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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LINDBERG CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 3398 36-1391480
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
6133 NORTH RIVER ROAD, SUITE 700
ROSEMONT, ILLINOIS 60018
TELEPHONE: (847) 823-2021
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
STEPHEN S. PENLEY JOHN H. BITNER
SENIOR VICE PRESIDENT AND CHIEF BELL, BOYD & LLOYD
FINANCIAL OFFICER SUITE 3300
LINDBERG CORPORATION CHICAGO, ILLINOIS 60602
6133 NORTH RIVER ROAD, SUITE 700 TELEPHONE: (312) 807-4306
ROSEMONT, ILLINOIS 60018
TELEPHONE: (847) 823-2021
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENTS FOR SERVICE)
COPIES TO:
STEVEN J. GRAY
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 N. LASALLE STREET, SUITE 2600
CHICAGO, ILLINOIS 60601
TELEPHONE: (312) 609-7500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, par value 1,610,000
$.01 per share......... shares $22.75 $36,627,500 $10,806
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</TABLE>
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(1) Includes 210,000 shares which may be purchased pursuant to an over-
allotment option granted by the Company to the Underwriters. Also includes
1,610,000 Common Share Purchase Rights evidenced by certificates of shares
of Common Stock that automatically trade with such Common Stock.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 of the Securities Act.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 19, 1998
1,400,000 SHARES
PROSPECTUS
LOGO
LINDBERG CORPORATION
COMMON STOCK
Of the 1,400,000 shares of common stock ("Common Stock") offered hereby (the
"Offering"), 1,275,000 shares are being sold by Lindberg Corporation (the
"Company") and 125,000 shares are being sold by certain stockholders of the
Company ("Selling Stockholders"). The Company will not receive any of the
proceeds from the sale of shares by the Selling Stockholders. See "Principal
and Selling Stockholders."
The Common Stock of the Company is quoted on the Nasdaq National Market under
the symbol "LIND." On June 18, 1998, the closing price of the Common Stock as
reported on the Nasdaq National Market was $22.25 per share. See "Price Range
of the Common Stock; Dividend Policy."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CON-
TRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT COMPANY(1)(2) STOCKHOLDERS(1)
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<S> <C> <C> <C> <C>
Per Share $ $ $ $
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Total(3) $ $ $ $
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</TABLE>
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(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $210,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 210,000 shares at the Price to Public less the Underwriting
Discount solely to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $ , $ and $ , respectively.
See "Underwriting."
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The shares of Common Stock are offered severally by the Underwriters
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order, in whole or in part. It is expected that
delivery of the certificates representing the shares will be made against
payment therefor in Chicago, Illinois, on or about , 1998.
ABN AMRO INCORPORATED MCDONALD & COMPANY
SECURITIES, INC.
, 1998.
<PAGE>
[logo]
[Map of the Company's facilities in the United States and photographs of
selected operations of the Company.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID. IN ADDITION, CERTAIN
UNDERWRITERS (AND SELLING GROUP MEMBERS, IF ANY) ALSO MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET,
IN ACCORDANCE WITH RULE 103 OF THE SECURITIES EXCHANGE ACT OF 1934. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and consolidated financial
statements, including the related notes thereto, appearing elsewhere or
incorporated by reference in this Prospectus. Unless otherwise indicated, all
information in this Prospectus assumes that the Underwriters' over-allotment
option will not be exercised. References in this Prospectus to the "Company" or
"Lindberg" are to Lindberg Corporation and its consolidated subsidiaries unless
the context indicates otherwise. Unless otherwise indicated, all financial
information refers to results from continuing operations.
THE COMPANY
OVERVIEW
Lindberg is the largest commercial heat treating company in the United
States, with operations in major industrial centers throughout the country. The
Company serves more than 9,000 customers in diverse industries, including
commercial aerospace, automotive/light truck, off-road vehicle, oilfield
equipment, defense, consumer products, tool and die, agriproducts and a variety
of other industries. Through both internal growth and acquisitions, the Company
currently operates 25 heat treating plants, and four heat treating facilities
located on the premises of customers, in 14 states. These 29 facilities are
grouped into 20 divisions.
Lindberg provides a wide range of heat treating processes, in which ferrous,
aluminum and other specialty metals are exposed to precise temperatures and
other conditions to improve mechanical properties, durability and wear
resistance. The Company provides these services to larger industrial
manufacturers with high volumes and a variety of products as well as small,
specialized manufacturers. Typical products that the Company heat treats are
aircraft components, automotive parts, machine tools and dies, oilfield drill
rig parts, consumer products and a variety of other metal products.
The Company has established itself as a leading commercial heat treater based
on its key competitive strengths, including its high level of quality and
service, technical expertise, network of facilities, industry certifications
and national reputation. The Company delivers high quality service on a timely
basis, while its technical expertise provides the capability to develop
customized solutions that meet specific customer needs. Many of the Company's
facilities are strategically located in major industrial centers in the
Midwest, California, Texas and the Northeast. This network allows the Company
to offer a wide range of services within close proximity to its customers. The
Company also offers dedicated heat treating services to certain larger
customers under long-term contracts through its Strategic Partnership 2000 ("SP
2000") program. This program was developed to (i) provide services to
manufacturers that perform their own heat treating in-house, (ii) retain
existing customers whose high heat treating volume may justify moving the
process in-house and (iii) capture additional volume from customers that may be
using multiple heat treaters.
The Company's net sales increased from $59.4 million in 1994 to $88.8 million
in 1997 and, over the same period, operating earnings increased from $4.9
million to $13.3 million and diluted earnings per share from continuing
operations increased from $.51 per share to $1.41 per share. Net sales
increased from $20.6 million in the first quarter of 1997 to $30.9 million in
the first quarter of 1998 and, over the same period, operating earnings
increased from $2.6 million to $4.9 million and diluted earnings per share from
continuing operations increased from $.27 per share to $.48 per share.
INDUSTRY
Heat treating is performed either in-house in captive departments of
manufacturers or externally by a commercial heat treating company such as
Lindberg. Commercial heat treaters are independent companies that specialize in
heat treating or other metal treatments and serve a large number of customers
across a variety of industries. The U.S. Department of Commerce reported sales
by commercial heat treating companies of
3
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approximately $2 billion in 1996. Management believes that this $2 billion
represents about 10% of the annual heat treating performed in the U.S., with
the balance performed in captive heat treating departments. Commercial heat
treating sales, as compiled by the Metal Treating Institute, an industry
association, have grown at a compound annual rate of approximately 8% to 9%
from 1993 through 1997.
Due to the time and costs associated with transporting materials and
customers' need for quick turnaround of heat treated products, commercial heat
treating has developed as a regional industry, with customers typically located
within 100 to 200 miles of the heat treating supplier. Consequently, the
commercial heat treating industry is highly fragmented and presents
opportunities for consolidation. Smaller heat treaters have been motivated to
combine with larger companies due to increasing regulatory and certification
requirements, ongoing capital expenditures necessary to remain competitive and
increasing demand for technical expertise. In addition, a number of industry
participants have acquired heat treaters in order to expand their geographical
presence and provide expanded or enhanced service capabilities.
BUSINESS STRATEGY
Management believes that the market environment has created opportunities for
the Company to strengthen its market position and enhance profitability by
meeting its customers' service requirements of quality, cost and on-time
delivery. To that end, the Company pursues an internal operating strategy and
an active acquisition strategy.
OPERATING STRATEGY
The operating strategy involves a combination of the following: (i) focusing
on service and quality designed to improve customer satisfaction and retention;
(ii) providing customers with a high degree of technical expertise and in depth
industry knowledge; (iii) emphasizing process improvements and equipment
utilization to increase productivity; (iv) operating on a decentralized basis
so that each division can react quickly and effectively to local market
conditions; (v) emphasizing employee ("associate") training and involvement in
all phases of the Company's operations; and (vi) attracting and retaining large
volume customers through a program that offers customers dedicated heat
treating services.
ACQUISITION STRATEGY
As industry consolidation continues, the Company expects acquisitions to be
an important part of its growth strategy. The Company is interested in
acquiring profitable, well run businesses that complement its heat treating
operations by increasing its existing market presence, providing an entry into
new regions or expanding its service offerings. By increasing the number of
facilities in a particular region, the Company can provide a more comprehensive
and higher level of service. Newly acquired companies in existing markets often
provide an opportunity for the Company to balance its production capacity
within a region. The Company also seeks to acquire businesses that are based in
markets in which Lindberg is not yet established, or that would expand the
Company's service offerings, such as coatings, forming or other ancillary
services. The Company seeks to improve operations of acquired businesses by
sharing established operating know-how, technology, technical expertise,
industry knowledge and financial resources and by leveraging Lindberg's
national reputation.
DIVESTITURE OF PRECISION PRODUCTS
In the fourth quarter of 1997, the Company established a plan to divest
itself of its Precision Products business segment. This segment consisted of
two aluminum die casting facilities (Impact Industries, Inc. and Arrow-Acme
Company) and one aluminum semi-permanent mold foundry (Harris Metals). The
Company reclassified its consolidated financial statements for 1997 and prior
periods to report that segment as discontinued operations. At December 31,
1997, net assets (less the allowance for an estimated after-tax loss of $5.9
million)
4
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of the discontinued operations totaled $17.5 million. The Company believes that
the divestiture will enable the Company to focus on its core competency and to
pursue growth opportunities in heat treating or ancillary services.
In April 1998, the Company sold substantially all of the operating assets of
Impact Industries, Inc. and in June 1998, the Company completed the sale of the
assets of Harris Metals. The Company expects the divestiture of the Precision
Products business segment to be completed by the end of 1998.
----------------
The principal executive offices of the Company are located at 6133 North
River Road, Suite 700, Rosemont, Illinois 60018, telephone: 847-823-2021.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.. 1,275,000 shares
Common Stock offered by the Selling 125,000 shares
Stockholders........................
Common Stock to be outstanding after
the Offering (1).................... 6,141,581 shares (6,351,581 shares if the
Underwriters exercise the over-allotment
option in full)
Use of Proceeds...................... To reduce bank debt and for general
corporate purposes
Nasdaq National Market symbol........ LIND
</TABLE>
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(1) Based on 4,866,581 shares issued and outstanding as of May 31, 1998. Does
not include 704,075 shares reserved for issuance upon exercise of
outstanding stock options and stock options which may be granted under the
Company's stock option plans. As of May 31, 1998, options to purchase
435,850 shares were outstanding, of which options for 216,875 shares were
exercisable on that date.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
Set forth below is summary historical consolidated financial information and
certain adjusted financial information of the Company. The consolidated
financial information as of and for the five years ended December 31, 1997 set
forth below has been derived from consolidated financial statements audited by
Arthur Andersen LLP, independent public accountants. The consolidated financial
data as of and for the three months ended March 31, 1998 and 1997 has been
derived from unaudited condensed consolidated financial statements which, in
the opinion of management, reflect all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the financial data for
such periods. The following information should be read in conjunction with
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and the Company's consolidated financial statements and the
accompanying notes appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
--------------- -------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AND PLANT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
DATA:
Net Sales.............. $30,872 $20,646 $88,784 $72,776 $67,967 $59,380 $55,609
Gross Profit........... 9,600 5,472 25,092 20,257 19,265 15,028 12,905
Operating Earnings
(Loss)................ 4,876 2,574 13,317 9,643 8,036 4,865 (5,742)(1)
Earnings (Loss) from
Continuing Operations
Before Income Taxes... 4,100 2,203 11,636 8,131 7,013 4,076 (6,073)
Earnings (Loss) from
Continuing Operations. 2,440 1,311 6,961 4,838 4,173 2,443 (3,766)
Earnings (Loss) from
Discontinued
Operations, Net of
Income Taxes.......... -- (206) (6,698)(2) 178 1,462 1,931 948
Net Earnings (Loss).... 2,440 1,105 263 5,016 5,635 4,374 (1,318)(3)
DILUTED EARNINGS PER
SHARE:(4)
Earnings (Loss) from
Continuing Operations. $ .48 $ .27 $ 1.41 $ .99 $ .88 $ .51 $ (.48)
Earnings (Loss) from
Discontinued
Operations............ -- (.04) (1.36) .04 .30 .41 .20
Net Earnings (Loss).... .48 .23 .05 1.03 1.18 .92 (.28)
Weighted Average Shares
Outstanding and
Equivalents........... 5,042 4,869 4,933 4,861 4,763 4,758 4,710
OTHER INFORMATION:
Capital Expenditures... $ 2,316 $ 1,154 $ 7,336 $ 5,365 $ 4,029 $ 4,396 $ 2,565
Depreciation and
Amortization.......... 1,471 951 4,204 3,695 3,459 3,258 3,457
Number of Plants at
Period-End............ 28 21 26 22 21 19 19
STATEMENT OF EARNINGS
DATA, AS
ADJUSTED(5)(6):
Earnings from
Continuing Operations. $ 2,700 $ 1,532 $ 7,861
Diluted Earnings per
Share from Continuing
Operations............ .43 .26 1.29
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1998
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ACTUAL AS ADJUSTED(5)
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(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital........................................ $ 18,385 $ 18,385
Total Assets........................................... 102,764 102,764
Total Debt............................................. 44,526 18,353
Total Stockholders' Equity............................. 34,254 60,427
</TABLE>
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(1) Includes a provision of $8,261,000 ($5,122,000 after-tax) for the
restructuring of the Company's heat treating operations.
(2) Includes a net charge of $5,944,000 related to the discontinuance of the
Company's Precision Products segment.
(3) Includes a gain of $1,500,000 representing the cumulative effect of
adopting SFAS 109, "Accounting for Income Taxes."
(4) Earnings per share have been restated to comply with SFAS No. 128,
"Earnings Per Share."
(5) Adjusted to give effect to the Offering at an assumed offering price of
$22.25 per share and after deducting the underwriting discount and
estimated offering expenses, and the application of the net proceeds of the
Offering to repay indebtedness which was outstanding during the periods
presented for the Statement of Earnings data and as of March 31, 1998 for
the Balance Sheet data. The adjusted financial information is not
necessarily indicative of the future results of operations and financial
position of the Company or the results of operations and financial position
that would have actually occurred had the Offering been in effect for the
periods or as of the date presented.
(6) Historical and As Adjusted Basic Earnings per Share from Continuing
Operations were $.50, $.27 and $1.45, and $.44, $.26 and $1.32,
respectively, for the three months ended March 31, 1998 and 1997 and the
year ended December 31, 1997.
6
<PAGE>
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Statements in this Prospectus or in documents incorporated herein by
reference that are not statements of historical fact constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995, including statements regarding future revenues, expenses
and profits. These forward-looking statements are subject to known and unknown
risks, uncertainties or other factors which may cause the actual results of
the Company to be materially different from the historical results or from any
results expressed or implied by the forward-looking statements. Such risks and
factors include, but are not limited to, those discussed below under "Risk
Factors" and "Management's Discussion and Analysis of Results of Operations
and Financial Condition." All cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear.
RISK FACTORS
An investment in the Common Stock involves certain risks. Prospective
investors should consider carefully the following risk factors, in addition to
the other information set forth in this Prospectus or incorporated herein by
reference, before purchasing the Common Stock.
ECONOMY; INDUSTRY CONCENTRATION
The Company provides services to customers operating across a wide range of
manufacturing industries, and its financial results have historically followed
general economic conditions in the United States. The Company has benefited
from the strong U.S. economy in recent years. However, a prolonged
retrenchment in the general U.S. economy could have a material adverse effect
on the Company's operating results and, ultimately, financial condition. In
addition, due to the high fixed cost structure of the heat treating business,
a reduction in the Company's sales volume can have a disproportionately
adverse effect on its profitability.
The Company estimates that customers serving the aerospace and automotive
industries currently account for approximately 30% to 35% and 15% to 20%,
respectively, of the Company's net sales. See "Business--Customers." A
significant decline in either commercial aircraft or automobile production
could have a material adverse effect on the Company's business and financial
condition, if the Company were unable to replace such business with orders
from other industries. The Company's concentration in certain industries may
change depending on the Company's acquisitions and the condition of the
industries served by the Company.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
The Company's growth strategy includes acquisitions of heat treating
businesses that complement its current operations. Although the Company
believes that there are many suitable acquisition candidates, it may not be
able to capitalize on certain opportunities due to potential sellers'
valuations and competition from other prospective buyers. The Company's
acquisition activities may involve certain other risks, including potential
disruption to the Company's ongoing business, integration difficulties,
difficulty implementing uniform standards, controls, procedures and policies,
potential impairment of relationships with employees and customers, and
potential liabilities of an acquired company. Future acquisitions may be
financed by internally generated funds, bank borrowings, or public offerings
or private placements of equity or debt securities, to the extent such
financing opportunities are available to the Company. Any acquisitions funded
by equity of the Company may be dilutive.
APPROVED VENDOR STATUS
Many of the Company's customers are contractors or subcontractors to major
manufacturers that impose stringent quality standards and that require their
contractors and subcontractors to use only approved vendors. The Company is an
approved vendor for these major manufacturers and, as an approved vendor, it
is subject to
7
<PAGE>
periodic audit and renewal of certifications. Should the Company lose its
status as an approved vendor for one or more major manufacturers, the Company
may suffer a loss in revenues and may incur additional costs in connection
with seeking recertification.
ENVIRONMENTAL REGULATIONS
The Company is subject to federal, state and local environmental laws and
regulations concerning emissions into the air, discharges into waterways and
the generation, handling and disposal of waste materials. The Company's past
expenditures relating to environmental compliance have not had a material
adverse effect on the Company. However, there can be no assurance that changes
in these laws and regulations or in their enforcement, or the discovery of new
environmental issues requiring corrective measures in the future, will not
adversely affect the Company's capital expenditures, earnings and competitive
position. See "Business--Environmental Regulation."
PRODUCT AND OTHER LIABILITIES
The Company's business may expose it to potential product liability claims
in the event that a failure of a product containing parts treated by the
Company results in personal injury or death. In addition, if any product with
parts treated by the Company proves to be defective, the Company may be
required to participate in a recall involving such product. Although the
Company maintains various types of insurance coverage, there can be no
assurance that such coverage will be adequate for liabilities that may be
incurred or that it will continue to be available on terms acceptable to the
Company.
The Company believes that it is in material compliance with applicable laws
and regulations relating to occupational hazards and safety. However, the
Company's operations entail risk of injury to production workers. There can be
no assurance that the Company will not incur material costs and liabilities in
connection with personal injuries suffered by its associates.
RISKS ASSOCIATED WITH GOVERNMENT PROGRAMS
The Company estimates that approximately 5% to 10% of the Company's net
sales are generated from government contractors and subcontractors whose
products are used by the defense industry. As a service provider to
contractors and subcontractors of the U.S. government, the Company is directly
and indirectly subject to various federal rules, regulations and orders
applicable to government contracts. Although the Company believes that it is
in material compliance with all such laws, any future violation could result
in civil liability, cancellation or suspension of existing contracts or
ineligibility for future contracts funded in whole or in part with federal
funds. Future changes in these rules, regulations and orders may make
compliance substantially more costly. In addition, a significant reduction in
defense budgets in the future may adversely affect the Company's volume and
margins.
The Company is the subject of a pending investigation by the government and
a qui tam (whistle-blower) lawsuit regarding alleged violations of the Federal
False Claims Act. Although the activities that are the subject of the
investigation and lawsuit appear to relate to only one plant, no assurance can
be given that the investigation or lawsuit will not materially adversely
affect the Company. See "Business--Litigation."
COMPETITION
Competition in the heat treating industry is intense. Companies generally
compete on a local level for customers in a defined geographic area on the
basis of timely delivery, quality and price. In certain markets, the Company
competes against companies that may have larger facilities and greater
resources in those markets.
8
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DEPENDENCE UPON KEY PERSONNEL
The Company's continued success will depend to a large extent upon the
abilities and continued efforts of its senior management and upon the
Company's ability to attract and retain highly qualified personnel, including
personnel associated with businesses acquired by the Company. The loss of key
members of the Company's management team could adversely affect the Company's
results of operations and future growth prospects.
VOLATILITY OF STOCK PRICE; LIMITED PUBLIC FLOAT
The market price of the Common Stock is affected by a number of factors,
including limited trading volume, variations in the Company's operating
results, evolving business prospects and competitors, as well as general
conditions in the economy and the financial markets. Also, the equity markets
generally have experienced significant price and volume fluctuations in recent
years. This volatility can impact significantly the stock price of many
companies for reasons unrelated to their performance.
Although a public market exists for the Common Stock, trading activity has
been limited. Due to the relatively small number of shares currently
outstanding, the trading of a relatively small number of shares could subject
the stock price to volatility and significantly affect the market price of the
Common Stock.
LIMITATIONS ON CHANGE IN CONTROL
Certain provisions in the Company's Certificate of Incorporation and By-laws
may have the effect of delaying, deferring or preventing a change in control
of the Company, even if such a change would be beneficial to many
stockholders. These provisions include a staggered board and super-majority
stockholder vote or approval by a super-majority of the Board of Directors for
a change in the number of directors. In addition, the board of directors has
the authority, without further action by the stockholders, to issue up to one
million shares of preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, and to issue authorized but
unissued shares of Common Stock up to a maximum of 25 million shares. The
issuance of preferred stock or additional shares of Common Stock could have
the effect of delaying, deferring or preventing a change in control of the
Company, even if such change in control would be beneficial to the Company's
stockholders. The Company's stockholder rights plan may also have the effect
of discouraging a change in control of the Company, as could the elimination
of stockholder action by written consent without a meeting, as the Company's
charter provides. A two-thirds vote of the holders of the Company's voting
securities is required for certain mergers and other major corporate
transactions with holders of 10% or more of the Company's voting securities
without approval of the Company's Board of Directors prior to such 10%
ownership. Further, the Company has not opted out of the provision under
Delaware law that imposes certain restrictions on any business combination
between the Company and an "interested stockholder" as defined in the Delaware
statute. See "Description of Capital Stock--Anti-Takeover Effects of the
Company's Governing Documents and Delaware Corporate Law."
9
<PAGE>
USE OF PROCEEDS
The Company estimates the net cash proceeds from the sale of the 1,275,000
shares of Common Stock to be approximately $26.2 million at an assumed
offering price of $22.25 per share, after paying the underwriting discount
(approximately $2.0 million) and the expenses of the offering (such as legal,
accounting and printing costs, which the Company estimates to be approximately
$210,000). If the Underwriters exercise their over-allotment option in full,
the net cash proceeds are estimated to be approximately $30.5 million.
The Company will not receive any of the proceeds from the sale of the shares
of Common Stock by the Selling Stockholders.
The Company intends to use all or substantially all of the net proceeds to
repay outstanding indebtedness under its revolving credit facility (the
"Revolving Credit Facility"). The Revolving Credit Facility will expire in
April 2000 and, at May 31, 1998, the Company's borrowings totaled $28 million
under the Revolving Credit Facility. These borrowings had an effective
interest rate of 6.6% per annum in 1997 and 6.7% per annum in the first
quarter of 1998. Of the outstanding revolving credit borrowings, approximately
$20 million were incurred in the twelve months ended May 31, 1998. This
primarily reflected the use of funds for acquisitions and capital
expenditures, offset to some degree by funds generated by operations and
proceeds from the sale of Impact Industries, Inc. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition --Liquidity and
Capital Resources." Any net proceeds remaining after repayment of the
borrowings under the Revolving Credit Facility will be used for general
corporate purposes.
10
<PAGE>
PRICE RANGE OF THE COMMON STOCK;
DIVIDEND POLICY
The Common Stock is quoted on the Nasdaq National Market under the symbol
"LIND." The table below shows the range of high and low closing sale prices of
the Common Stock, as reported by the Nasdaq National Market, for the periods
indicated.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1996:
First quarter........................................... $10 1/4 $ 6 3/8
Second quarter.......................................... 11 8 1/4
Third quarter........................................... 11 1/8 8 3/4
Fourth quarter.......................................... 11 9 1/4
1997:
First quarter........................................... 10 8 1/2
Second quarter.......................................... 9 1/4 8 1/2
Third quarter........................................... 12 1/2 9
Fourth quarter.......................................... 16 11 3/4
1998:
First quarter........................................... 18 1/8 12 3/4
Second quarter (through June 18, 1998).................. 25 16 3/4
</TABLE>
On June 18, 1998, the closing price of the Common Stock was $22.25 per
share, and there were 452 stockholders of record on that date.
The Company has paid quarterly cash dividends on the Common Stock on a
regular basis since 1959. The Company paid quarterly cash dividends of $.07
per share in the first three quarters of 1996. Commencing in the fourth
quarter of 1996, the quarterly cash dividend was increased to $.08 per share.
In determining whether to declare a cash dividend, the Board of Directors will
consider the Company's earnings, consolidated financial condition and results
of operations, taxes, legal restrictions, general economic conditions and
other factors. The Company intends to continue to pay regular quarterly cash
dividends on its Common Stock, subject to the Company's need for those funds
and compliance with financial covenants under the Company's financing
arrangements.
The Company's Note Agreement for its $10,000,000 Principal Amount 7.16%
Senior Notes due October 30, 2002 contains restrictions on the declaration or
payment by the Company of cash dividends or other distributions in respect of
its capital stock unless certain financial requirements are met. At March 31,
1998, approximately $5.0 million was not so restricted, which amount would be
increased by approximately $26.2 million upon completion of this Offering.
11
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated short-term debt and
capitalization of the Company at March 31, 1998, and as adjusted to reflect
the sale of the Common Stock offered hereby by the Company and the application
of the net proceeds from such sale. This table should be read in conjunction
with the Company's consolidated financial statements and the related notes and
other financial information included in this Prospectus or incorporated herein
by reference.
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------
ACTUAL AS ADJUSTED(1)
------- --------------
(IN THOUSANDS)
<S> <C> <C>
Short-Term Debt, including Current Maturities of Long-
Term Debt............................................. $ 8,463 $ 8,463
Long-Term Debt (Less Current Maturities)............... 36,063 9,890
------- -------
Total Debt......................................... 44,526 18,353
Stockholders' Equity:
Common Shares, $2.50 par value:
Authorized 12,000,000 shares;
Issued 5,673,397 shares(2)......................... 14,183 69(3)
Additional Paid-In Capital........................... 1,529 41,816(3)
Retained Earnings.................................... 23,431 23,431
Treasury Shares (826,216 shares) at cost............. (4,735) (4,735)
Underfunded Pension Liability Adjustment............. (154) (154)
------- -------
Total Stockholders' Equity......................... 34,254 60,427
------- -------
Total Capitalization................................... $78,780 $78,780
======= =======
</TABLE>
- --------
(1) As adjusted to reflect (i) the sale of 1,275,000 shares of Common Stock in
this Offering at the assumed offering price of $22.25 per share, net of
the underwriting discount and estimated expenses, and (ii) the application
of all of the anticipated net proceeds from the sale of shares by the
Company to reduce certain bank indebtedness of the Company. See "Use of
Proceeds."
(2) Excludes 704,075 shares reserved for issuance upon exercise of outstanding
stock options and stock options which may be granted under the Company's
stock option plans. At May 31, 1998, options to purchase 435,850 shares
were outstanding, of which options for 216,875 shares were exercisable on
that date.
(3) As adjusted to reflect the amendment to the Company's Certificate of
Incorporation effective April 24, 1998, pursuant to which the par value of
the Common Stock has been changed to $.01 per share, the number of
authorized shares of Common Stock was increased to 25,000,000 and a new
class of 1,000,000 shares of preferred stock, issuable in series, was
authorized.
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below is selected historical consolidated financial information
and certain adjusted financial information of the Company. The consolidated
financial information as of and for the five years ended December 31, 1997 set
forth below has been derived from consolidated financial statements audited by
Arthur Andersen LLP, independent public accountants. The consolidated
financial data as of and for the three months ended March 31, 1998 and 1997
has been derived from unaudited condensed consolidated financial statements
which, in the opinion of management, reflect all adjustments (consisting only
of normal recurring accruals) necessary for a fair presentation of the
financial data for such periods. The following information should be read in
conjunction with "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and the Company's consolidated financial
statements and the accompanying notes appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------ ---------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND PLANT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
DATA:
Net Sales.............. $ 30,872 $ 20,646 $ 88,784 $ 72,776 $ 67,967 $ 59,380 $ 55,609
Cost of Sales.......... (21,272) (15,174) (63,692) (52,519) (48,702) (44,352) (42,704)
-------- -------- -------- -------- -------- -------- --------
Gross Profit........... 9,600 5,472 25,092 20,257 19,265 15,028 12,905
Selling and
Administrative
Expenses.............. (4,724) (3,154) (13,211) (11,507) (11,530) (10,217) (10,386)
Equity in Earnings of
Partnership........... -- 256 1,436 893 301 54 --
Restructuring Charge... -- -- -- -- -- -- (8,261)
-------- -------- -------- -------- -------- -------- --------
Operating Earnings
(Loss)................ 4,876 2,574 13,317 9,643 8,036 4,865 (5,742)
Interest Expense (Net). (776) (371) (1,681) (1,512) (1,638) (789) (331)
Gain on Asset
Conversion............ -- -- -- -- 615 -- --
-------- -------- -------- -------- -------- -------- --------
Earnings (Loss) from
Continuing Operations
Before Income Taxes... 4,100 2,203 11,636 8,131 7,013 4,076 (6,073)
Provision (Benefit) for
Income Taxes--
Continuing Operations. 1,660 892 4,675 3,293 2,840 1,633 (2,307)
-------- -------- -------- -------- -------- -------- --------
Earnings (Loss) from
Continuing Operations. 2,440 1,311 6,961 4,838 4,173 2,443 (3,766)
Earnings (Loss) from
Discontinued
Operations, Net of
Income Taxes.......... -- (206) (6,698)(1) 178 1,462 1,931 948
-------- -------- -------- -------- -------- -------- --------
Net Earnings (Loss).... $ 2,440 $ 1,105 $ 263 $ 5,016 $ 5,635 $ 4,374 $ (1,318)(2)
DILUTED EARNINGS PER
SHARE:(3)
Earnings (Loss) from
Continuing Operations. $ .48 $ .27 $ 1.41 $ .99 $ .88 $ .51 $ (.48)
Earnings (Loss) from
Discontinued
Operations............ -- (.04) (1.36) .04 .30 .41 .20
Net Earnings (Loss).... .48 .23 .05 1.03 1.18 .92 (.28)
Weighted Average Shares
Outstanding and
Equivalents........... 5,042 4,869 4,933 4,861 4,763 4,758 4,710
BALANCE SHEET DATA:
Working Capital........ $ 18,385 $ 31,322 $ 16,147 $ 30,100 $ 29,237 $ 23,726 $ 8,616
Total Assets........... 102,764 74,638 89,563 74,888 68,639 65,878 48,223
Total Debt............. 44,526 21,901 36,166 21,601 18,900 17,900 7,780
Total Stockholders'
Equity................ 34,254 33,935 32,091 33,047 29,182 24,669 21,155
OTHER INFORMATION:
Capital Expenditures... $ 2,316 $ 1,154 $ 7,336 $ 5,365 $ 4,029 $ 4,396 $ 2,565
Depreciation and
Amortization.......... 1,471 951 4,204 3,695 3,459 3,258 3,457
Number of Plants at
Period-End............ 28 21 26 22 21 19 19
STATEMENT OF EARNINGS
DATA, AS
ADJUSTED(4)(5):
Earnings from
Continuing Operations. $ 2,700 $ 1,532 $ 7,861
Diluted Earnings per
Share from Continuing
Operations............ .43 .26 1.29
</TABLE>
- --------
(1) Includes a net charge of $5,944,000 related to the discontinuance of the
Company's Precision Products segment.
(2) Includes gain of $1,500,000 representing the cumulative effect of adopting
SFAS 109, "Accounting for Income Taxes."
(3) Earnings per share have been restated to comply with SFAS No. 128,
"Earnings Per Share."
(4) Adjusted to give effect to the Offering at an assumed offering price of
$22.25 per share and after deducting the underwriting discount and
estimated offering expenses, and the application of the net proceeds of
the Offering to repay indebtedness which was outstanding during the
periods presented. The adjusted financial information is not necessarily
indicative of the future results of operations and financial position of
the Company or the results of operations and financial position that would
have actually occurred had the Offering been in effect for the periods or
as of the date presented.
(5) Historical and As Adjusted Basic Earnings per Share from Continuing
Operations were $.50, $.27 and $1.45, and $.44, $.26 and $1.32,
respectively, for the three months ended March 31, 1998 and 1997 and the
year ended December 31, 1997.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The Company was founded in 1922 and, through internal growth and external
acquisitions, has become the largest provider of commercial heat treating in
the nation, operating 29 facilities located across the country. Over the past
year, management has repositioned the Company in order to take advantage of
the growth opportunities in its core heat treating operations. With the
planned divestiture of the Precision Products segment discussed below, the
Company's operating, managerial and financial resources are focused on
enhancing the performance of existing heat treating operations and expanding
the Company's presence through strategic acquisitions in existing and new
markets.
In addition to expanding its business internally, the Company continues to
seek external growth by acquisitions of profitable, well-run companies that
will complement its existing heat treating operations. Since 1994, the Company
has acquired seven heat treating businesses. In 1997, the Company acquired
Ticorm, Inc. and purchased the 50% interest in Alumatherm Heat Treating
Company not already owned by the Company. Ticorm and Alumatherm are Los
Angeles-based heat treating businesses that serve primarily the commercial
aerospace industry. In 1998, the Company acquired Industrial Steel Treating
Co. and Fabriform Metal Brazing Inc., two related facilities in the Los
Angeles area that also serve principally the commercial aerospace industry.
Also in 1998, the Company acquired Houston Heat Treating Company, a Houston-
based heat treating business that serves the oilfield equipment industry. The
Company has identified a number of other acquisition candidates and will
continue to evaluate these and other opportunities.
In the fourth quarter of 1997, the Company established a plan to divest its
Precision Products business segment and sell the underlying facilities so that
the Company could focus its resources on its higher margin, core heat treating
business. At year-end 1997, the Company reported the Precision Products
business as discontinued operations and recorded an after-tax charge of $5.9
million related to the estimated loss on the sale of the three facilities in
this segment. The Company completed the sale of certain assets of two of the
Precision Products facilities, Impact Industries, Inc. and Harris Metals, in
April and June 1998, respectively. The Company expects to complete the
divestiture of the Precision Products business segment by year-end 1998 and to
use the proceeds to repay borrowings and to fund continued expansion of its
heat treating operations, including acquisitions.
RESULTS OF OPERATIONS
The following table presents certain statement of earnings data expressed as
a percentage of net sales for the periods presented.
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
------------ -------------------
1998 1997 1997 1996 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net Sales................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Gross Profit.............................. 31.1 26.5 28.3 27.8 28.3
Selling and Administrative Expenses....... 15.3 15.3 14.9 15.8 17.0
Operating Earnings........................ 15.8 12.5 15.0 13.2 11.8
Interest Expense (Net).................... 2.5 1.8 1.9 2.1 2.4
Earnings from Continuing Operations....... 7.9 6.3 7.8 6.6 6.1
</TABLE>
First Quarter 1998 Compared to First Quarter 1997
Net sales for the quarter ended March 31, 1998 were $30.9 million, up $10.2
million, or 50%, from $20.6 million for the corresponding period in 1997.
Approximately 81% of the year-to-year increase in net sales
14
<PAGE>
resulted from acquisitions in 1997 and 1998. Excluding acquisitions, the
Company's remaining operations reported increased net sales of 9% overall.
Facilities serving aerospace markets experienced strong order rates in the
first quarter of 1998, making a significant contribution to the total net
sales increase.
Gross profit for the first quarter of 1998 was $9.6 million, up $4.1
million, or 75%, from $5.5 million for the first quarter of 1997. The
Company's gross margin in the first quarter of 1998 was 31.1%, compared to
26.5% in the corresponding period of 1997. The improved margin resulted as
sales growth exceeded the increase in expenses due to the fixed nature of
certain of the Company's operating costs. The improved margin also reflects
the effect of recent acquisitions.
Selling and administrative expenses for the first three months of 1998 were
$4.7 million, compared to $3.2 million in the first quarter of 1997. The
increase resulted largely from expenses associated with acquired companies.
Selling and administrative expenses as a percentage of net sales were 15.3%
for the first quarters of 1998 and 1997.
Subsequent to the Company's acquisition of its partner's 50% interest in the
Alumatherm partnership, the Company stopped recording equity in earnings of
the partnership and, therefore, did not report any such earnings during the
first quarter of 1998. During the first quarter of 1997, the Company reported
equity in earnings of $256,000 from the Alumatherm partnership.
Interest expense in the first three months of 1998 was $776,000, compared to
$371,000 in the first quarter of 1997. This resulted from the increased level
of borrowing for the Company's recent acquisitions. Borrowing rates were
largely unchanged at 6.7% per annum.
Reflecting the above, net earnings from continuing operations in the first
quarter of 1998 were $2.4 million, up $1.1 million, or 86%, from $1.3 million
for the corresponding period in 1997. Net earnings from continuing operations
for the first quarter of 1998 were $.48 per diluted share, up $.21, or 78%,
from $.27 per diluted share for the first quarter of 1997.
As required by Accounting Principles Board Opinion No. 30, results of
discontinued operations for the first quarter of 1998 were included in the
reserve for loss on discontinued operations provided for previously.
Discontinued operations reported a net loss of $206,000, or $.04 per diluted
share, in the first quarter of 1997. Therefore, the Company reported net
earnings of $1.1 million, or $.23 per share, for that period.
1997 Compared to 1996
Net sales in 1997 were $88.8 million, up $16.0 million, or 22%, from $72.8
million in 1996. The higher level of net sales resulted primarily from the
acquisition of three heat treating companies from May 1996 through October
1997, expansion of the SP 2000 program during 1997 and growth at certain heat
treating plants where customer demand was strong, in particular those serving
the commercial aerospace industry. The acquisition of Vac-Hyd in 1996, and of
Ticorm and Alumatherm in 1997, accounted for 48% of the increase in net sales
for 1997. Also in 1997, the Company expanded the number of SP 2000 sites in
operation to seven from six at the close of 1996. This program provided net
sales in 1997 of $6.2 million in comparison to $3.9 million in 1996, thereby
contributing to the overall increase in Company sales in 1997. Finally, while
not all of the Company's heat treating plants generated sales growth in 1997
as compared to the prior year, heat treating operations in existence at the
beginning of 1996 reported an overall 9% increase in net sales.
Gross profit in 1997 was $25.1 million, up $4.8 million, 24%, from $20.3
million in 1996. The gross margin in 1997 was 28.3%, compared to 27.8% in the
prior year. The increase in gross margin was related primarily to the higher
level of net sales during 1997, providing incremental earnings in excess of
the prior year's rate of gross margin. The improved gross margin was also the
result of cost containment efforts.
Selling and administrative expenses in 1997 were $13.2 million, compared to
$11.5 million in 1996. Selling and administrative expenses as a percentage of
net sales decreased to 14.9% in 1997 from 15.8% in 1996. The
15
<PAGE>
increase in the level of expenses in 1997 over the prior year resulted
primarily from additional expenses of approximately $1.0 million incurred in
connection with the acquisitions of Ticorm and Alumatherm.
During 1997, for the first nine months of the year prior to the Company's
acquisition of its partner's 50% interest in the joint venture, equity
earnings related to the Alumatherm partnership recorded by the Company totaled
$1.4 million. This compared to $893,000 recorded for the full year 1996.
Interest expense in 1997 was $1.7 million, compared to $1.5 million in 1996.
The increase resulted from the increased level of borrowings due to
acquisitions. The average interest rate on borrowings in 1997 was 6.6%
compared to 6.7% for 1996.
Reflecting the above items, net earnings from continuing operations in 1997
were $7.0 million, up $2.1 million, or 44%, from $4.8 million in 1996. Net
earnings from continuing operations in 1997 were $1.41 per diluted share, up
$.42, or 42%, from $.99 per diluted share in 1996.
The results of the Company's Precision Products segment, net of income
taxes, are presented as discontinued operations. In 1997, an after-tax loss of
$754,000 from operations was recorded compared to $178,000 in earnings for
1996. The loss from operations in 1997 resulted largely from a sales decline
at the segment's Impact Industries plant. Also in 1997, the Company recorded a
$5.9 million after-tax charge related to an estimated loss on the eventual
sale of the segment's operations. The Company concluded to divest the
Precision Products businesses and concentrate financial and operating
resources on the higher margin core heat treating business, which had
represented approximately 70% of total Company net sales during 1997. Net
earnings for 1997 were $263,000, or $.05 per diluted share, as compared to
$5.0 million, or $1.03 per diluted share, in 1996.
1996 Compared to 1995
Net sales for 1996 were $72.8 million, up $4.8 million, or 7%, from $68.0
million in 1995. The acquisition of Vac-Hyd accounted for approximately 27%,
and new SP 2000 projects accounted for approximately 40%, of the increase in
net sales in 1996. Excluding acquisitions and new SP 2000 net sales, heat
treating operations in existence at the beginning of 1996 reported an overall
2% increase in net sales.
Gross profit in 1996 was $20.3 million, up $1.0 million, or 5%, from $19.3
million in 1995. The Company's gross margin in 1996 was 27.8%, compared to
28.3% for the prior year. The decline in gross margin in 1996 resulted
primarily from higher employee related costs, which more than offset the
positive effect produced by the increase in net sales during 1996.
Selling and administrative expenses in 1996 were $11.5 million, essentially
unchanged from the prior year. Selling and administrative expenses as a
percentage of net sales decreased to 15.8% in 1996 from 17.0% in 1995.
In 1996, the Company recorded $893,000 in equity earnings related to its
ownership in the Alumatherm partnership, up $592,000, or 197%, from $301,000
in 1995. This increase resulted from the partnership's strong sales and
earnings growth primarily due to its participation in the improving commercial
aerospace industry.
Interest expense in 1996 was $1.5 million, compared to $1.6 million in 1995.
This resulted from lower interest rates experienced during 1996, which more
than offset higher levels of borrowings which the Company maintained during
the year, in particular after the acquisition of Vac-Hyd in May 1996.
Results in 1995 also included a $615,000 gain related to a fire at the
Company's facility in Solon, Ohio. The complete destruction of one major piece
of equipment and subsequent capitalization of a new furnace resulted in an
involuntary conversion gain reported as other income.
16
<PAGE>
Reflecting primarily the above factors, net earnings from continuing
operations in 1996 were $4.8 million, up $665,000, or 16%, from $4.2 million
in 1995. Net earnings from continuing operations in 1996 were $.99 per diluted
share, compared to $.88 per diluted share in 1995.
The Company's discontinued Precision Products segment recorded after-tax
earnings of $178,000 in 1996, compared to $1.5 million in 1995. The reduced
level of earnings in 1996 resulted from lower net sales within the segment for
the year, principally at the Impact Industries operation. Net earnings for
1996 were $5.0 million, or $1.03 per diluted share, as compared to $5.6
million, or $1.18 per diluted share, in 1995.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company's total debt was $44.5 million, an increase
of $8.4 million from $36.2 million outstanding at December 31, 1997. The
Company's total debt to capitalization ratio was 57% at the end of the first
quarter of 1998 compared to 53% at the end of 1997.
The level of debt increased in the first quarter of 1998 primarily as a
result of the acquisition of Industrial Steel Treating Co. and Fabriform Metal
Brazing, Inc. for a purchase price, net of cash received, of $10.6 million.
This transaction was funded with additional borrowings under the Company's
Revolving Credit Facility. The cash effect of this purchase was offset to a
degree by cash generated from operations during the quarter, which was used to
repay debt.
Capital expenditures for the first three months of 1998 were $2.3 million,
increased from $1.2 million in the corresponding period of 1997. The spending
in the first quarter of 1998 related primarily to the acquisition of
additional furnaces and equipment for expansion at certain facilities and for
equipment under the SP 2000 program.
In 1997, the Company's borrowings increased by $14.6 million to $36.2
million at year-end from $21.6 million at December 31, 1996. The ratio of debt
to total capitalization was 53% at the close of 1997, as compared to 40% at
year-end 1996.
The most significant factor in the year-to-year increase in borrowing was
the use of funds in 1997 for the acquisitions of Ticorm, Inc. for $3.8 million
and the remaining 50% share of the Company's joint venture partnership
Alumatherm from its partner for $12.8 million. The Company completed these
acquisitions using a combination of bank borrowings and notes payable. At
year-end 1997, the notes payable related to Ticorm in the amount of $1.9
million and Alumatherm in the amount of $6.3 million remained outstanding.
Another significant use of funds in 1997 was for capital expenditures. The
Company spent a total of $7.3 million on capital projects during 1997, as
compared to $5.4 million in 1996. The figures for both 1997 and 1996 exclude
amounts related to the purchase price of acquisitions and amounts related to
discontinued operations. The Company made capital investments in 1997
primarily to accommodate new business opportunities and, to a lesser degree,
upgrade facilities and equipment. Spending related to the Company's SP 2000
program represented about 25% of the total capital spending. Approximately 19%
of 1996 capital spending was for SP 2000 projects. Also during 1997, the
Company made significant capital outlays for new furnace installations at
several of its heat treating facilities.
Levels of working capital associated with accounts receivable and accounts
payable increased slightly at the end of the first quarter of 1998 compared to
year-end 1997 and increased at year-end 1997 from the prior year largely as a
result of additional requirements related to businesses acquired in 1997.
Since the Company's heat treating customers maintain ownership of products
shipped to the Company for processing, the business does not have a working
capital need related to inventories.
During 1997, the Company made cash outlays related to environmental matters.
These outlays largely included costs for consulting/engineering, legal
support, and in certain cases, remediation. The Company believes
17
<PAGE>
it will continue to make such expenditures in the future, but that such
spending will continue to have a limited effect on its financial condition and
liquidity.
During the first quarter of 1998, the Company paid cash dividends of $.08
per share, or a total of $387,000, compared to cash dividends of $.08 per
share, or a total of $382,000, during in the first quarter of 1997. In 1997,
the Company paid cash dividends totaling $.32 per share, which amounted to a
total of $1.5 million paid to stockholders during the year. This represented
an increase of 12% from the $1.4 million in cash dividends paid in 1996.
In February 1998, the Company amended its Revolving Credit Facility to
increase the total borrowing capacity under the facility from $35 million to
$45 million, extend the maturity date of the agreement relating to the
facility to April 2000 and adjust certain loan covenants. At March 31, 1998,
the Company had $17 million available capacity under the amended Revolving
Credit Facility.
The Company believes that its borrowing capacity and funds generated from
operations will be sufficient to meet currently foreseen capital investment
and working capital needs in support of existing business both in 1998 and in
the longer term. Proceeds from this Offering will be used to repay borrowings
and to provide the Company with a sufficiently strong financial structure to
fund additional investment opportunities through borrowings in the future.
INFLATION
Although the Company cannot accurately determine the exact effect of
inflation on its operations, it does not believe inflation had a material
effect during the past three years on sales or results of operations.
POSSIBLE EFFECTS OF YEAR 2000
The Company is continuing its investigation of the possible effect of the
Year 2000 issue on its operating, accounting and other systems. Based on
preliminary reviews, the Company believes that its internal systems and those
supplied it by third parties are or will be Year 2000 compliant without any
material additional expense. However, there can be no assurance that the
Company's operations will not be adversely affected by this issue,
particularly as it relates to compliance by the Company's customers and
suppliers.
18
<PAGE>
BUSINESS
GENERAL
Lindberg is the largest commercial heat treating company in the United
States, with operations in major industrial centers throughout the country.
The Company serves more than 9,000 customers in diverse industries, including
commercial aerospace, automotive/light truck, off-road vehicle, oilfield
equipment, defense, consumer products, tool and die, agriproducts and a
variety of other industries. The Company was founded in 1922 and, through both
internal growth and acquisitions, today operates 25 heat treating plants, and
four heat treating facilities located on the premises of customers, in 14
states. These 29 facilities are grouped into 20 divisions, each with certain
operational autonomy.
Lindberg provides a wide range of heat treating processes, in which ferrous,
aluminum and other specialty metals are exposed to precise temperatures and
other conditions to improve mechanical properties, durability, and wear
resistance. Among the many heat treating processes offered by the Company are
hardening, tempering and annealing, solution treating and aging, surface
treating, brazing and other specialty and ancillary processes. Lindberg
provides these services to larger industrial manufacturers with high volumes
and a variety of products as well as small, specialized manufacturers. Typical
products that the Company heat treats are aircraft components, automotive
parts, machine tools and dies, oilfield drill rig parts, consumer products and
a variety of other metal products.
Lindberg has established itself as a leading commercial heat treater based
on its key competitive strengths, including its high level of quality and
service, extensive technical expertise and network of facilities, industry
certifications and national reputation. The Company delivers high quality
service on a timely basis, while its technical expertise provides the
capability to develop customized solutions that meet specific customer needs.
The Company has developed its Benchmarks of Quality process, whereby it
monitors 17 different measurements of quality throughout its heat treating
operations. Many of the Company's facilities are strategically located in
major industrial centers in the Midwest, California, Texas and the Northeast.
This network allows the Company to offer a wide range of heat treating
services in close proximity to its customers. Most of the Company's plants are
recognized with third-party quality endorsements, such as ISO 9000, QS 9000,
NADCAP, and AS 9000, and have approved vendor status for many major
manufacturers. These certifications and approvals enable the Company to
service products manufactured by or for some of the largest domestic
manufacturers, and, increasingly, represent a barrier to entry for those heat
treaters seeking to serve such manufacturers.
INDUSTRY
Heat treating in the U.S. is performed in-house in captive heat treating
departments of manufacturers or externally by a commercial heat treating
company such as Lindberg. The U.S. Department of Commerce reported sales by
commercial heat treating companies of approximately $2 billion in 1996.
Management believes that $2 billion represents about 10% of the annual heat
treating performed in the U.S., with the balance performed in captive heat
treating departments. In-house heat treating facilities are typically part of
a larger facility, such as a steel mill or an automobile components factory,
whose large volumes justify a captive operation. Commercial heat treaters are
independent companies that specialize in heat treating or other metal
treatments and serve a large number of customers across a variety of
industries. Commercial heat treating sales, as compiled by the Metal Treating
Institute, an industry association, have grown at a compound annual rate of
approximately 8% to 9% from 1993 through 1997.
Due to the time and costs associated with transporting materials and
customers' need for quick turnaround times for heat treated products,
commercial heat treating has developed as a regional industry, with customers
typically located within 100 to 200 miles of the heat treating supplier.
Consequently, the commercial heat treating industry is highly fragmented.
Commercial heat treaters are concentrated in major industrial centers of the
country. Average 1997 revenues reported by the Metal Treating Institute
members participating in its annual survey were approximately $4 million.
Management estimates that the top five commercial heat treating companies in
terms of revenues in the U.S. represent approximately 15% of the commercial
market.
19
<PAGE>
The fragmented nature of the commercial heat treating industry presents
opportunities for consolidation. Several factors have motivated smaller
commercial heat treating owners to sell to larger commercial heat treaters,
including increasing regulatory and certification requirements which are
burdensome to smaller companies, capital expenditures necessary to remain
competitive, increasing demand for technical expertise, and succession
planning considerations. In addition, a number of industry participants have
acquired heat treaters in order to expand their geographical presence and
provide expanded or enhanced service capabilities.
Management expects outsourcing to be a continuing opportunity in the heat
treating industry. Many smaller companies involved in the manufacture of metal
components outsource their heat treating requirements to commercial heat
treaters in order to avoid the significant cost of heat treating equipment. In
recent years, larger manufacturers have also outsourced their heat treating
requirements due to the increased demand for technical expertise required in
heat treating and the relatively small portion of the total cost of the
finished product represented by heat treating.
BUSINESS STRATEGY
Management believes that the market environment has created opportunities
for the Company to strengthen its market position and enhance profitability by
meeting its customers' service requirements of quality, cost and on-time
delivery. To that end, the Company pursues an internal operating strategy and
an active acquisition strategy.
OPERATING STRATEGY
The Company's operating strategy consists of the following elements.
Focus on Service and Quality. The Company believes that maintaining and
attracting new customers depend on its ability to address customer needs for
service, timely delivery of products, quality and cost effectiveness. Heat
treating is an essential part of the customers' manufacturing process, and
customers depend on prompt, quality service to efficiently complete the
manufacturing process. In 1990, the Company established a formal Benchmarks of
Quality process to focus on improving every element of the business to
establish Lindberg as the lowest total cost provider and the preferred
business partner for its associates, customers, suppliers and stockholders.
Key goals of the process are to improve customer satisfaction and retention by
making on-time delivery, improving performance under the Company's Orders Done
Right the First Time program, achieving external quality recognition and
demonstrating process capability. Most of the Company's plants are recognized
with third-party quality endorsements, such as ISO 9000, QS 9000, NADCAP and
AS 9000, and have approved vendor status for many major manufacturers. Beyond
these designations, the Company is committed to continuously improving and
meeting its own rigorous internal standards for quality.
Technical Expertise. The Company strives to provide high quality, value-
added service by offering customers its technical expertise. At most
facilities, a metallurgist with access to a historical database of heat
treating processes is available to help customers, especially smaller or
second-tier suppliers, determine appropriate processes and product
specifications. For specialized needs, the Company can draw from widely varied
skills and metallurgical knowledge throughout the organization. The ability to
provide such value-added services to its customers gives the Company a
competitive edge over smaller operators with fewer technical and financial
resources.
Process Improvements and Production Efficiencies. Among the goals of the
Benchmarks of Quality process are waste reduction, increased productivity and
greater equipment utilization. Technology plays an important role in helping
Lindberg to reach these goals, although the heat treating industry tends to
experience evolutionary, rather than revolutionary, changes in technology.
Lindberg concentrates on the application of technology to improve efficiency
of the processes rather than on the development of specific technology. The
Company participates in national and international trade associations to
remain current on technological developments. Recent equipment developments
have focused on instrumentation, control and automation of existing processes.
20
<PAGE>
The focus on process design and engineering is to create added value by new
applications of existing metallurgical techniques. Installing new furnaces,
upgrading systems and employing new heat treating or manufacturing techniques
are some of the means to improve processes.
Flexible, Decentralized Organization. The Company operates on a
decentralized basis so that each division can react quickly and effectively to
local market conditions. The Company's divisions have considerable autonomy in
most operational areas, such as sales, pricing and hiring, and participate in
strategic planning for their own markets. In addition, the Company's
facilities tend to be clustered in certain geographic areas, which permits
individual facilities to utilize additional capacity or other heat treating
processes at alternate sites if necessary. In areas where the facilities are
clustered, the flexibility to react speedily to changes in local market
conditions and to provide a wide variety of specialized services quickly is a
significant competitive advantage for the Company.
Associate Involvement. All Company associates are involved in attaining
strategic goals. To that end and in recognition of the value of skilled
associates, the Company emphasizes effective training and motivation related
to the work environment, safety, competency, communication, shared knowledge
and other aspects of the business. Associates receive a minimum of 28 hours of
annual training designed to improve services and processes at all levels. In
tying performance-based bonus compensation to earnings and the attainment of
other performance goals, the Company provides management with incentives to
continue to strive for excellence.
Strategic Partnerships. Management believes that approximately 90% of
domestic heat treating is conducted in-house by manufacturers. Since 1991, the
Company has offered dedicated heat treating services to certain larger
customers under long-term contracts through its SP 2000 program. The Company
initiated the SP 2000 program in an effort to (i) obtain new, large volume
customers that currently perform their own heat treating, (ii) retain existing
customers whose heat treating volumes may justify performing the process in-
house and (iii) capture additional volume from customers that may be using
multiple heat treaters. Under the SP 2000 program, the Company provides heat
treating services to customers at the Company's facilities or on-site at the
customers' facilities. The Company provides the technical expertise and, in
some cases, the capital required to create a heat treating operation
customized to meet the needs of the particular customer, and manages the
operation for the customer. The program provides the customer with the benefit
of Lindberg's delivery of high quality heat treating and metallurgical
expertise, guaranteed capacity, reduced inventory, improved productivity and
quick turnaround. Without the need to invest in equipment, training and
management of the process, the customer will be free to concentrate on its
core competencies. To date, the Company operates seven SP 2000 facilities and
expects to commence an eighth operation in 1998.
ACQUISITION STRATEGY
As industry consolidation continues, the Company expects acquisitions to be
an important part of its growth strategy. The Company is interested in
acquiring profitable businesses that complement its heat treating operations,
have a strong management team in place and can be purchased at reasonable
prices.
Increase Presence in Existing Markets. The Company intends to selectively
acquire heat treating companies that further strengthen its market presence.
The Company is interested in small specialty service companies as well as
larger heat treating companies in markets in which it operates. By increasing
the number of facilities in a particular region, the Company can provide a
more comprehensive and higher level of service. For example, six of the
recently acquired companies are located in Southern California, making the
Company the largest commercial heat treating company in that region.
Enter New Markets. The Company seeks to acquire businesses that are based in
markets in which Lindberg has no or a limited presence or that serve other
industries. In these locations, the Company is primarily interested in larger
heat treaters with market positions that provide an attractive platform for
expansion. The Company will continue to monitor certain geographical regions
and industries to identify attractive opportunities.
21
<PAGE>
Expand Service Offerings. Lindberg considers the acquisition of businesses
that expand the Company's variety of service offerings. Potential new service
offerings may include heat treating processes or other ancillary services that
complement the Company's existing heat treating services, such as coatings or
forming.
Integrate and Enhance Newly Acquired Companies. The Company seeks to improve
the operations of acquired businesses by sharing its established operating
know-how, technology, technical expertise, industry knowledge and financial
resources and by leveraging Lindberg's national reputation. In markets where
the Company is well established, initial efforts at integrating acquisitions
are aimed at increasing sales by exchanging market and customer information,
combining sales and marketing efforts and sharing service capabilities,
combining administrative functions and sharing facilities and equipment. Newly
acquired businesses in existing markets often provide an opportunity for
nearby Lindberg facilities to balance production capacity within a region.
SERVICES
The Company offers a range of heat treating services for steel, aluminum,
cast iron, titanium alloys and other metals. Services are performed on
customer-provided products at various steps in the manufacturing cycle. The
Company does not maintain a raw material inventory or own work-in-process. The
range of processing offered by the Company requires different types and sizes
of primary and secondary heat treating equipment.
Heat treating improves the mechanical properties, performance, durability
and wear resistance of metals and is an important step in many manufacturing
processes involving metals. Heat treating can soften metal to improve
formability, make a part harder to improve strength, put a hard surface on a
relatively soft component to increase strength or abrasion resistance, put a
corrosion-resistant surface on an item that would otherwise corrode or toughen
a brittle product. Heat treated parts are essential to the operation of
automobiles, aircraft, spacecraft, consumer products, and heavy equipment of
every kind. Bearings, gears, aluminum bicycle frames, axles, fasteners,
camshafts, crankshafts and cutting tools are examples of products that require
heat treating.
Heat treating is a process in which metal is heated and cooled under tight
controls. Heat treating processes require three basic steps: (i) heating to a
specified temperature, (ii) holding at that temperature for the appropriate
amount of time, and (iii) cooling according to a prescribed method.
Temperatures may range as high as 2400(degrees)F, and time at temperature may
vary from a few seconds to as many as 60 hours or more. Some materials are
cooled slowly in the furnace, but others must be cooled quickly, or
"quenched." Primary quenching media include water, oils, gases and polymer
solutions. Each quenching medium has specific characteristics that make it
well-suited for certain applications.
Of the Company's wide range of heat treating services, the following are the
most common:
HARDENING, TEMPERING AND ANNEALING are performed using a variety of media,
including electric furnaces, neutral salt baths, press quenching and vacuum
furnaces. The purpose of these processes is to create the ideal metallurgical
properties in the treated material.
SOLUTION TREATING AND AGING is performed on aluminum, titanium and stainless
steel pieces to create desired properties of ductility and hardness throughout
the piece.
SURFACE TREATING utilizes a specialized furnace to heat steels to an
appropriate temperature. Once the selected temperature is achieved, a carbon
or nitrogen rich gas is introduced to the furnace and elements within the gas
diffuse into the surface of the steel. The surface of the material is
transformed into a tougher, more wear resistant structure, while the core of
the material retains its ductility. Types of surface treatment include
carburizing, nitriding, carbo nitriding and ferritic nitrocarburizing.
BRAZING is a process which uses heat treating to bond two different pieces.
The Company utilizes electric furnaces, vacuum furnaces and induction in its
brazing process.
22
<PAGE>
OPERATIONS
The Company operates 25 of its own heat treating plants, each serving an
average of 375 customers. A typical plant employs 20 to 70 individuals,
including a division manager, a plant manager, sales personnel, a
metallurgist, quality personnel and an office manager. Each facility operates
24 hours per day, five or more days per week, depending on volume or seasonal
activity.
Each plant is equipped with furnaces of various types, sizes and support
equipment. Many pieces of primary equipment are capable of running several
different processes. Auxiliary items include fixtures, atmosphere generators,
material handling equipment, cleaning equipment and metallurgical testing
equipment. Key suppliers provide electricity and natural gas. Other important
purchased materials include quench oils, process gases, fixtures, maintenance
supplies, laboratory and testing supplies and auxiliary equipment.
Each plant is located in a major industrial area, in most cases serving
customers in that region. The Company typically processes orders within one to
five days. In addition, customers generally want to minimize the expense and
risks associated with transporting their products over long distances to and
from commercial heat treating plants. Consequently, customers tend to prefer
heat treaters located in their own areas. They deliver and pick up their
parts, or the plant provides some delivery with its own trucking. This market
configuration has led to some degree of specialization for most of the
Company's plants, with each plant focusing on the particular needs of its
major customers in its area.
Many large customers and end-users have the technical expertise to provide
processing specifications on the components, which they design. However,
smaller manufacturers and second-tier suppliers often specify only the
material of construction and metallurgical properties required. In these
cases, the Company's plants determine the proper heat treating processes and
fixturing to meet customer requirements. This variety of needs creates a job
shop environment where customized processing instructions are developed or
reviewed for each part the plant processes.
Because the industry is fragmented and localized, the Company's operations
are decentralized so each plant can react quickly and effectively to local
market conditions. The Company's divisions have considerable autonomy in most
operational areas, including sales, pricing, hiring and the development of
non-financial systems, and participation in strategic planning for their
respective local markets.
The Company's corporate office oversees the financial management of the
Company and serves as a resource to the divisions in such areas as finance and
human resources. Two group vice presidents at the corporate level oversee heat
treating operations. The Company also maintains an operating staff which
includes an engineering and market development manager, controller, and
several quality, engineering, and information systems personnel to provide
support to all heat treating operations.
Each plant, generally, uses a common computer system located on site, which
provides for order entry, billing, plant routing, shipping, and process
management. The Company is developing new software, which will replace and
enhance the functionality of the current proprietary system. The new system,
expected to be installed and operational by 1999, will also provide the
flexibility for the automation of other processes in the future.
In April 1998, the Company announced the establishment of its first heat
treating operation in Mexico. The site is expected to be operational in
Monterrey during the third quarter of 1998. The Company intends to use the
plant to establish a base of operations that could expand over time to meet
other market needs, particularly the growing metal-working markets of northern
Mexico.
23
<PAGE>
PROPERTIES
The principal plants of the Company are as follows:
<TABLE>
<CAPTION>
LOCATION SQUARE FEET LEASED OR OWNED
-------- ----------- ---------------
<S> <C> <C>
Melrose Park, IL............................. 273,600 Owned
Racine, WI................................... 193,500 Owned
Houston, TX (1).............................. 100,000 Owned
Solon, OH.................................... 96,300 Owned
Lansing, MI.................................. 83,800 Owned
Paramount, CA (1)............................ 80,000 Leased
Rancho Dominguez, CA......................... 55,000 Leased
New Berlin, WI............................... 50,000 Owned
St. Louis, MO................................ 50,000 Owned
Gardena, CA.................................. 45,000 Leased
Worcester, MA................................ 45,000 Owned
Huntington Park, CA (1)...................... 40,000 Owned
Minneapolis, MN.............................. 40,000 Leased
Westminister, CA............................. 38,400 Owned
Berlin, CT................................... 36,700 Owned
Santa Fe Springs, CA......................... 36,000 Leased
Waterbury, CT................................ 32,600 Leased
Los Angeles, CA.............................. 31,000 Owned
Tulsa, OK.................................... 30,300 Owned
Wichita, KS.................................. 30,000 Leased
Garden Grove, CA............................. 21,000 Leased
Rochester, NY................................ 17,000 Leased
- --------
(1) Consisting of two plants.
The following SP 2000 operations are located in customer facilities at the
locations indicated (in each case with no substantial occupancy charge):
<CAPTION>
LOCATION SQUARE FEET
-------- -----------
<S> <C> <C>
Wyomissing, PA............................... 15,000
Bedford Heights, OH.......................... 9,600
Clintonville, WI............................. 5,000
Downers Grove, IL............................ 4,500
</TABLE>
The Company's corporate office consists of an 8,900-square-foot leased space
located in Rosemont, Illinois. Four of the Company's leases will expire within
the next three years, three of which are renewalable at the option of the
Company.
The Company's facilities are suitable for their respective uses and are, in
general, adequate for the Company's current needs. All facilities serve
largely localized markets and customers. Those providing products in markets
where economic activity is strong at any particular time operate at relatively
high levels of plant utilization. The Company believes that it has sufficient
capacity at its current facilities to absorb additional workloads at
reasonably anticipated levels.
CUSTOMERS
The Company serves about 9,000 customers that range from owner-operated job
shops to large, national manufacturing companies. The Company's largest direct
customer accounted for less than 3% of the Company's net sales in 1997. The
ten largest customers, excluding SP 2000 customers, accounted for
approximately 13% of net sales in 1997.
24
<PAGE>
The Company's customers are suppliers to companies operating in a variety of
manufacturing industries, including commercial aerospace, automotive/light
truck, off-road vehicle, oilfield equipment, defense, consumer products,
building components, tool and die, agriproducts and a variety of other
industries. The Company also provides heat treating services directly to those
companies in such industries.
Management estimates that customers serving the commercial aerospace
industry currently account for approximately 30% to 35% of the Company's net
sales and that customers serving the automotive/light truck industry account
for approximately 15% to 20% of net sales. These estimates are based on an
annual survey of the Company's division managers and reflect the knowledge of
each division's customer base. Because the Company provides heat treating
services at different stages of the manufacturing process to a wide range of
manufacturers and their suppliers in a variety of industries, the Company
cannot measure precisely its penetration of specific industries.
SALES AND MARKETING
Each division within the Company has its own sales function, coordinated
regionally if appropriate. Each plant is responsible for developing and
distributing its own brochures and sales materials. Minimal advertising is
employed on a local basis.
The Company's sales force consists of one or two sales representatives per
plant. In addition, each division manager is actively involved in local sales
efforts. These individuals are responsible for customer service, pricing and
quoting at their location. Local sales efforts are enhanced by plant
metallurgists who may discover opportunities as they consult with customers on
heat treating specifications. Services are generally quoted on a per pound,
per piece, or per furnace load basis. Quotes on a per pound basis represent
the most typical arrangement.
The Company's local sales efforts are augmented with marketing, sales,
metallurgical and engineering efforts carried out by personnel at the
corporate level. This includes national customer contact, regional sales
coordination where possible, and SP 2000 market development.
COMPETITION
Due to the regional and highly fragmented nature of the commercial heat
treating industry, each plant has competition of varying degrees of intensity.
Competition consists of local heat treating owner-operators and certain
facilities of larger regional heat treating companies. Each plant competes in
its market on the basis of service and on-time delivery, quality, and price.
Local management at each of the Company's facilities is largely responsible
for its own pricing and cost control, and thus has the flexibility to respond
to local market conditions.
National competition in the commercial heat treating industry is limited.
There are competitors in particular localities that are larger than the
Company's facility located in those markets. Such competitors may also be
divisions of larger regional companies and, therefore, have access to
additional resources. Competition also exists from in-house heat treating
facilities of manufacturers, although the Company considers such manufacturers
as potential customers.
Management believes that the Company's national presence, size and
reputation for quality and service position it as a preferred supplier to many
of the nation's largest corporations. These companies have exceptionally
strict quality standards and often prefer a primary supplier relationship. The
certification requirements by many of these major companies are a significant
barrier to entry for heat treaters seeking to serve such customers.
THIXOMAT
The Company is a minority stockholder in a consortium of five industrial
partners called Thixomat, Inc. Thixomat, Inc. was formed in 1989 to promote
and commercialize the Thixomolding(TM) technology, a specialized
25
<PAGE>
molding process. The Company's $434,000 investment in Thixomat, Inc. is
carried at cost. In addition, the Company operates a THX Molding division,
using the Thixomolding(TM) process. This operation is in a start-up mode, and
is not expected to contribute materially to the Company's results in the
foreseeable future.
ASSOCIATES
Currently, the Company employs approximately 1,200 associates within its
continuing operations. Of these associates, approximately 190 are covered by
collective bargaining agreements, none of which are subject to renewal
negotiation in 1998 and 1999. The Company believes that its employee relations
are good.
LITIGATION
The Company is a defendant in a qui tam (whistle-blower) lawsuit filed by a
former employee of the Company under seal on or about July 25, 1996 in the
U.S. District Court for the Central District of California, seeking to recover
damages and civil penalties arising from allegedly false statements and claims
made by the Company in violation of the federal False Claims Act (the "FCA")
and for damages resulting from the plaintiff's allegedly wrongful discharge
and retaliatory acts by the Company. The complaint alleges that the Company
defrauded the government by submitting invoices and other documentation
falsely representing that certain metal parts had been treated at one Company
facility by equipment that met certain industry and government standards.
Private parties may bring actions under the FCA on behalf of the government
and share in any recovery, and may recover attorneys' fees. The FCA provides
for civil penalties of up to $10,000 for each false claim, plus trebling of
damages sustained by the government. A qui tam complaint must be filed under
seal (without service on the defendant) and may remain under seal while the
government conducts its own investigation and determines whether to join the
action. The government notified the Company of the complaint in late May 1998,
stating that the court partially unsealed the complaint, which the government
gave to the Company, to facilitate discussions between the parties. The
government told the Company that it has not yet determined whether to join the
action, and that it was also independently investigating the hardness testing
certification of certain items treated at the same Company facility. The
Company has responded to a civil investigative demand from the government and
is cooperating with the government in its investigation. Although the
activities that are the subject of the investigation and the lawsuit appear to
be limited to one plant, the Company cannot predict whether the government
will join the action nor whether the action or the government's investigation
will have a material adverse effect on the Company.
The Company is a party to various other lawsuits and claims arising in the
ordinary course of business. After review and consultation with legal counsel,
the Company believes that any liability resulting from these matters would not
materially affect its financial condition or results of operations.
ENVIRONMENTAL REGULATION
Lindberg uses some environmentally hazardous materials in its business. The
Company has made expenditures to comply with environmental laws and
regulations, including studies, investigations and remediation of ground
contamination, and expects to make such expenditures in the future in its
continued effort to comply with existing and future requirements. While such
expenditures to date have not materially affected the Company's capital
expenditures, competitive position, financial condition or results of
operations, there can be no assurance that more stringent regulation or
enforcement in the future will not have such effects.
In some cases, the Company has notified state authorities of a possible need
for remediation at sites it previously operated or currently operates. At all
such sites, costs which may be incurred are difficult to predict accurately
until the level of contamination is determined, and such costs would be
subject to increase if more contamination is discovered during investigation
or remediation or if state authorities require more remediation than
anticipated. Such costs may be less if the contamination proves to be less
than currently expected and to the extent costs are covered by insurance or
are allocable to others.
26
<PAGE>
The Company has also been notified by various state and federal governmental
authorities that they believe the Company may be a "potentially responsible
party" or otherwise have responsibility for clean-up obligations at three
waste disposal sites which were never owned or operated by the Company. The
Company is participating in negotiations for settlement with the relevant
authorities or other parties it believes to be responsible for these clean-up
obligations and the Company expects its responsibility to be of a minor
nature. The Company believes that the ultimate outcome will not have a
material effect on its financial condition or results of operations.
At March 31, 1998, the Company had reserves of approximately $2.2 million to
cover future anticipated costs of investigation and remediation. It has
estimated a range of costs in establishing these reserves. Of such reserves,
approximately $1.2 million relates to environmental issues at Industrial Steel
Treating Co. (acquired in 1998) which have been reported to California
environmental authorities. Approximately $675,000 relates to the investigation
and remediation, under the supervision of the Illinois Environmental
Protection Agency, of contamination at the Company's Melrose Park, Illinois
facility. These reserves give no effect to possible recoveries from insurers
or other potentially responsible parties, nor do these reserves reflect any
discount for the several years over which investigation or remediation amounts
may be paid out.
The Company has policies related to environmental compliance, but does not
currently have standardized corporate-wide internal environmental assessment
procedures. The Company is currently in the process of implementing
standardized assessment procedures for its facilities, many of which have not
recently been fully assessed for potential environmental compliance. No
assurance can be given that the Company will not be subject to environmental
claims, penalties or remediation costs in the future that would have a
material adverse effect on the Company's results of operations or financial
condition or that the compliance assessments, if implemented, will reduce the
Company's exposure to potential environmental liabilities.
27
<PAGE>
MANAGEMENT
The executive officers and directors of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
George H. Bodeen........ 74 Chairman of the Board of Directors
Leo G. Thompson......... 57 President, Chief Executive Officer and Director
Stephen S. Penley....... 48 Senior Vice President, Chief Financial Officer and
Secretary
Michael W. Nelson....... 51 Senior Group Vice President
Paul J. McCarren........ 51 Group Vice President
Dr. Raymond F. Decker... 67 Director
Raymond A. Jean......... 55 Director
John W. Puth............ 69 Director
J. Thomas Schanck....... 67 Director
</TABLE>
GEORGE H. BODEEN has served as Chairman of the Board of Directors of the
Company since December 1980. He was the Company's Chief Executive Officer from
1965 until December 1990 when he retired from that position and was President
from April 1965 to October 1987.
LEO G. THOMPSON has served as President and Chief Executive Officer of the
Company since January 1991. He joined the Company as President, Chief
Operating Officer and a director in 1987. Prior thereto, he was Vice President
and a director of Clevite Industries Inc. (manufacturer of auto and truck
related parts) and President of the Engine Parts Division of that company from
1985 to 1987.
STEPHEN S. PENLEY has served as Chief Financial Officer since January 1989,
Senior Vice President since July 1993 and Secretary since October 1990. He was
Vice President from January 1989 to July 1993 and Treasurer from January 1989
to July 1996. He joined the Company as Corporate Controller in late 1987.
Prior to joining the Company, he was Corporate Controller of Clevite
Industries Inc. from 1985 to 1987 and held various other positions at the
company before that time.
MICHAEL W. NELSON has served as Senior Group Vice President since March
1998. Prior thereto, he was Senior Vice President and President of Heat Treat
Operations from July 1993 and Vice President-Central Region from July 1990 to
June 1993. He joined the Company in 1983 as an in-house consultant. Before
joining the Company, he was a consultant to a variety of manufacturing
businesses.
PAUL J. MCCARREN has served as Group Vice President and Manager of West
Coast Operations since March 1998. Prior thereto, he held various operating
positions with the Company. He joined the Company in 1972 as a metallurgist.
DR. RAYMOND F. DECKER has served as a director of the Company since 1987. He
is President and Chief Executive Officer of University Science Partners, Inc.
(a general partnership that funds, develops and commercializes university and
national laboratory technology) since August 1986, Chairman since December
1988 and Chief Executive Officer from December 1988 to April 1993, of
Thixomat, Inc. (a general partnership formed to promote and commercialize
Thixomolding(TM) technology and in which the Company has a 18% interest). Dr.
Decker is a director of Wavemat, Inc. (designer and manufacturer of microwave
plasma systems and sources) and Special Metals Corporation (manufacturer of
high temperature nickel superalloys).
28
<PAGE>
RAYMOND A. JEAN has served as a director of the Company since 1995. He is a
director of Varlen Corporation (manufacturer of engineered products), and has
been its President since May 1997 and Chief Operating Officer since February
1993. Prior thereto, he was Executive Vice President from February 1993 and
Group Vice President from August 1988 to January 1993 of Varlen Corporation.
JOHN W. PUTH has served as a director of the Company since 1987. He is
President of J. W. Puth Associates (industrial consultants) since December
1987 and a director of U.S. Freightways Corporation (operator of general
commodities carriers), Allied Products Corporation (manufacturer of
agricultural and industrial machinery), A.M. Castle & Co. (operator of metals
service centers) and Brockway Standard Holdings Corporation.
J. THOMAS SCHANCK has served as a director of the Company since 1975. He was
Vice Chairman of Illinois Tool Works Inc. (producer of specialty engineered
products and systems) from September 1986 until his retirement in December
1988.
29
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table contains certain information regarding beneficial
ownership of the Common Stock as of May 28, 1998 (except as otherwise noted),
and as adjusted to reflect the completion of the Offering, by (i) each person
or group known by the Company to own beneficially more than five percent of
the Common Stock, (ii) each director, (iii) each executive officer, (iv) each
Selling Stockholder, and (v) all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED(1) SHARES TO OWNED(1)
PRIOR TO THE OFFERING BE SOLD AFTER THE OFFERING
------------------------- IN THE -----------------------
NAME NUMBER PERCENT(2) OFFERING NUMBER PERCENT(2)
- ---- ------ ------------ --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Ira Sochet(3)......................... 799,200 16.4% -- 799,200 13.0%
Nancy L. Bodeen(4).................... 455,976 9.4 50,000 405,976 6.6
The Killen Group,
Inc.(5).............................. 408,132 8.4 -- 408,132 6.6
Dimensional Fund
Advisors, Inc.(6).................... 343,500 7.1 -- 343,500 5.6
Ronald E. Byrd(7)..................... 274,220 5.6 75,000 199,220 3.2
George H. Bodeen(8)(9)................ 212,164 4.3 -- 212,164 3.4
Raymond F. Decker(9).................. 13,000 * -- 13,000 *
Raymond A. Jean(9).................... 6,500 * -- 6,500 *
John W. Puth(9)....................... 3,500 * -- 3,500 *
J. Thomas Schanck(9).................. 12,500 * -- 12,500 *
Leo G. Thompson(9).................... 138,750 2.8 -- 138,750 2.2
Stephen S. Penley(9).................. 36,615 * -- 36,615 *
Michael W. Nelson(9).................. 35,700 * -- 35,700 *
Paul J. McCarren(9)................... 13,375 * -- 13,375 *
All directors and
executive officers
as a group (9 persons)(10)........... 472,104 9.4 -- 472,104 7.5
</TABLE>
- --------
*Less than 1%.
(1) Unless otherwise indicated, the persons named in the table above have
sole voting and investment power over all shares shown as beneficially
owned by them. Beneficially owned shares include shares subject to
options exercisable within 60 days of May 28, 1998.
(2) Based on 4,866,581 shares outstanding as of May 28, 1998.
(3) Based on report of ownership on amendment to Schedule 13D, dated February
10, 1998, filed with the SEC reporting ownership as of January 23, 1998.
The address of Ira Sochet is 9350 S. Dixie Highway, Suite 1260, Miami,
Florida 33156.
(4) Includes 417,176 shares over which Nancy L. Bodeen has sole voting and
sole dispositive power and 38,800 shares held by a family charitable
foundation over which shares she has shared voting and shared dispositive
power as co-trustee with her husband, George H. Bodeen, the Chairman of
the Board and a director of the Company. Excludes 47,634 shares held by a
trust created under the will of L. A. Lindberg of which trust Mrs. Bodeen
is the beneficiary but over which shares she has no voting or dispositive
power. Mrs. Bodeen's address is 1180 Whitebridge Hill, Winnetka, Illinois
60093.
(5) Based on a report of ownership on Schedule 13G, dated February 17, 1998,
filed with the SEC reporting ownership as of December 31, 1997. The
Killen Group, Inc. has sole power to vote 83,904 shares. The address of
the Killen Group, Inc. is 1199 Lancaster Avenue, Berwyn, Pennsylvania
19312.
(6) Based on a report of ownership on an amendment to Schedule 13G, dated
February 9, 1998, filed with the SEC reporting ownership as of December
31, 1997. Dimensional Fund Advisors, Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 343,500
shares as of December 31, 1997, all of which shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust or the DFA Group Trust, and DFA participation
Group Trust, investment vehicles for qualified
30
<PAGE>
employee benefit plans, for all of which Dimensional serves as investment
manager. Dimensional disclaims beneficial ownership of all such shares.
The address of Dimensional is 1299 Ocean Avenue, 11th Floor, Santa Monica,
California 90401.
(7) Ronald E. Byrd has shared voting and dispositive power with his spouse
over 199,220 shares. Excludes 31,706 shares over which his spouse has
sole voting and dispositive power and 33,480 shares held by a trust
created under the will of L. A. Lindberg of which trust his spouse is the
sole beneficiary but over which she has no voting or dispositive power.
Mr. Byrd's address is 24 Marsh Point Road, Amelia Island, Florida 32034.
(8) George H. Bodeen has sole voting and sole dispositive power over 92,250
shares which includes 75,750 shares he owns directly, 11,500 shares
subject to currently exercisable options, and 5,000 shares held by his
personal retirement trust of which he is co-trustee and co-beneficiary.
In addition, Mr. Bodeen has shared voting and sole dispositive power over
81,114 shares as co-trustee of trusts created under the will of L. A.
Lindberg. Mr. Bodeen also has shared voting and shared dispositive power
over 38,800 shares as co-trustee with his wife, Nancy L. Bodeen, of a
family charitable foundation.
(9) Includes shares subject to stock options which are exercisable within 60
days of May 28, 1998, as follows: George H. Bodeen and J. Thomas Schanck,
11,500 shares each; Raymond F. Decker, 8,500 shares; Raymond A. Jean,
6,000 shares; John W. Puth, 2,500 shares; Leo G. Thompson, 62,250 shares;
Stephen S. Penley, 19,500 shares; Michael W. Nelson, 28,500 shares; and
Paul J. McCarren, 9,175 shares.
(10) Includes 119,914 shares with shared voting power, and 159,425 shares
subject to stock options which are currently exercisable or become
exercisable within 60 days of May 28, 1998.
31
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000 shares of
Common Stock, $.01 par value per share, and 1,000,000 shares of preferred
stock, $.01 par value per share. The Company's Certificate of Incorporation
authorizes the Board of Directors to issue, without further action by the
stockholders, shares of preferred stock in one or more series and to fix their
rights, preferences, privileges and restrictions thereof. The Company has not
issued any shares of preferred stock. Based on 4,866,581 shares issued and
outstanding as of May 31, 1998, upon completion of this Offering, there will
be 6,141,581 shares of Common Stock issued and outstanding (6,351,581 shares
if the Underwriters exercise their over-allotment option in full), excluding
shares issuable under currently outstanding options held by officers and
directors.
COMMON STOCK
Subject to the rights of the holders of any then outstanding preferred
stock, holders of Common Stock are entitled to receive distributions on Common
Stock as may be declared by the Board of Directors. In any liquidation, each
outstanding share of Common Stock will entitle its holder to share (based on
the percentage of shares held) in the assets of the Company that remain after
payment of all liabilities, subject to the preference rights of the holders of
outstanding preferred stock, if any.
Holders of Common Stock are entitled to one vote for each share on all
matters submitted to a stockholder vote. Unless otherwise required, the
holders of Common Stock possess the exclusive voting power. Stockholders do
not have cumulative voting in the election of directors. This means that the
holders of a majority of the Common Stock can elect all of the directors of a
class standing for election and the holders of the remaining Common Stock
could not elect any director of that class.
Common stockholders have no conversion, sinking fund, redemption or
preemptive rights. All outstanding shares of Common Stock are, and the shares
of Common Stock offered hereby will be when issued, fully paid and
nonassessable.
The Company furnishes stockholders with annual reports containing audited
consolidated financial statements, which contain an opinion of the Company's
independent public accountants. The Company also furnishes stockholders with
quarterly reports for the first three quarters of each year, which contain
unaudited financial information.
The Common Stock is quoted on the Nasdaq National Market. The transfer agent
and registrar for the Common Stock is Harris Trust and Savings Bank, 311 West
Monroe Street, Chicago, Illinois 60690.
ANTI-TAKEOVER EFFECTS OF THE COMPANY'S GOVERNING DOCUMENTS AND DELAWARE
CORPORATE LAW
Certain provisions of the Company's Certificate of Incorporation and By-laws
may have anti-takeover effects and may discourage, delay or prevent a third
party from gaining control of the Company by means of a tender offer, a proxy
contest for a majority of the Board of Directors or otherwise, including an
action that might result in payment of a premium over the market price for the
Common Stock. These provisions (i) classify the Board of Directors into three
classes, having three-year terms that expire in successive years, (ii) provide
that only the Board of Directors, the Chairman and the President may call
special meetings of stockholders, (iii) require the affirmative vote of the
holders of at least two-thirds of the outstanding voting stock or approval by
a majority of the Board of Directors to change the number of directors, (iv)
eliminate action by written consent of stockholders without a meeting, and (v)
permit the Board of Directors to issue up to one million shares of preferred
stock and fix their preferences, privileges and restrictions without further
action by the stockholders. The Company's Certificate of Incorporation also
requires the affirmative vote of the holders of two-thirds of the Company's
voting securities to approve (i) certain mergers and other major corporate
transactions with holders of 10% or more of the Company's voting securities
unless approved by the Board of Directors prior to such 10% or greater
ownership or by sufficient members of the Board of Directors who were
directors prior to such
32
<PAGE>
ownership to constitute a majority of the total number of directorships
(including vacancies), (ii) liquidation or dissolution of the Company, and
(iii) amendments to these and certain other provisions of the Company's
Certificate of Incorporation. There are also notice requirements for
stockholders to nominate directors or present proposals at meetings of
stockholders.
The Delaware General Corporation Law generally prohibits the Company from
merging with an "interested stockholder" (a holder of 15% or more of the
Common Stock) for three years if the Company will not be the surviving entity
in the merger. Delaware law also generally prohibits the Company from selling
10% or more of its assets to an interested stockholder. The Company can enter
into these transactions, however, if the Board of Directors approves the
proposed transaction before the stockholder became an interested stockholder
or if the Company's Board of Directors and the holders of at least 66 2/3% of
voting shares (excluding shares owned by the interested stockholder) approve
the transaction.
In addition, the Company has a stockholder rights plan, established November
21, 1996, when the Board of Directors declared a dividend of one common share
purchase right for each outstanding share of Common Stock. Such rights become
exercisable ten days after a person or group, whose action has not received
prior approval from the Board of Directors, acquires beneficial ownership of
20% or more of the Company's outstanding Common Stock or ten business days
after a person or group commences or announces an intention to commence a
tender or exchange offer that could result in the acquisition of 20% of the
Company's outstanding Common Stock. Each right then may be exercised to
acquire one share of Common Stock at an exercise price of $40, subject to
adjustment. In addition, upon the occurrence of certain events, and upon
payment of the then-current purchase price, the rights may "flip in" and
entitle holders to buy the Company's Common Stock or "flip over" and entitle
the holders to buy common stock of the acquiring entity in such amount that
the market value is equal to twice the purchase price. The rights may be
redeemed by the Company at $.01 per right at any time until the tenth day
following the public announcement that a 20% position has been acquired. The
rights expire on November 21, 2006.
33
<PAGE>
UNDERWRITING
ABN AMRO Incorporated and McDonald & Company Securities, Inc. have severally
agreed to purchase from the Company and the Selling Stockholders the
respective number of shares of Common Stock set forth opposite their names
below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
ABN AMRO Incorporated....................................
McDonald & Company Securities, Inc.......................
---------
Total................................................ 1,400,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to approval of certain legal matters by counsel and to various
other conditions. The nature of the Underwriters' obligations is such that
they are committed to purchase and pay for all of the above shares of Common
Stock if any are purchased.
The Underwriters propose to offer the shares of Common Stock to the public
initially at the public offering price stated on the cover page of this
Prospectus and to certain selected dealers that are members of the National
Association of Securities Dealers, Inc. at such price less a concession of
$ per share, and that such dealers may reallow a concession of $ per
share to certain other dealers. After the public offering, the offering price
and other selling terms may be changed by the Underwriters. The shares of
Common Stock offered hereby are included for quotation on the Nasdaq National
Market under the symbol "LIND."
The Company has granted to the Underwriters a 30-day over-allotment option
to purchase from the Company up to an aggregate of 210,000 additional shares
of Common Stock, exercisable at the public offering price less the
underwriting discount. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of Common Stock offered by
this Prospectus. If the Underwriters exercise such over-allotment option, then
each of the Underwriters will have a firm commitment, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as it was obligated to purchase under the Underwriting Agreement.
Subject to certain exceptions, the Company, its executive officers and
directors and the Selling Stockholders have agreed that for a period of 90
days after the later of (i) the date on which the registration statement of
which this Prospectus forms a part is declared effective by the SEC or (ii)
the first date on which the shares are bona fide offered to the public, they
will not sell or otherwise dispose of any shares Common Stock without the
prior written consent of the Underwriters.
The Underwriters' consent is not required for the grant of stock options
under stock option plans or the issuance of Common Stock upon the exercise of
stock options previously granted, upon exercise of Common Share Purchase
Rights or the issuance of Common Stock as consideration for acquisitions.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, loss and expenses, including those
under the Securities Act of 1933, or to contribute to payments that the
Underwriters may be required to make in respect thereof.
In connection with the Offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions, "passive" market making and purchases to cover
syndicate short positions created in connection with the Offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the Common Stock, and
syndicate short positions involve the sale by the Underwriters of a greater
number of shares of Common Stock than they are required to purchase from the
Company and the Selling Stockholders in the
34
<PAGE>
Offering. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers for the
shares of Common Stock sold in the Offering for their account may be reclaimed
by the syndicate if such shares are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Common Stock, which may be higher
than the price that might otherwise prevail in the open market, and these
activities, if commenced, may be discontinued at any time. These transactions
may be effected on the Nasdaq National Market, in the over-the-counter market
or otherwise.
As permitted by Rule 103 under the Securities Exchange Act of 1934, certain
Underwriters (and selling group members, if any) that are market makers
("passive market makers") in the Common Stock may make bids for or purchases
of the Common Stock in the Nasdaq National Market until such time, if any,
when a stabilizing bid for the Common Stock has been made. Rule 103 generally
provides that (i) a passive market maker's net daily purchase of the Common
Stock may not exceed 30% of its average daily trading volume in the shares of
Common Stock for the two full consecutive calendar months (or any 60
consecutive days ending within the ten days) immediately preceding the filing
date of the registration statement of which this Prospectus forms a part, (ii)
a passive market maker may not effect transactions or display bids for the
Common Stock at a price that exceeds the highest independent bid for the
Common Stock by persons who are not passive market makers, and (iii) bids made
by passive market makers must be identified as such.
LEGAL MATTERS
Certain legal matters in connection with the sale of these securities will
be passed on for the Company and the Selling Stockholders by Bell, Boyd &
Lloyd, Chicago, Illinois, and for the Underwriters by Vedder, Price, Kaufman &
Kammholz, Chicago, Illinois.
EXPERTS
The consolidated balance sheets of Lindberg Corporation as of December 31,
1997 and 1996, and the consolidated statements of earnings, stockholders'
equity and cash flows for the years ended December 31, 1997, 1996 and 1995
included in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said reports.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, registration
statements, proxy statements and other information filed by the Company with
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices, 500 West
Madison Street, Chicago, Illinois 60661, and 7 World Trade Center, New York,
New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding registrants, such as the Company, which are
filed electronically with the Commission. Copies of certain reports, proxy
statements and other information filed by the Company can be inspected at the
offices of National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006-1500.
The Company has filed a Registration Statement on Form S-2 (together with
all amendments and exhibits thereto, the "Registration Statement") under the
Securities Act of 1933, as amended, with respect to the Common Stock offered
hereby. This Prospectus, filed as part of the Registration Statement, does not
contain all
35
<PAGE>
the information set forth in the Registration Statement, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. For further information regarding the Company and the Common Stock
offered hereby, reference is made to the Registration Statement, which may be
inspected or copied as described in the preceding paragraph. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to herein are not necessarily complete and in each case
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed previously with the Securities and Exchange
Commission under Section 13 of the Exchange Act are incorporated herein by
reference:
1. The Company's Annual Report on Form 10-K for 1997;
2. The Company's Quarterly Report on Form 10-Q for the three months ended
March 31, 1998;
3. The Company's Current Reports on Form 8-K dated January 16, 1998 and
April 23, 1998; and
4. The description of the Company's Common Stock Purchase Rights in the
Company's registration statement on Form 8-A for the registration of such
Rights under Section 12(g) of the Securities Exchange Act of 1934,
effective December 12, 1996 (File No. 0-8287).
Each document filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the Offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part of this Prospectus from the date
of filing of such document. Any statement contained in this Prospectus or in a
document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of the
Registration Statement and this Prospectus to the extent that a statement
contained in this Prospectus, or in any subsequently filed document which also
is or is deemed to be incorporated by reference in this Prospectus, modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of the Registration Statement or this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of any such person,
a copy of any or all of the documents that are incorporated by reference in
this Prospectus, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference into such documents). Requests
should be directed to Stephen S. Penley, Lindberg Corporation, 6133 North
River Road, Suite 700, Rosemont, Illinois 60018 (telephone: (847) 823-2021).
36
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS:
Unaudited Condensed Consolidated Balance Sheet as of March 31, 1998..... F-2
Unaudited Condensed Consolidated Statements of Earnings for the three-
month periods ended March 31, 1998 and 1997............................ F-3
Unaudited Condensed Consolidated Statements of Cash Flows for the three-
month periods ended March 31, 1998 and 1997............................ F-4
Notes to Unaudited Condensed Consolidated Financial Statements.......... F-5
AUDITED FINANCIAL STATEMENTS:
Report of Independent Public Accountants................................ F-7
Consolidated Balance Sheets as of December 31, 1997 and December 31,
1996................................................................... F-8
Consolidated Statements of Earnings for the years ended December 31,
1997, 1996 and 1995.................................................... F-9
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995.................................................... F-10
Consolidated Statements of Stockholders' Equity......................... F-11
Notes to Consolidated Financial Statements.............................. F-12
</TABLE>
F-1
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31,
ASSETS 1998
------ ------------
<S> <C>
CURRENT ASSETS:
Cash............................................................ $ 546,325
Receivables--Net................................................ 18,894,122
Prepaid and Refundable Income Taxes............................. 14,011
Prepaid Expenses................................................ 946,153
Net Assets of Discontinued Operations........................... 17,354,934
Other Current Assets............................................ 603,264
------------
Total Current Assets.............................................. 38,358,809
PROPERTY AND EQUIPMENT:
Cost............................................................ 95,849,749
Less-Accumulated Depreciation................................... (53,801,229)
------------
Net Property and Equipment...................................... 42,048,520
Goodwill........................................................ 19,700,059
Other Non-Current Assets........................................ 2,657,089
------------
TOTAL ASSETS...................................................... $102,764,477
============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C>
CURRENT LIABILITIES:
Current Maturities on Long-Term Debt............................ $ 83,328
Notes Payable................................................... 8,380,000
Accounts Payable................................................ 4,659,643
Accrued Expenses................................................ 6,850,941
------------
Total Current Liabilities......................................... 19,973,912
NON-CURRENT LIABILITIES:
Deferred Income Taxes........................................... 6,209,001
Long-Term Debt (Less Current Maturities)........................ 36,062,512
Accrued Pension................................................. 3,304,257
Other Non-Current Liabilities................................... 2,960,973
------------
Total Non-Current Liabilities..................................... 48,536,743
STOCKHOLDERS' EQUITY:
Common Shares, $2.50 par value:................................. 14,183,493
Authorized 12,000,000 shares in 1998 and
1997. Issued 5,673,397 shares in 1998 and 1997
Additional Paid-In Capital...................................... 1,528,620
Retained Earnings............................................... 23,430,887
Treasury Shares (826,216 in 1998
and 845,016 in 1997), at Cost.................................. (4,734,643)
Underfunded Pension Liability Adjustment........................ (154,535)
------------
Total Stockholders' Equity........................................ 34,253,822
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................ $102,764,477
============
</TABLE>
See Notes to the Unaudited Condensed Consolidated Financial Statements.
F-2
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net Sales.......................................... $ 30,872,196 $ 20,645,811
Cost of Sales...................................... (21,272,434) (15,173,396)
------------ ------------
Gross Profit..................................... 9,599,762 5,472,415
Selling and Administrative Expenses................ (4,723,832) (3,154,306)
Equity in Earnings of Partnership.................. -- 255,931
------------ ------------
Operating Earnings............................... 4,875,930 2,574,040
Interest Expense (Net)............................. (775,526) (370,609)
------------ ------------
Earnings from Continuing Operations
Before Income Taxes.............................. 4,100,404 2,203,431
Provision for Income Taxes--Continuing Operations.. (1,660,487) (892,441)
------------ ------------
Earnings from Continuing Operations.............. 2,439,917 1,310,990
Loss from Discontinued Operations,
Net of Income Taxes.............................. -- (206,108)
------------ ------------
NET EARNINGS....................................... $ 2,439,917 $ 1,104,882
============ ============
BASIC EARNINGS PER SHARE:
Earnings from Continuing Operations.............. $ .50 $ .27
Loss from Discontinued Operations................ -- (.04)
------------ ------------
Net Earnings..................................... $ .50 $ .23
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING................ 4,835,884 4,788,858
DILUTED EARNINGS PER SHARE:
Earnings from Continuing Operations.............. $ .48 $ .27
Loss from Discontinued Operations................ -- (.04)
------------ ------------
Net Earnings..................................... $ .48 $ .23
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING AND
EQUIVALENTS....................................... 5,041,993 4,868,685
CASH DIVIDENDS DECLARED AND PAID................... $ .08 $ .08
</TABLE>
See Notes to the Unaudited Condensed Consolidated Financial Statements.
F-3
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31,
-------------------------
1998 1997
------------ -----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings........................................ $ 2,439,917 $ 1,104,882
Adjustments to Reconcile Net Earnings
to Net Cash Provided by Operating Activities:
Depreciation........................................ 1,309,901 948,201
Goodwill Amortization............................... 160,686 2,500
Increase in Deferred Taxes.......................... 60,000 60,000
Change in Assets and Liabilities.................... 1,248,609 (663,413)
------------ -----------
Total Adjustments to Reconcile
Net Earnings to Net Cash Provided by Operating
Activities......................................... 2,779,196 347,288
------------ -----------
Net Cash Provided by Operating Activities........... 5,219,113 1,452,170
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures................................ (2,315,837) (1,154,370)
Investment in Acquisitions, Net of Cash Received.... (10,613,703) --
------------ -----------
Net Cash Used in Investing Activities............... (12,929,540) (1,154,370)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings Under Revolving Credit Agreement..... 10,200,000 300,000
Notes Payable for Purchase of Ticorm................ (1,900,000) --
Notes Payable for Purchase of Alumatherm............ 60,000 --
Dividends Paid...................................... (386,518) (382,491)
------------ -----------
Net Cash Provided by (Used in) Financing Activities. 7,973,482 (82,491)
NET INCREASE IN CASH:............................... 263,055 215,309
Cash at Beginning of Period......................... 283,270 36,228
------------ -----------
Cash at End of Period............................... $ 546,325 $ 251,537
============ ===========
Supplemental Disclosures of Cash Flow Information:
Interest Paid....................................... $ 562,537 $ 209,082
Income Taxes Paid--Net of Refunds................... 232,984 99,938
</TABLE>
See Notes to the Unaudited Condensed Consolidated Financial Statements.
F-4
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. CONDENSED FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. It
is suggested that these condensed financial statements be read in conjunction
with the consolidated financial statements for the three years ended December
31, 1997, and the notes thereto, appearing elsewhere in this Prospectus.
Statements for the three month periods ended March 31, 1998 and March 31,
1997 reflect, in the opinion of the Company, all adjustments (consisting only
of normal recurring accruals) necessary to present fairly the results of these
periods. Results for interim periods are not necessarily indicative of results
for a full year.
NOTE 2. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS 130, "Reporting
Comprehensive Income." For the first quarters of 1998 and 1997, there was no
difference between net earnings as reported and comprehensive income as per
SFAS 130.
NOTE 3. ACQUISITIONS
On January 16, 1998, the Company acquired all of the outstanding shares of
both Industrial Steel Treating Co. ("Industrial") and Fabriform Metal Brazing,
Inc. ("Fabriform"), related heat treating companies in the Los Angeles area,
for $10.6 million. The acquisitions were funded with borrowings under the
revolving credit agreement ("Credit Agreement").
The preliminary allocation of the purchase price of Industrial and Fabriform
included in the Company's financial statements for the first quarter of 1998
is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Property and Equipment.................................... $ 1,952
Accounts Receivable....................................... 2,018
Other Assets.............................................. 199
Goodwill.................................................. 8,323
Accounts Payable.......................................... (166)
Other Liabilities......................................... (1,713)
-------
$10,613
</TABLE>
The cost of the acquisitions has been allocated to the assets and
liabilities based on their estimated fair market value. Goodwill is amortized
using the straight line method over 30 years.
F-5
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO THE
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The purchase agreement with Industrial and Fabriform was effective as of
January 1, 1998. Therefore, the results of Industrial and Fabriform are
included for the entire first quarter of 1998.
The following table presents pro forma information for the first quarter of
1997 of the combined entities of Lindberg Corporation, Industrial and
Fabriform, and Alumatherm Heat Treating Company. The Company purchased the
remaining 50% interest in Alumatherm from its partner on October 1, 1997.
The unaudited pro forma information assumes the acquisitions had taken place
at the beginning of the period presented.
<TABLE>
<CAPTION>
FIRST QUARTER 1997
-------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C>
Net Sales.......................... $26,186
Earnings from Continuing
Operations........................ 1,687
Net Earnings....................... 1,481
Per Diluted Share:
Earnings from Continuing
Operations...................... $ .34
Net Earnings..................... .30
</TABLE>
Adjustments to the statement of earnings include additional depreciation and
interest charges, goodwill amortization, adjustments of certain other expenses
and income tax effects. The pro forma information is provided for illustrative
purposes only and is not necessarily reflective of the future results of the
Company or results of operations that would have actually occurred had the
transactions been in effect for the period presented.
NOTE 4. DEBT
On February 10, 1998, the Credit Agreement was amended to increase the
facility by $10 million to $45 million and to adjust certain loan covenants.
Additionally, the amendment extended the maturity date of the Credit Agreement
to April 2000.
NOTE 5. MATERIAL CHANGES
The Company is the subject of a pending investigation by the government and
a qui tam (whistle-blower) lawsuit regarding alleged violations of the Federal
False Claims Act. The Company learned of the lawsuit in late May 1998.
Although the activities that are the subject of the investigation and lawsuit
appear to relate to only one plant, no assurance can be given that the
investigation or lawsuit will not materially adversely affect the Company. See
"Business--Litigation." Also, the Company assumed a liability for
environmental remediation, which was estimated to be $1.2 million as of March
31, 1998, in its acquisition of Industrial. Otherwise, no material changes
have occurred with respect to the Company's contingent liabilities outlined in
the Company's financial statements and the notes thereto for the three years
ended December 31, 1997 appearing elsewhere in this Prospectus through the
date of this report.
NOTE 6. SUBSEQUENT EVENTS
Subsequent to the end of the first quarter, on April 16, 1998, the Company
acquired all of the outstanding common stock of Houston Heat Treating Company
("HHT") for $10.7 million in cash. The acquisition was funded with additional
borrowings under the Credit Agreement. HHT is a heat treating facility located
in Houston, Texas, specializing in processing for the oilfield equipment
market. On April 24, 1998 the Company's Certificate of Incorporation was
amended to change the par value of the Common Stock to $.01 per share, to
increase the number of authorized shares of Common Stock to 25,000,000 and to
create a new class of 1,000,000 authorized shares of preferred stock, issuable
in series.
NOTE 7. DISCONTINUED OPERATIONS
On April 22, 1998, the Company sold certain assets of its Impact Industries,
Inc., a subsidiary operating in the discontinued Precision Products segment,
for cash and a note. On June 11, 1998, the Company sold the assets of Harris
Metals, another Precision Products facility, for cash and a note. The Company
is continuing to pursue the sale of the remaining Precision Products
operations and expects to complete divestiture of the segment by year-end
1998, as originally scheduled.
F-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Lindberg Corporation:
We have audited the accompanying consolidated balance sheets of Lindberg
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of earnings, stockholders'
equity and cash flows for the years ended December 31, 1997, 1996 and 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lindberg Corporation and
subsidiaries as of December 31, 1997 and 1996 and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
January 22, 1998
F-7
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
ASSETS 1997 1996
------ ---------------- ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash...................................... $ 283,270 $ 36,228
Receivables, Less Allowance for Doubtful
Accounts of $304,000 in 1997 and $325,000
in 1996.................................. 14,875,005 10,461,635
Prepaid and Refundable Income Taxes....... 1,380,768 1,687,534
Note Receivable........................... -- 1,102,600
Prepaid Expenses.......................... 632,846 633,386
Net Assets of Discontinued Operations..... 17,475,866 25,272,160
Other Current Assets...................... 1,616,774 371,053
---------------- ----------------
Total Current Assets..................... 36,264,529 39,564,596
PROPERTY AND EQUIPMENT:
Land...................................... 1,745,246 1,745,246
Buildings and Improvements................ 16,674,207 15,663,434
Machinery and Equipment................... 71,363,851 63,135,960
Construction in Progress.................. 1,819,101 2,007,217
---------------- ----------------
Total Property and Equipment............. 91,602,405 82,551,857
Less Accumulated Depreciation............. (52,505,822) (51,673,102)
---------------- ----------------
Net Property and Equipment............... 39,096,583 30,878,755
Goodwill.................................. 11,537,742 314,738
Investment in Partnership................. -- 1,607,632
Other Non-Current Assets.................. 2,664,577 2,521,855
---------------- ----------------
TOTAL ASSETS.............................. $ 89,563,431 $ 74,887,576
================ ================
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Current Maturities on Long-Term Debt...... $ 83,328 $ --
Notes Payable............................. 10,220,000 901,437
Accounts Payable.......................... 3,540,279 3,180,271
Accrued Expenses:
Salaries and Wages....................... 1,775,352 1,221,914
Taxes, other than Income................. 543,795 511,213
Employee Insurance and Benefits.......... 1,395,126 1,436,917
Utilities................................ 658,741 593,776
Other.................................... 1,900,780 1,619,272
---------------- ----------------
Total Current Liabilities................ 20,117,401 9,464,800
NON-CURRENT LIABILITIES:
Deferred Income Taxes..................... 6,149,001 6,847,504
Long-Term Debt (Less Current Maturities).. 25,862,512 20,700,000
Accrued Pension........................... 3,342,458 3,148,114
Other Non-Current Liabilities............. 2,000,641 1,680,256
---------------- ----------------
Total Non-Current Liabilities............ 37,354,612 32,375,874
STOCKHOLDERS' EQUITY:
Common Shares, $2.50 par value:
Authorized 12,000,000 shares in 1997 and
1996;
Issued 5,673,397 shares in 1997 and 1996. 14,183,493 14,183,493
Additional Paid-In Capital................ 1,526,192 1,493,406
Retained Earnings......................... 21,377,489 22,652,574
Treasury Shares (845,016 in 1997 and
894,256 in 1996), at Cost................ (4,841,221) (5,054,651)
Underfunded Pension Liability Adjustment.. (154,535) (227,920)
---------------- ----------------
Total Stockholders' Equity............... 32,091,418 33,046,902
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................... $ 89,563,431 $ 74,887,576
================ ================
</TABLE>
See Notes to Consolidated Financial Statements.
F-8
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES............................ $ 88,783,577 $ 72,776,202 $ 67,967,257
Cost of Sales........................ (63,691,330) (52,519,365) (48,702,131)
------------ ------------ ------------
Gross Profit......................... 25,092,247 20,256,837 19,265,126
Selling and Administrative Expenses.. (13,211,421) (11,507,041) (11,530,647)
Equity in Earnings of Partnership.... 1,436,328 892,822 301,195
------------ ------------ ------------
Operating Earnings................. 13,317,154 9,642,618 8,035,674
Interest Expense (Net)............... (1,681,103) (1,511,312) (1,637,740)
Gain on Asset Conversion............. -- -- 615,242
------------ ------------ ------------
Earnings From Continuing Operations
Before Income Taxes................ 11,636,051 8,131,306 7,013,176
Provision for Income Taxes--
Continuing Operations............... (4,674,961) (3,293,032) (2,840,336)
------------ ------------ ------------
Earnings From Continuing
Operations........................ 6,961,090 4,838,274 4,172,840
Discontinued Operations, Net of
Income Taxes:
Earnings (Loss) From Operations...... (754,240) 178,118 1,461,676
Estimated Loss on Sale............... (5,944,000) -- --
------------ ------------ ------------
Earnings (Loss) From Discontinued
Operations........................ (6,698,240) 178,118 1,461,676
------------ ------------ ------------
NET EARNINGS......................... $ 262,850 $ 5,016,392 $ 5,634,516
============ ============ ============
BASIC EARNINGS PER SHARE:
Earnings From Continuing Operations.. $ 1.45 $ 1.01 $ .89
Earnings (Loss) From Discontinued
Operations.......................... (1.40) .04 .30
------------ ------------ ------------
NET EARNINGS......................... $ .05 $ 1.05 $ 1.19
============ ============ ============
DILUTED EARNINGS PER SHARE:
Earnings From Continuing Operations.. $ 1.41 $ .99 $ .88
Earnings (Loss) From Discontinued
Operations.......................... (1.36) .04 .30
------------ ------------ ------------
NET EARNINGS......................... $ .05 $ 1.03 $ 1.18
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-9
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings........................... $ 262,850 $ 5,016,392 $ 5,634,516
Adjustments to Reconcile Net Earnings
to Net Cash Provided by Operating
Activities:
Depreciation........................... 4,084,315 3,689,743 3,459,246
Equity Earnings, Net of Cash
Distributions......................... (235,128) (692,822) (301,195)
Goodwill Amortization.................. 119,347 5,000 --
Increase (Decrease) in Deferred Taxes.. 101,497 732,996 (376,879)
Estimated Loss on Sale of Discontinued
Operations............................ 5,944,000 -- --
Gain on Asset Conversion............... -- -- (615,242)
Change in Assets and Liabilities:
Receivables............................ (2,337,872) (165,047) (788,998)
Prepaid and Refundable Income Taxes.... 310,846 (626,989) 966,601
Prepaid Expenses and Other Current
Assets................................ (220,486) (12,417) 62,989
Accounts Payable....................... 18,311 (150,594) (1,741,409)
Accrued Expenses....................... 356,720 (484,785) (868,754)
Net Assets of Discontinued Operations.. 1,052,294 (522,631) (1,851,911)
Other.................................. 698,788 (1,571,556) 319,754
------------ ----------- -----------
Total Adjustments to Reconcile Net
Earnings to Net Cash Provided by
Operating Activities.................. 9,892,632 200,898 (1,735,798)
------------ ----------- -----------
Net Cash Provided by Operating
Activities............................ 10,155,482 5,217,290 3,898,718
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures................... (7,336,401) (5,365,396) (4,028,647)
Cash Received for Sale of Alloy Wire
Belt.................................. 1,102,600 1,000,000 --
Investment in Alumatherm, Net of Cash
Received.............................. (12,757,711) -- --
Investment in Ticorm, Net of Cash
Received.............................. (3,797,556) -- --
Investment in Vac-Hyd.................. -- (2,325,560) --
Proceeds from Notes Receivable......... -- -- 400,000
------------ ----------- -----------
Net Cash Used in Investing Activities.. (22,789,068) (6,690,956) (3,628,647)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Payments) Under
Revolving Credit Agreement............ 7,100,000 1,800,000 (2,700,000)
Note Payable for Purchase of Vac-Hyd... (901,437) 901,437 --
Borrowings Under Senior Note Agreement. -- -- 10,000,000
Payments on Bank Term Loan............. -- -- (6,300,000)
Notes Payable for Purchase of Ticorm... 1,900,000 -- --
Notes Payable for Purchase of
Alumatherm............................ 6,320,000 -- --
Dividends Paid......................... (1,537,935) (1,379,120) (1,181,054)
------------ ----------- -----------
Net Cash Provided by (Used in)
Financing Activities................ 12,880,628 1,322,317 (181,054)
------------ ----------- -----------
NET INCREASE (DECREASE) IN CASH........ 247,042 (151,349) 89,017
Cash at Beginning of Year.............. 36,228 187,577 98,560
------------ ----------- -----------
Cash at End of Year.................... $ 283,270 $ 36,228 $ 187,577
============ =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest Paid.......................... $ 1,679,402 $ 1,649,277 $ 1,686,270
Income Taxes Paid...................... 3,875,117 3,235,993 3,287,073
</TABLE>
See Notes to Consolidated Financial Statements.
F-10
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNDERFUNDED
FOR THE YEARS ENDED ADDITIONAL PENSION COMPRE-
DECEMBER 31, 1997, 1996 AND COMMON PAID-IN TREASURY RETAINED LIABILITY HENSIVE
1995 SHARES CAPITAL SHARES EARNINGS ADJUSTMENT INCOME TOTAL
- --------------------------- ----------- ---------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994. $14,183,493 $1,531,600 $(5,405,657) $14,561,840 $(202,760) $24,668,516
Comprehensive Income:
Net Earnings.............. 5,634,516 $5,634,516 5,634,516
Pension Adjustment........ 21,332 21,332 21,332
----------
Comprehensive Income.... $5,655,848
==========
Dividends Paid............. (1,181,054) (1,181,054)
Exercise of Stock Options.. (19,494) 58,619 39,125
----------- ---------- ----------- ----------- --------- -----------
Balance, December 31, 1995. 14,183,493 1,512,106 (5,347,038) 19,015,302 (181,428) 29,182,435
Comprehensive Income:
Net Earnings.............. 5,016,392 $5,016,392 5,016,392
Pension Adjustment........ (46,492) (46,492) (46,492)
----------
Comprehensive Income.... $4,969,900
==========
Dividends Paid............. (1,379,120) (1,379,120)
Exercise of Stock Options.. (18,700) 292,387 273,687
----------- ---------- ----------- ----------- --------- -----------
Balance, December 31, 1996. 14,183,493 1,493,406 (5,054,651) 22,652,574 (227,920) 33,046,902
Comprehensive Income:
Net Earnings.............. 262,850 $ 262,850 262,850
Pension Adjustment........ 73,385 73,385 73,385
----------
Comprehensive Income.... $ 336,235
==========
Dividends Paid............. (1,537,935) (1,537,935)
Exercise of Stock Options.. 32,786 213,430 246,216
----------- ---------- ----------- ----------- --------- -----------
Balance, December 31, 1997. $14,183,493 $1,526,192 $(4,841,221) $21,377,489 $(154,535) $32,091,418
=========== ========== =========== =========== ========= ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-11
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 1. ACCOUNTING POLICIES
A. Nature of Operations. The Company serves metal-using and metal-working
industries, providing commercial metal heat treating.
B. Principles of Consolidation. The consolidated financial statements
include the accounts of Lindberg Corporation and its subsidiaries. Significant
intercompany balances and transactions have been eliminated.
The Company's 50% share of a heat treating partnership was carried at cost
plus equity in undistributed earnings from the partnership formation on July
1, 1994, until the acquisition of that entity on October 1, 1997 (see Note
(2)).
C. Revenue Recognition. The Company recognizes revenues from sales upon
shipment to its customers.
D. Property and Depreciation. Property and equipment are stated at cost.
Depreciation is provided on the straight line method for financial statement
purposes and on accelerated methods for income tax purposes. Maintenance costs
are charged to expense as incurred. Expenditures which improve efficiency or
capacity or extend the useful life of assets are capitalized. Interest cost
incurred during the period of construction of plant and equipment is
capitalized as part of the cost of such plant and equipment.
E. Income Taxes. The Company determines its tax provision and deferred tax
balance in compliance with SFAS 109, "Accounting for Income Taxes". Under this
approach, the provision for income taxes represents income taxes paid or
payable for the current year adjusted for the change in deferred taxes during
the year. Deferred income taxes reflect the net tax effects of temporary
differences between the financial statement bases and the tax bases of assets
and liabilities and are adjusted for changes in tax rates and tax laws when
changes are enacted.
F. Earnings Per Share. Effective January 1, 1997, the Company adopted SFAS
128, "Earnings per Share" (SFAS 128). The provisions of SFAS 128 require
computations of basic and diluted earnings per share. Diluted earnings per
share reflect the potential dilution that could occur if outstanding stock
options were converted into common stock. Dilutive shares used in the
calculations for the years ended December 31, 1997, 1996 and 1995 were
4,932,828, 4,860,555, and 4,763,491, respectively. Basic earnings per share
excludes dilution effects. Earnings per share for all years have been computed
in accordance with SFAS 128.
G. Use of Estimates. The preparation of these financial statements, in
conformity with generally accepted accounting principles, required the use of
certain estimates by management in determining the Company's assets,
liabilities, revenues and expenses. Actual results could differ from those
estimates.
H. Impairment of Long-Lived Assets. Effective January 1, 1996, the Company
adopted SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" (SFAS 121). The provisions of SFAS 121
require a review of long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The Company does not believe that any impairment of long-lived
assets has occurred, and, therefore, the adoption of SFAS 121 did not have any
effect on the Company's statements of earnings in 1997 or 1996.
I. Reclassifications. Certain prior period amounts have been reclassified to
be consistent with the 1997 presentation.
NOTE 2. ACQUISITIONS
On May 31, 1996, the Company acquired the assets of Vac-Hyd for $1.4 million
of cash and a note payable of $.9 million. On July 31, 1997, the Company
acquired all of the outstanding shares of Ticorm, Inc. for $1.9
F-12
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
million of cash and $1.9 million of notes payable. On October 1, 1997, the
Company acquired the remaining 50% share of its joint venture partnership--
Alumatherm Heat Treating Company ("Alumatherm")--from its partner for $6.5
million of cash and $6.3 million of notes payable. Each of these acquired
businesses is a heat treating company in the Los Angeles area. Cash payments
made as part of each purchase were funded with additional borrowings under the
Company's revolving credit agreement.
Prior to the purchase of Alumatherm, the Company reported its results under
the equity method of accounting as an unconsolidated partnership. Accordingly,
the Company's statements of earnings for the years ended December 31, 1996 and
1995 and for the nine months ended September 30, 1997, include the Company's
equity in Alumatherm's earnings. The Company's investment in Alumatherm was
included in Total Assets for the year ended December 31, 1996; subsequent to
the purchase, the financial position for Alumatherm was included in the
Company's balance sheet on a fully consolidated basis.
All of the acquisitions were accounted for using the purchase method;
accordingly, the results of operations have been included in the consolidated
totals of the Company since the dates of their respective acquisitions. The
cost of the acquisitions has been allocated to the assets and liabilities
based on their estimated fair market value. Goodwill is amortized using the
straight line method over 30 years.
With the exception of Alumatherm, the acquired companies did not materially
impact the consolidated financial position or results of operations for the
periods presented. The preliminary allocation of the total cost of Alumatherm,
which includes the purchase price and the elimination of the related equity
investment account, is as follows:
<TABLE>
<CAPTION>
ALUMATHERM
--------------
(IN THOUSANDS)
<S> <C>
Property and Equipment.................................... $ 3,575
Accounts Receivable....................................... 1,921
Goodwill.................................................. 9,873
Other Assets.............................................. 237
Accounts Payable.......................................... (281)
Other Liabilities......................................... (722)
-------
$14,603
=======
</TABLE>
The following table presents pro forma information for the combined entities
of Lindberg Corporation and Alumatherm for the twelve months ended December
31, 1997 and 1996 assuming the acquisition had taken place at the beginning of
the periods presented.
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Unaudited
Net Sales........................ $ 98,962 $ 81,806
Earnings from Continuing
Operations...................... 7,831 5,181
Net Earnings..................... 1,133 5,359
Per Diluted Share:
Earnings from Continuing
Operations.................... $ 1.59 $ 1.07
Net Earnings................... .23 1.10
</TABLE>
Adjustments to the statements of earnings include additional depreciation
and interest charges, goodwill amortization, the reduction of certain other
expenses and income tax effects. The pro forma information is provided for
illustrative purposes only and is not necessarily reflective of the future
results of the Company or results of operations that would have actually
occurred had the transaction been in effect for the periods presented.
F-13
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. DISCONTINUED OPERATIONS
On December 22, 1997, the Board of Directors approved a plan to sell the
Company's Precision Products business segment ("Precision Products"). Although
difficult to predict, the Company expects to sell the segment during 1998.
Precision Products is reported as discontinued operations, and the
consolidated financial statements have been reclassified to segregate the net
assets and operating results of the business. The Precision Products segment
consists of two aluminum die casting facilities (Impact Industries, Inc. and
Arrow-Acme Company) and one aluminum semi-permanent mold foundry (Harris
Metals).
The estimated loss recorded during 1997 for the sale of Precision Products
was $6.7 million, which included a reduction in asset values of $5.8 million
and a provision for anticipated closing costs and operating losses until
disposal of $.9 million. The loss was reported net of an income tax benefit of
$.8 million, for an after-tax loss of $5.9 million.
The loss on the sale of Precision Products was based on estimates of the
proceeds expected to be realized on the sale of the operations. The amounts
the Company will ultimately realize could differ materially from the amounts
assumed in arriving at the loss on disposal of the discontinued operations.
Summary operating results of the discontinued operations for 1997, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales....................................... $34,567 $41,244 $54,037
Costs and expenses.............................. 35,835 40,945 51,580
------- ------- -------
Earnings (loss) before taxes.................... (1,268) 299 2,457
Provision (benefit) for income taxes............ (514) 121 995
------- ------- -------
Net income (loss)............................... $ (754) $ 178 $ 1,462
======= ======= =======
</TABLE>
At December 31, 1997, net assets of the discontinued operations of
approximately $17.5 million consisted of $7.4 million of net current assets,
$14.2 million of equipment and $2.6 million of other net assets, less the
allowance for the estimated loss on disposal.
NOTE 4. INCOME TAXES
The major components of the provision for income taxes for 1997, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
1997
Federal......................................... $3,448 $269 $3,717
State........................................... 800 51 851
Canadian........................................ 107 -- 107
------ ---- ------
$4,355 $320 $4,675
====== ==== ======
1996
Federal......................................... $2,142 $386 $2,528
State........................................... 620 74 694
Canadian........................................ 54 17 71
------ ---- ------
$2,816 $477 $3,293
====== ==== ======
1995
Federal......................................... $1,852 $211 $2,063
State........................................... 737 40 777
------ ---- ------
$2,589 $251 $2,840
====== ==== ======
</TABLE>
F-14
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The provision for income taxes includes deferred tax expense (benefit)
resulting from timing differences in the recognition of revenue and expense
for tax and financial statement purposes. The sources of these differences and
the tax effect of each are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Depreciation............................................ $158 $137 $ 88
Restructuring Activities................................ -- -- 385
Environmental Control Activities........................ (49) 241 (370)
Other................................................... 211 99 148
---- ---- -----
$320 $477 $ 251
==== ==== =====
</TABLE>
The differences between the provision for income taxes at the statutory rate
and that shown in the consolidated statements of earnings are summarized as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Consolidated Pretax Earnings at Statutory Rate...... $3,956 $2,765 $2,384
State Income Taxes, Net of Federal Tax Benefit...... 614 429 370
Other............................................... 105 99 86
------ ------ ------
$4,675 $3,293 $2,840
====== ====== ======
</TABLE>
Significant components of the Company's deferred tax liabilities and assets
at December 31, 1997, and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred Tax Liabilities:
Tax Depreciation Over Book............................. $(6,104) $(7,452)
Reserve for Discontinued Operations.................... (840) --
Other Liabilities...................................... (482) (398)
------- -------
Total Deferred Tax Liabilities........................ $(7,426) $(7,850)
======= =======
Deferred Tax Assets:
Reserves Not Deducted for Tax.......................... $ 761 $ 829
Employee Benefit Provisions in Excess of Cash Payments. 1,221 1,266
Other Assets........................................... 148 324
------- -------
Total Deferred Tax Assets............................. $ 2,130 $ 2,419
------- -------
Net Deferred Tax Liability............................ $(5,296) $(5,431)
======= =======
Included in Balance Sheet in:
Prepaid and Refundable Income Taxes.................... $ 853 $ 1,417
Deferred Income Taxes.................................. (6,149) (6,848)
------- -------
$(5,296) $(5,431)
======= =======
</TABLE>
F-15
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Senior Notes............................................ $10,000 $10,000
Revolving Credit........................................ 17,800 10,700
Notes Payable........................................... 8,366 901
------- -------
36,166 21,601
Less-Current Maturities................................. (10,303) (901)
------- -------
$25,863 $20,700
======= =======
</TABLE>
In April 1994, the Company entered into an unsecured revolving credit
agreement (the "Agreement") with two banks which provided for a line of credit
of $20,000,000 and a term loan of $7,000,000.
In November 1995, the Company refinanced its debt. Ten million dollars of
senior notes were issued, the proceeds of which were used to retire the
outstanding balance of the Company's term loan and a portion of the
outstanding balance on its revolving credit facility. The notes bear interest
at 7.16% annually and have a seven-year final maturity. Equal annual principal
payments on the notes commence on the third anniversary of closing and
continue on each anniversary date through the life of the notes. In
conjunction with the refinancing, the Company and its banks amended the
Agreement to allow for the issuance of the senior notes and to terminate the
term loan.
In February 1996, the Agreement was amended to increase the total facility
by $5 million to $25 million. The total facility was further increased by $10
million to $35 million in September 1997 and amended in February 1998 to
increase the facility $10 million to $45 million. Additionally, the February
1998 amendment extended the maturity date of the Agreement to April 2000.
The Company may choose from two interest rate alternatives (i) the bank's
reference rate (prime rate) and (ii) a Eurodollar loan rate plus an applicable
margin based on the Company's ratio of funded debt to earnings before
interest, taxes, depreciation and amortization. The effective interest rates
for the Agreement were 6.6% and 6.7% during 1997 and 1996, respectively; the
year-end rates were 6.7% and 6.5% for 1997 and 1996, respectively.
The revolving credit and senior note agreements contain various covenants
which, among others, restrict the ability of the Company to pay dividends
beyond certain limits and require the Company to meet certain financial
ratios. In February 1998, certain covenants in the Agreement and in the senior
notes were modified.
The Company also has a second agreement which provides for the issuance of
letters of credit, up to a maximum of $5,000,000. At December 31, 1997, a
letter of credit totaling $4,500,000 was issued in accordance with an
insurance agreement.
Annual maturities of long-term debt, excluding the revolving credit
agreement, for the five years following December 31, 1997 are $10,303,000,
$2,063,000, $2,000,000, $2,000,000 and $2,000,000, respectively.
NOTE 6. LEASES
The Company has a number of lease agreements related to the rental of
production and administrative facilities and equipment. These are of varying
terms and extend as far as the year 2007.
F-16
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a schedule of estimated future minimum rental payments
required under leases that have initial or remaining noncancelable terms in
excess of one year as of December 31, 1997:
<TABLE>
<CAPTION>
OPERATING LEASES
----------------
(IN THOUSANDS)
<S> <C>
1998..................................................... $1,703
1999..................................................... 1,635
2000..................................................... 1,174
2001..................................................... 882
2002..................................................... 709
Thereafter............................................... 1,220
------
Total minimum payment required....................... $7,323
======
</TABLE>
The total rent expense for 1997, 1996 and 1995 was $1,765,000, $1,412,000,
and $1,086,000, respectively.
No sublease income is due after 1997.
NOTE 7. EMPLOYEE BENEFITS
The Company and its subsidiaries have various defined benefit pension plans
covering many of their employees. The pension expense related to these plans
for 1997, 1996 and 1995 was $391,000, $455,000, and $31,000, respectively,
which included amortization of past service cost over 30 years. The standards
utilized by the Company to fund the pension plans satisfy the minimum funding
requirements under the provisions of ERISA.
Net periodic pension cost for 1997, 1996 and 1995 included the following
components:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service Cost--Benefits Earned During the
Period...................................... $ 727 $ 776 $ 533
Interest Cost on Projected Benefit
Obligations................................. 1,226 1,158 1,076
Return on Plan Assets........................ (3,760) (2,436) (3,194)
Net Amortization and Deferral................ 2,198 957 1,616
------- ------- -------
$391 $ 455 $ 31
======= ======= =======
</TABLE>
F-17
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Table 1 summarizes the funded status of the plans and provides a
reconciliation to the long-term pension liability recorded on the Company's
consolidated balance sheets at December 31, 1997 and 1996.
TABLE 1: RECONCILIATION OF FUNDED STATUS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
1997 1997 1996 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Actuarial Present Value
of Benefit
Obligations:
Vested Benefit
Obligations............ $(11,834) $(1,345) $(10,807) $(1,805)
Accumulated Benefit
Obligations............ (12,375) (1,535) (11,295) (2,028)
Projected Benefit
Obligations............ (15,969) (1,787) (14,593) (2,255)
Plan Assets at Fair
Value.................. 20,796 383 17,592 714
-------- ------- -------- -------
Plan Assets in Excess of
(or less than)
Projected Benefit
Obligations............ 4,827 (1,404) 2,999 (1,541)
Unrecognized Net (Gain)
Loss................... (4,647) 519 (2,452) 619
Unrecognized Net
(Assets) Obligations
Amortized over Average
Remaining
Service Period of the
Employee
Workforce.............. (919) 73 (1,100) 109
Unrecognized Prior
Service Cost........... 195 191 269 238
Long-Term Balance Sheet
Liability.............. -- (531) -- (738)
-------- ------- -------- -------
Long-Term Pension
Liability.............. $ (544) $(1,152) $ (284) $(1,313)
======== ======= ======== =======
</TABLE>
The discount rate used in determining the projected benefit obligation was
7.50% in 1997 and 1996. The rate of increase in future compensation levels and
the expected long-term rate of return on assets were 5.0% and 9.0%,
respectively, in both 1997 and 1996.
The Company and its subsidiaries also have various defined contribution
plans. The Company matches 50% of the participants' contributions up to 4% of
compensation. Additionally, the Company also contributes one percent of each
employee's compensation for all employees who are not participants in a
defined benefit plan, have six months of service, and who are still
participants in the 401(k) savings plan at the end of the year. The Company
made distributions for contributions and related expenses of $598,000,
$544,000, and $499,000 to these defined contribution plans in 1997, 1996 and
1995, respectively.
The Company provides no other postretirement benefits other than the benefit
plans listed above.
NOTE 8. STOCK OPTIONS
In 1991, the Board of Directors and stockholders approved a stock option
plan for key employees. The plan provides for the issuance, from time to time,
of options to purchase shares of the Company's common stock at prices not less
than 100% of the fair market value of the stock at the time an option is
granted. In 1995, the plan was amended to increase the reserve of common stock
available for issuance upon the exercise of options to
F-18
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
675,000 shares. The following table summarizes information as to options
granted, exercised, cancelled and outstanding under this plan and options
still available under a similar plan which expired in 1991.
<TABLE>
<CAPTION>
AVERAGE OPTION
SHARES PRICE PER SHARE
------- ---------------
<S> <C> <C>
Outstanding, December 31, 1994................... 318,400 $6.20
Options exercised during year.................... (10,375) 3.77
Options cancelled during year.................... (1,250) 4.63
------- -----
Outstanding, December 31, 1995................. 306,775 6.29
Options granted during year...................... 72,900 7.50
Options exercised during year.................... (51,750) 5.29
Options cancelled during year.................... (9,700) 7.30
------- -----
Outstanding, December 31, 1996................. 318,225 6.70
Options granted during year...................... 73,900 9.00
Options exercised during year.................... (56,125) 6.26
Options cancelled during year.................... (26,300) 7.52
------- -----
Outstanding, December 31, 1997................. 309,700 $7.26
======= =====
</TABLE>
The Company adopted the disclosure-only option under SFAS 123, "Accounting
for Stock Based Compensation" (SFAS 123), as of December 31, 1996. As such,
the Company continues to account for employee stock options under APB Opinion
25, as permitted under generally accepted accounting principles. Accordingly,
no compensation cost has been recognized in the accompanying financial
statements related to these options. Had compensation cost for these plans
been determined consistent with SFAS 123, the Company's net earnings and net
earnings per share would have been the following:
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Earnings From Continuing
Operations
As reported.................... $ 6,961 $ 4,838
Pro forma...................... 6,796 4,745
Net Earnings
As reported.................... 263 5,016
Pro forma...................... 165 4,961
Diluted Earnings Per Share:
Earnings From Continuing
Operations
As reported.................... $ 1.41 $ .99
Pro forma...................... 1.38 .98
Net Earnings
As reported.................... .05 1.03
Pro forma...................... .03 1.02
</TABLE>
Since SFAS 123 does not apply to options granted prior to January 1, 1995,
the pro forma disclosure is not likely to be indicative of pro forma results
which may be expected in future years.
The fair values of the option grants are estimated at the date of grant
using the Black-Scholes option pricing model with the following weighted-
average assumptions for 1997 and 1996, respectively: risk-free interest rates
of 5.7% and 6.5%; dividend yields of 2.1% and 3.2%; volatility of 40.1% and
46.0%; and an average expected life of 5 years for both 1997 and 1996. The
options vest ratably over 4 years. The fair value of options granted during
1997 and 1996 were calculated to be $3.29 and $2.83, respectively.
F-19
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In 1991, the stockholders approved a stock option plan for members of the
Board of Directors who are not employees of the Company, covering a maximum of
72,000 shares. In 1997, this plan was amended to increase the reserve of
common stock available for issuance upon the exercise of options to 150,000
shares and to remove the termination date of the plan, among other changes.
Under the terms of this plan, options to purchase an aggregate of 75,000
shares have been granted. The average exercise price for these options is
$7.74 per share. At December 31, 1997, 75,000 shares were available for future
grant.
NOTE 9. RELATED PARTY
The Company holds an 18% equity interest in Thixomat, Inc., a Company formed
to promote and commercialize Thixomolding(TM) technology. The Chairman of
Thixomat serves on the Board of Directors of Lindberg, and is also the
President and Chief Executive Officer of University Science Partners, Inc.,
which holds a 40% equity interest in Thixomat. In addition, Lindberg holds a
seat on Thixomat's Board of Directors. At December 31, 1997, the Company held
a $434,000 equity investment in Thixomat.
NOTE 10. COMMITMENTS AND CONTINGENCIES
The Company is a party to various lawsuits and claims arising in the
ordinary course of business. Management, after review and consultation with
legal counsel, considers that any liability resulting from these matters would
not materially affect the financial condition or results of operations of the
Company.
The Company employs some environmentally hazardous materials. The Company
has made expenditures to comply with laws and regulations relating to the
protection of the environment, including studies, investigations and
remediation of ground contamination, and expects to make such expenditures in
the future in its efforts to comply with existing and future requirements.
While such expenditures to date have not materially affected the Company's
capital expenditures, competitive position, financial condition, or results of
operations, there can be no assurance that more stringent regulation or
enforcement in the future will not have such effects.
In some cases, the Company has notified state authorities of a possible need
for remediation at sites it previously operated, or currently operates. At all
such sites, costs which may be incurred are difficult to predict accurately
until the level of contamination is determined, and would be subject to
increase if more contamination is discovered during investigation or
remediation or if state authorities require more remediation than anticipated.
Such costs may be less if the contamination proves to be less than currently
expected, and to the extent costs are covered by insurance or are allocable to
others.
The Company has also been notified by various state and federal governmental
authorities that they believe it may be a "potentially responsible party" or
otherwise have responsibility with respect to clean-up obligations at three
waste disposal sites which were never owned or operated by the Company. The
Company is participating in negotiations for settlement with the relevant
authorities or other parties believed by the Company to be responsible for
clean-up obligations and further believes its responsibility to be of a minor
nature. Management believes that the ultimate outcome will not have a material
effect on the Company's financial condition or results of operations.
At December 31, 1997, the Company had reserves of approximately $900,000 to
cover future anticipated costs. The Company has estimated a range of costs in
establishing these reserves. Such reserves give no effect to possible
recoveries from insurers or other potentially responsible parties nor do they
reflect any discount for the several years over which investigation or
remediation amounts may be paid out.
F-20
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1997 and 1996 are shown in Table 2.
TABLE 2: QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS EXCEPT FOR PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
1997
Net Sales.......................... $20,646 $20,750 $20,955 $26,433
Gross Profit....................... 5,472 5,777 5,381 8,462
Earnings From Continuing
Operations........................ 1,311 1,822 1,547 2,281
Loss From Discontinued Operations.. (206) (15) (200) (6,277)
------- ------- ------- -------
NET EARNINGS (LOSS).............. $ 1,105 $ 1,807 $ 1,347 $(3,996)
======= ======= ======= =======
Basic Earnings Per Share:
Earnings From Continuing
Operations........................ $ .27 $ .38 $ .32 $ .47
Loss From Discontinued Operations.. (.04) -- (.04) (1.30)
------- ------- ------- -------
NET EARNINGS (LOSS).............. $ .23 $ .38 $ .28 $ (.83)
======= ======= ======= =======
Diluted Earnings Per Share:
Earnings From Continuing
Operations........................ $ .27 $ .37 $ .31 $ .46
Loss From Discontinued Operations.. (.04) -- (.04) (1.25)
------- ------- ------- -------
NET EARNINGS (LOSS).............. $ .23 $ .37 $ .27 $ (.79)
======= ======= ======= =======
1996
Net Sales.......................... $17,742 $18,374 $18,262 $18,398
Gross Profit....................... 4,664 5,209 4,903 5,481
Earnings From Continuing
Operations........................ 925 1,185 1,050 1,678
Earnings (Loss) From Discontinued
Operations........................ 318 285 19 (444)
------- ------- ------- -------
NET EARNINGS..................... $ 1,243 $ 1,470 $ 1,069 $ 1,234
======= ======= ======= =======
Basic Earnings Per Share:
Earnings From Continuing
Operations........................ $ .20 $ .25 $ .22 $ .35
Earnings (Loss) From Discontinued
Operations........................ .07 .06 -- (.09)
------- ------- ------- -------
NET EARNINGS..................... $ .27 $ .31 $ .22 $ .26
======= ======= ======= =======
Diluted Earnings Per Share:
Earnings From Continuing
Operations........................ $ .19 $ .24 $ .22 $ .34
Earnings (Loss) From Discontinued
Operations........................ .07 .06 -- (.09)
------- ------- ------- -------
NET EARNINGS..................... $ .26 $ .30 $ .22 $ .25
======= ======= ======= =======
</TABLE>
The quarter ended December 31, 1997 includes a net charge of $5,944,000
related to the discontinuance of the Company's Precision Products segment.
F-21
<PAGE>
LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12. STOCKHOLDER RIGHTS PLAN
In 1996, the Company declared a dividend distribution of one common share
purchase right on each outstanding share of common stock. The rights become
exercisable after a person or group acquires beneficial ownership of 20% or
more of the common stock of the Company or publicly announces a tender offer
or exchange offer for 20% or more of the common stock. Initially, each right
will entitle its holder to buy one share of common stock of the Company at an
exercise price of $40 per share. If a person or group acquires beneficial
ownership of 20% or more of the outstanding common stock of the Company: 1.)
each right will entitle its holder to purchase shares of common stock of the
Company at one-half their market price, or, in certain circumstances, at their
par value (currently $2.50 per share) and 2.) if the Company or its assets are
acquired in certain merger or other transactions, holders of rights may
acquire common stock of the acquiring Company having a market value of twice
the exercise price of the right. Rights held by the 20% holder will become
void and will not be exercisable to purchase shares at the reduced purchase
price. The rights, which do not have voting rights, will expire on November
21, 2006 and may be redeemed by the Company's board of directors at a price of
$.01 per right prior to their expiration or the accumulation of 20% or more of
the Company's common stock.
NOTE 13. SUBSEQUENT EVENT
On January 16, 1998, the Company acquired all of the outstanding shares of
both Industrial Steel Treating Co. and Fabriform Metal Brazing, Inc., heat
treating companies in the Los Angeles area, for $11 million. The acquisitions
were funded with borrowings under the revolving credit agreement.
F-22
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR INCOR-
PORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMA-
TION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD
BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. UNDER NO CIRCUMSTANCES
SHALL THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE PURSUANT TO THIS PRO-
SPECTUS CREATE ANY IMPLICATION THAT INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
OF THIS PROSPECTUS.
--------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Statement Concerning Forward-Looking Statements........................... 7
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 10
Price Range of the Common Stock; Dividend Policy.......................... 11
Capitalization............................................................ 12
Selected Consolidated Financial Data...................................... 13
Management's Discussion and Analysis of Results of Operations and
Financial Condition...................................................... 14
Business.................................................................. 19
Management................................................................ 28
Principal and Selling Stockholders........................................ 30
Description of Capital Stock.............................................. 32
Underwriting.............................................................. 34
Legal Matters............................................................. 35
Experts................................................................... 35
Available Information..................................................... 35
Incorporation of Certain Documents by Reference........................... 36
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1,400,000 SHARES
LOGO
LINDBERG CORPORATION
COMMON STOCK
PROSPECTUS
ABN AMRO INCORPORATED
MCDONALD & COMPANY
SECURITIES, INC.
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table shows estimates of the various expenses to be paid by
Lindberg Corporation in connection with the registration of the Common Stock
offered pursuant to this Registration Statement.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee*............. $ 10,806
National Association of Securities Dealers, Inc. Filing Fee*..... 4,167
Legal Fees....................................................... 75,000
Accounting Fees.................................................. 25,000
Nasdaq Listing Fee*.............................................. 17,500
Printing Costs................................................... 60,000
Miscellaneous.................................................... 17,527
--------
Total........................................................ $210,000
========
</TABLE>
- --------
*Actual.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's directors and officers are and will be indemnified against
certain liabilities in accordance with the Delaware General Corporation Law
("DGCL"), the Certificate of Incorporation and bylaws of the Company. The
Certificate of Incorporation requires the Company to indemnify its directors
and officers to the fullest extent permitted from time to time by the DGCL
except for any suit brought by a director or officer without the prior
approval of the Board of Directors. The DGCL permits a corporation to
indemnify its directors and officers, among others, against expenses
(including reasonable attorneys' fees) judgments, penalties, fines and
settlements they incur actually and reasonably in connection with any
proceeding to which they are a party by reasons of their service in those or
other capacities provided that it is established that the director or officer
acted in good faith and in a manner he or she reasonably believed to be in and
not opposed to the best interests of the Company and, in the case of any
criminal action, he or she had no reasonable cause to believe his or her
conduct was unlawful.
The Company has an insurance policy, which insures its directors and
officers against certain liabilities which they might incur in connection with
the performance of their duties.
ITEM 16. EXHIBITS
The exhibits to this registration statement are listed in the exhibit index
which follows the signature page and which is hereby incorporated by
reference.
ITEM 17. UNDERTAKINGS
(a) The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-1
<PAGE>
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Certificate of
Incorporation and By-laws of the Registrant and the laws of the State of
Delaware, or otherwise, the Registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-2 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT, OR AMENDMENT THERETO, TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROSEMONT, STATE OF
ILLINOIS, ON JUNE 19, 1998.
Lindberg Corporation
/s/ Leo G. Thompson
By___________________________________
Leo G. Thompson
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1993, THIS
REGISTRATION STATEMENT, OR AMENDMENT THERETO, HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT IN THE CAPACITIES INDICATED
BELOW ON JUNE 19, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Leo G. Thompson President, Chief Executive Officer and
___________________________________________ Director
Leo G. Thompson
/s/ Stephen S. Penley Senior Vice President, Chief Financial
___________________________________________ Officer and Principal Financial and
Stephen S. Penley Accounting Officer
/s/ George H. Bodeen Director
___________________________________________
George H. Bodeen
/s/ Raymond F. Decker Director
___________________________________________
Dr. Raymond F. Decker
/s/ Raymond A. Jean Director
___________________________________________
Raymond A. Jean
/s/ John W. Puth Director
___________________________________________
John W. Puth
/s/ J. Thomas Schanck Director
___________________________________________
J. Thomas Schanck
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.
2.1 Purchase Agreement dated October 1, 1997 among Aerospace Aluminum
Heat Treating Company, Alta Canada Corporation and Lindberg
Corporation (incorporated by reference to Exhibit 2.1 of the
Company's Current Report on Form 8-K dated October 1, 1997,
Commission file No. 0-8287).
2.2 Purchase Agreement dated January 16, 1998 among the stockholders
of Industrial Steel Treating Co. and Lindberg Corporation
(incorporated by reference to Exhibit 2 of the Company's Current
Report on Form 8-K filed dated January 16, 1998, Commission file
No. 0-8287).
2.3 Purchase Agreement dated April 16, 1998 among the stockholders of
Houston Heat Treating Company and Lindberg Corporation
(incorporated by reference to Exhibit 2.1 of the Company's Current
Report on Form 8-K filed on April 23, 1998, Commission file No. 0-
8287).
3.1 Composite Certificate of Incorporation, as amended through April
24, 1998 (incorporated by reference to Exhibit 3.1 of the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, Commission file No. 0-8287).
3.2 Certificate of Incorporation effective as of February 11, 1976
(incorporated by reference to Exhibit 1 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1996,
Commission file No. 0-8287).
3.3 Certificate of Amendment of Certificate of Incorporation effective
as of May 9, 1979 (incorporated by reference to Exhibit 3.2 of the
Company's Annual Report on Form 10-Q for the quarter ended March
31, 1995, Commission file No. 0-8287).
3.4 Certificate of Amendment of Certificate of Incorporation effective
as of April 24, 1987 (incorporated by reference to page 6 of the
Company's Definitive Proxy Statement on Schedule 14A filed with
the Commission in connection with the Company's 1987 annual
meeting of stockholders, Commission file No. 0-8287).
3.5 Certificate of Amendment of Certificate of Incorporation effective
as of April 24, 1998 (incorporated by reference to Exhibit 3.2 of
the Company's Quarter Report on Form 10-Q for the quarter ended
March 31, 1998, Commission file No. 0-8287).
3.6 Amended and Restated By-laws, as amended through October 23, 1996
(incorporated by reference to Exhibit 3.4 of the Company's Annual
Report on Form 10-K for 1996, Commission file No. 0-8287).
4.0 Specimen Common Stock Certificate.
4.1 Amended and Restated Credit Agreement dated as of April 28, 1994
the Company, various financial institutions and Continental Bank
N.A (now Bank of America National Trust and Savings Association),
as agent (incorporated by reference to Exhibit 4.2 of the
Company's Current Report on Form 8-K dated April 29, 1994,
Commission file No. 0-8287).
4.2 First Amendment to Amended and Restated Credit Agreement dated as
of November 2, 1995 (incorporated by reference to Exhibit 4.2 of
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, Commission file No. 0-8287).
4.3 Second Amendment to Amended and Restated Credit Agreement dated as
of January 31, 1996 (incorporated by reference to Exhibit 4.3 of
the Company's Annual Report on Form 10-K for 1995, Commission file
No. 0-8287).
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4.4 Third Amendment to Amended and Restated Credit Agreement dated as
of September 29, 1997 (incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-K dated October 1, 1997,
Commission file No. 0-8287).
4.5 Fourth Amendment to Amended and Restated Credit Agreement dated as
of February 10, 1998 (incorporated by reference to Exhibit 4.5 to
the Company's Annual Report on Form 10-K for 1997, Commission file
No. 0-8287).
4.6 Note Agreement dated as of October 15, 1995 (incorporated by
reference to Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995, Commission file No.
0-8287).
4.7 Rights Agreement dated November 21, 1996 between the Company and
Harris Trust and Savings Bank, as Rights Agent (incorporated by
reference to Exhibit 99.1 of the Company's Current Report on Form
8-K filed on December 6, 1996, Commission file No. 0-8287).
5.1 Opinion of Bell, Boyd & Lloyd.*
10.1 Description of Bonus Program (incorporated by reference to page 6
of the Company's Definitive Proxy Statement on Schedule 14A filed
with the Commission in connection with the Company's 1996 annual
meeting of stockholders, Commission file No. 0-8287).
10.2 Consulting Agreement between the Company and George H. Bodeen
dated October 25, 1990 (incorporated by reference to Exhibit 10.5
of the Company's Annual Report on Form 10-K for 1990, Commission
file No. 0-8287).
10.3 Amended and Restated 1991 Stock Option Plan for Key Employees
(incorporated by reference to the Company's Definitive Proxy
Statement on Schedule 14A filed with the Commission in connection
with the Company's 1995 annual meeting of stockholders, Commission
file No. 0-8287).
10.4 Amended and Restated 1991 Stock Option Plan for Directors
(incorporated by reference to the Company's Definitive Proxy
Statement on Schedule 14A filed with the Commission in connection
with the Company's 1997 annual meeting of stockholders, Commission
file No. 0-8287).
10.5 Employment Agreement dated September 17, 1996, between the Company
and Leo G. Thompson (incorporated by reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, Commission file No. 0-8287).
10.6 Employment Agreement dated September 17, 1996, between the Company
and Stephen S. Penley (incorporated by reference to Exhibit 10.2
to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, Commission file No. 0-8287).
11.1 Computation of Per Share Earnings (incorporated by reference to
Exhibit 11 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 and Exhibit 11 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1998, Commission file No. 0-8287).
23.1 Consent of Bell, Boyd & Lloyd (included in Exhibit 5.1).*
23.2 Consent of Arthur Andersen LLP.
</TABLE>
- --------
* To be filed by amendment.
2
<PAGE>
1,400,000 Shares*
Lindberg Corporation
Common Stock
UNDERWRITING AGREEMENT
July ___, 1998
ABN AMRO Incorporated
McDonald & Company Securities, Inc.
As Representatives of the
several Underwriters named
in Schedule I hereto
c/o ABN AMRO Incorporated
208 South LaSalle Street
Chicago, Illinois 60604
Ladies and Gentlemen:
Pursuant to the terms of this Underwriting Agreement (this "Agreement"),
Lindberg Corporation, a Delaware corporation (the "Company"), proposes, subject
to the terms and conditions set forth herein, to issue and sell an aggregate of
1,275,000 shares of Common Stock, par value $0.01 per share (the "Common
Stock"), of the Company to the several underwriters named in Schedule I hereto
(collectively, the "Underwriters") and the stockholders of the Company named in
Schedule II hereto (the "Selling Stockholders") propose, subject to the terms
and conditions set forth herein, to sell to the Underwriters an aggregate of
125,000 shares of Common Stock. The Company has agreed to sell to the several
Underwriters, upon the terms and conditions set forth in Section 2 hereof, up to
an additional 210,000 shares of Common Stock. The aggregate of 1,400,000 shares
to be sold by the Company and the Selling Stockholders are herein called the
"Firm Shares" and the aggregate of 210,000 additional shares to be sold by the
Company are herein called the "Additional Shares." The Firm Shares and the
Additional Shares are hereinafter collectively referred to as the "Shares." ABN
AMRO Incorporated and McDonald & Company Securities, Inc. are acting
individually and as representatives of the several Underwriters and in such
capacity are hereinafter referred to as the "Representatives."
- ------------------
*Plus an option to purchase up to 210,000 Additional Shares to cover over-
allotments.
<PAGE>
Prior to the purchase and public offering of the Shares by the several
Underwriters, the Company, the Representatives and the Selling Stockholders
shall enter into an agreement substantially in the form of Exhibit A hereto (the
"Pricing Agreement"). The Pricing Agreement may take the form of an exchange of
any standard form of written telecommunication between the Company, the Selling
Stockholders and the Representatives and shall specify such applicable
information as is indicated in Exhibit A hereto. The offering of the Shares will
be governed by this Agreement, as supplemented by the Pricing Agreement. From
and after the date of the execution and delivery of the Pricing Agreement, this
Agreement shall be deemed to incorporate the Pricing Agreement.
The Company and the Selling Stockholders are advised by the Representatives
that the Underwriters have agreed to make a public offering of their respective
portions of the Shares as soon after the Registration Statement has become
effective and the Pricing Agreement has been executed as in the reasonable
judgment of the Representatives is advisable and to first offer the Shares upon
the terms set forth in the Prospectus.
The Company, the Representatives and the other Underwriters hereby agree to
the following matters with respect to the purchase and sale of the Shares:
Section 1. (a) Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(i) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Act"), a registration statement on
Form S-2 (File No. 333-______), including a preliminary prospectus, relating to
the Shares and certain amendments thereto. The Company will next file with the
Commission one of the following: (A) prior to effectiveness of such registration
statement, a further amendment thereto, including the form of final prospectus,
(B) a final prospectus in accordance with Rules 430A and 424(b) under the Act or
(C) a term sheet (the "Term Sheet") as described in and in accordance with Rules
434 and 424(b) under the Act. As filed, the final prospectus, if one is used, or
the Term Sheet and the latest Preliminary Prospectus, if a final prospectus is
not used, shall include all Rule 430A Information (as defined below). There have
been or will promptly be delivered to you three signed copies of such
registration statement and amendments, together with three copies of all
documents incorporated by reference therein, three copies of each exhibit filed
therewith, and conformed copies of such registration statement and amendments
(but without exhibits) and of the related preliminary prospectus or prospectuses
and final forms of prospectus or Term Sheet, if a Term Sheet is used, for each
of the Underwriters. The term "Registration Statement" as used in this Agreement
shall mean such registration statement at the time such registration statement
becomes effective and, in the event any amendment thereto becomes effective
prior to the Closing Date (as hereinafter defined), shall also mean such
registration statement as so amended; provided, however, that such term shall
also include all Rule 430A Information deemed to be included in such
registration statement at the time such registration statement becomes effective
as provided by Rule 430A and, if a Term Sheet is used, shall also include all
information
2
<PAGE>
deemed to be included in such registration statement at the time such
registration statement becomes effective as provided by Rule 434; provided,
further, that if the Company files a registration statement under the Act to
register a portion of the Shares and relies on Rule 462(b) for such registration
statement to become effective upon filing with the Commission (the "Rule 462
Registration Statement"), then any reference to "Registration Statement" herein
shall be deemed to be to both the registration statement referred to above (No.
333-_______) and the Rule 462 Registration Statement, as each such registration
statement may be amended pursuant to the Act. The term "Preliminary Prospectus"
as used in this Agreement shall mean any preliminary prospectus relating to the
Shares filed with the Commission under the Act and the rules and regulations
thereunder, including any preliminary prospectus included in the Registration
Statement at the time it becomes effective that omits Rule 430A Information. The
term "Prospectus" as used in this Agreement shall mean: (X) the prospectus
relating to the Shares in the form in which it is first filed with the
Commission pursuant to Rule 424(b) under the Act; (Y) if a Term Sheet is not
used and no filing pursuant to Rule 424(b) under the Act is required, the form
of final prospectus included in the Registration Statement at the time the
Registration Statement becomes effective; or (Z) if a Term Sheet is used in lieu
of a prospectus, the Term Sheet in the form in which it is first filed with the
Commission pursuant to Rule 424(b) under the Act, together with the latest
Preliminary Prospectus included in the Registration Statement at the time it
becomes effective (such Term Sheet and Preliminary Prospectus are sometimes
collectively referred to herein as the "Rule 434 Prospectus"). The term "Rule
430A Information" as used in this Agreement shall mean information with respect
to the Shares and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A under the
Act. The Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder are hereinafter collectively referred
to as the "Exchange Act." Any reference herein to the Registration Statement,
any Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to Form S-2
under the Act ("Incorporated Documents"), as of the date of the Registration
Statement, any such Preliminary Prospectus or Prospectus, as the case may be.
The Incorporated Documents, when they were filed with the Commission, conformed
in all material respects to the requirements of the Exchange Act and none of
such documents contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(ii) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus complied in all material respects when so filed with the requirements
of the Act (except to the extent that, in conformity with the Act, such
Preliminary Prospectus is subject to completion).
(iii) The Registration Statement in the form in which it becomes
effective and also in such form as it may be when the Pricing Agreement is
executed or any post-effective amendment to the Registration Statement shall
become effective, and the Prospectus when and in the form last filed with the
Commission as part of the Registration Statement prior to effectiveness or, if
applicable, first filed pursuant to Rule 424(b) under the Act, and when any
supplement or amendment thereto is filed with the Commission, each will comply
in all material respects with the
3
<PAGE>
requirements of the Act, will not at any such time contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. This representation
and warranty does not apply to statements in or omissions from the Registration
Statement or the Prospectus (or any supplement or amendment thereto) made in
reliance upon and in conformity with information relating to any Underwriter
furnished to the Company in writing by or on behalf of such Underwriter through
the Representatives specifically for use in the Registration Statement.
(iv) There is no contract or other document of a character required
to be described in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required.
(v) The accountants who have expressed their opinions with respect
to certain of the financial statements of the Company included or incorporated
by reference in the Registration Statement and the Prospectus, are independent
public accountants as required by the Act.
(vi) The consolidated financial statements, together with the notes
thereto, of the Company included or incorporated by reference in the
Registration Statement and the Prospectus comply in all material respects with
the Act and present fairly the consolidated financial position of the Company as
of the dates indicated, and the consolidated results of operations, cash flows
and changes in financial position of the Company for the periods specified. Such
financial statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the entire period
involved except to the extent disclosed therein.
(vii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
full corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Registration Statement and Prospectus.
The Company is duly qualified to do business as a foreign corporation and in
good standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except in
any such case in which the failure to so qualify or be in good standing would
not have a material adverse effect upon the business of the Company and its
subsidiaries, taken as a whole; and no proceeding of which the Company has
knowledge has been instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
qualification.
(viii) Each of the Company's subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to own,
lease and operate its properties and conduct its business as described in the
Registration Statement and Prospectus. Each of the Company's subsidiaries is
duly qualified to do business as a foreign corporation in good standing in each
jurisdiction in which the ownership or leasing of its properties or the conduct
of its business requires such qualification, except in any such case in which
the failure to so qualify or be in good standing would not have a material
adverse effect on the business of the Company and its subsidiaries, taken as a
whole. Each of the Company's subsidiaries has all authorizations, approvals,
orders, certificates and permits of
4
<PAGE>
and from all state, federal and other regulatory officials and bodies necessary
to own its properties and to conduct its business as described in the
Registration Statement and Prospectus, except where the failure to have any such
authorization, approval, order, certificate or permit would not have a material
adverse effect on the business affairs, business prospects, properties,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole. Except for the capital stock of the subsidiaries
and except as otherwise described in the Prospectus, the Company does not own
any capital stock of, or other securities evidencing an equity interest in, any
corporation, partnership or other entity. All of the issued and outstanding
shares of capital stock of the Company's subsidiaries have been duly and validly
authorized and issued, are fully paid and non-assessable, and except as
described in the Prospectus, are owned by the Company, free and clear of any
security interest, claim, lien, encumbrance or adverse interest of any nature.
Except as described in the Prospectus, there are no outstanding subscriptions,
rights, warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock of any of the Company's
subsidiaries.
(ix) The Company has an authorized and outstanding capitalization as
set forth in the Prospectus and the Shares conform to the description thereof
contained in the Prospectus. All of the issued and outstanding shares of Common
Stock (including the Shares to be sold by the Selling Stockholders to the
Underwriters) have been duly authorized, validly issued and are fully paid and
non-assessable and free of preemptive or other similar rights and there are no
options, agreements, contracts or other rights in existence to acquire from the
Company any shares of Common Stock, except as set forth in the Prospectus.
(x) The Shares to be sold by the Company pursuant to this Agreement
and the Pricing Agreement have been duly authorized and, when issued and paid
for in accordance with this Agreement and the Pricing Agreement, will be validly
issued, fully paid and non-assessable; the holders of the Shares will not be
subject to personal liability by reason of being such holders; there are no
holders of securities of the Company having rights, contractual or otherwise, to
registration thereof or preemptive rights to purchase Common Stock; all
corporate actions required to be taken for the authorization, issue and sale of
the Shares have been validly and sufficiently taken; and upon delivery of and
payment for such Shares hereunder, the Underwriters will acquire valid and
marketable title thereto, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature.
(xi) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated or
contemplated therein, there has not been (A) any material adverse change in the
financial condition, earnings, affairs, business or prospects of the Company and
its subsidiaries, taken as a whole, whether or not arising in the ordinary
course of business, (B) any material transaction entered into, or any material
liability or obligation incurred, by the Company or its subsidiaries other than
in the ordinary course of business, (C) any change in the capital stock, or
material increase in the short-term debt or long-term debt of the Company or its
subsidiaries, or (D) any dividend or distribution of any kind declared, paid or
made by the Company or its subsidiaries on its capital stock.
5
<PAGE>
(xii) The Company and each of its subsidiaries have good and
marketable title to all properties and assets reflected as owned in the
financial statements hereinabove described or described in the Prospectus as
owned by them, free and clear of all liens, charges, encumbrances or
restrictions of any kind, except such as are referred to in such financial
statements or the Prospectus or which are not material to the business of the
Company and its subsidiaries, taken as a whole; all of the leases and subleases
material to the business of the Company and its subsidiaries, taken as a whole
or under which the Company or its subsidiaries holds properties are in full
force and effect; and neither the Company nor any of its subsidiaries has
received any notice of any material claim of any sort which has been asserted by
anyone adverse to the rights of the Company or any subsidiary as owner or as
lessee or sublessee under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such subsidiary to the
continued possession of the leased or subleased premises under any such lease or
sublease.
(xiii) Neither the Company nor any of its subsidiaries is in default
in the observance of any provision of its Certificate of Incorporation or by-
laws, or in the performance or observance of any obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which it is a party or by which it or any of
its properties may be bound, the effect of which could be materially adverse to
the financial condition, earnings, affairs, business or prospects of the Company
and its subsidiaries, taken as a whole.
(xiv) The execution and delivery of this Agreement and the Pricing
Agreement, the issuance and delivery of the Shares, the consummation of the
transactions contemplated herein and in the Registration Statement and
compliance with the terms of this Agreement and the Pricing Agreement have been
duly authorized by all necessary corporate action and will not result in any
violation of the Certificate of Incorporation or by-laws of the Company or any
of its subsidiaries, and will not conflict with or result in a breach of any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge, encumbrance or restriction of any
kind upon any property or assets of the Company or any of its subsidiaries under
any contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries, or any of their
respective properties, is bound, or any existing applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or any of their respective properties. No
approval, authorization or consent of any court, regulatory body, administrative
agency or other governmental body having jurisdiction over the Company or any of
its subsidiaries is required in connection with the sale of the Shares to the
Underwriters, except such as may be required under the Act, state securities or
Blue Sky laws or in connection with the clearance of the offering with the
National Association of Securities Dealers, Inc. (the "NASD").
(xv) Except as disclosed in the Registration Statement and the
Prospectus, there is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, or any arbitrator or
arbitration panel, now pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries which could result
in any
6
<PAGE>
material adverse change to the financial condition, earnings, affairs,
business or prospects of the Company and its subsidiaries, taken as whole; and
there is no decree, judgment or order of any kind in existence against or
restraining the Company or any of its subsidiaries, or any of their respective
officers, employees or directors, from taking any actions of any kind in
connection with the business of the Company or any such subsidiary.
(xvi) The Company and each of its subsidiaries own or possess or have
obtained all material governmental licenses, permits, consents, orders,
approvals and other authorizations necessary to lease or own, as the case may
be, and to operate their properties and to carry on their businesses as
presently conducted, and neither the Company nor any such subsidiary has
received any notice of proceedings related to revocation or modification of any
such licenses, permits, consents, orders, approvals or authorizations which
singly or in the aggregate, if the subject of an unfavorable ruling or finding,
would be materially adverse to the financial condition, earnings, affairs,
business or prospects of the Company and its subsidiaries, taken as a whole.
(xvii) The conduct of the business of the Company and each of its
subsidiaries is in compliance with all applicable federal, state and local laws
and regulations that regulate or are concerned in any way with the business of
the Company or such subsidiaries, where the effect of the failure to comply
would be materially adverse to the financial condition, earnings, affairs,
business or prospects of the Company and its subsidiaries, taken as a whole.
(xviii) The Company together with its subsidiaries owns or possesses,
or can acquire on reasonable terms, all right, title and interest in or to, or
has duly licensed from third parties, all patents, trademarks, service marks,
copyrights, trade names, trade secrets and other proprietary rights ("Trade
Rights") necessary to conduct the business now or proposed to be conducted by
it, and neither the Company nor any of its subsidiaries has received any notice
of, and has no knowledge of, infringement of or conflict with asserted rights of
others with respect to any such Trade Rights which, singly or in the aggregate,
if the subject of any unfavorable decision, ruling or finding, would be
materially adverse to the financial condition, earnings, affairs, business or
prospects of the Company and its subsidiaries, taken as a whole.
(xix) The Company has filed all tax returns required to be filed and
has paid all taxes which were payable pursuant to said returns or any
assessments with respect thereto, other than any tax returns which the Company
is contesting in good faith or which are not material to the Company and there
is no tax deficiency that has been, or to the knowledge of the Company might
reasonably be expected to be, asserted against the Company or any of its
properties or assets that would or could be expected to have a material adverse
affect upon the financial condition or results of operations of the Company and
its subsidiaries, taken as a whole.
(xx) This Agreement has been duly executed and delivered by the
Company.
(xxi) A registration statement relating to the Common Stock has been
declared effective by the Commission pursuant to the Exchange Act and the Common
Stock is duly registered
7
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thereunder. The Shares have been authorized for trading on the Nasdaq National
Market of the NASDAQ Stock Market, subject to notice of issuance or sale, as the
case may be.
(xxii) The Company is not, and does not intend to conduct its
business in a manner in which it would become, an "investment company" as
defined in Section 3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(xxiii) All offers and sales of the Company's capital stock within
the three year period prior to the date hereof were at all relevant times
registered under the Act or exempt from the registration requirements of the Act
and were duly registered with, or the subject of an available exemption from,
the registration requirements of the applicable state securities or Blue Sky
laws.
(xxiv) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any security of the Company.
(xxv) Except as disclosed in the Registration Statement and the
Prospectus, no transaction has occurred between or among the Company, on the one
hand, and any of its officers or directors or any affiliate or affiliates of any
such officer or director, on the other hand, that is required to be so
disclosed, including, but not limited to, any outstanding loans, advances or
guaranties of indebtedness by the Company to or for the benefit of any
affiliates of the Company, or any of the officers or directors of the Company,
or any family member of any of them.
(xxvi) The Company has not, directly or indirectly, at any time (A)
made any contributions to any candidate for foreign political office, or if
made, failed to disclose fully any such contribution made in violation of law,
or (B) made any payment to any state, federal or foreign governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments or contributions required or allowed by applicable law. The
Company's internal accounting controls and procedures are sufficient to cause
the Company to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.
(xxvii) Except as disclosed in the Registration Statement and the
Prospectus the Company and each of its subsidiaries (a) are in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (b) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (c) are in compliance with all terms and conditions of
any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
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(xxviii) The Company reasonably believes that the costs and
liabilities associated with compliance with all Environmental Laws (including,
without limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, and any related constraints on operating activities and any
potential liabilities to third parties) would not, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries, taken as a
whole.
(b) Representations, Warranties and Covenants of the Selling Stockholders.
Each Selling Stockholder severally represents and warrants and agrees with the
Company and the Underwriters that:
(i) Such Selling Stockholder has good and marketable title to the
Shares proposed to be sold by such Selling Stockholder hereunder and full right,
power and authority to enter into this Agreement and the Pricing Agreement and
to sell, assign, transfer and deliver such Shares hereunder, free and clear of
all voting trust arrangements, security interests, claims, liens, encumbrances,
community property rights or adverse interests of any nature; and upon delivery
of and payment for such Shares hereunder, the Underwriters will acquire valid
and marketable title thereto, free and clear of all voting trust arrangements,
security interests, claims, liens, encumbrances, property rights or adverse
interests of any nature.
(ii) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which might be reasonably
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
(iii) Such Selling Stockholder has executed and delivered a Custody
Agreement and Power of Attorney (the "Custody Agreement and Power of Attorney")
among the Selling Stockholder, Leo G. Thompson and Stephen S. Penley (the
"Agents") and the Company as custodian (the "Custodian"), pursuant to which such
Selling Stockholder has named the Agents as such Selling Stockholder's
attorneys-in-fact (and, by the execution by any Agent of this Agreement, such
agent hereby represents and warrants that he has been duly appointed an
attorney-in-fact by the Selling Stockholders pursuant to the Power of Attorney)
for the purpose of entering into and carrying out this Agreement and the Pricing
Agreement, and the Custody Agreement and Power of Attorney has been duly
executed by such Selling Stockholder and a copy thereof has been delivered to
you.
(iv) Such Selling Stockholder further represents and warrants and
agrees that such Selling Stockholder has deposited in custody, with the
Custodian under the Custody Agreement and Power of Attorney, certificates in
negotiable form for the Shares to be sold hereunder by such Selling Stockholder,
for the purpose of further delivery pursuant to this Agreement. Such Selling
Stockholder agrees that the Shares to be sold by such Selling Stockholder on
deposit with the Custodian are subject to the interests of the Company, the
Underwriters and the other Selling Stockholders, that the arrangements made for
such custody, and the appointment of the Agents pursuant to the Custody
Agreement and Power of Attorney, are to that extent irrevocable, and that the
obligations of such Selling Stockholder hereunder and under the Custody
Agreement and Power
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of Attorney shall not be terminated except as provided in this Agreement the
Custody Agreement and Power of Attorney or by any act of such Selling
Stockholder, by operation of law, whether, in the case of an individual Selling
Stockholder, by the death or incapacity of such Selling Stockholder or, in the
case of a trust or estate, by the death of the trustee or trustees or the
executor or executors or the termination of such trust or estate, or, in the
case of a partnership or corporation, by the dissolution, winding-up or other
event affecting the legal life of such entity, or by the occurrence of any other
event. If any individual Selling Stockholder, trustee or executor should die or
become incapacitated, or any such trust, estate, partnership or corporation
should be terminated, or if any other event should occur before the delivery of
the Shares hereunder, the documents evidencing Shares then on deposit with the
Custodian shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such death, incapacity, termination or other
event had not occurred, regardless of whether or not the Custodian shall have
received notice thereof. Each Agent has been authorized by such Selling
Stockholder to execute and deliver this Agreement and the Pricing Agreement and
the Custodian has been authorized to receive and acknowledge receipt of the
proceeds of sale of the Shares to be sold by such Selling Stockholder against
delivery thereof and to otherwise act on behalf of such Selling Stockholder.
(v) Each Preliminary Prospectus, insofar as it has related to such
Selling Stockholder as of its date, has conformed in all material respects with
the requirements of the Act and, as of its date, has not included any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; and the Registration Statement at the time of
effectiveness, and at all times subsequent thereto, (A) such parts of the
Registration Statement and the Prospectus and any amendments or supplements
thereto as relate to such Selling Stockholder, contained or will contain all
statements that are required to be stated therein in accordance with the Act and
in all material respects conformed or will in all material respects conform to
the requirements of the Act, and (B) neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, as it relates to such
Selling Stockholder, included or will include any untrue statement of a material
fact or omitted or will omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made (in the case of the Prospectus), not
misleading; provided that neither clause (A) nor (B) shall have any effect if
information has been given by such Selling Stockholder to the Company and the
Representatives in writing which would eliminate or remedy any such untrue
statement or omission.
(vi) Such Selling Stockholder agrees with the Company and the
Underwriters not to sell, contract to sell or otherwise dispose of any Common
Stock or rights to purchase Common Stock for a period of ninety (90) days after
the date of the Pricing Agreement without the prior written consent from the
Representatives.
Section 2. Agreement to Sell and Purchase.
(a) Subject to such adjustments to eliminate any fractional share sales or
purchases as the Representatives in their discretion may make, (i) the Company
hereby agrees to issue and sell to the Underwriters an aggregate of 1,275,000
Firm Shares, (ii) the Selling Stockholders hereby
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agree, severally and not jointly, to sell to the Underwriters in the respective
amounts set forth in Schedule II hereto, an aggregate of 125,000 Firm Shares,
and (iii) on the basis of the representations, warranties and agreements of the
Company and the Selling Stockholders herein contained and subject to the terms
and conditions set forth herein, each Underwriter agrees, severally and not
jointly, to purchase from (A) the Company and the Selling Stockholders, at the
purchase price per Share set forth in the Pricing Agreement (the "Purchase Price
per Share"), the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number of Firm Shares as such
Underwriter shall be obligated to purchase pursuant to the provisions of Section
9 hereof) and (B) the Selling Stockholders the number of Firm Shares set further
opposite the name of such Selling Stockholder in Schedule II hereto.
(b) The Company agrees to sell to the Underwriters and, on the basis of
the representations, warranties and agreements of the Company set forth herein
and subject to the terms and conditions set forth herein, the Underwriters shall
have the right to purchase, severally and not jointly, from the Company up to
210,000 Additional Shares at the Purchase Price per Share upon delivery to the
Company of the notice hereinafter referred to. Such Additional Shares may be
purchased solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. If any Additional Shares are to be
purchased, each Underwriter, severally and not jointly, agrees to purchase from
the Company the number of Additional Shares (subject to such adjustments to
eliminate fractional Shares as the Representatives may determine) which bears
the same proportion to the total number of Additional Shares to be purchased
from the Company as the number of Firm Shares set forth opposite such
Underwriter's name in Schedule I (or such number of Firm Shares increased
pursuant to the terms set forth in Section 9 hereof) bears to the total number
of Firm Shares.
Section 3. Delivery of the Shares and Payment Therefor.
(a) Delivery to the Underwriters of the Firm Shares shall be made against
payment therefor at 9:00 a.m., Chicago, Illinois time, on the third full
business day following the date of the Pricing Agreement (the "Closing Date") at
the offices of Bell, Boyd & Lloyd, Chicago, Illinois. The place of the closing
and the Closing Date may be varied by agreement among the Representatives and
the Company.
(b) Delivery to the Underwriters of any Additional Shares to be purchased
by the several Underwriters shall be made in Chicago, Illinois against payment
therefor at the offices of Vedder, Price, Kaufman & Kammholz, Chicago, Illinois,
at such time on such date (the "Option Closing Date"), which may be the same as
the Closing Date, but shall in no event be earlier than the Closing Date nor
earlier than three nor later than ten business days after the giving of the
notice hereinafter referred to, as shall be specified in written notice from the
Representatives to the Company and the Agents of the determination to purchase a
number, specified in said notice, of Additional Shares. Said notice may be given
at any time, but only one time, within 30 days after the date of the execution
of the Pricing Agreement. The place of the closing and the Option Closing Date
may be varied by agreement among the Representatives and the Company.
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(c) If the Representatives, the Company and the Selling Stockholders have
elected to enter into the Pricing Agreement after the Registration Statement is
effective, the Purchase Price per Share to be paid by the several Underwriters
for the Shares shall be an amount equal to the public offering price, less an
amount to be determined by agreement among the Representatives, the Company and
the Selling Stockholders. The public offering price per Share of the Shares
shall be a fixed price to be determined by agreement among the Representatives,
the Company and the Selling Stockholders. The public offering price and the
Purchase Price per Share, when so determined, shall be set forth in the Pricing
Agreement. If such prices have not been agreed upon and the Pricing Agreement
has not been executed and delivered by all parties thereto by the close of
business on the fourth business day following the date of this Agreement, this
Agreement shall terminate forthwith, without liability of any party to any other
party, unless otherwise agreed to by the Company, the Selling Stockholders and
the Representatives and except as otherwise provided in Section 5 hereof. If
the Representatives, the Company and the Selling Stockholders have elected to
enter into the Pricing Agreement prior to the Registration Statement becoming
effective, the initial public offering price and the Purchase Price per Share to
be paid by the several Underwriters for the Shares having each been determined
and set forth in the Pricing Agreement, the Company agrees to file an amendment
to the Registration Statement and the Prospectus before the Registration
Statement becomes effective.
(d) Certificates for the Firm Shares and for the Additional Shares shall
be registered in such names and in such denominations as the Representatives
shall request upon at least 48 hours prior notice to the Company and the
Custodian preceding the Closing Date or the Option Closing Date, as the case may
be. Such certificates shall be made available to the Representatives at the
office of The Depository Trust Company, New York, New York, for inspection and
packaging not later than at least 24 hours prior to the Closing Date or the
Option Closing Date, as the case may be. The certificates evidencing the Firm
Shares and the Additional Shares shall be delivered to the Representatives on
the Closing Date or the Option Closing Date, as the case may be, with any
transfer taxes thereon duly paid by the Company or the Selling Stockholders, as
the case may be, for the respective accounts of the several Underwriters,
against payment of the purchase price therefor by wire or other immediately
available funds. It is understood by the Company and the Selling Stockholders
that each of the Underwriters has authorized the Representatives, for its
account, to accept delivery of, receipt for and make payment of the purchase
price for, the Shares it has agreed to purchase.
Section 4. Agreements of the Company. The Company covenants and agrees
with the several Underwriters that:
(a) The Company will endeavor to cause the Registration Statement to
become effective and will advise the Representatives promptly and, if requested
by the Representatives, will confirm such advice in writing, (i) when the
Registration Statement has become effective and when any post-effective
amendment to it becomes effective, and of the filing of any final prospectus or
supplement or amendment to the Prospectus, (ii) of any request by the Commission
for amendments or supplements to the Registration Statement or Prospectus or any
Preliminary Prospectus or for additional information, (iii) of the issuance by
the Commission of any stop order suspending the
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effectiveness of the Registration Statement or of the suspension of
qualification of the Shares for offering or sale in any jurisdiction, or the
initiation or contemplation of any proceeding for such purposes, and (iv) within
the period of time referred to in paragraph (f) below, of the happening of any
event which makes any statement made in the Registration Statement or Prospectus
(as then amended or supplemented) untrue in any material respect or which
requires the making of any additions to or changes in the Registration Statement
or Prospectus (as then amended or supplemented) in order to make the statements
therein, in light of the circumstances under which they were made (in the case
of the Prospectus), not misleading or the necessity to amend or supplement the
Prospectus to comply with the Act or any other law. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible moment. If the Company
elects to rely on Rule 434 of the Act, the Company will prepare a Term Sheet
that complies with the requirements of Rule 434 of the Act and will provide the
Representatives with copies of the form of Rule 434 Prospectus in such numbers
as you may reasonably request and file or transmit for filing with the
Commission the form of Prospectus complying with Rule 434(c)(2) of the Act in
accordance with Rule 424(b) of the Act by the close of business in Chicago on
the business day immediately succeeding the date hereof. If the Company elects
not to rely on Rule 434, the Company will provide you with copies of the form of
Prospectus in such numbers as you may reasonably request and file or transmit
for filing with the Commission such Prospectus in accordance with Rule 424(b) of
the Act, by the close of business in Chicago on the business day immediately
succeeding the date hereof.
(b) If, at the time that the Registration Statement becomes effective, any
information shall have been omitted therefrom in reliance upon Rule 430A under
the Act, then promptly following the execution of the Pricing Agreement, the
Company will prepare and file with the Commission, in accordance with Rule 430A
and Rule 424(b) under the Act, copies of an amended Prospectus, or, if required
by Rule 430A, a post-effective amendment to the Registration Statement
(including an amended Prospectus) containing all information so omitted.
(c) Neither the Company nor any of its subsidiaries will, prior to the
earlier of the Option Closing Date or termination or expiration of the related
option, incur any liability or obligation, direct or contingent, or enter into
any material transaction, other than in the ordinary course of business, except
as contemplated in the Prospectus.
(d) The Company will not file any amendment to the Registration Statement
or make any amendment or supplement to the Prospectus of which the
Representatives shall not previously have been advised or to which the
Representatives shall promptly after being so advised reasonably object in
writing.
(e) Prior to the effective date of the Registration Statement, the Company
has delivered or will deliver to each of the Underwriters, without charge,
copies of each form of Preliminary Prospectus in such quantities as they have
reasonably requested or may hereafter reasonably request. The Company consents
to the use, in accordance with the provisions of the Act and with the securities
or Blue Sky laws of the jurisdictions in which the Shares are offered by the
several
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Underwriters and by dealers, prior to the effective date of the Registration
Statement, of each Preliminary Prospectus so furnished by the Company.
(f) On the effective date of the Registration Statement and thereafter
from time to time during such period as in the opinion of counsel for the
Underwriters a prospectus relating to the Shares is required by law to be
delivered in connection with offers or sales of the Shares by an Underwriter or
a dealer, the Company will deliver to each Underwriter and dealer, without
charge, as many copies of the Registration Statement, the Prospectus and each
Preliminary Prospectus and the Incorporated Documents (and of any amendment or
supplement to such documents) as they may reasonably request. During such
period, if any event occurs which in the judgment of the Company, or in the
opinion of counsel for the Underwriters, should be set forth in the Prospectus
in order to ensure that no part of the Prospectus includes an untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances at the time the
Prospectus is delivered to a purchaser, not misleading, the Company will
forthwith prepare, submit to the Representatives, file with the Commission and
deliver, without charge to the several Underwriters and dealers (whose names and
addresses will be furnished by the Representatives to the Company) to whom
shares have been sold by the Underwriters or to other dealers any amendments or
supplements to the Prospectus so that the statements in the Prospectus, as so
amended or supplemented, will comply with the standards set forth in this
sentence. The Company consents to the use of such Prospectus (and of any
amendments or supplements thereto) in accordance with the provisions of the Act
and with the securities or Blue Sky laws of the jurisdictions described in the
preliminary Blue Sky memorandum in which the Shares are lawfully offered by the
several Underwriters and by all dealers to whom Shares may be sold, both in
connection with the offering or sale of the Shares and for such period of time
thereafter as the Prospectus is required by law to be delivered in connection
therewith. In case any Underwriter is required to deliver a Prospectus (and any
amendment or supplement thereto) more than nine months after the first date upon
which the Shares are offered to the public, the Company will, upon request, but
at the expense of such Underwriter, promptly prepare and furnish such
Underwriter with reasonable quantities of a Prospectus complying with Section
10(a)(3) of the Act.
(g) The Company will cooperate with the Representatives and counsel for
the Underwriters in connection with the registration or qualification of the
Shares for offer and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions as the Representatives may
designate, will continue such registrations or qualifications in effect so long
as reasonably required for the distribution of the Shares and will file such
consents to service of process or other documents as may be necessary in order
to effect such registration or qualification; provided that in no event shall
the Company be obligated (i) to qualify to do business in any jurisdiction where
it is not now so qualified, (ii) to file any general consent to service of
process, or (iii) take any action that would subject it to income taxation in
any jurisdiction where it is not so qualified.
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(h) For a period of three years after the date of the Pricing Agreement:
(i) the Company will furnish to the Representatives (A) as soon as
available, a copy of each report of the Company of general interest mailed to
any class of its security holders (B) copies of all annual reports and current
reports filed with the Commission on Forms 10-K, 10-Q and 8-K and any amendment
thereto or such other similar forms as may be designated by the Commission and
(C) from time to time, such other information concerning the Company as the
Representatives may reasonably request;
(ii) if at any time during such three year period, the Company shall
cease filing with the Commission the annual reports and current reports on Forms
10-K, 10-Q and 8-K or other similar forms referred to in clause (i) above, the
Company will forward to its stockholders generally and the Representatives and
upon request to each of the other Underwriters (A) as soon as practicable after
the end of each fiscal year, copies of a balance sheet and statements of income
and retained earnings of the Company as of the end of and for such fiscal year,
certified by independent public accountants, and (B) as soon as practicable
after the end of each quarterly fiscal period, except for the last quarterly
fiscal period in each fiscal year, a summary statement (which need not be
certified) of income and retained earnings of the Company for such period, which
shall also be made publicly available; and
(iii) the Company will furnish to the Representatives and to the
NASD, and by issuance of a press release, on the date of declaration, notice of
all dividends, including the amount and medium of payment, the record date
(which shall be not less than ten days subsequent to the declaration date) and
the payment date (which shall be not less than ten days subsequent to the record
date).
(i) The Company will make generally available to its security holders an
earnings statement of the Company, which need not be audited, covering a twelve-
month period commencing after the effective date of the Registration Statement
and ending not later than 15 months thereafter, as soon as practicable after the
end of such period, which earnings statement shall satisfy the provisions of
Section 11(a) of the Act and the rules and regulations of the Commission
thereunder (including Rule 158).
(j) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than by notice given by the Representatives'
termination of this Agreement pursuant to Section 10 hereof), or if this
Agreement shall be terminated by the several Underwriters because of any failure
or refusal on the part of the Company to comply with the terms or fulfill any of
the conditions of this Agreement, the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including reasonable fees and
expenses of counsel for the Underwriters) reasonably incurred by them in
connection herewith but without any further obligation of the Company for lost
profits or otherwise. If this Agreement is terminated pursuant to Section 10
hereof, the several Underwriters shall themselves bear any such out-of-pocket
expenses incurred by them.
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(k) The Company will not sell, contract to sell or otherwise dispose of any
Common Stock or rights to purchase Common Stock for a period of ninety (90) days
after the date of the Pricing Agreement without the prior written consent of the
Representatives, except that such consent is not required for the grant of stock
options under stock option plans of the Company or the issuance of Common Stock
upon exercise of stock options previously granted, upon exercise of Common Stock
purchase rights or the issuance of Common Stock as consideration for
acquisitions. The Company will also obtain similar agreements from each of its
officers and directors.
(l) The Company will apply the net proceeds from the sale of the shares to
be sold by it under this Agreement and the Pricing Agreement for the purposes
set forth in the Prospectus under the caption "Use of Proceeds."
(m) The Company will use its best efforts, subject to notice of issuance,
to cause the Shares to be approved for quotation on the NASDAQ Stock Market.
(n) The Company will comply with Rule 463 of the Act with respect to the
reporting of the use of proceeds from the sale of the Shares under this
Agreement.
Section 5. Payment of Expenses. The Company and the Selling Stockholders
will pay, or reimburse if paid by the Representatives, whether or not the
transactions contemplated hereby are consummated or this Agreement is
terminated, all costs and expenses incident to the performance by them of their
obligations under this Agreement and the Pricing Agreement, including, without
limiting the generality of the foregoing, (a) preparation, printing, filing and
distribution (including postage, air freight charges and charges for counting
and packaging) of the original registration statement, the Registration
Statement, each Preliminary Prospectus, the Prospectus (including all
Incorporated Documents, exhibits and financial statements and any Term Sheet
delivered by the Company pursuant to Rule 434 of the Act), each amendment and/or
supplement to any of the foregoing, and this Agreement, the Pricing Agreement,
the Agreement Among Underwriters, Selected Dealers Agreement, Powers of Attorney
and Underwriters' Powers of Attorney and Questionnaires, (b) furnishing to the
several Underwriters and dealers copies of the foregoing materials (provided,
however, that any such copies furnished by the Company more than nine months
after the first date upon which the Shares are offered to the public shall be at
the expense of the several Underwriters or dealers so requesting as provided in
Section 4(f) above), (c) the registrations or qualifications referred to in
Section 4(g) above (including filing fees and fees and disbursements of counsel
in connection therewith) and expenses of printing and delivering to the several
Underwriters copies of the preliminary and final Blue Sky memoranda, (d) the
review of the terms of the public offering of the Shares by the NASD (including
the filing fees paid to the NASD in connection therewith) and the reasonable
fees and disbursements of counsel for the Underwriters in connection therewith,
(e) the performance by the Company and each of the Selling Stockholders of its
other obligations under this Agreement, including the fees of the Company's and
each Selling Stockholder's counsel and accountants, (f) the issuance of the
Shares and the preparation and printing of the stock certificates representing
the Shares, including any stamp taxes payable in connection with the original
issuance of the Shares, (g) furnishing to the several Underwriters copies
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of all reports and information required by Section 4(h) above, including
reasonable costs of shipping and mailing, and (h) the designation of the Common
Stock as a NASDAQ National Market security.
Section 6. Conditions of the Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares hereunder are
subject to the following conditions:
(a) That the Registration Statement shall have become effective not later
than 1:00 p.m., Chicago time, on the first full business day after the date of
this Agreement, or at such later date and time as shall be consented to in
writing by the Representatives, and, if the Representatives and the Company have
elected to rely upon Rule 430A, the price of the Shares and any price-related or
other information previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission for
filing pursuant to Rule 424(b) within the prescribed time period, and, if the
Representatives and the Company have elected to rely upon a Term Sheet, such
Term Sheet shall have been transmitted to the Commission for filing pursuant to
Rule 434 and Rule 424(b) within the prescribed time period, and on or prior to
the Closing Date, the Company shall have provided evidence satisfactory to the
Representatives of such timely filing, or a post-effective amendment providing
such information shall have been promptly filed and declared effective in
accordance with the requirements of Rule 430A. No stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for the purpose shall have been instituted or shall be pending or,
to the knowledge of the Company or the Selling Stockholders, shall be
contemplated by the Commission and there shall not have come to the attention of
the Representatives any facts that would cause them to believe that the
Prospectus, at the time it was required to be delivered to purchasers of the
Shares, contained any untrue statement of material fact or omitted to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which there were made, not misleading.
(b) That subsequent to the effective date of the Registration Statement,
(i) there shall not have occurred any change, or any development involving a
prospective change, in or affecting particularly the business or properties of
the Company or its subsidiaries not contemplated by the Prospectus, which, in
the Representatives' reasonable opinion, as Representatives of the several
Underwriters, would materially adversely affect the market for the Shares or
make it impracticable or inadvisable to proceed with the offering or the
delivery of the Shares, as contemplated herein and in the Prospectus, or to
attempt to enforce contracts for the purchase of Shares, and (ii) the business
and operations of the Company shall not have been adversely affected by strike,
fire, flood, accident or other calamity (whether or not insured).
(c) The Representatives shall have received from Bell, Boyd & Lloyd,
counsel for the Company and the Selling Stockholders, a favorable opinion dated
the Closing Date and satisfactory to the Representatives and the Underwriters'
counsel to the effect that:
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware, with
full corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Registration Statement. The Company is
duly qualified to do business as a foreign corporation and
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in good standing in each jurisdiction where the ownership or leasing of its
properties or the conduct of its business requires such qualification, except in
any such case where the failure to so qualify or be in good standing would not
have a material adverse effect on the financial condition or results of
operations of the Company and its subsidiaries, taken as a whole.
(ii) An opinion to the same general effect as clause (i) of this
subparagraph (c) in respect of each direct and indirect subsidiary of the
Company.
(iii) All of the issued and outstanding capital stock of the
subsidiaries of the Company has been duly authorized and validly issued and is
fully paid and non-assessable, and except as disclosed in the Registration
Statement, the Company owns directly or indirectly 100 percent of the
outstanding capital stock of each subsidiary and, to the best knowledge of such
counsel, such stock is owned free and clear of any security interests, claims,
liens, encumbrances or adverse interests of any nature.
(iv) The issued and outstanding capital stock of the Company has
been duly authorized and validly issued and is fully paid and non-assessable and
free of preemptive rights.
(v) The authorized capitalization of the Company consists entirely
of 25,000,000 shares of Common Stock, par value $0.01 per share of which
[__________] were issued and outstanding on the date of the Prospectus and
1,000,000 shares of Preferred Stock, par value $0.01 per share, none of which
were issued and outstanding on the date of the Prospectus and all of which
conform to the description thereof in the Registration Statement and the
Prospectus.
(vi) The certificates for the Shares to be delivered hereunder are
in due and proper form, and when duly countersigned by the Company's transfer
agent and delivered to the Representatives against payment of the agreed
consideration therefor in accordance with the provisions of this Agreement and
the Pricing Agreement, the Shares represented thereby will be duly authorized
and validly issued, fully paid and nonassessable and free of preemptive rights
and, to the knowledge of such counsel, will be free of any security interest,
claim, lien, encumbrance or adverse interest of any nature, or rights of first
refusal in favor of, stockholders with respect to any of the Shares or the
issuance or sale thereof, pursuant to the Certificate of Incorporation or by-
laws of the Company and, to such counsel's knowledge, there are no contractual
preemptive rights, rights of first refusal, rights of co-sale or other similar
rights which exist with respect to any of the Shares or the issuance and sale
thereof; and the Shares to be sold hereunder have been duly and validly
authorized and qualified for inclusion on the Nasdaq National Market, subject to
notice of issuance and sale.
(vii) This Agreement and the Pricing Agreement have been duly and
validly authorized, executed and delivered by the Company and are legal, valid
and binding obligations of the Company, enforceable in accordance with their
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity, and except that such counsel need
express no opinion as to those provisions relating to indemnities or
contribution for liabilities under the Act.
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(viii) No authorization, approval, order or consent of any
governmental authority or agency is required for the valid issuance and sale of
the Shares, except such as may be required under the Act or state securities
laws or by the NASD as to which such counsel need express no opinion.
(ix) The execution, delivery and performance of this Agreement and
the Pricing Agreement by the Company, the issue and sale of the Shares, and the
consummation of the transactions contemplated hereby and thereby will not
conflict with or result in a breach of any of the provisions of, or constitute a
default under (A) the Company's Certificate of Incorporation or by-laws or any
agreement, franchise, license, indenture, mortgage, deed of trust or other
instrument or agreement known to such counsel to which the Company or any of its
subsidiaries is a party or by which Company or any of its subsidiaries is bound
or to which any of their respective properties is subject or (B) so far as known
to such counsel, any statute, order, rule or regulation applicable to the
Company or any of its subsidiaries of any court or other governmental authority
or body having jurisdiction over the Company or any of its subsidiaries or any
of its properties.
(x) All documents incorporated by reference in the Prospectus, when
they were filed with the Commission, complied as to form in all material
respects with the requirements of the Exchange Act; and such counsel have no
reason to believe that any of such documents, when they were so filed, contained
an untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such documents were so filed, not
misleading; such counsel need express no opinion as to the financial statements
or other financial or statistical data contained in any such document.
(xi) The Registration Statement has become effective under the Act,
and, to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or contemplated under the
Act.
(xii) The Registration Statement (including the information deemed to
be part of the Registration Statement at the time of effectiveness pursuant to
Rule 430A(b), if applicable) as amended or supplemented (except for the
financial statements and notes thereto, the financial statement schedules and
other statistical or financial data included therein as to which such counsel
need express no opinion) and the Prospectus and any supplements or amendments
thereto (except for the financial statements and notes thereto, the financial
statement schedules and other statistical or financial data included therein, as
to which such counsel need express no opinion) comply as to form in all material
respects with the requirements of the Act and the rules of the Commission
thereunder and nothing has come to the attention of such counsel that would
cause such counsel to believe that the Registration Statement (including the
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b), if applicable) as amended or
supplemented (except for the financial statements and notes thereto, the
financial statement schedules and other statistical or financial data included
therein as to which such counsel
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need express no opinion) at the time it became effective, at the time the
Pricing Agreement was executed and at the Closing Date, contained any untrue
statement of a material fact or omitted or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, or that, as of its date, the Prospectus or any amendment or
supplement thereto (except for the financial statements and notes thereto, the
financial statement schedules and other statistical or financial data included
therein as to which such counsel need express no opinion) included or includes
any untrue statement of a material fact or omitted or omits to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Rule 434
Prospectus conforms to the requirements of Rule 434 of the Act.
(xiii) The statements in the Prospectus in the sections captioned
"Description of Capital Stock," in each case insofar as such statements reflect
a summary of the material legal matters or the documents referred to therein,
fairly and accurately present the information called for by the Act and the
applicable rules and regulations promulgated thereunder.
(xiv) To the knowledge of such counsel there are no statutes or
regulations, provisions of the Delaware General Corporation Law or any pending
or threatened litigation or governmental proceedings against the Company
required to be described in the Prospectus which are not so described, nor any
contracts or documents of a character required to be described in or filed as a
part of the Registration Statement which are not described or filed as required.
(xv) To such counsel's knowledge, except as disclosed in the
Prospectus, no person has the right, contractual or otherwise, to cause the
Company to register pursuant to the Act any shares of capital stock of the
Company, upon the issuance and sale of the Shares to be sold by the Company to
the Underwriters pursuant to this Agreement.
(xvi) Neither the Company nor any of its subsidiaries is an
"investment company" or a person "controlled by" an "investment company" within
the meaning of the Investment Company Act.
(xvii) To such counsel's knowledge, all offers and sales of the
Company's and each of its subsidiaries' capital stock during the three years
prior to the date hereof were at all relevant times registered under the Act or
exempt from the registration requirements of the Act and were duly registered or
the subject of an available exemption from the registration requirements of the
applicable state securities or blue sky laws.
(xviii) With respect to each Selling Stockholder, this Agreement and
the Pricing Agreement have been duly authorized, executed and delivered by or on
behalf of each such Selling Stockholder; the Agents and the Custodian for each
such Selling Stockholder have been duly and validly authorized to carry out all
transactions contemplated herein on behalf of each such Selling Stockholder; and
the execution and performance of this Agreement and the Pricing Agreement, the
sale and transfer of the Shares by such Selling Stockholder and the consummation
of the transactions contemplated herein by such Selling Stockholder will not
contravene, conflict with any of the
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provisions of, or result in a breach or default under, any agreement, franchise,
license, indenture, mortgage, deed of trust or other agreement or instrument
known to such counsel to which any of such Selling Stockholders is a party or by
which any are bound or to which any of the property of such Selling Stockholders
is subject, nor will such actions violate any order, rule or regulation known to
such counsel of any court or regulatory or governmental body having jurisdiction
over any of such Selling Stockholders or any of their properties; and no
consent, approval, authorization or order of any court or governmental agency or
body is required for the consummation of the transactions contemplated by this
Agreement and the Pricing Agreement or the sale of Shares to be sold by such
Selling Stockholders hereunder, except such as may be required under the Act or
state securities laws or by the NASD as to which counsel need express no
opinion;
(xix) Each Selling Stockholder has full right, power and authority to
enter into this Agreement and the Pricing Agreement and to sell, transfer and
deliver the Shares to be sold on the Closing Date by such Selling Stockholder
hereunder; upon registration in the name of the Underwriters of such Shares to
be sold by such Selling Stockholder hereunder, the Underwriters (who counsel may
assume to be bona fide purchasers) will acquire valid title to such Shares so
sold, free and clear of all voting trust arrangements, security interests,
claims, liens, encumbrances, community property rights or any adverse interests
of any nature imposed on such Shares by such Selling Stockholder or the Company.
(xx) This Agreement and the Pricing Agreement are legal, valid and
binding agreements of each Selling Stockholder except as enforceability of the
same may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by general
principles of equity, and except that such counsel need express no opinion to
those provisions relating to indemnities or contribution for liabilities arising
under the Act.
(xxi) The Custody Agreement and Power of Attorney has been duly
executed and delivered by each Selling Stockholder and constitute valid and
binding agreements of each such Selling Stockholder in accordance with their
terms.
In rendering such opinion, such counsel may state that they are relying
upon the certificate of the Selling Stockholders and of officers of the Company
and the transfer agent for the Common Stock, as to the number of shares of
Common Stock at any time or times outstanding, and that insofar as their opinion
under clause (xii) above relates to the accuracy and completeness of the
Prospectus and Registration Statement, it is based upon a general review with
the Company's representatives and independent accountants of the information
contained therein, without independent verification by such counsel of the
accuracy or completeness of such information. Such counsel may also rely upon
the opinions of other competent counsel and, as to factual matters, on
certificates of officers of the Company and of state officials, in which case
their opinion is to state that they are so doing and copies of such opinions or
certificates are to be attached to the opinion unless such opinions or
certificates (or, in the case of certificates, the information therein) have
been furnished to the Representatives otherwise.
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(d) That the Representatives shall have received on the Closing Date a
favorable opinion dated the Closing Date from Vedder, Price, Kaufman & Kammholz,
counsel for the Underwriters, as to such matters as the Representatives may
reasonably require.
(e) That the Representatives shall have received letters addressed to the
Representatives and dated the date hereof and the Closing Date from Arthur
Andersen LLP, independent public accountants for the Company, to the effect set
forth in Schedule III. There shall not have been any change or decrease
specified in the letters referred to in this subparagraph which makes it
impractical or inadvisable in the judgment of the Representatives to proceed
with the public offering or purchase of the Shares as contemplated hereby.
(f) That (i) no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been taken or, to the knowledge of the Company, shall be contemplated by the
Commission at or prior to the Closing Date; (ii) there shall not have been any
change in the capital stock of the Company nor any material increase in the
short or long-term debt of the Company from that set forth or contemplated in
the Registration Statement; (iii) there shall not have been, since the
respective dates as to which information is given in the Registration Statement
and the Prospectus, except as may otherwise be set forth or contemplated in the
Registration Statement and the Prospectus, any material adverse change in the
financial condition or results of operations of the Company; (iv) the Company
shall not have incurred any material liabilities or obligations, direct or
contingent (whether or not in the ordinary course of business), other than those
reflected in the Registration Statement, and (v) all of the representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects on and as of the date hereof and the Closing Date as if
made on and as of each such date, and the Representatives shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the principal financial officer (or such other officers as are acceptable to
the Representatives) to the effect set forth in this Section 6(f) and in Section
6(g) hereof.
(g) That the Company shall not have failed at or prior to the Closing Date
to have performed or complied in all material respects with any of the
agreements herein contained and required to be performed or complied with by it
at or prior to the Closing Date.
(h) Within 24 hours after the Registration Statement becomes effective, or
within such longer period as to which the Representatives shall have consented,
the Shares shall have been qualified for sale or exempted from such
qualification under the securities laws of such jurisdictions as the
Representatives shall have designated prior to the time of execution of the
Pricing Agreement and such qualification or exemption shall continue in effect
to and including the Closing Date.
(i) That the representations and warranties of each Selling Stockholder
contained in this Agreement shall be true and correct in all material respects
on and as of the date hereof and the Closing Date as if made on and as of each
such date, and the Representatives shall have received a certificate, dated the
Closing Date, to the effect set forth in this Section 6(i).
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The several obligations of the Underwriters to purchase Additional Shares
hereunder are subject to the satisfaction on and as of the Option Closing Date
of the conditions set forth in paragraphs (a) through (h); except that the
opinions called for in paragraphs (c) and (d) shall be revised to reflect the
sale of Additional Shares by the Company (and need not contain any opinion
relating to the Selling Stockholders) and shall be dated the Option Closing
Date, if different from the Closing Date.
Section 7. Indemnification and Contribution.
--------------------------------
(a) The Company and each of the Selling Stockholders, severally, agree to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of the Act or the Exchange Act from
and against any and all losses, claims, damages or liabilities, joint or
several, whatsoever (including any investigation, legal or other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted) to which such Underwriter, or such
controlling person may become subject, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Registration Statement or the Prospectus or in any
amendment or supplement thereto or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred, except insofar as such losses, claims,
damages or liabilities arise out of or are based upon any such untrue statement
or omission or allegation thereof which has been made therein or omitted
therefrom in reliance upon and in conformity with information relating to such
Underwriter furnished in writing to the Company by or on behalf of any
Underwriter through the Representatives expressly for use therein; provided,
however, that (i) each Selling Stockholder shall be liable hereunder only
insofar as any such untrue statement or alleged untrue statement or omission or
alleged omission relates to such Selling Stockholder, and (ii) the
indemnification contained in this paragraph with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or of any person
controlling such Underwriter) with respect to any action or claim arising from
the sale of the Shares by such Underwriter brought by any person who purchased
Shares from such Underwriter if (i) a copy of the Prospectus (as amended or
supplemented if any amendments or supplements thereto shall have been furnished
to the Underwriter prior to the written confirmation of the sale involved) shall
not have been given or sent to such person by or on behalf of the Underwriter
with or prior to the written confirmation of the sale involved and (ii) the
untrue statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (as amended or supplemented if
amended or supplemented as aforesaid).
(b) If any action or claim shall be brought against any Underwriter or any
person controlling such Underwriter, in respect of which indemnity may be sought
against the Company, such Underwriter shall promptly notify the Company in
writing, and the Company shall assume the defense thereof, including the
employment of counsel and payment of all fees and expenses. Any Underwriter or
any such person controlling such Underwriter shall have the right to employ
separate
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counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Underwriter or such
controlling person and shall be reimbursed as they are incurred unless (i) the
Company has agreed in writing to pay such fees and expenses, (ii) the Company
has failed to assume the defense and employ counsel, or (iii) the named parties
to any such action (including any impleaded party) included such Underwriter or
controlling person and the Company and such Underwriter or controlling person
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Company and which may also result in a conflict of interest (in
which case if such Underwriter or controlling person notifies the Company, the
Company shall not have the right to assume the defense of such action on behalf
of such Underwriter or controlling person, it being understood, however, that
the Company shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys for all such
Underwriters and controlling persons, which firm shall be designated in writing
by the Representatives). The Company shall not be liable for any settlement or
any such action effected without the written consent of the Company, but if
settled with the written consent of the Company, or if there shall be a final
judgment for the plaintiff in any such action and the time for filing all
appeals has expired, the Company agrees to indemnify and hold harmless any
Underwriter and any such controlling person from and against any loss or
liability by reason of such settlement or judgment.
(c) Each Underwriter will severally indemnify and hold harmless the
Company, its directors, its officers who sign the Registration Statement and
each Selling Stockholder, and any person controlling the Company within the
meaning of the Act or the Exchange Act to the same extent as the foregoing
indemnity from the Company to each Underwriter, but only with respect to
information relating to such Underwriter furnished in writing to the Company by
or on behalf of such Underwriter through the Representatives expressly for use
in the Registration Statement, the Prospectus or any Preliminary Prospectus. If
any action or claim shall be brought or asserted against the Company, any of its
directors, any such officer, any such Selling Stockholder, or any such
controlling person based on the Registration Statement, the Prospectus or any
Preliminary Prospectus and in respect of which indemnity may be sought against
any Underwriter, such Underwriter shall have the rights and duties given to the
Company pursuant to Section 7(b) hereof (except that if the Company shall have
assumed the defense thereof, such Underwriter shall not be required to do so,
but may employ separate counsel therein and participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of such
Underwriter), and the Company, its directors, any such officer, any such Selling
Stockholder, and any such controlling person shall have the rights and duties
given to the Underwriters by Section 7(b) hereof.
(d) (i) If the indemnification provided for in this Section 7 is
unavailable as a matter of law to any indemnified party under this Section 7 in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by damages,
liabilities or expenses (A) in such proportion as is appropriate to reflect the
relative benefits received by the Company, the Selling Stockholders and the
Underwriters from the offering of the Shares or (B) if
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the allocation provided by clause (A) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (A) above but also the relative fault of the Company, the
Selling Stockholders and the Underwriters in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The respective
relative benefits received by the Company, the Selling Stockholders and the
Underwriters shall be deemed to be in the same proportion in the case of each of
the Company and the Selling Stockholders, as the total price paid to each by the
Underwriters (net of underwriting discount but before deducting expenses) for
the Shares, and in the case of the Underwriters as the underwriting discount
received by them bears to the total of such amounts paid to the Company and the
Selling Stockholders and received by the Underwriters as underwriting discount,
in each case as contemplated by the Prospectus. The relative fault of the
Company, the Selling Stockholders and the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Selling Stockholders or by
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in this Section shall be
deemed to include, subject to the limitations set forth in this Section, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
(ii) The Company, the Selling Stockholders and the Underwriters
agree that the determination of contribution pursuant to this Section based on
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph would not be just and equitable (even if the several Underwriters were
treated as one entity for such purpose). Notwithstanding the provisions of this
Section, no Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Shares underwritten by it and
distributed to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to indemnification or contribution from any person who was not
guilty of such fraudulent misrepresentation. The Selling Stockholders'
obligations to indemnify and contribute pursuant to this Section are several in
proportion to the respective total price paid to each by the Underwriters (net
of underwriting discount but before deducting expenses) and not joint, and shall
not exceed the amounts paid to each. The Underwriters' obligations to contribute
pursuant to this Section are several in proportion to their respective
underwriting commitments and not joint.
(e) The indemnity and contribution agreements contained in this Section
and the representations and warranties of the Company and the Selling
Stockholders set forth in this Agreement shall remain operative and in full
force and effect, regardless of (i) any investigation made by or on behalf of
any Underwriter or any person controlling any Underwriter, the Company or its
directors or officers or any Selling Stockholder (or any person controlling the
Company or any Selling Stockholder), (ii) acceptance of any Shares and payment
therefor hereunder and (iii) any
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termination of this Agreement. A successor or assign of an Underwriter, any
Selling Stockholder, the Company or its directors or officers, and their legal
and personal representatives (or of any person controlling an Underwriter, or
the Company or any Selling Stockholder) shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section.
Section 8. Effective Date of Agreement. This Agreement shall become
effective immediately as to Sections 5, 7, 10 and 11 and as to all other
provisions at 10:00 A.M., Chicago Time, on the day following the date upon which
the Pricing Agreement is executed and delivered, unless such a day is a
Saturday, Sunday or holiday (and in that event this Agreement shall become
effective at such hour on the business day next succeeding such Saturday, Sunday
or holiday); but this Agreement shall nevertheless become effective at such
earlier time after the Pricing Agreement is executed and delivered as you may
determine on and by notice to the Company and the Selling Stockholders or by
release of any Shares for sale to the public. For the purposes of this Section,
the Shares shall be deemed to have been so released upon the release for
publication of any newspaper advertisement relating to the Shares or upon the
release by you of telegrams (i) advising Underwriters that the Shares are
released for public offering, or (ii) offering the Shares for sale to securities
dealers, whichever may occur first.
Section 9. Default of Underwriters. If any one or more of the Underwriters
shall fail or refuse to purchase Firm Shares which it or they have agreed to
purchase under this Agreement and the Pricing Agreement and the aggregate number
of Firm Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of Firm Shares, each non-defaulting Underwriter shall be obligated, severally,
in the proportion which the number of Firm Shares set forth opposite its name in
Schedule I bears to the aggregate number of Firm Shares set forth opposite the
names of all non-defaulting Underwriters or in such other proportion as the
Representatives may specify in accordance with the Agreement Among Underwriters
to purchase the Firm Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase. If any Underwriter or Underwriters
shall fail or refuse to purchase Firm Shares and the aggregate number of Firm
Shares with respect to which such default occurs is more than one-tenth of the
aggregate number of Firm Shares and arrangements satisfactory to the
Representatives and the Company for the purchase of such Firm Shares are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company. In any
such case which does not result in termination of this Agreement, either the
Representatives or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and the Prospectus or any other
documents or arrangements may be effected. Any action taken under this paragraph
shall not relieve any defaulting Underwriter from liability in respect of any
such default of any such Underwriter under this Agreement.
(b) Any notice under this Section 9 may be made by telecopy or telephone
but shall be subsequently confirmed by letter.
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Section 10. Termination of Agreement. This Agreement and the Pricing
Agreement shall be subject to termination by notice given by you to the Company,
if (a) after the execution and delivery of this Agreement and the Pricing
Agreement and prior to the Closing Date (and with respect to the Additional
Shares, the Option Closing Date) (i) trading generally shall have been suspended
or materially limited on or by, as the case may be, any of the New York Stock
Exchange or the National Association of Securities Dealers, Inc., (ii) trading
of any securities of the Company shall have been suspended on any exchange or in
any over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York or in Chicago shall have been declared by either Federal,
New York or Illinois State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your reasonable judgment, is material and adverse
and (b) in the case of any of the events specified in clauses (a)(i) through
(iv), such event, singly or together with any other such event, makes it, in
your reasonable judgment, impracticable to market the Shares on the terms and in
the manner contemplated in the Prospectus. Notice of such cancellation shall be
given to the Company by telecopy or telephone but shall be subsequently
confirmed by letter.
Section 11. Reimbursement of Underwriters' Expenses. If the sale to the
Underwriters of the Shares on the Closing Date is not consummated because any
condition to the Underwriters' obligations hereunder is not satisfied or because
of any refusal, inability or failure on the part of the Company or the Selling
Stockholders to perform any agreement herein or to comply with any provision
hereof, unless such failure to satisfy such condition or to comply with any
provision hereof is due to the default or omission of any Underwriter, the
Company and the Selling Stockholders agree to reimburse you and the other
Underwriters upon demand for all out-of-pocket expenses (including reasonable
fees and disbursements of counsel) that shall have been reasonably incurred by
you and them in connection with the proposed purchase and the sale of the
Shares. Any such termination shall be without liability of any party to any
other party except that the provisions of this Section, Section 5 and Section 7
shall at all times be effective and shall apply.
Section 12. Notices. Except as otherwise provided in Sections 9 and 10
hereof, notice given pursuant to any of the provisions of this Agreement shall
be in writing and shall be delivered (a) if to the Company, at the office of the
Company at Lindberg Corporation, 6133 N. River Road, Suite 700, Rosemont, IL
60018 Attention: Leo G. Thompson, President, with a copy to John H. Bitner,
Esq., Bell, Boyd & Lloyd, Three First National Plaza, 70 West Madison Street,
Suite 3300, Chicago, IL 60602 or (b) if to the Representatives, at the offices
of ABN AMRO Incorporated, 208 South LaSalle Street, 4th Floor, Chicago, Illinois
60604, Attention: Corporate Finance Department, with a copy to Steven J. Gray,
Esq., Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street, Chicago, IL
60601 or (c) if to the Selling Stockholders, to the Agents and the Custodian at
such address as they have previously furnished to the Company and the
Representatives, with a copy to John H. Bitner, Esq., Bell, Boyd & Lloyd, Three
First National Plaza, 70 West Madison Street, Suite 3300, Chicago, IL 60602, or
in any case to such other address as the person to be notified may have
requested in writing.
Section 13. Successors. The Agreement and the Pricing Agreement are made
solely for the benefit of the several Underwriters, the Company, their directors
and officers and other
27
<PAGE>
controlling persons referred to in Section 7 hereof, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement or the Pricing Agreement. The term
"successors and assigns" as used in this Agreement shall not include a purchaser
from any of the several Underwriters of any of the Shares in his status as such
purchaser.
Section 14. Representation of Underwriters. The Representatives will act
for the several Underwriters in connection with the purchase, offering and sale
of the Shares, and any action taken by the Representatives will be binding upon
all the Underwriters.
Section 15. Partial Unenforceability. If any section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.
Section 16. Applicable Law. This Agreement and the Pricing Agreement shall
be governed by and construed in accordance with the internal laws of the State
of Illinois.
Section 17. Counterparts. This Agreement may be signed in various
counterparts which together shall constitute one and the same instrument.
28
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Company and the several Underwriters.
Very truly yours,
LINDBERG CORPORATION
By:_________________________
Name: Leo G. Thompson
Title: President and Chief Executive Officer
The Selling Stockholders Named in
Schedule II to this Agreement
By:_________________________
Attorney-in-Fact
Accepted and delivered as of
the date first written above.
ABN AMRO Incorporated
McDonald & Company Securities, Inc.
Acting as Representatives of
the Several Underwriters named
in Schedule I hereto.
ABN AMRO INCORPORATED
By: ____________________________
29
<PAGE>
LINDBERG CORPORATION
SCHEDULE I
Underwriters
------------
<TABLE>
<CAPTION>
Number of
Name Firm Shares
- ---- -----------
<S> <C>
ABN AMRO Incorporated.................
McDonald & Company Securities, Inc....
TOTAL............................... 1,400,000
=========
</TABLE>
<PAGE>
LINDBERG CORPORATION
SCHEDULE II
Selling Stockholders
--------------------
<TABLE>
<CAPTION>
Number of
Firm Shares
Name to be sold
- ---- -----------
<S> <C>
Nancy L. Bodeen..................... 50,000
Ronald E. Byrd...................... 75,000
-------
TOTAL............................. 125,000
=======
</TABLE>
<PAGE>
LINDBERG CORPORATION
SCHEDULE III
Comfort Letter of Arthur Andersen LLP
-------------------------------------
(1) They are independent public accountants with respect to the Company and
its subsidiaries within the meaning of the Act.
(2) In their opinion the consolidated financial statements of the Company
and its subsidiaries included or incorporated by reference in the Registration
Statement and the consolidated financial statements of the Company from which
the information presented under the caption "Selected Consolidated Financial
Information" has been derived which are stated therein to have been examined by
them comply as to form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act.
(3) On the basis of specified procedures (but not an examination in
accordance with generally accepted auditing standards), including inquiries of
certain officers of the Company and its subsidiaries responsible for financial
and accounting matters as to transactions and events subsequent to December 31,
1997, a reading of minutes of meetings of the stockholders and directors of the
Company and its subsidiaries since December 31, 1997, a reading of the latest
available interim unaudited consolidated financial statements of the Company and
its subsidiaries (with an indication of the date thereof) and other procedures
as specified in such letter, nothing came to their attention which caused them
to believe that (i) the unaudited consolidated financial statements of the
Company and its subsidiaries included or incorporated by reference in the
Registration Statement do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the Exchange Act or that
such unaudited financial statements are not fairly presented in accordance with
generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in the
Registration Statement, if applicable, cover pro forma financial statements and
(ii) at a specified date not more than five days prior to the date thereof in
the case of the first letter and not more than two business days prior to the
date thereof in the case of the second and third letters, there was any change
in the capital stock or long-term debt or short-term debt (other than normal
payments) of the Company and its subsidiaries on a consolidated basis or any
decrease in consolidated net current assets or consolidated stockholders' equity
as compared with amounts shown on the latest unaudited balance sheet of the
Company included in the Registration Statement or for the period from the date
of such balance sheet to a date not more than five days prior to the day thereof
in the case of the first letter and not more than two business days prior to the
date thereof in the case of the second and third letters, there were any
decreases, as compared with the corresponding period of the prior year, in
consolidated net sales, consolidated income before income taxes or in the total
or per share amounts of consolidated net income except, in all instances, for
changes or decreases which the Prospectus discloses have occurred or may occur
or which are set forth in such letter.
<PAGE>
(4) They have carried out specified procedures, which have been agreed to
by the Representatives, with respect to certain information in the Prospectus
specified by the Representatives, and on the basis of such procedures, they have
found such information to be in agreement with the general accounting records of
the Company and its subsidiaries.
2
<PAGE>
Exhibit A
1,400,000 Shares
LINDBERG CORPORATION
COMMON STOCK
PRICING AGREEMENT
July ___, 1998
ABN AMRO Incorporated
McDonald & Company Securities, Inc.
Individually and as Representatives of the
Several Underwriters Named in Schedule I
to the Underwriting Agreement
c/o ABN AMRO Incorporated
208 South LaSalle Street
4th Floor
Chicago, Illinois 60604
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated July __, 1998 (the
"Underwriting Agreement"), relating to the purchase by the several Underwriters
named in Schedule I thereto (collectively, the "Underwriters"), for whom you are
acting individually and as representatives (the "Representatives"), of the above
referenced Common Stock (the "Shares") of Lindberg Corporation (the "Company").
Pursuant to Section 3 of the Underwriting Agreement, the Company and the
Selling Stockholders agree with each of the Underwriters as follows:
1. The initial public offering price per share of the Shares determined
as provided in said Section 3 shall be $_______.
2. The purchase price per share of the Shares to be paid by the several
Underwriters shall be $________, being an amount equal to the initial public
offering price set forth above, less $_______ per Share.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts,
<PAGE>
will become a binding agreement among the Underwriters, the Company and the
Selling Stockholders in accordance with its terms.
Very truly yours,
LINDBERG CORPORATION
By:
--------------------------------------------
Name: Leo G. Thompson
Title: President and Chief Executive Officer
The Selling Stockholders Named in Schedule
II to the Underwriting Agreement
By:
--------------------------------------------
Attorney-in-Fact
Confirmed and Accepted, as of the date
first above written for themselves and
as Representatives of the other Underwriters
named in the Underwriting Agreement:
ABN AMRO Incorporated
McDonald & Company Securities, Inc.
Acting as Representatives of the Several
Underwriters named in Schedule I to
the Underwriting Agreement
ABN AMRO INCORPORATED
By:
2
<PAGE>
EXHIBIT 4.0
LINDBERG CORPORATION
THIS CERTIFICATE IS TRANSFERABLE EITHER IN CHICAGO, IL OR NEW YORK, NY
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
CUSIP
SEE REVERSE SIDE FOR CERTAIN
DEFINITIONS
THIS CERTIFIES that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE $0.01 EACH OF COMMON STOCK
OF
LINDBERG CORPORATION
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney, upon surrender of this certificate properly
endorsed. This certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated
[CORPORATE SEAL OF LINDBERG CORPORATION]
Secretary Chairman of the Board
COUNTERSIGNED AND REGISTERED:
HARRIS TRUST AND SAVINGS BANK
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in a Rights Agreement between Lindberg Corporation (the
"Company") and Harris Trust and Savings Bank, as Rights Agent, dated as of
November 21, 1996 as the same may be amended from time to time (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference and
a copy of which is on file at the principal executive offices of the Company.
Under certain circumstances, as set forth in the Rights Agreement, such Rights
will be evidenced by separate certificates and will no longer be evidenced by
this certificate. The Company will mail to the holder of this certificate a
copy of the Rights Agreement without charge after receipt of a written request
therefor. Under certain circumstances, as set forth in the Rights Agreement,
Rights owned by or transferred to any Person who is or becomes an Acquiring
Person (as defined in the Rights Agreement) and certain transferees thereof will
become null and void and will no longer be transferable.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -as tenants in common UNIF GIFT MIN ACT-______Custodian_______
TEN ENT -as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as joint Act_______
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For Value Received, _______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________
| |
__________________________________
________________________________________________________________________________
(Please print or typewrite name and address including zip code of assignee)
_________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer said stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated ____________________
AFFIX MEDALLION SIGNATURE ____________________________________________
GUARANTEE IMPRINT BELOW (Signature)
____________________________________________
(Signature)
ABOVE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE
OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERNATION OR ENLARGEMENT, OR ANY CHANGE
WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION SUCH AS A SECURITIES
BROKER/DEALER, COMMERCIAL BANK & TRUST COMPANY,
SAVINGS AND LOAN ASSOCIATION OR A CREDIT UNION
PARTICIPATING IN A MEDALLION PROGRAM APPROVED BY
THE SECURITIES TRANSFER ASSOCIATION, INC.
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report included in this registration statement and to the incorporation
by reference in this registration statement of our report dated January
22, 1998 included in Lindberg Corporation's Form 10-K for the year ended
December 31, 1997 and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
Chicago, Illinois
June 19, 1998
