated Statements of Cash Flows....................... 24
Notes to Consolidated Financial Statements.................. 25
</TABLE>
18
<PAGE> 21
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Werner Holding Co. (PA), Inc.
Greenville, Pennsylvania
We have audited the accompanying consolidated balance sheets of Werner
Holding Co. (PA), Inc. and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of operations, changes in shareholders'
equity (deficit) and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Werner Holding
Co. (PA), Inc. and subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Cleveland, Ohio
February 28, 1999
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<PAGE> 22
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents...................................... $ 9,387 $ 3,107
Accounts receivable....................................... -- 64,163
Undivided interest in accounts receivable................. 46,298 --
Allowance for doubtful accounts........................... (1,600) (1,250)
Refundable income taxes................................... 490 820
Inventories............................................... 46,777 44,670
Deferred income taxes..................................... 2,830 4,451
Other..................................................... 2,559 6,936
-------- --------
Total current assets........................................ 106,741 122,897
Other assets:
Insurance fund investments................................ -- 58,579
Deferred income taxes..................................... 5,997 11,586
Deferred financing fees, net.............................. 13,745 15,098
Other investments......................................... 5,688 --
Other..................................................... 14,915 14,196
-------- --------
40,345 99,459
Property, plant and equipment:
Land and improvements..................................... 7,262 7,369
Buildings................................................. 34,077 34,666
Machinery and equipment................................... 102,019 97,909
-------- --------
143,358 139,944
Less accumulated depreciation and amortization............ 83,455 77,284
-------- --------
59,903 62,660
Capital projects in progress.............................. 5,790 3,169
-------- --------
65,693 65,829
-------- --------
TOTAL ASSETS................................................ $212,779 $288,185
======== ========
</TABLE>
20
<PAGE> 23
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Short-term bank debt...................................... $ -- $ 41,500
Accounts payable.......................................... 22,742 24,904
Accrued liabilities....................................... 28,583 24,896
Current maturities of long-term debt...................... 1,450 1,450
-------- --------
Total current liabilities................................... 52,775 92,750
Long-term obligations:
Long-term debt -- less current maturities (net of
unamortized original issue discount of $3,617 in 1998
and $4,009 in 1997).................................... 278,483 279,541
Reserve for product liability and workers' compensation
claims................................................. 13,639 49,644
Accrued employee retirement benefits...................... 22,279 19,922
-------- --------
314,401 349,107
Shareholders' deficit:
Common stock:
Class A -- $.01 par value; voting; 5,000 shares
authorized; 2,059 shares issued and outstanding..... -- --
Class B -- $.01 par value; voting; 25,000 shares
authorized; 22,438 shares issued and outstanding.... -- --
Class C -- $.01 par value; non-voting; 45,000 shares
authorized; 4,682 shares issued and outstanding..... -- --
Class D -- $.01 par value; voting; 1,000 shares
authorized; 1,000 shares issued and outstanding..... -- --
Class E -- $.01 par value; non-voting; 50,000 shares
authorized; 45,000 shares issued and outstanding.... 1 1
Additional paid-in capital................................ 198,847 198,847
Retained deficit.......................................... (351,607) (351,753)
Accumulated other non-owner changes in equity............. (1,638) (767)
-------- --------
Total shareholders' deficit................................. (154,397) (153,672)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT................. $212,779 $288,185
======== ========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 24
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales............................................... $436,091 $416,321 $366,864
Cost of sales........................................... 322,451 303,354 267,987
-------- -------- --------
Gross profit............................................ 113,640 112,967 98,877
General and administrative expense...................... 31,626 27,652 23,779
Selling and distribution expense........................ 50,165 49,075 47,908
Recapitalization expense................................ -- 22,714 --
Non-cash compensation charge............................ -- 78,527 --
-------- -------- --------
Operating profit (loss)................................. 31,849 (65,001) 27,190
Other income (expense), net............................. 645 (15,813) 9,675
-------- -------- --------
Income (loss) before interest and taxes................. 32,494 (80,814) 36,865
Interest expense........................................ 30,591 8,979 7,517
-------- -------- --------
Income (loss) before provision for income taxes......... 1,903 (89,793) 29,348
Income taxes............................................ 1,757 714 9,988
-------- -------- --------
NET INCOME (LOSS)....................................... $ 146 $(90,507) $ 19,360
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 25
WERNER HOLDING CO. (PA), INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRE-RECAPITALIZATION COMMON
STOCK POST-RECAPITALIZATION COMMON STOCK
-------------------------------------- -----------------------------------
CLASS A CLASS B CLASS A CLASS B
----------------- ------------------ ---------------- ----------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996........................ 13,282 $14 149,887 $149 $ $
Net income........................................
Unrealized losses on investments (net of deferred
tax benefit of $1,640)...........................
Adjustment to minimum pension liability...........
Total other non-owner changes in equity...........
Amortization of deferred compensation.............
Repurchase of common stock........................ (55) (1) (1,414) (1)
Dividends declared ($11.25 per share).............
------- --- -------- ---- ----- --- ------ ---
Balance at December 31, 1996...................... 13,227 13 148,473 148
Net (loss)........................................
Unrealized losses on investments (net of deferred
tax benefit of $5,934)...........................
Reclassification adjustment for losses realized
included in net loss (net of tax)................
Adjustment to minimum pension liability...........
Total other non-owner changes in equity...........
Amortization of deferred compensation.............
Repurchase of common stock........................ (55) -- (574) --
Dividends declared ($10.50 per share).............
Redemption and reclassification of common stock in
connection with the Recapitalization............. (13,172) (13) (147,899) (148) 2,059 -- 22,438 --
Issuance of common stock in connection with the
Recapitalization, net of issuance costs of
$2,196...........................................
Non-cash compensation charge......................
------- --- -------- ---- ----- --- ------ ---
Balance at December 31, 1997...................... -- -- -- -- 2,059 -- 22,438 --
Net income........................................
Unrealized losses on investments (net of deferred
tax benefit of $1,243)...........................
Reclassification adjustment for losses realized
included in net income (net of tax)..............
Adjustment to minimum pension liability...........
Total other non-owner changes in equity...........
------- --- -------- ---- ----- --- ------ ---
Balance at December 31, 1998...................... $-- $ -- 2,059 $-- 22,438 $--
======= === ======== ==== ===== === ====== ===
<CAPTION>
POST-RECAPITALIZATION COMMON STOCK
------------------------------------------------------
CLASS C CLASS D CLASS E ADDITIONAL
---------------- ---------------- ---------------- PAID-IN RETAINED
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS CAPITAL EARNINGS
------ ------- ------ ------- ------ ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996........................ $ $ $ $ 1,316 $ 54,288
Net income........................................ 19,360
Unrealized losses on investments (net of deferred
tax benefit of $1,640)...........................
Adjustment to minimum pension liability...........
Total other non-owner changes in equity...........
Amortization of deferred compensation.............
Repurchase of common stock........................ (1,410)
Dividends declared ($11.25 per share)............. (1,836)
----- --- ----- --- ------ -- -------- ---------
Balance at December 31, 1996...................... 1,316 70,402
Net (loss)........................................ (90,507)
Unrealized losses on investments (net of deferred
tax benefit of $5,934)...........................
Reclassification adjustment for losses realized
included in net loss (net of tax)................
Adjustment to minimum pension liability...........
Total other non-owner changes in equity...........
Amortization of deferred compensation.............
Repurchase of common stock........................ (731)
Dividends declared ($10.50 per share)............. (1,691)
Redemption and reclassification of common stock in
connection with the Recapitalization............. (1,515) (329,226)
Issuance of common stock in connection with the
Recapitalization, net of issuance costs of
$2,196........................................... 4,682 -- 1,000 -- 45,000 $1 120,519
Non-cash compensation charge...................... 78,527
----- --- ----- --- ------ -- -------- ---------
Balance at December 31, 1997...................... 4,682 -- 1,000 -- 45,000 1 198,847 (351,753)
Net income........................................ 146
Unrealized losses on investments (net of deferred
tax benefit of $1,243)...........................
Reclassification adjustment for losses realized
included in net income (net of tax)..............
Adjustment to minimum pension liability...........
Total other non-owner changes in equity...........
----- --- ----- --- ------ -- -------- ---------
Balance at December 31, 1998...................... 4,682 $-- 1,000 $-- 45,000 $1 $198,847 $(351,607)
===== === ===== === ====== == ======== =========
<CAPTION>
ACCUMULATED OTHER
NON-OWNER
CHANGES IN EQUITY
----------------------------------
UNREALIZED
GAINS
MINIMUM (LOSSES)
PENSION ON
LIABILITY INVESTMENTS TOTAL OTHER TOTAL
--------- ----------- -------- ----- ---------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996........................ $ $ 6,853 $ 6,853 $(517) $ 62,103
Net income........................................ 19,360
Unrealized losses on investments (net of deferred
tax benefit of $1,640)........................... (3,046) (3,046) (3,046)
Adjustment to minimum pension liability........... (275) (275) (275)
---------
Total other non-owner changes in equity........... 16,039
Amortization of deferred compensation............. 185 185
Repurchase of common stock........................ (1,412)
Dividends declared ($11.25 per share)............. (1,836)
------- -------- -------- ----- ---------
Balance at December 31, 1996...................... (275) 3,807 3,532 (332) 75,079
Net (loss)........................................ (90,507)
Unrealized losses on investments (net of deferred
tax benefit of $5,934)........................... (12,962) (12,962) (12,962)
Reclassification adjustment for losses realized
included in net loss (net of tax)................ 10,609 10,609 10,609
Adjustment to minimum pension liability........... (1,946) (1,946) (1,946)
---------
Total other non-owner changes in equity........... (94,806)
Amortization of deferred compensation............. 133 133
Repurchase of common stock........................ (731)
Dividends declared ($10.50 per share)............. (1,691)
Redemption and reclassification of common stock in
connection with the Recapitalization............. 199 (330,703)
Issuance of common stock in connection with the
Recapitalization, net of issuance costs of
$2,196........................................... 120,520
Non-cash compensation charge...................... 78,527
------- -------- -------- ----- ---------
Balance at December 31, 1997...................... (2,221) 1,454 (767) -- (153,672)
Net income........................................ 146
Unrealized losses on investments (net of deferred
tax benefit of $1,243)........................... (2,302) (2,302) (2,302)
Reclassification adjustment for losses realized
included in net income (net of tax).............. 808 808 808
Adjustment to minimum pension liability........... 623 623 623
---------
Total other non-owner changes in equity........... (725)
------- -------- -------- ----- ---------
Balance at December 31, 1998...................... $(1,598) $ (40) $ (1,638) $ -- $(154,397)
======= ======== ======== ===== =========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 26
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
---------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 146 $(90,507) $ 19,360
Reconciliation of net income (loss) to net cash provided by
operating activities:
Recapitalization expense................................ 22,714
Non-cash compensation charge............................ 78,527
Net gain on transfer of loss reserves and discontinuance
of MIICA.............................................. (4,506)
Depreciation............................................ 8,465 8,371 8,135
Amortization of deferred financing fees and original
issue discount........................................ 2,611 320 59
Amortization of Recapitalization costs and other........ 9,079 2,809 1,007
Provision for losses on accounts receivable............. 599 (115) 700
Provision for product liability and workers'
compensation claims................................... 17,023 15,841 17,181
Payment of product liability and workers' compensation
claims................................................ (4,206) (11,517) (13,347)
Deferred income taxes................................... 8,997 (8,044) (3,625)
Realized net (gains) losses on disposition and
impairment of investments............................. 2,520 16,407 (9,431)
Net purchases of trading securities..................... (1,975) (5,381)
Net proceeds from sale of accounts receivable........... 20,000
Changes in operating assets and liabilities:
Accounts receivable................................... 43,811 (16,521) (4,326)
Undivided interest in accounts receivable............. (46,298)
Refundable income taxes............................... 330 1,196 (313)
Inventories........................................... (2,107) (263) 3,644
Accounts payable...................................... (2,162) 3,213 5,130
Accrued liabilities................................... (3,183) (1,267) 3,414
Other (net)........................................... 687 (1,957) (2,689)
-------- -------- --------
Net cash provided by operating activities................... 51,806 17,232 19,518
INVESTING ACTIVITIES
Capital expenditures, net................................... (8,940) (11,710) (13,048)
Available-for-sale securities:
Purchases of debt and equity securities................... (572) (79,484) (176,034)
Sale of debt and equity securities........................ 59,497 178,623
Net sales of other investments.............................. 6,936 24,073 2,345
Other....................................................... 4,062 (7,718)
-------- -------- --------
Net cash used in investing activities....................... (2,576) (3,562) (15,832)
FINANCING ACTIVITIES
Redemption of common stock.................................. (332,899)
Issuance of common stock.................................... 122,716
Payment of Recapitalization fees and expenses............... (37,952)
Refinancing of debt......................................... (65,571)
Issuance of Senior Subordinated Notes, net.................. 130,950
Borrowings under Senior Credit Facility..................... 186,500
Net (repayments) borrowings under revolving credit
agreements................................................ (6,300) 7,600
Repayment of receivables facility........................... (41,500)
Repayments of long-term debt................................ (1,450) (6,571) (7,642)
Repurchase of common stock.................................. (731) (1,412)
Dividends paid.............................................. (1,691) (1,836)
Other....................................................... (39)
-------- -------- --------
Net cash used in financing activities....................... (42,950) (11,549) (3,329)
-------- -------- --------
Net increase in cash and equivalents........................ 6,280 2,121 357
Cash and equivalents at beginning of year................... 3,107 986 629
-------- -------- --------
CASH AND EQUIVALENTS AT END OF YEAR......................... 9,387 $ 3,107 $ 986
======== ======== ========
CASH PAID (RECEIVED) DURING THE YEAR FOR
Interest.................................................... $ 26,112 $ 7,752 $ 6,756
======== ======== ========
Income taxes................................................ $ (7,567) $ 9,955 $ 13,925
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 27
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
A. DESCRIPTION OF BUSINESS
Werner Holding Co. (PA), Inc. through its subsidiaries is a manufacturer of
climbing equipment which includes aluminum, fiberglass and wood ladders,
scaffolding, stages, and planks; and aluminum extruded products. The Company
operates in two business segments, Climbing Products and Extruded Products,
which are located in the United States.
B. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The consolidated financial statements of Werner
Holding Co. (PA), Inc. include its accounts and the accounts of its wholly-owned
subsidiary, Werner Holding Co. (DE), Inc., and its wholly-owned subsidiaries
(collectively the "Company"). Werner Holding Co. (PA), Inc. has no substantial
operations or assets, other than its investment in Werner Holding Co. (DE), Inc.
The consolidated financial condition and results of operations of Werner Holding
Co. (PA), Inc. are substantially the same as those of Werner Holding Co. (DE),
Inc. Intercompany accounts and transactions have been eliminated.
Revenue Recognition -- Sales are recorded when products are shipped and
title passes to the customer.
Accounts Receivable -- The Company provides credit, in the normal course of
business, to its customers. The Company's customers are not concentrated in any
specific geographic region. The Company performs ongoing credit evaluations of
its customers and maintains allowances for potential credit losses which, when
realized, have been within the range of management's expectations. Write-offs of
uncollectible accounts receivable have totaled $72, $565 and $557 in 1998, 1997
and 1996, respectively.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
Inventories -- Inventories are stated at the lower of cost or market (net
realizable value). Cost is determined by the last-in, first-out (LIFO) method
for approximately 95% and 92% of the inventories at December 31, 1998 and 1997,
respectively.
Derivative Commodity Instruments -- The Company utilizes futures contracts
to hedge the price risk associated with a certain percentage of its anticipated
aluminum raw material requirements. The futures contracts obligate the Company
to make or receive a payment equal to the net change in value of the contract at
its maturity. Such contracts are designated as hedges, correspond to the
commitment period and are effective in hedging the Company's exposure to changes
in aluminum prices during that cycle. At December 31, 1998 and 1997, the Company
had futures contracts to purchase aluminum totaling $44,297 and $45,118,
respectively. The fair value of these contracts was approximately $38,732 and
$45,453 at December 31, 1998 and 1997, respectively.
All gains and losses on qualifying hedge transactions are deferred and are
reported as a component of the underlying transaction (the deferral accounting
method).
Property, Plant and Equipment -- Property, plant and equipment is stated at
cost. Depreciation expense is calculated principally by using accelerated
methods over the estimated useful lives of the
25
<PAGE> 28
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
B. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
assets. The estimated useful lives for buildings range from 40 to 45 years and
for machinery and equipment range from 3 to 14 years.
Long-lived assets are reviewed for impairment. Impairment is recognized
when events or changes in circumstances indicate that the carrying amount of the
asset, or related group of assets, may not be recoverable. If the expected
future undiscounted cash flows are less than the carrying amount of the asset,
an impairment loss is recognized at that time. Measurement of impairment may be
based upon appraisals, market values of similar assets or discounted cash flows.
Insurance Fund Investments -- Until March 31, 1998, the Company's captive
insurance subsidiary, Manufacturers Indemnity and Insurance Company of America
("MIICA"), maintained an investment fund which consisted of debt securities,
equity securities, real estate, cash and equivalents, and other investments.
MIICA's investments in debt and equity securities were available for sale;
therefore, these securities were reported at market value. Investments in real
estate were recorded at depreciated value and short-term and other investments
were stated primarily at cost which approximated market. Investments in special
expiration price options were classified as trading securities and were reported
at market value.
Realized gains and losses on the sale of investments were recognized in
operations. The cost of securities sold was based on the specific identification
method. Changes in market values of debt and equity securities were reflected as
unrealized gains or losses directly in shareholders' equity and accordingly, had
no effect on operations until sold unless such losses were other than temporary,
at which time such losses were recognized in operations. Changes in market
values of special expiration price options were reported directly in operations.
Substantially all of the MIICA insurance fund investments were liquidated as
part of the discontinuance of MIICA -- see Note M.
Reserve for Product Liability and Workers' Compensation Claims -- Until
March 31, 1998, MIICA maintained reserves for the product liability, workers'
compensation and environmental liability claims of the Company. On March 31,
1998, the Company obtained third party commercial insurance coverage for its
product liability and workers' compensation claims previously provided for by
MIICA. Under the terms of this insurance coverage, the commercial insurance
provider agreed to assume losses which occurred on or before March 31, 1998,
capped at a maximum of $75,000 in losses and extinguished the Company's
liability in regard to such losses -- see Note M. Additionally, on April 1,
1998, the Company obtained third party insurance coverage, subject to certain
deductible provisions, for product liability and workers' compensation claims
which occur on or after that date and maintains a reserve for the insurance
deductibles related to such claims. The reserve for product liability and
workers' compensation claims includes an amount determined from loss reports and
individual cases and an amount, based on past experience, for losses incurred
but not reported. Such reserve is necessarily based on estimates and, while
management believes that the amount is adequate, the ultimate liability may be
in excess of or less than the amount provided. The methods for making such
estimates and for establishing the resulting reserve are continually reviewed,
and any adjustments are reflected in earnings currently.
Deferred Financing Fees -- Amortization of deferred financing fees is
computed using the effective interest method.
Advertising -- The Company expenses all advertising as incurred. These
expenses for the years ended December 31, 1998, 1997 and 1996 totaled $8,606,
$8,001, and $7,586, respectively.
26
<PAGE> 29
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
B. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
Stock-Based Compensation -- The Company accounts for stock-based
compensation in accordance with the provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees.
Statement of Cash Flows -- Cash and equivalents include cash on hand,
demand deposits and short-term highly liquid debt instruments purchased with a
maturity of three months or less, exclusive of investments that were held by
MIICA.
Recently Issued Accounting Standards -- In June 1998, the Financial
Accounting Standards Board (FASB) issued Statement No. 133 (SFAS No. 133),
Accounting for Derivative Instruments and Hedging Activities, which is required
to be adopted by the Company in 2000. The Statement requires that the Company
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in the fair value of
such derivatives will either be offset against the change in fair value of the
hedged assets, liabilities, or firm commitments through earnings or recognized
in accumulated other non-owner equity changes until the hedged item is
recognized in earnings. The portion of a derivative's change in fair value, if
unrelated to a hedge, will be immediately recognized in earnings. The Company
has not yet determined what the effect of SFAS No. 133 will be on the earnings
and financial position of the Company.
Comprehensive Income -- The Company adopted SFAS No. 130 (SFAS No. 130),
Reporting Comprehensive Income on January 1, 1998. SFAS No. 130 requires that an
enterprise classify items of other comprehensive income or "other non-owner
changes in equity" as referred to by the Company, by their nature in a financial
statement and display the accumulated other non-owner changes in equity
separately from retained earnings and additional paid-in capital in the equity
section of the balance sheet. Certain reclassifications have been made to prior
years' financial statements to conform to the requirements of this statement.
Fair Values of Financial Instruments -- The Company's disclosures for
financial instruments are as follows:
Cash and equivalents -- The carrying amounts reported in the balance
sheet for cash and equivalents bear interest at prevailing market rates and
therefore approximate fair value.
Insurance fund investments -- Debt and equity securities and other
invested assets are stated at fair value.
Long-term debt -- The carrying amounts of the Company's borrowings
under its credit agreements and the Variable Rate Demand Industrial
Building Revenue Bonds, bear interest at prevailing market rates and
therefore approximate their fair value at December 31, 1998 and 1997. The
fair value of the outstanding borrowings of the Senior Subordinated Notes
at December 31, 1998 and 1997 was $133,650 and $135,000, respectively.
Reclassification -- Certain prior year amounts have been reclassified to
conform to the current year presentation in the consolidated financial
statements.
C. RECAPITALIZATION
In October 1997, the Company entered into a recapitalization agreement (the
"Recapitalization Agreement") with certain affiliates of INVESTCORP S.A.
("Investcorp") and certain other international investors organized by Investcorp
(collectively the "Investors"). Pursuant to the Recapitalization Agree-
27
<PAGE> 30
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
C. RECAPITALIZATION -- CONTINUED
ment, on November 24, 1997, (the "Recapitalization Closing Date") the Company
(a) amended and restated its Articles of Incorporation pursuant to which the
Company's capital stock was reclassified, (b) redeemed for cash and the Market
Participation Right (as hereinafter described) certain shares of the
reclassified stock totaling $330,700 and (c) sold to the Investors shares of
newly created Class C, D and E Common Stock of the Company totaling $122,700
(all of which actions together constituted the "Recapitalization"). As a result
of the Recapitalization, the Pre-Recapitalization shareholders continue to own
approximately 33% of the outstanding voting equity of the Company and the
Investors own approximately 67% of the outstanding voting equity of the Company.
Recapitalization Financing -- The Recapitalization was funded by (a)
$186,500 of borrowings under a senior credit facility with a syndicate of banks
which included term loans, a revolving line of credit, and a facility providing
for borrowings collateralized by accounts receivable (collectively the "Senior
Credit Facility") (b) the issuance of $135,000 in principal amount of Senior
Subordinated Notes (the "Notes") and (c) proceeds from the sale of certain
shares of the Company's stock to the Investors.
The proceeds from these financings funded: the payment of approximately
$330,700 to holders of the reclassified stock; the repayment of approximately
$66,000 of outstanding indebtedness under the then existing credit facility and
notes; and the payment of approximately $45,200 of fees and expenses associated
with the Recapitalization.
Market Participation Right -- If, prior to the tenth anniversary of the
Recapitalization Closing Date: (i) there is an initial underwritten public
offering of at least 10% of the common equity of the Company, or the Investors
sell a majority of their shares of the Company and (ii) at the time of such
initial public offering or sale of shares, the Company's equity value equals or
exceeds certain target values that imply significant annual compound rates of
return (between 20% and 40%) to the Post-Recapitalization shareholders, then
those persons who have the Market Participation Right shall be entitled to
receive an aggregate amount equal to up to 5% of the Company's equity value (the
"Payment"). The Payment will be payable in cash, provided that the Company, in
its discretion, may make up to half of the Payment in notes or similar
obligations with market terms which the Company's Board of Directors in good
faith believes are of equivalent value. Such Payment will be treated as an
equity distribution to those persons who have the Market Participation Right.
Voting Rights -- Holders of the Class A Common Stock and Class B Common
Stock are entitled to one vote per share and holders of the Class D Common Stock
are entitled to approximately 50.7 votes per share. Class C Common Stock and
Class E Common Stock have no voting rights. Upon the occurrence of a sale of
100% of the outstanding equity securities of the Company, a sale of
substantially all the assets of the Company or a public offering of any equity
securities of the Company ("Triggering Event"), each outstanding share of Class
A Common Stock, Class B Common Stock, Class C Common Stock, Class D Common Stock
and Class E Common Stock will convert into one share of Common Stock of the
Company. Common stock with a par value of $.01 per share has been authorized
(131,000 shares), but no shares were issued or outstanding at December 31, 1998
and 1997. When issued, this new class of Common Stock of the Company will have
one vote per share.
Recapitalization Accounting -- The transaction was accounted for as a
recapitalization and as such, the historical basis of the Company's assets and
liabilities was not affected. Recapitalization related costs of $22,700
consisting of investment banker fees, transaction fees, legal and accounting
fees, cash transaction bonuses, and other miscellaneous costs were expensed in
1997. Additionally, approximately $2,200 of Recapitalization costs incurred
related to the issuance of shares of stock to the Investors was netted against
the proceeds of approximately $122,700.
28
<PAGE> 31
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
C. RECAPITALIZATION -- CONTINUED
Other Arrangements -- The Company also entered into employee protection
agreements whereby certain management employees received cash payments
aggregating approximately $6,600 upon completion of one year of service from the
Recapitalization Closing Date. This amount was included in other current assets
and liabilities at December 31, 1997, and was amortized to expense during 1998.
Additionally, as a result of the Recapitalization, payments totaling $3,708
related to consulting agreements entered into in December 1996 with four senior
executive officers/shareholders were accelerated and paid on the
Recapitalization Closing Date. Such amounts were expensed and were included as
part of the Recapitalization costs above.
Included in the Recapitalization related costs above is approximately
$6,000 of advisory fees paid to Investcorp International, Inc., an affiliate of
Investcorp, and $6,000 of standby commitment fees paid to Invifin S.A., an
affiliate of Investcorp. The Company also entered into an agreement for
management and consulting services for a five-year term with Investcorp
International, Inc., pursuant to which the Company prepaid Investcorp
International, Inc. $5,000 upon the consummation of the Recapitalization. This
amount is being amortized to expense over the five-year period.
D. NON-CASH COMPENSATION CHARGE
In 1997, the Company recorded a non-cash compensation charge of $78,500,
with an offsetting credit to additional paid in capital. Such charge resulted
from changes made to the terms of the plan under which restricted
Pre-Recapitalization class B common stock was issued to certain key employees of
the Company. Approximately $74,300 of this charge related to the accelerated
vesting, as a result of the Recapitalization, of restricted Pre-Recapitalization
stock previously granted to certain key employees of the Company and $4,200 of
the charge related to the accelerated vesting, as a result of the
Recapitalization, of restricted Pre-Recapitalization stock previously granted to
a former key management employee upon his separation from the Company. Such
charges represent the fair value of the shares at the date of the
Recapitalization ($2,421.29 per share) less the amount of the previously
recognized compensation under the plan.
E. INVENTORIES
Inventories are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1998 1997
------- -------
<S> <C> <C>
Finished goods.............................................. $26,887 $26,512
Work in process............................................. 12,339 11,953
Raw materials and supplies.................................. 17,808 18,075
------- -------
Total inventories, which approximates replacement cost...... 57,034 56,540
Less excess of cost over LIFO stated values................. 10,257 11,870
------- -------
NET INVENTORIES............................................. $46,777 $44,670
======= =======
</TABLE>
29
<PAGE> 32
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
F. DEBT AND CREDIT ARRANGEMENTS
Debt and credit arrangements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
Variable Rate Demand Industrial Building Revenue Bonds, due
2015..................................................... $ 5,000 $ 5,000
Secured Credit Facility:
Term loan facility....................................... 143,550 145,000
Senior Subordinated Notes, due 2007, net of unamortized
discount................................................. 131,383 130,991
-------- --------
Total debt and credit arrangements......................... 279,933 280,991
Less current maturities.................................... 1,450 1,450
-------- --------
DEBT CLASSIFIED AS LONG-TERM............................... $278,483 $279,541
======== ========
</TABLE>
As part of the Recapitalization, the Company entered into the Senior Credit
Facility, and pursuant to an indenture dated November 24, 1997, issued the
Notes. Each of the Company's subsidiaries (except for MIICA and Werner Funding
Corporation) have guaranteed the Senior Credit Facility and the Notes. Such
guarantee of the Notes is subordinate to the guarantee of the Senior Credit
Facility.
The Notes:
The $135,000 of Notes mature on November 15, 2007. Interest at 10% on the
Notes is payable semi-annually in arrears on May 15 and November 15 and
commenced on May 15, 1998. The Notes are general unsecured obligations of the
Company ranking subordinate in right of payment to all existing and future
senior indebtedness of the Company. The Notes rank pari passu in right of
payment with all other indebtedness of the Company that is subordinated to
senior indebtedness of the Company.
The Notes are not redeemable at the Company's option prior to November 15,
2002. The Notes are redeemable at the Company's option at 105.000% during the
twelve months beginning November 15, 2002, 103.333% during the twelve months
beginning November 15, 2003, 101.667% during the twelve months beginning
November 15, 2004 and at 100% thereafter (expressed as a percentage of principal
amount). In addition, prior to November 15, 2002, up to 35% of the Notes may be
redeemed at 110% of the principal amount out of the proceeds of certain equity
offerings.
Senior Credit Facility:
The Senior Credit Facility consists of $145,000 in term loan facilities; a
$100,000 revolving credit facility; and a $75,000 receivables credit facility.
Term Loan Facilities. The Term Loan Facilities consists of two tranches of
term loans in an aggregate principal amount of $145,000. The Tranche B term
loans are in an aggregate principal amount of $90,000, and the Tranche C term
loans are in an aggregate principal amount of $55,000. These loans were made in
a single drawing as part of the Recapitalization. The Tranche B and C term loans
mature on November 30, 2004 and 2005, respectively. Installments of the Tranche
B term loans are due in aggregate principal amounts of $900 per annum for the
first five years, $30,000 for the sixth year, and $55,500 for the seventh year.
Installments of the Tranche C term loans are due in aggregate principal amounts
of $550 for the first seven years and $51,150 for the eighth year.
Revolving Credit Facility. The Revolving Credit Facility consists of a
revolving credit facility in an aggregate principal amount of $100,000 under
which no amounts were borrowed at December 31, 1998 except for amounts under the
letter of credit subfacility mentioned below. The Company is entitled to
30
<PAGE> 33
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
F. DEBT AND CREDIT ARRANGEMENTS -- CONTINUED
draw amounts under the Revolving Facility for general corporate purposes and
working capital requirements. The Revolving Facility includes sub-limits for
letters of credit and swing line loans available on same-day notice. The
Revolving Facility matures on November 30, 2003. Available borrowings under this
arrangement are reduced by amounts issued under a letter of credit subfacility
which totaled $5,755 and $5,108 at December 31, 1998 and 1997, respectively.
Receivables Facility. The Receivables Facility consisted of a revolving
credit facility in an aggregate principal amount of $75,000, which was subject
to a borrowing base limit not to exceed 80% of eligible accounts receivable. At
December 31, 1997 $41,500 was outstanding under the Receivables Facility and was
classified as short-term bank debt. In May 1998, the Company refinanced the
outstanding amounts borrowed under the Receivables Facility with proceeds from a
sale of its accounts receivable under the Receivables Purchase Agreement, see
Note P. Upon such refinancing, the Receivables Facility was terminated.
Borrowings under the Senior Credit Facility bear interest at alternative
floating rate structures at management's option (8.00% and 8.25% at December 31,
1998 on Tranche B Term Loans and Tranche C Term Loans, respectively) and are
collateralized by all of the capital stock of each of the Company's subsidiaries
and substantially all of the inventory and property, plant and equipment of the
Company and its subsidiaries, except for Werner Funding Corporation. The Senior
Credit Facility requires an annual commitment fee of 0.5% on the average daily
unused amount of the Term Loan Facility, and the Revolving Credit Facility.
Variable Rate Demand Industrial Building Revenue Bonds were issued in order
to finance the Company's acquisition of land and equipment and the subsequent
construction of a climbing products manufacturing facility. Under a lease
agreement, the Company makes rental payments to the issuer in amounts sufficient
to meet the debt service payments on the bonds. The bonds bear interest at a
variable rate established weekly which may not exceed 15% per annum (4.35% at
December 31, 1998). The interest rate on the bonds may be converted to a fixed
rate upon the satisfaction of certain conditions. Prior to a conversion to a
fixed rate, the bonds are subject to purchase from the holder upon demand at a
price equal to principal plus accrued interest. On or prior to the date of
conversion to a fixed rate, the bonds are subject to redemption, in whole or in
part, at the option of the Company. After conversion to a fixed rate, the bonds
are subject to redemption, as a whole or in part, at the Company's option, on or
after the tenth anniversary of the conversion, at annual redemption prices
varying from 103% to 100% of the principal outstanding. Certain property and
equipment having an original cost of $3,889 are pledged as collateral for the
bonds.
The Senior Credit Facility and the Notes contain various restrictive
covenants including restrictions on additional indebtedness, mergers, asset
dispositions, restricted payments, prepayment and amendments of subordinated
indebtedness. These covenants also prohibit, among other things, the payment of
dividends. The financial covenants of the Senior Credit Facility require the
Company to meet specific interest coverage, maximum leverage, minimum EBITDA,
and capital expenditure requirements.
No short-term borrowings were outstanding at December 31, 1998. The
weighted average interest rate on short-term borrowings outstanding at December
31, 1997 was 9.0%.
The aggregate amount of principal payments is $1,450 in each of the years
1999 through 2002 and $30,550 in 2003.
31
<PAGE> 34
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
G. ACCRUED LIABILITIES
Accrued liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Advertising, promotions and allowances.............. $ 7,037 $ 5,668
Payroll............................................. 8,128 6,521
Deferred management transaction bonuses............. 1,804 6,634
Interest............................................ 3,387 1,368
Other............................................... 8,227 4,705
------- -------
$28,583 $24,896
======= =======
</TABLE>
H. STOCK INCENTIVE PLANS
In November 1997, the Company adopted the Werner Holding Co. (PA), Inc.
1997 Stock Incentive Plan (the "Plan"). The Plan is administered by the
Company's Board of Directors. Pursuant to the Plan, certain directors, employees
and officers of the Company are given an opportunity to acquire shares of the
Company's Class C Common Stock (the "Class C Stock") through the grant of
non-qualified and qualified stock options, stock appreciation rights and
restricted stock. The options granted under the plan are exercisable at no less
than the fair market value of the Class C Stock at the time of grant and vest
upon the seventh anniversary of the grant with the possibility for accelerated
vesting based, in part, on the achievement of certain financial targets as
provided for in the Plan. The Plan also provides for vesting of certain
percentages of the options in the event of an Initial Public Offering or
Approved Sale as defined in the Plan. Options issued pursuant to the plan expire
on the thirtieth day following the seventh anniversary of the grant date.
In December 1998, 4,955 options were granted under the Plan at an exercise
price of $2,421.29 per share. No shares were exercised or cancelled in 1998 and
no options were granted prior to 1998. A total of 7,500 shares of Class C Stock
have been reserved for issuance under the Plan.
No options were exercisable at December 31, 1998. The weighted average
remaining contractual life of the options was approximately 5.9 years. The
weighted average fair value of the options was $577.86 per share.
The Company measures compensation cost using the intrinsic value method of
accounting pursuant to APB No. 25. Had the compensation cost for options granted
in 1998 been determined using the fair market value method of SFAS No. 123,
Accounting for Stock Based Compensation, compensation expense (net of related
taxes) would have been $2 resulting in pro forma net income of $144.
For purposes of fair market value disclosures, the fair market value of an
option grant is determined using the Black-Scholes option pricing model with the
following assumptions:
<TABLE>
<CAPTION>
1998
----
<S> <C>
Risk-free interest rate..................................... 4.73%
Average life of options (years)............................. 5.9
Volatility.................................................. 0%
Dividend yield.............................................. 0%
</TABLE>
In November 1997, the Company adopted the Management Stock Purchase
Agreement (the "Stock Purchase Plan"). Pursuant to the Stock Purchase Plan
certain members of the Company's management were given the opportunity to
purchase shares of the Company's Class C Stock. In 1998, no shares of Class C
Stock were purchased under the Stock Purchase Plan. The Class C Stock
32
<PAGE> 35
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
H. STOCK INCENTIVE PLANS -- CONTINUED
purchased pursuant to the Stock Purchase Plan carry certain restrictions. In
conjunction with the adoption of the Stock Purchase Plan, the Company also
adopted the Werner Holding Co. (PA), Inc. Stock Loan Plan (the "Stock Loan
Plan") to finance a portion of the purchase price paid for the shares acquired
under the Stock Purchase Plan. At December 31, 1998, no notes were outstanding
under the Stock Loan Plan. Upon issuance, the notes will bear interest at rates
tied to interest rates paid on the Company's third party credit arrangements and
will be due no later than November 24, 2004 or upon sale of the shares. All
shares purchased pursuant to the terms of the Stock Loan Plan will be pledged to
the Company. Upon issuance, these notes will be classified as a deduction to
shareholders' equity in the Company's consolidated balance sheet.
Until the date of the Recapitalization, the Company maintained a restricted
stock plan. Amortization of unearned compensation was $133 and $185 in 1997 and
1996, respectively. As discussed in Note D, in connection with the
Recapitalization the restricted stock awards which were outstanding at that date
became fully vested.
I. INCOME TAXES
The components of income taxes (benefit) at December 31 are presented
below:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Current taxes:
Federal........................................ $(6,838) $ 8,093 $12,797
State and local................................ (402) 665 816
------- ------- -------
(7,240) 8,758 13,613
Deferred taxes:
Federal........................................ 9,124 (7,859) (3,094)
State and local................................ (127) (185) (531)
------- ------- -------
8,997 (8,044) (3,625)
------- ------- -------
TOTAL............................................ $ 1,757 $ 714 $ 9,988
======= ======= =======
</TABLE>
Income taxes (benefit) for financial reporting purposes varied from income
taxes (benefit) at the federal statutory rate as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- -------- -------
<S> <C> <C> <C>
Income taxes (benefit) at federal statutory
rate............................................ $ 667 $(31,428) $10,272
Non-cash compensation charge...................... 27,484
State and local income taxes, net of federal
benefit......................................... (529) 481 285
Adjustments to estimated income tax accruals...... (127) 3,071 (383)
Valuation allowance change........................ 1,746 1,106
Other -- net...................................... (186)
------- -------- -------
INCOME TAXES...................................... $ 1,757 $ 714 $ 9,988
======= ======== =======
</TABLE>
33
<PAGE> 36
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
I. INCOME TAXES -- CONTINUED
Significant components of the Company's deferred tax assets and liabilities
as of December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Deferred tax liabilities:
Depreciation.............................................. $ 5,157 $ 4,817
Other..................................................... 4,153 4,379
------- -------
Total deferred tax liabilities.............................. 9,310 9,196
Deferred tax assets:
Provision for product liability and workers' compensation
claims................................................. 5,183 5,460
Accrued vacation.......................................... 1,437 1,467
Pension obligation........................................ 3,435 2,821
Deferred compensation..................................... 3,399 3,040
Accrued expenses.......................................... 4,683 8,264
Capital losses............................................ 2,852 5,287
Capital loss valuation allowance.......................... (2,852) (1,106)
------- -------
Total deferred tax assets................................... 18,137 25,233
------- -------
NET DEFERRED TAX ASSETS..................................... $ 8,827 $16,037
======= =======
</TABLE>
SFAS No. 109, Accounting for Income Taxes, requires that deferred tax
assets be reduced by a valuation allowance if it is more likely than not that
some portion or all of the deferred tax assets will not be realized. As
realization of deferred tax assets relating to certain capital losses is
considered uncertain, a valuation allowance has been recorded. The Company
believes that it has taxable income in prior periods sufficient to fully
recognize its remaining deferred tax assets.
J. LEASES
The Company leases certain real estate and various equipment under
long-term operating leases. Total rent expense for all leases amounted to
$4,551, $4,970 and $5,606 for 1998, 1997, and 1996, respectively.
Future minimum rental commitments as of December 31, 1998 for all
noncancelable operating leases are as follows:
<TABLE>
<S> <C>
1999............................................ $ 3,456
2000............................................ 2,411
2001............................................ 1,177
2002............................................ 581
2003............................................ 316
Thereafter...................................... 2,081
-------
TOTAL........................................... $10,022
=======
</TABLE>
K. COMMITMENTS AND CONTINGENCIES
The Company has contracts to provide most of its estimated aluminum
requirements with six principal suppliers. These contracts include stipulated
prices, with provisions for price adjustments based on market. The six contracts
are renegotiable, five in 1999 and one in 2001.
34
<PAGE> 37
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
K. COMMITMENTS AND CONTINGENCIES -- CONTINUED
In addition, in March 1998, an action was filed in the United States
District Court for the Western District of Pennsylvania entitled Elizabeth
Werner, et al v. Eric J. Werner, et al (Civil Action No. 98-503). The plaintiffs
of the action are Elizabeth Werner, Jeffrey R. Ackerman, individually and as
trustee under a trust for the benefit of Elizabeth Werner; Matthew W. Weiss (by
his parent Elizabeth Werner); Timothy F. Burke, Jr., as executor of the estate
of Anne L. Werner and as trustee of certain trusts under Anne L. Werner's last
will and testament; Edward A. Pollock; and all of such plaintiffs derivatively
on behalf of Holding. Defendants include the Management Shareholders, former
company officers Richard L. Werner, Robert I. Werner, Marc L. Werner, certain
non-management shareholders, Holding, the Registrant and certain of its
subsidiaries including, Werner Co. The action purports, in part, to be brought
derivatively on behalf of Holding and, in part, to be brought on behalf of
plaintiffs individually against the Company and certain current and former
officers and directors of the Company. The aspect of the case purportedly
brought on behalf of Holding alleges breaches of fiduciary duty by various
members of the Company's management arising out of, among other things, the
issuance of restricted stock to management of the Company in 1992 and 1993.
Holding's Board of Directors has referred the matter to a special committee of
disinterested directors to investigate the merits of the claim and to take
appropriate actions on behalf of Holding. After a detailed investigation, the
special committee has recommended that the derivative claims not be pursued by
or on behalf of Holding. Accordingly, all the defendants have made motions to
dismiss the derivative claims. The aspect of the case purportedly brought on
behalf of plaintiffs individually against the Company appear to arise out of the
1992 and 1993 restricted stock issuances as well as certain alleged
misrepresentations by representatives of the Company. The plaintiffs seek
monetary damages in an unspecified amount. Management believes that the ultimate
resolution of this lawsuit will not have material adverse effect on the
Company's financial condition.
L. EMPLOYEE RETIREMENT AND BENEFIT PLANS
Effective December 31, 1998, the Company adopted SFAS No. 132 (SFAS No.
132), Employers' Disclosures about Pensions and Other Postretirement Benefits.
SFAS No. 132 addresses disclosure requirements only and did not change the way
the Company recognizes or measures its pension and post-retirement obligations.
The Company sponsors two non-contributory defined benefit pension plans to
provide retirement benefits for substantially all of its employees. The pension
plans provide benefits based upon the participant's years of service and
compensation or stated amounts for each year of service. The Company's funding
policy is to contribute at least the amount that is sufficient to meet the
minimum funding requirements of applicable federal law. Plan assets consist
primarily of listed common stocks, corporate and government bonds and short-term
investments.
The Company also sponsors two unfunded non-qualified supplemental
retirement plans to provide to certain officers a defined pension benefit in
excess of limits imposed by federal tax law.
Additionally, the Company sponsors several unfunded postretirement life and
health-care benefits to certain of its key employees. Benefits are determined
based on varying formulas using age at retirement and years of active service.
35
<PAGE> 38
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
L. EMPLOYEE RETIREMENT AND BENEFIT PLANS -- CONTINUED
The following provides a reconciliation of benefit obligations, plan assets
and funded status of the plans.
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
--------------------- -----------------------
1998 1997 1998 1997
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
CHANGE IN PROJECTED BENEFIT OBLIGATION
Benefit obligation at January 1............ $ 54,251 $ 46,437 $ 4,622 $ 4,274
Service cost............................... 1,878 1,792 130 189
Interest cost.............................. 3,553 3,453 168 326
Amendments................................. -- 3,336 (1,112) --
Actuarial (gain)/loss...................... (1,402) 4,386 (1,605) (26)
Benefits paid.............................. (2,096) (5,153) (82) (141)
-------- -------- ------- -------
Benefit obligation at December 31.......... 56,184 54,251 2,121 4,622
CHANGE IN PLAN ASSETS
Fair value of assets at January 1.......... 32,238 32,509 -- --
Actual return on plan assets............... 5,285 646 -- --
Employer contributions..................... 718 4,236 82 141
Benefits paid.............................. (2,096) (5,153) (82) (141)
-------- -------- ------- -------
Fair value of assets at December 31........ 36,145 32,238 -- --
-------- -------- ------- -------
FUNDED STATUS (UNDER-FUNDED)............... (20,039) (22,013) (2,121) (4,622)
Unrecognized transition (asset)
obligation............................... (420) (485) 566 2,505
Unrecognized prior service cost............ 50 53 -- --
Unrecognized net actuarial loss............ 3,728 7,895 (92) 741
-------- -------- ------- -------
NET AMOUNT RECOGNIZED...................... $(16,681) $(14,550) $(1,647) $(1,376)
======== ======== ======= =======
Amounts recognized in the Consolidated
Balance Sheets consist of:
Accrued employee retirement benefits..... $(20,904) $(18,705) $(1,647) $(1,376)
Intangible asset......................... 1,646 1,934
Accumulated other non-owner changes in
equity................................ 2,577 2,221
-------- -------- ------- -------
NET AMOUNT RECOGNIZED...................... $(16,681) $(14,550) $(1,647) $(1,376)
======== ======== ======= =======
</TABLE>
The combined projected benefit obligation includes the projected benefit
obligations of the unfunded plans of $13,587 in 1998 and $13,739 in 1997. The
accumulated benefit obligation of these unfunded non-qualified supplemental
pension plans was $12,860 at December 31, 1998 and $11,571 at December 31, 1997.
The remaining projected benefit obligation relates to the Company's two funded
pension plans. At December 31, 1998 and 1997, one of these plans had an
accumulated benefit obligation exceeding the fair value of the assets related to
the plan of $6,362 and $6,026, respectively. The fair value of the assets
related to this plan were $4,740 and $4,264 at December 31, 1998 and 1997,
respectively.
The change in the discount rate in 1998 from 1997 increased the accumulated
benefit obligation of the non-contributory defined benefit plans and the
non-qualified supplemental retirement plans by $1,227 and $211, respectively, at
December 31, 1998.
36
<PAGE> 39
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
L. EMPLOYEE RETIREMENT AND BENEFIT PLANS -- CONTINUED
The assumed health care trend rate for 1999 is 6.5% decreasing ratably to
6.0% in the year 2000 and thereafter. The effect of a one percentage point
increase (decrease) in the accrued health-care cost trend rate assumption would
increase (decrease) the accumulated postretirement benefit obligation by $164
and ($124), respectively, at December 31, 1998. The increase to the
postretirement benefit cost would not be material.
Net periodic pension and other postretirement benefit costs consist of the
following components:
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
--------------------------------- -----------------------
1998 1997 1996 1998 1997 1996
----------- ------- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC
BENEFIT COST
Service Cost................... $ 1,878 $ 1,792 $ 1,968 $130 $189 $131
Interest cost.................. 3,553 3,453 3,243 168 326 273
Expected return on plan
assets....................... (2,650) (2,858) (2,685) -- -- --
Amortization of transition
obligation................... (67) (67) (67) 69 147 147
Amortization of prior service
cost......................... 3 3 3 -- -- --
Amortization of actuarial
(gain) loss.................. 133 36 64 (14) 16 6
Additional expense for lump sum
payments..................... -- 3,336 -- -- --
------- ------- ------- ----- ----- -----
Net Periodic benefit cost...... $ 2,850 $ 5,695 $ 2,526 $353 $678 $557
------- ------- ------- ----- ----- -----
------- ------- ------- ----- ----- -----
Weighted-average assumptions as
of December 31
Discount rate................ 6.75% 7.00% 7.75% 6.75% 7.00% 7.75%
Expected return on plan
assets..................... 7.50%-9.00% 9.00% 9.00%
Rate of compensation
increase................... 4.00% 5.00% 5.00%
</TABLE>
Pension expense in 1997 includes $3,336 of special retirement benefits paid
to certain former key management employees.
The Company also sponsors various defined contribution plans which cover
substantially all of its employees. For certain employees covered by contract,
contributions are based on negotiated rates and hours worked; for others,
contributions are a percentage of employees contributions. The expense related
to these plans was $1,698, $1,515 and $1,386 in 1998, 1997 and 1996,
respectively.
M. RESERVE FOR PRODUCT LIABILITY AND WORKER'S COMPENSATION CLAIMS AND INSURANCE
FUND INVESTMENTS
On March 31, 1998, the Company obtained third party commercial insurance
coverage for its product liability and workers' compensation claims. Previously,
the Company provided insurance for such claims through MIICA. Under the terms of
the commercial insurance coverage, the commercial insurance provider agreed to
assume losses which occurred on or before March 31, 1998, capped at a maximum of
$75,000 in losses, and extinguished the Company's liability in regard to such
losses (the "MIICA Insurance Transfer"). The Company paid approximately $42,400
for the commercial insurance coverage from the proceeds of liquidating certain
of MIICA's insurance fund investments. As of the date of the MIICA Insurance
Transfer, the Company had a reserve for such losses of approximately $47,500. As
a result of the MIICA Insurance Transfer, the Company recognized a gain of
approximately $4,500, which is net of costs to discontinue the operations of
MIICA. The Company has obtained third party commercial insurance coverage for
its product liability and workers' compensation claims occurring on or after
April 1, 1998, subject to certain deductible provisions, for which the Company
has provided a
37
<PAGE> 40
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
M. RESERVE FOR PRODUCT LIABILITY AND WORKER'S COMPENSATION CLAIMS -- CONTINUED
reserve of $14,277 at December 31, 1998. Prior to the date of the MIICA
Insurance Transfer, MIICA maintained a reserve for the product liability and
workers' compensation claims of the Company and the related claim payments were
made from MIICA's insurance fund investments.
The following is a summary of the components of MIICA's insurance fund
investments at December 31, 1997:
<TABLE>
<S> <C>
Cash and equivalents........................................ $14,821
Debt securities............................................. 17,851
Equity securities........................................... 20,422
Other investments........................................... 5,485
-------
TOTAL INSURANCE FUND INVESTMENTS............................ $58,579
=======
</TABLE>
AVAILABLE-FOR-SALE SECURITIES
The insurance fund investment portfolio of debt and marketable equity
securities, at December 31, 1997, primarily consisted of the following
investments classified as available-for-sale:
<TABLE>
<CAPTION>
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury........................... $13,272 $ 97 $ 20 $13,349
States and political subdivisions....... 1,075 41 1,116
Foreign governments..................... 401 1 400
Corporate............................... 2,981 6 1 2,986
------- ------ ------ -------
Total debt securities................... 17,729 144 22 17,851
Equity securities....................... 18,536 4,893 3,007 20,422
------- ------ ------ -------
$36,265 $5,037 $3,029 $38,273
======= ====== ====== =======
</TABLE>
The gross realized gains and (losses) on sales of available-for-sale
securities totaled $2,019 and $(463) for 1998, $4,118 and $(2,949) for 1997 and
$11,139 and $(3,893) for 1996, respectively. During 1998, 1997, and 1996 the
change in net unrealized holding gain (loss) on available-for-sale securities
that has been included as a separate component of shareholders' equity totaled
$(1,346) net of deferred taxes of $727, $(2,636) net of deferred taxes of
$1,420, and $196 net of deferred taxes of $106, respectively.
In 1998, 1997 and 1996, MIICA recorded impairment losses of $3,732, $9,884
and $656, respectively, relating to available-for-sale equity securities deemed
by management to be other-than-temporarily impaired.
TRADING SECURITIES
MIICA also owned special expiration price options which were classified as
trading securities. Those outstanding at December 31, 1996 were either sold,
exercised or allowed to expire in 1997. The average fair value of the options
held during the year ended December 31, 1997 was $3,207. Unrealized gains on
these options were reported directly in net income and totaled $1,190 in 1996.
There were no
38
<PAGE> 41
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
M. RESERVE FOR PRODUCT LIABILITY AND WORKER'S COMPENSATION CLAIMS -- CONTINUED
unrealized gains or losses on these options in 1998 and 1997. The net realized
(losses) on sales of these investments totaled $(8,798) in 1997 and $(4,595) in
1996.
OTHER INVESTMENTS
MIICA had investments, which were not publicly traded and which were
carried on the equity method. The net adjustment to unrealized holding gains
(losses) on these securities, included as a separate component of shareholders'
equity, totaled $283 in 1997 (net of deferred taxes of $153). Equity income or
losses from these investments were not significant for any of the years
presented. Other investments at December 31, 1997 also included real estate
ventures of $3,207.
N. OTHER INCOME (EXPENSE), NET
Other income (expense), net is comprised of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------
1998 1997 1996
------- -------- ------
<S> <C> <C> <C>
MIICA investment (loss) income:
Realized (losses) gains and impairment losses.... $(2,520) $(17,513) $7,458
Unrealized gains on trading securities........... 1,190
Other investment earnings........................ 1,061 2,952 803
------- -------- ------
Investment income (loss), net.................... (1,459) (14,561) 9,451
Accounts receivable securitization expense............ (1,454)
Net gain on transfer of loss reserves and
discontinuance of MIICA............................. 4,506
Miscellaneous income (loss), net...................... (948) (1,252) 224
------- -------- ------
Total other income (expense), net..................... $ 645 $(15,813) $9,675
======= ======== ======
</TABLE>
O. SEGMENT INFORMATION
Effective December 31, 1998, the Company adopted SFAS No. 131, Disclosures
About Segments of an Enterprise and Related Information which changed the way
the Company reports information about its operating segments. The information
for 1997 and 1996 has been restated to conform to the 1998 presentation.
The Company classifies its business into two segments: Climbing Products,
which includes aluminum, fiberglass and wood ladders, scaffolding, stages and
planks; and Extruded Products, which includes aluminum extrusions and fabricated
components. The Company's reportable segments are based on the characteristics
of the product and the markets and distribution channels through which the
products are sold. The Company evaluates segment performance based on operating
earnings. The accounting policies of the reportable segments are the same as
those described in the summary of significant accounting policies.
39
<PAGE> 42
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
O. SEGMENT INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
NET SALES
Climbing Products...................................... $329,965 $314,216 $277,308
Extruded Products...................................... 106,126 102,105 89,556
-------- -------- --------
$436,091 $416,321 $366,864
======== ======== ========
OPERATING PROFIT (LOSS)
Climbing Products...................................... $ 37,091 $ 38,417 $ 30,227
Extruded Products...................................... 6,886 5,994 4,334
Corporate & Other...................................... (12,128) (109,412) (7,371)
-------- -------- --------
$ 31,849 $(65,001) $ 27,190
======== ======== ========
DEPRECIATION & AMORTIZATION
Climbing Products...................................... $ 7,981 $ 7,361 $ 6,264
Extruded Products...................................... 1,067 1,111 924
Corporate & Other...................................... 11,107 3,028 2,013
-------- -------- --------
$ 20,155 $ 11,500 $ 9,201
======== ======== ========
IDENTIFIABLE ASSETS
Climbing Products...................................... $125,301 $162,962 $144,318
Extruded Products...................................... 54,407 44,345 34,976
Corporate & Other...................................... 33,071 80,878 81,891
-------- -------- --------
$212,779 $288,185 $261,185
======== ======== ========
EXPENDITURES FOR LONG-LIVED ASSETS, NET
Climbing Products...................................... $ 4,629 $ 6,972 $ 6,802
Extruded Products...................................... 1,673 1,315 1,020
Corporate & Other...................................... 2,638 3,423 5,226
-------- -------- --------
$ 8,940 $ 11,710 $ 13,048
======== ======== ========
</TABLE>
Corporate & Other includes various corporate expenses, Recapitalization
expense, non-cash compensation charge, and eliminations.
Climbing Products net sales to two significant customers individually
exceeded 10% of the Company's total net sales in 1998 as follows: 21%, and 11%
of net sales, respectively. In 1997 and 1996, only one Climbing Products
customer accounted for more than 10% of total net sales as follows: 19% and 10%,
respectively. No customer accounted for more than 10% of the Company's Extruded
Products net sales in those years.
Revenues included in the consolidated financial statements of the Company
are primarily derived from customers domiciled in the United States.
Substantially all of the Company's long-lived assets are located in the United
States.
40
<PAGE> 43
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
P. SALE OF ACCOUNTS RECEIVABLE
In May 1998, the Company entered into a five-year Receivables Purchase
Agreement (the "Receivables Purchase Agreement") with a financial institution
and its affiliate to provide additional financing capacity (maximum availability
$50,000) and repay the outstanding amounts borrowed under the receivables
portion of the Senior Credit Facility. Under the Receivables Purchase Agreement,
the Company established a consolidated wholly-owned subsidiary, Werner Funding
Corporation (Funding), which is a special purpose bankruptcy-remote entity that
acquires, on a daily basis, a variable percentage interest of certain eligible
trade receivables generated by the Company. The purchases by Funding are
financed through the sale of an undivided percentage ownership interest in such
receivables to the affiliate of the financial institution. As of December 31,
1998, the Company had transferred $66,298 of accounts receivable in exchange for
$20,000 in cash and an undivided interest in the accounts receivable of $46,298.
In accordance with the provisions of SFAS No. 125, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, the
transactions have been recorded as a sale of receivables to a qualified special
purpose entity. The ongoing cost associated with the Receivables Purchase
Agreement, which represents a return to investors in the purchased interests, as
well as the cost of implementation, is reported in the accompanying consolidated
statements of operations in "Other income (expense), net". The interest rate on
the purchased interests at December 31, 1998 was 5.40%.
The accompanying consolidated balance sheets reflect an allowance for
doubtful accounts at December 31, 1998 that relates, in large part, to accounts
receivable representing the undivided interest in the assets of the financial
institution affiliate.
Q. SUPPLEMENTAL GUARANTOR INFORMATION
As discussed in Note F, the Company in November 1997 refinanced
substantially all of its outstanding debt through borrowings under the Senior
Credit Facility and the Notes. The issuer of the refinanced debt is Werner
Holding Co. (DE), Inc. (the "Issuer"). The Issuer's wholly-owned subsidiaries,
except for MIICA and Funding, (collectively, the "Guarantor Subsidiaries"),
along with Werner Holding Co. (PA), Inc., its parent, have provided full,
unconditional, joint and several guarantees of the Senior Credit Facility and
the Notes.
Following is condensed consolidated financial information for Werner
Holding Co. (PA), Inc. (the "Parent Company"), the Issuer, the Guarantor
Subsidiaries and MIICA and Funding (MIICA and Funding are called collectively,
the "Non-Guarantor Subsidiaries," and individually, a "Non-Guarantor
Subsidiary"). Separate financial statements of the Guarantor Subsidiaries are
not presented because management has determined that they would not provide
additional information that is material to investors. Therefore, the Guarantor
Subsidiaries are combined in the presentation below. Further, separate financial
statements of the Issuer have not been provided as management has determined
that they would not provide information that is material to investors, as the
Issuer has no substantial operations or assets, other than its investment in its
subsidiaries.
Investments in subsidiaries are accounted for by the Company on the equity
method of accounting. Earnings at subsidiaries are, therefore, reflected in the
Company's investment account. The elimination entries eliminate investment in
subsidiaries and intercompany balances and transactions. For presentation
purposes, all current and deferred taxes have been combined in the financial
statements of the Guarantor Subsidiaries.
41
<PAGE> 44
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Q. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- --------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents.... $ 1 $ 2,618 $ 6,768 $ $ $ 9,387
Undivided interest in
accounts
receivable........... 46,298 46,298
Allowance for doubtful
accounts............. (1,600) (1,600)
Refundable income
taxes................ 490 490
Inventories............. 46,777 46,777
Deferred income taxes... 2,830 2,830
Other................... 125 2,434 2,559
--------- --------- -------- ------- --------- --------
Total current assets...... 1 2,743 57,699 46,298 106,741
Investments and other
assets:
Deferred income taxes... 5,997 5,997
Deferred financing fees,
net.................. 13,745 13,745
Investment in
subsidiaries......... (165,779) (186,751) 6,906 345,624
Other investments....... 5,688 5,688
Other................... 14,915 14,915
--------- --------- -------- ------- --------- --------
(165,779) (167,318) 27,818 345,624 40,345
Property, plant and
equipment:
Land and improvements... 7,262 7,262
Buildings............... 34,077 34,077
Machinery and
equipment............ 102,019 102,019
--------- --------- -------- ------- --------- --------
143,358 143,358
Less accumulated
depreciation and
amortization......... 83,455 83,455
--------- --------- -------- ------- --------- --------
59,903 59,903
Capital projects in
progress............. 5,790 5,790
--------- --------- -------- ------- --------- --------
65,693 65,693
--------- --------- -------- ------- --------- --------
Total assets.............. $(165,778) $(164,575) $151,210 $46,298 $ 345,624 $212,779
========= ========= ======== ======= ========= ========
</TABLE>
42
<PAGE> 45
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Q. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- --------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
SHAREHOLDERS' (DEFICIT)
EQUITY
Current liabilities:
Accounts payable........ $ $ $ 22,742 $ $ $ 22,742
Intercompany
(receivable)
payable.............. (11,381) (277,116) 249,150 39,347
Accrued liabilities..... 3,387 25,151 45 28,583
Current maturities of
long-term debt....... 1,450 1,450
--------- --------- -------- ------- --------- --------
Total current
liabilities............. (11,381) (272,279) 297,043 39,392 52,775
Long-term obligations:
Long-term debt -- less
current maturities
(net of unamortized
discount of
$3,617).............. 273,483 5,000 278,483
Reserve for product
liability and
workers' compensation
claims............... 13,639 13,639
Accrued employee
retirement
benefits............. 22,279 22,279
--------- --------- -------- ------- --------- --------
273,483 40,918 314,401
Shareholders' (deficit)
equity.................. (154,397) (165,779) (186,751) 6,906 345,624 (154,397)
--------- --------- -------- ------- --------- --------
Total liabilities and
shareholders' (deficit)
equity.................. $(165,778) $(164,575) $151,210 $46,298 $ 345,624 $212,779
========= ========= ======== ======= ========= ========
</TABLE>
43
<PAGE> 46
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Q. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- --------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents.... $ 17 $ 6 $ 3,084 $ $ $ 3,107
Accounts receivable,
net.................. 62,548 6,502 (6,137) 62,913
Refundable income
taxes................ 664 156 820
Inventories............. 44,670 44,670
Deferred income taxes... 2,623 1,828 4,451
Other................... 6,636 300 6,936
--------- --------- -------- ------- --------- --------
Total current assets...... 17 6 120,225 8,786 (6,137) 122,897
Investments and other
assets:
Insurance fund
investments.......... 58,579 58,579
Deferred income taxes... 6,445 5,141 11,586
Deferred financing fees,
net.................. 15,098 15,098
Investment in
subsidiaries......... (165,080) (176,886) 341,966
Other................... 13,447 749 14,196
--------- --------- -------- ------- --------- --------
(165,080) (161,788) 19,892 64,469 341,966 99,459
Property, plant and
equipment:
Land and improvements... 7,369 7,369
Buildings............... 34,666 34,666
Machinery and
equipment............ 97,736 173 97,909
--------- --------- -------- ------- --------- --------
139,771 173 139,944
Less accumulated
depreciation and
amortization......... 77,157 127 77,284
--------- --------- -------- ------- --------- --------
62,614 46 62,660
Capital projects in
progress............. 3,169 3,169
--------- --------- -------- ------- --------- --------
65,783 46 65,829
--------- --------- -------- ------- --------- --------
Total assets.............. $(165,063) $(161,782) $205,900 $73,301 $ 335,829 $288,185
========= ========= ======== ======= ========= ========
</TABLE>
44
<PAGE> 47
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Q. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- --------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
SHAREHOLDERS' (DEFICIT)
EQUITY
Current liabilities:
Short-term bank debt.... $ $ 41,500 $ $ $ $ 41,500
Accounts payable........ 24,904 24,904
Intercompany
(receivable)
payable.............. (11,391) (314,193) 325,845 (261)
Accrued liabilities..... 24,597 6,436 (6,137) 24,896
Current maturities of
long-term debt....... 1,450 1,450
--------- --------- -------- ------- --------- --------
Total current
liabilities............. (11,391) (271,243) 375,346 6,175 (6,137) 92,750
Long-term obligations:
Long-term debt -- less
current maturities
(net of unamortized
discount of
$4,009).............. 274,541 5,000 279,541
Reserve for product
liability and
workers' compensation
claims............... 49,644 49,644
Accrued employee
retirement
benefits............. 20,079 (157) 19,922
--------- --------- -------- ------- --------- --------
274,541 25,079 49,487 349,107
Shareholders' (deficit)
equity.................. (153,672) (165,080) (194,525) 17,639 341,966 (153,672)
--------- --------- -------- ------- --------- --------
Total liabilities and
shareholders' (deficit)
equity.................. $(165,063) $(161,782) $205,900 $73,301 $ 335,829 $288,185
========= ========= ======== ======= ========= ========
</TABLE>
45
<PAGE> 48
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Q. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF
OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- -------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales.................... $ $ $436,091 $ $ $436,091
Cost of sales................ 322,451 322,451
-------- -------- -------- -------- -------- --------
Gross profit................. 113,640 113,640
General and administrative
expense.................... 31,626 31,626
Selling and distribution
expense.................... 50,165 50,165
-------- -------- -------- -------- -------- --------
Operating profit............. 31,849 31,849
Income (loss) from equity
investees.................. 146 (103) 1,794 (1,837)
Other income (expense),
net........................ 249 (2,323) 2,719 645
-------- -------- -------- -------- -------- --------
Income before interest and
taxes...................... 146 146 31,320 2,719 (1,837) 32,494
Interest expense............. 30,591 30,591
-------- -------- -------- -------- -------- --------
Income before provision for
income taxes............... 146, 146 729 2,719 (1,837) 1,903
Income taxes................. 832 925 1,757
-------- -------- -------- -------- -------- --------
NET INCOME (LOSS)............ $ 146 $ 146 $ (103) $ 1,794 $ (1,837) $ 146
======== ======== ======== ======== ======== ========
</TABLE>
46
<PAGE> 49
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Q. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF
OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- -------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales.................... $ $ $416,321 $ 2,704 $ (2,704) $416,321
Cost of sales................ 303,354 303,354
-------- -------- -------- -------- -------- --------
Gross profit................. 112,967 2,704 (2,704) 112,967
General and administrative
expense.................... 26,183 2,501 (1,032) 27,652
Selling and distribution
expense.................... 49,075 49,075
Recapitalization expense..... 22,714 22,714
Non-cash compensation
charge..................... 78,527 78,527
-------- -------- -------- -------- -------- --------
Operating (loss) profit...... (63,532) 203 (1,672) (65,001)
(Loss) from equity
investees.................. (90,507) (90,507) 181,014
Other (expense), net......... (1,250) (14,563) (15,813)
-------- -------- -------- -------- -------- --------
(Loss) before interest and
taxes...................... (90,507) (90,507) (64,782) (14,360) 179,342 (80,814)
Interest expense............. 8,979 8,979
-------- -------- -------- -------- -------- --------
(Loss) before provision for
income taxes............... (90,507) (90,507) (73,761) (14,360) 179,342 (89,793)
Income taxes................. 4,623 (3,909) 714
-------- -------- -------- -------- -------- --------
NET (LOSS)................... $(90,507) $(90,507) $(78,384) $(10,451) $179,342 $(90,507)
======== ======== ======== ======== ======== ========
</TABLE>
47
<PAGE> 50
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Q. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF
OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------- ------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales..................... $ $ $366,864 $ 687 $ (687) $366,864
Cost of sales................. 267,987 267,987
------- ------- -------- ------- -------- --------
Gross profit.................. 98,877 687 (687) 98,877
General and administrative
expense..................... 22,678 2,509 (1,408) 23,779
Selling and distribution
expense..................... 47,908 47,908
------- ------- -------- ------- -------- --------
Operating profit (loss)....... 28,291 (1,822) 721 27,190
Income from equity
investees................... 19,360 19,360 (38,720)
Other (loss) income, net...... (115) 9,629 161 9,675
------- ------- -------- ------- -------- --------
Income before interest and
taxes....................... 19,360 19,360 28,176 7,807 (37,838) 36,865
Interest expense.............. 7,517 7,517
------- ------- -------- ------- -------- --------
Income before provision for
income taxes................ 19,360 19,360 20,659 7,807 (37,838) 29,348
Income taxes.................. 7,413 2,575 9,988
------- ------- -------- ------- -------- --------
NET INCOME.................... $19,360 $19,360 $ 13,246 $ 5,232 $(37,838) $ 19,360
======= ======= ======== ======= ======== ========
</TABLE>
48
<PAGE> 51
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Q. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH
FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
---------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- --------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED
IN) OPERATING
ACTIVITIES............... $ $ $ 58,170 $ (6,364) $ $ 51,806
INVESTING ACTIVITIES
Capital expenditures....... (8,940) (8,940)
Insurance fund securities
available-for-sale:
Purchases of debt and
equity securities... (572) (572)
Net sales of other
insurance fund
investments.............. 6,936 6,936
Intercompany
transactions............. (16) 45,562 (45,546)
-------- --------- -------- -------- -------- --------
Net cash (used in) provided
by investing
activities............... (16) 45,562 (54,486) 6,364 (2,576)
FINANCING ACTIVITIES
Repayment of receivables
facility................. (41,500) (41,500)
Repayments of long-term
debt..................... (1,450) (1,450)
-------- --------- -------- -------- -------- --------
Net cash (used in)
financing activities..... (42,950) (42,950)
-------- --------- -------- -------- -------- --------
Net (decrease) increase in
cash and equivalents..... (16) 2,612 3,684 6,280
Cash and equivalents at
beginning of year........ 17 6 3,084 3,107
-------- --------- -------- -------- -------- --------
CASH AND EQUIVALENTS AT END
OF YEAR.................. $ 1 $ 2,618 $ 6,768 $ $ $ 9,387
======== ========= ======== ======== ======== ========
</TABLE>
49
<PAGE> 52
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Q. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH
FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- --------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED
IN) OPERATING
ACTIVITIES............... $ $ $ 24,318 $ (7,086) $ $ 17,232
INVESTING ACTIVITIES
Capital expenditures....... (11,710) (11,710)
Insurance fund securities
available-for-sale:
Purchases of debt and
equity securities... (79,484) (79,484)
Sale of debt and
equity securities... 59,497 59,497
Net sales of other
insurance fund
investments.............. 24,073 24,073
Other (net)................ 4,062 4,062
Intercompany
transactions............. 212,278 (279,505) 67,227 -- -- --
-------- --------- -------- -------- -------- --------
Net cash provided by (used
in) investing
activities............... 212,278 (279,505) 59,579 4,086 (3,562)
FINANCING ACTIVITIES
Redemption of common
stock.................... (332,899) (332,899)
Issuance of common stock... 122,716 122,716
Payment of Recapitalization
fees and expenses........ (37,952) (37,952)
Refinancing of debt........ (65,571) (65,571)
Issuance of Senior
Subordinated Notes,
net...................... 130,950 130,950
Borrowings under Senior
Credit Facility.......... 186,500 186,500
Net (repayments) under
revolving credit
agreements............... (6,300) (6,300)
Repayments of long-term
debt..................... (6,571) (6,571)
Repurchase of common
stock.................... (731) (731)
Dividends paid............. (1,691) (1,691)
Capital contribution....... (8,000) 8,000
Other...................... 5,000 (5,000)
-------- --------- -------- -------- -------- --------
Net cash (used in) provided
by financing
activities............... (212,605) 279,498 (81,442) 3,000 (11,549)
-------- --------- -------- -------- -------- --------
Net (decrease) increase in
cash and equivalents..... (327) (7) 2,455 2,121
Cash and equivalents at
beginning of year........ 344 13 629 986
-------- --------- -------- -------- -------- --------
CASH AND EQUIVALENTS AT END
OF YEAR.................. $ 17 $ 6 $ 3,084 $ $ $ 3,107
======== ========= ======== ======== ======== ========
</TABLE>
50
<PAGE> 53
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Q. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH
FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- -------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED
IN) OPERATING
ACTIVITIES............... $ $ $ 24,452 $ (4,934) $ $ 19,518
INVESTING ACTIVITIES
Capital expenditures....... (13,048) (13,048)
Insurance fund securities
available-for-sale:
Purchases of debt and
equity securities... (176,034) (176,034)
Sale of debt and
equity securities... 178,623 178,623
Net sales of other
insurance fund
investments.............. 2,345 2,345
Other...................... (7,718) (7,718)
Intercompany
transactions............. 3,259 3 (3,262)
-------- -------- -------- -------- -------- ---------
Net cash provided by (used
in) investing
activities............... 3,259 3 (24,028) 4,934 (15,832)
FINANCING ACTIVITIES
Net borrowings under
revolving credit
agreements............... 7,600 7,600
Repayments of long-term
debt..................... (7,642) (7,642)
Repurchase of common
stock.................... (1,412) (1,412)
Dividends paid............. (1,836) (1,836)
Other...................... (39) (39)
-------- -------- -------- -------- -------- ---------
Net cash (used in) provided
by financing
activities............... (3,248) (81) (3,329)
-------- -------- -------- -------- -------- ---------
Net increase in cash and
equivalents.............. 11 3 343 357
Cash and equivalents at
beginning of year........ 333 10 286 629
-------- -------- -------- -------- -------- ---------
CASH AND EQUIVALENTS AT END
OF YEAR.................. $ 344 $ 13 $ 629 $ $ $ 986
======== ======== ======== ======== ======== =========
</TABLE>
51
<PAGE> 54
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age and principal position of each
of the directors of Holding and the executive officers of the Company.
Each director of Holding will hold office until the next annual meeting of
shareholders of Holding or until his successor has been elected and qualified.
Officers of the Company are appointed by the respective Boards of Directors of
Holding and its subsidiaries and serve at the discretion of such Boards, subject
to any applicable employment agreements.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Donald M. Werner.......................... 65 Chairman, President, Chief Executive
Officer, and Director
Howard L. Solot........................... 61 Vice Chairman and Director
Robert P. Tamburrino...................... 42 Vice President, Chief Financial Officer
and Treasurer
Michael E. Werner......................... 39 President, Werner Ladder Co.
Joseph J. Despoy.......................... 59 President, Werner Extruded Products
Michael D. Isacco......................... 61 Vice President, Manufacturing
Eric J. Werner............................ 36 Chief Administrative Officer, Secretary
and General Counsel
Savio W. Tung............................. 47 Director
Charles J. Philippin...................... 48 Director
Christopher J. Stadler.................... 34 Director
</TABLE>
Donald M. Werner has served as President and Chief Executive Officer of
Holding since May 1997. From 1995 to 1997, Mr. Werner was President of Werner
Ladder Co. Prior to 1995, Mr. Werner served in various positions with the
Company including Sales Manager, Vice President -- Marketing and Senior Vice
President -- Corporate Sales and Marketing. Mr. Werner also holds various
director and officerships at subsidiaries of Holding. Prior to commencing his 41
year career with the Company, Mr. Werner was an aircraft structural design
engineer for Grumman Aircraft Co. Mr. Werner is Chairman of the American
Hardware Manufacturers Association and served on the boards of directors of the
Scaffolding Industry Association and the Hardware Group Association. Mr. Werner
is the father of Eric J. Werner, the uncle of Michael E. Werner and the cousin
of Howard L. Solot.
Howard L. Solot has served as a Director of Holding since 1974. He recently
served as Executive Vice President and Chief Operating Officer of Holding from
1995 to his retirement in March of 1999. He joined the Company in 1959 and has
held various planning, systems, engineering and manufacturing related positions,
including Plant Manager, Division General Manager, Vice President -- Engineering
and Corporate Planning and Senior Vice President -- Manufacturing. Mr. Solot
also holds various director positions at subsidiaries of Holding. Mr. Solot is a
member of the board of directors of the Aluminum Extruders Council. Mr. Solot is
the cousin of Donald M. Werner.
Robert P. Tamburrino joined the Company as Vice President, Chief Financial
Officer and Treasurer in December 1998. Prior to joining the Company, Mr.
Tamburrino served as Chief Financial Officer for the steel service center group
of Usinor from 1997 to 1998. From 1991 to 1997, he served Usinor subsidiaries as
Senior Vice President and Chief Financial Officer of Francosteel Corporation and
Executive Vice President and Chief Financial Officer of Edgcomb Metals Company.
Mr. Tamburrino held
52
<PAGE> 55
financial and chief executive officer positions with Rome Cable Corp., a
manufacturer and distributor of copper electrical wire and cable from 1984 to
1990 and was employed by KPMG Peat Marwick from 1978 to 1984.
Michael E. Werner has served as President of the Company's Werner Ladder
Co. business unit since 1997. Mr. Werner joined the Company in 1988 and has held
several positions including Vice President -- National Accounts and Vice
President -- Sales & Marketing. Mr. Werner also holds various officerships at
subsidiaries of Holding. Prior to joining the Company, Mr. Werner served as Vice
President for Mergers, Acquisitions and Investments at Pacific Holding Co. and,
prior to that, as an associate in the Mergers & Acquisitions Department of
Goldman, Sachs & Co. Mr. Werner is the nephew of Donald M. Werner and the cousin
of Eric J. Werner.
Joseph J. Despoy has served as President of the Company's Werner Extruded
Products business unit since 1995. Mr. Despoy joined the Company in 1984 and has
served in various positions including: Marketing Manager, Extruded Products;
Sales Manager, Mill Products Division; and Vice President, Mill Products
Sales -- Northern Division. Prior to joining Werner, Mr. Despoy held several
administrative and marketing positions including Vice President -- Marketing
with the Aluminum Association in Washington, D.C.
Michael D. Isacco has served as Vice President, Manufacturing of the
Company since April 1995. Mr. Isacco joined the Company in 1981 as Engineering
Administrator and has held a variety of positions with the Company, including
Manager of Engineering Administration and Greenville Division Plant Manager.
Prior to joining the Company, Mr. Isacco spent twenty years in various positions
with the United States Army, retiring in 1979 with the rank of Lieutenant
Colonel.
Eric J. Werner joined the Company in 1988 as Secretary and Corporate
Counsel. He has served as Chief Administrative Officer of the Company since 1995
and General Counsel of the Company since 1993. Prior to joining the Company, Mr.
Werner was an associate at the law firm of O'Connor, Broude, Snyder and Aronson.
Mr. Werner also holds various officerships at subsidiaries of Holding. Mr.
Werner also serves as a director of FNB Corporation. Mr. Werner is the son of
Donald M. Werner and the cousin of Michael E. Werner.
Savio W. Tung has served as a director of Holding since November 1997. He
has been an executive of Investcorp, its predecessor or one or more of its
wholly-owned subsidiaries since September 1984. Mr. Tung is a director of CSK
Auto Corporation, and Star Markets Holdings, Inc.
Charles J. Philippin has served as a director of Holding since November
1997. He has been an executive of Investcorp or one or more of its wholly-owned
subsidiaries since July 1994. Prior to joining Investcorp, Mr. Philippin was a
partner of Coopers & Lybrand L.L.P. Mr. Philippin is a director of Saks
Holdings, Inc., CSK Auto Corporation, The William Carter Company and Falcon
Building Products, Inc.
Christopher J. Stadler has served as a director of Holding since November
1997. He has been an executive of Investcorp or one or more of its wholly-owned
subsidiaries since April 1996. Prior to joining Investcorp, Mr. Stadler was a
Director with CS First Boston Corporation. Mr. Stadler is a director of CSK Auto
Corporation, The William Carter Company and Falcon Building Products, Inc.
DIRECTOR COMPENSATION
Holding does not pay any additional remuneration to its employees or to
executives of Investcorp for serving as directors. The Company does reimburse
directors for any expenses incurred in attending meetings. See " -- Executive
Compensation."
53
<PAGE> 56
SHAREHOLDER RIGHTS AGREEMENT
Pursuant to the Shareholder Rights Agreement entered into on the
Recapitalization Closing Date, (i) Class D Investors have a right to designate
at least a majority of Holding's Board, (ii) the Chief Executive Officer of
Holding shall be a director, and, (iii) depending on the size of the board, the
following shareholders, Donald M. Werner, Howard L. Solot, Michael E. Werner,
Eric J. Werner, Michael J. Solot, Craig R. Werner and Bruce D. Werner
(collectively, the "Management Shareholders") are entitled to designate a
minimum of one director and up to that number of directors equal to one third of
the authorized number of directors minus one. See "Certain Transactions --
Agreements with Certain Shareholders -- Shareholder Rights Agreement."
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning annual and long-term
compensation (for 1998 and 1997) awarded to, earned by or paid to the Company's
Chief Executive Officer and each of the other four most highly compensated
executive officers whose remuneration exceeded $100,000 (collectively, the
"Named Executive Officers"). The current compensation arrangements for each of
these officers are described in " -- Employment Arrangements" below.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION ($) SECURITIES
------------------------------ UNDERLYING
OTHER ANNUAL OPTION/SARS ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION (SHARES) COMPENSATION(a)
- ---------------------------- ---- ------- ------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Donald M. Werner(1)....... 1998 407,093 163,013 107,633 585 630,000
President, Chief 1997 414,923 297,920 100,104 -- 2,000,000
Executive Officer
Howard L. Solot(2)........ 1998 386,036 162,042 98,250 -- 626,500
Chief Operating 1997 413,058 297,920 65,041 -- 2,000,000
Officer, Executive Vice
President
Michael E. Werner(3)...... 1998 234,630 73,162 34,426 500 351,000
President of Werner 1997 222,942 134,952 182,137 -- --
Ladder Co.
Eric J. Werner(4)......... 1998 183,493 61,906 36,873 300 326,250
Chief Administrative 1997 214,961 84,448 28,775 -- --
Officer, Secretary,
General Counsel
Joseph J. Despoy(5)....... 1998 175,471 36,225 58,890 100 262,500
President of Werner 1997 169,288 74,813 52,089 -- --
Extruded Products
</TABLE>
- ---------------
(a) See the following section "Compensation Relating to the Recapitalization"
for a detailed explanation of amounts in this column.
(1) The amount shown for Mr. Werner under Other Annual Compensation reflects
payments of $75,902 and $67,972 in respect of life insurance premiums paid
by the Company in 1998 and 1997,respectively, $5,000 and $4,750 in respect
of matching contributions made under the 401(k) Plan in 1998 and 1997,
respectively, $8,863 and $11,873 in respect of accruals under the Retiree
Health Plan in 1998 and 1997, respectively, $3,063 and $2,625 of imputed
income arising from the personal use of a Company provided automobile in
1998 and 1997, respectively, $14,805 and $6,798 for financial planning
services in 1998 and 1997, respectively, and $0 and $6,086 of imputed
interest in 1998 and 1997, respectively. The amount shown for Mr. Werner
under All Other Compensation reflects payments of $630,000 relating to
payments made under his Employee Protection Agreement in
54
<PAGE> 57
1998 and $2,000,000 relating to the acceleration of additional pension and
consulting payments as part of the Recapitalization in 1997.
(2) Mr. Solot retired effective March 1999. The amount shown for Mr. Solot under
Other Annual Compensation reflects payments of $46,582 and $32,795 in
respect of life insurance premiums paid by the Company in 1998 and 1997,
respectively, $5,000 and $4,750 in respect of matching contributions made
under the 401(k) Plan in 1998 and 1997, respectively, $8,685 and $11,136 in
respect of accruals under the Retiree Health Plan in 1998 and 1997,
respectively, $9,512 and $7,030 of imputed income arising from the personal
use of a Company provided automobile in 1998 and 1997, respectively, and
$28,471 and $9,330 for financial planning services in 1998 and 1997,
respectively. The amount shown for Mr. Solot under All Other Compensation
reflects payments of $626,500 relating to payments made under his Employee
Protection Agreement in 1998 and $2,000,000 relating to the acceleration of
additional supplemental pension and consulting payments as a result of the
Recapitalization in 1997.
(3) The amount shown for Michael E. Werner under Other Annual Compensation
reflects payments of $8,374 and $8,044 in respect of life insurance premiums
paid by the Company in 1998 and 1997, respectively, $4,463 and $3,062 in
respect of matching contributions made under the 401(k) Plan in 1998 and
1997, respectively, $6,368 and $6,382 in respect of accruals under the
Retiree Health Plan in 1998 and 1997, respectively, $3,063 and $3,889 of
imputed income arising from the personal use of a Company provided
automobile in 1998 and 1997, respectively, $50,391 of moving expense in
1997, $107,119 of special pay in 1997 and $12,158 and $3,250 of financial
planning services in 1998 and 1997, respectively. The amount shown under All
Other Compensation reflects payments of $351,000 made under his Employee
Protection Agreement in 1998.
(4) The amount shown for Eric J. Werner under Other Annual Compensation reflects
payments of $7,811 and $6,935 in respect of life insurance premiums paid by
the Company in 1998 and 1997, respectively, $5,000 and $4,750 in respect of
matching contributions made under the 401(k) Plan in 1998 and 1997,
respectively, $5,533 and $5,431 in respect of accruals under the Retiree
Health Plan in 1998 and 1997, respectively, $7,399 and $4,766 of imputed
income arising from the personal use of a Company provided automobile in
1998 and 1997, respectively, and $11,130 and $6,893 of financial planning
services in 1998 and 1997, respectively. The amount shown under All Other
Compensation reflects payments of $326,250 made under his Employee
Protection Agreement in 1998.
(5) The amount shown for Mr. Despoy under Other Annual Compensation reflects
payments of $28,507 and $26,841 in respect of life insurance premiums paid
by the Company in 1998 and 1997, respectively, $4,890 and $2,716 in respect
of matching contributions made under the 401(k) Plan in 1998 and 1997,
respectively, $22,319 and $19,689 in respect to accruals under the Retiree
Health Plan in 1998 and 1997, respectively, $1,174 and $1,098 of imputed
income arising from the personal use of a Company provided automobile in
1998 and 1997, respectively, and $2,000 and $1,745 of financial planning
services in 1998 and 1997, respectively. The amount shown under All Other
Compensation reflects payments of $262,500 made under his Employee
Protection Agreement in 1998.
COMPENSATION RELATED TO THE RECAPITALIZATION
Consulting Agreements
As part of the Company's succession plan, the Company Board determined in
December 1996 to provide each of Richard L. Werner, Robert I. Werner, Donald M.
Werner and Howard L. Solot a Consulting Agreement and an additional supplemental
pension to be entered into or paid (as the case may be) at the time that each of
the foregoing retires from the Company subject to certain acceleration
provisions. Accordingly, in April 1997, each of Richard L. Werner and Robert I.
Werner entered into a four-year Consulting Agreement providing for consulting
fees of $250,000 per annum and received an additional supplemental pension of $1
million. Pursuant to the December 1996 awards, a change of control of Holding
results in the acceleration of such payments. The Recapitalization constituted a
change of control for purposes of the Consulting Agreements, and, as a result,
all remaining amounts under the Consulting Agreements were accelerated and paid
to each of Richard L. Werner and Robert I. Werner on the Recapitalization
Closing Date. In addition, pursuant to the December 1996 awards, each of Donald
M. Werner and Howard L. Solot became entitled to receive, at the time of the
Transactions, all amounts that they would have received had they retired as of
such time, pursuant to the terms of
55
<PAGE> 58
additional supplemental pensions and the acceleration of their Consulting
Agreements. Such amounts totalling $2 million each were paid by Holding on the
Recapitalization Closing Date. See "-- Pension Plans." After all such payments
were made pursuant to the acceleration, the Consulting Agreements terminated
pursuant to their terms.
Employee Protection Agreements
In connection with the Recapitalization, Holding entered into Employee
Protection Agreements with approximately 50 employees, including the Named
Executive Officers and the Company's other senior management. The Employee
Protection Agreements provided for payments ranging from 50% to 150% of a year's
salary to be paid to each covered employee (i) who remains employed on the first
anniversary of a change in control of Holding or (ii) prior to such anniversary
(A) whose employment is terminated by Holding other than for cause or (B) who
suffers a "material employment change" (as defined in the Employee Protection
Agreements).
Employment Arrangements
Pursuant to the Recapitalization Agreement, Holding entered into employment
agreements with each of Donald M. Werner, Howard L. Solot, Michael E. Werner,
Eric J. Werner and three other senior managers of the Company. In addition, in
December 1998, the Company entered into an Employment Agreement with Robert P.
Tamburrino. The employment agreements for all of these officers are collectively
referred to as the "Employment Agreements." Each of the Employment Agreements is
for a term of three years. The Employment Agreements for Named Executive
Officers provide for a base annual salary in the following amounts: $406,000 for
Donald M. Werner, $385,000 for Howard L. Solot, $183,000 for Eric J. Werner,
$234,000 for Michael E. Werner and $250,000 for Robert P. Tamburrino. In
addition to such executive's salary, the Employment Agreements also provide for
an annual bonus payment up to a maximum of 90% of annual salary for Donald M.
Werner and Howard L. Solot, 60% of annual salary for Eric J. Werner, 70% of
annual salary for Michael E. Werner and 60% of annual salary for Robert P.
Tamburrino. This bonus is reduced, within a range of board discretion, to the
extent that the Company falls short of EBITDA targets specified in the
Employment Agreements. The Employment Agreements further provide for an
additional cash bonus payable at the discretion of the Company Board. Under the
Employment Agreements, Holding may only terminate such executives' employment,
without obligation for severance, for cause. If an executive's employment is
terminated without cause or if an executive terminates his employment for good
reason, the Company must (i) pay such executive a lump sum equal to 12 months'
base salary, and the most recent annual bonus paid (or earned but not yet paid)
prior to termination of employment, and (ii) continue such executive's employee
benefits for 12 months. The Employment Agreements define "cause" as conviction
of embezzlement or other felony involving fraud with respect to performance of
duties and, subject to notice and opportunity to cure, willful engagement in
gross misconduct concerning duties. "Good reason" is defined as a reduction in
salary, bonus opportunities or employee benefits from the level in effect as of
the Recapitalization, adverse changes in duties and forced relocation.
Management Stock Incentive Plan
Pursuant to the Recapitalization Agreement, Holding adopted a stock
incentive plan, pursuant to which options to purchase Class C Common Stock may
be granted to employees and directors of the Company. On December 15, 1998 the
Company issued options representing approximately 6.6% of the outstanding
post-Recapitalization common stock to certain members of senior management,
including the Named Executive Officers. The exercise price for options granted
is equal to the Cash Redemption Price. Awards granted under the plan to
employees include a provision terminating the award upon termination of
employment under certain circumstances or accelerating the receipt of benefits
upon the occurrence of specified events, including any change of control of
Holding. Each option is subject to certain vesting provisions. To the extent not
earlier vested or terminated, all options will vest on the seventh anniversary
of the date of grant and will expire 30 days thereafter if not exercised. Upon
the termination of an optionee's employment with the Company, Holding has
certain rights to repurchase,
56
<PAGE> 59
and the optionee has certain rights to require an affiliate of Investcorp to
repurchase (subject to the right, granted to Holding, to repurchase such shares
instead of the Investcorp affiliate), the Class C Common Stock purchased by the
optionee pursuant to the exercise of his option(s).
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS GRANT
OPTION/SAR GRANTED TO EMPLOYEES EXERCISE EXPIRATION DATE
NAME GRANTED IN FISCAL YEAR PRICE DATE VALUE(1)
---- -------------------- -------------------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Donald M. Werner
President, Chief
Executive Officer 585 11.8 $2,421.29 12/24/2004 $340,007.85
Michael E. Werner
President of Werner
Ladder Co. 500 10.1 $2,421.29 12/24/2004 $290,605.00
Eric J. Werner
Chief Administrative
Officer,
Secretary and General
Counsel 300 6.05 $2,421.29 12/24/2004 $174,363.00
Joseph J. Despoy
President of Werner
Extruded Products 100 2.02 $2,421.29 12/24/2004 $ 58,121.00
</TABLE>
- --------------------------------------------------------------------------------
(1) For purposes of fair market value disclosures, the fair market value of an
option grant is determined using the Black-Scholes option pricing model. See
Note H to the Company's Consolidated Financial Statements.
Stock Loan Plan
Pursuant to the Recapitalization Agreement, Holding adopted a Stock Loan
Plan in order to make loans to certain members of management entering into
certain stock purchase agreements between management participants and the
Investors (the "Loan Participants") in amounts that do not exceed the sum of (i)
50% of the purchase price of the shares of Class C Common Stock purchased by the
Loan Participant and (ii) the amount of the retention bonus to be paid by
Holding to the Loan Participant pursuant to the respective Employee Protection
Agreement. Loans made pursuant to the Stock Loan Plan will mature in seven
years, and will bear interest at the Company's effective borrowing rate using
the rates under the Revolving Facility of the Senior Credit Facility and the
Receivables Purchase Agreement. Holding will negotiate with each Loan
Participant the amount of principal to be paid from such Loan Participant's
annual bonus. The Stock Loan Plan requires each Loan Participant to enter into a
pledge agreement and to execute a secured promissory note. Shares with an
aggregate fair market value of at least $2 million are available for purchase
pursuant to the Stock Loan Plan and management stock purchase agreements.
Pension Plans
The Company's salaried employees receive an annual lifetime pension (up to
$130,000, as adjusted) benefit based on years of service and salary under the
Werner Holding Co. (DE), Inc. Salaried Employees' Pension Plan, a funded,
tax-qualified defined benefit plan covering all salaried employees (the
"Retirement Plan"). Certain Named Executive Officers also receive pension
benefits under the Werner Holding Co. (DE), Inc. Supplemental Pension Plan A
and/or the Werner Holding Co. (DE), Inc. Supplemental Pension Plan B. The
following tables show the estimated aggregate annual benefits payable at age 65
to Named Executive Officers retiring at age 65 with the indicated average
compensation and years of credited service from both the Retirement Plan and the
applicable Supplemental Pension Plans.
57
<PAGE> 60
A. PENSION PLAN TABLE: ANNUAL BENEFITS PAYABLE AT AGE 65
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35 40 45
- ------------ ------- ------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$100,000 $ 6,370 $12,741 $ 19,111 $ 25,481 $ 31,852 $ 38,222 $ 45,370 $ 52,519 $ 59,668
200,000 13,519 27,038 40,557 54,075 67,594 81,113 95,410 109,707 124,004
300,000 20,667 41,335 62,002 82,670 103,337 124,004 145,450 166,895 188,341
400,000 27,816 55,632 83,448 111,264 139,080 166,895 195,490 224,084 252,678
500,000 34,964 69,929 104,893 139,858 174,822 209,787 245,529 281,272 317,014
</TABLE>
B. PENSION PLAN TABLE: ANNUAL BENEFITS PAYABLE AT AGE 65
<TABLE>
<CAPTION>
YEARS OF SERVICE AS AN OFFICER
----------------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35 40 45
- ------------ ------- ------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$300,000 $ 0 $14,297 $ 21,446 $ 28,594 $ 35,743 $ 42,891 $ 50,040 $ 57,188 $ 64,337
400,000 0 19,063 28,594 38,125 47,657 57,188 66,720 76,251 85,782
500,000 0 23,828 35,743 47,657 59,571 71,485 83,399 95,314 107,228
600,000 0 28,594 42,891 57,188 71,485 85,782 100,079 114,376 128,673
700,000 0 33,360 50,040 66,720 83,399 100,079 116,759 133,439 150,119
800,000 0 38,125 57,188 76,251 95,314 114,376 133,439 152,502 171,565
900,000 0 42,891 64,337 85,782 107,228 128,673 150,119 171,565 193,010
</TABLE>
The benefits listed in the tables are not subject to any deduction for
Social Security. The benefits listed in Table A are computed on the basis of the
average salary of the employee (excluding bonuses) for the three consecutive
full calendar years out of the last 10 years prior to retirement that provide
the highest average. The benefits listed in Table B are computed on the basis of
the average salary of the employee (including bonuses) for the three consecutive
full calendar years out of the last 10 years prior to retirement that provide
the highest average.
Supplemental Pension Plans A and B are unfunded, non-qualified plans which
provide lifetime annual pension benefits to certain stated executives in excess
of benefits payable under the Retirement Plan, due to Retirement Plan
limitations imposed by Employee Retirement Income Saving Act (ERISA), plus
additional other benefits. Supplemental Pension Plan A covers all members of the
Company's Management Committee and Supplemental Pension Plan B covers all the
elected corporate officers. Supplemental Pension Plan benefits are a function of
service and final average compensation. Executives must have spent at least ten
years as either an elected salaried corporate officer or a member of the
Management Committee of the Company which includes all of the named executive
officers to be eligible. Eligibility for supplemental plans is conditioned upon
participants' compliance with a non-competition agreement.
The compensation used for pension formula purposes is annual base pay alone
for the qualified Retirement Plan (subject to IRS limits, currently at $160,000
per year) and both base pay and annual bonus (without regard to any limits) for
the nonqualified Supplemental Plans. The base salaries and bonuses of each of
the named executive officers for 1998 are set forth in the Summary Compensation
Table.
The respective years of credited service for the Named Executive Officers
as of December 31, 1998 are: Donald M. Werner, 40; Howard L. Solot, 39; Michael
E. Werner, 10; Eric J. Werner, 10; and Joseph J. Despoy, 15.
58
<PAGE> 61
COMMITTEES OF THE BOARD OF DIRECTORS;
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The full board of directors of Werner determines the compensation for
management of Werner. Donald M. Werner and Howard L. Solot are members of the
board of directors of Werner. The compensation for the Named Executive Officers,
except for Mr. Despoy, is determined under each such officer's employment
agreement.
None of the executive officers of the Company served on the board of
directors or on the compensation committee of any other entity, the officers of
which served on any of the boards of directors of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
PRINCIPAL SHAREHOLDERS
All of outstanding voting stock of Werner Holding Co. (DE), Inc. is owned
by Holding. The following table sets forth certain information regarding the
beneficial ownership of the capital stock of Holding.
The Class A Stock, Class B Stock and Class D Common Stock are the only
classes of Holding's capital stock that have the power to vote. The Class A
Stock and Class B Stock each possesses the right to one vote per share. The
Class D Common Stock possesses the right to 50.6818 votes per share.
The table sets forth for such periods (i) each person known by the Company
to be the beneficial owner of more than 5% of each class of voting stock of
Holding, (ii) each person who is a director of Holding or Named Executive
Officer of the Company who is expected to beneficially own shares of voting
stock of Holding and (iii) all directors of Holding and executive officers of
the Company as a group. Unless otherwise indicated, each of the shareholders
shown in the table below has sole voting and investment power with respect to
the shares beneficially owned.
Investcorp and the Investors beneficially own approximately 67% of the
outstanding voting stock of Holding and the pre-Recapitalization existing
shareholders, including certain members of management, now own approximately 33%
of the outstanding voting stock of Holding. In addition, the Investors own 4,682
shares of Class C Common Stock and 45,000 shares of Class E Common Stock. See
"Certain Transactions -- Agreements with Certain Shareholders" and "The
Transactions."
<TABLE>
<CAPTION>
NUMBER %
OF SHARES(1) OF CLASS
------------ --------
<S> <C> <C>
CLASS A VOTING STOCK
Noel Berk-Rauch............................................. 142 6.9
Aleena R. Shapiro(2)........................................ 110 5.3
Howard L. Solot(3).......................................... 361 17.5
Donald M. Werner............................................ 388 18.8
Richard L. Werner Revocable Trust(4)........................ 331 16.1
Ronald E. Werner(5)......................................... 240 11.7
All directors and executive officers as a group, including
certain of the above named persons........................ 884 42.9
CLASS B VOTING STOCK
Howard L. Solot(6).......................................... 1,415 6.3
Bruce D. Werner Trust(7).................................... 1,399 6.2
Craig R. Werner Trust(8).................................... 1,508 6.7
Michael E. Werner Revocable Trust(9)........................ 1,496 6.7
Donald M. Werner(10)........................................ 769 3.5
Eric J. Werner(11).......................................... 1,384 6.2
Ronald E. Werner(12)........................................ 1,746 7.8
All directors and executive officers as a group, including
certain of the above named persons........................ 5,064 22.6
</TABLE>
59
<PAGE> 62
<TABLE>
<CAPTION>
NUMBER %
OF SHARES(1) OF CLASS
------------ --------
<S> <C> <C>
CLASS D VOTING STOCK
INVESTCORP S.A.(13)(14)..................................... 1,000 100.0
SIPCO Limited(15)........................................... 1,000 100.0
CIP Limited(16)(17)......................................... 920 92.0
Ballet Limited(16)(17)...................................... 92 9.2
Denary Limited(16)(17)...................................... 92 9.2
Gleam Limited(16)(17)....................................... 92 9.2
Highlands Limited(16)(17)................................... 92 9.2
Noble Limited(16)(17)....................................... 92 9.2
Outrigger Limited(16)(17)................................... 92 9.2
Quill Limited(16)(17)....................................... 92 9.2
Radial Limited(16)(17)...................................... 92 9.2
Shoreline Limited(16)(17)................................... 92 9.2
Zinnia Limited(16)(17)...................................... 92 9.2
INVESTCORP Investment Equity Limited(14).................... 80 8.0
</TABLE>
- ---------------
(1) As used in the table above, a beneficial owner of a security includes any
person who, directly or indirectly, through contract, arrangement,
understanding, relationship, or otherwise has or shares (i) the power to
vote, or direct the voting of, such security or (ii) investment power which
includes the power to dispose, or to direct the disposition of, such
security. In addition, a person is deemed to be the beneficial owner of a
security if that person has the right to acquire beneficial ownership of
such security within 60 days.
(2) Ms. Shapiro does not directly own any stock in Holding. The number of
shares shown as owned are held in the name of Rauch Trust of which Aleena
R. Shapiro is Trustee. Ms. Shapiro disclaims the beneficial ownership of
such shares.
(3) Includes 36.47 shares of Class A Stock held in the name of Mr. Solot's
spouse, Janet F. Solot.
(4) Includes 27.93 shares of Class A Stock held in the name of the Lois S.
Werner Revocable Trust. Lois S. Werner is the spouse of Mr. Werner.
(5) Includes 238.85 shares of Class A Stock held in the name of the Florence J.
Werner Irrevocable Trust of which Ronald E. Werner is the trustee. Mr.
Werner disclaims the beneficial ownership of such shares.
(6) Includes 212.17 shares of Class B Stock held in the name of Mr. Solot's
spouse, Janet F. Solot.
(7) Includes 17.30 shares of Class B Stock held as joint tenant with Tammy H.
Werner and 391.01 shares of Class B Stock held in the name of the Bruce D.
Werner Family Limited Partnership.
(8) Includes 582.16 shares of Class B Stock owned by the Craig R. Werner Family
Limited Partnership.
(9) Includes 179.98 shares of Class B Stock held in the name of the Laura W.
Werner Revocable Trust, 102.92 shares of Class B Stock held in the name of
the Jonathan C. Werner Gift Trust, 57.65 shares of Class B Stock held in
the name of the Margot A. Werner Gift Trust and 102.92 shares of Class B
Stock held in the name of the Stephanie N. Werner Gift Trust.
(10) Includes 22 shares of Class B Stock owned with Barbara Werner as joint
tenants and 88 shares of Class B Stock held in the name of Barbara Werner.
(11) Includes 29.48 shares of Class B Stock owned with Melanie R. Werner as
joint tenants, 274.56 shares of Class B Stock held in the name of Melanie
R. Werner, Custodian for Isabelle N. Werner and 274.56 shares of Class B
Stock held in the name of Melanie R. Werner, Custodian for Sophia K.
Werner.
(12) Includes 1,035.74 shares of Class B Stock held in the name of the Robert I.
Werner Irrevocable Trust and 200.17 shares of Class B Stock held in the
name of the Florence J. Werner Irrevocable Trust. Mr. Werner disclaims the
beneficial ownership of all of these shares.
60
<PAGE> 63
(13) Investcorp does not directly own any stock in Holding. The number of shares
shown as owned by Investcorp includes all of the shares owned by INVESTCORP
Investment Equity Limited (see (15) below). Investcorp owns no stock in
Ballet Limited, Denary Limited, Gleam Limited, Highlands Limited, Noble
Limited, Outrigger Limited, Quill Limited, Radial Limited, Shoreline
Limited, Zinnia Limited, or in the beneficial owners of these entities (see
(18) below). Investcorp may be deemed to share beneficial ownership of the
shares of voting stock held by these entities because the entities have
entered into revocable management services or similar agreements with an
affiliate of Investcorp, pursuant to which each such entity has granted
such affiliate the authority to direct the voting and disposition of the
Holding voting stock owned by such entity for so long as such agreement is
in effect. Investcorp is a Luxembourg corporation with its address at 37
rue Notre-Dame, Luxembourg.
(14) INVESTCORP Investment Equity Limited is a Cayman Islands corporation, and a
wholly-owned subsidiary of Investcorp, with its address at P.O. Box 1111,
West Wind Building, George Town, Grand Cayman, Cayman Islands.
(15) SIPCO Limited may be deemed to control Investcorp through its ownership of
a majority of a company's stock that indirectly owns a majority of
Investcorp's shares. SIPCO Limited's address is P.O. Box 1111, West Wind
Building, George Town, Grand Cayman, Cayman Islands.
(16) CIP Limited ("CIP") owns no stock in Holding. CIP indirectly owns less than
0.1% of the stock in each of Ballet Limited, Denary Limited, Gleam Limited,
Highlands Limited, Noble Limited, Outrigger Limited, Quill Limited, Radial
Limited, Shoreline Limited and Zinnia Limited (see (18) below). CIP may be
deemed to share beneficial ownership of the shares of voting stock of
Holding held by such entities because CIP acts as a director of such
entities and the ultimate beneficial shareholders of each of those entities
have granted to CIP revocable proxies in companies that own those entities'
stock. None of the ultimate beneficial owners of such entities beneficially
owns individually more than 5% of Holding's voting stock.
(17) Each of CIP Limited, Ballet Limited, Denary Limited, Gleam Limited,
Highlands Limited, Noble Limited, Outrigger Limited, Quill Limited, Radial
Limited, Shoreline Limited and Zinnia Limited is a Cayman Islands
corporation with its address at P.O. Box 2197, West Wind Building, George
Town, Grand Cayman, Cayman Islands.
Right of First Offer; Tag-Along Rights
Pursuant to the Restated Articles, prior to an initial public offering of
the capital stock of Holding, any holder of Class A Stock or Class B Stock that
intends to sell any shares of such stock will be required to furnish notice to
Holding of such holder's intent to sell such shares. Following the receipt of
such notice, Holding will have the option to purchase such stock on the same
terms as the proposed sale. In addition, if any holder of Class D Common Stock
proposes to transfer shares of such stock, holders of the other classes of
Holding capital stock will have certain tag-along rights with respect thereto.
Any shares for which any holders elect to exercise such tag-along rights but
whose shares are not sold in connection therewith will have such shares redeemed
by Holding, to the extent it is legally permitted to do so.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
AGREEMENTS WITH CERTAIN SHAREHOLDERS
Consulting and Financial Services Agreements
In connection with the Recapitalization the Company entered into an
agreement for management advisory and consulting services for a five-year term
with Investcorp International, Inc. ("III"), III, pursuant to which the Company
prepaid III $5.0 million upon closing.
61
<PAGE> 64
Shareholder Rights Agreement
On the Recapitalization Closing Date, Holding executed the Shareholder
Rights Agreement with each of the Management Shareholders and each holder of
Class D Common Stock ("Class D Investors"). The Shareholder Rights Agreement
contains the following provisions: (i) the right, following an initial public
offering of Holding's capital stock, in favor of the Class D Investors to
require the Management Shareholders to sell their remaining equity interests in
Holding if the Class D Investors decide to sell as a group 85% or more of their
remaining equity interests in the Company and the Class D Investors hold at that
time (prior to giving effect to the proposed sale) more than 80% of the shares
of Class D Common Stock purchased by the Investors in the Recapitalization, (ii)
the right in favor of all holders of Holding's capital stock, during the period
beginning immediately after the Closing Date and continuing until, but ending
prior to, an initial public offering, to participate on a pro rata basis in
equity financings by the Company (other than issuances of equity securities in
connection with stock incentive or compensation plans approved by Holding's
Board of Directors or in connection with business acquisitions by Holding) if
the securities to be issued by the Company are not being issued at fair market
value as determined in good faith by Holding's Board of Directors, (iii) certain
demand and piggy-back registration rights in favor of the Class D Investors and
certain piggy-back registration rights in favor of all other shareholders of
Holding, (iv) the obligation of the Management Shareholders to enter into
certain customary "lock-up" agreements with underwriters in future public
offerings, and (v) an agreement by the Class D Investors and the Management
Shareholders to vote their respective shares such that (a) at least a majority
of Holding's Board will consist of persons designated by the Class D Investors,
(b) the Chief Executive Officer of Holding shall be a director and (c) depending
on the size of the board, the Management Shareholders shall be entitled to
designate a minimum of one director and up to that number of directors equal to
one third of the authorized number of directors (rounded to the nearest whole
number) minus one.
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements
The financial statements set forth in the Index are filed as part of
this Annual Report on Form 10-K.
(b) Reports on Form 8-K:
None.
62
<PAGE> 65
(c) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
2 Amended and Restated Recapitalization Agreement, dated as of
October 27, 1997, by and among Holding and certain investors
organized by Investcorp S.A. (filed as Exhibit 2 to
Registrant's Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
3.1 Certificate of Incorporation of Werner Holding Co. (DE),
Inc. (filed as Exhibit 3.1 to Registrant's Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
3.2 By-laws of Werner Holding Co. (DE), Inc. (filed as Exhibit
3.2 to Registrant's Form S-4 Registration Statement No.
333-46607 and incorporated herein by reference).
3.2.1 Certificate of Ownership and Merger of Werner Holding Co.
(DE), Inc. regarding merger of Werner Financial Inc. with
and into Werner Holding Co. (DE), Inc.
3.3 Amended and Restated Articles of Incorporation of Werner
Holding Co. (PA), Inc. (filed as Exhibit 3.3 to Registrant's
Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
3.4 By-laws of Werner Holding Co. (PA), Inc. (filed as Exhibit
3.4 to Registrant's Form S-4 Registration Statement No.
333-46607 and incorporated herein by reference).
3.5 Articles of Incorporation of Werner Co. (filed as Exhibit
3.5 to Registrant's Form S-4 Registration Statement No.
333-46607 and incorporated herein by reference).
3.5.1 Articles of Merger of Werner Co. regarding merger of R.D.
Arizona Ladder Corp. with and into Werner Co.
3.5.2 Articles of Merger of Werner Co. regarding merger of Phoenix
Management Services, Inc., Werner Management Co., Florida
Ladder Company, Kentucky Ladder Company and Gold Medal
Ladder Company with and into Werner Co.
3.5.3 Articles of Merger of Werner Co. regarding merger of Olympus
Properties, Inc. with and into Werner Co.
3.6 By-laws of Werner Co. (filed as Exhibit 3.6 to Registrant's
Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
3.7 Certificate of Incorporation of WIP Technologies, Inc.
(filed as Exhibit 3.19 to Registrant's Form S-4 Registration
Statement No. 333-46607 and incorporated herein by
reference).
3.8 By-laws of WIP Technologies, Inc. (filed as Exhibit 3.20 to
Registrant's Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
3.9 Certificate of Incorporation of Werner Funding Corporation
3.10 By-laws of Werner Funding Corporation
4.1 Indenture between the Company and IBJ Schroder Bank & Trust
Company, as Trustee, dated as of November 24, 1997 (filed as
Exhibit 4.1 to Registrant's Form S-4 Registration Statement
No. 333-46607 and incorporated herein by reference).
4.2 Form of Note (included as Exhibit B to Exhibit 4.1 in
Registrant's Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
4.3 Registration Rights Agreement among the Company, Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and Goldman, Sachs & Co. dated November 24, 1997
(filed as Exhibit 1.2 in Registrant's Form S-4 Registration
Statement No. 333-46607 and incorporated herein by
reference).
4.4 Form of Letter of Transmittal (filed as Exhibit 1.3 in
Registrant's Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
</TABLE>
63
<PAGE> 66
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
10.1 Form of Employee Protection Agreements between Holding and
certain employees (schedule attached) (filed as Exhibit 10.1
to Registrant's Amendment No. 1 to Form S-4 Registration
Statement No. 333-46607 and incorporated herein by
reference).
10.2 Shareholder Agreement, dated as of November 24, 1997, by and
among Holding, Investcorp Investment Equity Limited, certain
other holders of shares of Class D Common Stock of Holding
and the other individuals listed on the signature pages
thereto (filed as Exhibit 10.2 to Registrant's Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
10.3 Form of Employment Agreement, dated as of November 24, 1997,
between Werner Management Co. and certain named executive
officers (filed as Exhibit 10.3 to Registrant's Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
10.4 Management Stock Incentive Plan, established by Werner
Holding Co. (PA), Inc. as of November 24, 1997 (filed as
Exhibit 10.4 to Registrant's Form S-4 Registration Statement
No. 333-46607 and incorporated herein by reference).
10.5 Form of Stock Option Agreements pursuant to Stock Incentive
Plan between Werner Holding Co. (PA), Inc. and certain
employees (schedule attached) (filed as Exhibit 10.5 to
Registrant's Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
10.6 Trust Indenture, dated as of September 1, 1990, between the
County of Carroll, Kentucky and Dai-Ichi Kangyo Trust
Company (filed as Exhibit 10.6 to Registrant's Amendment No.
1 to Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
10.7 Variable Rate Demand Industrial Building Revenue Bonds
issued by the County of Carroll, Kentucky (filed as Exhibit
10.7 to Registrant's Amendment No. 1 to Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
10.8 Lease Agreement, dated as of September 1, 1990, between
County of Carroll, Kentucky and Kentucky Ladder Company
(filed as Exhibit 10.8 to Registrant's Amendment No. 1 to
Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
10.9 Employment Agreement between Werner Co. and Robert P.
Tamburrino.
10.10 Master Registration Rights Agreement, dated as of November
24, 1997, by Werner Holding Co. (PA), Inc. for the benefit
of certain shareholders (filed as Exhibit 10.10 to
Registrant's Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
10.11 Werner 1997 Stock Loan Plan (filed as Exhibit 10.11 to
Registrant's Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
10.12 Credit Agreement, dated as of November 24, 1997, among the
Company, Bankers Trust Company, as Administrative Agent and
Co-Arranger, Merrill Lynch Capital Corporation, as
Syndication Agent and as Co-Arranger, The Chase Manhattan
Bank, as Documentation Agent, and Goldman Sachs Credit
Partners L.P., as Co-Agent (filed as Exhibit 10.12 to
Registrant's Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
10.13 Pension Plan for Certain Hourly Bargaining Unit Employees of
Werner Co. (filed as Exhibit 10.13 to Registrant's Amendment
No. 1 to Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
10.14 Retirement Plan for Salaried Employees of Werner Holding Co.
(DE), Inc. (filed as Exhibit 10.14 to Registrant's Amendment
No. 1 to Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
</TABLE>
64
<PAGE> 67
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
10.15 Supplemental Pension Plan A Applicable to Key Executives of
Werner Holding Co. (DE), Inc., its Parent and Subsidiaries
(filed as Exhibit 10.15 to Registrant's Amendment No. 1 to
Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
10.16 Supplemental Pension Plan B Applicable to Elected Salaried
Corporate Officers of Werner Holding Co. (DE), Inc., its
Parent and Subsidiaries (filed as Exhibit 10.16 to
Registrant's Amendment No. 1 to Form S-4 Registration
Statement No. 333-46607 and incorporated herein by
reference).
10.17 Amendment to the Supplemental Pension Plan B Applicable to
Elected Salaried Corporate Officers of Werner Holding Co.
(DE), Inc., its Parent and Subsidiaries (filed as Exhibit
10.17 to Registrant's Amendment No. 1 to Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
10.18 Werner Holding Co. (DE), Inc. Employee Savings Plan (filed
as Exhibit 10.18 to Registrant's Amendment No. 1 to Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
10.19 Form of Management Stock Purchase Agreement between Stepup
Limited, Werner Holding Co. (PA), Inc. and certain
individuals (filed as Exhibit 10.19 to Registrant's Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
10.20 Form of Loan and Pledge Agreement of Werner Holding Co.
(PA), Inc. (filed as Exhibit 10.20 to Registrant's Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
10.21 Agreement for Management Advisory, Strategic Planning and
Consulting Services between the Company and Investcorp
International, Inc. (filed as Exhibit 10.21 to Registrant's
Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
10.22 Financing Advisory Agreement between the Company and
Investcorp International Inc. (filed as Exhibit 10.22 to
Registrant's Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
10.23 Stand-By Commitment Letter of Invifin S.A. (filed as Exhibit
10.23 to Registrant's Form S-4 Registration Statement No.
333-46607 and incorporated herein by reference).
10.24 Reinsurance Agreement, dated March 31, 1998, among
Manufacturer's Indemnity and Insurance Company of America
and National Union Fire Insurance Company of Pittsburgh, PA.
(filed as Exhibit No. 10.24 to Registrant's Amendment No. 1
to Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
10.25 Agreement, dated March 31, 1998, among National Union Fire
Insurance Company of Pittsburgh, PA, Manufacturer's
Indemnity and Insurance Company of America and the
Reinsurers named therein (filed as Exhibit No. 10.25 to
Registrant's Amendment No. 1 to Form S-4 Registration
Statement No. 333-46607 and incorporated herein by
reference).
10.26 Assumption Agreement, dated March 31, 1998, among National
Union Fire Insurance Company of Pittsburgh, PA,
Manufacturer's Indemnity and Insurance Company of America
and Werner Holding Co. (PA), Inc. (filed as Exhibit No.
10.26 to Registrant's Amendment No. 1 to Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
10.27 Novation and Assumption Agreement, dated March 31, 1998,
among Insurance Company of North America, National Union
Fire Insurance Company of Pittsburgh, PA and Werner Holding
Co. (PA), Inc. (filed as Exhibit No. 10.27 to Registrant's
Amendment No. 1 to Form S-4 Registration Statement No.
333-46607 and incorporated herein by reference).
</TABLE>
65
<PAGE> 68
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
10.28 Commutation Agreement, dated March 31, 1998, between
Insurance Company of North America, Pacific Employers
Insurance Company and CIGNA Insurance Company of Illinois,
and Manufacturer's Indemnity and Insurance Company (filed as
Exhibit No. 10.28 to Registrant's Amendment No. 1 to Form
S-4 Registration Statement No. 333-46607 and incorporated
herein by reference).
10.29 Indemnity Agreement, dated March 31, 1998, between National
Union Fire Insurance Company of Pittsburgh, PA and Werner
Holding Co. (PA), Inc. (filed as Exhibit No. 10.29 to
Registrant's Amendment No. 1 to Form S-4 Registration
Statement No. 333-46607 and incorporated herein by
reference).
10.30 Novation Agreement, dated March 31, 1998, among The
Travelers Indemnity Company of Hartford, Connecticut,
certain of its subsidiaries and affiliates, Werner Holding
Co. (PA), Inc. and certain of its subsidiaries, and National
Union Fire Insurance Company of Pittsburgh, PA. (filed as
Exhibit No. 10.30 to Registrant's Amendment No. 1 to Form
S-4 Registration Statement No. 333-46607 and incorporated
herein by reference).
10.31 Receivables Purchase Agreement dated as of May 29, 1998
among Werner Funding Corporation, Werner Co., Market Street
Funding Corporation and PNC Bank, National Association
(filed as Exhibit 10.1 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 and
incorporated herein by reference).
10.32 Purchase and Sale Agreement dated as of May 29, 1998 between
Werner Funding Corporation and Werner Co. (filed as Exhibit
10.2 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 and incorporated herein by
reference).
10.33 Third Amendment to the Werner Holding Co. (DE), Inc.
Employee Savings Plan (filed as Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 and incorporated herein by reference).
10.34 Third Amendment to the Retirement Plan for Salaried
Employees of Werner Holding Co. (DE), Inc. (filed as Exhibit
10.2 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 and incorporated herein by
reference).
10.35 Second Amendment to the Pension Plan for Certain Hourly
Bargaining Unit Employees of Werner Co. (filed as Exhibit
10.3 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 and incorporated herein by
reference).
10.36 Premium Conversion Plan of Werner Holding Co. (DE), Inc.
21 Subsidiaries of the Company.
27 Financial Data Schedule.
</TABLE>
66
<PAGE> 69
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
WERNER HOLDING CO. (DE), INC.
By: /s/ DONALD M. WERNER
------------------------------------
Donald M. Werner
President
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 March 29, 1999.
<TABLE>
<S> <C>
/s/ DONALD M. WERNER Chairman of the Board, Chief Executive Officer and
- ----------------------------------------------------- President (Principal Executive Officer)
Donald M. Werner
/s/ ROBERT P. TAMBURRINO Vice President, Chief Financial Officer and Treasurer
- ----------------------------------------------------- (Principal Financial Officer and Principal Accounting
Robert P. Tamburrino Officer)
/s/ HOWARD L. SOLOT Vice Chairman of the Board
- -----------------------------------------------------
Howard L. Solot
/s/ SAVIO W. TUNG Director
- -----------------------------------------------------
Savio W. Tung
/s/ CHARLES J. PHILIPPIN Director
- -----------------------------------------------------
Charles J. Philippin
/s/ CHRISTOPHER J. STADLER Director
- -----------------------------------------------------
Christopher J. Stadler
</TABLE>
67
<PAGE> 1
Exhibit 3.2.1
CERTIFICATE OF OWNERSHIP AND MERGER
OF
WERNER FINANCIAL INC.
(a Delaware corporation)
INTO
WERNER HOLDING CO. (DE), INC.
(a Delaware corporation)
It is hereby certified that:
1. WERNER HOLDING CO. (DE), INC. (hereinafter referred to as the
"Corporation") is a business corporation of the State of Delaware.
2. The Corporation is the owner of all of the outstanding shares of the
stock of WERNER FINANCIAL INC. ("FINANCIAL"), which is also a business
corporation of the State of Delaware.
3. On June 22, 1998, the Board of Directors of the Corporation adopted the
following resolutions to merge FINANCIAL into the Corporation:
RESOLVED: That FINANCIAL be merged into the Corporation, and that all
of the estate, property, rights, privileges, powers and franchises of
FINANCIAL be vested in and held and enjoyed by the Corporation as fully
and entirely and without change or diminution as the same were before
held and enjoyed by FINANCIAL in its name; and
FURTHER RESOLVED: That the Corporation shall assume all of the
obligations of FINANCIAL; and
FURTHER RESOLVED: That the Corporation shall cause to be executed and
filed and/or recorded the documents prescribed by the laws of the State
of Delaware and will cause to be performed all necessary acts within
the State of Delaware; and
FURTHER RESOLVED: That the effective time of the Certificate of
Ownership and Merger setting forth a copy of these resolutions, and the
time when the merger therein provided for, shall become effective shall
be 11:59 p.m. on June 30, 1998.
Executed on June 24, 1998
WERNER HOLDING CO. (DE), INC.
By: /s/ Donald M. Werner
-----------------------------
Donald M. Werner
President and Chief Executive Officer
<PAGE> 1
Exhibit 3.5.1
ARTICLES OF MERGER
OF
R. D. ARIZONA LADDER CORP.
(an Arizona business corporation)
AND
WERNER CO.
(a Pennsylvania corporation)
Pursuant to the provisions of the Business Corporation Law of 1988 of
the Commonwealth of Pennsylvania, as amended, and the provisions of Chapters 1
through 17 of Title 10, of the Arizona Revised Statutes, governing the merger of
a wholly-owned subsidiary business corporation into its parent corporation, the
undersigned business corporations hereby submit the following Articles of
Merger.
1. The name of the subsidiary corporation, which is a business
corporation organized under the laws of the State of Arizona,
and which is subject to the provisions of Chapters 1 through
17 of Title 10, Arizona Revised Statutes, is R. D. ARIZONA
LADDER CORP.
2. The name of the parent corporation and the surviving
corporation following the merger, which is a business
corporation organized under the laws of the Commonwealth of
Pennsylvania, and which is subject to the provisions of the
Business Corporation Law of 1988 of the Commonwealth of
Pennsylvania, as amended, is WERNER CO. ("WERNER").
3. The number of outstanding shares of R. D. ARIZONA is One
Thousand (1,000), all of which are of one class, and all of
which are owned by WERNER.
4. The address of the known place of business in Arizona of
WERNER is 402 North 37th Drive, Suite 101, Phoenix, Arizona,
85009. The name and the address of the statutory agent of
WERNER in Arizona is Corporation Service Company, 3636 North
Central Avenue, Phoenix, Arizona, 85012.
5. Shareholder approval was not required.
<PAGE> 2
6. The Business Corporation Law of 1988 of the Commonwealth of
Pennsylvania, as amended, and Chapters 1 through 17 of Title
10, of the Arizona Revised Statutes permit a merger of a
wholly-owned subsidiary business corporation into a parent
business corporation of another jurisdiction and the merger of
R. D. ARIZONA into WERNER is in compliance with the laws of
the Commonwealth of Pennsylvania and the State of Arizona.
7. The registered address of the surviving corporation in the
Commonwealth of Pennsylvania and the address to which the
Arizona Corporation Commission may forward a copy of any
process served on it against the surviving corporation is:
Werner Co. 93 Werner Road, Greenville, Pennsylvania 16125.
8. The effective time and date of the merger herein provided for
shall be 12:01 a.m. on May 18, 1998.
9. The Plan of Merger is set forth in full in Exhibit A attached
hereto and made a part hereof.
Executed on May 12, 1998.
R. D. ARIZONA LADDER CORP.
/s/ Donald W. Resnick
------------------------------------------
By: Donald W. Resnick
Treasurer and Chief Financial Officer
WERNER CO.
/s/ Donald W. Resnick
------------------------------------------
By: Donald W. Resnick
Treasurer and Chief Financial Officer
<PAGE> 3
EXHIBIT "A"
PLAN OF MERGER
The following is the Plan of Merger for merging R. D. ARIZONA LADDER
CORP., an Arizona business corporation ("R. D. ARIZONA") into WERNER CO., a
Pennsylvania business corporation ("WERNER") as approved on May 12, 1998 by
resolution of the Boards of Directors of R. D. ARIZONA and WERNER.
10. R. D. ARIZONA shall, pursuant to the provisions of the
Business Corporation Law of 1988 of the Commonwealth of
Pennsylvania, as amended, and pursuant to the provisions of
Chapters 1 through 17 of Title 10 of the Arizona Revised
Statutes, be merged into WERNER, which shall be the surviving
corporation upon the effective date of the merger in the
Commonwealth of Pennsylvania and which shall continue to exist
as said surviving corporation pursuant to the provisions of
the Business Corporation Law of 1988 of the Commonwealth of
Pennsylvania, as amended. The separate existence of R. D.
ARIZONA, which is a wholly-owned subsidiary of WERNER, shall
cease upon the effective date of the merger in accordance with
the provisions of Chapters 1 through 17 of Title 10 of the
Arizona Revised Statutes.
11. The Articles of Incorporation and Bylaws of Werner upon the
effective date of the merger in the Commonwealth of
Pennsylvania shall be the Articles of Incorporation and Bylaws
of the surviving corporation.
12. The issued shares of capital stock of R. D. ARIZONA shall not
be converted or exchanged in any manner, but each said share
which is issued as of the effective time and date of the
merger shall be cancelled and retired. The issued shares of
capital stock of WERNER shall not be changed as a result of
the merger.
13. The Boards of Directors and the proper officers of R. D.
ARIZONA and of WERNER are hereby authorized, empowered, and
directed to do any and all acts and things, and to make,
execute, deliver, file, and/or record any and all instruments,
papers, and documents which shall be or become necessary,
proper, or convenient to carry out or put into effect any of
the provisions of this Plan of Merger or of the merger herein
provided for.
<PAGE> 4
Executed on May 12, 1998
R. D. ARIZONA LADDER CORP,
d/b/a R. D. WERNER CO., INC. - ARIZONA
/s/ Donald W. Resnick
-----------------------------------------
By: Donald W. Resnick
Treasurer and Chief Financial Officer
WERNER CO.
/s/ Donald W. Resnick
-----------------------------------------
By: Donald W. Resnick
Treasurer and Chief Financial Officer
<PAGE> 1
Exhibit 3.5.2
THIS IS A TRUE COPY OF THE ORIGINAL SIGNED DOCUMENT FILED WITH THE DEPARTMENT
OF STATE.
Microfilm Number Filed with the Department of State on June 26, 1998
---------- -------------
Entity Number /s/illegible
------------- ----------------------------------------------------
Secretary of the Commonwealth
ARTICLES OF MERGER-DOMESTIC BUSINESS CORPORATION
DSCB:15-1926 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. Section 1926
(relating to articles of merger or consolidation), the undersigned business
corporations, desiring to effect a merger, hereby state that:
1. The name of the corporation surviving the merger is: Werner Co.
-----------------------
- -------------------------------------------------------------------------------
2. (CHECK AND COMPLETE ONE OF THE FOLLOWING):
X The surviving corporation is a domestic business corporation and the
- ---(a) ADDRESS of its current registered office in this Commonwealth or
(b) NAME of its commercial registered office provider and the county of
venue is (the Department is hereby authorized to correct the following
information to conform to the records of the Department):
(a) 93 Werner Road Greenville PA 16125 Mercer
------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
__ The surviving corporation is a qualified foreign business corporation
incorporated under the laws of __________________ and the (a) ADDRESS of its
current registered office in this Commonwealth or (b) NAME of its commercial
registered office provider and the county of venue is (the Department is
hereby authorized to correct the following information to conform to the
records of the Department):
(a)
-------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
__ The surviving corporation is a nonqualified foreign business corporation
incorporated under the laws of _______________ and the address of its
principal office under the laws of such domiciliary jurisdiction is:
-------------------------------------------------------------------------
Number and Street City State Zip
3. The NAME and the ADDRESS of the registered office in this Commonwealth or
NAME of its commercial registered office provider and the county of venue of
each other domestic business corporation and qualified foreign business
corporation which is a party to the plan of merger are as follows:
ADDRESS OF REGISTERED OFFICE
OR NAME OF COMMERCIAL
NAME OF CORPORATION REGISTERED OFFICE PROVIDER COUNTY
Phoenix Management
Services, Inc. 93 Werner Road, Greenville, PA 16125 Mercer
<PAGE> 2
DSCB:15-1926 (Rev 90)-2
4. (Check, and if appropriate complete, one of the following):
__ The plan of merger shall be effective upon filing these Articles of
Merger in the Department of State.
X The plan of merger shall be effective on: June 30, 1998
--- -------------------------------
at 11:59 p.m. Date
------------------------------------
Hour
5. The manner in which the plan of merger was adopted by each domestic
corporation is as follows:
Name of Corporation Manner of Adoption
Werner Co. Adopted by the Board of Directors and Sole
Shareholder pursuant to 15 PA C.S.
Section 1924 (a)
Phoenix Management Adopted by the Board of Directors and Sole
Services, Inc. Shareholder pursuant to 15 PA C.S.
Section 1924 (a)
6.
----------------------------------------------------------
7. (Check, and if appropriate complete, one of the following):
X The plan of merger is set forth in full in Exhibit A attached hereto and
--- made a part hereof.
Pursuant to 15 Pa.C.S. Section 1901 (relating to omission of certain
--- provisions from filed plans) the provisions, if any, of the plan of
merger that amend or constitute the operative Articles of Incorporation
of the surviving corporation as in effect subsequent to the effective
date of the plan are set forth in full in Exhibit A attached hereto and
made a part hereof. The full text of the plan of merger is on file at the
principal place of business of the surviving corporation, the address of
which is:
-------------------------------------------------------------------------
Number and Street City State Zip County
IN TESTIMONY WHEREOF, the undersigned corporation or each undersigned
corporation has caused these Articles of Merger to be signed by a duly
authorized officer thereof this 24th day of June, 1998.
-------- ----------
Werner Co.
----------------------------------------
(Name of Corporation)
BY: /s/ Donald M. Werner
----------------------------------------
(Signature)
TITLE: President and Chief Executive Officer
----------------------------------------
Phoenix Management Services, Inc.
----------------------------------------
(Name of Corporation)
BY: /s/ illegible
---------------------------------------
(Signature)
TITLE: President and Chief Executive Officer
---------------------------------------
<PAGE> 3
EXHIBIT "A"
PLAN OF MERGER
The following is the Plan of Merger for merging PHOENIX MANAGEMENT
SERVICES, INC., a Pennsylvania corporation ("PMSI") into WERNER CO., a
Pennsylvania corporation ("WERNER") as approved on June 22, 1998 by resolution
of the Boards of Directors and Shareholders of PMSI and WERNER.
1. PMSI shall, pursuant to the provisions of the Business Corporation
Law of 1988 of the Commonwealth of Pennsylvania, as amended, be
merged into WERNER, which shall be the surviving corporation upon
the effective date of the merger in the Commonwealth of Pennsylvania
and which shall continue to exist as said surviving corporation
pursuant to the provisions of the Business Corporation Law of 1988
of the Commonwealth of Pennsylvania, as amended. The separate
existence of PMSI, shall cease upon the effective date of the
merger.
2. The Articles of Incorporation and Bylaws of Werner upon the
effective date of the merger in the Commonwealth of Pennsylvania
shall be the Articles of Incorporation and Bylaws of the surviving
corporation.
3. The issued shares of capital stock of PMSI shall not be converted or
exchanged in any manner, but each said share which is issued as of
the effective time and date of the merger shall be cancelled and
retired. The issued shares of capital stock of WERNER shall not be
changed as a result of the merger.
4. The merger shall become effective at 11:59 p.m. on June 30, 1998.
5. The Boards of Directors and the officers of PMSI and of WERNER are
hereby authorized, empowered, and directed to do any and all acts
and things, and to make, execute, deliver, file, and/or record any
and all instruments, papers, and documents which shall be or become
necessary, proper, or convenient to carry out or put into effect any
of the provisions of this Plan of Merger or of the merger herein
provided for.
<PAGE> 4
THIS IS A TRUE COPY OF THE ORIGINAL SIGNED DOCUMENT FILED WITH THE DEPARTMENT
OF STATE.
Microfilm Number Filed with the Department of State on June 26, 2998
---------- -------------
Entity Number /s/ illegible
------------- ----------------------------------------------------
Secretary of the Commonwealth
ARTICLES OF MERGER-DOMESTIC BUSINESS CORPORATION
DSCB:15-1926 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. Section 1926
(relating to articles of merger or consolidation), the undersigned business
corporations, desiring to effect a merger, hereby state that:
1. The name of the corporation surviving the merger is: Werner Co.
-----------------------
- -------------------------------------------------------------------------------
2. (CHECK AND COMPLETE ONE OF THE FOLLOWING):
X The surviving corporation is a domestic business corporation and the
- ---(a) ADDRESS of its current registered office in this Commonwealth or
(b) NAME of its commercial registered office provider and the county of
venue is (the Department is hereby authorized to correct the following
information to conform to the records of the Department):
(a) 93 Werner Road Greenville PA 16125 Mercer
------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
__ The surviving corporation is a qualified foreign business corporation
incorporated under the laws of __________________ and the (a) ADDRESS of its
current registered office in this Commonwealth or (b) NAME of its commercial
registered office provider and the county of venue is (the Department is
hereby authorized to correct the following information to conform to the
records of the Department):
(a)
-------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
__ The surviving corporation is a nonqualified foreign business corporation
incorporated under the laws of _______________ and the address of its
principal office under the laws of such domiciliary jurisdiction is:
-------------------------------------------------------------------------
Number and Street City State Zip
3. The NAME and the ADDRESS of the registered office in this Commonwealth or
NAME of its commercial registered office provider and the county of venue of
each other domestic business corporation and qualified foreign business
corporation which is a party to the plan of merger are as follows:
ADDRESS OF REGISTERED OFFICE OR
NAME OF COMMERCIAL
NAME OF CORPORATION REGISTERED OFFICE PROVIDER COUNTY
Werner Management Co. 93 Werner Road, Greenville, PA 16125 Mercer
<PAGE> 5
DSCB:15-1926 (Rev 90)-2
4. (Check, and if appropriate complete, one of the following):
__ The plan of merger shall be effective upon filing these Articles of
Merger in the Department of State.
X The plan of merger shall be effective on: June 30, 1998
--- -------------------------------
at 11:59 p.m. Date
------------------------------------
Hour
5. The manner in which the plan of merger was adopted by each domestic
corporation is as follows:
Name of Corporation Manner of Adoption
Werner Co. Adopted by the Board of Directors and Sole
Shareholder pursuant to 15 PA C.S.
Section 1924 (a)
Werner Management Co. Adopted by the Board of Directors and Sole
Shareholder pursuant to 15 PA C.S.
Section 1924 (a)
6.
----------------------------------------------------------
7. (Check, and if appropriate complete, one of the following):
X The plan of merger is set forth in full in Exhibit A attached hereto and
--- made a part hereof.
Pursuant to 15 Pa.C.S. Section 1901 (relating to omission of certain
--- provisions from filed plans) the provisions, if any, of the plan of
merger that amend or constitute the operative Articles of Incorporation
of the surviving corporation as in effect subsequent to the effective
date of the plan are set forth in full in Exhibit A attached hereto and
made a part hereof. The full text of the plan of merger is on file at the
principal place of business of the surviving corporation, the address of
which is:
-------------------------------------------------------------------------
Number and Street City State Zip County
IN TESTIMONY WHEREOF, the undersigned corporation or each undersigned
corporation has caused these Articles of Merger to be signed by a duly
authorized officer thereof this 24th day of June, 1998.
-------- ----------
Werner Co.
----------------------------------------
(Name of Corporation)
BY: /s/ Donald M. Warner
----------------------------------------
Signature
TITLE: President and Chief Executive Officer
----------------------------------------
Werner Management Co.,
----------------------------------------
(Name of Corporation)
BY: /s/ Donald M. Werner
---------------------------------------
(Signature)
TITLE: President and Chief Executive Officer
---------------------------------------
<PAGE> 6
EXHIBIT "A"
PLAN OF MERGER
The following is the Plan of Merger for merging WERNER MANAGEMENT CO.,
a Pennsylvania corporation ("WMC") into WERNER CO., a Pennsylvania corporation
("WERNER") as approved on June 22, 1998 by resolution of the Boards of Directors
and Shareholders of WMC and WERNER
1. WMC shall, pursuant to the provisions of the Business
Corporation Law of 1988 of the Commonwealth of Pennsylvania, as
amended, be merged into WERNER, which shall be the surviving
corporation upon the effective date of the merger in the
Commonwealth of Pennsylvania and which shall continue to exist
as said surviving corporation pursuant to the provisions of the
Business Corporation Law of 1988 of the Commonwealth of
Pennsylvania, as amended. The separate existence of WMC, shall
cease upon the effective date of the merger.
2. The Articles of Incorporation and Bylaws of Werner upon the
effective date of the merger in the Commonwealth of Pennsylvania
shall be the Articles of Incorporation and Bylaws of the
surviving corporation.
3. The issued shares of capital stock of WMC shall not be converted
or exchanged in any manner, but each said share which is issued
as of the effective time and date of the merger shall be
cancelled and retired. The issued shares of capital stock of
WERNER shall not be changed as a result of the merger.
4. The merger shall become effective at 11:59 p.m. on June 30,
1998.
5. The Boards of Directors and the officers of WMC and of WERNER
are hereby authorized, empowered, and directed to do any and all
acts and things, and to make, execute, deliver, file, and/or
record any and all instruments, papers, and documents which
shall be or become necessary, proper, or convenient to carry out
or put into effect any of the provisions of this Plan of Merger
or of the merger herein provided for.
<PAGE> 7
THIS IS A TRUE COPY OF THE ORIGINAL SIGNED DOCUMENT FILED WITH THE DEPARTMENT
OF STATE.
Microfilm Number Filed with the Department of State on June 26, 2998
---------- -------------
Entity Number /s/ illegible
------------- ----------------------------------------------------
Secretary of the Commonwealth
ARTICLES OF MERGER-DOMESTIC BUSINESS CORPORATION
DSCB:15-1926 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. Section 1926
(relating to articles of merger or consolidation), the undersigned business
corporations, desiring to effect a merger, hereby state that:
1. The name of the corporation surviving the merger is: Werner Co.
-----------------------
- -------------------------------------------------------------------------------
2. (CHECK AND COMPLETE ONE OF THE FOLLOWING):
X The surviving corporation is a domestic business corporation and the
- ---(a) ADDRESS of its current registered office in this Commonwealth or
(b) NAME of its commercial registered office provider and the county of
venue is (the Department is hereby authorized to correct the following
information to conform to the records of the Department):
(a) 93 Werner Road Greenville PA 16125 Mercer
------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
__ The surviving corporation is a qualified foreign business corporation
incorporated under the laws of __________________ and the (a) ADDRESS of its
current registered office in this Commonwealth or (b) NAME of its commercial
registered office provider and the county of venue is (the Department is
hereby authorized to correct the following information to conform to the
records of the Department):
(a)
-------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
__ The surviving corporation is a nonqualified foreign business corporation
incorporated under the laws of _______________ and the address of its
principal office under the laws of such domiciliary jurisdiction is:
-------------------------------------------------------------------------
Number and Street City State Zip
3. The NAME and the ADDRESS of the registered office in this Commonwealth or
NAME of its commercial registered office provider and the county of venue of
each other domestic business corporation and qualified foreign business
corporation which is a party to the plan of merger are as follows:
ADDRESS OF REGISTERED OFFICE
OR NAME OF COMMERCIAL
NAME OF CORPORATION REGISTERED OFFICE PROVIDER COUNTY
Florida Ladder Company c/o Werner Co. Mercer
93 Werner Road
Greenville, PA 16125
<PAGE> 8
DSCB:15-1926 (Rev 90)-2
4. (Check, and if appropriate complete, one of the following):
__ The plan of merger shall be effective upon filing these Articles of
Merger in the Department of State.
X The plan of merger shall be effective on: June 30, 1998
--- -------------------------------
at 11:59 p.m. Date
------------------------------------
Hour
5. The manner in which the plan of merger was adopted by each domestic
corporation is as follows:
Name of Corporation Manner of Adoption
Werner Co. Adopted by the Board of Directors and Sole
Shareholder pursuant to 15 PA C.S.
Section 1924 (a)
6. (Strike out this paragraph if no foreign corporation is a party to the
merger). The plan was authorized, adopted or approved, as the case may be, by
the foreign business corporation (or each of the foreign business
corporations) party to the plan in accordance with the laws of the
jurisdiction in which it is incorporated.
7. (Check, and if appropriate complete, one of the following):
X The plan of merger is set forth in full in Exhibit A attached hereto and
--- made a part hereof.
Pursuant to 15 Pa.C.S. Section 1901 (relating to omission of certain
--- provisions from filed plans) the provisions, if any, of the plan of
merger that amend or constitute the operative Articles of Incorporation
of the surviving corporation as in effect subsequent to the effective
date of the plan are set forth in full in Exhibit A attached hereto and
made a part hereof. The full text of the plan of merger is on file at the
principal place of business of the surviving corporation, the address of
which is:
-------------------------------------------------------------------------
Number and Street City State Zip County
IN TESTIMONY WHEREOF, the undersigned corporation or each undersigned
corporation has caused these Articles of Merger to be signed by a duly
authorized officer thereof this 24th day of June, 1998.
---- -----------
Werner Co.
----------------------------------------
(Name of Corporation)
BY: /s/ Donald M. Werner
----------------------------------------
(Signature)
TITLE: President and Chief Executive Officer
----------------------------------------
Florida Ladder Company
----------------------------------------
(Name of Corporation)
BY: /s/ Donald M. Werner
---------------------------------------
(Signature)
TITLE: President and Chief Executive Officer
---------------------------------------
<PAGE> 9
EXHIBIT "A"
PLAN OF MERGER
The following is the Plan of Merger for merging FLORIDA LADDER COMPANY,
a Florida corporation ("FLC") into WERNER CO., a Pennsylvania corporation
("WERNER") as approved on June 22, 1998 by resolution of the Boards of Directors
and Shareholders of FLC and WERNER.
1. FLC shall, pursuant to the provisions of the Business
Corporation Law of 1988 of the Commonwealth of Pennsylvania, as
amended, and pursuant to the provisions of the Florida Business
Corporation Act be merged into WERNER, which shall be the
surviving corporation upon the effective date of the merger in
the Commonwealth of Pennsylvania and which shall continue to
exist as said surviving corporation pursuant to the provisions
of the Business Corporation Law of 1988 of the Commonwealth of
Pennsylvania, as amended. The separate existence of FLC, shall
cease upon the effective date of the merger.
2. The Articles of Incorporation and Bylaws of Werner upon the
effective date of the merger in the Commonwealth of Pennsylvania
shall be the Articles of Incorporation and Bylaws of the
surviving corporation.
3. The issued shares of capital stock of FLC shall not be converted
or exchanged in any manner, but each said share which is issued
as of the effective time and date of the merger shall be
cancelled and retired. The issued shares of capital stock of
WERNER shall not be changed as a result of the merger.
4. The merger shall become effective at 11:59p.m. on June 30, 1998.
5. The Boards of Directors and the officers of FLC and of WERNER
are hereby authorized, empowered, and directed to do any and all
acts and things, and to make, execute, deliver, file, and/or
record any and all instruments, papers, and documents which
shall be or become necessary, proper, or convenient to carry out
or put into effect any of the provisions of this Plan of Merger
or of the merger herein provided for.
<PAGE> 10
THIS IS A TRUE COPY OF THE ORIGINAL SIGNED DOCUMENT FILED WITH THE DEPARTMENT
OF STATE.
Microfilm Number Filed with the Department of State on June 26, 2998
---------- -------------
Entity Number /s/ illegible
------------- ----------------------------------------------------
Secretary of the Commonwealth
ARTICLES OF MERGER-DOMESTIC BUSINESS CORPORATION
DSCB:15-1926 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. Section 1926
(relating to articles of merger or consolidation), the undersigned business
corporations, desiring to effect a merger, hereby state that:
1. The name of the corporation surviving the merger is: Werner Co.
-----------------------
- -------------------------------------------------------------------------------
2. (CHECK AND COMPLETE ONE OF THE FOLLOWING):
X The surviving corporation is a domestic business corporation and the
- ---(a) ADDRESS of its current registered office in this Commonwealth or
(b) NAME of its commercial registered office provider and the county of
venue is (the Department is hereby authorized to correct the following
information to conform to the records of the Department):
(a) 93 Werner Road Greenville PA 16125 Mercer
------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
__ The surviving corporation is a qualified foreign business corporation
incorporated under the laws of __________________ and the (a) ADDRESS of its
current registered office in this Commonwealth or (b) NAME of its commercial
registered office provider and the county of venue is (the Department is
hereby authorized to correct the following information to conform to the
records of the Department):
(a)
-------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
__ The surviving corporation is a nonqualified foreign business corporation
incorporated under the laws of _______________ and the address of its
principal office under the laws of such domiciliary jurisdiction is:
-------------------------------------------------------------------------
Number and Street City State Zip
3. The NAME and the ADDRESS of the registered office in this Commonwealth or
NAME of its commercial registered office provider and the county of venue of
each other domestic business corporation and qualified foreign business
corporation which is a party to the plan of merger are as follows:
ADDRESS OF REGISTERED OFFICE
OR NAME OF COMMERCIAL
NAME OF CORPORATION REGISTERED OFFICE PROVIDER COUNTY
Kentucky Ladder Company 93 Werner Road, Greenville, PA 16125 Mercer
<PAGE> 11
DSCB:15-1926 (Rev 90)-2
4. (Check, and if appropriate complete, one of the following):
__ The plan of merger shall be effective upon filing these Articles of
Merger in the Department of State.
X The plan of merger shall be effective on: June 30, 1998
--- -------------------------------
at 11:59 p.m. Date
------------------------------------
Hour
5. The manner in which the plan of merger was adopted by each domestic
corporation is as follows:
Name of Corporation Manner of Adoption
Werner Co. Adopted by the Board of Directors and Sole
Shareholder pursuant to 15 PA C.S.
Section 1924 (a)
Kentucky Ladder Company Adopted by the Board of Directors and Sole
Shareholder pursuant to 15 PA C.S.
Section 1924 (a)
6.
----------------------------------------------------------
7. (Check, and if appropriate complete, one of the following):
X The plan of merger is set forth in full in Exhibit A attached hereto and
--- made a part hereof.
Pursuant to 15 Pa.C.S. Section 1901 (relating to omission of certain
--- provisions from filed plans) the provisions, if any, of the plan of
merger that amend or constitute the operative Articles of Incorporation
of the surviving corporation as in effect subsequent to the effective
date of the plan are set forth in full in Exhibit A attached hereto and
made a part hereof. The full text of the plan of merger is on file at the
principal place of business of the surviving corporation, the address of
which is:
-------------------------------------------------------------------------
Number and Street City State Zip County
IN TESTIMONY WHEREOF, the undersigned corporation or each undersigned
corporation has caused these Articles of Merger to be signed by a duly
authorized officer thereof this 24th day of June, 1998.
-------- ----------
Werner Co.
----------------------------------------
(Name of Corporation)
BY: /s/ Donald M. Werner
----------------------------------------
(Signature)
TITLE: President and Chief Executive Officer
----------------------------------------
Kentucky Ladder Company
----------------------------------------
(Name of Corporation)
BY: /s/ Donald M. Werner
---------------------------------------
(Signature)
TITLE: President and Chief Executive Officer
---------------------------------------
<PAGE> 12
EXHIBIT "A"
PLAN OF MERGER
The following is the Plan of Merger for merging KENTUCKY LADDER COMPANY,
a Pennsylvania corporation ("KLC") into WERNER CO., a Pennsylvania corporation
("WERNER") as approved on June 22, 1998 by resolution of the Boards of Directors
and Shareholders of KLC and WERNER.
1. KLC shall, pursuant to the provisions of the Business
Corporation Law of 1988 of the Commonwealth of Pennsylvania, as
amended, be merged into WERNER, which shall be the surviving
corporation upon the effective date of the merger in the
Commonwealth of Pennsylvania and which shall continue to exist
as said surviving corporation pursuant to the provisions of the
Business Corporation Law of 1988 of the Commonwealth of
Pennsylvania, as amended. The separate existence of KLC, shall
cease upon the effective date of the merger.
2. The Articles of Incorporation and Bylaws of Werner upon the
effective date of the merger in the Commonwealth of Pennsylvania
shall be.the Articles of Incorporation and Bylaws of the
surviving corporation.
3. The issued shares of capital stock of KLC shall not be converted
or exchanged in any manner, but each said share which is issued
as of the effective time and date of the merger shall be
cancelled and retired. The issued shares of capital stock of
WERNER shall not be changed as a result of the merger.
4. The merger shall become effective at 11:59 p.m. on June 30,
1998.
5. The Boards of Directors and the officers of KLC and of WERNER
are hereby authorized, empowered, and directed to do any and all
acts and things, and to make, execute, deliver, file, and/or
record any and all instruments, papers, and documents which
shall be or become necessary, proper, or convenient to carry out
or put into effect any of the provisions of this Plan of Merger
or of the merger herein provided for.
<PAGE> 13
THIS IS A TRUE COPY OF THE ORIGINAL SIGNED DOCUMENT FILED WITH THE DEPARTMENT
OF STATE.
Microfilm Number Filed with the Department of State on June 26, 2998
---------- -------------
Entity Number /s/ illegible
------------- ----------------------------------------------------
Secretary of the Commonwealth
ARTICLES OF MERGER-DOMESTIC BUSINESS CORPORATION
DSCB:15-1926 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. Section 1926
(relating to articles of merger or consolidation), the undersigned business
corporations, desiring to effect a merger, hereby state that:
1. The name of the corporation surviving the merger is: Werner Co.
-----------------------
- -------------------------------------------------------------------------------
2. (CHECK AND COMPLETE ONE OF THE FOLLOWING):
X The surviving corporation is a domestic business corporation and the
- ---(a) ADDRESS of its current registered office in this Commonwealth or
(b) NAME of its commercial registered office provider and the county of
venue is (the Department is hereby authorized to correct the following
information to conform to the records of the Department):
(a) 93 Werner Road Greenville PA 16125 Mercer
------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
__ The surviving corporation is a qualified foreign business corporation
incorporated under the laws of __________________ and the (a) ADDRESS of its
current registered office in this Commonwealth or (b) NAME of its commercial
registered office provider and the county of venue is (the Department is
hereby authorized to correct the following information to conform to the
records of the Department):
(a)
-------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
__ The surviving corporation is a nonqualified foreign business corporation
incorporated under the laws of _______________ and the address of its
principal office under the laws of such domiciliary jurisdiction is:
-------------------------------------------------------------------------
Number and Street City State Zip
3. The NAME and the ADDRESS of the registered office in this Commonwealth or
NAME of its commercial registered office provider and the county of venue of
each other domestic business corporation and qualified foreign business
corporation which is a party to the plan of merger are as follows:
ADDRESS OF REGISTERED OFFICE
OR NAME OF COMMERCIAL
NAME OF CORPORATION REGISTERED OFFICE PROVIDER COUNTY
Gold Medal Ladder Company 93 Werner Road, Greenville, PA 16125 Mercer
<PAGE> 14
DSCB:15-1926 (Rev 90)-2
4. (Check, and if appropriate complete, one of the following):
__ The plan of merger shall be effective upon filing these Articles of
Merger in the Department of State.
X The plan of merger shall be effective on: June 30, 1998
--- -------------------------------
at 11:59 p.m. Date
------------------------------------
Hour
5. The manner in which the plan of merger was adopted by each domestic
corporation is as follows:
Name of Corporation Manner of Adoption
Werner Co. Adopted by the Board of Directors and Sole
Shareholder pursuant to 15 PA C.S.
Section 1924 (a)
Gold Medal Ladder Adopted by the Board of Directors and Sole
Company Shareholder pursuant to 15 PA C.S.
Section 1924 (a)
6.
----------------------------------------------------------
7. (Check, and if appropriate complete, one of the following):
X The plan of merger is set forth in full in Exhibit A attached hereto and
--- made a part hereof.
Pursuant to 15 Pa.C.S. Section 1901 (relating to omission of certain
--- provisions from filed plans) the provisions, if any, of the plan of
merger that amend or constitute the operative Articles of Incorporation
of the surviving corporation as in effect subsequent to the effective
date of the plan are set forth in full in Exhibit A attached hereto and
made a part hereof. The full text of the plan of merger is on file at the
principal place of business of the surviving corporation, the address of
which is:
-------------------------------------------------------------------------
Number and Street City State Zip County
IN TESTIMONY WHEREOF, the undersigned corporation or each undersigned
corporation has caused these Articles of Merger to be signed by a duly
authorized officer thereof this 24th day of June, 1998.
Werner Co.
----------------------------------------
(Name of Corporation)
BY: /s/ Donald M. Werner
----------------------------------------
(Signature)
TITLE: President and Chief Executive Officer
----------------------------------------
Gold Medal Ladder Company
----------------------------------------
(Name of Corporation)
BY: /s/ Donald M. Werner
---------------------------------------
(Signature)
TITLE: President and Chief Executive Officer
---------------------------------------
<PAGE> 15
EXHIBIT "A"
PLAN OF MERGER
The following is the Plan of Merger for merging GOLD MEDAL LADDER
COMPANY, a Pennsylvania corporation ("GMLC") into WERNER CO., a Pennsylvania
corporation ("WERNER") as approved on June 22, 1998 by resolution of the Boards
of Directors and Shareholders of GMLC and WERNER.
1. GMLC shall, pursuant to the provisions of the Business
Corporation Law of 1988 of the Commonwealth of Pennsylvania, as
amended, be merged into WERNER, which shall be the surviving
corporation upon the effective date of the merger in the
Commonwealth of Pennsylvania and which shall continue to exist
as said surviving corporation pursuant to the provisions of the
Business Corporation Law of 1988 of the Commonwealth of
Pennsylvania, as amended. The separate existence of GMLC, shall
cease upon the effective date of the merger.
2. The Articles of Incorporation and Bylaws of Werner upon the
effective date of the merger in the Commonwealth of Pennsylvania
shall be the Articles of Incorporation and Bylaws of the
surviving corporation.
3. The issued shares of capital stock of GMLC shall not be
converted or exchanged in any manner, but each said share which
is issued as of the effective time and date of the merger shall
be cancelled and retired. The issued shares of capital stock of
WERNER shall not be changed as a result of the merger.
4. The merger shall become effective at 11:59 p.m. on June 30,
1998.
5. The Boards of Directors and the officers of GMLC and of WERNER
are hereby authorized, empowered, and directed to do any and all
acts and things, and to make, execute, deliver, file, and/or
record any and all instruments, papers, and documents which
shall be or become necessary, proper, or convenient to carry out
or put into effect any of the provisions of this Plan of Merger
or of the merger herein provided for.
<PAGE> 1
Exhibit 3.5.3
Microfilm Number Filed with the Department of State on Dec. 22, 1998
---------- -------------
Entity Number 2613157 /s/ illegible
------------- ---------------------------------------------------
Secretary of the Commonwealth
ARTICLES OF MERGER-DOMESTIC BUSINESS CORPORATION
DSCB:15-1926 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. Section 1926
(relating to articles of merger or consolidation), the undersigned busines
corporations, desiring to effect a merger, hereby state that:
1. The name of the corporation surviving the merger is: Werner Co.
-----------------------
- ------------------------------------------------------------------------------
2. (CHECK AND COMPLETE ONE OF THE FOLLOWING):
X The surviving corporation is a domestic business corporation and the
- ---(a) ADDRESS of its current registered office in this Commonwealth or
(b) name of its commercial registered office provider and the county of
venue is (the Department is hereby authorized to correct the following
information to conform to the records of the Department):
(a) 93 Werner Road Greenville PA 16125 Mercer
------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
__ The surviving corporation is a qualified foreign business corporation
incorporated under the laws of __________________ and the (a) ADDRESS of its
current registered office in this Commonwealth or (b) NAME of its commercial
registered office provider and the county of venue is (the Department is
hereby authorized to correct the following information to conform to the
records of the Department):
(a)
-------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
__ The surviving corporation is a nonqualified foreign business corporation
incorporated under the laws of _______________ and the address of its
principal office under the laws of such domiciliary jurisdiction is:
-------------------------------------------------------------------------
Number and Street City State Zip
3. The NAME and the ADDRESS of the registered office in this Commonwealth or
NAME of its commercial registered office provider and the county of venue of
each other domestic business corporation and qualified foreign business
corporation which is a party to the plan of merger are as follows:
ADDRESS OF REGISTERED OFFICE
OR NAME OF COMMERCIAL
NAME OF CORPORATION REGISTERED OFFICE PROVIDER COUNTY
OLYMPUS PROPERTIES, INC. c/o WERNER CO. Mercer
93 Werner Road
Greenville, PA 16125
<PAGE> 2
DSCB:15-1926 (Rev 90)-2
4. (Check, and if appropriate complete, one of the following):
__ The plan of merger shall be effective upon filing these Articles of
Merger in the Department of State.
X The plan of merger shall be effective on: December 31, 1998
--- -------------------------------
at 11:59 p.m. Date
------------------------------------
Hour
5. The manner in which the plan of merger was adopted by each domestic
corporation is as follows:
Name of Corporation Manner of Adoption
Werner Co. Adopted by the Board of Directors and Sole
Shareholder pursuant to 15 PA C.S.
Section 1924 (a)
6. (Strike out this paragraph if no foreign corporation is a party to the
merger). The plan was authorized, adopted or approved, as the case may be, by
the foreign business corporation (or each of the foreign business
corporations) party to the plan in accordance with the laws of the
jurisdiction in which it is incorporated.
7. (Check, and if appropriate complete, one of the following):
X The plan of merger is set forth in full in Exhibit A attached hereto and
--- made a part hereof.
Pursuant to 15 Pa.C.S. Section 1901 (relating to omission of certain
--- provisions from filed plans) the provisions, if any, of the plan of
merger that amend or constitute the operative Articles of Incorporation
of the surviving corporation as in effect subsequent to the effective
date of the plan are set forth in full in Exhibit A attached hereto and
made a part hereof. The full text of the plan of merger is on file at the
principal place of business of the surviving corporation, the address of
which is:
------------------------------------------------------------------------
Number and Street City State Zip County
IN TESTIMONY WHEREOF, the undersigned corporation or each undersigned
corporation has caused these Articles of Merger to be signed by a duly
authorized officer thereof this 15th day of December, 1998.
Werner Co.
----------------------------------------
(Name of Corporation)
BY: /s/ Donald M. Werner
----------------------------------------
(Signature)
TITLE: President and Chief Executive Officer
----------------------------------------
OLYMPUS PROPERTIES, INC.
----------------------------------------
(Name of Corporation)
BY: /s/ Eric ?. Werner
---------------------------------------
(Signature)
TITLE: President and Chief Executive Officer
---------------------------------------
<PAGE> 3
EXHIBIT "A"
PLAN OF MERGER
The following is the Plan of Merger for merging OLYMPUS PROPERTIES,
INC., an Illinois corporation ("OLYMPUS") into WERNER CO., a Pennsylvania
corporation ("WERNER") as approved on December 15, 1998 by resolution of the
Boards of Directors and Shareholders of OLYMPUS and WERNER.
1. OLYMPUS shall, pursuant to the provisions of the Business
Corporation Law of 1988 of the Commonwealth of Pennsylvania, as
amended, and the Business Corporation Act of 1983 of the State
of Illinois, as amended, be merged into WERNER, which shall be
the surviving corporation upon the effective date of the merger
in the Commonwealth of Pennsylvania and which shall continue to
exist as said surviving corporation pursuant to the provisions
of the Business Corporation Law of 1988 of the Commonwealth of
Pennsylvania, as amended. The separate existence of OLYMPUS,
shall cease upon the effective date of the merger in accordance
with the provisions of the Business Corporation Act of the State
of Illinois, as amended.
2. The Articles of Incorporation and Bylaws of WERNER upon the
effective date of the merger in the Commonwealth of Pennsylvania
shall be the Articles of Incorporation and Bylaws of the
surviving corporation.
3. The directors and officers of WERNER in office upon the
effective date of the merger shall be the members of the first
Board of Directors and the first officers of the surviving
corporation, all of whom shall hold their directorships and
offices until the election and qualification of their respective
successors or until their tenure is otherwise terminated in
accordance with the by-laws of the surviving corporation.
4. The issued shares of capital stock of OLYMPUS shall not be
converted or exchanged in any manner, but each said share which
is issued as of the effective time and date of the merger shall
be cancelled and retired. The issued shares of capital stock of
WERNER shall not be changed as a result of the merger.
5. The merger shall become effective at 11:59p.m. on December 31,
1998.
6. The Boards of Directors and the officers of OLYMPUS and of
WERNER are hereby authorized, empowered, and directed to do any
and all acts and things, and to make, execute, deliver, file,
and/or record any and all instruments, papers, and documents
which shall be or become necessary, proper, or convenient to
carry out or put into effect any of the provisions of this Plan
of Merger or of the merger herein provided for.
<PAGE> 1
Exhibit 3.9
CERTIFICATE OF INCORPORATION
OF WERNER FUNDING CORPORATION
ARTICLE I: NAME. The name of the Corporation is Werner Funding
Corporation.
ARTICLE II: REGISTERED OFFICE. The address of the Corporation's
registered office in the State of Delaware is 1105 North Market Street, Suite
1300, Wilmington, New Castle County, Delaware, 19801. The name of the
Corporation's registered agent at such address is Delaware Corporate Management,
Inc.
ARTICLE III: PURPOSE.
Section 1. The nature of the business to be conducted by the
Corporation is to engage solely in the following activities:
(a) to do one or more of the following: (i) own, hold, sell, assign,
pledge, lease, finance, trade, exchange and otherwise deal in the trade
receivables and rights related thereto of Werner Co. (the "Trade Receivables");
(ii) hold cash and cash equivalents in deposit accounts from time to time
derived from transactions relating to the Trade Receivables; (iii) acquire other
assets arising out of or in any way related to the Trade Receivables or
transactions involving the foregoing; and (iv) acquire all income, payments
(including insurance payments) and proceeds of the foregoing;
(b) to exercise all of its rights, powers, duties and obligations under
the Receivables Purchase Agreement, among the Corporation, Werner Co., Market
Street Funding Corporation and PNC Bank, National Association, as amended from
time to time (the "Receivables Purchase Agreement"); and the Purchase and Sale
Agreement, between the Corporation and Werner Co., as amended from time to time
(the "Purchase and Sale Agreement");
(c) to pay any and all costs and expenses incurred in connection with
the foregoing, including but not limited to, legal, accounting and servicing
fees and expenses, principal and interest on loans made to the Corporation, the
cost of any financing, including fees incurred in connection with the placement
thereof, taxes and insurance;
(d) to exercise all powers enumerated in the Delaware General
Corporation Law that are incident to and necessary or convenient to the conduct
of the business described above; and
(e) to engage in any lawful acts or activities that are incidental to
and necessary or convenient for the accomplishment of such purpose, including
without limitation, entering into agreements to service the Trade Receivables.
Section 2. The Corporation: (i) is organized solely for the purposes set
forth in Section 1 of this Article III, and will not engage in any business
unrelated to the purposes set
<PAGE> 2
forth in Section 1 of this Article III; (ii) will not have any material assets
other than the Trade Receivables; (iii) shall, at all times have at least one
director (the "Independent Director") who shall not have been, at the time of
his or her appointment or at any time in the preceding five (5) years and shall
not be at any time while serving as an Independent Director: (a) a direct or
indirect legal or beneficial shareholder of, or an officer, director, partner or
employee of, the Corporation or any of its shareholders, partners, subsidiaries
or affiliates, (b) a customer or creditor of, or supplier to, the Corporation or
any of its shareholders, partners, subsidiaries or affiliates, PROVIDED THAT,
notwithstanding any other language in this subclause (b), retail purchase of a
Werner product would not serve to disqualify an independent director, (c) a
person or other entity controlling or under common control with any such
shareholder, officer, director, partner, employee, supplier or customer, or (d)
a member of the immediate family of any such shareholder, officer, director,
partner, employee, supplier or customer (as used herein, the term "control":
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policy of a person or entity, whether
through ownership of voting securities, by contract or otherwise); (iv) will not
take any action requiring the unanimous affirmative vote of 100% of the members
of the board of directors unless all of the directors, including the Independent
Director, shall have participated in such vote and all of such directors shall
have voted affirmatively (including the affirmative consent of the Independent
Director) to authorize such action; (v) shall maintain books of account in
accordance with generally accepted accounting principles and maintain its
accounts, books and records separate from any other person or entity; PROVIDED,
that the Corporation's assets and liabilities may be included in a consolidated
financial statement issued by an affiliate of the Corporation; PROVIDED,
HOWEVER, that any such consolidated financial statement will make clear that the
Corporation's assets are not available to satisfy the obligations of such
affiliate; (vi) will not commingle its funds or assets with those of any other
entity; (vii) shall hold its assets in its own name; (viii) shall conduct its
business solely in its own name; (ix) shall pay its own liabilities out of its
own funds and assets; (x) shall observe all corporate formalities; (xi) shall
maintain an arms-length relationship with its affiliates; (xii) shall not incur
any indebtedness other than unsecured trade payables and professional and other
expenses customary for a special purpose corporation engaged in transactions
with trade receivables in the ordinary course of business; (xiii) will not
assume or guarantee or become obligated for the debts of any other entity or
hold out its credit as being available to satisfy the obligations of any other
entity and will not permit any other person to assume or guarantee or become
obligated for the debts of the Corporation or hold out its credit as being
available to satisfy the obligations of the Corporation; (xiv) will not acquire
obligations or securities of its stockholders; (xv) shall allocate fairly and
reasonably (and pay or charge for, as applicable) overhead or other expenses
that are properly shared with any other person or entity, including without
limitation, shared office space and services performed by an employee of any
affiliate, if any, and use separate stationery, invoices and checks bearing its
own name; (xvi) will not pledge its assets for the benefit of any other person
or entity, except as provided for in the Purchase and Sale Agreement and the
Originator Assignment Certificate, pursuant to which a security interest would
be created in favor of the Corporation in the event that the purchase of Trade
Receivables by the Corporation is recharacterized as a secured loan and such
security interest would be pledged by the Corporation to subsequent purchasers
of the Trade Receivables, and the Receivables Purchase Agreement, pursuant to
which the Corporation would grant a security interest in the Trade Receivables
to subsequent purchasers thereof; (xvii) will
2
<PAGE> 3
identify and hold itself out as a separate and distinct entity under its own
name and not as a division or part of any other person or entity; (xviii) will
not fail to correct any misunderstanding known to it regarding the separate
identity of the Corporation; (xix) will not make loans to any person or entity;
(xx) will not identify its stockholders, or any affiliates of any of them, as a
division or part of the Corporation and will not identify itself as a division
or part of any entity; (xxi) will not enter into, or be a party to, any
transaction with its stockholders or their affiliates except in the ordinary
course of its business and on terms which are intrinsically fair and are no
less favorable to it than would be obtained in a comparable arms-length
transaction with an unrelated third party; (xxii) will maintain a sufficient
number of employees in light of its contemplated business operations; PROVIDED,
HOWEVER, that nothing herein will require the Corporation to have any employees
so long as employees are not necessary to the conduct of the Corporation's
business; and (xxiii) shall pay the salaries of its own employees, if any,
from its own funds.
ARTICLE IV: AUTHORIZED CAPITAL STOCK. The total number of shares of
stock which the Corporation shall have authority to issue is three thousand
(3000) shares of Common Stock, $0.01 par value per share.
ARTICLE V: INCORPORATOR. The name and address of the sole
incorporator of the Corporation is as follows:
Kaye T. Walsh, c/o Gibson, Dunn & Crutcher LLP, 1228 N Street, Suite 5,
Sacramento, California 95814.
ARTICLE VI: DIRECTORS -- NUMBER AND QUALIFICATION.
Section 1. The Corporation shall have a Board of Directors consisting of
three (3) directors, which number may be increased or decreased hereafter in
accordance with the Bylaws of the Corporation. A quorum of the Board of
Directors shall consist of two (2) directors.
Section 2. The Corporation at all times shall cause there to be at least
one duly appointed Independent Director on its Board of Directors.
Notwithstanding anything to the contrary contained herein, such directorship
shall not be eliminated by reason of a vacancy. No Independent Director may be
removed unless his or her successor has been elected. The Independent Director
shall not at any time while serving as a director of the Corporation: (a) be the
legal or beneficial owner of either any stock of the Corporation or any of its
affiliates or of any interest in the Corporation or any successor thereof; or
(b) act as trustee-in-bankruptcy for any of the Corporation's affiliates or any
successor thereof.
ARTICLE VII: ELECTION OF DIRECTORS. Elections of directors need not be
by written ballot unless the Bylaws of the Corporation shall so provide.
ARTICLE VIII: BOARD POWER REGARDING BYLAWS. In furtherance and not in
limitation of the powers conferred by statute, the Board of Directors is
expressly authorized to make, alter or amend and rescind the Bylaws of the
Corporation. The Bylaws or any alteration,
3
<PAGE> 4
amendment or repeal thereof, shall not in any manner impair, or impair the
intent of, Articles Ill, VI, VIII, X or XI hereof.
ARTICLE IX: CORPORATE POWER. Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation (this "Certificate"), in the manner now or hereafter prescribed by
statute, and all rights conferred upon shareholders herein are granted subject
to this reservation.
ARTICLE X: CORPORATE 0PERATIONS, BOOKS AND RECORDS. In addition to the
other provisions set forth in this Certificate, the Corporation shall conduct
its affairs in accordance with the provisions of Article III, Section 2.
ARTICLE XI: VOTING.
Section 1. So long as the Purchase Facility, as created pursuant to the
Receivables Purchase Agreement (the "Purchase Facility"), has not been
terminated according to the terms thereof, then notwithstanding any provisions
in this Certificate to the contrary or inconsistent herewith, the unanimous vote
of the directors of the Corporation (including the vote of the Independent
Director) in favor of approval shall be necessary for the Corporation to: (a)
approve any merger or consolidation, or any conveyance or transfer of all or any
substantial portion of the property or assets of the Corporation outside of the
ordinary course of business to any other entity in a single transaction or a
series of transactions; (b) amend the Corporation's Certificate of Incorporation
to alter the provisions of Article III, Section 2 of Article VI or of Articles
VIII, X, XI or XII; (c) take any action to dissolve or liquidate the Corporation
or windup the affairs of the Corporation; (d) seek relief under any federal or
state law relating to bankruptcy, insolvency, reorganization, the relief from
debts, or the protection of debtors generally; (e) institute proceedings to have
the Corporation adjudicated a bankrupt or insolvent; (f) consent to the
institution of bankruptcy or insolvency proceedings against the Corporation; (g)
file a petition or consent to a petition seeking reorganization or relief on
behalf of the Corporation under any applicable federal or state law relating to
bankruptcy; (h) seek or consent to the appointment of a receiver, liquidator,
assignee, trustee, conservator, custodian, sequestrator or any similar official
for the Corporation or a substantial portion of the property of the Corporation;
(i) make any assignment for the benefit of the Corporation's creditors or admit
in writing its inability to pay its debts generally as they become due; (j) take
any action, or cause the Corporation to take any action, in furtherance of any
of the foregoing (any of the above foregoing actions is hereinafter referred to
as a "Bankruptcy Action"); or (k) take any action that, by the terms of the
Receivables Purchase Agreement and the Purchase and Sale Agreement requires the
consent of the Independent Director. The directors and officers of the
Corporation shall be under no obligation to any shareholder of the Corporation
to take any Bankruptcy Action. Neither the Corporation nor any shareholder of
the Corporation shall have any claim for breach of duty or otherwise against any
director or officer for failing to take any Bankruptcy Action.
Section 2. The Board of Directors shall not take any action requiring
the unanimous affirmative vote of one hundred percent (100%) of the Board of
Directors unless all
4
<PAGE> 5
of the members of the Board of Directors, including the Independent Director,
shall have participated in the vote.
Section 3. To the fullest extent permitted by law, the Board of
Directors of the Corporation shall consider the interest of creditors of the
Corporation (other than affiliates of the Corporation that are creditors) in
connection with all corporate action.
ARTICLE XII: LIABILITY AND INDEMNIFICATION.
Section 1. To the fullest extent permitted by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (provided that
the effect of any such amendment shall be prospective only) (the "Delaware
Law"), a director of the Corporation shall not be liable to the Corporation or
its shareholders for monetary damages for breach of fiduciary duty as director.
Section 2. The Corporation shall indemnify, in the manner and to the
fullest extent permitted by the Delaware Law (but in the case of any such
amendment thereto after the date hereof, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than permitted
prior thereto), any person (or the estate of any person) who is or was a party
to, or is threatened to be made a party to, any threatened, pending or completed
action, suit or proceeding, whether or not by or in the right of the
Corporation, and whether civil, criminal, administrative investigative or
otherwise, by reason of the fact that such person 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, employee or agent at another corporation,
partnership. joint venture, trust or other enterprise. The Corporation may, to
the fullest extent permitted by the Delaware Law, purchase and maintain
insurance on behalf of any such person against any liability which may be
asserted against such person. The Corporation may create a trust fund, grant a
security interest or use other means (including without limitation a letter of
credit) to ensure the payment of such sums as may become necessary to effect the
indemnification as provided herein. To the fullest extent permitted by the
Delaware Law, the indemnification provided herein shall include expenses
(including attorneys fees), judgments, fines and amounts paid in settlement and
any such expenses shall be paid by the Corporation in advance, of the final
disposition of such action, suit or proceeding.
IN WITNESS WHEREOF, the undersigned being the incorporator hereinbefore
named, for the purpose of filing the Amended and Restated Certificate of
Incorporation in accordance with the General Corporation Law of the State of
Delaware, has executed this Certificate as of May 27, 1998.
---------------------------------
Kaye T. Walsh, Incorporator
5
<PAGE> 1
Exhibit 3.10
BY-LAWS
of
WERNER FUNDING CORPORATION
(A Delaware corporation)
May 27, 1998
<PAGE> 2
INDEX
BY-LAWS
<TABLE>
<CAPTION>
ARTICLE I
STOCKHOLDERS
<S> <C> <C>
Section 1.01. Annual Meetings...................................................................................1
Section 1.02. Special Meetings..................................................................................1
Section 1.03. Notice of Annual and Special Meetings.............................................................1
Section 1.04. Quorum............................................................................................1
Section 1.05. Voting............................................................................................2
Section 1.06. Procedure at Stockholders' Meetings...............................................................2
Section 1.07. Action Without Meeting............................................................................2
ARTICLE II
DIRECTORS
Section 2.01. Number, Election and Term of Office...............................................................3
Section 2.02. Chairman of the Board.............................................................................3
Section 2.03. Annual Meeting....................................................................................3
Section 2.04. Regular Meetings..................................................................................3
Section 2.05. Special Meetings..................................................................................3
Section 2.06. Notice of Annual and Special Meetings.............................................................3
Section 2.07. Quorum and Manner of Acting.......................................................................4
Section 2.08. Action Without Meeting............................................................................4
Section 2.09. Participation by Conference Telephone.............................................................4
Section 2.10. Resignations......................................................................................4
Section 2.11. Removal of Directors..............................................................................4
Section 2.12. Vacancies.........................................................................................5
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 2.13. Compensation of Directors.........................................................................5
Section 2.14. Committees........................................................................................5
Section 2.15. Personal Liability of Directors...................................................................5
ARTICLE III
OFFICERS AND EMPLOYEES
Section 3.01. Executive Officers................................................................................5
Section 3.02. Additional Officers; Other Agents and Employees...................................................6
Section 3.03. The President.....................................................................................6
Section 3.04. The Vice Presidents...............................................................................6
Section 3.05. The Secretary and Assistant Secretaries...........................................................6
Section 3.06. The Treasurer and Assistant Treasurers............................................................7
Section 3.07. Vacancies.........................................................................................7
Section 3.08. Delegation of Duties..............................................................................7
Section 3.09. Personal Liability of Officers, Employees and Agents..............................................7
Section 3.09. Personal Liability of Officers, Employees and Agents..............................................7
ARTICLE IV
SHARES OF CAPITAL STOCK
Section 4.01. Share Certificates................................................................................7
Section 4.02. Transfer of Shares................................................................................8
Section 4.03. Transfer Agents and Registrars....................................................................8
Section 4.04. Lost, Stolen, Destroyed or Mutilated Certificates.................................................8
Section 4.05. Regulations Relating to Shares....................................................................8
Section 4.06. Holders of Record.................................................................................8
Section 4.07. Fixing of Record Date.............................................................................8
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE V
LOANS, NOTES, CHECKS, CONTRACTS
AND OTHER INSTRUMENTS
<S> <C> <C>
Section 5.01. Notes, Checks, etc................................................................................9
Section 5.02. Execution of Instruments Generally................................................................9
Section 5.03. Proxies in Respect of Stock or Other Securities or Other Corporations.............................9
ARTICLE VI
GENERAL PROVISIONS
Section 6.01. Offices..........................................................................................10
Section 6.02. Corporate Seal...................................................................................10
Section 6.03. Fiscal Year......................................................................................10
ARTICLE VII
VALIDATION OF CERTAIN CONTRACTS
Section 7.01....................................................................................................10
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 8.01....................................................................................................11
ARTICLE IX
AMENDMENTS
Section 9.01....................................................................................................11
</TABLE>
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<PAGE> 5
WERNER FUNDING CORPORATION
By-Laws
ARTICLE I
STOCKHOLDERS
SECTION 1.01. ANNUAL MEETINGS. Annual meetings of the
stockholders shall be held at such place, either within or without the State of
Delaware, and at such time and date as the Board of Directors shall determine
and as set forth in the notice of the meeting.
SECTION 1.02. SPECIAL MEETINGS. Special meetings of the
stockholders may be called at any time, for the purpose or purposes set forth in
the call, by the Chairman of the Board, the President, the Board of Directors or
the holders of at least one-fifth of all the shares outstanding and entitled to
vote thereat, by delivering a written request to the Secretary. At any time,
upon the written request of any person or persons who have duly called a special
meeting, it shall be the duty of the Secretary to fix the date of the meetings,
to be held not more than 75 days after receipt of the request, and to give due
notice thereof. Special meetings shall be held at such place, either within or
without the State of Delaware, and at such time and date as the Board of
Directors shall determine and as set forth in the notice of the meeting.
SECTION 1.03. NOTICE OF ANNUAL AND SPECIAL MEETINGS. Except as
otherwise expressly required by law, notice of each meeting of stockholders,
whether annual or special, shall be given at least 5 and not more than 60 days
prior to the date on which the meeting is to be held to each stockholder of
record entitled to vote thereat by delivery of a notice thereof to him
personally or by sending a copy thereof through the mail or by telecommunication
equipment, charges prepaid, to his address appearing on the records of the
Corporation. Each such notice shall specify the place, day and hour of the
meeting and, in the case of a special meeting, shall briefly state the purpose
or purposes for which the meeting is called. A written waiver of notice, signed
by the person or persons entitled to such notice, whether before or after the
date and time fixed for the meeting shall be deemed the equivalent of such
notice. Neither the business to be transacted at nor the purpose of the meeting
need be specified in a waiver of notice of such meeting.
SECTION 1.04. QUORUM. A stockholders' meeting duly called
shall not be organized for the transaction of business unless a quorum is
present. At any meeting the presence in person or by proxy of stockholder
entitled to cast at least a majority of the votes which all stockholders are
entitled to cast on the particular matter shall constitute a quorum for the
purpose of considering such matter, except as otherwise expressly provided by
law or by the Certificate of Incorporation or By-Laws of the Corporation. The
stockholders present at a duly organized meeting can continue to do business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum. If a meeting cannot be organized because a quorum has
not attended, those present may adjourn the meeting from time to time to such
time (not more than 30 days after the next previous adjourned meeting) and place
as they may determine, without notice other than by announcement at the meeting
of the time
<PAGE> 6
and place of the adjourned meeting; and in the case of any meeting called for
the election of directors, those who attend the second of such adjourned
meetings, although entitled to cast less than a majority of the votes entitled
to be cast on any matter to be considered at the meeting, shall nevertheless
constitute a quorum for the purpose of electing directors.
SECTION 1.05. VOTING. At every meeting of stockholders, each
holder of record of issued and outstanding stock of the Corporation entitled to
vote at such meeting shall be entitled to vote in person or by proxy and, except
where a date has been fixed as the record date for the determination of
stockholders entitled to notice of or to vote at such meeting, no holder of
record of a share of stock which has been transferred on the books of the
Corporation within 10 days next preceding the date of such meeting shall be
entitled to notice of or to vote at such meeting in respect of such share so
transferred. Resolutions of the stockholders shall be adopted, and any action of
the stockholders at a meeting upon any matter shall be taken and be valid, only
if at least a majority of the votes cast with respect to such resolutions or
matter are cast in favor thereof, except as otherwise expressly provided by law
or by the Certificate of Incorporation or By-Laws of the Corporation. The
Chairman of the Board (if one has been elected and is present) shall be
chairman, and the Secretary (if present) shall act as secretary, at all meetings
of the stockholders. In the absence of the Chairman of the Board, the President
shall be chairman; and in the absence of both of them, the chairman shall be
designated by the Board of Directors or if not so designated shall be elected by
the stockholders present; and in the absence of the Secretary, an Assistant
Secretary shall act as secretary of the meeting.
SECTION 1.06. PROCEDURE AT STOCKHOLDERS' MEETINGS. The
organization of each meeting of the stockholders, the order of business thereat
and all matters relating to the manner of conducting the meetings shall be
determined by the chairman of the meeting, whose decisions may be overruled only
by majority vote (which shall not be by ballot) of the stockholders present and
entitled to vote at the meeting in person or by proxy. Meetings shall be
conducted in a manner designed to accomplish the business of the meeting in a
prompt and orderly fashion and to be fair and equitable to all stockholders, but
it shall not be necessary to follow Roberts' Rules of Order or any other manual
of parliamentary procedure.
SECTION 1.07. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at any annual or special meeting of stockholders, or any
action which may be taken at any annual or special meeting, may be taken without
a meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted, and such written consent is filed with the
minutes of proceedings of the stockholders. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
2
<PAGE> 7
ARTICLE II
DIRECTORS
SECTION 2.01. NUMBER, ELECTION AND TERM OF OFFICE. The number
of directors which shall constitute the full Board of Directors shall be
determined by resolution of the board of directors or by the stockholders at the
annual meeting provided, however, that in no event shall the number of directors
be less than three or more than eleven. Each director shall hold office for the
term for which he is elected and thereafter until his successor is duly elected
or until his prior death, resignation or removal. Directors need not be
stockholders.
SECTION 2.02. CHAIRMAN OF THE BOARD. The Board of Directors
shall elect a Chairman of the Board. The Chairman when present shall preside at
all meetings of the shareholders and of the Board of Directors.
SECTION 2.03. ANNUAL MEETING. Annual Meetings of the Board of
Directors shall be held each year at the same place as and immediately after the
annual meeting of stockholders, or at such other place and time as shall
theretofore have been determined by the Board. At its regular annual meeting,
the Board of Directors shall organize itself and elect the officers of the
Corporation for the ensuing year, and may transact any other business.
SECTION 2.04. REGULAR MEETINGS. Regular meetings of the Board
of Directors may be held at such intervals and at such time and place as shall
from time to time be determined by the Board. After there has been such
determination and notice thereof has been once given to each person then a
member of the Board of Directors, regular meetings may be held at such intervals
and time and place without further notice being given.
SECTION 2.05. SPECIAL MEETINGS. Special meetings of the Board
of Directors may be called at any time by the Board, by the Chairman of the
Board, by the President or by any two directors to be held on such day and at
such time and place as shall be specified by the person or persons calling the
meeting.
SECTION 2.06. NOTICE OF ANNUAL AND SPECIAL MEETINGS. Except as
otherwise expressly required by law, notice of the annual meeting of the Board
of Directors need not be given. Except as otherwise expressly required by law,
notice of every special meeting of the Board of Directors specifying the place,
date and time thereof shall be given to each director either by being mailed on
at least the third day prior to the date of the meeting or by being sent by
telecommunications equipment or given personally or by telephone at least 24
hours prior to the time of the meeting. A written waiver of notice of a special
meeting, signed by the person or persons entitled to such notice, whether before
or after the date and time stated therein fixed for the meeting, shall be deemed
the equivalent of such notice, and attendance of a director at a meeting shall
constitute a waiver of notice of such meeting except when the director attends
the meeting for the express purpose of objecting, when he enters the meeting, to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at nor the purpose of the
meeting need be specified in a waiver of notice of such meeting.
3
<PAGE> 8
SECTION 2.07. QUORUM AND MANNER OF ACTING. At all meetings of
the Board of Directors, except as otherwise expressly provided by law or by the
Certificate of Incorporation or By-Laws of the Corporation, the presence of a
majority of the full Board shall be necessary and sufficient to constitute a
quorum for the transaction of business. If a quorum is not present at any
meeting, the meeting may be adjourned from time to time by a majority of the
directors present until a quorum as aforesaid shall be present, but notice of
the time and place to which such a meeting is adjourned shall be given to any
directors not present either by being sent by telecommunications equipment or
given personally or by telephone at least 8 hours prior to the date of
reconvening. Resolutions of the Board of Directors shall be adopted, and any
action of the Board at a meeting upon any matter shall be taken and be valid,
only with the affirmative vote of at least a majority of the directors present
at the meeting, except as otherwise provided herein. The Chairman of the Board
(if one has been elected and is present) shall be chairman, and the Secretary
(if present) shall act as secretary, at all meetings of the Board. In the
absence of the Chairman of the Board, the President shall be chairman, and in
the absence of both of them the directors present shall select a member of the
Board of Directors to be chairman; and in the absence of the Secretary and
Assistant Secretary, the chairman of the meeting shall designate any person to
act as secretary of the meeting.
SECTION 2.08. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if a consent in writing,
setting forth the actions so taken, shall be signed by all members of the Board
or such committees, as the case may be, and such written consent is filed with
the minutes of the Board or committee.
SECTION 2.09. PARTICIPATION BY CONFERENCE TELEPHONE. Members
of the Board of Directors of the Corporation, or any committee designated by the
Board, may participate in a meeting of the Board or committee by means of
conference telephone or similar communications equipment by which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
SECTION 2.10. RESIGNATIONS. A director may resign by
submitting his written resignation to the Chairman of the Board (if one has been
elected) or the Secretary. Unless otherwise specified therein, the resignation
of a director need not be accepted to make it effective and shall be effective
immediately upon its receipt by such officer or as otherwise specified therein.
If the resignation of a director specifies that it shall be effective at some
time later than receipt, until that time the resigning director shall be
competent to act on all matters before the Board of Directors, including filling
the vacancy caused by such resignation.
SECTION 2.11. REMOVAL OF DIRECTORS. The entire Board of
Directors or any individual director may be removed at any time for cause or
without cause by the holders of a majority of the shares then entitled to vote
at an election of directors. The vacancy or vacancies caused in the Board of
Directors by such removal may but need not be filled by such stockholders at the
same meeting or at a special meeting of the stockholders called for that
purpose.
4
<PAGE> 9
SECTION 2.12. VACANCIES. Any vacancy that shall occur in the
Board of Directors by reason of death, resignation, removal, increase in the
number of directors or any other cause whatever shall, unless filled as provided
in Section 2.11 of this Article II, be filled by a majority of the then members
of the Board, whether or not a quorum, and each person so elected shall be a
director until he or his successor is elected by the stockholders at a meeting
called for the purpose of electing directors, or until his prior death,
resignation or removal.
SECTION 2.13. COMPENSATION OF DIRECTORS. The Corporation may
allow compensation to its directors for their services, as determined from time
to time by resolution adopted by the Board of Directors.
SECTION 2.14. COMMITTEES. The Board of Directors may, by
resolution adopted by a majority of the full Board, designate one or more
committees consisting of directors to have and exercise such authority of the
Board in the management of the business and affairs of the Corporation as the
resolution of the Board creating such committee may specify and as is otherwise
permitted by law. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of
any member of such committee or committees, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another director to act at the
meeting in the place of such absent or disqualified member.
SECTION 2.15. PERSONAL LIABILITY OF DIRECTORS.
(a) To the fullest extent that the laws of the State of
Delaware, as the same exist or may hereafter be amended, permit elimination of
the personal liability of directors, no director of this Corporation shall be
personally liable to this Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director.
(b) The provisions of this Section 2.15 shall be deemed to be
a contract with each director of this Corporation who serves as such at any time
while this Section 2.15 is in effect, and each such director shall be deemed to
be serving as such in reliance on the provisions of this Section 2.15. Any
amendment or repeal of this Section 2.15 or adoption of any By-Law of this
Corporation or other provision of the Certificate of Incorporation of this
Corporation which has the effect of increasing director liability shall operate
prospectively only and shall not affect any action taken, or any failure to act,
by a director of this Corporation prior to such amendment, repeal, By-Law or
other provision becoming effective.
ARTICLE III
OFFICERS AND EMPLOYEES
SECTION 3.01. EXECUTIVE OFFICERS. The Executive Officers of
the Corporation shall be the President, a Secretary and a Treasurer, and may
include one or more Vice Presidents as the Board of Directors may from time to
time determine, all of whom shall be elected by the Board of Directors. Any two
or more offices may be held by the same person. Each Executive Officer shall
hold office until the next succeeding annual meeting of the Board of Directors
and
5
<PAGE> 10
thereafter until his successor is duly elected and qualifies, or until his
earlier death, resignation or removal.
SECTION 3.02. ADDITIONAL OFFICERS; OTHER AGENTS AND EMPLOYEES.
The Board of Directors may from time to time appoint or hire such additional
officers, assistant officers, agents, employees and independent contractors as
the Board deems advisable; and the Board or the President shall prescribe their
duties, conditions of employment and compensation. Subject to the power of the
Board of Directors, the President may employ from time to time such other
agents, employees, and independent contractors as he may deem advisable for the
prompt and orderly transaction of the business of the Corporation, and he may
prescribe their duties and the conditions of their employment, fix their
compensation and dismiss them, without prejudice to their contract rights, if
any.
SECTION 3.03. THE PRESIDENT. Subject to the control of the
Board of Directors, the President shall have general policy supervision of and
general management and executive powers over all the property, business,
operations and affairs of the Corporation, and shall see that the policies and
programs adopted or approved by the Board are carried out. The President shall
exercise such further powers and duties as from time to time may be prescribed
in these By-Laws or by the Board of Directors.
SECTION 3.04. THE VICE PRESIDENTS. The Vice Presidents may be
given by resolution of the Board of Directors general executive powers, subject
to the control of the President, concerning one or more or all segments of the
operations of the Corporation. The Vice Presidents shall exercise such further
powers and duties as from time to time may be prescribed in these By-Laws or by
the Board of Directors or by the President. At the request of the President or
in his absence or disability, the senior Vice President shall exercise all the
powers and duties of the President.
SECTION 3.05. THE SECRETARY AND ASSISTANT SECRETARIES. It
shall be the duty of the Secretary (a) to keep or cause to be kept an original
or duplicate record of the proceedings of the stockholders and the Board of
Directors, and a copy of the Certificate of Incorporation and of the By-Laws;
(b) to attend to the giving of notices of the Corporation as may be required by
law or these By-Laws; (c) to be custodian of the corporate records and of the
seal of the Corporation and see that the seal is affixed to such documents as
may be necessary or advisable; (d) to have charge of the stock books of the
Corporation, and a share register, giving the names of the stockholders in
alphabetical order, and showing their respective addresses, the number and
classes of shares held by each, the number and date of certificates issued for
the shares, and the date of cancellation of every certificate surrendered for
cancellation; and (e) to exercise all powers and duties as may be prescribed by
the Board of Directors or by the President from time to time. The Secretary by
virtue of his office shall be an Assistant Treasurer. The Assistant Secretaries
shall assist the Secretary in the performance of his duties and shall also
exercise such further powers and duties as from time to time may be assigned to
them by the Board of Directors, the President or the Secretary. At the direction
of the Secretary or in his absence or disability, an Assistant Secretary shall
perform the duties of the Secretary.
6
<PAGE> 11
SECTION 3.06. THE TREASURER AND ASSISTANT TREASURERS. The
Treasurer shall have custody of all the funds and securities of the Corporation.
He shall collect all moneys due the Corporation and deposit such moneys to the
credit of the Corporation in such banks, trust companies, or other depositories
as may have been duly designated by the Board of Directors. He shall endorse for
collection on behalf of the Corporation checks, notes, drafts and other
documents, and may sign and deliver receipts, vouchers and releases of liens
evidencing payments made to the Corporation. Subject to Section 5.01 of these
By-Laws, he shall cause to be disbursed the funds of the Corporation by payment
in cash or by checks or drafts upon the authorized depositories of the
Corporation. He shall have charge of the books and accounts of the Corporation.
He shall perform all acts incident to the office of Treasurer and such other
duties as may be assigned to him by the Board of Directors. The Treasurer by
virtue of his office shall be an Assistant Secretary. The Assistant Treasurers
shall assist the Treasurer in the performance of his duties and shall also
exercise such further powers and duties as from time to time may be assigned to
them by the Board of Directors, the President or the Treasurer. At the direction
of the Treasurer or in his absence or disability, an Assistant Treasurer shall
perform the duties of the Treasurer.
SECTION 3.07. VACANCIES. Vacancy in any office or position by
reason of death, resignation, removal, disqualification, disability or other
cause, shall be filled in the manner provided in this Article III for regular
election or appointment to such office.
SECTION 3.08. DELEGATION OF DUTIES. The Board of Directors may
in its discretion delegate from the time being the powers and duties, or any of
them, of any officer to any other person whom it may selection.
SECTION 3.09. PERSONAL LIABILITY OF OFFICERS, EMPLOYEES AND
AGENTS. The Corporation shall indemnify its officers, employees and agents to
the full extent permitted by Section 145 of the Delaware General Corporation
Law, as amended from time to time, or any successor provision of Delaware law.
SECTION 3.09. PERSONAL LIABILITY OF OFFICERS, EMPLOYEES AND
AGENTS. The Corporation shall indemnify its officers, employees and agents to
the full extent permitted by Section 145 of the Delaware General Corporation
Law, as amended from time to time, or any successor provision of Delaware law.
ARTICLE IV
SHARES OF CAPITAL STOCK
SECTION 4.01. SHARE CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to a certificate or certificates, to be in such
form as the Board of Directors may from time to time prescribe, signed by the
President or any Vice President and by the Treasurer or any Assistant Treasurer
or the Secretary or any Assistant Secretary. The signatures of such officers may
be facsimiles. Each such certificate shall set forth the name of the registered
holder thereof, the number and class of shares and the designation of the
series, if any, which the certificate represents. The Board of Directors may, if
it so determines, direct that certificates for shares of
7
<PAGE> 12
stock of the Corporation be signed by a transfer agent or registered by a
registrar or both, in which case such certificates shall not be valid until so
signed or registered.
In the case of any officer of the Corporation who shall have
signed, or whose facsimile signature shall have been used on, any certificate
for shares of stock of the Corporation shall cease to be such officer, whether
because of death, resignation, removal or otherwise, before such certificate
shall have been delivered by the Corporation, such certificate shall
nevertheless be deemed to have been adopted by the Corporation and may be issued
and delivered as though the person who signed such certificate or whose
facsimile signature shall have been used thereon had not ceased to be such
officer.
SECTION 4.02. TRANSFER OF SHARES. Transfer of shares of stock
of the Corporation shall be made only on the books of the Corporation by the
registered holder thereof or by his attorney thereunto authorized by an
instrument duly executed and filed with the Corporation, and on surrender of the
certificate or certificates for such shares properly endorsed or accompanied by
properly executed stock powers and evidence of the payment of all taxes imposed
upon such transfer. Except as provided in Section 4.04 of this Article IV, every
certificate surrendered for transfer shall be canceled and no new certificate or
certificates shall be issued in exchange for any existing certificate until such
existing certificate shall have been so canceled.
SECTION 4.03. TRANSFER AGENTS AND REGISTRARS. The Board of
Directors may appoint any one or more qualified banks, trust companies or other
corporations organized under any law of any state of the United States or under
the laws of the United States as agent or agents for the Corporation in the
transfer of the stock of the Corporation and likewise may appoint any one or
more such qualified banks, trust companies or other corporations as registrar or
registrars of the stock of the Corporation.
SECTION 4.04. LOST, STOLEN, DESTROYED OR MUTILATED
CERTIFICATES. New certificates for shares of stock may be issued to replace
certificates lost, stolen, destroyed or mutilated upon such terms and
conditions, which may but need not include the giving of a satisfactory bond or
other indemnity, as the Board of Directors may from time to time determine.
SECTION 4.05. REGULATIONS RELATING TO SHARES. The Board of
Directors shall have power and authority to make such rules and regulations not
inconsistent with these By-Laws or with law as it may deem expedient concerning
the issue, transfer and registration of certificates representing shares of
stock of the Corporation.
SECTION 4.06. HOLDERS OF RECORD. The Corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder and owner in fact thereof 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 it shall have express or other notice thereof, except as
otherwise expressly provided by the laws of the State of Delaware.
SECTION 4.07. FIXING OF RECORD DATE. The Board of Directors
may fix a record date which does not precede the date on which the resolution
fixing such record date is adopted,
8
<PAGE> 13
(a) In order to determine the stockholders entitled to notice
of or to vote at any meeting of stockholders provided such record date is not
less than ten or more than sixty days prior to the date of any such meeting; and
(b) in order to determine the stockholders entitled to consent
to corporate action in writing without a meeting provided such record date is
not more than ten days after the date on which the resolution fixing such record
date is adopted; and
(c) in order to determine the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change conversion
or exchange of stock, or for the purpose of any other lawful action, provided
such record date is not more than sixty days prior to such action.
In such case, only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to notice of, or to vote at,
such meeting or to receive payment of such dividend, or to receive such
allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the Corporation after
any record date fixed as aforesaid.
ARTICLE V
LOANS, NOTES, CHECKS,
CONTRACTS AND OTHER INSTRUMENTS
SECTION 5.01. NOTES, CHECKS, ETC. All notes, drafts,
acceptances, checks, endorsements (other than for deposit) and all evidences of
indebtedness of the Corporation whatsoever shall be signed by such officers or
agents and shall be subject to such requirements as to countersignature or other
conditions as the Board of Directors from time to time may designate. Facsimile
signatures on checks may be used unless prohibited by the Board of Directors.
SECTION 5.02. EXECUTION OF INSTRUMENTS GENERALLY. Except as
provided in Section 5.01 of this Article V, all contracts and other instruments
requiring execution by the Corporation may be executed and delivered by the
President, any Vice President or the Treasurer, and authority to sign any such
contracts or instruments, which may be general or confined to specific
instances, may be conferred by the Board of Directors upon any other person or
persons. Any person having authority to sign on behalf of the Corporation may
delegate, from time to time, by instrument in writing, all or any part of such
authority to any person or person if authorized so to do by Board of Directors.
SECTION 5.03. PROXIES IN RESPECT OF STOCK OR OTHER SECURITIES
OR OTHER CORPORATIONS. Unless otherwise provided by the Board of Directors, the
President may from time to time appoint an attorney or attorneys or an agent or
agents of the Corporation to exercise in the name and on behalf of the
Corporation the powers and rights which the Corporation may have as the holder
of stock or other securities in any other corporation to vote or consent in
respect of such stock or other securities, may instruct the person or persons so
appointed as to the manner of exercising such powers and rights and may execute
or cause to be executed in the name and on
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behalf of the Corporation and under its corporate seal or otherwise all such
written proxies or other instruments as he may deem necessary or proper in order
that the Corporation may exercise its said powers and rights.
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.01. OFFICES. The registered office of the
Corporation shall be at 1105 North Market Street, Suite 1300, Wilmington,
Delaware. The Corporation may have other offices, within or without the State of
Delaware, at such place or places as the Board of Directors may from time to
time determine or the business of the Corporation may require.
SECTION 6.02. CORPORATE SEAL. The Board of Directors shall
prescribe the form of a suitable corporate seal, which shall contain the full
name of the Corporation and the year and state of incorporation. Such seal may
be used by causing it or a facsimile or reproduction thereof to be affixed to or
placed upon the document to be sealed.
SECTION 6.03. FISCAL YEAR. Unless otherwise determined by
the Board of Directors, the fiscal year of the Corporation shall be the calendar
year.
ARTICLE VII
VALIDATION OF CERTAIN CONTRACTS
SECTION 7.01. No contract or other transaction between the
Corporation and another person shall be invalidated or otherwise adversely
affected by the fact that any one or more stockholders, directors or officers of
the Corporation -
(i) is peculiarly or otherwise interested in, or is a
stockholder, director, officer, or member of, such other person, or
(ii) is a party to, or is in any other way peculiarly or
otherwise interested in, the contract or other transaction, or
(iii) is in any way connected with any person peculiarly or
otherwise interested in such contract or other transaction, provided the fact of
such interest shall be disclosed or known to the Board of Directors or the
stockholders, as the case may be, and in any action of the stockholders or of
the Board authorizing or approving any such contract or other transaction, any
and every stockholder or director may be counted in determining the existence of
a quorum with like force and effect as though he were not so interested, or were
not such a stockholder, director, member or officer, or were not such a party,
or were not so connected. Such director, stockholder or officer shall not be
liable to account to the Corporation for any profit realized by him from or
through any such contract or transaction approved or authorized as aforesaid. As
used herein, the term "person" includes a corporation, partnership, firm,
association or other legal entity.
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ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 8.01. To the maximum extent provided by applicable
law, no director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. The foregoing sentence shall not eliminate or limit the
liability of a director, (i) for breach of the director's duty of loyalty of the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct of a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit. No
amendment to or repeal of this Article VIII 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.
Directors and officers of the Corporation shall be indemnified
as of right to the fullest extent now or hereafter permitted by law in
connection with any actual or threatened civil, criminal, administrative or
investigative action, suit or proceeding (whether brought by or in the name of
the Corporation or otherwise) arising out of their service to the Corporation or
to another organization at the request of the Corporation. Persons who are not
directors or officers of the Corporation may be similarly indemnified in respect
of such service to the extent authorized at any time by the Board of Directors
of the Corporation. The Corporation may purchase and maintain insurance to
protect itself and any such director, officer or other person against any
liability asserted against him and incurred by him in respect of such service
whether or not the Corporation would have the power to indemnify him against
such liability by law or under the provisions of this Article. The provisions of
this Article shall be applicable to actions, suits or proceedings commenced
after the adoption hereof, whether arising from acts or omissions occurring
before or after the adoption hereof, and to directors, officers and other
persons who have ceased to render such service, and shall inure to the benefit
of the heirs, executors and administrators of the directors, officers and other
persons referred to in this Article.
ARTICLE IX
AMENDMENTS
SECTION 9.01. These By-Laws may be amended, altered and
repealed, and new By-Laws may be adopted, by the stockholders or the Board of
Directors of the Corporation at any regular or special meeting. No provision of
these By-Laws shall vest any property or contract right in any stockholder.
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Exhibit 10.9
EMPLOYMENT AGREEMENT
This Employment Agreement ("this Agreement") is made and entered into
as of December 18, 1998 (the "Effective Date"), by and between Werner Co., a
Pennsylvania corporation (the "Company"), and Robert P. Tamburrino
("Executive").
The Company hereby agrees to employ Executive, and Executive hereby
accepts such employment, on the terms and conditions hereinafter set forth. The
offer of employment letter dated November 13, 1998 (the "Offer Letter"), is
hereby incorporated herein by reference; however, the provisions of this
Employment Agreement shall supersede the Offer Letter in case there is a
discrepancy between the documents or if the Offer Letter does not address
certain issues.
1. POSITION.
From the Effective Date until the termination of Executive's employment
hereunder (the "Period of Employment"), Executive shall serve in the capacity
indicated on Schedule 1 hereto, and shall have the normal duties and
responsibilities commensurate with such position. During the Period of
Employment, Executive will (a) during normal business hours, devote his full
time and exclusive attention to, and use his best efforts to advance, the
business and welfare of the Company, and (b) not engage in any other employment
activities for any direct or indirect remuneration without the concurrence of
the Board, provided, however, Executive may serve on corporate, charitable and
community boards so long as such activities do not unreasonably interfere with
the performance of his duties under this Agreement and provided that any such
activities are approved in advance by the Board, which approval will not be
unreasonably withheld. Executive shall also serve as Vice President, Treasurer
and Chief Financial Officer at Werner Holding Co. (PA), Inc., Werner Holding Co.
(DE), Inc. and all subsidiaries and affiliates without any additional
compensation.
2. PLACE AND TERM OF EMPLOYMENT.
(a) Executive's office shall be at the location set forth on Schedule 1
attached hereto.
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(b) Subject to Section 6 hereunder, the term of this Agreement shall be
through January 31, 2002. This Employment Agreement shall be automatically
renewed for successive one (1) year periods unless either party gives notice
otherwise by November 30, just prior to an expiration.
3. COMPENSATION.
3.1 BASE SALARY. Effective as of December 18, 1998, the Company shall
pay Executive the per annum Base Salary indicated on Schedule 1 attached hereto
during the Period of Employment payable biweekly and otherwise in accordance
with the standard policies of the Company and subject to payroll deductions as
may be necessary or customary in respect of the Company's salaried employees in
general. Thereafter Executive's Base Salary hereunder shall be subject to annual
review by the Board for such increases as the Board may determine.
3.2 PERFORMANCE BASED COMPENSATION. In addition to the Base Salary
provided for in Section 3.1 hereof, commencing on January 1, 1999, Executive
shall be eligible to receive an annual cash bonus earned during the calendar
year in an amount equal to 60% of the Base Salary in effect at the end of such
calendar year based upon the extent to which Werner Holding Co. (PA), Inc.'s
("Holdings") consolidated Earnings Before Interest, Taxes, Depreciation and
Amortization ("EBITDA"), as defined in EXHIBIT 1 hereto, equals or exceeds the
percentages of target annual EBITDA with respect to such fiscal year in
accordance with the chart set forth below, in an amount equal to a percentage of
the "Bonus Amount" set forth in Schedule 1 hereto, provided, however, that at
the discretion of the Board, such bonus may be subject to upward or downward
adjustment in accordance with chart set forth below:
<TABLE>
<CAPTION>
Percentage of Target % of Bonus (Subject to Board Range in Which Target % of Bonus
EBITDA Target Achieved Adjustment) May Be Adjusted at Discretion of
---------------------- ----------------------------------- the Board
--------------------------------
<S> <C> <C>
Less than 85% 0% 0%
85% or above, but below 90% 20% 10% - 30%
90% or above, but below 95% 50% 40% - 60%
95% or above, but below 100% 75% 65% - 85%
100% 100% 90% - 110%
</TABLE>
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<PAGE> 3
The EBITDA targets for the fiscal years 1999-2002 shall be set by the Company's
Board of Directors as part of its annual budgeting process.
Executive shall also be eligible to receive an additional annual cash
bonus at the discretion of the Board based upon the Board's evaluation of
Executive's performance for each fiscal year of Holdings during the Period of
Employment. Bonuses will be payable no later than April of the respective years
following the years with respect to which they were earned.
Notwithstanding any other provision to the contrary, Bob will
absolutely be entitled to received a minimum bonus of $75,000 in April 2000
(prorated if his employment ceases prior to December 31, 1999) if (a) he was
still employed by the Company on December 31, 1999 or (b) such employment had
been terminated prior thereto by the Company without Cause or by Bob for Good
Reason.
4. BENEFITS.
During the Period of Employment, Executive shall be entitled to
participate in all benefit plans and programs maintained by the Company which
are available to its executive officers or employees generally, including any
and all perquisites, provided that, subject to Section 5.4 of the
Recapitalization Agreement dated October 8, 1997 and amended October 27, 1997 by
and among the Company and certain investor clients of Investcorp S.A., (i)
Executive's right to participate in such plans and programs shall not affect the
Company's right to amend or terminate
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the general applicability of such plans and programs, and (ii) Executive
acknowledges that he shall have no vested rights under or to participate in any
such plan or program except as expressly provided under the terms thereof.
During the two year period following the Effective Date, the Company shall
provide the Executive with the benefits described on Exhibit 2 hereto, provided,
however, the benefits so described may be amended or terminated upon the
approval of the members of the Board nominated pursuant to Section 4(iii) of the
Shareholder Rights Agreement dated as of the date hereof among the Company, the
Executive, Investcorp Investment Equity Limited, the other holders of shares of
Class D Common Stock of the Company and the other individuals party thereto. The
Company shall provide Executive with an office at 93 Werner Road, a full-time
secretary and such other facilities and services as shall be suitable to
Executive's position and adequate for the performance of his duties hereunder.
You shall also have the opportunity to purchase an additional 50 shares @
$2,421.29 until December 18, 1999 with 75% financing available from the Company.
Should you purchase the additional 50 shares you will be granted an additional
50 options on the same terms and condition as the original 300. You will also
qualify for relocation assistance as covered in the Company's Relocation Policy
except that your reasonable actual documented commuting and interim living
expenses (between Newtown, PA and the Greenville, PA area) through August 31,
1999 will be paid by the Company. Also, please refer to the Special Fringe
Benefits Memorandum for additional items. Further, you will be reimbursed up to
$7,500 for your reasonable actual documented legal expenses associated with your
commencement of employment with Werner Co.
5. EXPENSES; TAXES.
Upon presentation of acceptable substantiation therefor, the Company
will pay or reimburse Executive for such reasonable travel, entertainment and
other expenses as he may incur during the Period of Employment in connection
with the performance of his duties hereunder. Federal, state and local income
taxes shall be withheld on all cash and in-kind payments made by the Company to
Executive in accordance with applicable tax laws and regulations.
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<PAGE> 5
6. TERMINATION OF EMPLOYMENT.
The provisions of this Section 6 shall apply upon termination of
Executive's employment hereunder. In connection with any termination of
Executive's employment hereunder, Executive or his beneficiaries shall be
entitled to receive, pro-rated as appropriate, earned but unpaid Base Salary,
unreimbursed amounts pursuant to Section 5 hereof, and unpaid and unreimbursed
payments and benefits under, and in accordance with the terms of, applicable
benefit plans and programs, said payments being collectively referred to as
Standard Termination Payments.
6.1 FOR CAUSE OR NOT FOR GOOD REASON. If the Company terminates
Executive's employment for Cause (as hereinafter defined) or if Executive
terminates his employment other than for Good Reason (as defined in Section
6.3), the Company's obligations to compensate Executive shall in all respects
cease as of the date of such termination, except for Standard Termination
Payments. Termination of Executive's employment for "Cause" shall mean
termination by the Company because Executive:
(i) has been convicted of a felony, or has entered a plea of
guilty or NOLO CONTENDERE to a felony;
(ii) has committed an act of fraud involving dishonesty for
personal gain which is materially injurious to the Company;
(iii) has willfully and continually refused to substantially
perform his duties with the Company (other than any such refusal resulting from
his incapacity due to mental illness or physical illness or injury), after a
demand for substantial performance has been delivered to the Executive by the
Board, where such demand specifically identifies the manner in which the Board
believes that the Executive has refused to substantially perform his duties and
the passage of a reasonable period of time for Executive to comply with such
demand; or
(iv) has willfully engaged in gross misconduct materially and
demonstrably injurious to the Company or its subsidiaries.
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<PAGE> 6
For purposes of this paragraph, no act or failure to act on the
Executive's part shall be considered "willful" unless done, or omitted to be
done, by the Executive not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company or its subsidiaries.
Notwithstanding the foregoing, with respect to termination for Cause arising out
of conduct described in clause (ii), (iii) or (iv) above, a termination shall
not be considered for Cause for purposes of this Agreement unless there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire Board, at a
meeting of the Board called and held for that purpose (after reasonable notice
to the Executive and an opportunity for the Executive, together with his counsel
or other advisors, to be heard at such meeting), finding that in the good faith
opinion of the Board the Executive had engaged in conduct described in clause
(ii), (iii) or (iv) above and specifying the particulars thereof in detail. Such
a finding by the Board of Directors of the Company is a prerequisite to a
termination for Cause pursuant to clauses (ii), (iii) or (iv) above; PROVIDED,
HOWEVER, that such a finding may be challenged, by appropriate judicial process,
on the merits (i.e., that Cause did not exist) or on the basis that the Board's
finding was not made in good faith (provided that proof that Cause for
termination existed shall be a complete defense to any showing that the Board's
findings were not made in good faith).
If the Executive terminates his employment other than for Good Reason,
the Executive must provide the Company with thirty (30) days written notice
prior to such termination.
6.2 UPON DEATH OR PERMANENT DISABILITY. If Executive's employment is
terminated as a result of death or Permanent Disability (as hereinafter
defined), the Company's obligation to compensate Executive shall in all respects
cease as of the date of such termination, except for Standard Termination
Payments including all applicable disability benefits. The Company may terminate
Executive's employment hereunder attributable to the "Permanent Disability" of
Executive if Executive becomes physically or mentally incapacitated or disabled
so that he is unable to perform for the Company substantially the same services
as he performed prior to incurring such incapacity or disability (the Company,
at its option and expense, is entitled to retain a physician reasonably
acceptable to Executive to confirm the existence of such incapacity or
disability, and the determination of such physician shall be binding upon the
Company and
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Executive), and such incapacity or disability exists for an aggregate of six (6)
calendar months in any twelve (12) calendar month period.
6.3 NOT FOR CAUSE OR FOR GOOD REASON. If (i) Executive's employment is
terminated by the Company for a reason other than Cause, Executive's death or
Executive's Permanent Disability, or (ii) Executive terminates his employment
for Good Reason (as hereinafter defined), the Company's obligation to compensate
Executive shall in all respects cease as of the date of such termination, except
(a) for Standard Termination Payments, (b) that the Company will pay to
Executive a lump sum amount equal the sum of (1) twelve (12) months of the
Executive's Base Salary in effect at the time of such termination and (2) the
bonus that the Executive received (or earned but did not receive) for the fiscal
year immediately preceding the fiscal year in which his employment terminated,
and (c) that the Company will, for a period of twelve (12) months following said
date of termination, provide Executive with retirement benefits and welfare
(including any life insurance, hospitalization, medical and disability)
benefits, substantially similar to those provided to Executive as of the date of
termination, provided that such welfare benefits shall be discontinued to the
extent Executive receives similar benefits from subsequent employment. For
purposes of this Agreement, "Good Reason" shall mean (1) except as specifically
provided herein, the assignment to the Executive of duties, or the assignment of
the Executive to a position, constituting a material diminution in the
Executive's role, responsibilities or authority compared with his role,
responsibilities or authority with the Company or its affiliates on the
Effective Date; (2) a reduction by the Company in the Executive's bonus
opportunities or, except as specifically provided herein, base salary as in
effect on the Effective Date or as the same may be increased from time to time;
(3) unless the members of the Board appointed pursuant to Section 4(iii) of the
Shareholder Agreement dated as of the date hereof agree to such reduction or
other action, any material reduction in the level of benefits (including
participation in any bonus plan) to which the Executive is entitled under one or
more employee benefit plans on the Effective Date, or the taking of any action
by the Company which would adversely affect the Executive's accrued benefits
under any such employee benefit plans or deprive the Executive of any material
fringe benefit enjoyed by the Executive on the Effective Date; (4) a demand by
the Company to the Executive to relocate to any place that exceeds a fifty
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(50) mile radius beyond the location at which the Executive performed the
Executive's duties on the Effective Date; or (5) any material breach by the
Company of any provision of this Agreement.
6.4 RELEASE AND SATISFACTION. At the time of termination of Executive's
employment, Executive and the Company agree to execute mutual releases whereby
(a) Executive will release, relinquish and forever discharge the Company and any
director, officer, employee, shareholder, controlling person or agent of the
Company from any and all claims, damages, losses, costs, expenses, liabilities
or obligations, whether known or unknown (except as set forth in Section 6.5
hereof other than any such claims, damages losses, costs, expenses, liabilities
or obligations arising under (i) any indemnification arrangement of the Company
with respect to Executive, (ii) any employee benefit plan or program (whether or
not tax-qualified) covering Executive, (iii) any stock purchase or stock option
plan or agreement to which the Company and Executive are parties (or any
document executed in connection therewith) or (iv) this Agreement, to the extent
the Company or any such person has continuing obligations pursuant to the
express provisions hereof following such termination), which Executive has
incurred or suffered or may incur or suffer as a result of Executive's
employment by the Company or the termination of such employment, and (b) the
Company will release, relinquish and forever discharge Executive and his heirs,
successors and assigns from any and all claims, damages, losses, costs,
expenses, liability or obligations, whether known or unknown (except as set
forth in Section 6.5 hereof and other than any such claims, damages, losses,
costs, expenses, liabilities or obligations arising under any of the
arrangements or agreements referred to in clauses (i) through (iii) in the
preceding clause (a) of this Section 6.4 or under this Agreement to the extent
Executive or any such person has continuing obligations pursuant to the express
provisions hereof following such termination), which the Company has incurred or
suffered or may incur or suffer as a result of the Company's employment of
Executive or the termination of such employment.
6.5 EFFECT ON THIS AGREEMENT. The termination of Executive's employment
shall not affect the continuing operation and effect of Sections 6.4 and 7
hereof, nor affect any obligation of the Company to make payments pursuant to
Section 6 hereof, which shall continue in full force and effect upon the Company
and Executive, and its and his heirs, successors and assigns.
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<PAGE> 9
Nothing in Section 6.1 or 6.4 hereof shall be deemed to operate or shall operate
as a release, settlement or discharge of any liability of Executive to the
Company (a) from any act or omission by Executive enumerated in Section 6.1
which constituted a reason for termination of Executive's employment for Cause
or (b) in connection with any amount Executive owes to the Company pursuant to a
loan or other advance.
6.6 MITIGATION. Executive shall not be required to mitigate the amount
of any payment provided for under this Agreement by seeking other employment or
otherwise nor will any payments provided for herein be subject to offset in
respect of any claims which the Company may have against Executive and, except
as specifically provided herein, the amount of any payment or benefit provided
for in this Agreement shall not be reduced by any compensation earned or
benefits received by Executive as the result of employment by a future employer,
by offset against any amount claimed to be owed by him to the Company, or
otherwise.
7. NON-COMPETITION; NON-DISCLOSURE OF PROPRIETARY INFORMATION, SURRENDER
OF RECORDS; INVENTIONS AND PATENTS.
7.1 NON-COMPETITION
(a) Executive acknowledges that in the course of his
employment with the Company he will become familiar with the trade secrets and
other confidential information of the Company and its subsidiaries and that his
services will be of special, unique and extraordinary value to the Company.
Therefore, Executive agrees that, during the Period of Employment and for two
years thereafter (the "Noncompete Period"), he shall not directly or indirectly
own, manage, control, participate in, consult with, render services for, or in
any manner engage in any business competing with the businesses of the Company
or any of its subsidiaries (i) which relates to (A) the manufacturing or sale of
climbing equipment or (B) aluminum extrusion or (ii) which is commenced by the
Company or any of its subsidiaries after the Effective Date and as of the date
of termination constitutes or will constitute a material portion of the
Company's overall future business within the United States and any other
geographical area in which the Company or any of its subsidiaries engage in such
businesses. Nothing herein shall prohibit Executive from being a passive owner
of not more than 2% of the outstanding equity of any class of a
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<PAGE> 10
corporation or other entity which is publicly traded so long as Executive has no
active participation in the business of such corporation.
(b) During the Noncompete Period, Executive shall not directly
or indirectly through another entity (i) induce or attempt to induce any
employee of the Company or any of its subsidiaries to leave the employ of such
person, or in any way interfere with the employee relationship between the
Company or any of its subsidiaries and any employee thereof, (ii) hire any
person who was an employee of the Company or any subsidiary of the Company at
any time during the Employment Period (other than individuals who have not been
employed by the Company or any subsidiary of the Company for a period of at
least one year prior to employment by Executive directly or indirectly through
another entity), or (iii) induce or attempt to induce any customer, supplier,
licensee or other person having a business relationship with the Company or any
of its subsidiaries (A) which relates to (x) the manufacturing or sale of
climbing equipment or (y) aluminum extrusion or (B) which is commenced by the
Company or any of its subsidiaries after the Effective Date and as of the date
of termination constitutes or will constitute a material portion of the
Company's overall future business to cease doing business with the Company or
such subsidiaries, or interfere materially with the relationship between any
such customer, supplier, licensee or other person having a business relationship
with the Company or any of its subsidiaries.
7.2 PROPRIETARY INFORMATION. Executive agrees that he shall not use for
his own purpose or for the benefit of any person or entity other than the
Company or its shareholders or affiliates, nor otherwise disclose to any
individual or entity at any time while he is employed by the Company or
thereafter any proprietary information of the Company unless such disclosure (a)
has been authorized by the Board, (b) is in the good faith judgment of Executive
required in the course of Executive's employment hereunder, (c) is in the course
of such individual's or entity's employment or retention by the Company, or (d)
is required by law, a court of competent jurisdiction or a governmental or
regulatory agency. For purposes of this Agreement, the term "proprietary
information" shall mean: (a) the name or address of any customer, supplier or
affiliate of the Company or any information concerning the transactions or
relations of any customer, supplier or affiliate of the Company or any of its
shareholders; (b) any information
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concerning any product, technology or procedure employed by the Company, but not
generally known to its customers, suppliers or competitors, or under development
by or being tested by the Company, but not at the time offered generally to
customers or suppliers; (c) any information relating to the marketing methods,
sales margins, discounts, rebates, supplier incentives, or the like, the capital
structure, or results of any business plan of the Company; (d) any information
contained in the Company's policies and procedures or employees' manual; (e) any
inventions, innovations, trade secrets or other items covered by Section 7.4
below; and (f) any other information which the Board has determined by
resolution and communicated to Executive to be confidential or proprietary.
However, proprietary information shall not include any information that is or
becomes generally known to the public other than through actions of Executive in
violation of Sections 7.1, 7.2 or 7.3 hereof or any information which become
available to Executive on a non-confidential basis from a source other then the
Company, its affiliates or their respective employees, provided that such source
is not known to Executive to be subject to any obligation of secrecy to the
Company or its affiliates provided that such information was unsolicited and
that with regard thereto Executive took no action.
7.3 CONFIDENTIALITY AND SURRENDER OF RECORDS. Executive agrees that,
while he is employed by the Company or at any time thereafter, he shall not
except as required by law give any "confidential records" (as hereinafter
defined) to, or permit any inspection or copying of confidential records by, any
individual or entity other than in the course of such individual's or entity's
employment or retention by the Company or as required by law, a court of
competent jurisdiction, or a governmental or regulatory agency, nor shall he
retain any of the same following termination of this employment, without the
prior approval of the Board. For purposes hereof, "confidential records" means
all correspondence, memoranda, files, manuals, financial, operating or marketing
records, magnetic tape, or electronic or other media of any kind which may be in
Executive's possession or under his control or accessible to him which contain
any proprietary information as defined in Section 7.2 above.
7.4 INVENTIONS AND PATENTS. Executive agrees that all inventions,
innovations, trade secrets, patents and processes in any way relating, directly
or indirectly, to the Company's or its subsidiaries' businesses developed by him
alone or in conjunction with others at any time during
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his employment by the Company shall belong to the Company. Executive will use
his best efforts to perform all actions reasonably requested by the Board to
establish and confirm such ownership by the Company.
7.5 DEFINITION OF COMPANY. For purposes of this Section 7, the term
"Company" shall include Holdings and any and all of its subsidiaries, ventures
or affiliates (including the Company and any and all of its subsidiaries,
ventures or affiliates) whether currently existing or hereafter formed.
7.6 ENFORCEMENT. The parties hereto agree that the duration and area
for which the covenants set forth in Section 7 are to be effective are
reasonable. In the event that any court or arbitrator determines that the time
period or the area, or both of them, are unreasonable and that any of the
covenants are to that extent unenforceable, the parties hereto agree that such
covenants will remain in full force and effect, first, for the greatest time
period, and second, in the greatest geographical area that would not render them
unenforceable. The parties intend that this Agreement will be deemed to be a
series of separate covenants, one for each and every county of each and every
state of the United States of America. Executive agrees that damages are an
inadequate remedy for any breach of the covenants in this Section 7 and that the
Company will, whether or not it is pursuing any potential remedies at law, be
entitled to equitable relief in the form of preliminary and permanent
injunctions without bond or other security upon any actual or threatened breach
of this Agreement.
8. MISCELLANEOUS.
8.1 NOTICE. Any notice required or permitted to be given hereunder
shall be deemed sufficiently given if sent by registered or certified mail,
postage prepaid, addressed to the addressee at his or its address last provided
the sender in writing by the addressee for purposes of receiving notices
hereunder or, unless or until such address shall be so furnished, to the address
indicated opposite his or its signature to this Agreement. Each party may also
provide notice by sending the other party a facsimile at a number provided by
such other party.
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8.2 MODIFICATION AND NO WAIVER OF BREACH. No waiver or modification of
this Agreement shall be binding unless it is in writing signed by the parties
hereto. No waiver by a party of a breach hereof by the other party shall be
deemed to constitute a waiver of a future breach, whether of a similar or
dissimilar nature, except to the extent specifically provided in any written
waiver under this Section 8.2.
8.3 GOVERNING LAW. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the Commonwealth of Pennsylvania,
and all questions relating to the validity and performance hereof and remedies
hereunder shall be determined in accordance with such law.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same Agreement.
8.5 CAPTIONS. The captions used herein are for ease of reference only
and shall not define or limit the provisions hereof.
8.6 ENTIRE AGREEMENT. This Agreement together with any agreement, plans
or other documents implementing the terms of this Agreement constitute the
entire agreement between the parties hereto relating to the matters encompassed
hereby and supersede any prior oral or written agreements.
8.7 ASSIGNMENT. The rights of the Company under this Agreement may,
without the consent of Executive, be assigned by the Company, in its sole and
unfettered discretion, to any person, firm, corporation or other business entity
which at any time, whether by purchase, merger, or otherwise, directly or
indirectly, acquires all or substantially all of the stock, assets or business
of the Company.
8.8 NON-TRANSFERABILITY OF INTEREST. None of the rights of Executive to
receive any form of compensation payable pursuant to this Agreement shall be
assignable or transferable except through a testamentary disposition or by the
laws of descent and distribution upon the death of Executive. Any attempted
assignment, transfer, conveyance, or other disposition (other
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than as aforesaid) of any interest in the rights of Executive to receive any
form of compensation to be made by the Company pursuant to this Agreement shall
be void.
8.9 ARBITRATION. Any dispute, claim or controversy arising out of or
relating to this Agreement, or the breach, termination or validity hereof, shall
be finally settled by arbitration in accordance with the then-prevailing
Commercial Arbitration Rules of the American Arbitration Association, as
modified herein ("Rules"). There shall be one arbitrator who shall be jointly
selected by the parties. If the parties have not jointly agreed upon an
arbitrator within twenty days of respondent's receipt of claimant's notice of
intention to arbitrate, either party may request the American Arbitration
Association to furnish the parties with a list of names from which the parties
shall jointly select an arbitrator. If the parties have not agreed upon an
arbitrator within ten days of the transmittal date of the list, then each party
shall have an additional five days in which to strike any names objected to,
number the remaining names in order of preference, and return the list to the
American Arbitration Association, which shall then select an arbitrator in
accordance with Rule 13 of the Rules. The place of arbitration shall be
Pittsburgh, Pennsylvania. By agreeing to arbitration, the parties hereto do not
intend to deprive any court of its jurisdiction to issue a pre-arbitral
injunction, pre-arbitral attachment or other order in aid of arbitration. The
arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. ss.ss.
1-16. Judgment upon the award of the arbitrator may be entered in any court of
competent jurisdiction. Each party shall bear its or his own costs and expenses
in any such arbitration and one-half of the arbitrator's fees and expenses.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first written above.
<TABLE>
<S> <C>
WERNER CO., a Pennsylvania Corporation.
By: __________________________________________
Name: Donald M. Werner
Address for Notices: Title: Chairman, President and
Chief Executive Officer
93 Werner Road
Greenville, PA 16125-9499
Attention: Eric J. Werner, Esq.
General Counsel
With a copy to: Consented and Agreed to for the purposes of
guaranteeing the obligations of the Company
under Sections 3, 6.2, and 6.3:
Investcorp International Inc.
280 Park Avenue, 37th Floor WERNER HOLDING CO. (PA), INC., a Pennsylvania
New York, NY 10017 Corporation.
Attention: Chris J. Stadler
By: __________________________________________
Name: Donald M. Werner
Title: Chairman, President and
Chief Executive Officer
EXECUTIVE
_________________________________________________
Address for Notices: Robert P. Tamburrino
Robert P. Tamburrino
7 Bayshore Drive
Newton, PA 18940
</TABLE>
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<PAGE> 16
SCHEDULE 1
----------
<TABLE>
<CAPTION>
BONUS AMOUNT
TITLE LOCATION OF BASE SALARY AS A
OFFICE PERCEN-TAGE
OF BASE SALARY
<S> <C> <C> <C>
Vice President and Chief 93 Werner Road $250,000 60%
Financial Officer Greenville, PA
</TABLE>
16
<PAGE> 17
EXHIBIT 1
---------
EARNINGS BEFORE INTEREST, TAXES,
DEPRECIATION AND AMORTIZATION
Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") is defined as Consolidated Net Income (loss) of the Company and its
subsidiaries as it would appear on a statement of income (loss), which shall (i)
exclude or be adjusted otherwise for all acquisitions and additional equity
contributions to the extent such acquisitions and/or equity contributions
materially change target EBITDA for any particular Fiscal Year, (ii) reflect a
reduction for all management and employment bonuses payable with respect to the
Fiscal Year of the Company prepared in accordance with U.S. GAAP consistently
applied and (iii) be adjusted for any material Board approved amendment to the
capital expenditure plan: plus (minus) the following amounts, to the extent such
amounts are otherwise taken into account in determining EBITDA (prior to
adjustment):
1. Any provision (benefit) for taxes (including franchise taxes)
deducted (added) in calculating such consolidated net income (loss); plus
2. Any interest expense (net of interest income), deducted in
calculating such consolidated net income (loss); plus
3. Amortization expenses deducted in calculating consolidated net
income (loss); plus
4. Depreciation expense deducted in calculating consolidated net income
(loss); plus
5. Management fees paid to Investcorp; plus (minus)
6. Any unusual losses (gains) deducted (added) in calculating
consolidated net income (loss). (Unusual items are intended to include
transactions considered outside the ordinary course of business. EBITDA will be
adjusted to eliminate the effects, if any, of such
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<PAGE> 18
transactions, the intent being to calculate EBITDA as if such transactions had
not occurred; plus (minus)
7. Any compensation expense (income) deducted (added) in calculating
consolidated net income (loss) attributable to transactions involving equity
securities of the Company or its subsidiaries.
The Executive and his representative shall be provided reasonable
opportunity to review the computation of EBITDA and reasonable access to the
data and information supporting much computation, but the Board's determination
shall be conclusive and binding.
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EXHIBIT 2
---------
List of current Employee Benefits
---------------------------------
Term Life Insurance
Travel Insurance
Supplemental Pension Plan
Personal Financial Planning Program
Tax Planning and Preparation
Estate Planning
Officers' Salary Continuation Plan
Officers'/Directors' Health and Dental Insurance Continuation Plan
Company Car
Vacation
Laptop Computer
Cellular Telephone
Internet E-Mail and Web Surfing Account
Annual Supplemental Physical Reimbursement
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<PAGE> 1
Exhibit 10.36
WERNER CO.
PREMIUM CONVERSION PLAN
<TABLE>
<S> <C>
Introduction ................................................................ 1
Premium Conversion .......................................................... 1
Salary Reduction Agreements ................................................. 2
Miscellaneous ............................................................... 4
Administration And Appeals .................................................. 6
Changing or Ending the Plan ................................................. 7
Statement of ERISA Rights ................................................... 7
</TABLE>
<PAGE> 2
INTRODUCTION
PLAN DOCUMENT AND SPD. This is the plan document and the summary plan
description for the Werner Co. Premium Conversion Plan (which we will simply
call the "plan"). This is a "cafeteria plan" within the meaning of the Internal
Revenue Code. It is also an employee welfare benefit plan under the federal
Employee Retirement Income Security Act of 1974. Its plan number is 503.
SPONSOR AND ADMINISTRATOR. The plan is sponsored by Werner Co. (which we
will call "Werner"), whose address is 93 Werner Road, Greenville, PA 16125, and
whose employer identification for federal tax purposes is 25-1754435. The plan
is administered by the Chief Financial Officer of Werner Co. (whom we will call
"the plan administrator"), whose address is 93 Werner Road, Greenville, PA 16125
and telephone number is (724) 588-2000.
PLAN YEAR. You will see references to the "plan year" in this document.
The "plan year" is the 12-month period ending each December 31.
EFFECTIVE DATE AND HISTORICAL NOTE. This plan takes effect on January 1,
1999. As of that date, it entirely supersedes and replaces all prior plans and
programs (if any) providing benefits of the same type as the benefits set forth
in this plan.
QUESTIONS. If you have questions after you read the plan, ask the plan
administrator for help. Better yet, write the question down and give it to the
plan administrator so that there is no misunderstanding. Don't rely on what
anyone else (such as a supervisor or co-employee) tells you, because only the
plan administrator is authorized to interpret and apply the plan.
PREMIUM CONVERSION
THE BENEFIT OF PREMIUM CONVERSION. Normally, employee contributions for
health insurance are deducted from your paycheck after payment of federal income
tax and Social Security tax (FICA). This plan offers you the opportunity to
have the employee contributions made before federal income tax and Social
Security tax.
WHAT'S GOOD ABOUT PREMIUM CONVERSION. If you choose to take advantage of
this plan, you will pay less in taxes, because you won't be paying federal
income and Social Security taxes on your employee contribution. Nor will you be
paying state or local income taxes on your employee contributions (except in a
few localities).
Federal income tax is at least 15% (more if you're in a higher tax
bracket). Your share of FICA is 7.65%. So using this plan of the plan saves you
at least 22.65% of the cost of your employee contribution in federal taxes
alone.
Please note: Under the current Social Security system, when you retire
and claim Social Security benefits, your benefits are based on the earnings on
which you paid Social Security taxes. Using this plan to reduce the earnings on
which you pay Social Security taxes will reduce the earnings that the Social
Security Administration uses to compute your Social Security benefits and may
result in a lower Social Security benefit. Most people feel that saving Social
Security taxes now is worth much more than the potential reduction in Social
Security benefits at retirement, but we want you to be aware of the situation so
that you can make up your own mind.
WHO IS ELIGIBLE FOR COVERAGE. All employees are eligible for coverage
under this plan as long as they are required to make an employee contribution
for health insurance coverage and are receiving a paycheck from Werner (or are
on a leave to which they are entitled under the federal Family and Medical Leave
Act of 1993). As an exception, employees whose terms and conditions of
employment are
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governed by a collective bargaining agreement are not eligible for this plan
unless and until, and then only to the extent that, the collective bargaining
agreement provides for participation in this plan.
WHEN COVERAGE STARTS. To take advantage of this plan, an eligible
employee needs to fill out a "salary reduction" agreement and return it to
Werner. Then Werner will sign it and give back a copy for the employee's
records.
HOW PREMIUM CONVERSION WORKS. The salary reduction agreement is a
contract between the employee and Werner, in which the employee chooses an
alternative package of pay and benefits:
- In the ordinary package of pay and benefits (that is, if the employee
does not choose premium conversion), the employee gets a certain amount of pay
and also gets health insurance coverage that requires employee contributions (as
described in the health insurance plan).
- In the alternative package that the employee gets by choosing premium
conversion, the employee gets a package in which the pay is slightly less but
the employee contribution in the health insurance plan is waived. The amount of
the reduction in the pay component is exactly equal to the employee contribution
that would ordinarily be required under the health insurance plan.
It seems a little artificial, but this is how the law works: in the
alternative package of pay and benefits, the amount that used to be an employee
contribution is now an employer contribution. Since it is an employer
contribution, it is not subject to federal income tax or FICA.
CLAIMS FOR BENEFITS UNDER THE PLAN. Please keep in mind: this plan
doesn't pay any health insurance benefits. The only function of this plan is to
transform after-tax employee contributions for health insurance into pre-tax
employer contributions. Claims for benefits under this plan are limited to
employees who believe they are entitled to take advantage of this plan and who
have filed salary reduction agreements with Werner but who aren't getting
pre-tax employee contributions.
Claims should be filed in writing with the plan administrator. The plan
administrator will respond in writing within 90 days and, if the claim is
denied, point out the specific reasons and plan provisions on which the denial
is based, describe any additional information needed to complete the claim, and
describe the appeal procedure.
FUNDING. This plan is not funded or insured in any way. (It couldn't be,
because no money changes hands.) In return for the employee's agreement to take
a reduction in salary or wages under this plan, the employee gets a waiver of
the employee contribution that would otherwise be required under the health
insurance plan.
SALARY REDUCTION
AGREEMENTS
IRS REQUIREMENTS. Salary reduction agreements are required to implement
the plan, in accordance with detailed rules of the Internal Revenue Service.
This section of the plan describes the rules.
FIRST TIME. You can make a salary reduction agreement at any time after
meeting the eligibility requirements for the plan.
WHEN IT TAKES EFFECT. A salary reduction agreement only applies to pay
earned after the agreement is filed. That means it doesn't take effect until the
paycheck received for the next pay period that begins after the form is filed.
(And if it is changed, the change only applies to pay that earned after the new
salary reduction agreement is filed.)
HOW LONG IT LASTS. A salary reduction agreement lasts for a whole plan
year at a time. (In the year when you first sign up, it lasts for the rest of
the plan year.) This means that if you leave the plan and come back before the
end of the same plan year, the salary reduction agreement will spring back into
effect for the balance of the plan year. If you leave the plan and come back
after the end of that plan year, a new salary reduction agreement will be
necessary.
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<PAGE> 4
ANNUAL CHANGES. During open enrollment period at the end of each plan
year, you may change the salary reduction agreement that is on file for you, but
if you do not make any change, the salary reduction agreement will continue in
force for the following plan year.
MID-YEAR CHANGES IN SALARY REDUCTION AGREEMENTS. As an exception to the
general rule that a salary reduction agreement lasts for a whole plan year at a
time, you may change a salary reduction agreement in the following
circumstances:
Changes in health plan enrollment permitted by HIPAA. You may change
your salary reduction agreement in order to exercise your special enrollment
rights under the Health Insurance Portability and Accountability Act of 1996, as
reflected in section 9801(f) of the Code.
Significant change in health coverage by third-party provider. If
health coverage that you have chosen is provided by an independent,
third-party provider and is significantly curtailed or ceases, you may change
your salary reduction agreement in order to choose instead any other, similar
coverage that is available under the group health plan (prospectively only, of
course). For this purpose, withdrawal of a hospital system from an HMO, or
withdrawal of a set of doctors, may be considered a significant curtailment of
coverage. A significant change in health coverage does not entitle you to drop
health coverage altogether.
Change in health coverage due to spouse's employment. You may change
your salary reduction agreement if the change is on account of, and consistent
with, a significant change in the health coverage of either you or your husband
or wife that is attributable to your husband's or wife's employment. Your
husband's or wife's becoming eligible for Medicare does not constitute a
significant change in the health coverage for this purpose, nor does exhaustion
of limits of coverage under your husband' or wife's plan.
Significant change in cost of health coverage. If there is a change in
the cost of health coverage provided by an independent, third-party provider,
your salary reduction agreement will be adjusted automatically to reflect the
change. A significant change in the cost of health coverage does not entitle you
to drop health coverage.
Change in status. You may change your salary reduction agreement if (a)
one of the following changes in status causes you, your husband or wife, or a
dependent to gain or lose eligibility for coverage (under a Werner plan or a
plan of the spouse's employer or dependent's employer) and (b) the change in
your choices is consistent with that gain or loss of eligibility.
By way of explanation, gaining or losing eligibility for a particular
benefit package option (such as a managed care option) will be considered
gaining or losing eligibility for coverage. Becoming eligible for COBRA
continuation coverage will be considered gaining eligibility for coverage. If
the change of status is to become eligible for coverage under a plan of your
husband's or wife's employer or your dependent's employer, a change of election
under our plan is consistent with that change of status only if the individual
actually elects coverage under the plan of the spouse's or dependent's employer.
The changes in status are as follows:
- your marital status legally changes, including marriage, divorce,
legal separation (if it exists and constitutes a change in marital status under
state law), annulment, or death of your husband or wife.
- the number of your dependents changes, including birth, adoption,
placement for adoption, or death of a dependent.
- you, your husband or wife, or a dependent begins or ends employment.
- the hours of employment of you, your husband or wife, or a dependent
change, including a switch between full-time and part-time status, a strike or
lockout, or taking or returning from an unpaid leave of absence.
- a dependent becomes eligible or ceases to be eligible under the plan,
including attainment of a particular age or cessation of student status.
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- there is a change in the place where you, your husband or wife, or a
dependent works or resides.
Entitlement to Medicare or Medicaid. You may change your salary
reduction agreement in order to drop health insurance coverage for an individual
(whether yourself, your husband or wife, or a dependent) who enrolls in Medicare
or Medicaid (other than the program of vaccinations for children).
Court orders. You may change your salary reduction agreement in order to
add health insurance coverage for a child if required to do so by a judgment,
decree or order resulting from divorce, legal separation, annulment or change in
legal custody, including a qualified medical child support order. Likewise, you
may change your salary reduction agreement in order to drop health insurance
coverage for a child if such an order requires your former husband or wife to
provide coverage (rather than you).
Separation from service. If you separate from the service of the
employer, there is not necessarily any need for a change in your salary
reduction agreement. For example, if you cease to be eligible for health
insurance upon separation from service, no change in your choices is needed
because, although your choice remains in effect, there is nothing to which it
applies. If you return to service with the employer and resume coverage under
the health insurance plan during the same plan year, your existing choice
remains in effect for the balance of that plan year (unless it is changed for
some other reason).
CHANGING A SALARY REDUCTION AGREEMENT. To change a salary reduction
agreement, just complete a new one and turn it in to Werner.
MISCELLANEOUS
TAX STATUS. This plan is designed to meet the requirements of section
125 of the Code as a cafeteria plan, and the description above assumes that it
does. However, there is no procedure by which the IRS issues determination
letters assuring the sponsor and the employees that a plan meets those
requirements. Accordingly, Werner makes no guarantee that the tax consequences
of participating in the plan will be as described above.
FAMILY AND MEDICAL LEAVE. While on a leave of absence to which you are
entitled under the federal Family and Medical Leave Act of 1993, you will not
suffer the loss of any "employment benefit" (as defined for the purpose of the
Family and Medical Leave Act) under the plan which had accrued before you took
the leave and which would not have been lost if you had remained actively at
work. But you will not accrue any additional "employment benefits" under the
plan during the leave. If the leave is unpaid (so that you have no salary),
there will be no salary reduction.
MILITARY SERVICE. If you are absent due to service in the uniformed
services of the United States and you meet the requirements of the federal
Uniformed Services Employment and Reemployment Rights Act of 1994, you will be
entitled to all the same benefits under this plan (if any) as any other employee
on leave of absence, unless you knowingly provide written notice of intent not
to return to employer after the uniformed service (in accordance with the
USERRA).
In addition, upon re-employment in accordance with the USERRA, you are
entitled to all the same rights and benefits under this plan that you had when
your absence began plus those which would you would have attained under the plan
if you had remained continuously employed. And no exclusion or waiting period
will be applied that would not have been applied if you had remained
continuously employed, except with respect to an illness or injury determined by
the Secretary of Veterans Affairs to have been incurred in, or aggravated
during, performance of service in the uniformed services.
QUALIFIED MEDICAL CHILD SUPPORT ORDERS. If the plan administrator
receives a child support order that is (i) a judgment, decree or order of a
court (including approval of a settlement agreement) (or else issued through an
administrative process established under state law that has the force and effect
of law under applicable state law) that (ii) provides for child
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support for a child of an eligible employee and (iii) either relates to benefits
under this plan or enforces a federally prescribed state law relating to
Medicaid recipients, then the plan administrator will notify you and the child
that the order has been received and describe the procedure that the plan
administrator will follow in deciding whether to honor the order.
Next, the administrator will separately account for health care claims
filed that, in the absence of the order, would not be paid. Payment of these
claims will be neither approved nor denied while the plan administrator decides
whether to honor the order.
The plan will not honor a child support order unless it constitutes a
"qualified medical child support order" under the law. That means the plan will
not honor a child support order unless it specifies:
- that it applies to this plan;
- the name and last known mailing address of the affected employee;
- the name and last known mailing address of the child;
- a reasonable description of the type of coverage to be provided
by the plan to each child or the manner in which the coverage is to be
determined; and
- the time period to which the order applies.
Also, the plan will not honor a child support order that purports to
require the plan to provide any type or form of benefit, or any option, that is
not already provided for in the plan (except as necessary to satisfy a federally
prescribed state law relating to Medicaid recipients).
Upon making the decision whether the order is a "qualified medical child
support order" under the law, the plan administrator will notify the employee
and the child and act in accordance with the decision. Whichever way the
decision goes, the decision will be considered a denial of benefits subject to
the appeal procedure described later in the plan under the heading
"Administration and Appeals."
FAIL-SAFE PROVISIONS FOR COMPLIANCE WITH HIPAA. Though we believe that
the ordinary terms of the plan, which are set out in this document, fully comply
with the Health Insurance Portability and Accountability Act of 1996 (HIPAA), we
want to be sure there is no misunderstanding. And so we recite here that,
effective with the first plan year beginning on or after July 1, 1997:
Access. To the extent that this plan constitutes a "group health plan"
under HIPAA, it will not exclude an employee, or impose a longer waiting period
to get into the plan, or require any individual to pay a premium or contribution
that is greater than the premium or contribution for "a similarly situated
individual" on the basis of health status, medical condition (whether physical
or mental), claims experience, receipt of health care, medical history, genetic
information, evidence of insurability (including "conditions arising out of acts
of domestic violence"), or disability, disregarding premium discounts or rebates
or modification of copayments or deductibles in return for adherence to programs
of health promotion and disease prevention-all within the meaning of HIPAA.
Enrollment. If an employee does not enroll in this plan when first
eligible because he has other coverage, then, to the extent that this plan
constitutes "group health plan" under HIPAA, the employee may enroll himself
(and any spouse or dependent children) afterward when he exhausts his COBRA, he
ceases to be eligible for the other coverage (such as divorce, death, etc.), or
the employer ceases contributing toward the other coverage.
In the same fashion, if an employee enrolls himself when first eligible
but chooses not to enroll a spouse or dependent child, he may add the spouse or
dependent child when any of the foregoing events occurs for the spouse or
dependent child.
And if an employee acquires a spouse or dependent child by marriage,
birth, adoption or placement for adoption, the employee may enroll himself (or
himself and the spouse or dependent child) at that time, even if the employee
has previously declined coverage. In the case of birth, adoption or placement
for adoption, the coverage will take effect retroactively to that date if the
employee enrolls the dependent child within 30
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days of the event. In the case of a spouse or dependent child acquired by
marriage, the coverage will take effect no later than the first of the month
after the employee files the application, if the employee applies with 30 days
after the marriage.
Portability. This plan does not impose a pre-existing condition
limitation. But, to the extent that this plan constitutes a "group health plan"
under HIPAA, each person who is covered under the plan is entitled to a
certificate of creditable coverage in the circumstances prescribed by HIPAA,
including regulations under HIPAA. This means each employee, each spouse, and
each dependent child is treated as a separate individual entitled to a
certificate (provided they are covered, of course).
MATERNITY. To the extent that the plan that constitutes a "group health
plan," it will comply with the Newborns' and Mothers' Health Protection Act of
1996. In that regard, government regulations also require us to provide this
statement, effective on the same date, drafted by the federal government: "Group
health plans and health insurance issuers offering group insurance coverage
generally may not, under federal law, restrict benefits for any hospital length
of stay in connection with childbirth for the mother or newborn child to less
than 48 hours following a normal vaginal delivery, or less than 96 hours
following a caesarean section, or require that a provider obtain authorization
from the plan or the insurance issuer for prescribing a length of stay not in
excess of the above periods."
MENTAL HEALTH. To the extent that the plan constitutes a "group health
plan," it will comply with the Mental Health Parity Act of 1996 if two
conditions are met: (1) the employer has 50 employees or more and (2) compliance
would not raise the cost of health insurance coverage under the plan by 1 % or
more.
PROSPECTIVE APPLICATION OF PLAN AND ANY CHANGES. The plan does not apply
to any employee who is not actively employed by Werner after Werner adopts this
plan. Any changes to the plan do not apply to any employee who is not actively
employed after the effective date of the changes.
SELF-EMPLOYED. The plan does not cover self-employed individuals (such
as partners) or people who are considered self-employed by the Internal Revenue
Code (such as 2% owners of Subchapter S corporations).
UTILIZATION TEST. While the plan makes the same benefits available to
all eligible employees, regardless of the level of their compensation, it is
possible for the top-level employees to actually take advantage of the plan to a
significantly greater extent than other employees. In that case (which we see as
highly unlikely), the Internal Revenue Code denies the tax advantage to these
top-level employees. (Everyone else still enjoys the full tax advantage.) The
plan administrator will monitor this situation and notify any top-level employee
who is affected by it. The plan administrator also has authority to cut back the
utilization of top-level employees in order to avoid the problem.
ADMINISTRATION
AND APPEALS
ADMINISTRATION. The plan administrator has all rights, duties and powers
necessary or appropriate for the administration of the plan, except to the
extent that they are vested in the appeals authority in accordance with the
appeal procedure described below.
APPEAL PROCEDURE. If your claim is denied and you disagree and want to
pursue the matter, you must file an appeal in accordance with the following
procedure. You cannot take any other steps unless and until you have exhausted
the appeal procedure. For example, if your claim is denied and you do not use
the appeal procedure, the denial of your claim is conclusive and cannot be
challenged, even in court.
To file an appeal write to the Chief Administrative Officer of Werner
Co. (which we will call "the appeals authority") at 93 Werner Road, Greenville,
PA 16125, stating the reasons why you disagree with the denial of your claim.
You must do this within 60 days after the claim was denied. In the appeal
process, you have the right to review pertinent documents. You have the right
to be represented by
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anyone else, including a lawyer if you wish. And you have the right to present
evidence and arguments in support of your position.
The appeals authority will issue a written decision within 60 days. The
appeals authority may, in its sole discretion, decide to hold a hearing, in
which case it will issue its decision within 120 days. The decision will explain
the reasoning of the appeals authority and refer to the specific provisions of
this plan on which the decision is based.
DISCRETIONARY AUTHORITY. The plan administrator and appeals authority
shall have and shall exercise complete discretionary authority to construe,
interpret and apply all of the terms of the plan, including all matters relating
to eligibility for benefits, amount, time or form of payment, and any disputed
or allegedly doubtful terms. In exercising such discretion, the plan
administrator and appeals authority shall give controlling weight to the intent
of the sponsor of the plan.
All decisions of the appeals authority in the exercise of its authority
under the plan (or of the plan administrator if the decision is not appealed)
shall be final and binding on the plan, the plan sponsor and all participants
and beneficiaries.
CHANGING OR
ENDING THE PLAN
CHANGING THE PLAN. The right to change the plan is expressly reserved to
Werner, which may change the plan in any way and at any time and is not required
to give a reason for the changes. These changes can be retroactive. Any special
arrangement made by Werner for an individual will constitute an amendment to
this plan applicable only to that individual.
ENDING THE PLAN. The plan has no set expiration date; when it was
established, it was not intended to be temporary. Nevertheless, Werner has the
right to end the plan (in whole or in part) at any time and is not required to
give a reason for doing so.
STATEMENT OF
ERISA RIGHTS
INTRODUCTION. Regulations of the federal government require that the
following "Statement of ERISA Rights" appear in this document, and we are
reproducing it here with quotation marks. Not all of the statement is
necessarily accurate or applies to this plan. Neither Werner nor the plan
administrator takes any responsibility for the accuracy or completeness of this
statement, which is made to you by the federal government, not by anyone
connected with the plan:
GOVERNMENT STATEMENT. "As a participant in this plan, you are entitled
to certain rights and protections under the Employee Retirement Income Security
Act of 1974 (ERISA). ERISA provides that all plan participants shall be entitled
to:
"Examine, without charge, at the plan administrator's office and at
other specified locations, such as worksites and union halls, all plan
documents, including collective bargaining agreements and copies of all
documents filed by the plan with the U.S. Department of Labor, such as detailed
annual reports and plan descriptions.
"Obtain copies of all plan documents and other plan information upon
written request to the plan administrator. The administrator may make a
reasonable charge for the copies.
"Receive a summary of the plan's annual financial report. The plan
administrator is required by law to furnish each participant with a copy of this
summary annual report.
"In addition to creating rights for plan participants, ERISA imposes
duties upon the people who are responsible for the operation of the employee
benefit plan. The people who operate your plan, called `fiduciaries' of the
plan, have a duty to do so prudently and in the interest of you and other plan
Page 7
<PAGE> 9
participants and beneficiaries. No one, including your employer or any other
person, may fire you or otherwise discriminate against you in any way to prevent
you from obtaining a welfare benefit or exercising your rights under ERISA. If
your claim for a welfare benefit is denied in whole or in part you must receive
a written explanation of the reason for the denial. You have the right to have
the plan review and reconsider your claim. Under ERISA, there are steps you can
take to enforce the above rights. For instance, if you request materials from
the plan and do not receive them within 30 days, you may file suit in a federal
court. In such a case, the court may require the plan administrator to provide
the materials and pay you up to $100 a day until you receive the materials,
unless the materials were not sent because of reasons beyond the control of the
administrator. If you have a claim for benefits which is denied or ignored, in
whole or in part [and you have exhausted the plan's internal appeal procedure],
you may file suit in a state or federal court. If it should happen that plan
fiduciaries misuse the plan's money, or if you are discriminated against for
asserting your rights, you may seek assistance from the U.S. Department of
Labor, or you may file suit in a federal court. The court will decide who should
pay court costs and legal fees. If you are successful the court may order the
person you have sued to pay these costs and fees. If you lose, the court may
order you to pay these costs and fees, for example, if it finds your claim is
frivolous. If you have any questions about this statement or about your rights
under ERISA, you should contact the nearest office of the Pension and Welfare
Benefits Administration, U. S. Department of Labor, listed in your telephone
directory, or the Division of Technical Assistance and Inquiries, Pension and
Welfare Benefits Administration, U. S. Department of Labor, 200 Constitution
Avenue N.W., Washington, D.C. 20210."
SERVICE OF PROCESS. Service of legal process may be made on the plan
administrator.
Page 8
<PAGE> 1
Subsidiaries of the Company Exhibit 21
Werner Co., a Pennsylvania corporation
Wentworth Institutional Realty, Inc., a Delaware corporation
Werner Funding Corp., a Delaware corporation
WIP Technologies, Inc., a Delaware corporation
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001056112
<NAME> WERNER HOLDING CO. (PA), INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 9,387
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 1,600
<INVENTORY> 46,777
<CURRENT-ASSETS> 106,741
<PP&E> 149,148
<DEPRECIATION> 83,455
<TOTAL-ASSETS> 212,779
<CURRENT-LIABILITIES> 52,775
<BONDS> 278,483
0
0
<COMMON> 1
<OTHER-SE> (154,398)
<TOTAL-LIABILITY-AND-EQUITY> 212,779
<SALES> 436,091
<TOTAL-REVENUES> 436,091
<CGS> 322,451
<TOTAL-COSTS> 404,242
<OTHER-EXPENSES> (645)
<LOSS-PROVISION> 599
<INTEREST-EXPENSE> 30,591
<INCOME-PRETAX> 1,903
<INCOME-TAX> 1,757
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
