UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO
_________
Commission File Number 1-2725
HEIN-WERNER CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-0340430
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2120 Pewaukee Road 53188
Waukesha, Wisconsin (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (414) 542-6611
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $1 par value American Stock Exchange
Common Stock Purchase Rights American Stock Exchange
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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for at least the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to this Form 10-K [ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 27, 1998: $21,816,743
The number of shares outstanding of each registrant's classes of common
stock as of March 27, 1998: Common Stock, $1 par value -- 2,908,899
shares
DOCUMENTS INCORPORATED BY REFERENCE:
Definitive Proxy Statement relating to the 1998 annual meeting
of shareholders (Part III of Form 10-K).
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL. Hein-Werner Corporation was incorporated under the
laws of the State of Wisconsin on April 16, 1921 and is headquartered in
Waukesha, Wisconsin. Throughout the remainder of this Form 10-K, Hein-
Werner Corporation and its subsidiaries will be referred to as the
"Company" or the "Registrant" except where the context otherwise requires.
THE DISPOSITIONS. In order to reposition the Company around its
core business, Hein-Werner sold two of its three operating divisions in
fiscal 1997: (i) the Great Bend Industries Division ("Great Bend"),
located in Great Bend, Kansas, and (ii) the Winona Van Norman Division
("Winona"), located in Winona, Minnesota (together, the sale of Great Bend
and Winona are referred to as the "Dispositions").
Great Bend, which was sold for approximately $22.8 million in
cash on May 29, 1997, designed, manufactured, and supplied high
performance hydraulic cylinders and related hydraulic components to
original equipment manufacturers in the construction, transportation,
solid waste, utility, and energy industries. Great Bend employed
approximately 230 people and accounted for net sales of approximately $7.4
million, $20.2 million, and $20.9 million in fiscal 1997, 1996, and 1995,
respectively. Winona, which was sold for cash on August 28, 1997,
designed, manufactured and supplied engineering machinery for the
automotive aftermarket (primarily for automotive, truck, diesel, and high-
performance engine rebuilding) and also manufactured brake lathes and
related equipment. Winona employed approximately 59 people and accounted
for net sales of $5.6 million, $6.7 million, and $11.0 million in fiscal
1997, 1996, and 1995, respectively. The proceeds from the Dispositions
were used to reduce domestic debt levels.
Income statement data included herein have been restated to
reflect continuing and discontinued operations as a result of the
Dispositions. For additional information concerning the Dispositions, see
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Notes to the Consolidated Financial Statements,"
contained herein.
THE BUSINESS. The Company designs, manufactures, markets and
sells proprietary collision repair equipment worldwide, with operations
centered in North America and in Europe.
Collision repair equipment is comprised of vehicle correction
equipment for straightening collision damaged cars, vehicle alignment
equipment for measuring cars as they are straightened, and heavy duty
collision repair equipment for the truck market. The collision repair
market is made up of autobody shops and other collision repair facilities
owned by automotive dealers, franchisees, and independents. The Company's
collision repair equipment is designed to straighten collision-damaged
cars and trucks to original manufacturers' specifications. Using computer
aided design and patented measuring systems, the Company measures each new
model of automobile soon after its introduction and provides to its
customers books or magnetic media that detail measurement data covering
every model of car over the preceding three model years. When a damaged
automobile is to undergo collision repair, an autobody repair technician
applies controlled pressure to designated points on the body using chains
and hydraulic pumps to restore the body to its designated size and shape
utilizing the measurement equipment and specification data published by
the Company.
The majority of cars are now made with a unibody shell compared
to older vehicles built with frames. Unibody vehicles are designed to
better absorb the impact of a collision which necessitates more vehicle
straightening and a higher degree of accuracy in measuring vehicles as
they are straightened. The closer tolerances needed in repairing unibody
vehicles requires the use of sophisticated straightening and measurement
systems such as those designed, manufactured, and marketed by the Company.
The insurance industry and automobile manufacturers encourage the use of
such systems.
In North America, the Company services the market with its
Kansas Jack,/R/ Blackhawk,/R/ Hein-Werner Heavy Duty,/R/ and Hein-Werner
SHARK/R/ brands. The Company's strategy is to offer the most complete
line of collision repair equipment available in the marketplace at a range
of price levels. The product offering is a full range of frame
straightening and vehicle alignment equipment for both trucks and
automobiles including floor-pull correction systems, rack and bench repair
systems, and universal and dedicated vehicle alignment systems employing
state of the art technology for laser, mechanical, and ultrasonic
measurement of collision damaged vehicles. From North America, the
Company services the markets in North and South America, the Caribbean,
and certain Pacific Rim countries.
The Company serves the rest of the international market through
wholly-owned subsidiaries in Europe. European operating units accounted
for approximately 53% of the Company's 1997 collision repair sales.
International operations are headquartered in Strasbourg, France. The
Company maintains manufacturing and sales facilities in the United Kingdom
and Italy; distribution and training facilities in France; and sales
offices in France and Germany.
In the international market served from Europe, the Company
principally sells collision repair equipment under the Blackhawk and Hein-
Werner trade names. All collision repair manufacturing facilities provide
product to markets worldwide. U.S. manufactured products are modified for
international markets at the Company's plant in Italy. European
manufactured products are modified for the North American market at the
Company's facilities in the United States.
The Company markets its collision repair products through sales
representatives, equipment distributors, automotive jobbers, and a direct
sales force, depending upon the country and local market. The Company
also participates in the equipment programs of all major U.S. and foreign
automotive manufacturers including Ford, General Motors, Chrysler, Nissan,
Toyota, Hyundai, Peugeot, and Volvo, and national tool marketing programs
of the companies. The Company's products have been approved by all major
European automobile manufacturers. Such approvals provide the Company
with a significant competitive advantage.
Sales of the Company's SHARK/R/ product represented
approximately 28.7%, 26.2% and 25.4% of the Company's net sales for the
years ended December 31, 1997, 1996, and 1995, respectively.
RAW MATERIALS. The Company's principal raw materials are steel
products, castings, and forgings. The Company customarily procures its
castings and forgings from unaffiliated foundries. Steel products are
purchased by the Company from a number of steel mills and steel service
centers. The principal materials and supplies used by the Company can
ordinarily be procured in the general market. Raw materials, parts, and
components are purchased from many different sources, generally on a
purchase order basis.
MANUFACTURING/PRODUCT SOURCING. The Company has supply
arrangements with manufacturers in Taiwan and the People's Republic of
China for equipment manufactured exclusively to the Company's standards
and specifications. Such equipment is shipped to the Company's facilities
in Wisconsin and France for packaging and shipment to the Company's
customers.
The Company has the ability to switch sources of manufacturing
to take advantage of wage rates, foreign exchange rates, foreign trade
developments, and other factors. The Company can manufacture products
domestically as well.
PATENTS AND TRADEMARKS. The Company owns certain patents and
trademarks which are considered to be important to the success of the
Company. The remaining term on the Company's patents is one to seventeen
years.
SEASONALITY. The Company experiences a significant decline in
order demand during July and August.
CUSTOMERS. The Company is not dependent upon a single customer
or on a few customers, the loss of which would have a material adverse
effect on the Company.
BACKLOG. The estimated amount of backlog at December 31, 1997
was approximately $1.2 million; the comparable figure for December 31,
1996 was approximately $2.4 million. The Company anticipates that all
orders on hand as of December 31, 1997 will be filled during 1998. Most
orders are filled within three months.
COMPETITION. The Company experiences intense competition with
numerous domestic and foreign producers. Some of the Company's
competitors are significantly larger than the Company and have
substantially greater resources. The Company expects that it will
continue to encounter highly competitive conditions. The Company believes
that it competes favorably primarily on the basis of the Company's
recognized brand names, reputation for product innovation and engineering
of high quality products, and the Company's distribution channels.
RESEARCH AND DEVELOPMENT. The Company has 15 engineering
employees who devote all or a portion of their time to the development and
improvement of its products, and many of the features of the Company's
products are the result of its own development work. The Company spent
approximately $1.0 million, $1.2 million, and $1.2 million in the years
ended December 31, 1997, 1996, and 1995, respectively, on engineering and
research activities for continuing operations relating to product
development and improvement, all of which were Company sponsored.
IMPACT OF ENVIRONMENTAL LEGISLATION. The Company did not during
1997, nor does it expect to during 1998, experience any material capital
expenditures as a result of federal, state, or local environmental
legislation.
FOREIGN AND EXPORT SALES. Information concerning foreign and
export sales is part of the "Notes to Consolidated Financial Statements"
and "Geographic Data," which can be found in "FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA," Item 8 of this report.
EMPLOYEES. The Company's continuing operations had about 250
and 253 employees at the end of 1997 and 1996, respectively, none of whom
were represented by labor unions. The Company considers its employee
relations to be satisfactory.
MISCELLANEOUS. On January 23, 1998, the Company paid a 5% stock
dividend to shareholders of record on January 2, 1998.
ITEM 2. PROPERTIES
The following table sets forth certain information with respect
to the principal manufacturing facilities (20,000 square feet or more)
which the Company uses in its operations:
Owned Expiration Square
Location or Leased Date of Lease Footage
Baraboo, WI Leased December 2005 73,000
Ashford, Kent, England Leased September 2002 20,000
Verona, Italy Leased August 1999 43,000
Sales, marketing, administrative, and distribution and training
facilities are leased in Wisconsin, France, and Germany. The properties
above are considered to be adequate for present and planned future
business.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, claims,
and administrative actions arising in the normal course of business. For
additional information, see the footnote "Commitments and Contingencies"
in "Notes to Consolidated Audited Financial Statements" (Item 8 of this
report).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of its security
holders during the fourth quarter of 1997.
EXECUTIVE OFFICERS OF REGISTRANT
Set forth below is certain information concerning the executive
officers of the Registrant as of March 27, 1998:
Name, Age and Position Business Experience During Past 5 Years
Joseph L. Dindorf, 57 President and Chief Executive Officer,
President and Chief Hein-Werner Corporation (elected in
Executive Officer 1976).
Reinald D. Liegel, 55 Senior Vice President-Technology, Hein-
Senior Vice President- Werner Corporation (elected June, 1988).
Technology
Jean-Paul Barthelme, 60 Vice President, and President of European
Vice President, and Operations, Hein-Werner Corporation
President-European (elected September, 1988).
Operations
Michael J. Koons, 58 Vice President-Industrial Relations and
Vice President-Industrial Personnel, Hein-Werner Corporation
Relations and Personnel (elected in 1979).
Maurice J. McSweeney, 59 Elected March, 1983; partner, Foley &
Secretary Lardner, attorneys, Milwaukee, Wisconsin.
The officers of Registrant are elected annually by the Board of
Directors following the Annual Meeting of Shareholders and each officer
holds office until his successor has been duly elected and qualified or
until his prior death, resignation, or removal.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
The Company's Common Stock is listed on the American Stock
Exchange under the symbol "HNW." The following table sets forth the range
of high and low closing sales prices per share as reported on the American
Stock Exchange for the Company's Common Stock and the cash dividends
declared per share of Common Stock thereon during the periods indicated.
The Company paid a 5% stock dividend on (i) January 24, 1997 to
shareholders of record on January 3, 1997 and (ii) January 23, 1998 to
shareholders of record on January 2, 1998.
Closing sale price Cash
dividends
High Low declared
1996
4th quarter . . . . . . $7.250 $6.250 --
3rd quarter . . . . . . 8.000 5.750 --
2nd quarter . . . . . . 8.750 5.813 --
1st quarter . . . . . . 6.375 4.250 --
1997
4th quarter . . . . . . $8.375 $6.875 --
3rd quarter . . . . . . 8.375 7.250 --
2nd quarter . . . . . . 8.250 6.375 --
1st quarter . . . . . . 7.500 6.375 --
As of March 27, 1998, the closing sales price of the Company's Common
Stock, as reported on the American Stock Exchange, was $7.50 per share.
As of that date there were approximately 568 holders of record of the
Company's Common Stock. Holders of Common Stock are entitled to receive
such dividends, if any, as may be declared from time to time by the Board
of Directors out of funds legally available therefor. The Company's
credit agreement with domestic banks, which is not currently being
utilized, contains a restriction against the payment of cash dividends
which could be enforced should the Company begin to utilize this credit
facility.
ITEM 6. SELECTED FINANCIAL DATA
(Amounts in thousands, except per share data)
1997 1996 1995 1994 1993
Net sales from
continuing operations $39,037 $41,696 $41,819 $36,615 $33,515
Net income (loss) from
continuing operations 1,337 1,908 892 281 (1,622)
Net income (loss) . . . 6,299 2,176 1,013 827 (1,576)
Earnings per share from
continuing operations -
basic . . . . . . . . . 0.46 0.66 0.31 0.10 (0.56)
Earnings per share -
basic . . . . . . . . 2.17 0.75 0.35 0.29 (0.55)
Earnings per share from
continuing operations -
diluted . . . . . . . 0.42 0.57 0.26 0.08 (0.56)1
Earnings per share -
diluted . . . . . . . 1.96 0.69 0.32 0.24 (0.55)1
Total assets . . . . . 37,348 45,598 49,657 46,101 45,345
Long-term debt,
excluding current
installments . . . . . 310 10,161 10,902 13,256 14,071
Cash dividends declared
per common share . . . $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Per share data has been restated to give effect to stock dividends paid
through January 23, 1998.
1 Diluted earnings per share was anti-dilutive for this period.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion includes forward-looking statements that
reflect management's current assumptions and estimates concerning the
Company's performance and financial results. Each forward-looking
statement contained herein is either preceded by or contained in a
paragraph beginning with the phrase, "management expects" or words of
similar import. A variety of factors could cause the Company's actual
results to differ materially from the anticipated results. These factors
include, but are not limited to, increased competition; unfavorable
fluctuation of currency exchange rates; rising interest rates; instability
of foreign governments; and the escalation of raw material prices,
primarily steel.
During 1997, the Company sold its Engine Rebuilding and Fluid Power
industry segments for cash. The remaining segment is Collision Repair with
operations in North America and Europe. Operations are categorized by
where sales originate from, North America or Europe. North American
operations mainly serve markets in the United States, Central America,
South America, the Caribbean, Canada, and Mexico while operations in
Europe mainly serve markets in Europe, Russia, Japan, the Pacific Rim, the
People's Republic of China, South Korea, New Zealand, Africa, India, the
Middle East, Indochina, and Australia. The income statement data herein
have been restated to reflect continuing and discontinued operations.
Balance sheet information for prior years has not been restated.
Additional information concerning the discontinued operations is included
in the Notes to the Consolidated Financial Statements.
Results of Operations
Net sales
Consolidated net sales for 1997 decreased 6.4% from 1996 following
virtually no change between 1996 and 1995.
(Amounts in
thousands) 1997 1996 1995
North America $18,220 $18,510 $15,777
Europe 20,817 23,186 26,042
------ ------ ------
Total net sales $39,037 $41,696 $41,819
====== ====== ======
Sales by the Company's North American operations remained steady
between 1997 and 1996, following an increase between 1995 and 1996 of
17.3%.
European operations experienced a 10.2% decline in sales following an
11.0% decrease between 1996 and 1995. The decrease between 1996 and 1997
resulted from unfavorable foreign exchange translation reflecting weak
business conditions in certain European countries as well as the downturn
in the Asian markets during 1997. The decrease between 1995 and 1996
resulted from a weakening in both the French and German markets.
Management expects sales levels to improve in 1998. During 1997, we
restructured our business units on a country-by-country basis in an effort
to meet current and future economic demands. Our North American operation
is expected to remain strong with potential for future growth in the Latin
American region. International sales made through European operations
should improve with strong growth potential in the East European countries
as well as Turkey, China, Russia, and the Ukraine. Weakness in the
Southeast Asia economy may adversely impact European sales; however,
management expects such impact to be less than in 1997.
Costs and profit margins
Gross profit as a percent of net sales decreased 1.5% between 1997
and 1996 mainly due to reduced sales volume, pricing pressure and
unfavorable exchange rates in the European markets. Gross profit
percentages in North American markets remained stable between 1997 and
1996. The 1996 gross profit as a percent of sales decreased 1.0% from
1995. Gross margins in the markets served by North American operations
rose 10.0% between 1995 and 1996 while margins for European markets for
the same time period declined 6.9%.
The North American operations were able to maintain gross profit
percentages despite pricing pressures for certain products due to several
reasons. The manufacturing facility implemented procedures to improve
productivity while maintaining its fixed costs. This work process
improvement led to their receipt of ISO 9002 certification during 1997.
Strong sales of more advanced equipment during 1997 resulted in higher
margins for the Company because these sales were typically direct to the
end-user. This benefit was partially offset by commissions paid to
distributors. In addition, the North American operation continues to
benefit from the value engineering program. This program involves
reengineering products to reduce their material cost content and to better
utilize raw material in the production process.
The gains maintained in the North American operation were offset,
however, by lower margins in the markets served by the European
operations. Margins in certain countries were lower due to overall
economic conditions fostering pricing pressures and unfavorable exchange
rates.
Operating expenses and profit
(Amounts in 1997 1996 1995
thousands)
Operating expenses $16,518 $16,865 $18,168
Operating profit $ 1,809 $ 2,970 $ 1,937
Operating expenses for 1997 were 2.1% below the 1996 level. This
reduction in operating expenses was achieved even with the inclusion of
restructuring charges incurred for the elimination of the sales office in
Geneva, Switzerland. Operating expenses in 1996 were down 7.2% from 1995.
The decreases in these two years can be attributed to the Company's
continued emphasis on cost control. Over the past several years, insurance
premiums have been reduced due to favorable workers' compensation
experience, a favorable settlement of a patent infringement lawsuit during
1996 allowed the Company to recover fees incurred in prior years, and the
1995 restructuring of the German sales office reduced both marketing and
administrative expenses during 1996 and 1997.
Operating profits decreased 39.1% between 1997 and 1996 mainly due to
reduced sales and margins from the European operations. Operating profit
rose 53.3% from 1995 to 1996 mainly due to above-mentioned cost reduction
programs and the restructuring of the German sales office.
Operating expenses as a percent of net sales for 1997 increased 4.7%
over 1996 due to reduced sales volume. Operating expenses as a percent of
net sales decreased 6.9% between 1996 and 1995 due to the restructuring of
the German sales office during 1995 and continued emphasis on cost
control.
Nonoperating income and expense
Historically, interest expense has been the largest component of
nonoperating expense, consisting of interest paid to banks, leasing
companies, and other lenders for borrowed money or for capitalized leases.
Interest expense was reduced during 1997 as the result of the Company
applying the proceeds from the sale of discontinued businesses to reduce
domestic debt levels by 97.5%. European debt levels were also reduced due
to improved cash flow in 1997. Improved cash flow during 1996 allowed the
Company to lower overall borrowing levels. The reduction in 1996 was
combined with a negotiated reduction in interest rates during the last
half of the year. Both of these factors provided for a 21.7% reduction in
interest expense between 1996 and 1995.
(Amounts in thousands) 1997 1996 1995
Interest expense $ 95 $ 775 $ 990
Loss on foreign exchange 161 207 135
Miscellaneous, net (81) (42) (44)
----- ----- -----
Total nonoperating expense,
net $ 175 $ 940 $1,081
===== ===== =====
The foreign exchange gains and losses are primarily attributable to
European operations where a considerable amount of buying and selling is
done in nonlocal currencies. Receivables and payables denominated in
nonlocal currencies give rise to foreign exchange gains and losses on a
regular basis. Normally, foreign exchange risk in this category is managed
by a review of the balance of receivables and payables and, where
warranted, the purchase of foreign exchange contracts to hedge risk.
Income tax expense
Income tax expense from continuing operations in 1997 was entirely
from European operations. No income tax was allocated to continuing North
American operations since all of such current tax expense would have been
completely offset by the reduction of the previously established valuation
reserve for deferred tax assets. Thus, all North American income tax was
allocated to the discontinued North American operations. Income tax
expense in 1996 was primarily from European operations, as North American
operations were able to make use of net operating loss carryforwards. The
income tax benefit recorded in 1995 was the result of recoverable income
taxes from net operating loss carrybacks and the favorable resolution of
audits of prior year tax returns.
Discontinued operations
Effective May 29, 1997, the Company sold for cash substantially all
of the business and assets, and transferred certain of the liabilities, of
its Great Bend Industries fluid power division. The fluid power division
designed, manufactured, and supplied high performance single-acting,
double-acting, and telescopic hydraulic cylinders and related hydraulic
components to original equipment manufacturers in the construction,
transportation, solid waste, utility, and energy industries.
Effective August 28, 1997, the Company sold for cash substantially
all of the business, including certain assets and liabilities, of its
Winona Van Norman engine rebuilding division. The engine rebuilding
division designed, manufactured, and supplied advanced machinery for the
automotive aftermarket, primarily for automotive, truck, diesel, and high-
performance engine rebuilding. The division also manufactured brake lathes
and related equipment, as well as provided contract machining services.
Financial Condition
Liquidity
Net income adjusted for noncash items for 1997 decreased $3.7 million
from 1996 mainly due to expenses associated with the sale of the
discontinued operations combined with the satisfaction of associated lease
and accounts payable commitments. In 1996, net income adjusted for noncash
items increased $484,000 over the previous year's level.
(Amounts in thousands) 1997 1996 1995
Net income (loss) $ 6,299 $ 2,176 $ 1,013
Adjustments for noncash items (6,342) 1,523 2,202
------ ------ ------
(43) 3,699 3,215
Changes in cash from certain
assets and liabilities (177) (724) (2,676)
------ ------ ------
Cash provided by operating
activities $ (220) $ 2,975 $ 539
====== ====== ======
Management expects cash provided by operating activities to supply
the Company with sufficient cash to satisfy debt service requirements and
investments in capital assets in 1998.
(Amounts in thousands) 1997 1996 1995
Current assets $33,386 $37,090 $41,525
Current liabilities 12,885 16,197 20,749
-------- -------- --------
Working capital $20,501 $20,893 $20,776
======== ======== ========
Current ratio 2.6 to 1 2.3 to 1 2.0 to 1
======== ======== ========
During 1997, the Company completed the sale of both the Great Bend
Industries fluid power division and the Winona Van Norman engine
rebuilding division. Both sales were cash transactions. Current assets and
liabilities from the discontinued operations were $10.8 and $1.1 million
in 1996 and $13.8 and $4.6 million in 1995, respectively. The proceeds
from these transactions were used to reduce domestic debt levels. The
Company's current ratio continued to improve in 1997 and working capital
remained strong. In 1996, the Company maintained inventory levels while
increasing accounts receivable collections allowing a significant
reduction in accounts payable and notes payable. The Company repaid $1.3
million of subordinated debt on schedule during the last half of 1996
while reducing overall debt levels by 2.8%.
Financing Activities
Credit arrangements in Europe are short-term in nature and designed
to satisfy seasonal fluctuations in liquidity requirements. Those
arrangements are renewed annually and management expects they will be
sufficient to support the needs of the Company's European operations in
1998.
The Company currently is not utilizing its credit agreements with
domestic banks. Cash remaining from the sale of the two divisions after
reducing domestic debt levels is invested in short-term instruments. At
the end of the year, the Company entered into an agreement with
Massachusetts Mutual Life Insurance Company to repurchase certain warrants
to purchase Company common stock that arose from convertible subordinated
debt which was repaid during 1996 and 1997. This transaction will have a
positive impact on future earnings per share by reducing common stock
dilution. During 1996, the Company had a maximum $12.0 million credit line
dependent on the balances of underlying collateral. At December 31, 1996,
based on the balances of underlying collateral, the Company could borrow
$8.4 million of the line of credit of which $6.1 million was utilized.
Management intends to expand into one or more complementary and counter-
cyclical businesses during 1998. Management believes that the current cash
position, along with cash provided by operating activities, will be
sufficient to satisfy the cash needs of the Company's North American
operations and that adequate financing will be obtained, if required, for
any future acquisition activity.
Year 2000 Compliance
Many software programs will experience malfunctions associated with
the turning of the year 2000. The Company has undertaken a review of
potential year 2000 concerns, and management expects that the Company will
be year 2000 compliant by the end of 1998. The Company's North American
operation currently is compliant and management expects the European
operations to be compliant prior to the end of 1998. Management does not
expect the cost of the year 2000 compliance to have a material adverse
effect on its financial results.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index
Report of Management
Independent Auditors' Report
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
<PAGE>
REPORT OF MANAGEMENT
The management of Hein-Werner Corporation is responsible for the
preparation and presentation of financial statements. Management believes
the established policies, internal accounting controls and review
procedures provide reasonable assurance that the consolidated financial
statements included herein are prepared in accordance with generally
accepted accounting principles. This preparation has been based upon the
best estimates and judgments and giving due consideration to materiality.
The Company maintains internal accounting control systems and related
policies and procedures. These systems are designed to provide reasonable
assurance that assets are safeguarded, transactions are executed in
accordance with management's authorization and properly recorded, and
accounting records may be relied upon for the preparation of financial
statements and other financial information. The design, monitoring and
revision of internal accounting control systems involve, among other
things, management's judgment with respect to the relative cost and
expected benefits of specific control measures.
The independent auditors are responsible for expressing their opinion
as to whether the financial statements present fairly the financial
position, operating results and cash flows of the Company. In this
process, they obtain a sufficient understanding of the internal accounting
systems to establish the audit scope, review selected transactions and
carry out other audit procedures.
The Audit Committee of the Board of Directors is composed of three
nonemployee directors who meet periodically with the independent auditors
and the Company's management. This Committee considers the audit scope,
discusses financial and reporting subjects and reviews management actions
on these matters. The independent auditors have full and free access to
the Audit Committee.
/s/ Mary L. Kielich /s/ Joseph L. Dindorf
Mary L. Kielich Joseph L. Dindorf
Corporate Controller President and Chief
Executive Officer
Waukesha, Wisconsin
February 13, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of Hein-Werner Corporation:
We have audited the accompanying consolidated balance sheets of Hein-
Werner Corporation and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of income and cash flows for each of
the years in the three-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Hein-Werner Corporation and subsidiaries as of December 31, 1997 and 1996,
and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Milwaukee, Wisconsin
February 13, 1998
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31:
(Amounts in thousands, except
per share data) 1997 1996 1995
Net sales $39,037 $41,696 $41,819
Cost of sales 20,710 21,861 21,714
------ ------ ------
Gross profit 18,327 19,835 20,105
Selling, engineering, and
administrative expenses 16,518 16,865 18,168
------ ------ ------
Operating profit 1,809 2,970 1,937
Interest expense, net 95 775 990
Other expense, net 80 165 91
------ ------ ------
Income from continuing
operations, before income tax 1,634 2,030 856
Income tax expense (benefit) 297 122 (36)
------ ------ ------
Net income from continuing
operations 1,337 1,908 892
Discontinued businesses:
Income (loss) from operations
of discontinued businesses,
net of related income tax (79) 268 121
Gain on the disposal of
discontinued businesses, net
of related income tax 5,041 --- ---
------ ------ ------
Net income $ 6,299 $ 2,176 $ 1,013
====== ====== ======
Earnings per share from
continuing operations - basic $ 0.46 $ 0.66 $ 0.31
Earnings per share from
discontinued operations -
basic 1.71 0.09 0.04
------ ------ ------
Earnings per share - basic $ 2.17 $ 0.75 $ 0.35
====== ====== ======
Earnings per share from
continuing operations
- diluted $ 0.42 $ 0.57 $ 0.26
Earnings per share from
discontinued operations
- diluted 1.54 0.12 0.06
----- ------ -----
Earnings per share - diluted $ 1.96 $ 0.69 $ 0.32
===== ====== ======
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
As of December 31: 1997 1996
(Amounts in thousands, except share data)
Assets
Current Assets:
Cash and cash equivalents $ 9,696 $ ---
Accounts receivable, net 12,180 18,794
Inventories 9,876 17,415
Prepaid expenses and other 1,634 881
------ ------
Total current assets 33,386 37,090
------ ------
Property, plant, and equipment, net 2,800 5,451
Other assets 1,162 3,057
------ ------
$37,348 $45,598
====== ======
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable $ 2,674 $ 3,281
Current installments of long-term debt 91 1,856
Accounts payable 4,530 4,873
Other current liabilities 5,590 6,187
------ ------
Total current liabilities 12,885 16,197
------ ------
Long-term debt, excluding current
installments 310 10,161
Other long-term liabilities 2,051 1,304
------ ------
Commitments and contingencies
Total liabilities 15,246 27,662
------ ------
Stockholders' Equity:
Common stock of $1 par value per share
Authorized: 20,000,000 shares; Issued:
2,770,630 and 2,629,320 shares
at December 31, 1997 and 1996,
respectively 2,771 2,629
Capital in excess of par value 11,769 11,995
Retained earnings 8,312 2,921
Cumulative translation adjustments (750) 443
------ ------
22,102 17,988
Less cost of common shares in treasury -
3,104 at December 31, 1996 --- 52
------ ------
Total stockholders' equity 22,102 17,936
------ ------
$37,348 $45,598
====== ======
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31:
(Amounts in thousands) 1997 1996 1995
Cash From Operating Activities:
Net income $ 6,299 $ 2,176 $ 1,013
Adjustments to reconcile net income
to cash provided by operating
activities:
Adjustments to net income for items
not using or providing cash:
Depreciation and amortization 837 1,103 1,234
Bad debt expense 265 420 970
Gain on sale of property, plant
and equipment (23) --- (2)
Gain on sale of discontinued
business (7,421) --- ---
Increase (decrease) in cash due to
changes in:
Accounts receivable 3,492 4,063 (4,372)
Inventories 1,157 (144) (1,117)
Prepaid expenses and other
assets (327) (75) 806
Accounts payable (1,343) (4,358) 1,929
Other liabilities (3,156) (210) 78
------ ------ ------
Cash provided by (used in)
operating activities (220) 2,975 539
------- ------ ------
Cash From Investing Activities:
Capital expenditures (859) (1,139) (1,174)
Proceeds from sale of property,
plant, and equipment --- 14 28
------- ------ ------
Cash used in investing activities (859) (1,125) (1,146)
------- ------ ------
Cash From Financing Activities:
Increase (decrease) in notes payable (607) (928) 1,020
Proceeds from long-term debt --- 551 163
Proceeds from sale of discontinued
businesses 23,861 --- ---
Proceeds from exercise of stock
options 60 --- ---
Repayment of long-term debt (11,346) (1,485) (1,363)
------- ------- -------
Cash provided by (used in)
financing activities 11,968 (1,862) (180)
------- ------- -------
Cumulative translation adjustments (1,193) (384) 717
------ ------- -------
Total cash provided (used) 9,696 (396) (70)
Cash and cash equivalents - beginning
of year --- 396 466
------- ------- -------
Cash and cash equivalents - end of
year $ 9,696 $ --- $ 396
======== ======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies
(A) NATURE OF OPERATIONS
The Company is a worldwide manufacturer and marketer of collision
repair equipment. The Company has manufacturing operations and offices in
the United States and Europe, with distribution channels throughout the
rest of the world. During 1997, the Company sold its Engine Rebuilding
and Fluid Power industry segments.
(B) FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly-owned. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of these
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting periods to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(C) CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers
all highly liquid investments purchased with a maturity of three months or
less to be cash equivalents.
(D) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined on the first-in, first-out ("FIFO") basis. Inventory which is
repossessed is recorded at the lesser of its original FIFO cost, the
amount receivable from the customer, or its fair market value.
(E) PROPERTY, PLANT, AND EQUIPMENT
The cost of plant and equipment is depreciated over the estimated
useful lives of the respective assets using the straight-line method.
Major replacements and betterments are capitalized, while maintenance and
repairs are expensed as incurred.
(F) INTANGIBLES
Patents and trademarks are amortized over their estimated useful
lives but not exceeding seventeen years. The excess cost over net assets
of acquired companies is amortized on the straight-line basis over a
forty-year period. Deferred debt issuance costs are amortized over the
term of the underlying debt agreements. The Company periodically
evaluates the carrying value and remaining amortization periods of
intangible assets for impairment.
(G) LONG-LIVED ASSETS
Long-lived assets and certain identifiable intangibles, including
goodwill, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the
assets.
(H) NONCURRENT RECEIVABLES
Certain accounts receivable from distributors in the Collision Repair
segment were renegotiated during 1993 to notes with payment schedules
which extend beyond one year. These notes, which bear an interest rate of
8%, have been collateralized with personal guarantees of the owners,
partners, and principals of the distributors and are presented as
noncurrent assets. The allowance for uncollectible notes is management's
estimate of uncollectible amounts based upon a review of the outstanding
balances.
(I) REVENUE RECOGNITION AND CONCENTRATION OF CREDIT RISK
Sales are recognized upon shipment of products to equipment
distributors, automotive jobbers, warehouse distributors, and retail
dealers for resale, and on shipments directly to end-users. Estimated
losses on accounts receivable and guaranteed notes are provided for in
allowance for losses.
The Company extends customary industry credit terms to customers in
North America and in Europe. Sales outside these regions are generally
supported by letters of credit. Accounts receivable from resellers of
equipment are generally collateralized by the products sold and the
Company also obtains guarantees from some owners, partners, or principals.
When product is repossessed for which the Company has obtained a
guarantee, the guarantor takes possession of the product and the Company
records a receivable from the guarantor. If there is no third party
guarantor, the Company takes possession of the equipment and charges any
recognizable loss to an allowance account established for that purpose.
(J) INCOME TAXES
The Company uses the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred tax assets
and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
(K) TRANSLATION OF FOREIGN FINANCIAL STATEMENTS
Assets and liabilities of foreign subsidiaries are translated at
year-end exchange rates and the statements of operations are translated at
the average exchange rates for the year. Gains or losses resulting from
translating foreign currency financial statements are accumulated as a
separate component of stockholders' equity until the entity is sold or
liquidated, at which time any gain or loss is included in net earnings.
The Company enters into forward foreign exchange contracts relating
to the anticipated settlement in local currencies of intercompany
purchases. These contracts generally require the Company to exchange U.S.
dollars for foreign currencies. The contracts are marked to market, and
the related adjustment is recognized in other expense, net. Intercompany
purchases and sales are eliminated at the consolidated level. At December
31, 1997, the Company had outstanding forward exchange contracts to buy
approximately $487,000 in foreign currencies of countries in which it
operates.
Gains or losses from foreign currency transactions (transactions
denominated in a currency other than the entity's functional currency) are
included in net earnings.
(L) ADVERTISING EXPENSES
The Company incurred advertising costs for continuing operations of
approximately $845,000 in 1997, $938,000 in 1996, and $1,184,000 in 1995.
Advertising costs are expensed as incurred.
(M) RESEARCH & DEVELOPMENT EXPENSES
The Company incurred research and development costs for continuing
operations of approximately $1,019,000 in 1997, $1,151,000 in 1996, and
$1,166,000 in 1995. Research and development costs are expensed as
incurred.
(N) EARNINGS PER SHARE
Earnings per share ("EPS") data and weighted average shares
outstanding have been restated for all years presented to give effect to
the 5% stock dividend paid January 23, 1998 and all previous stock
dividends.
The Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 128, Earnings per Share, on December 15,
1997. This Statement replaces the presentation of primary EPS and fully
diluted EPS with basic EPS and diluted EPS. Basic EPS is computed by
dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Basic EPS does not
consider common stock equivalents as did primary EPS. Diluted EPS
reflects the dilution that would occur if convertible debt securities and
employee stock options were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings
of the entity. The computation of diluted EPS uses "if converted" and
"treasury stock" methods to reflect dilution in a manner similar to fully
diluted EPS under Accounting Principles Board ("APB") Opinion No. 15. The
statement requires that at adoption, all prior period EPS data presented
be restated (including interim financial statements, summaries of
earnings, and selected financial data).
As adjusted for stock dividends, the number of shares used in
calculating basic earnings per share was 2,896,000 in 1997, 2,895,000 in
1996, and 2,888,000 in 1995. The number of shares used in calculating
diluted earnings per share was 3,258,000 in 1997, 3,631,000 in 1996, and
3,659,000 in 1995. The difference between the number of shares used in
the two calculations is due to the convertible debt securities and
employee stock options.
(O) STOCK OPTION PLAN
Prior to January 1, 1996, the Company accounted for its stock option
plan in accordance with the provisions of APB Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations. As such,
compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price.
On January 1, 1996, the Company adopted SFAS No. 123, Accounting for
Stock-Based Compensation, which permits entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro
forma earnings per share disclosures for employee stock option grants made
in 1995 and future years as if the "fair-value-based method" defined in
SFAS No. 123 had been applied. The Company has elected to continue to
apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure when required by SFAS No. 123.
(P) RECLASSIFICATIONS
Certain amounts in 1996 and 1995 have been reclassified to conform to
the 1997 presentation.
(Q) PENDING ACCOUNTING CHANGES
In June 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 130, Reporting Comprehensive Income. As a result , the
Company will be required to separately report comprehensive income
components previously excluded from net income. Comprehensive income
includes all changes to equity during a period except those resulting from
investments by or distributions to shareholders. Because comprehensive
income is subject to external factors beyond the Company's control,
including, but not limited to, foreign currency fluctuations and economic
factors, the impact from SFAS No. 130 cannot be estimated at this time.
Accounts Receivable
(Amounts in thousands) 1997 1996
Accounts receivable $13,750 $20,445
Less allowance for losses 1,570 1,651
------ ------
$12,180 $18,794
====== ======
Inventories
(Amounts in thousands) 1997 1996
Raw material $ 2,065 $ 5,574
Work-in-process 958 1,172
Finished goods 6,853 10,669
------ ------
$ 9,876 $17,415
====== ======
Property, Plant, and Equipment, Net
(Amounts in thousands) 1997 1996
Land $ --- $ 90
Buildings 1,191 3,125
Machinery and equipment 6,338 14,361
------ ------
7,529 17,576
Less accumulated depreciation 4,729 12,125
------ ------
$ 2,800 $ 5,451
====== ======
Other Assets
(Amounts in thousands) 1997 1996
Patents and trademarks $1,033 $1,359
Goodwill 141 2,282
------ ------
1,174 3,641
Less accumulated amortization 720 1,467
------ ------
Net intangibles 454 2,174
Noncurrent notes receivable 850 1,159
Less allowance for
uncollectible notes 473 500
------ ------
Net notes receivable 377 659
Other 331 224
------ ------
$1,162 $3,057
====== ======
The fair value of noncurrent notes receivable is estimated using
discounted cash flows on expected payments to be received based on the
terms of the notes and current interest rates. The fair value of the
noncurrent notes receivable is estimated to be approximately $340,000 and
$532,000 at December 31, 1997 and 1996, respectively.
Short-term Borrowings and Lines of Credit
The Company has various unsecured lines of credit with foreign banks
aggregating $6,168,000. The amount of unused available borrowings under
these various lines of credit was $3,494,000 at December 31, 1997. The
weighted average interest rate on outstanding amounts was 5.85% and 7.5%
at December 31, 1997 and 1996, respectively.
In addition, the Company has the ability to borrow funds outside of
these lines of credit at foreign banks by using local currency receivables
as collateral. The Company was not utilizing this facility as of December
31, 1997.
Other Current Liabilities
(Amounts in thousands) 1997 1996
Accrued payroll and related $ 1,684 $ 2,199
expenses
Accrued commissions 876 1,055
Other accrued expenses 2,031 2,667
Accrued income taxes 999 266
------ ------
$ 5,590 $ 6,187
====== ======
Long-term Debt
(Amounts in thousands) 1997 1996
Revolving credit agreement $ --- $ 6,070
8% Convertible subordinated
notes due 1996 to 1999 --- 3,375
11.5% Financing due to 2000 --- 791
8.75% Financing due to 2004 --- 272
5.0% Financing due to 2002 --- 188
Capitalized leases due to 2005 112 670
Other 289 651
------- -------
401 12,017
Less current installments of
long-term debt 91 1,856
------- -------
Total long-term debt, excluding
current installments $310 $10,161
======= ======
Aggregate required annual principal payments, including capital
leases, for the next five years are:
(Amounts in thousands)
1998 $ 91
1999 104
2000 130
2001 76
2002 ---
The Company is not currently using its credit arrangements with
domestic banks, however a line of $6.0 million is available. Were this
facility to be utilized, borrowings would be based on the availability of
collateral assets, primarily inventory and accounts receivable, and would
be at an interest rate of prime plus .65%. The prime rate at December 31,
1997, was 8.5%.
The 8% convertible subordinated notes were convertible into common
stock at a price of approximately $5.98 per share after giving effect to
the 5% stock dividend paid January 24, 1997. The note agreement, as
modified in 1994, also called for the issuance of nondetachable warrants,
fixed in price and quantity, to purchase common stock when scheduled
principal repayments were made. Under the agreement, 179,000 of
exercisable warrants were issued in 1996 at an exercise price of $5.98. A
similar number of warrants was to be issued when scheduled principal
repayments were made in 1997 and 1998. All of the warrants issued under
the agreement were to expire when the final scheduled principal repayment
was to be made in 1999. The notes were repaid on May 29, 1997 and
warrants were issued concurrently to the holder of the notes. On December
30, 1997 the Company entered into an agreement to repurchase all of the
approximately 750,000 outstanding warrants for $1.0 million.
The 11.5% financing was collateralized by machinery and equipment
with a net book value at December 31, 1996 of $1.1 million. The 8.75%
financing was collateralized by buildings and fixtures with a net book
value at December 31, 1996 of $565,000. In 1995, the Company entered into
a 5% financing arrangement with a county in the state of Kansas allowing
borrowings up to $195,000. The borrowings were collateralized by a second
mortgage on buildings and fixtures with a net book value at December 31,
1996 of $933,000. Each of these obligations was repaid in conjunction
with the sale of the discontinued operations.
Included in other long-term debt is a liability for the present
value, discounted at the Company's current borrowing rate, of future
payments expected to be made in connection with the acquisition of
distribution and trademark rights to Blackhawk collision repair equipment
for Central and South America and selected Asian markets.
The fair value of the Company's long-term debt was estimated using
discounted cash flow analyses based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements. The carrying
amount of long-term debt approximated fair value at December 31, 1997 and
1996.
Interest paid during 1997, 1996, and 1995 was $145,000, $1,524,000,
and $1,842,000, respectively.
Commitments and Contingencies
(A) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
To meet the financing needs of consumers of its collision repair and
engine rebuilding products, the Company is, in the normal course of
business, a party to financial instruments with off-balance-sheet risk.
The instruments are guarantees of notes payable to financing institutions
arranged by the Company. The Company performs credit reviews on all such
guarantees. These guarantees extend for periods up to five years and
expire in decreasing amounts through 2001. The amount guaranteed to each
institution is contractually limited to a portion of the amount financed
in a given year. The notes are collateralized by the equipment financed.
Proceeds from the resale of recovered equipment have generally
approximated 90% of repurchased notes.
The maximum credit risk to the Company at December 31, 1997 and 1996
was approximately $1,538,000 and $2,199,000, respectively. Proceeds from
guaranteed notes totaled approximately $241,000, and $728,000 in 1997 and
1996, respectively.
In 1997, the Company adopted SFAS No. 125, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities.
This Statement provides accounting and reporting standards for transfers
and servicing of financial assets and extinguishments of liabilities based
on consistent application of a financial-components approach that focuses
on control. It distinguishes transfers of financial assets that are sales
from transfers that are secured borrowings. Adoption of this
pronouncement did not have a material impact on the Company's financial
position, results of operations, or liquidity.
(B) LITIGATION
The Company is involved in legal proceedings, claims, and
administrative actions arising in the normal course of business. In the
opinion of management, the Company's liability, if any, under any pending
litigation or administrative proceeding would not materially affect its
financial condition or operations.
(C) ENVIRONMENTAL CLAIMS
From time to time, the Company is identified as a potentially
responsible party in environmental matters primarily related to waste
disposal sites which contain residuals from the manufacturing process
which were previously disposed of by the Company in accordance with
applicable regulations in effect at the time of disposal. Materials
generated by the Company in these sites have been small and claims against
the Company have been handled on a de minimis basis. In addition, the
Company has indemnified purchasers of property previously sold by the
Company against any environmental damage which may have existed at the
time of the sale. In the opinion of management, the Company's liability,
if any, under any pending administrative proceeding or claim would not
materially affect its financial condition or operations.
(D) LEASES
At December 31, 1997, future minimum lease payments under capital
leases and under noncancelable operating leases with initial terms greater
than one year are as follows:
Capitalized Operating
(Amounts in thousands) leases leases
1998 $ 50 $1,201
1999 35 1,096
2000 44 1,114
2001 --- 913
2002-2005 --- 312
------- -------
Total minimum lease payments 129 $4,636
Less amount representing
interest 17
--------
Present value of minimum
lease payments $ 112
========
Current portion of
capitalized
lease obligations $ 39
========
Property, plant, and equipment includes the following amount relating
to leases which have been capitalized:
(Amounts in thousands) 1997 1996
Machinery and equipment $ 130 $ 1,041
Less accumulated depreciation 18 513
----- ------
$ 112 $ 528
===== ======
Operating leases are for buildings, warehouses, and equipment.
Included in the above operating leases is $199,000 each year for the next
four years for an obligation related to one of the discontinued
operations. The present value of these lease payments is included in
current and noncurrent liabilities of discontinued operations. Rental
expense for operating leases was $1,565,000 in 1997, $1,857,000 in 1996,
and $1,955,000 in 1995.
<TABLE>
<CAPTION>
Changes in Stockholders' Equity
Capital in Cumulative Total
(Amounts in thousands, except Common excess of Retained translation Treasury stockholders'
share data) stock par value earnings adjustments stock equity
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ 2,386 $11,377 $ 827 $ 110 $ (378) $14,322
Net income --- --- 1,013 --- --- 1,013
Translation adjustments --- --- --- 717 --- 717
5% Stock dividend paid January
27, 1995, 117,944 shares issued 118 413 (531) --- --- ---
5% Stock dividend, fractional
shares --- --- (1) --- --- (1)
Shares contributed to employee
benefit plan --- (232) --- --- 326 94
------ ------ ------ ------ ------ ------
Balance at December 31, 1995 2,504 11,558 1,308 827 (52) 16,145
Net income --- --- 2,176 --- --- 2,176
Translation adjustments --- --- --- (384) --- (384)
5% Stock dividend paid January
26, 1996, 124,899 shares issued 125 437 (562) --- --- ---
5% Stock dividend, fractional
shares --- --- (1) --- --- (1)
------ ------ ------ ------ ------- -------
Balance at December 31, 1996 2,629 11,995 2,921 443 (52) 17,936
Net income --- --- 6,299 --- --- 6,299
Translation adjustments --- --- --- (1,193) --- (1,193)
5% Stock dividend paid January
24, 1997, 131,169 shares issued 131 738 (869) --- --- ---
5% Stock dividend, fractional
shares --- --- (2) --- --- (2)
Issue treasury shares - exercise
of employee stock options -
3,190 shares --- --- (36) --- 51 15
Exercise of employee stock
options, 10,210 shares issued 11 36 --- --- --- 47
Return 69 treasury shares to
authorized but unissued --- --- (1) --- 1 ---
Repurchase outstanding warrants --- (1,000) --- --- --- (1,000)
------ ------ ------ ------ ------- ------
Balance at December 31, 1997 $ 2,771 $11,769 $ 8,312 $ (750) $ --- $22,102
====== ====== ====== ====== ======= ======
</TABLE>
Stock Plans
Under the 1987 Stock Option and Incentive Plan (the "Plan"), the
Company is authorized to grant 141,381 stock options. No option may be
exercised until three years after the date of grant when 50% of the
options granted become exercisable. Five years after the date of grant
100% of the options granted are exercisable. Options expire ten years
after the date of grant. Under provisions defined in the Plan, all
options become exercisable in the event of a public tender offer or if an
exchange offer is made for the Company's stock. Stock options arising
from stock dividends are exercisable upon issuance of the dividend.
Stock option activity for each of the three years in the period
ended December 31, 1997 follows:
Option Price
shares per share*
December 31, 1994 112,455 $ 4.61
Cancelled (5,788)
Granted via stock dividend 5,623
------- ---------
December 31, 1995 112,290 $ 4.61
Cancelled (3,473)
Granted via stock dividend 5,441
------- ---------
December 31, 1996 114,258 $ 4.61
Exercised (13,400)
Cancelled (9,573)
Granted via stock dividend 5,713
-------
December 31, 1997 96,998
=======
Exercisable at December 31,
1997: 96,998 $ 4.61
======= =========
Available for future grants 44,383
=======
*Option shares and price are adjusted to give effect to the stock
dividend paid January 24, 1997.
Each outstanding share of common stock is entitled to one common
share purchase right. Pursuant to the Rights Agreement and under certain
circumstances, each right entitles the holder to purchase one share of
common stock at $65, subject to adjustment. The rights are not
exercisable until ten days after a public announcement that a person or
group has acquired at least 20% of the outstanding common stock or ten
business days (or later date determined by the Board of Directors) after a
person or group announces an intention to make, or commences, a tender or
exchange offer that would result in ownership of 20% or more of the
Company's common stock. Subject to certain limitations, the Company's
Board of Directors may reduce the thresholds applicable to the rights to
not less than 10%.
If a person or group acquires 20% or more of the outstanding common
stock, or certain other events occur, each right not owned by a 20% or
greater stockholder will become exercisable for that number of shares of
common stock having a market value of twice the exercise price of the
right. If the Company is acquired in a merger or other business
combination, or 50% or more of its consolidated assets or earning power is
sold at any time after the rights become exercisable, the rights will
entitle the holder thereof to purchase common stock of the acquiring
company having a market value equal to two times the exercise price of the
rights.
The rights, which do not have voting privileges, may be redeemed by
the Company at a price of $.03 per right at any time prior to public
announcement that a person or group has acquired 20% or more of the
Company's common stock. In addition, under certain circumstances the
rights may be redeemed by stockholder action in connection with an
acquisition proposal. Further, at any time after a person or group
acquires 20% or more of the Company's common stock and prior to that
person or group acquiring 50% or more of the common stock, the Company may
exchange the rights (other than rights owned by such 20% or greater
stockholder) in whole or in part for one share of common stock per right.
The rights expire on May 23, 1999.
Employee Benefit Plans
A profit sharing and retirement plan is in effect for all domestic
employees of the Company. The Company can contribute between 5% and 16%
of its earnings before income taxes in excess of varying levels, ranging
from $250,000 to $4,500,000. The Company's expense under the terms of the
plan was $179,000, $314,000, and $96,600 in 1997, 1996, and 1995,
respectively. In addition, the Board of Directors authorized a special
1997 contribution of $73,215 in the form of 10,000 shares of the Company's
common stock to be made in 1998. The shares were valued at the year end
closing price of $7.3215 per share. The Company does not provide post-
retirement benefits under current benefit programs. Obligations under
previous programs are not material.
A foreign subsidiary maintains a defined benefit plan which is not
material to the financial position of the Company. The Company's expense
under this benefit plan was $54,000, $58,000, and $54,000 in 1997, 1996,
and 1995, respectively.
Income Taxes
Income from continuing operations before income tax consists of the
following:
(Amounts in thousands) 1997 1996 1995
Domestic $ 1,279 $ 1,574 $ (672)
Foreign 355 456 1,528
------ ------ ------
$ 1,634 $ 2,030 $ 856
====== ====== ======
Income tax expense (benefit) from continuing operations consists of
the following:
(Amounts in
thousands) 1997 1996 1995
Current:
U.S. Federal $ 369 $ 143 $ (306)
Foreign 291 109 270
------ ------ ------
660 252 (36)
Deferred:
U.S. Federal (369) (130) ---
Foreign 6 --- ---
------ ------ ------
(363) (130) ---
------ ------ ------
$ 297 $ 122 $ (36)
====== ====== ======
Income tax expense (benefit) related to the operation of the
discontinued businesses was ($38,000) in 1997, $2,000 in 1996, and zero in
1995. Amounts for 1996 and 1995 reflect the utilization of net operating
loss carryforwards and the reduction in the valuation allowance for
deferred tax assets. Income tax expense related to the sale of the
discontinued businesses was $2.4 million.
The significant components of deferred income tax expense (benefit)
attributable to income from continuing operations before income tax are as
follows:
(Amounts in thousands) 1997 1996 1995
Deferred income tax expense
(benefit) (exclusive of
the effects of other
components listed below) $ (79) $ 1,040 $ 32
Increase (decrease) in the
valuation allowance for
deferred tax assets (284) (1,170) (32)
------ ------ -----
$ (363) $ (130) $ ---
====== ====== =====
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities are as follows:
(Amounts in thousands) 1997 1996
Inventory valuation $ 79 $ 150
Accounts receivable valuation 304 140
Vacation accrual 93 166
Self-insurance accrual 146 244
Accrual related to discontinued
operations 719 ---
Net operating loss carryforwards 349 792
Foreign tax credit carryforwards 401 ---
Other 363 899
------ ------
Gross deferred tax assets 2,454 2,391
Less valuation allowance 913 1,387
------ ------
Deferred tax assets 1,541 1,004
------ ------
Depreciation (356) (874)
Other (81) ---
------ ------
Deferred tax liabilities (437) (874)
------ -----
Net deferred tax asset $ 1,104 $ 130
====== ======
The net deferred tax asset is included in prepaid expenses and other.
The Company made net income tax payments of $3,309,000 during 1997
and received net income tax refunds of $171,000 and $306,000 during 1996
and 1995, respectively.
Deferred income taxes have been provided on that portion of the
undistributed earnings of foreign subsidiaries which the Company expects
to recover in a taxable manner, such as through the receipt of dividends.
A provision has not been made for U.S. or additional foreign taxes on
foreign earnings which have been and will continue to be reinvested. It
is not practicable to estimate the amount of additional tax that might be
payable on these foreign earnings. At December 31, 1997, the
undistributed earnings of these foreign subsidiaries on which taxes have
not been provided were approximately $4,200,000.
A reconciliation of actual income tax expense (benefit) attributable
to income from continuing operations before income tax to the "expected"
income tax expense (benefit) computed by applying the U.S. Federal
corporate tax rate to income before income tax follows:
(Percent of pretax earnings) 1997 1996 1995
Statutory rate 34.0% 34.0% 34.0%
Amortization of excess cost over
net assets of acquired companies 0.8 2.0 2.0
Effect of foreign operations 14.8 (2.0) 20.9
Net operating losses utilized (4.9) (29.7) ---
Foreign tax credit carryforwards
utilized (11.6) --- ---
Resolution of income tax
examinations --- --- (31.8)
Change in the valuation allowance
for deferred tax assets
allocatedto income tax expense (17.4) 5.6 (30.7)
Other items, net 2.5 (3.9) 1.4
----- ----- ----
18.2% 6.0% (4.2)%
===== ===== ====
Approximate net operating loss carryforwards available at December
31, 1997, to offset future taxable earnings of the Company are as follows:
(Amounts in thousands) Amount Year of expiration
State $4,000 1998 through 2010
Foreign 45 1999 through 2000
A valuation allowance has been provided for the future benefit of the
above net operating loss carryforwards.
Discontinued Operations
Effective May 29, 1997, the Company sold for cash substantially all
of the business and assets, and transferred certain of the liabilities, of
its Great Bend Industries fluid power division. The fluid power division
designed, manufactured, and supplied high performance single-acting,
double-acting, and telescopic hydraulic cylinders and related hydraulic
components to original equipment manufacturers in the construction,
transportation, solid waste, utility, and energy industries.
Effective August 28, 1997, the Company sold for cash substantially
all of the business, including certain assets and liabilities, of its
Winona Van Norman engine rebuilding division. The engine rebuilding
division designed, manufactured, and supplied advanced machinery for the
automotive aftermarket, primarily for automotive, truck, diesel, and high-
performance engine rebuilding. The division also manufactured brake
lathes and related equipment, as well as provided contract machining
services.
At December 31, 1996, assets and liabilities of the discontinued
operations consisted of the following:
(Amounts in thousands)
Accounts receivable, net $ 4,224
Inventories, net 6,567
Property, plant, and equipment, net 2,557
Other assets 1,367
-------
Total assets $ 14,715
-------
Less: Current portion of long-term debt 464
Current liabilities 605
Long-term debt 1,457
-------
Net assets of discontinued operations $ 12,189
=======
Assets and liabilities relating to the discontinued operations on the
balance sheet as of December 31, 1997 were $505,000 and $1,844,000,
respectively. The assets consist mainly of receivables retained in the
sale of the engine rebuilding segment and the balance in an escrow account
relating to the sale of the fluid power segment. The liabilities consist
mainly of reserves for estimated costs associated with the sale of the
businesses, including lease commitments. Current liabilities of $669,000
are included in other accrued expenses with the balance in other long-term
liabilities.
Net sales of the fluid power division for the period January 1, 1997
through May 29, 1997 were $7.4 million, and $20.2 million and $20.9
million for the years ended December 31, 1996 and 1995, respectively. Net
sales of the engine rebuilding division for the period January 1, 1997
through August 28, 1997 were $5.6 million, and $6.7 million and $11.0
million for the years ended December 31, 1996 and 1995, respectively.
Interest has been allocated to the discontinued operations based on the
ratio of the net assets to be sold to the sum of total assets of the net
consolidated entity plus consolidated debt other than (a) debt of the
discontinued operations that was assumed by the buyer and (b) debt that
can be directly attributable to other operations of the enterprise.
Segment Information
During 1997, the Company sold its Engine Rebuilding and Fluid Power
industry segments. The remaining segment is Collision Repair, with
operations in North America and Europe. The Collision Repair segment
includes frame straightening and vehicle measurement equipment, as well as
various tools and accessories.
Supplemental Information
Quarterly Data
The following table contains selected unaudited quarterly
consolidated financial data for the last two years including all
adjustments which the Company considers necessary to a fair presentation
thereof:
(Amounts in thousands, except
per share amounts)
1997: Quarter: 1st 2nd 3rd 4th
Net sales from continuing
operations $ 9,599 $10,040 $ 7,482 $11,916
Gross profit from continuing
operations 4,434 4,635 3,529 5,729
Net income (loss) from
continuing operations 351 339 (125) 772
Earnings (loss) from
discontinued operations (81) 5,690 (374) (273)
Net income (loss) 270 6,029 (499) 499
----- ----- ------ -----
Earnings (loss) per share from
continuing operations - basic 0.12 0.12 (0.04) 0.27
Earnings (loss) per share from
discontinued operations - basic (0.03) 1.96 (0.13) (0.10)
Earnings (loss) per share -
basic 0.09 2.08 (0.17) 0.17
----- ------ ----- -----
Earnings (loss) per share from
continuing operations - diluted 0.11 0.10 (0.04) 0.25
Earnings (loss) per share from
discontinued operations -
diluted (0.02) 1.69 (0.12) (0.09)
Earnings (loss) per share -
diluted 0.09 1.79 (0.16) 0.16
------ ------ ----- -----
Stock price high 7.500 8.250 8.375 8.375
Stock price low 6.375 6.375 7.250 6.875
------ ------ ----- -----
(Amounts in thousands, except per
share amounts)
1996: Quarter: 1st 2nd 3rd 4th
Net sales from continuing operations$10,580 $10,005 $ 8,827 $12,284
Gross profit from continuing
operations 5,021 4,706 4,151 5,957
Net income from continuing
operations 704 462 206 536
Earnings (loss) from discontinued
operations 76 20 (4) 176
Net income 780 482 202 712
------ ------ ------ ------
Earnings per share from continuing
operations - basic 0.24 0.16 0.07 0.19
Earnings per share from discontinued
operations - basic 0.03 0.01 0.00 0.06
Earnings per share - basic 0.27 0.17 0.07 0.25
----- ----- ----- -----
Earnings per share from continuing
operations - diluted 0.21 0.14 0.07 0.16
Earnings per share from discontinued
operations - diluted 0.03 0.01 0.01 0.06
Earnings per share - diluted 0.24 0.15 0.08 0.22
----- ------ ------ ------
Stock price high 6.375 8.750 8.000 7.250
Stock price low 4.250 5.813 5.750 6.250
Earnings per share data have been adjusted to give effect to the 5% stock
dividend paid January 23, 1998.
Geographic Data
Data for geographic regions, excluding corporate expenses and
eliminations, is presented below:
(Amounts in thousands)
Net sales Earnings before
1997: unaffiliated income taxes Assets
North America $18,220 $ 1,827 $11,956
Europe 20,817 355 19,406
------ ------ ------
$39,037 $ 2,182 $31,362
====== ====== ======
1996:
North America $18,510 $ 2,233 $11,548
Europe 23,186 456 24,011
------ ------ ------
$41,696 $ 2,689 $35,559
====== ====== ======
1995:
North America $15,777 $ 992 $11,389
Europe 26,042 1,528 25,935
------ ------ ------
$41,819 $ 2,520 $37,324
====== ====== ======
Export sales of United States operations made to unaffiliated customers
located in foreign countries aggregated $1,875,000, $1,992,000, and
$1,461,000, in 1997, 1996, and 1995, respectively.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES
The Company did not file a Form 8-K within the 24 months prior to the
date of its most recent financial statements that reports a change of
accountants and a disagreement on any matter of accounting principles or
practices or financial statement disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item with respect to directors and
Section 16 compliance is included under the headings "ELECTION OF
DIRECTORS" and "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE"
in the definitive Proxy Statement, relating to the 1998 annual meeting of
shareholders (the "Proxy Statement"), and is incorporated herein by
reference. Information about executive officers appears at the end of
Part I of this Form 10-K under the caption "EXECUTIVE OFFICERS OF
REGISTRANT."
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is included under the
heading "EXECUTIVE COMPENSATION" in the Proxy Statement and is
incorporated herein by reference; provided, however, that the subsection
entitled "Report on Executive Compensation" shall not be deemed to be
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information concerning security ownership is included under the
heading "STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in
the Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning relationships and related transactions is
included under the headings "EXECUTIVE COMPENSATION - Compensation
Committee Interlocks and Insider Participation" and "CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS" in the Proxy Statement and is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. and 2. Financial Statements and Financial Statement
Schedules. Reference is made to the separate index to
consolidated financial statements and schedules
contained hereinafter.
3. Exhibits. Reference is made to the Exhibit Index
contained hereinafter.
(b) Form 8-K
There were no reports on Form 8-K filed during the fiscal
quarter ended December 31, 1997.
<PAGE>
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.
Dated March 31, 1998
HEIN-WERNER CORPORATION
By: /s/ J. L. Dindorf
J. L. Dindorf
President and Chief Executive Officer
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 and on the dates indicated.
Dated March 31, 1998 By:/s/ J. L. Dindorf
J. L. Dindorf
President and Chief Executive Officer;
Director (Principal Executive Officer,
Principal Financial Officer and Principal
Accounting Officer)
Dated March 31, 1998 By:
O. A. Friend
Director
Dated March 31, 1998 By:/s/ J. S. Jones
J. S. Jones
Director
Dated March 31, 1998 By:/s/ M. J. McSweeney
M. J. McSweeney
Director
Dated March 31, 1998 By:/s/ D. J. Schuetz
D. J. Schuetz
Director
By:/s/ D. L. Krause
Dated March 31, 1998 D. L. Krause
Director
<PAGE>
Index to Consolidated Financial Statements and Schedules for Form 10-K
The consolidated financial statements of Hein-Werner Corporation and
Subsidiaries, together with the opinion thereon of KPMG Peat Marwick LLP
dated February 13, 1998, appear in Item 8 of this report. The following
additional financial data should be read in conjunction with the financial
statements in such 1997 Annual Report to Shareholders.
Additional Financial Data
Independent Auditors' Report on Financial Statement Schedules
Schedule Submitted:
II- Valuation and qualifying accounts
All other schedules are omitted because they are either not applicable or
the required information is shown in the financial statements or the notes
thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Hein-Werner Corporation:
Under date of February 13, 1998, we reported on the consolidated balance
sheets of Hein-Werner Corporation and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of income and cash flows
for each of the years in the three-year period ended December 31, 1997, as
contained in the Annual Report on Form 10-K for the year 1997. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related financial statement schedule as
listed in the accompanying index. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statement schedule based on our
audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Milwaukee, Wisconsin
February 13, 1998
<PAGE>
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands)
Allowances for Losses(1)
Balance at Charged to Balance
beginning cost and Other(2) at end
of period expenses Additions Deduction(3) of period
1997 $2,151 $ 265 $ 230 $ 603 $2,O43
1996 $2,469 $ 420 $ -- $ 738 $2,151
1995 $2,625 $ 970 $ -- $1,126 $2,469
Inventory Valuation Reserve
Balance at Charged to Balance
beginning cost and Other at end
of period expenses Additions Deduction(4) of period
1997 $ 455 $ 314 $ -- $ 437 $ 332
1996 $ 690 $ 91 $ -- $ 326 $ 455
1995 $ 588 $ 576 $ -- $ 474 $ 690
_____________
(1) Includes allowances for losses on accounts receivable and non-
current notes receivable.
(2) Increase in allowance for losses on accounts receivable for
discontinued operations.
(3) Bad debts written off, net of any recoveries.
(4) Inventory written off, net of any recoveries.
Exhibits
(2) Plan of acquistion, reorganization, arrangement, liquidation, or
succession:
(2.1) Asset Purchase Agreement, dated as of April
9, 1997, by and among the Company, Kaydon
Corporation and Kaydon Acquisition VIII, Inc.
(incorporated by reference to Exhibit 2 to
the Company's Form 8-K, dated April 9, 1997)
(2.2) Escrow Agreement, dated as of May 29, 1997,
by and among the Company, Kaydon Acquisition
VIII, Inc. and Firstar Trust Company
(incorporated by reference to Exhibit 2.2 to
the Company's Form 8-K, dated May 29, 1997)
(2.3) Asset Purchase Agreement, dated as of August
18, 1997, by the Company and Van Norman
Equipment Co., Inc. (incorporated by
reference to Exhibit 2.1 to the Company's
Form 8-K, dated August 28, 1997)
(3) Articles of Incorporation and By-Laws:
(3.1) Amendments to the By-Laws of the Company
(3.2) By-Laws of the Company, as amended through
March 12, 1998
(3.3) Restated Articles of Incorporation, as
amended through February 21, 1991
(incorporated by reference to Exhibit 3.2 to
the Company's Form 10-K for the year ended
December 31, 1993)
(4) Instruments defining the rights of security holders,
including indentures:
(4.1) Revolving Loan and Security Agreement dated
October 13, 1993 by and between the Company
and Firstar Bank Milwaukee, N.A. and
Continental Bank N.A. (incorporated by
reference to Exhibit 4.1 to the Company's
Form 10-Q for the quarter ended October 2,
1993)
(4.2) Letter dated October 27, 1994 by Firstar Bank
Milwaukee, N.A., as administrator of the
Revolving Loan and Security Agreement dated
October 13, 1993 by and between the
Registrant and Firstar Bank Milwaukee, N.A.
and BankAmerica N.A.'s Pacific Business
Credit Inc. (formerly Continental Bank,
N.A.), extending the Revolving Loan and
Security Agreement to May 31, 1996
(incorporated by reference to Exhibit 4.1 to
the Company's Form 10-Q for the quarter ended
October 1, 1994)
(4.3) Letter dated June 25, 1996 by Firstar Bank
Milwaukee, N.A., as administrator of the
Revolving Loan and Security Agreement dated
October 13, 1993 by and between the Company
and Firstar Bank Milwaukee, N.A., amending
and extending the agreement through June 30,
1999 (incorporated by reference to Exhibit 4
to the Company's Form 10-Q for the quarter
ended June 29, 1996)
(4.4) Letter dated November 27, 1996 by Firstar
Bank Milwaukee, N.A., as administrator of the
Revolving Loan and Security Agreement dated
October 13, 1993 by and between the Company
and Firstar Bank Milwaukee, N.A., amending
the agreement (incorporated by reference to
Exhibit 4.4 to the Company's Form 10-K for
the year ended December 31, 1996)
(4.5) Rights Agreement by and between the Company
and Firstar Trust Company (formerly First
Wisconsin Trust Company) (incorporated by
reference to Exhibit 4.8 to the Company's
Form 10-K for the year ended December 31,
1993)
(10) Material contracts:
(10.1) *Change of Control Agreement between the
Company and Joseph L. Dindorf dated January
27, 1984 (incorporated by reference to
Exhibit 10.1 to the Company's Form 10-K for
the year ended December 31, 1993)
(10.2) Lease dated January 25, 1983 between the
Company and Winvan, Inc. (incorporated by
reference to Exhibit 10.3 to the Company's
Form 10-K for the year ended December 31,
1993)
(10.3) *1987 Stock Option and Incentive Plan
(incorporated by reference to Exhibit 10.4 to
the Company's Form 10-K for the year ended
December 31, 1993)
(10.4) *1988 Corporate Officer Incentive Bonus
Schedule (incorporated by reference to
Exhibit 10.5 to the Company's Form 10-K for
the year ended December 31, 1993)
(10.5) Option Purchase Agreement, dated as of
December 30, 1997, by and between the Company
and Massachusetts Mutual Life Insurance
Company.
(21) Subsidiaries (incorporated by reference to
Exhibit 21 to the Company's Form 10-K for the
year ended December 31, 1996)
(23) Consent of KPMG Peat Marwick LLP
(27.1) 1997 Financial Data Schedule
(27.2) Restated 1996 Financial Data Schedule
(27.3) Restated 1995 Financial Data Schedule
(99) Definitive Proxy Statement relating to the
1998 Annual Meeting of Shareholders (to be
filed within 120 days of the Company's fiscal
1997 year end)
[Except to the extent specifically incorporated by
reference, the Company's Proxy Statement relating to the
1998 Annual Meeting of Shareholders is not deemed to be
filed with the Commission as part of this Annual Report on
Form 10-K]
________________
* A management contract or compensatory plan or arrangement
Exhibit 3.1
Amendments to the By-Laws of the Company
1.) Pursuant to a resolution of the Board of Directors, the By-Laws of
the Company were amended by changing the third sentence of Section 2.05 to
read as follows:
"In lieu of closing the stock transfer books, the Board of
Directors may fix in advance a date as the record date for any
such determination of shareholders, such date in any case to be
not more than seventy days and, in case of a meeting of
shareholders, not less than ten days prior to the date on which
the particular action, requiring such determination of
shareholders, is to be taken."
2.) Pursuant to a resolution of the Board of Directors, the By-Laws of
the Company were amended by changing the second sentence of the first
paragraph of Section 3.01 to read as follows:
"The number of directors of the corporation shall be six."
Exhibit 3.2
BY-LAWS
OF
HEIN-WERNER CORPORATION
(a Wisconsin corporation)
ARTICLE I. OFFICES
1.01. Principal and Business Offices. The principal office of
the corporation shall be located in Waukesha, Wisconsin. The corporation
may have such other business offices, either within or without the State
of Wisconsin, as the Board of Directors may designate or as the business
of the corporation may require from time to time.
1.02. Registered Office. The registered office of the
corporation required by the Wisconsin Business Corporation Law to be
maintained in the State of Wisconsin may be, but need not be, identical
with the principal office in the State of Wisconsin, and the address of
the registered office may be changed from time to time by the Board of
Directors or by the registered agent. The business office of the
registered agent of the corporation shall be identical to such registered
office.
ARTICLE II. SHAREHOLDERS
2.01. Annual Meeting. The annual meeting of the shareholders
shall be held on the second Thursday in April in each year at 2:00 o'clock
P.M., or at such other time and date within thirty days before or after
said date as may be fixed by or under the authority of the Board of
Directors, for the purpose of electing directors and for the transaction
of such other business as may come before the meeting. If the day fixed
for the annual meeting shall be a legal holiday in the State of Wisconsin,
such meeting shall be held on the next succeeding business day. If the
election of directors shall not be held on the day designated herein, or
fixed as herein provided, for any annual meeting of the shareholders, or
at any adjournment thereof, the Board of Directors shall cause the
election to be held at a special meeting of the shareholders as soon
thereafter as conveniently may be.
2.02. Special Meeting. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be
called by the President or the Board of Directors or by the person
designated in the written request of the holders of not less than one-
tenth of all shares of the corporation entitled to vote at the meeting.
2.03. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Wisconsin, as the place of
meeting for any annual meeting or for any special meeting called by the
Board of Directors. A waiver of notice signed by all shareholders entitled
to vote at a meeting may designate any place, either within or without the
State of Wisconsin, as the place for the holding of such meeting. If no
designation is made, or if a special meeting may otherwise be called, the
place of meeting shall be the principal business office of the corporation
in the State of Wisconsin or such other suitable place in the county of
such principal office as may be designated by the person calling such
meeting, but any meeting may be adjourned to reconvene at any place
designated by vote of a majority of the shares represented thereat.
2.04. Notice of Meeting. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than
ten days (unless a longer period is required by law or the Restated
Articles of Incorporation) nor more than fifty days before the date of the
meeting, either personally or by mail, by or at the direction of the
President, or the Secretary, or other officer or persons calling the
meeting, to each shareholder of record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in
the United States mail, addressed to the shareholder at his address as it
appears on the stock record books of the corporation, with postage thereon
prepaid.
2.05. Closing of Transfer Books or Fixing of Record Date. For
the purpose of determining shareholders entitled to notice of or to vote
at any meeting of shareholders or any adjournment thereof, or shareholders
entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, fifty days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such books
shall be closed for at least ten days immediately preceding such meeting.
In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy days and,
in case of a meeting of shareholders, not less than ten days prior to the
date on which the particular action, requiring such determination of
shareholders, is to be taken. If the stock transfer books are not closed
and no record date is fixed for the determination of shareholders entitled
to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the close of business on the
date on which notice of the meeting is mailed or on the date on which the
resolution of the Board of Directors declaring such dividend is adopted,
as the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall be applied to any adjournment thereof except where the
determination has been made through the closing of the stock transfer
books and the stated period of closing has expired.
2.06. Voting Records. The officer or agent having charge of the
stock transfer books for shares of the corporation shall, before each
meeting of shareholders, make a complete record of the shareholders
entitled to vote at such meeting, or any adjournment thereof, with the
address of and the number of shares held by each. Such record shall be
produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole time of the
meeting for the purposes of the meeting. The original stock transfer
books shall be prima facie evidence as to who are the shareholders
entitled to examine such record or transfer books or to vote at any
meeting of shareholders. Failure to comply with the requirements of this
section shall not affect the validity of any action taken at such meeting.
2.07. Quorum. Except as otherwise provided in the Restated
Articles of Incorporation, a majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting
of shareholders. If a quorum is present, the affirmative vote of the
majority of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders unless the vote of
a greater number or voting by classes is required by law or the Restated
Articles of Incorporation. Though less than a quorum of the outstanding
shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further
notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
2.08. Conduct of Meeting. The President, and in his absence, a
Vice President in the order provided under Section 4.06, and in their
absence, any person chosen by the shareholders present shall call the
meeting of the shareholders to order and shall act as chairman of the
meeting, and the Secretary of the corporation shall act as secretary of
all meetings of the shareholders, but, in the absence of the Secretary,
the presiding officer may appoint any other person to act as secretary of
the meeting.
2.09. Proxies. At all meetings of shareholders, a
shareholder entitled to vote may vote in person or by proxy appointed in
writing by the shareholder or by his duly authorized attorney in fact.
Such proxy shall be filed with the Secretary of the corporation before or
at the time of the meeting. Unless otherwise provided in the proxy, a
proxy may be revoked at any time before it is voted, either by written
notice filed with the Secretary or the acting secretary of the meeting or
by oral notice given by the shareholder to the presiding officer during
the meeting. The presence of a shareholder who has filed his proxy shall
not of itself constitute a revocation. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in
the proxy. The Board of Directors shall have the power and authority to
make rules establishing presumptions as to the validity and sufficiency of
proxies.
2.10. Voting of Shares. Each outstanding share shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders, except to the extent that the voting rights of the shares of
any class or classes are enlarged, limited or denied by the Restated
Articles of Incorporation.
2.11. Voting of Shares by Certain Holders.
(a) Other Corporations. Shares standing in the name of another
corporation may be voted either in person or by proxy, by the
president of such corporation or any other officer appointed by such
president. A proxy executed by any principal officer of such other
corporation or assistant thereto shall be conclusive evidence of the
signer's authority to act, in the absence of express notice to this
corporation, given in.writing to the Secretary of this corporation,
of the designation of some other person by the board of directors or
the by-laws of such other corporation.
(b) Legal Representatives and Fiduciaries. Shares held by any
administrator, executor, guardian, conservator, trustee in
bankruptcy, receiver, or assignee for creditors may be voted by him,
either in person or by proxy, without a transfer of such shares into
his name provided that there is filed with the Secretary before or at
the time of meeting proper evidence of his incumbency and the number
of shares held. Shares standing in the name of a fiduciary may be
voted by him, either in person or by proxy. A proxy executed by a
fiduciary, shall be conclusive evidence of the signer's authority to
act, in the absence of express notice to this corporation, given in
writing to the Secretary of this corporation, that such manner of
voting is expressly prohibited or otherwise directed by the document
creating the fiduciary relationship.
(c) Pledgees. A shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been transferred
into the name of the pledgee, and thereafter the pledgee shall be
entitled to vote the shares so transferred.
(d) Treasury Stock and Subsidiaries. Neither treasury shares,
nor shares held by another corporation if a majority of the shares
entitled to vote for the election of directors of such other
corporation is held by this corporation, shall be voted at any
meeting or counted in determining the total number of outstanding
shares entitled to vote, but shares of its own issue held by this
corporation in a fiduciary capacity, or held by such other
corporation in a fiduciary capacity, may be voted and shall be
counted in determining the total number of outstanding shares
entitled to vote.
(e) Minors. Shares held by a minor may be voted by such minor
in person or by proxy and no such vote shall be subject to
disaffirmance or avoidance, unless prior to such vote the Secretary
of the Corporation has received written notice or has actual
knowledge that such shareholder is a minor.
(f) Incompetents and Spendthrifts. Shares held by an
incompetent or spendthrift may be voted by such incompetent or
spendthrift in person or by proxy and no such vote shall be subject
to disaffirmance or avoidance, unless prior to such vote the
Secretary of the corporation has been adjudicated an incompetent or
spendthrift or actual knowledge of filing of judicial proceedings for
appointment of a guardian.
(g) Joint Tenants. Shares registered in the names of two or
more individuals who are named in the registration as joint tenants
may be voted in person or by proxy signed by any one or more such
individuals if either (i) no other such individual or his legal
representative is present and claims the right to participate in the
voting of such shares or prior to the vote filed with the Secretary
of the corporation a contrary written voting authorization or
direction or written denial of authority of the individual present or
signing the proxy proposed to be voted or (ii) all such other
individuals are deceased and the Secretary of the corporation has no
actual knowledge that the survivor has been adjudicated not to be the
successor to the interests of those deceased.
2.12. Waiver of Notice by Shareholders. Whenever any notice
whatever is required to be given to any shareholder of the corporation
under the Restated Articles of Incorporation or By-laws or any provision
of law, a waiver thereof in writing, signed at any time, whether before or
after the time of meeting, by the shareholder entitled to such notice,
shall be deemed equivalent to the giving of such notice; provided that
such waiver in respect to any matter of which notice is required under any
provision of the Wisconsin Business Corporation Law, shall contain the
same information as would have been required to be included in such
notice, excePt the time and place of meeting.
2.13. Unanimous Consent without Meeting. Any action
required or permitted by the Restated Articles of Incorporation or By-laws
or any provision of law to be taken at a meeting of the shareholders, may
be taken without a meeting if a consent in writing, setting forth the
action so taken, shall be signed by all of the shareholders entitled to
vote with respect to the subject matter thereof.
ARTICLE III. BOARD OF DIRECTORS
3.01. General Powers, Classification and Number. The
business and affairs of the corporation shall be managed by its Board of
Directors. The number of directors of the corporation shall be six.
At the 1978 annual meeting of shareholders, the directors of the
first class shall be elected for a term to expire at the first annual
meeting of shareholders after their election, the directors of the second
class shall be elected for a term to expire at the second annual meeting
of shareholders after their election, and the directors of the third class
shall be elected for a term to expire at the third annual meeting of
shareholders after their election. At each annual meeting of shareholders
the successors to the class of directors whose terms shall expire at the
time of such annual meeting shall be elected to hold office until the
third succeeding annual meeting of shareholders.
Each director shall hold office for the term for which he is
elected and until his successor is elected and qualified or until his
prior death, resignation or removal. A director may resign at any time by
filing his written resignation with the Secretary of the corporation.
3.02. Tenure and Qualifications. Directors shall be
shareholders of the corporation. No director will stand for re-election
as a director who has attained age 72 on or before the annual meeting of
shareholders. A director who is an officer of the corporation and who
shall retire or otherwise terminate employment as such officer shall
automatically be retired as a director of the corporation and thereafter
shall not be eligible for reelection as a director, unless his continued
service as a director is approved by the number of directors specified in
Article IX of the Restated Articles of Incorporation.
3.03. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this By-Law immediately
after the annual meeting of share-holders, and each adjourned session
thereof. The place of such regular meeting shall be the same as the place
of the meeting of shareholders which precedes it, or such other suitable
place as may be announced at such meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place, either within or
without the State of Wisconsin, for the holding of additional regular
meetings without other notice than such resolution.
3.04. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the President, Secretary
or any two directors. The person or persons calling any special meeting
of the Board of Directors may fix any place, either within or without the
State of Wisconsin, as the place for holding any special meeting of the
Board of Directors called by them, and if no other place is fixed the
place of meeting shall be the principal business office of the corporation
in the State of Wisconsin.
3.05. Notice: Waiver. Notice of each meeting of the Board
of Directors (unless otherwise provided in or pursuant to Section 3.03)
shall be given to each director not less than 48 hours prior to the
meeting by giving oral, telephone or written notice to a director in
person, or by telegram of not not less than four days prior to a meeting
by delivering or mailing written notice to the business address or such
other address as a director shall have designated in writing filed with
the Secretary. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail so addressed, with postage
thereon prepaid. If notice be given by telegram, such notice shall be
deemed to be delivered when the telegram is delivered to the telegraph
company. Whenever any notice whatever is required to be given to any
director of the corporation under the Restated Articles of Incorporation
or By-laws or any provision of law, a waiver thereof in writing, signed at
any time, whether before or after the time of meeting, by the director
entitled to such notice, shall be deemed equivalent to the giving of such
notice. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a
meeting and objects thereat 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, any regular or special meeting of the
Board of Directors need be specified in the notice of waiver of notice of
such meeting.
3.06. Quorum. Except as otherwise provided by law or by the
Restated Articles of Incorporation or these By-laws, a majority of the
number of directors as provided in Section 3.01 shall constitute a quorum
for the transaction of business at any Meeting of the Board of Directors,
but a majority of the directors present (though less than such quorum) may
adjourn the meeting from time to time without further notice.
3.07. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors, unless the act of a greater number is
required by law or by the Restated Articles of Incorporation or these By-
laws.
3.08. Conduct of Meetings. The President, and in his
absence, a Vice-President in the order provided under Section 4.06, and in
their absence, any director chosen by the directors present, shall call
meetings of the Board of Directors to order and shall act as chairman of
the meeting. The Secretary of the Board of Directors, but in the absence
of the Secretary, the presiding officer may appoint any Assistant
Secretary or any director or other person present to act as secretary of
the meeting.
3.09. Vacancies. If the office of any director or directors
becomes vacant for any reason, the vacancy shall be filled as provided for
in the Restated Articles of Incorporation.
3.10. Compensation. The Board of Directors, by affirmative
vote of a majority of the directors then in office, and irrespective of
any personal interest of any of its members, may establish reasonable
compensation of all directors for services to the corporation as
directors, or may delegate such authority to an appropriate committee. The
Board of Directors shall establish the compensation of the President, who
shall have the authority under Section 4.05 to establish the compensation,
exclusive of the benefits hereinafter referred to in this Section 3.10, of
the other officers, employees and agents of the corporation. The Board of
Directors also shall have authority to provide for or to delegate
authority to an appropriate committee to provide for reasonable pensions,
disability or death benefits, and other benefits or payments, to
directors, officers and employees and.to their estates, families,
dependents or beneficiaries on account of prior services rendered by such
directors, officers and employees to the corporation.
3.11. Presumption of Assent. A director of the corporation
who is present at a meeting of the Board of Directors or committee thereof
of which he is a member at which action on any corporate matter is taken
shall be presumed to have assented to the action taken unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as the secretary of
the meeting before the adjournment thereof or shall forward such dissent
by registered mail to the Secretary of the corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
3.12. Committees. The Board of Directors by resolution
adopted by the affirmative vote of a majority of the number of directors
as provided in Section 3.01 may designate one or more committees, each
committee to consist of three or more directors elected by the Board of
Directors, which to the extent provided in said resolution as initially
adopted, and as thereafter supplemented or amended by further resolution
adopted by a like vote, shall have and may exercise, when the Board of
Directors is not in session, the powers of the Board of Directors in the
management of the business and affairs of the corporation, except action
in respect to dividends to shareholders, election of the principal
officers or the filing of vacancies in the Board of Directors or
committees created pursuant to this section. The Board of Directors may
elect one or more of its members as alternate members of any such
committee who may take the place of any absent member or members at any
meeting of such committee, upon request by the President or upon request
by the chairman of such meeting. Each such committee shall fix its own
rules governing the conduct of its activities and shall make such reports
to the Board of Directors of its activities as the Board of Directors may
request.
3.13. Unanimous Consent Without Meeting. Any action
required or permitted by the Restated Articles of Incorporation or By-laws
or any provision of law to be taken by the Board of Directors at a meeting
or by resolution may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the directors
then in office.
ARTICLE IV. OFFICERS
4.01. Number. The principal officers of the corporation
shall be a President, Vice-Presidents, a Secretary, and a Treasurer, each
of whom shall be elected by the Board of Directors. Such other officers
and assistant officers as may be deemed necessary may be elected or
appointed by the Board of Directors. Any two or more offices may be held
by the same person, except the offices of President and Secretary and the
offices of President and Vice President.
4.02. Election and Term of Office. The officers of the
corporation to be elected by the Board of Directors shall be elected
annually by the Board of Directors at the first meeting of the Board of
Directors held after each annual meeting of the shareholders. If the
election of officers shall not be held at such meeting, such election
shall be held as soon thereafter as conveniently may be. Each officer
shall hold office until his successor shall have been duly elected or
until his prior death, resignation or removal.
4.03. Removal. Any officer or agent may be removed by the
Board of Directors whenever in its judgment the best interests of the
corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Election or appointment shall not of itself create contract rights.
4.04. Vacancies. A vacancy in any principal office
because of death, resignation, removal, disqualification or otherwise,
shall be filled by the Board of Directors for the unexpired portion of the
term.
4.05. President. The President shall be the principal
executive offIcer of the corporation and, subject to the control of the
Board of Directors, shall in general supervise and control all of the
business and affairs of the corporation. He shall, when present, preside
at all meetings of the shareholders and of the Board of Directors. He
shall have authority, subject to such rules as may be prescribed by the
Board of Directors, to appoint such employees and agents of the
corporation as he shall deem necessary, to prescribe their powers, and
duties and to delegate authority to them. The President shall establish
the compensation, exclusive of certain benefits provided by the Board of
Directors under Section 3.10, of the other officers, employees and agents
of the corporation. Such employees and agents shall hold office at the
discretion of the President. He shall have authority to sign, execute and
acknowledge, on behalf of the corporation, all deeds, mortgages, bonds,
stock certificates, contracts, leases, reports and all other documents or
instruments necessary or proper to be executed in the course of the
corporation's regular business, or which shall be authorized by resolution
of the Board of Directors; and, except as otherwise provided by law or the
Board of Directors, he may authorize any Vice President or other officer
or agent of the corporation to assign, execute and acknowledge such
documents or instruments in his place and stead. In general he shall
perform all duties incident to the office of president and such other
duties as may be prescribed by the Board of Directors from time to time.
4.06. The Vice Presidents. In the absence of the President or
in the event of his death, inability or refusal to act, or in the event
for any reason it shall be impracticable for the President to act
personally, the Vice-President (or in the event there be more than one
Vice-President, the Vice-Presidents in the order designated by the Board
of Directors, or in the absence of any designation, then in the order of
their election) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice-President may sign, with the
Secretary or Assistant Secretary, certificates for shares of the
corporation; and shall perform such other duties and have such authority
as from time to time may be delegated or assigned to him by the President
or by the Board of Directors. The execution of any instrument of the
corporation by any Vice-President shall be conclusive evidence, as to
third parties, of his authority to act in the stead of the President.
4.07. The Secretary. The Secretary shall: (a) keep the
minutes of the meetings of the shareholders and of the Board of Directors
in one or more books provided for that purpose; (b) see that all notices
are duly given in accordance with the provisions of these By-laws or as
required by law; (c) be custodian of the corporate records and of the seal
of the corportion and see that the seal of the corporation is affixed to
all documents the execution of which on behalf of the corporation under
its seal is duly authorized; (d) keep or arrange for the keeping of a
register of the post office address of each shareholder which shall be
furnished to the Secretary by such shareholder; (e) sign with the
President, or a Vice President, certificates for shares of the
corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and have such other duties and
exercise such authority as from time to time may be delegated or assigned
to him by the President or by the Board of Directors.
4.08. The Treasurer. The Treasurer shall: (a) have charge
and custody of and be responsible for all funds and securities of the
corporation; (b) receive and give receipts for moneys due and payable to
the corporation from any source whatsoever, and deposit all such moneys in
the name of the corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with the provisions of
Section 5.04; and (c) in general perform all of the duties incident to the
office of Treasurer and have such other duties and exercise such other
authority as from time to time may be delegated or assigned to him by the
President or by the Board of Directors. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of
his duties in such sum and with such surety or sureties as the Board of
Directors shall determine.
4.09. Assistant Secretaries and Assistant Treasurers. There
shall be such number of Assistant Secretaries and Assistant Treasurers as
the Board of Directors may from time to time authorize. The Assistant
Secretaries may sign with the President or a Vice-President certificates
for shares of the corporation the issuance of which shall have been
authorized by-a resolution of the Board of Directors. The Assistant
Treasurers shall respectively, if required by the Board of Directors, give
bonds for the faithful discharge of their duties in such sums and with
such sureties as the Board of Directors shall determine. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such
duties and have such authority as shall from time to time be delegated or
assigned to them by the Secretary or the Treasurer, respectively, or by
the President or the Board of Directors.
4.10. Other Assistants and Acting Officers. The Board of
Directors shall have the power to appoint any person to act as assistant
to any officer, or as agent for the corporation in his stead, or to
perform the duties of such officer whenever for any reason it is
impracticable for such officer to act personally, and such assistant or
acting officer or other agent so appointed by the Board of Directors shall
have the power to Perform all the duties of the office to which he is so
appointed to be assistant, or as to which he is so appointed to act,
except as such power may be otherwise defined or restricted by the Board
of Directors.
ARTICLE V. CONTRACTS, LOANS, CHECKS
AID DEPOSITS; SPECIAL CORPORATE ACTS
5.01. Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or
execute or deliver any instrument in the name of and on behalf of the
corporation, and such authorization may be general or confined to specific
instances. In the absence of other designation, all deeds, mortgages and
instruments of assignment or pledge made by the corporation shall be
executed in the name of the corporation by the President or one of the
Vice-Presidents and by the Secretary, an Assistant Secretary, the
Treasurer or an Assistant Treasurer; the Secretary or an Assistant
Secretary, when necessary or required, shall affix the corporate seal
thereto; and when so executed no other party to such instrument or any
third party shall be required to make any inquiry into the authority of
the signing officer or officers.
5.02. Loans. No indebtedness for borrowed money shall be
contracted on behalf of the corporation and no evidences of such
indebtedness shall. be issued in its name unless authorized by or under
the authority or a resolution of the Board of Directors. Such
authorization may be general or confined to specific instances.
5.03. Checks, Drafts, etc. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation, shall be signed by such officer or
officers, agent or agents of the corporation and in such manner as shall
from time to time be determined by or under the authority of a resolution
of the Board of Directors.
5.04. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositaries as may be
selected by or under the authority of a resolution of the Board of
Directors.
5.05. Voting of Securities Owned by this Corporation. Subject
always to the specific directions of the Board Directors, (a) any shares
or other securities issued by any other corporation and owned or
controlled by this corporation may be voted at any meeting of security
holders of such other corporation by the President of this corporation if
he be present, or in his absence by any Vice President of this corporation
who may be present, and (b) whenever, in the judgment of the President, or
on his absence by any Vice President, it is desirable for this corporation
to execute a proxy or written consent in respect to any shares or other
securities issued by any other corporation and owned by this corporation,
such proxy or consent shall be executed in the name of this corporation by
the President or one of the Vice Presidents of this corporation without
necessity of any authorization by the Board of Directors, affixation of
corporate seal or countersignature or attestation by another officer. Any
person or persons designated in the manner above stated as the proxy or
proxies of this corporation shall have full right, power and authority to
vote the shares or other securities issued by such other corporation and
owned by this corporation the same as such shares or other securities
might be voted by this corporation.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.01. Certificates for Shares. Certificates representing shares
of the corporation shall be in such form, consistent with law, as shall be
determined by the Board of Directors. Such certificates shall be signed
by the President or a Vice-President and by the Secretary or an Assistant
Secretary. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the
shares represented thereby are issued, with the number of shares and date
of issue, shall be entered on the stock transfer books of the corporation.
All certificates surrendered to the corporation for transfer shall be
canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled, except as provided in Section 6.06.
6.02. Facsimile Signatures and Seal. The seal of the corporation
on any certificate for snares may be a facsimile. The signatures of the
President or Vice President and the Secretary or Assistant Secretary upon
a certificate may be facsimiles if the certificate is manually signed on
behalf of a transfer agent, or a registrar, other than the corporation
itself or an employee of the corporation.
6.03. Signature by Former Officers. In case any officer, who has
signed or whose facsimile signature has been placed upon any certificate
for shares, shall have ceased to be such officer before such certificate
is issued, it may be issued by the corporation with the same effect as if
he were such officer at the date of its issue.
6.04. Transfer of Shares. Prior to due presentment of a
certificate for shares for registration of transfer the corporation may
treat the registered owner of such shares as the person exclusively
entitled to vote, to receive notifications and otherwise to have and
exercise all the rights and power of an owner. Where a certificate for
shares is presented to the corporation with a request to register for
transfer, the corporation shall not be liable to the owner or any other
person suffering loss as a result of such registration of transfer if (a)
there were on or with the certificate the necessary endorsements, and (b)
the corporation had no duty to inquire into adverse claims or has
discharged any such duty. The corporation may require reasonable
assurance that said endorsements are genuine and effective and compliance
with such other regulations as may be prescribed by or under the authority
of the Board of Directors.
6.05. Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation of any
restriction imposed by the corporation upon the transfer of such shares.
6.06. Lost, Destroyed or Stolen Certificates. Where the owner
claims that his certificate for shares has been lost, destroyed or
wrongfully taken, a new certificate shall be issued in place thereof if
the owner (a) so requests before the corporation has notice that such
shares have been acquired by a bona fide purchaser, and (b) files with the
corporation a sufficient indemnity bond, and (c) satisfies such other
reasonable requirements as may be prescribed by or under the authority of
the Board of Directors.
6.07. Consideration for Shares. The shares of the corporation
may be issued for such consideration as shall be fixed from time to time
by the Board of Directors, provided that any shares having a par value
shall not be issued for a consideration less than the par value thereof.
The consideration to be paid for shares may be paid in whole or in part,
in money, in other property, tangible or intangible, or in labor or
services actually performed for the corporation. When payment of the
consideration for which shares are to be issued shall have been received
by the corporation, such shares shall be deemed to be fully paid and
nonassessable by the corporation. No certificate shall be issued for any
share until such share is fully paid.
6.08. Stock Regulations. The Board of Directors shall have the
power and authority to make all such further rules and regulations not
inconsistent with the statutes of the State of Wisconsin as it may deem
expedient concerning the issue, transfer and registration of certificates
representing shares of the corporation.
ARTICLE VII. SEAL
7.01. The Board of Directors shall provide a corporate seal which
shall be circular in form and shall have inscribed thereon the name of the
corporation and the state of incorporation and the words, "Corporate
Seal".
ARTICLE VIII. INDEMNIFICATION
8.01. Certain Definitions. All capitalized terms used in this
Article VIII and not otherwise hereinafter defined in this Section 8.01
shall have the meaning set forth in Section 180.042 of the Statute. The
following capitalized terms (including any plural forms thereof) used in
this Article VIII shall be defined as follows:
(a) "Affiliate" shall include, without limitation, any corporation,
partnership, joint venture, employee benefit plan, trust or other
enterprise that directly or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the
corporation.
(b) "Authority" shall mean the entity selected by the Director or
Officer to determine his or her right to indemnification pursuant to
Section 8.04.
(c) "Board" shall mean the entire then elected and serving board of
directors of the corporation, including all members thereof who are
parties to the subject proceeding or any related proceeding.
(d) "Breach of Duty" shall mean the Director or Officer breached or
failed to perform his or her duties to the corporation and his or her
breach of or failure to perform those duties is determined, in accordance
with Section 8.04, to constitute misconduct under Section 180.044(2) (a)
l, 2, 3 or 4 of this Statute.
(e) "Corporation," as used herein and as defined in the Statute and
incorporated by reference into the definitions of certain other
capitalized terms used herein, shall mean this corporation, including,
without limitation, any successor corporation or entity to this
corporation by way of merger, consolidation or acquisition of all or
substantially all of the capital stock or assets of this corporation.
(f) "Director or Officer" shall have the meaning set forth in the
Statute; provided, that, for purposes of this Article VIII, it shall be
conclusively presumed that any Director or Officer serving as a director,
officer, partner, trustee, member of any governing or decision-making
committee, employee or agent of an Affiliate shall be so serving to the
request of the corporation.
(g) "Disinterested Quorum" shall mean a quorum of the Board who are
not parties to the subject proceeding or any related proceeding.
(h) "Party" shall have the meaning set forth in the Statute;
provided, that, for purposes of this Article VIII the term "Party" shall
also include any Director or Officer who is or was witness in a preceeding
at a time when he or she has not otherwise been formally named a party
thereto.
(i) "Proceeding" shall have the meaning set forth in the Statute;
provided, that, for purposes of this Article VIII, the term "Proceeding"
shall also include all Proceedings (i) brought under (in whole or in part)
the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, their respective state counterparts, and/or any rule or
regulation promulgated under any of the foregoing; (ii) brought before an
Authority or otherwise to enforce rights hereunder; (iii) any appeal from
a Proceeding; and (iv) any Proceeding in which the Director or Officer is
a plaintiff or petitioner because he or she is a Director or Officer;
provided, however, that such Proceeding is authorized by a majority vote
of a Disinterested Quorum.
(j) "Statute" shall mean Sections 180.042 through 180.059,
inclusive, of the Wisconsin Business Corporation Law, Chapter 180 of the
Wisconsin Statutes, as the same shall then be in effect, including any
amendments thereto, but, in the case of any such amendment, only to the
extent such amendment permits or requires the corporation to provide
broader indemnification rights than the Statute permitted or required the
corporation to provide prior to such amendment.
8.02. Mandatory Indemnification. To the fullest extent permitted
or required by the Statute, the corporation shall indemnify a Director or
Officer against all liabilities incurred by or on behalf of such Director
or Officer in connection with a proceeding in which the Director or
Officer is a party because he or she is a Director or Officer.
8.03. Procedure Requirements.
(a) A Director or Officer who seeks indemnification under Section
8.02 shall make a written request therefor to the corporation. Subject to
Section 8.03(b), within sixty days of the corporation's receipt of such
request, the corporation shall pay or reimburse the Director or Officer
for the entire amount of liabilities incurred by the Director or Officer
in connection with the subject proceeding (net of any expenses previously
advanced pursuant to Section 8.05).
(b) No indemnification shall be required to be paid by the
corporation pursuant to Section 8.02 if, within such sixty-day period: (i)
a Disinterested Quorum, by a majority vote thereof, determines that the
Director or Officer requesting indemnification engaged in misconduct
constituting a Breach of Duty; or (ii) a Disinterested Quorum cannot be
obtained.
(c) In either case of nonpayment pursuant to Section 8.03(b), the
Board shall immediately authorize by resolution that an Authority, as
provided in Section 8.04, determine whether the Director's or Officer's
conduct constituted a Breach of Duty and, therefore, whether
indemnification should be denied hereunder.
(d) If the Board does not authorize an Authority to determine the
Director's or Officer's right to indemnification hereunder within such
sixty-day period and/or if indemnification of the requested amount of
Liabilities is paid by the Corporation, then it shall be conclusively
presumed for all purposes that a Disinterested Quorum has determined that
the Director or Officer did not engage in misconduct constituting a Breach
of Duty.
8.04. Determination of Indemnification.
(a) If the Board authorizes an Authority to determine a Director's
or Officer's right to indemnification pursuant to Section 8.03, then the
Director or Officer requesting indemnification shall have the absolute
discretionary authority to select one of the following as such Authority.
(i) An independent legal counsel; provided, that such counsel
shall be mutually selected by such Director or Officer and by a majority
vote of a Disinterested Quorum or, if a Disinterested Quorum cannot be
obtained, then by a majority vote of the Board.
(ii) A panel of three arbitrators selected from the panels of
arbitrators of the American Arbitration Association in Milwaukee
Wisconsin; provided, that (A) one arbitrator shall be selected by such
Director or Officer, the second arbitrator shall be selected by a majority
vote of a Disinterested Quorum or, if a Disinterested Quorum cannot be
obtained, than by a majority vote of the Board, and the third arbitrator
shall be selected by the two previously selected arbitrators; and (B) in
all other respects, such panel shall be governed by the American
Arbitration Association's then existing. Commercial Arbitration Rules; or
(iii) A court pursuant to and in accordance with Section 180.051
of the Statute.
(b) In any such determination by the selected Authority there shall
exist a rebuttable presumption that the Director's or Officer's conduct
did not constitute a Breach of Duty and that indemnification against the
requested amount of Liabilities is required. The burden of rebutting such
a presumption by clear and convincing evidence shall be on the Corporation
or such other party asserting that such indemnification should not be
allowed.
(c) The Authority shall make its determination within sixty days of
being selected and shall submit a written opinion of its conclusion
simultaneously to both the corporation and the Director or Officer.
(d) If the Authority determines that indemnification is required
hereunder, the corporation shall pay the entire requested amount of
Liabilities (net of any Expenses previously advanced pursuant to Section
8.05), including interest thereon at a reasonable rate, as determined by
the Authority, within ten days of receipt of the Authority's opinion;
provided, that, if it is determined by the Authority that a Director or
Officer is entitled to indemnification as to some claims, issues or
matters, but not as to other claims, issues or matters, involved in the
subject Proceeding, the corporation shall be required to pay (as set forth
above) only the amount of such requested Liabilities ask the authority
shall deem appropriate in light of all of the circumstances of such
Proceeding.
(e) The determination by the Authority that indemnification is
required hereunder shall be binding upon the corporation regardless of any
prior determination that the Director or Officer engaged in a Breach of
Duty.
(f) All Expenses incurred in the determination process under this
Section 8.04 by either the corporation or the Director or Officer,
including, without limitation, all Expenses of the selected Authority,
shall be paid by the corporation.
8.05. Mandatory Allowance of Expense.
(a) The corporation shall pay or reimburse, within ten days after
the receipt of the Director's or Officer's written request therefor, the
reasonable Expenses of the Director or Officer as such Expenses are
incurred, provided the following conditions are satisfied:
(i) The Director or Officer furnishes to the corporation an
executed written certificate affirming his or her good faith belief that
he or she has not engaged in misconduct which constitutes a Breach of
Duty; and
(ii) The Director or Officer furnishes to the corporation an
unsecured executed written agreement to repay any advances made under this
Section 8.05 if it is ultimately determined by an Authority that he or she
is not entitled to be indemnified by the corporation for such Expenses
pursuant to this Section 8.04.
(b) If the Director or Officer must repay any previously advanced
Expenses pursuant to this Section 8.05, such Director or Officer shall not
be required to pay interest on such amounts.
8.06. Indemnification and Allowance of Expenses of Certain
Others.
(a) The corporation shall indemnify a director or officer of an
Affiliate (who is not otherwise serving as a Director or Officer) against
all Liabilities, and shall advance the reasonable Expenses, incurred by
such director or officer in a Proceeding to the same extent hereunder as
if such director or officer incurred such Liabilities because he or she
was a Director or Officer, if such director or officer is a Party thereto
because he or she is or was a director or officer of the Affiliate.
(b) The Board may, in its sole and absolute discretion as it deems
appropriate, pursuant to a majority vote thereof, indemnify against
Liabilities incurred by, and/or provide for the allowance of reasonable
Expenses of, an authorized employee or agent of the corporation acting
within the scope of his or her duties as such and who is not otherwise a
Director or Officer.
8.07. Insurance. The corporation may purchase and maintain
insurance on behalf of a Director or Officer or any individual who is or
was an authorized employee or agent of the corporation against any
Liability asserted against or incurred by such individual in his or her
capacity as such or arising from his or her status as such, regardless of
whether the corporation is required or permitted to indemnify against any
such Liability under this Article VIII.
8.08. Notice to the Corporation. A Director or Officer shall
promptly notify the corporation in writing when he or she has actual
knowledge of a Proceeding which may result in a claim of indemnification
against Liabilities or allowance of Expenses hereunder, but the failure to
do so shall not relieve the corporation of any liability to the Director
or Officer hereunder unless the corporation shall have been irreparably
prejudiced by such failure (as determined by an Authority).
8.09. Severability. If any provision of this Article VIII shall
be deemed invalid or inoperative, or if a court of competent jurisdiction
determines that any of the provisions of this Article VIII contravene
public policy, this Article VIII shall be construed so that the remaining
provisions shall not be affected, but shall remain in full force and
effect and any such provisions which are invalid or inoperative or which
contravene public policy shall be deemed, without further action or deed
by or on behalf of the corporation, to be modified, amended and/or
limited, but only to the extent necessary to render the same valid and
enforceable.
8.10. Nonexclusivity, of Article VIII. The rights of a Director
or Officer (or any other person) granted under this Article VIII shall not
be deemed exclusive of any other rights to indemnification against
Liabilities or advancement of Expenses which the Director or Officer (or
such other person) may be entitled to under any written agreement, Board
resoLution, vote of shareholders of the corporation or otherwise,
including, without limitation, under the Statute. Nothing contained in
this Article VIII shall be deemed to limit the corporation's obligations
to indemnify a Director or Officer under the Statute.
8.11. ContractuaL Nature of Article VIII: Repeal or Limitation of
Rights. This Article VIII shall be deemed to be a contract between the
corporation and each Director and Officer and any repeal or other
limitation of this Article VIII or any repeal or limitation of the Statute
or any other applicable law shall not limit any rights of indemnification
against Liabilities or allowance of Expenses then existing or arising out
of events, acts or omissions occurring prior to such repeal or limitation,
including, without limitation, the right to indemnification against
Liabilities or allowance of Expenses for Proceedings commenced after such
repeal or limitation to enforce this Article VIII with regard to acts,
omissions or events arising prior to such repeal or limitation.
ARTICLE IX. AMENDMENTS
9.01. Except as otherwise provided in the Restated Articles of
Incorporation, these By-laws may be altered, amended or repealed and new
By-laws may be adopted by the shareholders by the affirmative vote of a
majority of the shares present or represented at any annual or special
meeting of the shareholders or by the affirmative vote of a majority of
the entire number of directors authorized, at any general or special
meeting of such Board of Directors.
Exhibit 10.5
OPTION PURCHASE AGREEMENT
This OPTION PURCHASE AGREEMENT dated effective as of December
30, 1997 by and between Hein-Werner Corporation, a Wisconsin corporation
(the "Company") and Massachusetts Mutual Life Insurance Company, a
Massachusetts corporation, MassMutual Participation Investors and
MassMutual Corporate Investors (collectively the "Seller"),
WITNESSETH
WHEREAS, the Seller is the holder of certain options entitling
the holder thereof to purchase a total of 752,478 duly authorized, validly
issued and fully paid shares of the Company's common stock, at a purchase
price of $5.98 per share and represented by certain Hein-Werner
Corporation Certificates dated as of September 3, 1996 and May 30, 1997
(the "Options"), and
WHEREAS, the Company desires to acquire the Options and the
Seller desires to sell the Options in accordance with the terms,
conditions and provisions set forth herein.
NOW THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements set forth herein, and other fair and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
the parties agree as follows:
1. Purchase and Sale of the Options.
Terms. Subject to the terms and conditions of this Agreement,
the Seller hereby sells the Options to the Company, and the Company hereby
purchases the Options from the Seller, for an aggregate purchase price of
$1,000,000 (One Million Dollars). Payment of the aggregate purchase price
shall be made by the Company in immediately available funds and the Seller
will thereafter promptly deliver the Options to the Company duly endorsed
in form to be transferred to the Company. Such payment and delivery shall
occur as soon as possible, but in no event later than January 30, 1998.
2. Representations and Warranties of the Seller. The Seller hereby
represents and warrants to the Company as follows:
(a) Corporate Organization and Authority. The Seller is a
corporation duly organized, validly existing and in good standing under
the laws of the Commonwealth of Massachusetts, with corporate power to own
its properties and to conduct its business as now conducted. The Seller
has full legal right, power and authority to enter into and perform this
Agreement.
(b) Authorization. The execution and delivery of this
Agreement by the Seller and the consummation by Seller of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Seller.
(c) Title. The Seller has good and marketable title to the
Options, with full power to deliver the Options hereunder. Upon payment
for the Options pursuant to this Agreement, the Company will receive good
and marketable title to the Options, free and clear of all liens,
encumbrances, claims, security interests and defects.
3. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Seller as follows:
(a) Corporate Organization. The Company is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Wisconsin, with corporate power to own its properties and to
conduct its business as now conducted. The Company has full legal right,
power and authority to enter into and perform this Agreement.
(b) Authorization. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company. This Agreement
constitutes a legal, valid and binding agreement of the Company.
(c) No Conflicts. Neither the execution and delivery of this
Agreement by the Company, nor the consummation of the transactions
contemplated hereby, will violate or conflict with (i) any provisions of
the Certificate of Incorporation or Bylaws of the Company, (ii) any
agreement or instrument to which the Company is a party or by which the
Company or any of its assets or properties are subject or (iii) any law,
rule, regulation, writ, judgment, injunction, decree, determination, award
or other order of any court, government, government agency or
instrumentality, domestic or foreign, binding upon the Company.
4. Price Adjustment Event. If at any time prior to January 20,
1999, any Price Adjustment Event (as hereinafter defined) occurs or an
agreement in principle concerning the material terms of a Price Adjustment
Event is reached, then the Company shall immediately notify the Seller.
Contemporaneously with the consummation of the Price Adjustment Event, the
Company shall pay to the Seller an amount equal to 752,478 times the
excess, if any, of (i) the per share purchase price determined as of the
date upon which such Price Adjustment Event is consummated and paid in
connection with the Price Adjustment Event, over (ii) $7.31 per share.
All computations made pursuant to this section and paid to Seller shall be
made in writing and shall be satisfactory to Seller.
For purposes herein, Price Adjustment Event shall mean any
Change of Control of the Company. "Change of Control" shall mean and
shall be deemed to have occurred if at any time for whatever reason any
Person together with "affiliates" and "associates" of such Person, within
the meaning of Rule 12b-2 of the Commission under the Exchange Act, shall
acquire control or beneficial ownership (including beneficial ownership
resulting from the formation of a "group" within the meaning of Rule 13d-5
of the Commission under the Exchange Act) of more than 51% of the shares
of any class of voting stock of the Company.
5. Miscellaneous.
(a) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such which may be
hereafter declared invalid, void or unenforceable.
(b) Expenses. Each party shall bear its own expenses and
costs for any and all transactions contemplated by this Agreement.
(c) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by and against
the successors and assigns of the parties hereto.
(d) Amendments. This Agreement embodies all representations,
warranties and agreements of the parties hereto, supersedes any prior
agreement and the understanding between the parties with respect to the
subject matter of this Agreement. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of
a written agreement executed by both the parties hereto. However, either
party may waive any condition to the obligation of the other party
hereunder.
(e) Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given, if given) by delivery, by
facsimile transmission or by mail (registered or certified mail, postage
prepaid, return receipt requested) to the respective parties as follows:
If to the Company:
Hein-Werner Corporation
2120 Pewaukee Road
Waukesha, Wisconsin 53188
Attention: J.L. Dindorf, President and
C.E.O.
If to the Seller:
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111-0001
Attention: Roger W. Crandall
or at such other address as either party may have furnished to the other
in writing in accordance herewith, except that notices of change of
address shall only be effective upon receipt.
(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the substantive law of the Commonwealth of
Massachusetts without giving effect to the principles of conflict of laws
thereof.
(g) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, HEIN-WERNER CORPORATION and MASSACHUSETTS
MUTUAL LIFE INSURANCE COMPANY have caused this Agreement to be duly
executed as of the day and year first above written.
HEIN-WERNER CORPORATION
By:/s/ Joseph L. Dindorf
Name: Joseph L. Dindorf
Title: President and
Chief Executive Officer
Seller:
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY, MassMutual
Participation Investors and
MassMutual Corporate Investors
By:/s/ Charles C. McCobb
Name: Charles C. McCobb
Title: Managing Director
Exhibit 23
Consent of KPMG Peat Marwick LLP
The Board of Directors
Hein-Werner Corporation:
We consent to incorporation by reference in the registration statement
(Registration No. 333-48633) on Form S-8 of Hein-Werner Corporation of our
report dated February 13, 1998, relating to the consolidated balance
sheets of Hein-Werner Corporation and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of operations and cash
flows for each of the years in the three-year period ended December 31,
1997, and our report dated February 13, 1998, relating to the financial
statement schedule for each of the years in the three-year period ended
December 31, 1997 which reports appear in the December 31, 1997 Annual
Report on Form 10-K of Hein-Werner Corporation.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Milwaukee, Wisconsin
March 31, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1997, THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,
1997; AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 9,696
<SECURITIES> 0
<RECEIVABLES> 13,750
<ALLOWANCES> 1,570
<INVENTORY> 9,876
<CURRENT-ASSETS> 33,386
<PP&E> 7,529
<DEPRECIATION> 4,729
<TOTAL-ASSETS> 37,348
<CURRENT-LIABILITIES> 12,885
<BONDS> 0
<COMMON> 2,771
0
0
<OTHER-SE> 19,331
<TOTAL-LIABILITY-AND-EQUITY> 37,348
<SALES> 39,037
<TOTAL-REVENUES> 39,037
<CGS> 20,710
<TOTAL-COSTS> 37,228
<OTHER-EXPENSES> 80
<LOSS-PROVISION> 265
<INTEREST-EXPENSE> 95
<INCOME-PRETAX> 1,634
<INCOME-TAX> 297
<INCOME-CONTINUING> 1,337
<DISCONTINUED> 4,962
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,299
<EPS-PRIMARY> 2.17
<EPS-DILUTED> 1.96
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1996, AND THE
COMPUTATION OF EARNINGS PER SHARE (EXHIBIT 11) FOR THE YEAR ENDED DECEMBER
31, 1996; AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 20,445
<ALLOWANCES> 1,651
<INVENTORY> 17,415
<CURRENT-ASSETS> 37,090
<PP&E> 17,576
<DEPRECIATION> 12,125
<TOTAL-ASSETS> 45,598
<CURRENT-LIABILITIES> 16,197
<BONDS> 0
<COMMON> 2,629
0
0
<OTHER-SE> 15,307
<TOTAL-LIABILITY-AND-EQUITY> 45,598
<SALES> 41,696
<TOTAL-REVENUES> 41,696
<CGS> 21,861
<TOTAL-COSTS> 38,726
<OTHER-EXPENSES> 165
<LOSS-PROVISION> 420
<INTEREST-EXPENSE> 775
<INCOME-PRETAX> 2,030
<INCOME-TAX> 122
<INCOME-CONTINUING> 1,908
<DISCONTINUED> 268
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,176
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.69
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1995, AND THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,
1995, AND THE COMPUTATION OF EARNINGS PER SHARE (EXHIBIT 11) FOR THE YEAR
ENDED DECEMBER 31, 1995; AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 396
<SECURITIES> 0
<RECEIVABLES> 25,019
<ALLOWANCES> 1,742
<INVENTORY> 17,271
<CURRENT-ASSETS> 41,525
<PP&E> 16,517
<DEPRECIATION> 11,163
<TOTAL-ASSETS> 49,657
<CURRENT-LIABILITIES> 20,749
<BONDS> 0
<COMMON> 2,504
0
0
<OTHER-SE> 13,641
<TOTAL-LIABILITY-AND-EQUITY> 49,657
<SALES> 41,819
<TOTAL-REVENUES> 41,819
<CGS> 21,714
<TOTAL-COSTS> 39,882
<OTHER-EXPENSES> 91
<LOSS-PROVISION> 970
<INTEREST-EXPENSE> 990
<INCOME-PRETAX> 856
<INCOME-TAX> (36)
<INCOME-CONTINUING> 892
<DISCONTINUED> 121
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,013
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.32
</TABLE>
