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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-K
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(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 0-23539
Ladish Co., Inc.
( Exact name of registrant as specified in its charter )
Wisconsin 31-1145953
( State of Incorporation ) ( I.R.S. Employer
Identification No. )
5481 S. Packard Avenue 53110
Cudahy, Wisconsin ( Zip Code )
( Address of principal
executive offices )
Registrant's telephone number, including area code (414) 747-2611
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
Common stock, $0.01 par value Nasdaq
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) or the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by nonaffiliates of the
Registrant is $46,276,111 as of February 8, 2000.
13,401,234
( Number of Shares of common stock outstanding as of February 18, 2000 )
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( Continued on reverse side )
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( Continued from cover page )
DOCUMENTS INCORPORATED BY REFERENCE
With the exception of those sections which are specifically incorporated by
reference in this Form 10-K Annual Report including the annual report to
security holders for fiscal year ended December 31, 1999 and the proxy statement
for the annual meeting of security holders in 2000, no other documents are to be
deemed a part of this report.
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PART 1
Item 1. Business
General
Ladish Co., Inc. ("Ladish" or the "Company") engineers, produces and markets
high-strength, high-technology forged and formed metal components for a wide
variety of load-bearing and fatigue-resisting applications in the jet engine,
aerospace and industrial markets. Approximately 90% of the Company's 1999
billings were derived from the sale of jet engine parts, missile components,
landing gear, helicopter rotors and other aerospace products. Approximately 20%
of the Company's 1999 billings were derived from sales, directly or through
prime contractors, under United States government contracts, primarily covering
defense equipment. Although no comprehensive trade statistics are available,
based on its experience and knowledge of the industry, management believes that
the Company is the second largest supplier of forging products to the domestic
aerospace industry, with an estimated 20% market share in the jet engine
component field.
Recent Acquisitions
In February 1999 the Company's wholly-owned subsidiary, Stowe Machine Co., Inc.
("Stowe"), acquired the business and assets of Adco Manufacturing, Incorporated
("Adco"). Adco was combined into Stowe and the Stowe financial results are
consolidated with those of the Company for the purpose of this Form 10-K Annual
Report. In January 2000 the Company's newly created, wholly-owned subsidiary,
Pacific Cast Technologies, Inc. ("PCT") merged with Wyman-Gordon Titanium
Castings, LLC with PCT being the surviving entity. For purposes of this Form
10-K Annual Report the results of PCT are not reflected in the Company's
financial results.
Products and Markets
The Company markets its forging products primarily to manufacturers of jet
engines, commercial business and defense aircraft, helicopters, satellites,
heavy-duty off-road vehicles and industrial and marine turbines. The principal
forging markets served by the Company are jet engine, commercial aerospace
(defined by Ladish as satellite, rocket and aircraft components other than jet
engines) and general industrial forgings. The amount of revenue and the revenue
as a percentage of total revenue by market were as follows for the periods
indicated:
Years Ended December 31,
1997 1998 1999
---- ---- ----
(Dollars in millions)
Jet Engine Forgings................$153 73% $160 70% $124 73%
Aerospace Forgings................. 35 17% 47 21% 27 16%
General Industrial Forgings........ 22 10% 20 9% 19 11%
---- ---- ---- ---- ---- ----
Total.........................$210 100% $227 100% $170 100%
==== ==== ==== ==== ==== ====
Manufacturing
Ladish offers one of the most complete ranges of forging services in the world.
The Company employs all major forging processes, including open and closed-die
hammer and press forgings, as well as ring-rolling, and also produces near-net
shape aerospace components through isothermal forging and hot-die forging
techniques. Closed-die forging involves hammering or pressing heated metal into
the required
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shape and size by utilizing machined impressions in specially prepared dies
which exert three-dimensional control on the heated metal. Open-die forging
involves the hammering or pressing of metal into the required shape without such
three-dimensional control, and ring-rolling involves rotating heated metal rings
through presses to produce the desired shape.
Much of the Company's forging business is capital intensive, requiring large and
sophisticated press, hammer and heating equipment and extensive facilities for
inspection and testing of components after forging. Ladish believes that it has
the largest forging hammer and largest ring-roll in the world at its plant in
Cudahy, Wisconsin. Its largest counterblow forging hammer has a capacity of
125,000 mkg (meter-kilograms), and its ring-rolling equipment can produce
single-piece seamless products that weigh up to 350,000 pounds with outside
diameters as large as 28 feet and face heights up to 10 feet. Ladish's 4,500-ton
and 10,000-ton isothermal presses can produce forgings, in superalloys as well
as titanium, that weigh up to 2,000 pounds. Much of the equipment has been
designed and built by Ladish. The Company also maintains such auxiliary
facilities as die-sinking, heat-treating and machining equipment and produces
most of the precision dies necessary for its forging operations. The Company
considers such equipment to be in good operating condition and adequate for the
purposes for which it is being used.
Marketing and Sales
The forging product sales force (consisting of 14 engineers), based in Cudahy,
Wisconsin, is supported by the Company's metallurgical staff of approximately
100 engineers and technicians. These technically trained sales engineers,
organized along product line and customer groupings, work with customers on an
ongoing basis to monitor competitive trends and technological innovations.
Additionally, sales engineers consult with customers regarding potential
projects and product development opportunities. During the past few years, the
Company has refocused its marketing efforts on the jet engine components market
and the commercial aerospace industry.
The Company is actively involved with key customers in joint cooperative
research and development, engineering, quality control, just-in-time inventory
control and computerized process modeling programs. The Company has entered into
strategic life-of-the-program contracts for a number of sole-sourced products
with each of Allison, Sikorsky and Thyssen for major programs. The Company
believes that these contracts are a reflection of the aerospace and industrial
markets' recognition of the Company's manufacturing and technical expertise.
The research and development of jet engine components is actively supported by
the Company's Advanced Materials and Process Technology Group. The Company's
long-standing commitment to research and development is evidenced by its
industry-recognized materials and process advancements such as processing
aluminum-lithium, Udimet 720 and titanium aluminides. The experienced staff and
fully equipped research facilities support Ladish sales through customer-funded
projects. Management believes that these research efforts position the Company
to participate in future growth in demand for critical advanced jet engine
components.
Customers
The Company's top three customers, Rolls-Royce, United Technologies and General
Electric, accounted for approximately 58% of the Company's revenues in 1997, 61%
of the Company's revenues in 1998 and 60% of the Company's revenues in 1999. No
other customer accounted for ten percent or more of the Company's sales.
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Caterpillar, Volvo and Allison are also significant customers of the Company.
Because of the relatively small number of customers for some of the Company's
principal products, the Company's largest customers exercise significant
influence over the Company's prices and other terms of trade.
A substantial portion of the Company's revenues is derived from long-term, fixed
price contracts with major engine and aircraft manufacturers. These contracts
are typically "requirements" contracts under which the purchaser commits to
purchase a given portion of its requirements of a particular component from the
Company. Actual purchase quantities are typically not determined until shortly
before the year in which products are to be delivered. The Company attempts to
minimize its risk by entering into fixed-price contracts with its raw material
suppliers. Additionally, a portion of the Company's revenue is directly or
indirectly related to government spending, particularly military and space
program spending.
Research and Development
The Company maintains a research and development department which is engaged in
applied research and development work primarily relating to the Company's
forging operations. The Company works closely with customers, universities and
government technical agencies in developing advanced forgings, materials and
processes. The Company spent approximately $3.4 million, $4.5 million and $3.3
million on applied research and development work during 1997, 1998 and 1999,
respectively.
Although the Company owns patents covering certain of its processes, the Company
does not consider these patents to be of material importance to the Company's
business as a whole. The Company considers certain other information that it
owns to be trade secrets and the Company takes measures to protect the
confidentiality and control the disclosure and use of such information. The
Company believes that these safeguards adequately protect its proprietary rights
and the Company vigorously defends these rights.
The Company owns or has obtained licenses for various trademarks, trademark
registrations, service marks, service mark registrations, trade names,
copyrights, copyright registrations, patent applications, inventions, know-how,
trade secrets, confidential information and any other intellectual property that
are necessary for the conduct of its business (collectively, "Intellectual
Property"). The Company is not aware of any existing or threatened patent
infringement claim (or of any facts that would reasonably be expected to result
in any such claim) or any other existing or threatened challenge by any third
party that would significantly limit the rights of the Company with respect to
any such Intellectual Property or to the validity or scope of any such
Intellectual Property. The Company has no pending claim against a third party
with respect to the infringement by such third party or any such Intellectual
Property that, if determined adversely to the Company, would individually or in
the aggregate have a material adverse effect on the Company's financial
condition or results of operations. While the Company considers all of its
proprietary rights as a whole to be important, the Company does not consider any
single right to be essential to its operations as a whole.
Raw Materials
Raw materials used by the Company in its forgings include alloys of titanium,
nickel, steel, aluminum, tungsten and other high temperature alloys. The major
portion of metal requirements for forged products are purchased from major metal
suppliers producing forging quality material as needed to fill customer orders.
The Company has two or more sources of supply for all significant raw materials.
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The titanium and nickel-based superalloys used by the Company have a relatively
high dollar value. Accordingly, the Company recovers and recycles scrap
materials such as machine turnings, forging flash, solids and test pieces.
The Company's most significant raw materials consist of nickel and titanium
alloys. Its principal suppliers of nickel alloys include Special Metals
Corporation and Allegheny Technologies. Its principal suppliers of titanium
alloys are Titanium Metals Corporation of America, Allegheny Technologies and
RTI International. The Company typically has fixed-price contracts with its
suppliers.
In addition, the Company, its customers and suppliers have undertaken active
programs for supply chain management which are reducing overall lead times and
the total cost of raw materials.
Backlog
The average amount of time necessary to manufacture the Company's products is
five to six weeks from the receipt of raw material. The timing of the placement
and filling of specific orders may significantly affect the Company's backlog
figures, which are subject to cancellation for a variety of reasons. In
addition, the Company typically only includes those contracts which will result
in shipments within the next 12 to 18 months when compiling backlog and does not
include the out years of long-term agreements. As a result, the Company's
backlog may not be indicative of actual results or provide meaningful data for
period-to-period comparisons. The Company's backlog was approximately $278
million, $243 million and $225 million as of December 31, 1997, 1998 and 1999,
respectively.
Patents and Trademarks
The Company does not hold, by license or otherwise, any patents, trademarks,
franchises or concessions whose loss or modification would materially affect its
business in the aggregate.
Competition
The sale of forged metal components is highly competitive. Certain of the
Company's competitors are larger than the Company, and have substantially
greater capital resources. Although the Company is the sole supplier on several
sophisticated components required by prime contractors under a number of
governmental programs, many of the Company's products could be replaced with
other similar products of its competitors. However, the significant investment
in tooling, the time required and the cost of obtaining the status of a
"certified supplier" are barriers to entry. Competition is based on quality
(including advanced engineering and manufacturing capability), price and the
ability to meet delivery requirements.
Environmental, Health and Safety Matters
The Company's operations are subject to many federal, state and local
regulations relating to the protection of the environment and to workplace
health and safety. In particular, the Company's operations are subject to
extensive federal, state and local laws and regulations governing waste
disposal, air and water emissions, the handling of hazardous substances,
environmental protection, remediation, workplace exposure and other matters.
Management believes that the Company is presently in substantial compliance with
all such laws and does not currently anticipate that the Company will be
required to expend any substantial amounts in the foreseeable future in order to
meet
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current environmental, workplace health or safety requirements. However,
additional costs and liabilities may be incurred to comply with current and
future requirements, which costs and liabilities could have a material adverse
effect on the Company's results of operations or financial condition.
There are no known pending remedial actions or claims relating to environmental
matters that are expected to have a material effect on the Company's financial
position or results of operations. All of the properties owned by the Company,
however, are located in industrial areas and have a history of heavy industrial
use. These properties may potentially incur environmental liabilities in the
future that could have a material adverse effect on the Company's financial
condition or results of operations. The Company has been named a potentially
responsible party at three "Superfund" sites. Although the Company does not
believe that the amount for which it may be held liable will be material and has
reserved approximately $250,000 for such loss, no assurance can be given that
the amount for which the Company will be held responsible will not be
significantly greater than expected. In connection with the sale of the
Company's former Industrial Products Division ("IPD"), the Company has agreed to
indemnify Trinity Industries, Inc. until May 29, 2001 against certain
environmental liabilities that may arise with respect to the properties and
operations of IPD relating to the period prior to closing.
Year 2000 Compliance
The Company installed a new computer operating system which is compliant with
Year 2000 demands. The new system includes hardware, software, fiber-optic
wiring and extensive training for numerous Company personnel. The project was
initiated in 1997 and the Company implemented the system at the end of the third
quarter of 1998. The Company did not experience any material operating issues
with respect to Year 2000.
Forward Looking Statements
Any statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Legislation Reform Act of 1995, and involve risks and uncertainties. These
forward-looking statements include expectations, beliefs, plans, objectives,
future financial performance, estimates, projections, goals and forecasts.
Potential factors which could cause the Company's actual results of operations
to differ materially from those in the forward-looking statements include market
conditions and demand for the Company's products; competition; technologies; raw
material prices; interest rates and capital costs; taxes; unstable governments
and business conditions in emerging economies; and legal, regulatory and
environmental issues. Any forward-looking statement speaks only as of the date
on which such statement is made. The Company undertakes no obligation to update
any forward-looking statement to reflect events or circumstances after the date
on which such statement is made.
Employees
As of December 31, 1999, the Company had approximately 1,001 employees, of whom
721 were engaged in manufacturing functions, 75 in executive and administrative
functions, another 160 in technical functions, and 45 in sales and sales
support. At such date, approximately 732 employees, principally those engaged in
manufacturing, were represented by labor organizations under collective
bargaining agreements. With the addition of PCT, the Company will add
approximately 260 employees. The following table sets forth certain information
with respect to the Company's collective bargaining agreements with its
employees:
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Number of
Employees
Represented
by Collective
Bargaining
Union Expiration Date Agreement
- ----- --------------- -------------
International Association of Machinists & February 20, 2000 317
Aerospace Workers, Local 1862
International Brotherhood of Boilermakers, September 24, 2000 175
Iron Ship Builders, Blacksmiths, Forgers
& Helpers, Subordinate Lodge 1509
International Federation of Professional & August 20, 2000 112
Technical Engineers, Technical Group,
Local 92
International Association of Machinists & March 26, 2000 67
Aerospace Workers, Die Sinkers, Local 140
Office & Professional Employees July 1, 2001 32
International Union, Clerical Group,
Local 35
International Brotherhood of Electrical October 15, 2000 25
Workers, Local 662
Service Employees International, Local 150 April 23, 2000 4
Management
Name Age Position
---- --- --------
Kerry L. Woody.................48 President & CEO and Director
Wayne E. Larsen................45 Vice President Law/Finance & Secretary
and Director
Gene E. Bunge..................54 Vice President, Engineering
Robert J. Noel.................59 Vice President, Corp. Business
Development/Technology
George Groppi..................51 Vice President, Quality & Metallurgy
David L. Provan................50 Vice President, Materials Management
Gary J. Vroman.................40 Vice President, Sales & Marketing
Lawrence C. Hammond............52 Vice President, Human Resources
Item 2. Properties
The following table sets forth the location and size of the Company's two
facilities:
Approximate
Approximate Acreage Square Footage
------------------- --------------
Cudahy, Wisconsin 184.5 1,650,000
Windsor, Connecticut 8.2 30,000
Albany, Oregon 14.0 90,000
The above facilities are owned by the Company. The Company also owns
approximately 4 acres of land in Houston, Texas, which is currently vacant and
for sale.
The Company believes that its facilities are well maintained, are suitable to
support the Company's business and are adequate for the Company's present and
anticipated needs. While the rate of utilization of the Company's manufacturing
equipment is not uniform, the Company estimates that its facilities overall are
currently operating at approximately 60% of capacity.
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The principal executive offices of the Company are located at 5481 South Packard
Avenue, Cudahy, Wisconsin 53110. Its telephone number at such address is (414)
747-2611.
Item 3. Legal Proceedings
From time to time the Company is involved in legal proceedings relating to
claims arising out of its operations in the normal course of business. The
Company believes that there are no material legal proceedings pending or
threatened against the Company or any of its properties.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth
quarter of 1999.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The common stock of the Company, par value $0.01 per share, trades on the Nasdaq
National Market under the symbol "LDSH".
Prior to the registration of the common stock of the Company on March 9, 1998,
limited trading of the common stock occurred in the over-the-counter market.
These quotations for the pre-registration period reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and do not necessarily
represent actual transactions. The following table sets forth, for the fiscal
periods indicated, the high and low bid prices up until March 9, 1998 and the
high and low sales prices for the periods thereafter. At December 31, 1999 there
were approximately 250 beneficial holders of the Company's common stock.
Year Ended Year Ended Year Ended
December 31, 1997 December 31, 1998 December 31, 1999
High Low High Low High Low
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First quarter......$12.60 $9.90 $22.50 $13.50 $8.38 $6.72
Second quarter.....$13.50 $9.90 $15.62 $12.25 $8.31 $6.41
Third quarter......$22.80 $12.60 $13.12 $8.00 $8.63 $6.44
Fourth quarter.....$19.80 $17.10 $10.00 $6.56 $7.50 $5.84
The Company has not paid cash dividends and currently intends to retain all its
earnings to finance its operations, its stock repurchase program and future
growth. The Company does not expect to pay dividends for the foreseeable future.
Item 6. Selected Financial Data
The selected financial data have been derived from the Financial Statements of
the Company and have been audited. The financial data set forth below as of
December 31, 1995, 1996, 1997, 1998 and 1999 and for the years ended December
31, 1995, 1996, 1997, 1998 and 1999 are derived from the Financial Statements
prepared of the Company which have been audited by Arthur Andersen LLP,
independent public accountants.
The data below should be read in conjunction with the Financial Statements and
the Notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this filing.
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<TABLE>
Year Ended December 31,
(dollars in thousands, except income (loss) per share)
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<CAPTION>
INCOME STATEMENT DATA 1995 1996 1997 1998 1999
- --------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales.......................................... $115,738 $162,002 $209,816 $226,767 $170,241
Income (loss) from operations...................... (18,752) 5,809 24,387 24,557 11,990
Interest expense................................... 3,339 3,703 3,334 1,256 810
Income (loss) from continuing operations........... (22,146) 2,135 18,902 21,372 9,703
Income (loss) from discontinued operations......... 1,214 (8,856) -- -- --
Net income (loss).................................. (20,932) (6,721) 18,902 21,372 9,703
Basic earnings (loss) per share from
continuing operations............................ (4.40) 0.42 3.63 1.76 0.71
Diluted earnings (loss) per share from
continuing operations............................ (4.40) 0.20 1.52 1.55 0.67
Dividends paid .................................... -- -- -- -- --
Shares used to compute income (loss) per share
Basic...........................................5,029,517 5,091,957 5,208,251 12,155,484 13,715,555
Diluted.........................................5,029,517 10,857,910 12,469,818 13,826,133 14,513,261
December 31,
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BALANCE SHEET DATA 1995 1996 1997 1998 1999
- ------------------ ---- ---- ---- ---- ----
Total assets....................................... $164,696 $170,270 $165,461 $172,893 $159,583
Net working capital................................ 24,405 15,475 32,292 40,049 39,007
Total debt......................................... 43,932 51,848 39,716 3,500 --
Stockholders' equity (deficit)..................... (9,751) (16,287) 5,017 68,646 73,467
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
In 1999, net sales at the Company were $170.2 million, a 25% decline from the
level of 1998 sales. This reduction in revenue was attributable to two
significant equipment failures, one at the Company and one at the Company's
joint venture partner, and to the overall softening of the aerospace supply
market in 1999. Gross profit for the year ended December 31, 1999 was $19.2
million, or 11.3% of sales, in contrast to $32.6 million, or 14.4% of sales, for
1998 due to the decrease in sales.
Selling, general and administrative expenses were $7.2 million, or 4.2% of
sales, in fiscal 1999 in comparison to $8.1 million, or 3.6% of sales, in 1998.
The increase in the expenses as a percentage of sales reflects the impact of the
sales reduction and the fixed nature of a portion of these expenses.
Interest expense for the year ended December 31, 1999 was $.8 million in
contrast to interest expense of $1.3 million in fiscal 1998. The reduction in
interest expense was the result of decreased levels of debt and reduced interest
rates. As of December 31, 1999 the Company's senior debt had an interest rate
equal to LIBOR plus 0.75% as opposed to an interest rate equal to commercial
paper plus 1.5% at December 31, 1998.
Income before taxes for 1999 was $11.4 million in comparison to pretax income of
$23.7 for 1998. The decrease in pretax income was directly due to the reduction
in sales from 1999 to 1998.
The 1999 tax provision of $1.7 million, an implied rate of 15%, primarily
reflects a non-cash accounting charge associated with the Company's use of its
net operating losses ("NOLs"). The reversal of valuation allowances relating to
pre-restructuring NOLs requires the Company to record a tax provision and to
reflect the offset as an addition to paid-in capital, rather than as an offset
to the provision for income taxes. The Company intends to continue to use its
NOLs in the future to reduce actual payment of federal income taxes. The future
use of the NOLs is subject to certain statutory restrictions. See "Liquidity and
Capital Resources."
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At December 31, 1999 contract backlog at the Company was $225 million. This
represents a 7% reduction from the $243 million of contract backlog at the end
of 1998. The decline in backlog is attributable to decreased raw material
prices, shortened lead-times and inventory adjustments at aerospace customers.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997.
For the third year in a row, net sales for the year ended December 31, 1998
increased over the prior year. In fiscal 1998 the Company had $226.8 million in
net sales, an 8% increase over the $209.8 million in net sales in fiscal 1997.
The Company attributed the growth in sales to the continued strength of the
commercial aerospace sector which drove the demand for jet engine components. In
addition, the Ladish sales improvement in 1998 was also the result of attention
to bettering on-time deliveries and internal operating efficiencies. Gross
profit in 1998 increased to $32.6 million due largely to increased net sales.
In 1998, selling, general and administrative expenses, as a percentage of sales,
were 3.6% in comparison to 3.5% in 1997. The increase is attributable to larger
foreign sales which incur additional selling expenses for travel and the
increase in sales commissions.
The Company incurred interest expense of $1.3 million in 1998 in comparison to
$3.3 million in 1997, a decrease of $2 million. The decrease of interest expense
was attributable to (i) the repayment of the Subordinated Notes issued in late
1995 and early 1996, see "Liquidity and Capital Resources"; (ii) lower loan
balances of senior debt; and (iii) reduced interest rates. As of December 31,
1998, the Company's senior debt had an effective interest rate equal to the
commercial paper rate plus 1.5% per annum (reduced from 2.0% as of April 1,
1998). Effective interest rates averaged 7.4% during 1998 compared to 8.3%
during 1997.
Income before taxes for 1998 was $23.7 million for the Company in comparison to
pretax income of $20.5 million for 1997. The increase in pretax income was
primarily related to the increase in sales from one period to the next and the
reduction in interest expense.
The 1998 tax provision of $2.4 million, an implied rate of 10%, represents a
non-cash accounting charge. The reversal of valuation allowances relating to
pre-restructuring NOLs requires the Company to record a tax provision and to
reflect the offset as an addition to paid-in capital, rather than as an offset
to the provision for income taxes.
Contract backlog at December 31, 1998 was $243 million, compared to $278 million
at December 31, 1997, a decrease of 12%, due to increased raw material
availability, shortened leadtimes and current aerospace global demand.
Liquidity and Capital Resources
As of July 1, 1999, the Company entered into a new credit facility (the "New
Facility") with a syndicate of lenders. The New Facility provides for borrowings
of up to $100 million subject to certain limitations. Borrowings under the New
Facility are unsecured and will initially be structured as revolving loans with
the option of conversion into term loans. Borrowings under the New Facility bear
interest at a rate of LIBOR plus 0.75% per annum. Proceeds from the New Facility
were used to terminate the prior credit agreement on July 1, 1999. At December
31, 1999, approximately $48.6
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million was available and undrawn under the New Facility. There were no
borrowings under the New Facility as of December 31, 1999.
On March 13, 1998 the Company successfully completed an initial public offering
for 2,336,000 shares of common stock (the "IPO"). The Company received
approximately $29.5 million in proceeds from the IPO, after underwriting
discounts and commissions. Those proceeds were utilized by the Company to reduce
its pension liability, redeem the Subordinated Notes and repay a portion of the
outstanding indebtedness under the Revolving Credit Facility. Subsequent to the
IPO, the underwriters elected to purchase additional shares of common stock from
the Company which resulted in the Company receiving approximately $6.3 million
in additional proceeds. These additional proceeds along with approximately $7.0
million of proceeds and satisfaction of debt from the exercise of warrants were
used to repay the remaining outstanding balance under the Revolving Credit
Facility.
In December 1995, the Company issued a total of $4.0 million of its 12% senior
subordinated secured notes due December 22, 2000 (the "Subordinated Notes") to
certain stockholders. In February 1996, the Company completed a second offering
of Subordinated Notes when it issued an additional $5.3 million of Subordinated
Notes to certain other stockholders. On March 31, 1998 the Company redeemed the
Subordinated Notes by repaying the outstanding face value of the Subordinated
Notes plus accrued interest thereon.
The Company has net operating loss ("NOL") carryforwards, which were generated
prior to a financial restructuring that was completed on April 30, 1993, as well
as NOL carryforwards that were generated in subsequent years. The total
remaining NOL carryforwards were approximately $50 million as of December 31,
1999. The NOL carryforwards expire gradually beginning in the year 2007 through
2010.
The Company's IPO created an ownership change as defined by the Internal Revenue
Service ("IRS"). This ownership change generated an IRS imposed limitation on
the utilization of NOL carryforwards on future tax returns. The annual use of
the NOL carryforwards is limited to the lesser of the Company's taxable income
or the amount of the IRS imposed limitation. Approximately $12 million of the
NOL carryforwards is available for use annually. Approximately $2 million of the
$12 million annual limitation relates to a previous restriction on NOL
carryforwards generated prior to the financial restructuring.
Based on the limitations described above and certain other factors, a valuation
allowance has been recorded against the entire amount of the net deferred tax
assets. Any tax benefit that is realized in subsequent years from the reduction
of the valuation allowance established at or prior to the financial
restructuring will be recorded as an addition to paid-in capital. Any tax
benefit that is realized in subsequent years from the utilization of deferred
tax assets created after April 30, 1993, will be recorded as a reduction of
future income tax provisions.
Under the common stock repurchase program authorized by the Company's Board of
Directors, the Company repurchased 1,516,768 shares of its common stock, or
common stock equivalents, as of December 31, 1999. The Company funded this
repurchase program with approximately $8.5 million of the cash generated from
operations. Inflation has not had a material effect upon the Company during the
period covered by this report. Given the products manufactured by the Company
and the raw materials used therein, the Company does not anticipate any
significant impact from inflation in the foreseeable future.
Item 7.A. Quantitative and Qualitative Disclosures about Market Risk
12
<PAGE>
The Company believes that its exposure to market risk related to changes in
foreign currency exchange rates and trade accounts receivable is immaterial.
Item 8. Financial Statements and Supplementary Data
The response to Item 8. Financial Statements and Supplementary Data incorporate
by reference the information listed in the index to consolidated financial
statements and accompanying schedules beginning on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The Company did not change public accounting firms in 1998, and there have been
no disagreements on accounting and financial disclosure with the Company's
public accounting firm, Arthur Andersen LLP.
PART III
Item 10. Directors and Executive Officers of the Registrant
Certain information called for by this Item is incorporated herein by reference
to the Proxy Statement for the Annual Meeting of Stockholders filed herewith as
an Exhibit.
The list of Executive Officers in Part I, Item 1. Business, paragraph captioned
"Executive Officers of the Registrant" is incorporated by reference. The list of
Directors of the Company is as follows:
Name Age
Lawrence L. Bianchi 58
Charles W. Finkl 79
Wayne E. Larsen 45
Robert W. Sullivan 41
Kerry L. Woody 48
Other information required by Item 401 of Regulation S-K is as follows:
Lawrence W. Bianchi, 58. Director since 1998. Mr. Bianchi in 1993 retired as the
Managing Partner of the Milwaukee, Wisconsin office of KPMG Peat Marwick. From
1994 to 1998 Mr. Bianchi served as CFO of the law firm of Foley & Lardner. Mr.
Bianchi's principal occupation is investments.
Gene E. Bunge, 54. Mr. Bunge has served as Vice President, Engineering since
November 1991. From 1985 until that time he was General Manager of Engineering.
Mr. Bunge has been with the Company since 1973. He has a B.S.E.E. from the
Milwaukee School of Engineering.
Charles W. Finkl, 79. Director since 1998. Mr. Finkl is a director and the
Chairman and Chief Executive Officer of A. Finkl & Sons, Co., a Chicago,
Illinois based metals processor, a position he has held for more than ten years.
George Groppi, 51. Mr. Groppi has served as Vice President Quality and
Metallurgy since September 1999. He was named Manager of Product Metallurgy in
1992. In 1994 he was appointed Manager of Production Control and recently
assumed the position of Manager of Quality & Metallurgy. Mr.
13
<PAGE>
Groppi has been with the Company since 1969. He holds a B.S. in Mechanical
Engineering from Marquette University.
Lawrence C. Hammond, 52. Mr. Hammond has served as Vice President, Human
Resources since January 1994. Prior to that time he had served as Director of
Industrial Relations at the Company and he had been Labor Counsel at the
Company. Mr. Hammond has been with the Company since 1980. He has a B.A. and a
Masters in Industrial Relations from Michigan State University and a J.D. from
the Detroit College of Law.
Wayne E. Larsen, 45. Director since 1997. Since 1995 Mr. Larsen has been Vice
President Law/Finance and Secretary of the Company. He served as General Counsel
and Secretary from 1989 after joining the Company as corporate counsel in 1981.
He is also a director and Vice President and Secretary of Stowe Machine Co.,
Inc. Mr. Larsen is a Trustee of the Ladish Co. Foundation and a director of the
Wisconsin Foundation for Independent Colleges. Mr. Larsen has a B.A. from
Marquette University and a J.D. from Marquette Law School.
Robert J. Noel. 59. Mr. Noel has served as Vice President Corporate Business
Development/ Tech-nology since September 1999. He had been Vice President,
Quality and Technology since March 1991. He had been Manager of Metallurgy since
1985 and prior to that period was a Product Metallurgist for jet engine
components. Mr. Noel has been with the Company since 1963. He has a B.S. in
Mechanical Engineering from Marquette University.
David L. Provan, 50. Mr. Provan has served as Vice President, Materials
Management since September 1999. Prior to that time he had been Purchasing
Manager, Raw Materials, and Head Buyer. Mr. Provan has been with the Company
since 1979. He has a Bachelor's Degree in Business Administration from the
University of Wisconsin-Parkside.
Robert W. Sullivan, 41. Director since 1993. Mr. Sullivan is President of The
Plitt Company, a seafood distribution concern. Previously Mr. Sullivan had been
President of The Martec Group, a sales and marketing consulting group for more
than five years.
Gary J. Vroman, 40. Mr. Vroman has served as Vice President, Sales and Marketing
since December 1995. From January 1994 to December 1995 he was General Manager
of Sales. Prior to that period he had been the Product Manager for jet engine
components. Mr. Vroman has been with the Company since 1982. He has a B.S. in
Engineering from the University of Illinois and a M.S. in Engineering Management
from the Milwaukee School of Engineering.
Kerry L. Woody, 48. Director since 1997. Mr. Woody has been President since 1995
and was appointed Chief Executive Officer of the Company in 1998. Prior to that
time he was Vice President-Operations, Vice President-Manufacturing Services and
Production Manager. He joined the Company in 1975. Mr. Woody is also a director
and Vice President of Stowe Machine Co., Inc. In addition, Mr. Woody serves as a
Director of Vilter Manufacturing Co. and Milwaukee Lutheran College. Mr. Woody
has a B.S. in Engineering from Milliken University.
Item 11. Executive Compensation
The information called for by this Item is incorporated herein by reference to
the Proxy Statement for the Annual Meeting of Stockholders filed herewith as an
Exhibit.
14
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information called for by this Item is incorporated herein by reference to
the Proxy Statement for the Annual Meeting of Stockholders filed herewith as an
Exhibit.
Item 13. Certain Relationships and Related Transactions
The information called for by this Item is incorporated herein by reference to
the Proxy Statement for the Annual Meeting of Stockholders filed herewith as an
Exhibit.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Exhibits. See the accompanying index to exhibits on page X-1 which is part of
this report.
Financial Statements. See the accompanying index to financial statements and
schedules on page F-1 which is a part of this report.
Reports on Form 8-K. The Company has not filed any reports on Form 8-K during
the fourth quarter of 1999.
15
<PAGE>
LADISH CO., INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1999
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders
of Ladish Co., Inc.:
We have audited the accompanying consolidated balance sheets of Ladish Co., Inc.
and subsidiaries, a Wisconsin corporation, as of December 31, 1998 and 1999, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three year period ended December 31, 1999.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ladish Co., Inc. and
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 1999 in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
---------------------------------
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 28, 2000
<PAGE>
LADISH CO., INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
(Dollars in Thousands Except Per Share Data)
ASSETS 1998 1999
------ --------- ---------
CURRENT ASSETS:
Cash and cash equivalents $5,517 $1,008
Accounts receivable, less allowance of $300 35,409 25,222
Inventories 40,983 42,427
Prepaid expenses and other current assets 276 238
--------- ---------
Total current assets 82,185 68,895
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements 3,855 3,855
Building and improvements 14,925 15,912
Machinery and equipment 112,279 120,526
Construction in progress 5,893 5,562
--------- ---------
136,952 145,855
Less- Accumulated depreciation (50,981) (62,648)
--------- ---------
Net property, plant and equipment 85,971 83,207
OTHER ASSETS 4,737 7,481
--------- ---------
Total assets $172,893 $159,583
========= =========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
LADISH CO., INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
(Dollars in Thousands Except Per Share Data)
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1999
------------------------------------ ----- ----
CURRENT LIABILITIES:
Current portion of senior debt $ 2,250 $ -
Accounts payable 16,194 12,548
Accrued liabilities-
Pensions 738 504
Postretirement benefits 5,488 5,551
Wages and salaries 4,045 3,107
Taxes, other than income taxes 272 227
Interest 36 54
Profit sharing 2,720 958
Paid progress billings 6,767 5,556
Other 3,626 1,383
-------- --------
Total current liabilities 42,136 29,888
LONG-TERM LIABILITIES:
Senior debt-less current portion 1,250 -
Pensions 16,013 12,947
Postretirement benefits 42,762 40,929
Officers' deferred compensation 1,409 1,745
Other noncurrent liabilities 677 607
-------- --------
Total liabilities 104,247 86,116
STOCKHOLDERS' EQUITY:
Common stock-authorized 100,000,000, issued
and outstanding 14,013,667 and 14,318,406
shares in each period of $.01 par value 140 143
Additional paid-in capital 81,661 80,293
Accumulated deficit (11,462) (1,759)
Treasury stock, 222,754 and 770,672 shares,
respectively, of common stock, at cost (1,693) (5,210)
-------- --------
Total stockholders' equity 68,646 73,467
-------- --------
Total liabilities and stockholders' equity $172,893 $159,583
======== ========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
LADISH CO., INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
Years Ended December 31,
----------------------------
1997 1998 1999
-------- -------- --------
NET SALES $209,816 $226,767 $170,241
COST OF SALES 178,051 194,125 151,065
-------- -------- --------
Gross profit 31,765 32,642 19,176
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 7,378 8,085 7,186
-------- -------- --------
Income from operations 24,387 24,557 11,990
OTHER (INCOME) EXPENSE:
Interest expense, net 3,334 1,256 810
Other, net 549 (446) (236)
-------- --------- -------
Income before provision for income taxes 20,504 23,747 11,416
PROVISION FOR INCOME TAXES 1,602 2,375 1,713
-------- -------- --------
Net income $ 18,902 $ 21,372 $ 9,703
======== ======== ========
EARNINGS PER SHARE:
Basic $3.63 $1.76 $0.71
Diluted $1.52 $1.55 $0.67
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
<TABLE>
LADISH CO., INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands Except Per Share Data)
<CAPTION>
Common Stock Additional Treasury
-------------------- Paid-in Accumulated Stock,
Shares Amount Capital Deficit at Cost Total
---------- ------ ---------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 5,139,993 $ 51 $35,398 $(51,736) $ - $(16,287)
Net income - - - 18,902 - 18,902
Issuance of common stock 119,166 1 814 - - 815
Reduction in valuation
allowance related to
pre-restructuring NOLs - - 1,519 - - 1,519
Exercise of warrants 56,314 1 67 - - 68
---------- ---- ------- -------- ------- --------
BALANCE, December 31, 1997 5,315,473 53 37,798 (32,834) - 5,017
Net income - - - 21,372 - 21,372
Issuance of common stock 2,837,138 28 34,910 - - 34,938
Exercise of warrants 5,869,389 59 6,892 - - 6,951
Purchase of treasury stock - - - - (1,693) (1,693)
Reduction in valuation
allowance related to
pre-restructuring NOLs - - 2,211 - - 2,211
Repurchase of shares, retired (8,333) - (150) - - (150)
---------- ---- ------- -------- ------- --------
BALANCE, December 31, 1998 14,013,667 140 81,661 (11,462) (1,693) 68,646
Net income - - - 9,703 - 9,703
Issuance of common stock 2,000 - 12 - - 12
Retirement of warrants - - (3,253) - - (3,253)
Exercise of warrants 302,739 3 207 - - 210
Purchase of treasury stock - - - - (3,517) (3,517)
Reduction in valuation
allowance related to
pre-restructuring NOLs - - 1,666 - - 1,666
---------- ---- ------- -------- ------- --------
BALANCE, December 31, 1999 14,318,406 $143 $80,293 $ (1,759) $(5,210) $ 73,467
========== ==== ======= ======== ======= ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
<TABLE>
LADISH CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<CAPTION>
Years Ended December 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $18,902 $21,372 $9,703
Adjustments to reconcile net income to net cash provided
by (used for) operating activities-
Depreciation 9,773 10,491 11,755
Amortization 159 227 506
Payment-in-kind interest on subordinated debt 1,240 300 -
Reduction in valuation allowance 1,519 2,211 1,666
Loss on disposal of property, plant and equipment 750 34 35
Changes in assets and liabilities, net of impact of
acquisitions-
Accounts receivable (5,382) (7,778) 11,398
Inventories (8,887) 6,720 1,507
Other assets (437) 345 (634)
Accounts payable and accrued liabilities (12,657) (4,009) (10,062)
Other liabilities (7,115) (14,833) (4,633)
------- ------- -------
Net cash provided by (used for) operating activities (2,135) 15,080 21,241
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (9,217) (13,662) (7,792)
Proceeds from sale of property, plant and equipment 984 3 33
Acquisition of businesses (8,529) - (11,593)
Proceeds from sale of IPD 36,500 - -
IPD disposition funds placed in escrow (3,650) - 3,650
------- ------- -------
Net cash provided by (used for) investing activities 16,088 (13,659) (15,702)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of senior subordinated debt (68) (11,625) -
Repayment of senior debt (14,304) (23,891) (3,500)
Repayment of notes payable - (1,000) -
Issuance of common stock 815 34,938 12
Retirement of warrants - - (3,253)
Exercise of warrants 68 6,951 210
Repurchase of common stock - (1,843) (3,517)
------- ------- -------
Net cash provided by (used in) financing activities (13,489) 3,530 (10,048)
------- ------- -------
</TABLE>
<PAGE>
<TABLE>
LADISH CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(continued)
<CAPTION>
Years Ended December 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 464 $ 4,951 $(4,509)
CASH AND CASH EQUIVALENTS, beginning of period 102 566 5,517
------- ------- -------
CASH AND CASH EQUIVALENTS, end of period $ 566 $ 5,517 $ 1,008
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 326 $ 48 $ 177
Interest paid $ 2,595 $ 3,868 $ 742
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
LADISH CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Data)
(1) Business Information-
Ladish Co., Inc. (the "Company") engineers, produces and markets
high-strength, high-technology forged and formed metal components for a wide
variety of load-bearing and fatigue-resisting applications in the engine,
aerospace and industrial markets, for both domestic and international
customers. The Company operates as a single segment. Net sales to the
engine, aerospace and industrial markets were approximately 73%, 16% and
11%, respectively, of total Company net sales in 1999.
Through May 30, 1997, the Company operated facilities located in Cudahy,
Wisconsin; Russellville, Arkansas; and Cynthiana, Kentucky. In February
1997, the Board of Directors approved the disposition of the Company's
Industrial Products Division ("IPD") which included the facilities located
in Arkansas and Kentucky. The disposal date was May 30, 1997, however, the
impact of the discontinued operations were accounted for in 1996.
Substantially all IPD assets were sold to a third party buyer for
approximately $36,500 in cash subject to a working capital adjustment. Ten
percent of the cash proceeds ($3,650) was placed in an escrow account to
secure certain representations made by the Company in connection with the
sale. In 1999, all contingencies were resolved and the funds placed in
escrow were collected.
In June 1997, the Company acquired Stowe Machine Co., Inc. ("Stowe"), a
finished machining operation located in Windsor, Connecticut. In February
1999, the Company acquired Adco Manufacturing, Incorporated ("Adco"), a
finished machining operation. Adco was relocated and merged operations with
Stowe in Windsor, Connecticut.
The Company has three customers that each accounted for more than 10% of
total Company net sales in 1997, 1998 and 1999, respectively, and
collectively accounted for approximately 58%, 61% and 60%, respectively, of
total Company net sales.
Exports accounted for approximately 42%, 44% and 44% of total Company net
sales in 1997, 1998 and 1999, respectively, with exports to Europe
constituting approximately 32%, 36% and 38%, respectively, of total Company
net sales.
As of December 31, 1999, approximately 73% of the Company's employees were
represented by one of seven collective bargaining units. The collective
bargaining agreements with most of these units will expire during the year
2000. The Company does not anticipate that work stoppages will arise in
connection with the renewal of these agreements in the future.
<PAGE>
(2) Summary of Significant Accounting Policies-
(a) Outstanding checks-
Outstanding payroll and accounts payable checks related to certain bank
accounts are recorded as accounts payable in the accompanying balance
sheets. These checks amounted to $2,144 and $2,037 as of December 31,
1998 and 1999, respectively.
(b) Inventories-
Inventories are stated at the lower of cost or market using the
first-in, first-out (FIFO) valuation method. Inventory values include
material and conversion costs.
Inventories consist of the following:
December 31,
----------------------
1998 1999
--------- ---------
Raw materials $16,546 $15,215
Work-in-process and finished 27,713 29,500
--------- ---------
44,259 44,715
Less progress payments (3,276) (2,288)
--------- ---------
Total inventories $40,983 $42,427
========= =========
(c) Property, plant and equipment-
Additions to property, plant, and equipment are recorded at cost.
Tooling costs are expensed as incurred. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets,
as follows:
Land improvements 30 or 39 years
Buildings and improvements 30 or 39 years
Machinery and equipment 5 to 12 years
(d) Goodwill-
Goodwill represents the excess of the purchase price over the fair value
of identifiable net assets relating to the 1997 acquisition of Stowe and
the 1999 acquisition of Adco. Goodwill is included in other assets and
is being amortized on a straight-line basis over 20 years. As of
December 31, 1999, unamortized goodwill amounted to $6,709. Amortization
expense was $24, $43 and $316 in 1997, 1998 and 1999, respectively. The
Company evaluates goodwill to assess recoverability from future
operations. Impairments are recognized in operating results to the
extent that carrying value exceeds fair value.
(e) Revenue recognition-
Sales revenue is recognized when products are shipped. Net sales include
reductions for returns and allowances, sales discounts and freight out.
Progress payments on contracts are generally recognized as a reduction
of the related inventory costs. Progress payments in excess of inventory
costs are reflected as deferred revenue.
-2-
<PAGE>
(f) Income taxes-
Deferred income taxes are provided at the enacted marginal rates on the
difference between the financial statement and income tax basis of
assets and liabilities. Deferred income tax provisions or benefits are
based on the change in the deferred tax assets and liabilities from
period to period.
(g) Consolidation-
The consolidated financial statements include the accounts of the
Company and all of its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
(h) Use of estimates-
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
(i) Reclassification-
Certain reclassifications have been made to the 1997 and 1998 financial
statements to conform with the 1999 presentation.
(3) Debt-
Senior debt-
On July 1, 1999, the Company entered into a new credit facility (the "New
Facility") with a syndicate of lenders. The New Facility provides for
borrowings of up to $100,000 subject to certain limitations. Borrowings
under the New Facility are unsecured and will initially be structured as
revolving loans with the option of conversion into term loans. Borrowings
under the New Facility bear interest at a rate of LIBOR plus 0.75% per
annum. Proceeds from the New Facility were used to terminate the prior
credit agreement on July 1, 1999. As of December 31, 1999, approximately
$48,600 was available and undrawn under the New Facility. The balance of the
borrowings under the New Facility as of December 31, 1999 was $0.
Senior subordinated secured notes and warrants-
In 1995 and 1996, the Company issued senior subordinated notes ("Notes") to
two of the Company's largest stockholders. The noteholders also received
warrants with each Note purchased. Each warrant entitles the holder to
purchase one share of common stock for $1.20 per share. The exercise price
may be paid in cash, or by the surrender of already outstanding Ladish
common stock, or other warrants having a fair value equal to the exercise
price. The warrants expire ten years from the date of issuance. In March
1998, the Notes were paid in full.
Warrants outstanding and exercisable were 7,608,932, 1,732,964 and 660,787
for the years ended December 31, 1997, 1998 and 1999, respectively.
-3-
<PAGE>
(4) Stockholders' Equity-
In December 1997, the Company's articles of incorporation were amended to
provide for a 1-6 reverse split of the common stock. All common stock
amounts have been adjusted for this reverse split.
In March 1998, the Company sold 2,837,138 shares in an initial offering
("IPO") at a per share price of $13.50. The net IPO proceeds to the Company
of approximately $35,000 were used to repay subordinated debt and a portion
of outstanding indebtedness under the Company's senior credit facility and
to contribute to certain underfunded pension plans. In addition, the Company
received total cash proceeds of $6,951 from the exercise of warrants during
1998.
Under the common stock repurchase program authorized by the Company's Board
of Directors, the Company repurchased 547,918 shares of its common stock and
746,096 warrants during 1999. The Company funded this repurchase program
with approximately $6,800 of the cash generated from operations. As of
December 31, 1999, the Company has repurchased a total of 1,517,798 shares
of its common stock, or common stock equivalents for a total of
approximately $8,500 under the repurchase program.
The Company has a Long-Term Incentive Plan (the "Plan") that covers certain
employees. Under the Plan, incentive stock options may be granted to
employees of the Company which expire ten years from the grant date. In
September 1996, the Company issued 433,333 options under the Plan. These
options vest over four years. During 1998 and 1999, the Company issued
320,000 and 76,000 options, respectively, under the Plan. These options vest
over two years. As of December 31, 1999, 713,416 of these options remain
outstanding. The Company has reserved 6,500 shares for future issuance under
the Plan.
The Company accounts for its option grants using the intrinsic value based
method pursuant to APB Opinion No. 25 and Statement of Financial Accounting
Standards No. 123 ("SFAS 123") under which no compensation expense was
recognized in 1997, 1998 and 1999. Had compensation cost for these options
been determined pursuant to the fair value method under SFAS 123, the
Company's pro forma net income and diluted earnings per share would have
been as follows:
1997 1998 1999
----------------- ----------------- ---------------
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
-------- -------- -------- -------- -------- ------
Net income $18,902 $17,439 $21,372 $20,603 $9,703 $9,202
Diluted earnings $1.52 $1.40 $1.55 $1.49 $0.67 $0.63
per share
Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, and additional awards in future years are
anticipated, the effect of applying SFAS 123 in the above pro forma
disclosure is not necessarily indicative of future results.
-4-
<PAGE>
The fair value of the option grants in 1999 used to compute the pro forma
amounts above was estimated based on vesting of the grants using the
Black-Scholes option pricing model with the following assumptions: weighted
average risk free interest rate of 5.72%, weighted-average expected
remaining lives of 10 years, weighted-average volatility factor of 45.11%,
and a weighted-average Black-Scholes option price of $5.06.
<TABLE>
<CAPTION>
1997 1998 1999
-------------------- -------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of Period 929,521 $11.34 815,604 $12.08 1,135,604 $11.00
Granted - - 320,000 8.25 76,000 8.18
Forfeited (2,500) 6.00 - - - -
Exercised (111,417) 6.00 - - (2,000) 6.00
-------- ------ --------- ------ --------- ------
Outstanding at end
of Period 815,604 $12.08 1,135,604 $11.00 1,209,604 $10.83
======== ====== ========= ====== ========= ======
Exercisable at end
of Period 598,937 $14.28 707,270 $13.02 973,604 $11.47
======== ====== ========= ====== ========= ======
</TABLE>
The options outstanding as of December 31, 1999 consist of the following:
Weighted Average Average
Range of Number of Options Exercise Price Remaining
Exercise ------------------------ ------------------------ Contractual
Prices Outstanding Exercisable Outstanding Exercisable Life
----------- ----------- ----------- ----------- ----------- -----------
$5 to $10 713,416 477,416 $ 7.24 $ 6.75 7.89
$10 to $15 220,528 220,528 12.00 12.00 3.33
$15 to $20 165,396 165,396 18.00 18.00 3.33
$20 to $25 110,264 110,264 21.00 21.00 3.33
--------- ------- ------ ------ ----
1,209,604 973,604 $10.83 $11.47 6.02
========= ======= ====== ====== ====
(5) Research and Development-
Research and Development costs are expensed as incurred. These costs were
$3,427, $4,503 and $3,265 in 1997, 1998 and 1999, respectively. Research and
Development costs funded by customers, amounting to $1,071, $2,310 and $862
in 1997, 1998 and 1999, respectively, have been recorded as sales.
Revenues from Research and Development funded by customers are recognized
when the related product is shipped or the services are provided.
-5-
<PAGE>
(6) Leases-
Certain office and warehouse facilities and equipment are leased under
noncancelable operating leases expiring on various dates through the year
2004. Rental expense was $304, $283 and $261 in 1997, 1998 and 1999,
respectively.
Minimum lease obligations under noncancelable operating leases are as
follows:
2000 $104
2001 85
2002 74
2003 45
2004 and thereafter 45
-----
Total $353
=====
(7) Income Taxes-
The Company has net operating loss ("NOL") carryforwards, which were
generated prior to a financial restructuring that was completed on April 30,
1993, as well as NOL carryforwards that were generated in subsequent years.
The total remaining NOL carryforwards were approximately $50,000 as of
December 31, 1999. The NOL carryforwards expire gradually beginning in the
year 2007 through 2010.
The Company's IPO created an ownership change as defined by the Internal
Revenue Service, ("IRS"). This ownership change generated an IRS imposed
limitation on the utilization of NOL carryforwards on future tax returns.
The annual use of the NOL carryforwards is limited to the lesser of the
Company's taxable income or the amount of the IRS imposed limitation.
Approximately $12,000 of the NOL carryforwards is available for use
annually. Approximately $2,100 of the $12,000 annual limitation relates to a
previous restriction on NOL carryforwards generated prior to the financial
restructuring.
Based on the limitations described above and certain other factors, a
valuation allowance has been recorded against the entire amount of the net
deferred tax assets. Any tax benefit that is realized in subsequent years
from the reduction of the valuation allowance established at or prior to the
financial restructuring will be recorded as an addition to paid-in-capital.
Any tax benefit that is realized in subsequent years from the utilization of
deferred tax assets created after April 30, 1993, will be recorded as a
reduction of future income tax provisions.
-6-
<PAGE>
Components of the deferred income taxes are as follows:
December 31,
------------------
1998 1999
------ ------
Current deferred tax assets:
Inventory adjustments $1,719 $ 585
Accrued employee costs 1,333 1,340
Pension benefits - 50
Postretirement healthcare benefits 2,195 2,220
Other 1,042 391
------ ------
Total current deferred tax assets 6,289 4,586
Current valuation allowance (6,289) (4,586)
------ ------
Net current deferred taxes $ - $ -
====== ======
December 31,
------------------
1998 1999
------ --------
Noncurrent deferred tax assets and (liabilities):
Property, plant and equipment $(18,028) $(16,617)
Operating loss carryforwards 20,965 20,198
Pension benefits 6,969 5,720
Postretirement healthcare benefits 17,105 16,372
Other 119 52
-------- -------
Total net noncurrent deferred tax assets 27,130 25,725
Noncurrent valuation allowance (27,130) (25,725)
-------- --------
Net noncurrent deferred taxes $ - $ -
======== ========
A summary of the Company's effective tax rates is as follows:
1997 1998 1999
------ ------- -------
Pretax book income $20,504 $23,747 $11,416
======= ======= =======
Federal tax at statutory rate $7,176 $8,311 $3,996
State tax at statutory rate 1,025 1,187 571
Post restructuring net operating
losses utilized (6,599) (7,123) (2,854)
------- ------- -------
Total provision $ 1,602 $2,375 $1,713
======= ======= =======
Effective tax rate 7.8% 10.0% 15.0%
======= ======= =======
(8) Pensions and Post-Retirement Benefits-
The Company has noncontributory defined benefit pension plans ("Plans")
covering substantially all employees. Plans covering salaried and management
employees provide pension benefits that are based on the highest five
consecutive years of an employee's compensation during the last ten years
prior to retirement. Plans covering hourly employees and union members
generally provide benefits of stated amounts for each year of service. The
Company's funding policy is to contribute annually an
-7-
<PAGE>
amount equal to or greater than the minimum amount required under the
Employee Retirement Income Security Act of 1974. The Plans' assets are
primarily invested in U.S. Government securities, corporate bonds and
common stocks.
In addition to pension benefits, employees are provided certain
postretirement healthcare and life insurance benefits. Substantially all of
the employees may become eligible for these benefits when they retire. The
Company accrues, as current costs, the future lifetime retirement benefits
for both active and retired employees and their dependents. Steps have been
taken by the Company to reduce the amount of the future obligation for
postretirement healthcare benefits of future retirees by capping the amount
of funds payable on behalf of the retirees.
The following is a reconciliation of the change in benefit obligation and
plan assets for the years ended December 31, 1998 and 1999:
<TABLE>
<CAPTION>
Pension Benefits Postretirement
Benefits
------------------------- ----------------------
December 31, December 31,
------------------------- ----------------------
1998 1999 1998 1999
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Projected benefit obligation at
beginning of year $177,820 $176,094 $ 54,178 $ 50,767
Service cost 1,203 1,318 357 361
Interest cost 13,781 13,310 3,984 3,612
Amendments - 3,750 - -
Actuarial (gains)/losses 492 (10,611) (2,264) (3,006)
Benefits paid (17,202) (17,844) (5,488) (5,551)
-------- -------- -------- --------
Projected benefit obligation at end of $176,094 $166,017 $ 50,767 $ 46,183
year ======== ======== ======== ========
CHANGE IN PLAN ASSETS:
Plan assets at fair value at beginning $183,318 $ $
of year $204,626 - -
Actual return on plan assets 18,531 27,274 - -
Company contributions 19,979 951 5,488 5,551
Benefits paid (17,202) (17,844) (5,488) (5,551)
-------- -------- -------- --------
Plan assets at fair value at end of year $204,626 $215,007 $ - $ -
======== ======== ======== ========
Funded status of plan $ 28,532 $ 48,990 $(50,767) $(46,183)
Unrecognized prior service cost 1,891 3,191 - -
Unrecognized net actuarial (gain)/loss (47,174) (65,632) 2,517 (297)
-------- -------- -------- --------
Net accrued benefit cost $(16,751) $(13,451) $(48,250) $(46,480)
======== ======== ======== ========
WEIGHTED AVERAGE ASSUMPTIONS:
Discount rate 7.50% 8.25% 7.50% 8.25%
Rate of increase in compensation levels 3.00% 3.00% - -
Expected long-term rate of return on 9.25% 9.25% - -
assets
</TABLE>
-8-
<PAGE>
The components of the net periodic benefit costs for the years ended
December 31, 1997, 1998 and 1999, respectively, are:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
---------------------------- ------------------------
1997 1998 1999 1997 1998 1999
-------- -------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Service cost-benefit earned during
the period $ 1,426 $ 1,203 $ 1,318 $ 343 $357 $361
Interest cost on projected benefit
obligation 14,070 13,781 13,310 3,619 3,984 3,612
Actual return on plan assets (35,145) (18,531) (27,274) - - -
Net amortization and deferral 21,660 3,575 10,295 (77) (28) (192)
------- ------- ------- ------ ------ ------
Net periodic benefit cost
(income) $ 2,011 $ 28 $(2,351) $3,885 $4,313 $3,781
======= ======= ======= ====== ====== ======
</TABLE>
Assumptions used in the determination of net periodic benefit costs for
these years are:
1997 1998 1999
-------- -------- --------
Discount rate 8.25% 7.75% 7.50%
Rate of increase in compensation
levels 2.00% 2.00% 3.00%
Expected long-term rate of return
on assets 9.25% 9.25% 9.25%
Certain employees are covered by union-sponsored, collectively bargained,
multi-employer pension plans.
The actuarial calculation of the Company's minimum funding pension payment
due in 2000 for 1999 is $504. This amount is shown as a current liability on
the balance sheet as of December 31, 1999.
Assumed healthcare cost trend rates have a significant effect on the amounts
reported for the postretirement healthcare plans. A one-percentage-point
change in assumed healthcare cost trend rates would have the following
effects:
1% 1%
Increase Decrease
-------- --------
Effect on total of service and interest cost $219 $(100)
components
Effect on postretirement healthcare benefit $1,821 $(1,155)
obligation
During 1999, the Company offered certain employees a one-time
early-retirement program that resulted in additional pension expense of
$2,097. The impact of the additional liability is included in the amendments
in the benefit obligation reconciliation.
-9-
<PAGE>
(9) Officers' Deferred Compensation Plan-
Certain officers have deferred compensation agreements which, upon
retirement, provide them with, among other things, supplemental pension and
other postretirement benefits. An accumulated unfunded liability, net of
the Rabbi Trust, of $1,409 and $1,745 as of December 31, 1998 and 1999,
respectively, has been recorded under these agreements as actuarially
determined. The expense was $165, $135 and $114 in 1997, 1998 and 1999,
respectively.
The Company established a Rabbi Trust in July of 1998 to fund a portion of
this plan. The Rabbi Trust does not hold any Company stock and is
considered in the calculations determined by the actuary.
(10) Profit Sharing-
The Company has a profit sharing program in which substantially all of the
employees are eligible to participate. The profit sharing payout is derived
from a formula based on pretax income and is payable no later than February
15th of the subsequent year. The expense was $2,629, $2,720 and $958 in
1997, 1998 and 1999, respectively.
(11) Commitments and Contingencies-
The Company is involved in various stages of investigation relative to
environmental protection matters relating to various waste disposal sites.
The potential costs related to such matters and the possible impact thereof
on future operations are uncertain due in part to uncertainty as to the
extent of the pollution, the complexity of government laws and regulations
and their interpretations, the varying costs and effectiveness of
alternative cleanup technologies and methods, and the questionable level
of the Company's involvement. The Company has made provisions in the
financial statements for potential losses related to these matters. The
Company does not anticipate such losses will have a material impact on the
financial statements beyond the aforementioned provisions.
Various other lawsuits and claims arising in the normal course of business
are pending against the Company and such losses are not expected to be
material to the financial statements.
In December 1998, one of the Company's primary presses suffered a major
breakdown and was not operational for several months. The Company filed
claims with its insurance company for all repair and business interruption
costs. As of December 31, 1999, all reimbursable costs have been recovered
through the Company's policy.
(12) Earnings Per Share-
Basic earnings per share of common stock are computed by dividing net
income by the weighed average number of common shares outstanding during
the period. Diluted earnings per share of common stock are computed by
dividing net income by the average number of common shares and common share
equivalents related to the assumed exercise of stock options and warrants.
-10-
<PAGE>
The following shares were used to calculate basic and diluted earnings per
share:
December 31,
----------------------------------
1997 1998 1999
---------- ---------- ----------
Average basic common shares 5,208,251 12,155,484 13,715,555
outstanding
Incremental shares applicable to 7,261,567 1,670,649 797,706
common stock options and warrants ---------- ---------- ----------
Average diluted common shares 12,469,818 13,826,133 14,513,261
outstanding ========== ========== ==========
The shares outstanding used to compute diluted earnings per share for 1999
excluded outstanding options to purchase 889,688 shares of common stock at
a weighted average exercise price of $9.25. The options were excluded
because their exercise prices were greater than the average market price of
the common shares during the year and their inclusion in the computation
would have been antidilutive.
(13) Acquisitions-
On June 16, 1997, the Company completed the purchase of certain assets and
assumption of certain liabilities of Stowe Machine Co., Inc. ("Stowe"). The
purchase price was composed of approximately $8,500 in cash and a note
payable of $1,000.
The Stowe acquisition was accounted for using the purchase method of
accounting. Accordingly, the net assets were allocated based upon their
fair values at the acquisition's effective date of June 16, 1997. The
Company's consolidated statements of operations do not include the revenues
and expenses of Stowe prior to this date. The excess of the purchase price
over the fair value of the net assets acquired (goodwill) of approximately
$870 will be amortized on a straight-line basis over 20 years.
On February 16, 1999, the Company completed the purchase of certain assets
and assumption of certain liabilities of Adco Manufacturing, Incorporated
("Adco"). The purchase price was approximately $10,850 in cash, plus a
working capital adjustment of approximately $750.
The Adco acquisition has been accounted for using the purchase method of
accounting. Accordingly, the net assets are included in the Company's
consolidated balance sheet as of December 31, 1999 based upon their fair
values at the acquisition date of February 16, 1999. The Company's
consolidated statements of operations do not include the revenues and
expenses of Adco prior to this date. The excess of the purchase price over
the fair value of the net assets acquired (goodwill) of approximately
$6,220 will be amortized on a straight-line basis over 20 years.
(14) Subsequent Events-
On January 14, 2000, the Company acquired all of the membership interest of
Wyman-Gordon Titanium Castings, LLC for a purchase price of $26,600 in
cash. The acquired business was renamed Pacific Cast Technologies, Inc. and
is located in Albany, Oregon. The acquisition was financed through the use
of the senior credit facility.
-11-
<PAGE>
(15) Quarterly Results of Operations (Unaudited)-
The following table sets forth unaudited consolidated income statement data
for each quarter of the Company's last two fiscal years. The unaudited
quarterly financial information has been prepared on the same basis as the
annual information presented in the financial statements and, in
management's opinion, reflects all adjustments (consisting of normal
recurring entries) necessary for a fair presentation of the information
provided. The operating results for any quarter are not necessarily
indicative of results for any future period.
Quarters Ended
--------------------------------------------
1998 March 31 June 30 September 30 December 31
-------------------------- -------- ------- ------------ -----------
Net sales $61,671 $60,779 $53,368 $50,949
Gross profit 9,714 10,248 6,719 5,961
Operating income 7,657 8,078 4,745 4,077
Net income 6,268 7,172 4,270 3,662
Basic earnings per share 0.94 0.51 0.30 0.26
Diluted earning per share 0.73 0.46 0.27 0.24
Quarters Ended
--------------------------------------------
1999 March 31 June 30 September 30 December 31
------------------------- -------- ------- ------------ -----------
Net sales $42,756 $44,771 $41,803 $40,911
Gross profit 3,438 5,015 5,044 5,679
Operating income 1,781 3,093 3,175 3,941
Net income 1,469 2,528 2,488 3,218
Basic earnings per share 0.11 0.18 0.18 0.24
Diluted earning per share 0.10 0.18 0.17 0.23
-12-
<PAGE>
(16) Valuation and Qualifying Accounts-
<TABLE>
<CAPTION>
Provision Payments
Balance at Charged to and Balance at
Beginning of Profit and Accounts End of
Year Loss Written Off Year
------------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1997
Allowance for doubtful accounts $300 $ 9 $ 9 $300
====== ===== ===== ======
Year ended December 31, 1998
Allowance for doubtful accounts $300 $ 2 $2 $300
====== ===== ===== ======
Year ended December 31, 1999
Allowance for doubtful accounts $300 $(3) $(3) $300
====== ===== ===== ======
</TABLE>
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
LADISH CO., INC.
By: /s/ WAYNE E. LARSEN
----------------------------------
Wayne E. Larsen
Vice President Law/Finance &
February 18, 2000 Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ KERRY L. WOODY President and Chief Executive February 18, 2000
- ------------------------- Officer (Principal Executive -----------------
Kerry L. Woody Officer), Director
/s/ WAYNE E. LARSEN Vice President Law/Finance & February 18, 2000
- ------------------------- Secretary (Principal Financial -----------------
Wayne E. Larsen and Accounting Officer),
Director
/s/ LAWRENCE W. BIANCHI Director February 18, 2000
- ------------------------- -----------------
Lawrence W. Bianchi
/s/ CHARLES W. FINKL Director February 18, 2000
- ------------------------- -----------------
Charles W. Finkl
/s/ ROBERT W. SULLIVAN Director February 17, 2000
- ------------------------- -----------------
Robert W. Sullivan
16
<PAGE>
INDEX TO EXHIBITS
Exhibit Page
Numbers Description Number
- ------- ----------- ------
3 (a) Articles of Incorporation of the Company as filed
with the Secretary of the State of Wisconsin filed with
Form S-1 as Exhibit 3.2 on December 23, 1997 are
incorporated by reference.
3 (b) The Ladish Co., Inc. By-Laws filed with Form S-1 as
Exhibit 3.2 on December 23, 1997 are incorporated by
reference.
10 (a) Form of Ladish Co., Inc. 1996 Long Term Incentive Plan
filed with Form S-1 as Exhibit 10.4 on December 23, 1997
is incorporated by reference.
10 (b) Form of Employment Agreement between Ladish Co., Inc.
and certain of its executive officers filed with Form
S-1 as Exhibit 10.5 on December 23, 1997 is
incorporated by reference.
10 (c) Credit Agreement dated February 15, 1999 among Ladish Co., X-2
Inc. and Firstar Bank Milwaukee, N.A. and the Financial
Institutions Parties thereto.
10 (d) Agreement dated September 15, 1995 between Ladish Co., Inc.
and Weber Metals, Inc. filed with Form S-1 as Exhibit 10.7
on February 23, 1998 is incorporated by reference.
21 List of Subsidiaries of the Company. X-56
23 Consent of Independent Public Accountants. X-
27 Financial Data Schedule. X-
99 Definitive Proxy Statement for the 2000 Annual Meeting of
Stockholders (to be filed pursuant to Regulation 14A
within 120 days after the end of the Company's fiscal
year and, upon such filing, incorporated herein by reference).
CREDIT AGREEMENT
AMONG
LADISH CO., INC.,
THE FINANCIAL INSTITUTIONS PARTIES HERETO
AND
FIRSTAR BANK MILWAUKEE, N.A.,
AS AGENT
DATED AS OF FEBRUARY 15, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions 1
2. The Credit Facilities; Fees
2.1 Revolving Loans 11
2.2 Interest Rate Options 12
2.3 Borrowing Procedure for Revolving Loans 12
2.4 Continuation and Conversion Procedure 14
2.5 Commitment Fee 14
2.6 Reduction or Termination of Revolving
Loan Commitment 15
2.7 Interest Rates 15
2.8 Payments 16
2.9 Prepayments 16
2.10 Additional LIBOR Rate Loan Provisions 17
2.11 Setoff 18
2.12 Pro Rata Treatment; Sharing of Payments 18
2.13 Capital Adequacy 19
2.14 Yield Protection 19
2.15 Taxes 20
2.16 Other Fees 22
2.17 Use of Proceeds 23
2.18 Lender Withdrawal Prior to Effective
Date; Replacement Lender 23
3. Representations and Warranties
3.1 Organizations, Subsidiaries; Corporate Power 24
3.2 Authorization and Binding Effect 24
3.3 Financial Statements 24
3.4 Litigation 25
3.5 Restricted Payments 25
3.6 Indebtedness; No Default 25
3.7 Ownership of Properties; Liens and Encumbrances 25
3.8 Tax Returns Filed 26
3.9 Margin Stock 26
3.10 Investment Company 26
<PAGE>
3.11 ERISA Liabilities 26
3.12 No Burdensome Agreements 27
3.13 Trademarks, Etc. 27
3.14 Dump Sites 27
3.15 Tanks 27
3.16 Other Environmental Conditions 27
3.17 Changes in Laws 28
3.18 Environmental Judgments, Decrees and Orders 28
3.19 Environmental Permits and Licenses 28
3.20 Year 2000 28
3.21 Accuracy of Information 28
4. Conditions for Borrowing
4.1 On or Before the Date of Execution of this Agreement 28
4.2 On or Before the Effective Date 29
4.3 On or Before Each Subsequent Borrowing Date 31
5. Affirmative Covenants
5.1 Annual Financial Statement 31
5.2 Interim Financial Statements 32
5.3 Management Letters 32
5.4 Other Financial Information 32
5.5 Books and Records; Inspection 32
5.6 Insurance 32
5.7 Condition of Property 33
5.8 Payment of Taxes 33
5.9 Compliance with Law 33
5.10 ERISA Certificate 33
5.11 Compliance with Other Loan Documents 34
5.12 Notice of Default or Claimed Default 34
6. Negative Covenants
6.1 Restricted Payments 34
6.2 Limitations on Indebtedness 35
6.3 Limitations on Guaranty Obligations 35
6.4 Limitations on Lease Obligations 35
6.5 Limitation on Liens and Encumbrances 35
6.6 Limitation on Mergers, Etc. 35
6.7 Limitation on Acquisitions, Advances and Investments 35
ii
<PAGE>
6.8 Lines of Business 36
6.9 Sales of Receivables 36
6.10 Sales of Subsidiaries 36
6.11 Sale and Leaseback 36
6.12 Indebtedness to Capitalization Ratio 36
6.13 Interest Coverage Ratio 36
6.14 Indebtedness to EBITDA Ratio 36
6.15 Transactions with Affiliates 36
7. Events of Default; Remedies
7.1 Events of Default 37
7.2 Remedies 38
8. The Agent
8.1 Appointment and Duties of Agent and Issuing Bank 39
8.2 Discretion and Liability of the Agent 39
8.3 Notice of Default 39
8.4 Consultation 39
8.5 Communications To and From the Agent 40
8.6 Limitations of Agency 40
8.7 No Representation or Warranty 40
8.8 Lender Credit Decision 40
8.9 Indemnity 40
8.10 Resignation or Removal of Agent; Successor
Agent 41
9. Miscellaneous
9.1 Survival of Representations and Warranties 41
9.2 Indemnification 42
9.3 Expenses 42
9.4 Notices 42
9.5 Assignments and Participations 43
9.6 Titles 44
9.7 Parties Bound; Waiver 44
9.8 Governing Law 45
9.9 Submission to Jurisdiction; Service of
Process 45
9.10 Waiver of Jury Trial 45
9.11 Limitation of Liability 46
iii
<PAGE>
9.12 Amendments 46
9.13 Counterparts 46
9.14 Entire Agreement 46
Schedules
Schedule 1.1: Existing Liens and Security Interests
Schedule 3.4: Litigation
Schedule 3.18: Environmental Matters
Schedule 3.20 Year 2000 Compliance
Schedule 6.3 Guaranty Obligations
Exhibits
Exhibit A: Form of Revolving Note
Exhibit B: Form of Notice of Borrowing
Exhibit C Form of Conversion/Continuation Notice
Exhibit D: Form of Opinion of Company Counsel
Exhibit E Form of Assignment and Assumption
iv
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of February 15, 1999, is among
LADISH CO., INC., a Wisconsin corporation (the "Company"), the financial
institutions parties hereto (individually a "Lender" and collectively the
"Lenders") and FIRSTAR BANK MILWAUKEE, N.A., as agent for the Lenders (in such
capacity, the "Agent"). The parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms
have the following meanings:
"Adjusted LIBOR Rate" means, with respect to a LIBOR Rate
Loan for the relevant Interest Period, a rate per annum (rounded upward, if
necessary, to the next higher 1/16 of 1%) determined according to the following
formula:
Adjusted LIBOR Rate = LIBOR Rate
------------------------------------
1.00 - LIBOR Reserve Requirement
"Affiliate" of any Person means any other Person, directly
or indirectly controlling, controlled by or under common control with such
Person. A Person shall be deemed to control another Person if the controlling
Person owns 10% or more of any class of voting securities (or other ownership
interests) of the controlled Person or possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
controlled Person, whether by ownership of stock (or other ownership interests),
by contract or otherwise.
"Amortization Expense" means, for any period, the aggregate
amount reported as an expense by the Company and its Consolidated Subsidiaries
for the amortization of intangible assets on the consolidated statement of
income for such period of the Company and its Consolidated Subsidiaries.
"Applicable Margin" means (a) in the case of Base Rate
Loans, minus 100 basis points (-1.0%) per annum and (b) in the case of LIBOR
Rate Loans, plus 75 basis points (.75%) per annum.
"Base Rate" means, for any day, the higher of (a) 0.50% per
annum above the latest Federal Funds Rate for such day and (b) the Prime Rate in
effect for such day.
"Base Rate Loans" means a Revolving Loan that bears interest
at a rate determined by reference to the Base Rate.
<PAGE>
"Borrowing Date" means each date on which a Revolving Loan
is made by a Lender to the Company.
"Business Day" means a day (other than Saturday or Sunday)
on which banks are open for business in Milwaukee , Wisconsin and, with respect
to the making, payment or rate determination of a LIBOR Rate Loan, a day on
which dealings in United States dollars are carried on in the London interbank
market.
"Capitalized Lease Obligations" means the aggregate amount
of the obligations of the Company and its Consolidated Subsidiaries under any
lease or rental arrangement which would be capitalized under GAAP and shown as a
liability on the consolidated balance sheet of the Company and its Consolidated
Subsidiaries.
"Change in Control" means the acquisition by any Person, or
two or more Persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 35% or more of the outstanding shares of
voting stock of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Subsidiaries" means Subsidiaries whose
financial statements are consolidated with those of the Company in accordance
with GAAP.
"Controlled Group" means a group of trades or businesses
(whether or not incorporated) under common control, as defined in the
regulations issued pursuant to section 414(c) of the Code or such other
regulations prescribed by the Pension Benefit Guaranty Corporation pursuant to
section 4001(b)(1) of ERISA, of which the Company is a part.
"Conversion/Continuation Notice" means a notice in
substantially the form of Exhibit C.
"Default" means any act, event, condition or omission which,
with the giving of notice or lapse of time, would constitute an Event of Default
if uncured or unremedied.
"Depreciation Expense" means, for any period, the aggregate
amount reported as an expense by the Company and its Consolidated Subsidiaries
2
<PAGE>
for the depreciation of tangible assets on the consolidated statement of income
for such period of the Company and its Consolidated Subsidiaries.
"Earnings Before Taxes" means, for any period, the Net
Earnings of the Company and its Consolidated Subsidiaries, but before income
taxes, as reported on the consolidated statement of income for such period of
the Company and its Consolidated Subsidiaries.
"Effective Date" means July 1, 1999.
"Eligible Assignee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having a combined
capital and surplus of at least $100,000,000, (b) a commercial bank organized
under the laws of any other country which is a member of the Organization for
Economic Cooperation and Development, or a political subdivision of any such
country, and having a combined capital and surplus of at least $100,000,000
(provided that such bank is acting through a branch or agency located in the
United States) and (c) a Person that is primarily engaged in the business of
commercial banking and which is an Affiliate of a Lender.
"Environmental Laws" means all federal, state and local laws
including statutes, regulations, ordinances, codes, rules and other governmental
restrictions and requirements relating to the discharge of air pollutants, water
pollutants or process waste water or otherwise relating to the environment or
hazardous substances including, but not limited to, the Federal Solid Waste
Disposal Act, the Federal Clean Air Act, the Federal Clean Water Act, the
Federal Resource Conservation and Recovery Act of 1976, the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
regulations of the Environmental Protection Agency, regulations of the Nuclear
Regulatory Commission and regulations of any state department of natural
resources or state environmental protection agency now or at any time hereafter
in effect.
"ERISA" means, at any date, the Employee Retirement Income
Security Act of 1974, and the regulations thereunder, all as the same shall be
in effect at such date.
"Event of Default" means the occurrence of any of the events
described in section 7.1.
"Federal Funds Rate" means, for any day, an interest rate
per annum equal to the weighted average of the rates on overnight, Federal funds
transactions with members of the Federal Reserve System arranged by Federal
Funds brokers on such day, as published for such day by the Federal Reserve Bank
of New York in the weekly statistical release designated as H.15(519), or any
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successor publication, on the preceding Business Day opposite the caption
"Federal Funds Rate (Effective)", or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it. In the case of a day which is not a Business
Day, the Federal Funds Rate for such day shall be the Federal Funds Rate for the
preceding Business Day.
"Firstar" means Firstar Bank Milwaukee, N.A., a national
banking association.
"GAAP" means generally accepted accounting principles in
effect in the United States from time to time.
"Guaranty Obligations" means any direct or indirect
liability or obligation of the Company or any Subsidiary under any agreement,
undertaking or arrangement under which the Company or a Subsidiary guarantees,
endorses or otherwise becomes or is liable for an obligation of any other
Person.
"Indebtedness" of a Person means, without duplication, such
Person's (a) obligations for borrowed money, (b) obligations representing the
deferred purchase price of property or services (other than accounts payable
arising in the ordinary course of such Person's business payable on terms
customary in the trade), (c) obligations, whether or not assumed, secured by a
mortgage lien, pledge or security interest on the property of such Person, (d)
obligations which are evidenced by notes, acceptances or other instruments, (e)
Capitalized Lease Obligations, (f) obligations arising pursuant to Swap
Contracts and (g) obligations for which such Person is obligated pursuant to a
letter of credit.
In the case of the Company, for purposes of the financial
covenants in section 6 of this Agreement, the Indebtedness under clause (f)
shall be valued at the Swap Termination Value if a "termination event" or "event
of default" has occurred under the Swap Contract and, at all other times, shall
be deemed to be $0.
"Indebtedness to Capitalization Ratio" means the
relationship, expressed as a numerical ratio, between:
(a) Indebtedness;
and
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(b) the sum of (i) Indebtedness and (ii) Total Equity;
all as determined without duplication in accordance with GAAP applied on a
consistent basis to the Company and its Consolidated Subsidiaries as of the date
of determination.
"Indebtedness to EBITDA Ratio" means the relationship,
expressed as a numerical ratio, between:
(a) Indebtedness, as of the date of determination;
and
(b) the sum of (i) Earnings Before Taxes, (ii) Interest
Expense, (iii) Depreciation Expense and (iv) Amortization Expense, in each case
for the four quarter period ending on the date of determination; all as
determined in accordance with GAAP applied on a consistent basis to the Company
and its Consolidated Subsidiaries; provided, however, if the Company (a)
acquires the capital stock or other ownership interests of another Person (the
"Acquired Company") which, upon completion of the transaction, becomes a
Subsidiary or (b) acquires assets from another Person (the "Acquired Assets"),
then the Earnings Before Taxes, Interest Expense, Depreciation Expense and
Amortization Expense of the Acquired Company, or, in the case of Acquired
Assets, the portion thereof attributable to the Acquired Assets, shall be added
to or subtracted from, as the case may be, those of the Company for the portion
of the four quarter period preceding the date of determination that the Company
did not own the Acquired Company or the Acquired Assets. The Company shall
separately identify any amounts relating to an Acquired Company or to Acquired
Assets in the financial covenant calculations required to be provided under
section 5.2.
"Interest Coverage Ratio" means the relationship, expressed
as a numerical ratio, between:
(a) the sum of (i) Earnings Before Taxes and (ii)
Interest Expense;
and
(b) Interest Expense;
all as determined without duplication in accordance with GAAP applied on a
consistent basis to the Company and its Consolidated Subsidiaries for the four
quarter period ending on the date of determination.
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"Interest Expense" means, for any period, the aggregate
amount which would be reported as paid, incurred, or accrued as interest expense
on the consolidated statement of income for such period of the Company and its
Consolidated Subsidiaries.
"Interest Period" means, with respect to a LIBOR Rate Loan,
a period of one, two or three months commencing on (and including) a Business
Day selected by the Company pursuant to section 2.4(a) or 2.5(c) of this
Agreement and ending on (but excluding) the day which corresponds numerically to
such date one, two or three months thereafter (or, if such month has no
numerically corresponding date, on the last Business Day of such month),
provided that:
(a) if an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
following Business Day (unless such next following Business Day is in a new
calendar month in which case such Interest Period shall end on the immediately
preceding Business Day); and
(b) no Interest Period may end later than the Maturity
Date, in the case of a Revolving Loan.
"Lease Obligations" means, at any date, the obligations of
the Company or any Subsidiary under leases of real or personal property
(including taxes, insurance, maintenance and similar expenses which the Company
or a Subsidiary is required to pay under any such lease) whether or not such
obligations are reflected as liabilities on the consolidated balance sheet of
the Company or in a note thereto excluding, however, Capitalized Lease
Obligations.
"LIBOR Rate" means, with respect to a LIBOR Rate Loan for
the applicable Interest Period, the interest rate at which deposits in United
States dollars, in an amount approximately equal to the requested LIBOR Rate
Loan and having a maturity approximately equal to the requested Interest Period,
are offered to the Agent by prime banks in the London interbank market at
approximately 11 a.m. (London time) two Business Days prior to the first day of
such Interest Period. The LIBOR Rate determined by the Agent shall, in the
absence of manifest error, be conclusive.
"LIBOR Rate Loan" means a Revolving Loan bearing interest at
a rate determined by reference to the Adjusted LIBOR Rate.
"LIBOR Reserve Requirement" means, with respect to a LIBOR
Rate Loan for the applicable Interest Period, the percentage (expressed as a
decimal) equal to the maximum aggregate reserve requirements (including,
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without limitation, any marginal, special, emergency and supplemental reserves)
established by the Board of Governors of the Federal Reserve System for
"eurocurrency liabilities" (as defined in Regulation D of such Board), or for
other liabilities which include deposits of the type used in determining the
LIBOR Rate, having a term approximately equal to the applicable Interest Period.
"Loan" means an extension of credit by a Lender to the
Company in the form of a Revolving Loan.
"Loan Documents" means this Agreement, the Notes and all
other documents, instruments and agreements related to or executed in connection
with this Agreement and the transactions contemplated hereby.
"Majority Lenders" means the Lenders holding in the
aggregate at least 51% of the aggregate outstanding principal balance of the
Loans or, if there are no Loans outstanding, Lenders whose aggregate Percentage
is at least 51%.
"Maturity Date" means June 29, 2000, or such earlier date on
which the Agent declares the Notes to be, or the Notes automatically become,
immediately due and payable pursuant to section 7.2 of this Agreement.
"Multiemployer Plan" means any pension benefit plan subject
to Title IV of ERISA as defined in section 4001(a)(3) of ERISA, to which the
Company, any of its Subsidiaries or any member of the Controlled Group is
required to contribute on behalf of its employees.
"Net Earnings" means, for any period, the excess of:
(a) all revenues and income derived from operations in
the ordinary course of business (excluding extraordinary gains and profits upon
the disposition of investments and fixed assets),
over
(b) all expenses and other proper charges against
income (including payment or provision for all applicable income and other
taxes, but excluding extraordinary losses and losses upon the disposition of
investments and fixed assets),
all as determined for such period in accordance with GAAP applied on a
consistent basis to the Company and its Consolidated Subsidiaries.
"Note" means a Revolving Note and "Notes" means all
Revolving Notes.
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"Notice of Borrowing" means a notice in substantially the
form of Exhibit B.
"Percentage" means, for each Lender:
(a) a percentage equal to such Lender's Revolving Loan
Commitment divided by the aggregate Revolving Loan Commitments of all Lenders;
or,
(b) if the aggregate Revolving Loan Commitments of all
Lenders have been terminated, a percentage equal to the outstanding principal
amount of Loans made by such Lender divided by the aggregate outstanding
principal amount of Loans made by all Lenders;
and the Percentage of each Lender as of the date of execution of this Agreement
is set forth opposite its signature hereto.
"Permitted Liens" means (a) security interests and liens
listed on Schedule 1.1 attached hereto, provided that the Indebtedness secured
thereby shall not be renewed, extended or increased; (b) liens for taxes,
assessments or governmental charges not delinquent or being contested in good
faith by the Company or any Subsidiary for which adequate reserves are
established and maintained in accordance with GAAP; (c) construction lien claims
not delinquent; (d) purchase money security interests or liens on any property
to be used by the Company or a Subsidiary in the normal course of its business,
and created or incurred simultaneously with the acquisition of such property, if
such security interest or lien is limited to the property so acquired and the
aggregate Indebtedness incurred by the Company and its Subsidiaries during any
fiscal year which is secured by such security interests and liens does not
exceed $2,000,000; (e) liens or deposits in connection with worker's
compensation or other insurance or to secure the performance of bids, trade
contracts (other than for borrowed money), leases, public or statutory
obligations, surety or appeal bonds or other obligations of like nature incurred
in the ordinary course of business; (f) security interests or liens in respect
of capital assets acquired pursuant to capitalized leases, provided the
aggregate Capitalized Lease Obligations (determined in accordance with GAAP)
under all capitalized leases does not exceed $2,000,000; and (h) easements,
restrictions, minor title irregularities and similar matters which have no
material adverse effect as a practical matter upon the ownership or use of its
property by the Company or any Subsidiary.
"Permitted Swap Contract" means a Swap Contract between the
Company and a Lender (or any Affiliate of a Lender); provided that such
agreement is entered into in the ordinary course of business by the Company for
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the purpose of mitigating the Company's risks with respect to interest rate
volatility and not for the purpose of speculation.
"Person" means any natural person, corporation, limited
liability company, joint venture, partnership, association, trust or other
entity or any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" means any pension benefit plan subject to Title IV of
ERISA, including any Multiemployer Plan, maintained by the Company, any of its
Subsidiaries or any member of the Controlled Group or any such Plan to which the
Company, any of its Subsidiaries or any member of the Controlled Group is
required to contribute on behalf of its employees.
"Prime Rate" means the rate of interest announced by the
Agent from time to time as its base rate for interest rate determinations. The
Prime Rate may or may not be the lowest interest rate charged by the Agent.
"Quoted Rate" means, as to a Swing Line Loan, the per annum
rate of interest quoted to the Company by Firstar as the rate of interest
applicable to the Swing Line Loan requested by the Company.
"Quoted Rate Loan" means a Swing Line Loan that bears
interest based on the Quoted Rate.
"Reportable Event" means a reportable event as that term is
defined in ERISA.
"Restricted Payments" means dividends or other distributions
by the Company or any Subsidiary based upon the stock or other ownership
interest of the Company or any Subsidiary (except dividends payable to the
Company and dividends payable solely in stock of the Company) and purchases,
redemptions and other acquisitions, direct or indirect, by the Company or any
Subsidiary, of the stock or other ownership interest of the Company or any
Subsidiary.
"Revolving Loan" means a Loan made by a Lender to the
Company pursuant to section 2.1 of this Agreement.
"Revolving Loan Commitment" means the obligation of each
Lender to make Revolving Loans to the Company. The total Revolving Loan
Commitment of the Lenders is $100,000,000 as of the date of the execution of
this Agreement and is subject to reduction from time to time pursuant to section
2.6 and is further subject to reduction and reinstatement pursuant to section
2.18. The
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Revolving Loan Commitment of each Lender as of the date of execution of this
Agreement is set forth opposite its signature hereto.
"Revolving Note" means a promissory note of the Company in
the form of Exhibit A, appropriately completed, evidencing Revolving Loans made
by a Lender to the Company and "Revolving Notes" means each Revolving Note.
"Subordinated Debt" means Indebtedness for borrowed money of
the Company or any of its Subsidiaries, the payment of which is fully
subordinated, in a manner satisfactory to the Lenders, to the prior payment of
the Notes.
"Subsidiary" means as of a particular date (a) any
corporation more than 50% of whose outstanding stock having ordinary voting
power for the election of directors shall at the time be owned or controlled by
the Company or by one of its Subsidiaries and (b) any limited liability company
more than 50% of whose outstanding ownership interests shall at the time be
owned or controlled by the Company or by one of its Subsidiaries.
"Swap Contract" means any agreement (including any master
agreement and the schedules thereto) designed to protect at least one of the
parties thereto from fluctuations in interest rates, exchange rates or forward
rates including, but not limited to, dollar-denominated or cross-currency
interest rate exchange agreements, forward currency exchange agreements,
interest rate swap, cap or collar agreements, forward rate currency or interest
rate options, puts and warrants.
"Swap Termination Value" means, in respect to any Swap
Contract, the termination value determined in accordance with such Swap Contract
after taking into account any legally enforceable netting agreement.
"Swing Line Loan" means a Revolving Loan made to the Company
by Firstar pursuant to Section 2.1(b). Swing Line Loans shall be a subfacility
of Firstar's Revolving Loan Commitment and thus, a subfacility of the Lenders'
total Revolving Loan Commitment.
"Term Loan" means an advance by a Lender to the Company with
a duration of one, three or five years to be used by the Company to finance (or
refinance Revolving Loans made to finance) the acquisition of the business
and/or assets of another Person. Term Loans will be made only upon the execution
and delivery of an amendment to this Agreement containing terms and conditions
acceptable to the Company and all of the Lenders.
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"Total Equity" means the aggregate amount shown as
shareholders' equity as reported on the consolidated balance sheet of the
Company and its Consolidated Subsidiaries.
"Type" means, with respect to any Revolving Loan, its nature
as a Base Rate Loan or as a LIBOR Rate Loan.
2. The Credit Facilities; Fees.
2.1 Revolving Loans.
(a) During the period from the Effective Date to the
Maturity Date, each Lender will make Revolving Loans to the Company, subject to
the terms and conditions hereof, in an amount equal to such Lender's Percentage
of the amount of Revolving Loans requested by the Company on the applicable
Borrowing Date, up to the maximum amount at any time outstanding of such
Lender's Revolving Loan Commitment; provided, however, that the Lenders shall
have no obligation to make Revolving Loans to the Company if, after giving
effect thereto, the sum of the aggregate outstanding principal amount of
Revolving Loans would exceed the total Revolving Loan Commitments. Within such
maximum amount Revolving Loans may be made, repaid and made again. The Revolving
Loans made by a Lender shall be evidenced by a Revolving Note payable to the
order of such Lender and shall be payable on the Maturity Date. Although each
Revolving Note shall be expressed to be payable in the amount of the payee
Lender's Revolving Loan Commitment on the Effective Date, the Company shall be
obligated to pay only the amount of Revolving Loans actually disbursed to or for
the account of the Company by the payee Lender, together with interest on the
unpaid balance of the sums so disbursed, which remain outstanding from time to
time as shown on the records of the payee Lender. Except as set forth below, the
Revolving Loans made by the Lenders on a Borrowing Date shall be made ratably in
accordance with each Lender's Percentage.
(b) The parties agree that for ease of administration
and to avoid frequent transfers of funds, Firstar may at its option and from
time to time make Swing Line Loans to the Company without proportionate loans by
the other Lenders. Notwithstanding any provision of this Agreement to the
contrary:
(i) The aggregate outstanding principal amount of
all outstanding Swing Line Loans shall not exceed $5,000,000;
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(ii) The Company may request a Swing Line Loan by
a telephonic request therefor to Firstar not later than 3 p.m., Milwaukee,
Wisconsin time on the requested Borrowing Date;
(iii) Swing Line Loans shall be evidenced by the
Revolving Note payable to the order of Firstar;
(iv) Swing Line Loans shall be Base Rate Loans or
Quoted Rate Loans, at the option of the Company; and
(v) Swing Line Loans may be prepaid at any time in
whole or in part without premium or penalty and all payments of principal and
interest made by the Company on Swing Line Loans shall be made to and retained
by Firstar.
Except as expressly set forth to the contrary in this
Agreement, Swing Line Loans shall be governed by the provisions of this
Agreement applicable to Revolving Loans.
During any period that any Swing Line Loans are outstanding,
the Lenders agree that at any time, upon the request of Firstar, each Lender
will make a Revolving Loan to the Company by transferring to Firstar an amount
equal to such Lender's Percentage of the aggregate principal amount of, and
accrued interest on, the Swing Line Loans then outstanding. Such transfer shall
be considered a Revolving Loan (which shall be a Base Rate Loan) by that Lender
to the Company and a payment of the Swing Line Loans by the Company to Firstar.
If an Event of Default occurs while Swing Line Loans are outstanding, each
Lender agrees to purchase from Firstar, at any time upon Firstar's request, a
participation in such Swing Line Loans in an amount equal to such Lender's
Percentage of the then outstanding principal amount of, and accrued interest on,
the Swing Line Loans, and the principal amount of such participation shall bear
interest at the greater of the Base Rate or the interest rate in effect for such
Swing Line Loans.
2.2 Interest Rate Options. Revolving Loans, except for Swing Line
Loans, may be Base Rate Loans or LIBOR Rate Loans, or a combination thereof. The
Company shall select the Type of Revolving Loan (and in the case of LIBOR Rate
Loans, the applicable Interest Period) in accordance with sections 2.3(a) and
2.4(c). The aggregate principal amount of LIBOR Rate Loans made by the Lenders
on a Borrowing Date, or pursuant to an election by the Company to either (a)
convert Base Rate Loans to LIBOR Rate Loans or (b) continue LIBOR Rate Loans,
shall be in a minimum amount of $1,000,000 and in integral multiples of $100,000
above such minimum. After giving effect to any
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advance under section 2.1 or conversion or continuation under section 2.4, there
may not be more than 10 different Interest Periods in effect.
2.3 Borrowing Procedure for Revolving Loans.
(a) The Company shall request Revolving Loans by submitting
a Notice of Borrowing to the Agent. The Notice of Borrowing must be received by
the Agent (i) in the case of LIBOR Rate Loans, not later than 11 a.m.,
Milwaukee, Wisconsin time, on a Business Day which is three Business Days prior
to the requested Borrowing Date (which must be a Business Day) and (ii) in the
case of Base Rate Loans, not later than 11 a.m., Milwaukee, Wisconsin time, on
the requested Borrowing Date (which must be a Business Day). Each Notice of
Borrowing must specify the amount of the requested Revolving Loans, the Type of
requested Revolving Loans and, if the Company requests LIBOR Rate Loans, the
applicable Interest Period. The aggregate amount of each type of Revolving Loans
made on each Borrowing Date shall be in a minimum amount of $1,000,000 and in
integral multiples of $100,000 above such minimum. Each Notice of Borrowing
shall be irrevocable and shall constitute a certification by the Company that
the borrowing conditions specified in sections 4.3(b) and 4.3(c) will be
satisfied on the specified Borrowing Date. The Agent will promptly notify the
Lenders of the requested Revolving Loans. On or before 3 p.m., Milwaukee,
Wisconsin time, on the specified Borrowing Date each Lender shall deposit its
Percentage of the requested Revolving Loans with the Agent in immediately
available funds. Upon fulfillment of the applicable borrowing conditions, the
Agent shall deposit the Revolving Loans in the Company's account maintained with
the Agent or as the Company may otherwise direct in writing.
(b) Unless the Agent shall have been notified by telephone,
confirmed promptly thereafter in writing, by a Lender not later than 2 p.m.,
Milwaukee, Wisconsin time, on a Borrowing Date that such Lender will not make
available to the Agent such Lender's Percentage of the requested Revolving
Loans, the Agent may assume that such Lender has made such amount available to
the Agent and, in reliance upon such assumption, the Agent may (but shall not be
required) to make available to the Company on such Borrowing Date a
corresponding amount. If and to the extent that such Lender shall not have so
made such amount available to the Agent and the Agent in such circumstances has
made such amount available to the Company, such Lender shall on the Business Day
following the Borrowing Date make such amount, together with interest at the
Federal Funds Rate for each day during such period, available to the Agent. If
such amount is so made available, such payment to the Agent shall constitute
such Lender's Revolving Loan on the Borrowing Date for all purposes of this
Agreement. If such amount is not made available to the Agent on the Business Day
following the Borrowing Date, the Agent shall notify the Company of such
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failure to fund and, upon demand by the Agent, the Company shall pay such amount
to the Agent for the Agent's account together with interest thereon, for each
day from the date the Agent made such amount available to the Company to the
date such amount is repaid to the Agent, at the interest rate specified in
section 2.7(a).
(c) The failure of any Lender to make a Revolving Loan shall
not relieve any other Lender of its obligation hereunder to make a Revolving
Loan on the applicable Borrowing Date, but no Lender shall be responsible for
the failure of any other Lender to make the Revolving Loan to be made by such
other Lender on the applicable Borrowing Date.
2.4 Continuation and Conversion Procedure.
(a) Base Rate Loans shall continue as Base Rate Loans unless
and until converted into LIBOR Rate Loans. The Company may elect from time to
time, subject to the terms and conditions of this Agreement, to convert all or
any part of the outstanding Base Rate Loans into LIBOR Rate Loans.
(b) At the end of the applicable Interest Period for LIBOR
Rate Loans, such LIBOR Rate Loans shall be automatically converted into Base
Rate Loans unless the Company shall have given the Agent notice in accordance
with section 2.4(c) requesting that, at the end of such Interest Period, such
LIBOR Rate Loans continue as LIBOR Rate Loans.
(c) The Company shall deliver a Conversion/ Continuation
Notice to the Agent for each conversion of Base Rate Loans or continuation of
LIBOR Rate Loans. The Conversion/Continuation Notice must be received by the
Agent not later than 11 a.m., Milwaukee time, at least three Business Days prior
to the date of the requested conversion or continuation and must specify (i) the
requested date (which shall be a Business Day) of such conversion or
continuation, (ii) the amount of Loans to be converted or continued and (iii)
the duration of the Interest Periods applicable thereto.
(d) The Agent will promptly notify each Lender of its
receipt of a Conversion/Continuation Notice or, if no notice is timely provided
by the Company, the Agent will promptly notify each Lender of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Loans with
respect to which the notice was given.
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(e) Notwithstanding anything to the contrary contained in
this section, Loans may not be converted into or continued as LIBOR Rate Loans
when any Default or Event of Default has occurred and is continuing.
2.5 Commitment Fee. As consideration for the Lenders' Revolving
Loan Commitments, the Company will pay to the Agent, for the account of the
Lenders, on the last Business Day of each quarter commencing September 30, 1999
and on the Maturity Date, a commitment fee equal to .15% (15 basis points) per
annum of the daily average unused amount of the Revolving Loan Commitment during
the preceding quarter or other applicable period; provided that for purposes of
computing the commitment fee due on September 30, 1999, the applicable period
shall be the Effective Date through September 30, 1999. Commitment fees shall be
calculated for the actual number of days elapsed on the basis of a 360-day year.
2.6 Reduction or Termination of Revolving Loan Commitment.
(a) The Company may, upon seven Business Days' prior written
notice to the Agent, permanently reduce the amount of the total Revolving Loan
Commitment; provided that (i) no such reduction shall reduce the amount of the
total Revolving Loan Commitment to an amount less than the sum of the aggregate
unpaid principal balances of the Revolving Notes on the date of such reduction
and (ii) upon any termination of the Revolving Loan Commitments the Company
shall pay to the Agent, for the account of the Lenders, the outstanding
principal balance of the Revolving Notes, all accrued interest on the Revolving
Notes and all fees, expenses and other amounts payable under this Agreement
relating to the Revolving Loans as of the termination date. Each reduction in
the total Revolving Loan Commitment shall be in a minimum amount of $1,000,000.
Each reduction in the total Revolving Loan Commitment shall ratably reduce each
Lender's Revolving Loan Commitment.
(b) The total Revolving Loan Commitment shall be reduced by
the principal amount of Revolving Loans the Company and the Lenders agree to
convert to Term Loans. As the Company repays the outstanding principal under the
Term Loans, the total Revolving Loan Commitment shall be increased by the amount
of each principal repayment and the Revolving Loan Commitment of each Lender
will be ratably increased.
2.7 Interest Rates.
(a) The unpaid principal balance of Base Rate Loans
outstanding from time to time under the Revolving Notes shall bear interest
prior to the Maturity Date at an annual rate equal to the Base Rate plus the
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Applicable Margin for Base Rate Loans, and such rate shall change on each day on
which the Base Rate changes. Accrued interest shall be due on the first Business
Day of each month, commencing August 2, 1999, and on the Maturity Date.
(b) The unpaid principal balance of each LIBOR Rate Loan
under the Revolving Notes shall bear interest during the applicable Interest
Period at the corresponding Adjusted LIBOR Rate plus the Applicable Margin for
LIBOR Rate Loans. Accrued interest for each LIBOR Rate Loan shall be due on the
last day of the applicable Interest Period, and on the Maturity Date.
(c) The unpaid principal balance of each Quoted Rate Loan
outstanding from time to time under the Revolving Notes shall bear interest
prior to the Maturity Date at an annual rate equal to the Quoted Rate. Accrued
interest for each Quoted Rate Loan shall be due on the first Business Day of
each month, commencing on the first of such dates to occur after the Borrowing
Date for such Quoted Rate Loan.
(d) Notwithstanding the provisions of sections 2.7(a),
2.7(b), and 2.7(c) above, upon the occurrence and during the continuance of an
Event of Default, the unpaid principal balance of each Note shall, upon notice
from the Agent to the Company (which notice the Agent may send in its discretion
and shall send at the direction of the Majority Lenders), bear interest at an
annual rate equal to the Base Rate plus one percentage point (the "Default
Rate"), payable upon demand. On and after the Maturity Date, the unpaid
principal balance of the Revolving Notes and all accrued interest thereon shall
bear interest at the Default Rate and shall be payable upon demand.
(e) Interest shall be calculated for the actual number of
days elapsed on the basis of a 360-day year.
2.8 Payments. All payments of principal and interest on the Notes
and of all fees due hereunder shall be made at the office of the Agent, for the
account of the Lenders, in immediately available funds not later than 12 noon,
Milwaukee, Wisconsin time, on the date due; funds received after that time shall
be deemed to have been received on the next Business Day. Whenever any payment
to be made shall otherwise be due on a day which is not a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall be included in computing interest and fees, if any, in connection
with such payment. The Agent may charge any account of the Company at the Agent
or at any Lender for any payment due under the Notes, or any fee or expense
payable hereunder, on or after the date due. Except as otherwise provided in
section 2.12, the Agent shall forward to each Lender,
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promptly after receipt (and in any event no later than 2 p.m. on the following
Business Day), such Lender's Percentage of such payments received by the Agent.
2.9 Prepayments. The Company shall make a mandatory prepayment of
the Revolving Notes if and to the extent that the sum of the aggregate
outstanding principal balances of the Revolving Notes exceeds the Revolving Loan
Commitment. The Company may at any time repay, without premium or penalty, Base
Rate Loans in a minimum amount of $ 100,000 (or, if less, all outstanding Base
Rate Loans). The Company may at any time repay, without premium or penalty,
Quoted Rate Loans. The Company may prepay LIBOR Rate Loans (in a minimum amount
of $1,000,000 and in integral multiples of $100,000 above such minimum) at any
time; provided, that, in the event of a prepayment of a LIBOR Rate Loan on any
day other than the last day of the applicable Interest Period, the Company shall
also pay to the Agent for the account of the Lenders on the prepayment date the
amounts referred to in section 2.10(c).
The Company will give the Agent notice of any optional prepayment
of the Revolving Notes not later than 12 noon, Milwaukee, Wisconsin time, on the
Business Day prior to the prepayment date, specifying the prepayment date (which
must be a Business Day) and the amount to be prepaid. The amount of such
prepayment and any amounts related thereto shall be due and payable on the
specified prepayment date.
2.10 Additional LIBOR Rate Loan Provisions
(a) If any Lender determines that the making or maintaining
of a LIBOR Rate Loan would violate any applicable law, rule regulation or
directive, whether or not having the force of law, then the obligation of the
Lenders to make or continue LIBOR Rate Loans, or to convert Base Rate Loans into
LIBOR Rate Loans, shall be suspended until the Agent notifies the Company that
the circumstances causing such suspension no longer exist. During any such
period, all LIBOR Rate Loans shall automatically convert into Base Rate Loans at
the end of the applicable Interest Period or sooner if required by law.
(b) If the Agent is unable to determine the LIBOR Rate in
respect of a requested Interest Period or the Majority Lenders are unable to
obtain deposits of United States dollars in the London interbank market in the
applicable amounts and for the requested Interest Period, then, upon notice from
the Agent to the Company, the obligation of the Lenders to make or continue
LIBOR Rate Loans, or to convert Base Rate Loans into LIBOR Rate Loans, shall be
suspended until the Agent notifies the Company that the circumstances causing
such suspension no longer exist.
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(c) If any Lender shall incur any loss or expense (including
any loss or expense incurred by reason of a liquidation or redeployment of
deposits or other funds acquired by such Lender to make, continue or maintain
any portion of a LIBOR Rate Loan, or to convert any portion of a Base Rate Loan
into a LIBOR Rate Loan) as a result of: (i) any conversion or repayment or
prepayment of the principal amount of LIBOR Rate Loan on a date other than the
last day of the Interest Period applicable thereto (whether as a result of
acceleration, prepayment or otherwise); (ii) any Revolving Loan not being made
as a LIBOR Rate Loan in accordance with the Notice of Borrowing therefor; or
(iii) any Revolving Loan not being continued as, or converted into, a LIBOR Rate
Loan in accordance with the Continuation/ Conversion Notice therefore, then,
upon written notice from such Lender to the Company, the Company shall, within
ten days of its receipt thereof, pay to such Lender such amount as will (in the
reasonable determination of such Lender) reimburse such Lender for such loss or
expense. Such written notice (which shall include calculations in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the Company.
2.11 Setoff. Each Lender shall, upon the occurrence and during
the continuance of an Event of Default, have the right to apply to the payment
of any Note held by such Lender (whether or not then due) any and all balances,
credits, deposits, accounts or monies of the Company then or thereafter
maintained with such Lender. Each Lender agrees to promptly notify the Company
and the Agent after any such setoff and application made by such Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such setoff and application.
2.12 Pro Rata Treatment; Sharing of Payments.
(a) Except as otherwise provided in this Agreement, all
payments of principal, interest and fees made by the Company shall be
distributed pro rata to the Lenders according to their respective Percentages.
If any Lender shall obtain any payment or other recovery (whether voluntary,
involuntary, by application of setoff or otherwise) in excess of its pro rata
share of payments then or therewith obtained by all Lenders, such Lender shall
immediately purchase, without recourse and for cash, from the other Lenders,
such participations in the Notes of such other Lenders so that each Lender shall
thereafter have a percentage interest in all of such obligations equal to such
Lender's Percentage; provided, however, that if any payment so received shall be
recovered in whole or in part from such purchasing Lender, the purchase shall be
rescinded and the purchase price restored to the extent of any such recovery,
but without interest. The Company agrees that any Lender so purchasing a
participation from another Lender pursuant to this section may, to the fullest
extent
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permitted by law, exercise all of its rights of payment (including its right of
setoff) with respect to such participation as if such Lender were the direct
creditor of the Company in the amount of such participation.
(b) Notwithstanding anything to the contrary contained in
this Credit Agreement, any Lender that fails to make available to the Agent its
pro rata share of any Loan as, when and to the full extent required by the
provisions of this Credit Agreement, shall be deemed delinquent ("a "Delinquent
Lender") until such time as such delinquency is satisfied. A Delinquent Lender
shall be deemed to have assigned any and all payments due to it from the Company
to the Agent and the nondelinquent Lenders for application to, and reduction of,
their respective pro rata shares of all outstanding Loans. The Delinquent Lender
hereby authorizes the Agent to (i) retain such payments to the extent the Agent
funded such delinquency or (ii) distribute such payments to the nondelinquent
Lenders in proportion to their respective pro rata shares of all outstanding
Loans to the extent the nondelinquent Lenders funded such delinquency. A
Delinquent Lender shall be deemed to have satisfied in full a delinquency when
and if, as a result of the application of the assigned payments to the Agent
and/or the nondelinquent Lenders, all advances funded by the Agent have been
repaid in full and the Lenders' respective pro rata shares of all outstanding
Loans have returned to their respective Percentages.
2.13 Capital Adequacy. As used in this section, the term
"Regulatory Change" means any change enacted or issued after the date of this
Agreement of any (or the adoption after the date of this Agreement of any new)
federal or state law, regulation, interpretation, direction, policy or
guideline, or any court decision, which affects (or, in the case of a court
decision would, if the decision were applicable to any Lender, affect) the
treatment of any Loan or any commitment of any Lender hereunder as an asset or
other item included for the purpose of calculating the appropriate amount of
capital to be maintained by such Lender or any corporation controlling such
Lender. If such Regulatory Change has the effect of reducing the rate of return
on such Lender's or such corporation's capital as a consequence of the Loans or
commitments of such Lender hereunder to a level below that which such Lender or
such corporation could have achieved but for such Regulatory Change (taking into
account such Lender's or such corporation's policies with respect to capital
adequacy) by an amount deemed in good faith by such Lender to be material, then
from time to time following notice by such Lender to the Company of such
Regulatory Change, within ten days after demand from such Lender, the Company
shall pay to such Lender such additional amount or amounts as will compensate
such Lender or such corporation, as the case may be, for such reduction.
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2.14 Yield Protection. If any law or any governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law), or any interpretation thereof, or the compliance of any Lender therewith,
(a) subjects any Lender to any tax, duty, charge or
withholding on or from payments due from the Company (excluding federal taxation
of the overall net income of any Lender and any such tax, duty, charge or
withholding in effect as of the date of this Agreement), or changes the basis of
taxation of payments to any Lender in respect of its Loans or other amounts due
it hereunder (excluding federal taxation of the overall net income of any
Lender);
(b) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any
lender (other than reserves and assessments taken into account in determining
the interest rate applicable to LIBOR Rate Loans) with respect to its Loans or
any Letter of Credit; or
(c) imposes any other condition the result of which is to
increase the cost to any Lender of making, funding or maintaining the Loans or
reduces any amount received by any Lender in connection with the Loans or
requires any Lender to make any payment calculated by reference to the amount of
Loans held or interest received by it, by an amount deemed material by such
Lender;
then, within ten days of demand by such Lender, the Company shall pay such
Lender that portion of such increased expense incurred or reduction in an amount
received which such Lender determines is attributable thereto.
2.15 Taxes.
(a) Any and all payments by the Company hereunder or under
the Notes shall be made, in accordance with sections 2.08 and 2.09 free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding in the case of each Lender and the Agent, taxes imposed on or
measured by net income or overall gross receipts, and capital and franchise
taxes imposed on it (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
Subject to the provisions of subsection 2.15(h) below, if the Company shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Lender or the Agent, (i) the sum payable
shall be increased as may be necessary so that after making all required
deductions
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(including deductions applicable to additional sums payable under this section
2.15) such Lender or the Agent (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Company shall make such deductions and (iii) the Company shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Company agrees to pay any present and
future stamp and documentary taxes and any other excise and property taxes,
charges and similar levies which arise from any payment made hereunder or under
the Notes or the other Loan Documents or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or the Notes or
the other Loan Documents (the foregoing are collectively referred to herein as
"Other Taxes").
(c) Except to the extent the Company makes payments pursuant
to subsections (a) or (b) above, and subject to the provisions of subsection (h)
below, the Company will indemnify each Lender and the Agent against, and
reimburse each on demand for, the full amount of Taxes and Other Taxes
(including, without limitation, any Taxes and Other Taxes imposed by any
jurisdiction on amounts payable under this section 2.15) incurred or paid by
such Lender or the Agent (as the case may be) or any of their respective
affiliates and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. Each Lender agrees, within a
reasonable time after receiving a written request from the Company, to provide
the Company and the Agent with such certificates as are reasonably required, and
take such other actions as are reasonably necessary, to claim such exemptions as
such Lender may be entitled to claim in respect of all or a portion of any Taxes
or Other Taxes which are otherwise required to be paid or deducted or withheld
pursuant to this section 2.15 in respect of any payments under this Agreement or
under the Notes.
(d) Within 90 days after the close of each fiscal year of
the Company, the Company will furnish to the Agent, at its address referred to
in section 11.4, the original or a certified copy of a receipt evidencing
payment of any Taxes or Other Taxes during such fiscal year.
(e) Each Lender that is not created or organized under the
laws of the United States or a political subdivision thereof shall deliver to
the Company and the Agent on the date hereof (i) [a] two duly completed copies
of IRS Form 1001 (or any successor or substitute form or forms) if such Lender
claims eligibility to receive payments hereunder and under the Notes or
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other documents without deduction or withholding of United States federal income
tax under the provisions of an applicable tax treaty concluded by the United
States or [b] two duly completed copies of IRS Form 4224 (or any successor or
substitute form or forms) if the Lender claims such eligibility under sections
1441(c)(1) and 1442(a) of the Code. Each such Lender shall amend or deliver such
additional IRS Forms as required by law and to the extent legally entitled to do
so.
(f) Any Lender claiming any additional amounts payable
pursuant to this section 2.15 shall use its best efforts (consistent with its
internal policy and legal and regulatory restrictions) to take any actions
permissible if the taking of such action would avoid the need for, or reduce the
amount of, any such additional amounts which may thereafter accrue and would
not, in the reasonable judgment of such Lender, be otherwise disadvantageous to
such Lender including changing the jurisdiction of its lending office. If such
additional amounts cannot be eliminated by such actions, the Company shall have
the right to replace the affected Lender hereunder with a Lender not so affected
which is reasonably acceptable to the Agent and the remaining Majority Lenders
upon payment to such affected Lender of outstanding principal, accrued interest
and fees and all other amounts due pursuant to this Agreement, including any
amounts payable hereunder and under sections 2.10, 2.13 and 2.14. No replacement
of a Lender shall be made pursuant hereto if, after giving affect thereto, any
amount shall be owing the replaced Lender hereunder.
(g) Without prejudice to the survival of any other agreement
of the Company under this Agreement, the agreements and obligations of the
Company, the Lenders or the Agent contained in this section 2.15 shall survive
the payment in full of principal and interest under this Agreement and under the
Notes.
(h) Notwithstanding the provisions of section 2.15(a) and
2.15(c) above, the Company shall not be required to pay any additional amounts
thereunder to a Lender if (i) the obligation to pay such additional amounts
would not have arisen but for a failure of the Lender to comply with
requirements described in section 2.15(e) and an exemption would have been
available to such Lender or (ii) the Lender shall not have furnished the Company
with such forms or shall not have taken such other action as reasonably may be
available to it under applicable tax laws and any applicable tax treaty to
obtain an exemption from, or reduction (to the lowest applicable rate) of
withholding of such United States federal income tax and an exemption would have
been available to such Lender; provided, however, that the Company's obligation
to pay such additional amounts shall be reinstated upon receipt of such
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forms or evidence that action with respect to obtaining such exemption or
reduction has been taken.
2.16 Other Fees. In addition to the other fees described herein:
(a) the Company shall pay to the Agent, for the ratable
account of the Lenders, a closing fee of $75,000 on the date of the execution of
this Agreement, which fee shall be fully earned on the Effective Date and shall
be refunded by a Lender only if such Lender withdraws from this Agreement
pursuant to Section 2.18(a); and
(b) the Company shall pay to Firstar, for the sole account
of Firstar, the fees set forth in that certain letter agreement dated as of
February 15, 1999 between Firstar and the Company.
2.17 Use of Proceeds. The Company shall use Loan proceeds solely
for the purpose of refinancing existing Indebtedness, corporate acquisitions,
working capital needs and for other general corporate and lawful purposes.
2.18 Lender Withdrawal Prior to Effective Date; Replacement
Lender.
(a) Each Lender may, by sending written notice to the Agent
and the Company on or prior to June 30, 1999, withdraw from this Agreement. In
such event, (i) all rights and obligations of the withdrawing Lender under this
Agreement shall immediately terminate and the withdrawing Lender shall be deemed
to no longer be a party to this Agreement and (ii) the total Revolving Loan
Commitment of the Lenders shall be reduced by the Revolving Loan Commitment of
the withdrawing Lender. The withdrawing Lender shall, at the time it sends
notice of withdrawal, refund to the Company such Lender's ratable share of the
closing fee paid by the Company pursuant to section 2.16(a). The withdrawing
Lender shall be entitled to the benefit of section 9.2 of this Agreement with
respect to matters arising prior to the date of such Lender's withdrawal.
(b) The Company and the Lenders may agree, on or before the
Effective Date, to add a new financial institution to this Agreement to replace
the withdrawing Lender. To do so, the Company, the Agent, the Lenders and the
new Lender shall execute an amendment or supplement to this Agreement which sets
forth the Revolving Loan Commitment of the new Lender and contains an agreement
that the new Lender will be bound by the provisions of this Agreement.
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Such amendment or supplement shall address such other matters as are mutually
agreeable to the Company, the Agent, the Lenders and the new Lender. Upon the
execution and delivery of such amendment or supplement, the new Lender shall be
a party to this Agreement and shall be a "Lender" for all purposes of the
Agreement and the total Revolving Loan Commitment of the Lenders shall be
increased by the Revolving Loan Commitment of the new Lender.
3. Representations and Warranties. In order to induce the Lenders to
make the Loans, the Company represents and warrants to the Lenders that:
3.1 Organization; Subsidiaries; Corporate Power. The Company is a
corporation validly existing under the laws of the State of Wisconsin and (a)
the Company has filed with the Wisconsin Department of Financial Institutions
the required annual report for its most recently completed report year, (b) the
Company is not the subject of a proceeding under Wisconsin Statutes section
180.1421 to cause its dissolution, (c) no filing has been made with the
Wisconsin Department of Financial Institutions of a decree of dissolution with
respect to the Company and (d) neither the shareholders nor the Board of
Directors of the Company have taken any action authorizing the liquidation or
dissolution of the Company. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of its business or the ownership of its properties requires
such qualification and in which the failure to so qualify would materially
adversely affect the business operations or financial condition of the Company.
Schedule 3.1 contains the name, state of incorporation and number of authorized
and outstanding shares of each class of stock of each Subsidiary and the number
thereof owned by the Company. Each Subsidiary is validly existing and in good
standing in the state of its incorporation and each is duly qualified as a
foreign corporation and is in good standing in every jurisdiction in which the
nature of its business or the ownership of its properties requires such
qualification and in which the failure to so qualify would materially adversely
affect the business operations or financial condition of such Subsidiary. The
Company and each Subsidiary has the corporate power to own its properties and
carry on its business as currently being conducted.
3.2 Authorization and Binding Effect. The execution and delivery
by the Company of the Loan Documents to which it is a party, and the performance
by the Company of its obligations thereunder, are within its corporate power,
have been duly authorized by proper corporate action on the part of the Company,
are not in violation of any existing law, rule or regulation of any governmental
agency or authority, any order or decision of any court, the Articles of
Incorporation or By-Laws of the Company or the terms of any agreement,
restriction or undertaking to which the Company is a party or by which it is
bound,
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and do not require the approval or consent of the shareholders of the Company,
any governmental body, agency or authority or any other person or entity. The
Loan Documents to which the Company is a party, when executed and delivered,
will constitute the valid and binding obligations of the Company enforceable in
accordance with their terms, except as limited by bankruptcy, insolvency or
similar laws of general application affecting the enforcement of creditors'
rights and except to the extent that general principles of equity might affect
the specific enforcement of such Loan Documents.
3.3 Financial Statements. The Company has furnished to the
Lenders (a) the consolidated balance sheet of the Company and its Consolidated
Subsidiaries as of December 31, 1997, and related statements of income, retained
earnings and cash flows for the year ended on that date, certified by Arthur
Anderson LLP, and (b) the consolidated balance sheet of the Company and its
Consolidated Subsidiaries dated September 30, 1998 and related statements of
income and retained earnings for the period ended on such date, prepared by the
Company. Such financial statements were prepared in accordance with GAAP
consistently applied throughout the periods involved, are correct and complete
and fairly present the consolidated financial condition of the Company and such
Subsidiaries as of such dates and the results of their operations for the
periods ended on such dates, subject, in the case of the interim statements, to
normal year-end adjustments. There has been no material adverse change in the
condition or prospects of the Company or its Consolidated Subsidiaries,
financial or otherwise, since the date of the most recent financial statement
furnished to the Lenders.
3.4 Litigation. Except for the matters described on Schedule 3.4,
there is no litigation or administrative proceeding pending or, to the knowledge
of the Company, threatened against or affecting the Company or any Subsidiary or
the properties of the Company or any Subsidiary which if determined adversely
would have a material adverse effect upon the business, financial condition or
properties of the Company or such Subsidiary.
3.5 Restricted Payments. The Company has not, since the date of
the most recent financial statements referred to in section 3.3, made any
Restricted Payments except for Restricted Payments permitted under section 6.1.
3.6 Indebtedness; No Default. Neither the Company nor any
Subsidiary has any outstanding Indebtedness, Guaranty Obligations or Lease
Obligations, except those permitted under sections 6.2, 6.3 and 6.4. There
exists no default nor has any act or omission occurred which, with the giving of
notice or the passage of time, would constitute a default under the provisions
of (a) any instrument evidencing such Indebtedness, Guaranty Obligations or
Lease Obligations or any agreement relating thereto or (b) any other agreement
or
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instrument to which the Company or any Subsidiary is a party and which is
material to the financial condition, business operations or prospects of the
Company or such Subsidiary.
3.7 Ownership of Properties; Liens and Encumbrances. The Company
and each Subsidiary has good and marketable title to all property, real and
personal, reflected on the most recent financial statement of the Company
furnished to the Lenders, and all property purported to have been acquired since
the date of such financial statement, except property sold or otherwise disposed
of in the ordinary course of business subsequent to such date; and all such
property is free of any lien, security interest, mortgage, encumbrance or charge
of any kind or any agreement not to grant a security interest, mortgage or lien,
except Permitted Liens. All owned and leased buildings and equipment of the
Company and each Subsidiary are in good condition, repair and working order
(reasonable wear and tear excepted) and, to the Company's knowledge, conform in
all material respects to all applicable laws, ordinances and regulations.
3.8 Tax Returns Filed. The Company and each Subsidiary has filed
when due all federal and state income and other tax returns which are required
to be filed. The Company has paid or made provision for the payment of all taxes
shown on such returns, and on all assessments received by it to the extent that
such taxes or assessments have become due, except any such taxes or assessments
which are being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP have been established. The Company has
no knowledge of any liabilities which may be asserted against it or any
Subsidiary upon audit of its federal or state tax returns.
3.9 Margin Stock. The Company will not use, directly or
indirectly, any part of the proceeds of any Note for the purpose of purchasing
or carrying, or to extend credit to others for the purpose of purchasing or
carrying, any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, or any amendments thereto. Neither the
Company nor any Subsidiary is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock.
3.10 Investment Company. The Company is not an "investment
company" or a company controlled by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
3.11 ERISA Liabilities. The Company has no knowledge of the
occurrence of any event with respect to any Plan which could result in a
liability of the Company or any Subsidiary or any member of the Controlled
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Group to any Plan, the Internal Revenue Service or to the Pension Benefit
Guaranty Corporation other than the payment of contributions in the normal
course or premiums (but not a late payment charge) pursuant to section 4007 of
ERISA. With respect to any Plan there is no (a) accumulated funding deficiency
within the meaning of section 412(a) of the Code; (b) nondeductible contribution
to any Plan within the meaning of section 4972 of the Code; (c) excess
contribution within the meaning of section 4979(c) of the Code which would
result in tax under section 4979(a) of the Code; (d) prohibited transaction
within the meaning of ERISA section 406 which is not exempt under ERISA section
408; (e) failure to make required contributions to any Multiemployer Plan; or
(f) withdrawal or partial withdrawal from any Multiemployer Plan within the
meaning of ERISA sections 4203 and 4205.
3.12 No Burdensome Agreements. Neither the Company nor any
Subsidiary is a party to or bound by any agreement, instrument or undertaking,
or subject to any other restriction (a) which materially adversely affects, or
is likely in the future to so affect, the property, financial condition or
business operations of the Company or any Subsidiary or (b) under or pursuant to
which the Company or any Subsidiary is or will be required to grant (or under
which any other Person may obtain) a security interest or lien upon any of its
property (other than a Permitted Lien), either upon demand or upon the
fulfillment of a condition, with or without demand.
3.13 Trademarks, Etc. The Company and each Subsidiary possesses
adequate trademarks, trade names, copyrights, patents, permits, service marks
and licenses, or rights thereto, for the present and planned future conduct of
their respective businesses substantially as now conducted, without any known
conflict with the rights of others which would result in a material adverse
effect on the Company or any Subsidiary.
3.14 Dump Sites. With respect to the period during which the
Company or any Subsidiary owned or occupied its real estate, and to the
Company's knowledge after reasonable investigation, with respect to the time
before the Company or any Subsidiary owned or occupied its real estate, no
person or entity has caused or permitted materials to be stored, deposited,
treated, recycled or disposed of on, under or at any real estate owned or
occupied by the Company or any Subsidiary, which materials, if known to be
present, would require cleanup, removal or some other remedial action under
Environmental Laws.
3.15 Tanks. There are not now, to the Company's knowledge after
reasonable investigation, tanks or other facilities on, under, or at any real
estate owned or occupied by the Company or any Subsidiary which
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contain materials which, if known to be present in soils or ground water, would
require cleanup, removal or some other remedial action under Environmental Laws.
3.16 Other Environmental Conditions. There are no conditions
existing which would subject the Company or any Subsidiary to damages,
penalties, injunctive relief or cleanup costs under any Environmental Laws or
which require or are likely to require cleanup, removal, remedial action or
other response pursuant to Environmental Laws by the Company or any Subsidiary.
3.17 Changes in Laws. To the Company's knowledge after reasonable
investigation, there are no proposed or pending changes in Environmental Laws
that would adversely affect the Company or any Subsidiary.
3.18 Environmental Judgments, Decrees and Orders. Neither the
Company nor any Subsidiary is subject to any judgment, decree, order or citation
related to or arising out of Environmental Laws. Except as set forth in Schedule
3.18, neither the Company nor any Subsidiary has been named as a potentially
responsible party by a governmental body or agency in a matter arising under any
Environmental Law.
3.19 Environmental Permits and Licenses. The Company and each
Subsidiary has all permits, licenses and approvals required under Environmental
Laws.
3.20 Year 2000. Except as set forth on Schedule 3.20 attached
hereto, the information technology systems used by the Company and its
Subsidiaries in their business operations accurately process date/time data
(including without limitation calculating, comparing and sequencing) from, into
and between the twentieth and twenty-first centuries, the year 1999 and 2000 and
leap year calculations.
3.21 Accuracy of Information. All information furnished by the
Company to the Lenders is true, correct and complete in all material respects as
of the date furnished and does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make such information not
misleading.
4. Conditions for Borrowing. The Lenders' obligations to make Loans is
subject to the satisfaction, on or before the following Borrowing Dates, of the
following conditions:
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4.1 On or Before the Date of Execution of this Agreement. The
Agent shall have received the following, all in form, detail and content
satisfactory to the Lenders:
(a) Certified Articles of Incorporation. A copy of the
Articles of Incorporation of the Company, certified as of a recent date by the
Wisconsin Department of Financial Institutions.
(b) Certificates of Status and Good Standing. Certificates
of status and good standing with respect to the Company, issued as of a recent
date by the Secretary of State (or comparable governmental authority) of each
state in which the Company is incorporated or is qualified to transact business
as a foreign corporation.
(c) Closing Certificate. Copies, certified by the Secretary
of the Company to be true and correct and in full force and effect on the
Closing Date, of (i) the By-Laws of the Company; (ii) resolutions of the Board
of Directors of the Company authorizing the execution and delivery of the Loan
Documents to which the Company is a party; and (iii) a statement containing the
names and titles of the officer or officers of the Company authorized to sign
such Loan Documents, together with true signatures of such officers.
(d) Proceedings Satisfactory. Such other documents as the
Lenders may reasonably request; and all proceedings taken in connection with the
transactions contemplated by this Agreement, and all instruments, authorizations
and other documents applicable thereto, shall be satisfactory to the Lenders.
(e) Fees. The fees set forth in section 2.16 hereof.
4.2 On or Before the Effective Date. The Agent shall have
received the following, in form, detail and content satisfactory to the Lenders:
(a) Notes. The Revolving Notes, duly executed by the
Company.
(b) Personal Property Searches. Searches of the appropriate
public offices demonstrating that no security interest, tax lien, judgment lien
or other charge or encumbrance is of record affecting the Company or its
properties except those which are acceptable to the Agent.
(c) Financial Statements. Financial statements of the
Company for the year ended December 31, 1998 and for the quarter ended
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March 31, 1999 which comply with the requirements of sections 5.1 and 5.2,
respectively.
(d) Termination of GE Capital Financing. Evidence that the
Company has terminated its financing arrangements with GE Capital Corporation
("GECC") as of the Effective Date and paid to GECC all amounts owed thereunder
together with GECC's release of its security interests in and liens upon the
properties of the Company and the agreement of GECC to provide such termination
statements, mortgage satisfactions and other, similar documents as may
reasonably be requested to evidence such release.
(e) Updated Closing Certificate. A certificate dated the
Effective Date and signed by the Secretary or Assistant Secretary of the Company
certifying that (i) the Articles of Incorporation and By-Laws of the Company
have not been amended since the date of the Closing Certificate furnished
pursuant to section 4.1(c), (ii) the Board of Directors' resolution attached to
such Closing Certificate has not been amended or revoked and is in full force
and effect and (iii) the officers of the Company who signed such Closing
Certificate continue to hold the office or offices set forth opposite their
names in such Closing Certificate.
(f) Bring-Down Certificate. A certificate dated the
Effective Date and signed by the President or any Vice President of the Company,
certifying that (i) the representations and warranties of the Company contained
in section 3 hereof are true and correct as of the Effective Date and (ii) no
Default or Event of Default exists as of the Effective Date.
(g) Opinion of Counsel. An opinion from Wayne E. Larsen,
Esq., general counsel of the Company, in the form of Exhibit D attached hereto.
(h) Proceedings Satisfactory. Such other documents as the
Lenders may reasonably request; and all proceedings taken in connection with the
transactions contemplated by this Agreement, and all instruments, authorizations
and other documents applicable thereto, shall be satisfactory to the Lenders.
4.3 On or Before Each Subsequent Borrowing Date:
(a) Borrowing Procedure. The Company shall have complied
with the borrowing procedure specified in section 2.3.
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(b) Representations and Warranties True and Correct. The
representations and warranties contained in section 3 hereof and in the other
Loan Documents shall be true and correct on and as of the relevant Borrowing
Date except (i) that the representations and warranties contained in section 3.3
shall apply to the most recent financial statements delivered pursuant to
sections 5.1 and 5.2 and (ii) for changes contemplated or permitted by this
Agreement.
(c) No Default. There shall exist on that Borrowing Date no
Default or Event of Default.
(d) Proceedings and Documentation. The Lenders shall have
received such instruments and other documents as they may reasonably request in
connection with the making of such Loans, and all such instruments and documents
shall be in form and content satisfactory to the Lenders.
5. Affirmative Covenants. The Company covenants that it will, at all
times on and after the Effective Date until the Lenders' Revolving Loan
Commitment has terminated or expired, and the Notes, and all fees and expenses
payable hereunder, have been paid in full:
5.1 Annual Financial Statement. Furnish to the Agent within 90
days after the end of each fiscal year of the Company a copy for each Lender of
a balance sheet of the Company and its Consolidated Subsidiaries as of the close
of such fiscal year and related statements of income, retained earnings and cash
flows for such year, setting forth in each case in comparative form
corresponding figures from the preceding annual audit, all in reasonable detail
and satisfactory in scope to the Lenders, prepared in accordance with GAAP
applied on a consistent basis, accompanied by the unqualified opinion of a firm
of independent certified public accountants selected by the Company and
satisfactory to the Lenders. Each annual financial statement shall be
accompanied by a written statement from the accounting firm which prepared the
same containing a computation showing whether or not the Company is in
compliance with the financial covenants contained in section 6. All such
financial statements, and the financial statements referred to in section 5.2,
shall be furnished in consolidated form for the Company and all Consolidated
Subsidiaries which it may at the time have.
5.2 Interim Financial Statements. Furnish to the Agent within 45
days after the end of each fiscal quarter of the Company a copy for each Lender
of the consolidated balance sheet of the Company and its Consolidated
Subsidiaries as of the end of such fiscal quarter, together with the related
statements of income and retained earnings for the period from the beginning of
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the fiscal year to the end of such period, prepared in the manner set forth in
section 5.1 for the annual statements, certified, subject to audit and normal
year-end adjustments, to be accurate and complete by an authorized financial
representative of the Company and accompanied by the certificate of such
representative (i) containing computations showing whether or not the Company is
in compliance with the financial covenants set forth in section 6 and (ii) to
the effect that there exists no Default or Event of Default or, if any Default
or Event of Default exists, specifying the nature thereof, the period of
existence thereof and what action the Company proposes to take with respect
thereto.
5.3 Management Letters. Furnish to the Agent, promptly upon
receipt, copies for each Lender of all management letters and detailed audit
reports submitted to the Company by its independent certified public
accountants.
5.4 Other Financial Information. Furnish to the Agent, as soon as
available, copies for each Lender of all reports submitted to the shareholders
of the Company in their capacity as shareholders, and such other financial
information as any Lender may from time to time reasonably request.
5.5 Books and Records; Inspection. Keep and cause each Subsidiary
to keep proper, complete and accurate books of record and account and permit any
representatives of the Agent or any Lender to visit and inspect any of the
properties and examine and copy any of the books and records of the Company or
any Subsidiary at any reasonable time and as often as may reasonably be desired.
5.6 Insurance. Maintain and cause each Subsidiary to maintain
insurance coverage as may be required by law but in any event not less than
insurance coverage, in the forms, amounts and with companies, which would be
carried by prudent management in connection with similar properties and
businesses. Without limiting the foregoing, the Company will and will cause each
Subsidiary to (a) keep all its physical property insured against fire and
extended coverage risks in amounts and with deductibles at least equal to those
generally maintained by businesses engaged in similar activities in similar
geographic areas; (b) maintain all such worker's compensation and similar
insurance as may be required by law; and (c) maintain, in amounts and with
deductibles at least equal to those generally maintained by businesses engaged
in similar activities in similar geographic areas, general public liability
insurance against claims for bodily injury, death or property damage occurring
on, in or about the properties of the Company or such Subsidiary, business
interruption insurance and product liability insurance.
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5.7 Condition of Property. Keep and cause each Subsidiary to keep
its properties (whether owned or leased) in good condition, repair and working
order (reasonable wear and tear excepted).
5.8 Payment of Taxes. Pay and discharge, and cause each
Subsidiary to pay and discharge, all lawful taxes, assessments and governmental
charges upon it or against its properties prior to the date on which penalties
are attached thereto, unless and to the extent only that the same shall be
contested in good faith and by appropriate proceedings by the Company or the
appropriate Subsidiary and appropriate reserves with respect thereto are
established and maintained in accordance with GAAP.
5.9 Compliance with Law. Do and, except as permitted under
section 6.6, cause each Subsidiary to do all things necessary to (a) maintain
its corporate existence in its state of incorporation and maintain its
qualification as a foreign corporation in any other state where the ownership of
property or the conduct of business make qualification necessary and where the
failure to so qualify would have a material adverse effect upon its business,
operations or financial condition, (b) preserve and keep in full force and
effect its rights and franchises necessary to continue its business and (c)
comply with all applicable laws, regulations and ordinances, including all
applicable Environmental Laws, except those being contested in good faith and
involving no possibility of criminal liability, if and to the extent that the
failure to so comply would have a material adverse affect upon the Company and
its Subsidiaries taken as a whole.
5.10 ERISA Certificate. Comply and cause each Subsidiary to
comply with all applicable requirements of ERISA for each Plan and furnish to
the Agent, as soon as possible and in any event within 30 days after the Company
shall have obtained knowledge that a Reportable Event has occurred with respect
to any Plan, a certificate of an officer of the Company setting forth the
details as to such Reportable Event and the action which the Company proposes to
take with respect thereto, and a copy of each notice of a Reportable Event sent
to the Pension Benefit Guaranty Corporation by the Company and, with respect to
a Multiemployer Plan, furnish to the Agent as soon as possible after the Company
receives notice or obtains knowledge that the Company or any member of the
Controlled Group may be subject to withdrawal liability, or required to post a
bond to avoid such liability, to a Multiemployer Plan, a certificate of an
officer of the Company setting forth the details as to such event and the
actions which the Company plans to take with respect thereto.
5.11 Compliance with Other Loan Documents. Timely comply with all
of its obligations under the other Loan Documents.
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5.12 Notice of Default or Claimed Default. Furnish to the Agent
(a) immediately upon becoming aware of any Default or Event of Default, a
written notice specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto; (b)
immediately upon becoming aware that the holder of any other Indebtedness issued
or assumed by the Company or any Subsidiary, or the lessor under any lease as to
which the Company or any Subsidiary is the lessee, has given notice or has taken
any action with respect to a claimed default thereunder, or under any agreement
under which any such Indebtedness was issued or secured, a written notice
specifying the notice given or action taken, the nature of the claimed default
and what action the Company is taking or proposes to take with respect thereto;
(c) immediately upon receipt, copies of any correspondence, notice, pleading,
citation, indictment, complaint, order, decree or other document from any
governmental authority or court asserting or alleging a circumstance or
condition which requires or may require a financial contribution by the Company
or a cleanup, removal, remedial action or other response by or on the part of
the Company or any Subsidiary under Environmental Laws or which seeks damages or
civil, criminal or punitive penalties from the Company or any Subsidiary for an
alleged violation of Environmental Laws which, in any such case, is likely to
have a material adverse effect on the financial condition or business operations
of the Company or any Subsidiary; and (d) written notice of any condition or
event which would make the warranties contained in section 3 inaccurate, as soon
as the Company becomes aware of such condition or event.
6. Negative Covenants. The Company covenants that, without the prior
written consent of the Majority Lenders, it will not, and will not permit any
Subsidiary to, at any time on or after the Effective Date until the Lenders'
Revolving Loan Commitment has terminated or expired, and the Notes, and all fees
and expenses payable hereunder, have been paid in full:
6.1 Restricted Payments. Make any Restricted Payments except that
so long as no Default or Event of Default exists the Company may make Restricted
Payments if, after giving effect thereto, the aggregate amount of Restricted
Payments made during the period after December 31, 1997, to and including the
date of making the Restricted Payment in question, does not exceed 50% of the
Company's Net Earnings for such period computed on a cumulative basis for said
entire period.
6.2 Limitations on Indebtedness. Create, incur, assume or permit
to exist any Indebtedness except (a) Indebtedness owed to the Lenders hereunder;
(b) Indebtedness secured by Permitted Liens; (c) Subordinated Debt; (d)
Indebtedness permitted under section 6.7(e); and (e) Indebtedness arising in
connection with a Permitted Swap Contract.
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6.3 Limitations on Guaranty Obligations. Create, incur, assume or
permit to exist any Guaranty Obligations except for (a) the endorsement of
negotiable or nonnegotiable instruments for collection in the ordinary course of
business, and (b) Guaranty Obligations in favor of a Lender; and (c) Guaranty
Obligations described on Schedule 6.3 existing on the date of this Agreement,
provided that the principal amount thereof shall not be increased.
6.4 Limitations on Lease Obligations. Permit the aggregate Lease
Obligations of the Company and its Subsidiaries to exceed $1,000,000 due in any
fiscal year of the Company.
6.5 Limitations on Liens and Encumbrances. Create, assume or
permit to exist any mortgage, security interest, lien or charge of any kind,
including any restriction against mortgages, security interests, liens or
charges upon any of its other property or assets, whether now owned or hereafter
acquired, except for Permitted Liens.
6.6 Limitations on Mergers, Etc. Merge or consolidate with or
into any other corporation or entity or sell, lease, transfer or otherwise
dispose of in a single transaction or a series of transactions, all or a
substantial part of its assets (other than sales made in the ordinary course of
business), except that any Subsidiary may merge into, or transfer all or a
substantial part of its assets to the Company or to a Subsidiary wholly owned by
the Company.
6.7 Limitations on Acquisitions, Advances and Investments.
Acquire stock issued by a corporation, all or substantially all of the assets of
any Person, an ownership interest in any limited liability company or any
partnership or joint venture interest or make any loan, advance or extension of
credit to any Person except (a) the purchase of United States government bonds
and obligations; (b) extensions of credit to customers in the ordinary course of
business of the Company or any Subsidiary; (c) the purchase of bank certificates
of deposit issued by a bank having a long-term certificate of deposit rating of
A or better from Standard & Poor's Rating Services (or an equivalent rating from
another national rating agency), (d) commercial paper with a maturity not
exceeding 90 days; (e) investments of the Company in any Subsidiary in existence
on the Closing Date, and loans and advances to wholly owned Subsidiaries of the
Company and advances by any Subsidiary to the Company or to another wholly owned
Subsidiary; (f) deposits in deposit accounts at banks; (g) investments in bank
repurchase agreements; (h) loans and advances to employees and agents in the
ordinary course of business for travel and entertainment expenses and similar
items; (i) partnership and joint ventures entered into in the ordinary course of
business; (j) nonhostile acquisitions of the assets or 100% of the stock or
other
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ownership interest of a Person; and (k) the purchase by the Company of its stock
to the extent permitted under section 6.1.
6.8 Lines of Business. Engage or permit any Subsidiary to engage
in any business other than those in which it is now engaged and any business
directly related thereto if, as a result thereof, the general nature of the
businesses engaged in by the Company and its Subsidiaries on a consolidated
basis would be substantially changed from the general nature of their businesses
as of the Closing Date.
6.9 Sales of Receivables. Discount or sell with recourse, or sell
for less than the face amount thereof, any of its notes or accounts receivable.
6.10 Sales of Subsidiaries. Sell or otherwise dispose of any
stock (or other ownership interest), or securities convertible into stock (or
other ownership interest), of any Subsidiary except to the Company or to a
Subsidiary wholly owned by the Company.
6.11 Sale and Leaseback. Sell or transfer any fixed assets and
then or thereafter rent or lease as lessee any such assets.
6.12 Indebtedness to Capitalization Ratio. Permit the
Indebtedness to Capitalization Ratio to exceed 0.55 to 1.0 at any time.
6.13 Interest Coverage Ratio. Permit the Interest Coverage Ratio
to be less than 3.00 to 1.00 at any time.
6.14 Indebtedness to EBITDA Ratio. Permit the Indebtedness to
EBITDA Ratio to exceed 2.00 to 1.0 at any time.
6.15 Transactions with Affiliates. Enter into or be a party to
any transaction with any Affiliate except as otherwise provided herein or in the
ordinary course of business and upon fair and reasonable terms which are no less
favorable than a comparable arm's length transaction with an entity which is not
an Affiliate.
7. Events of Default; Remedies.
7.1 Events of Default. The occurrence of any of the following
shall constitute an Event of Default:
(a) Failure to Pay Note. The Company fails to pay (a)
principal on any Note when due, whether at a stated payment date, or a date
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fixed by the Company for prepayment or by acceleration, or (b) interest on any
Note, or any fee or other amount payable hereunder, when due and such default in
payment of interest, fees or other amounts continues uncured for a period of
five days; or
(b) Falsity of Representations and Warranties. Any
representation or warranty made in any Loan Document or in any writing furnished
in connection with or pursuant to this Agreement or any other Loan Document is
false in any material respect on the date as of which made or as of which the
same is to be effective; or
(c) Breach of Covenants. The Company fails to comply with
any term, covenant or agreement contained in section 5 or 6 hereof; or
(d) Breach of Other Provisions. The Company fails to comply
with any other agreement contained herein and such default continues for a
period of 30 days after written notice to the Company from the Agent; or
(e) Default Under Other Agreements. The Company or any
Subsidiary fails to pay when due any other Indebtedness issued or assumed by the
Company or such Subsidiary or fails to comply with the terms of any agreement
under which such Indebtedness was created and such default continues beyond the
period of grace, if any, therein provided; or
(f) Entry of Final Judgments. A final judgment is entered
against the Company or any Subsidiary which, together with all unsatisfied final
judgments entered against the Company and all Subsidiaries, exceeds the sum of
$250,000, and such judgment shall remain unsatisfied or unstayed for a period of
60 days after the entry thereof; or
(g) ERISA Liability. Any event in relation to any Plan which
the Lenders determine in good faith could result in any of the occurrences set
forth in section 3.11 above; or
(h) Default Under Other Loan Documents. An "Event of
Default" (as defined therein) shall occur under any other Loan Document or the
party to any other Loan Document fails to timely comply with any term, covenant
or agreement contained therein; or
(i) Change In Control. Any Change in Control shall occur; or
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(j) Insolvency, Failure to Pay Debts or Appointment of
Receiver, Etc. The Company or any Subsidiary becomes insolvent or the subject of
state insolvency proceedings, fails generally to pay its debts as they become
due or makes an assignment for the benefit of creditors; or a receiver, trustee,
custodian or other similar official is appointed for, or takes possession of any
substantial part of the property of, the Company or any Subsidiary; or
(k) Subject of United States Bankruptcy Proceedings. The
taking of corporate action by the Company or any Subsidiary to authorize such
organization to become the subject of proceedings under the United States
Bankruptcy Code; or the execution by the Company or any Subsidiary of a petition
to become a debtor under the United States Bankruptcy Code; or the filing of an
involuntary petition against the Company or any Subsidiary under the United
States Bankruptcy Code which remains undismissed for a period of 60 days; or the
entry of an order for relief under the United States Bankruptcy Code against the
Company or any Subsidiary.
7.2 Remedies. Upon the occurrence of any of the events described
in sections 7.1(a) through 7.1(j), inclusive, the Agent shall, at the direction
of the Majority Lenders, at the same or different times, take any of the
following actions:
(a) declare the Lenders' Revolving Loan Commitments to be
terminated, whereupon the Lenders' Revolving Loan Commitments shall immediately
terminate; or
(b) declare the Loans, and all accrued interest thereon, to
be immediately due and payable, whereupon the Loans, all accrued interest
thereon and all other amounts owing or payable under the Loan Documents shall be
immediately due and payable without presentment, demand, protest or notice of
any kind, all of which are expressly waived by the Company.
Promptly following the making of such declaration, the Agent
shall give notice thereof to the Company and each Lender but the failure to give
such notice shall not impair any of the effects of such declaration. Upon the
occurrence of any of the events described in section 7.1(k), the Lenders'
Revolving Loan Commitments shall immediately terminate, and the Notes, together
with accrued interest thereon and all other amounts owing or payable under the
Loan Documents shall be immediately due and payable without presentment, demand,
protest or notice of any kind, all of which are expressly waived by the Company.
8. The Agent.
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8.1 Appointment and Duties of the Agent. The Lenders hereby
appoint Firstar, subject to the terms and conditions of this section 8, as the
Agent for the Lenders under and for purposes of this Agreement and the other
Loan Documents. Each of the Lenders hereby irrevocably, authorizes, and directs
the Agent to take such action on its behalf and to exercise such powers
hereunder as are delegated to the Agent herein, together with such powers as are
reasonably incident thereto, in connection with the administration of and
enforcement of any rights or remedies with respect to this Agreement and the
other Loan Documents. The Agent shall use reasonable diligence to examine the
face of each document received by it hereunder to determine whether such
document, on its face, appears to be what it purports to be. However, the Agent
shall not be under any duty to examine into or pass upon the validity or
genuineness of any documents received by it hereunder and the Agent shall be
entitled to assume that any of the same which appears regular on its face is
genuine and valid and what it purports to be.
8.2 Discretion and Liability of the Agent. Subject to sections
8.3, 8.5 and 9.12 hereof, the Agent shall be entitled to use its discretion with
respect to exercising or refraining from exercising any rights which may be
vested in it by, or with respect to, taking or refraining from taking any action
or actions which it may be able to take under or in respect of this Agreement
and the other Loan Documents. Neither the Agent nor any of its directors,
officers, employees, agents or representatives shall be liable for any action
taken or not taken under any Loan Document in the absence of gross negligence or
willful misconduct.
8.3 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to a failure by the Company to pay principal, interest or fees
required to be paid to the Agent, unless the Agent has actual knowledge of such
facts or has received notice from a Lender or the Company in writing that such
Lender or the Company considers that a Default or Event of Default has occurred
and is continuing and which specifies the nature thereof.
If the Agent shall acquire actual knowledge of or receive
notice from a Lender or the Company that a Default or Event of Default has
occurred, the Agent shall promptly notify the Lenders and the Company of such
Default or Event of Default.
8.4 Consultation. The Agent in good faith may consult with legal
counsel or other advisors selected by it and shall be entitled to fully rely
upon any opinion of such counsel or other advisor in connection with any action
taken or not taken by the Agent in accordance with such opinion.
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8.5 Communications To and From the Agent. Upon any occasion
requiring or permitting an approval, consent, waiver, election or other action
on the part of the Lenders, unless action by the Agent alone is expressly
permitted hereunder, action shall be taken by the Agent for and on behalf or for
the benefit of the Lenders upon the direction of the Majority Lenders or, if
required under section 9.12, all the Lenders. The Company may rely upon any
communication from the Agent hereunder and need not inquire into the propriety
of or authorization for such communication. Upon receipt by the Agent from the
Company or any Lender of any communication calling for an action on the part of
the Lenders, the Agent will, in turn, promptly inform the other Lenders in
writing of the nature of such communication. In addition, the Agent shall
forward to each Lender, promptly after receipt, copies of information provided
by the Company pursuant to the requirements of the Loan Documents including,
without limitation, the financial statements referred to in sections 5.1 and
5.2, and the notices referred to in section 5.12.
8.6 Limitations of Agency. The Agent will act under the Loan
Documents solely as the agent of the Lenders and only to the extent specifically
set forth in the Loan Documents and will, under no circumstances, be considered
to be a fiduciary of any nature whatsoever in respect of any other Person. The
relationship between the Agent and the Lenders is that of agent and principal
only and the Agent shall not be deemed to be a trustee or fiduciary for any
Lender. The Agent may generally engage in any kind of banking or trust business
with the Company as if it were not the Agent.
8.7 No Representation or Warranty. No Lender (including the
Agent) makes to any other Lender any representation or warranty, express or
implied, or assumes any responsibility with respect to the execution, validity
or enforceability of this Agreement or the other Loan Documents.
8.8 Lender Credit Decision. Each Lender acknowledges that it has,
independent of and without reliance upon any other Lender (including the Agent)
or any information provided by any other Lender (including the Agent) and based
upon the financial statements of the Company and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independent of and without reliance upon any other Lender (including the
Agent) and based upon such documents and information as it shall deem
appropriate at that time, continue to make its own credit decision in taking or
not taking action under this Agreement and the other Loan Documents.
8.9 Indemnity. Each Lender hereby indemnifies (which indemnity
shall survive the termination of this Agreement) the Agent, pro rata
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according to such Lender's Percentage, from and against any and all liabilities,
obligations, losses, damages, claims, costs, or expenses of any kind or nature
whatsoever including reasonable attorneys' fees which may at any time be imposed
on, incurred by, or asserted against, the Agent in any way related to or arising
out of this Agreement or the other Loan Documents and as to which the Agent is
not reimbursed by the Company; provided, however, that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, claims, costs or expenses which are determined by a court of competent
jurisdiction in a final proceeding to have resulted solely from the Agent's
gross negligence or willful misconduct. The Agent shall not be required to take
any action hereunder or under any other Loan Document, or to prosecute or defend
any suit in respect of the transactions contemplated hereby, unless it is
indemnified hereunder to its satisfaction. If any indemnity in favor of the
Agent shall be or become, in the Agent's determination, inadequate, the Agent
may call for additional indemnification from the Lenders and cease to do the
acts indemnified against hereunder until such additional indemnity is given.
8.10 Resignation or Removal of Agent; Successor Agent. The Agent
may resign as such at any time upon at least 30 days' prior notice to the
Company and all Lenders. The Agent may be removed at any time by the Majority
Lenders upon at least 30 days' prior notice by the Majority Lenders to the
Company and the Agent, but only for cause consisting of its gross negligence or
willful misconduct or following a declaration of insolvency by the appropriate
regulators. If the Agent at any time shall resign or be removed, the Majority
Lenders may appoint another Lender as a successor Agent which shall thereupon
become the Agent hereunder. If no successor Agent shall have been so appointed
by the Majority Lenders, and shall have accepted such appointment, within 30
days after the retiring Agent gives notice of resignation, then the retiring
Agent may, on behalf of the Lenders, appoint the successor Agent, which shall be
one of the Lenders. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall be entitled to receive from the
retiring Agent such documents of transfer and such assignments as such successor
Agent may reasonably request, and shall thereupon succeed to and become vested
with all rights, powers, privileges and duties of the retiring Agent and the
retiring Agent shall be discharged from its duties and obligations as Agent
under this Agreement.
9. Miscellaneous.
9.1 Survival of Representations and Warranties. The Company's
representations and warranties contained in section 3 hereof shall survive
closing and execution and delivery of the Notes.
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9.2 Indemnification. The Company agrees to defend, indemnify and
hold harmless the Agent, the Lenders and their respective directors, officers,
employees and agents from and against any and all loss, cost, expense or
liability (including reasonable attorneys' fees) incurred in connection with any
and all claims or proceedings (whether brought by a private party or
governmental agency) as a result of, or arising out of or relating to: (a)
bodily injury, property damage, abatement or remediation, environmental damage
or impairment or any other injury or damage resulting from or relating to any
hazardous or toxic substance or contaminated material (as determined under
Environmental Laws) located on or migrating into, from or through property
previously, now or hereafter owned or occupied by the Company, which the Agent
or any Lender may incur due to the making of the Loans, or otherwise;
(b) any transaction financed or to be financed, in whole or
in part, directly or indirectly, with the proceeds of any Loan; or
(c) the entering into, performance of and exercise of their
rights under this Agreement or any other Loan Document by the Agent, and the
Lenders.
This indemnity will survive the repayment of the Loans.
9.3 Expenses. The Company agrees, whether or not the transaction
hereby contemplated shall be consummated, to pay on demand (a) all out-of-pocket
expenses incurred by the Agent or any Lender in connection with the negotiation,
execution, administration, amendment or enforcement of this Agreement and the
other Loan Documents, including reasonable counsel fees and expenses (provided
that the maximum amount of fees and expenses incurred by each Lender in
connection with the negotiation, execution, administration and amendment of this
Agreement and the other Loan Documents to be reimbursed by the Company shall not
exceed $1,000), (b) any taxes (including any interest and penalties relating
thereto) payable by any Lender (other than taxes based upon such Lender's net
income) on or with respect to the transactions contemplated by this Agreement
(the Company hereby agreeing to indemnify each Lender with respect thereto) and
(c) all out-of-pocket expenses, including reasonable counsel fees and expenses,
incurred by the Agent or any Lender in connection with any litigation,
proceeding or dispute in any way related to the Agent's and the Lenders'
relationships with the Company, whether arising hereunder or otherwise, other
than in connection with a successful action brought by the Company against a
42
<PAGE>
Lender for such Lender's breach of its obligations to the Company. The
obligations of the Company under this section will survive payment of the Loans.
9.4 Notices. All notices provided for herein shall be in writing
and shall be (a) delivered; (b) sent by express or first-class mail; or (c) sent
by facsimile transmission and confirmed in writing provided to the recipient in
a manner described in (a) or (b), and, if to the Agent or a Lender, addressed to
it at the address set forth below its signature, and if to the Company,
addressed to it at 5481 South Packard Avenue, Cudahy, Wisconsin 53110,
Attention: Wayne E. Larsen, Vice President Law/Finance, Facsimile No.
414-747-2890, or to such other address with respect to any party as such party
shall notify the others in writing; such notices shall be deemed given when
delivered or mailed or so transmitted.
9.5 Assignments and Participations.
(a) Any Lender may, with the written consent of the Company
(at all times other than during the existence of an Event of Default) and the
Agent, which consents shall not be unreasonably withheld, at any time assign and
delegate to one or more Eligible Assignees (provided that no written consent of
the Company or the Agent shall be required in connection with any assignment and
delegation by a Lender to an Eligible Assignee that is an Affiliate of such
Lender) (each an "Assignee") all, or any ratable part of all, of the Loans, the
Revolving Loan Commitment and the other rights and obligations of such Lender
hereunder, in a minimum amount of $10,000,000; provided, however, that the
Company and the Agent may continue to deal solely and directly with such Lender
in connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses and
related information with respect to the Assignee, shall have been given to the
Company and the Agent by such Lender and the Assignee; (ii) such Lender and its
Assignee shall have delivered to the Company and the Agent an Assignment and
Acceptance in the form of Exhibit E (an "Assignment and Acceptance") together
with any Note subject to such assignment and (iii) the assignor Lender or
Assignee has paid to the Agent a processing fee in an amount specified by the
Agent not exceeding $3,500 and has agreed to indemnify and hold the Company
harmless from and against any and all costs, expenses and liabilities resulting
from such assignment.
(b) From and after the date that the Agent notifies the
assignor Lender that it has received (and provided its consent with respect to)
an executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Lender
43
<PAGE>
under the Loan Documents, and (ii) the assignor Lender shall, to the extent that
rights and obligations hereunder and under the other Loan Documents have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice by
the Agent that it has received an executed Assignment and Acceptance and payment
of the processing fee, (and provided that it consents to such assignment in
accordance with subsection 9.5(a)), the Company shall execute and deliver to the
Agent, a new Note evidencing such Assignee's assigned Revolving Loan Commitment
and, if the assignor Lender has retained a portion of its Loans and its
Revolving Loan Commitment, a replacement Note in the principal amount of the
Revolving Loan Commitment retained by the assignor Lender (such Note to be in
exchange for, but not in payment of, the Note held by such Lender). Immediately
upon each Assignee's making its processing fee payment under the Assignment and
Acceptance, this Agreement shall be deemed to be amended to the extent, but only
to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Revolving Loan Commitments arising therefrom. The
Revolving Loan Commitment allocated to each Assignee shall reduce the Revolving
Loan Commitment of the assigning Lender pro tanto.
(d) Any Lender may, at its option, with the written consent
of the Company (at all times other than during the existence of an Event of
Default) sell to another financial institution or institutions participating
interests in a Note payable to such Lender and, in connection with each such
sale, and thereafter, disclose to the purchaser or prospective purchaser of each
such interest financial and other information concerning the Company. The
Company agrees that if amounts outstanding under this Agreement or a Note are
due and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each such purchaser shall be deemed
to have, to the extent permitted by applicable law, the right of setoff in
respect of its participating interest in amounts owing under this Agreement and
such Note to the same extent as if the amount of its participating interest were
owed directly to it. The Company further agrees that each such purchaser shall
be entitled to the benefits of sections 2.13 and 2.14 with respect to its
participation in the selling Lender's Revolving Loan Commitment; provided that
no such purchaser shall be entitled to receive any greater amount pursuant to
that section than the Lender would have been entitled to receive if no such sale
had occurred.
9.6 Titles. The titles of sections in this Agreement are for
convenience only and do not limit or construe the meaning of any section.
44
<PAGE>
9.7 Parties Bound; Waiver. The provisions of this Agreement shall
inure to the benefit of and be binding upon any successor of any of the parties
hereto and shall extend and be available to any holder of a Note; provided that
the Company's rights under this Agreement are not assignable. No delay on the
part of the Agent or any Lender in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, and no single or partial exercise
of any right, power or privilege hereunder shall preclude other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein specified are cumulative and not exclusive of any
rights or remedies which the Agent or a Lender would otherwise have.
9.8 Governing Law. This Agreement is being delivered in and shall
be deemed to be a contract governed by the laws of the State of Wisconsin and
shall be interpreted and enforced in accordance with the laws of that state
without regard to the principles of conflicts of laws.
9.9 Submission to Jurisdiction; Service of Process. As a material
inducement to the Agent and the Lenders to enter into this Agreement:
(a) THE COMPANY AGREES THAT ALL ACTIONS OR PROCEEDINGS IN
ANY MANNER RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS MAY BE BROUGHT ONLY IN COURTS OF THE STATE OF WISCONSIN LOCATED IN
MILWAUKEE COUNTY OR THE FEDERAL COURT FOR THE EASTERN DISTRICT OF WISCONSIN AND
THE COMPANY CONSENTS TO THE JURISDICTION OF SUCH COURTS. THE COMPANY WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH COURT AND ANY
RIGHT IT MAY HAVE NOW OR HEREAFTER HAVE TO CLAIM THAT ANY SUCH ACTION OR
PROCEEDING IS IN AN INCONVENIENT COURT; and
(b) The Company consents to the service of process in any
such action or proceeding by certified mail sent to the address specified in
section 9.4.
Nothing contained herein shall affect the right of the Agent
or the Lenders to serve process in any other manner permitted by law.
9.10 Waiver of Jury Trial. THE COMPANY, THE AGENT AND THE LENDERS
HEREBY KNOWINGLY AND VOLUNTARILY WAIVE THE RIGHT EACH OF THEM MAY HAVE TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM BASED ON OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, ANY COURSE OF
CONDUCT, COURSE OF DEALING,
45
<PAGE>
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ANY OTHER ACTION OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT TO THE AGENT AND THE LENDERS TO ENTER INTO
THIS AGREEMENT.
9.11 Limitation of Liability. THE COMPANY, THE AGENT AND THE
LENDERS HEREBY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO CLAIM OR RECOVER FROM ANY
OTHER PARTY ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES, OF WHATEVER NATURE, OTHER THAN ACTUAL DAMAGES.
9.12 Amendments. No provision of this Agreement or the other Loan
Documents may be amended, modified, supplemented, changed, waived, discharged or
terminated unless the consent of the Majority Lenders and the Company is
obtained in writing, provided, however, that no such amendment, modification or
waiver which would:
(a) Modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Majority Lenders shall be effective
unless consented to by each Lender;
(b) modify this section 9.12, change the definition of
"Majority Lenders," increase any Revolving Loan Commitment or the Percentage of
any Lender, or reduce any fees payable hereunder, shall be effective unless
consented to by each Lender;
(c) extend the scheduled due date for the payment of
principal or interest on any Note (or reduce the principal amount of or rate of
interest on any Note) shall be made without the consent of the holder of such
Note;
(d) release any collateral (except as permitted herein or in
the applicable Loan Document) shall be effective unless consented to by each
Lender; or
(e) adversely affect the interests, rights, or obligations
of the Agent shall be made without the consent of the Agent.
9.13 Counterparts. This Agreement and any amendment hereof may be
executed in several counterparts, each of which shall be executed by the Agent
and the Company and be deemed to be an original and all of which together shall
constitute one instrument. This Agreement shall become effective when
counterparts hereof executed on behalf of the Company, the Agent and each
46
<PAGE>
Lender shall have been received by the Agent and notice thereof shall have been
given by the Agent to the Company and each Lender.
9.14 Entire Agreement. This Agreement and the other Loan
Documents shall constitute the entire agreement of the parties pertaining to the
subject matter hereof and supersedes all prior or contemporaneous agreements and
understandings of the parties in connection therewith.
LADISH CO., INC.
BY______________________________
Its____________________________
Revolving
Loan
Commitment Percentage
---------- ----------
$25,000,000 25% FIRSTAR BANK MILWAUKEE, N.A.,
as the Agent and a Lender
BY_____________________________
Its___________________________
Address: 777 East Wisconsin Avenue
Milwaukee, WI 53202
Attn: Jeffrey J. Janza
Facsimile No.: 414-765-4632
47
<PAGE>
Revolving
Loan
Commitment Percentage
---------- ----------
$17,500,000 17.5% THE FIRST NATIONAL BANK OF CHICAGO
BY_____________________________
Its___________________________
Address: One First National Plaza
Suite IL1-0088
Chicago, IL 60670
Attn: Lisa Mott
Facsimile No.: 312-732-1117
$17,500,000 17.5% U.S. BANK NATIONAL ASSOCIATION
BY_____________________________
Its___________________________
Address: 201 West Wisconsin Avenue
Milwaukee, WI 53259
Attn: Dennis Ciche
Facsimile No.: 414-227-5881
$15,000,000 15% HARRIS TRUST AND SAVINGS BANK
BY_____________________________
Its___________________________
Address: 111 West Monroe Street
48
<PAGE>
10th Floor West
Chicago, IL 60603
Attn: Sunny M. Harnett
Facsimile No.: 312-293-5040
$15,000,000 15% LASALLE NATIONAL BANK
BY_____________________________
Its___________________________
Address: 411 East Wisconsin Avenue
Milwaukee, WI 53202
Attn: James A. Meyer
Facsimile No.: 414-224-0071
$10,000,000 10% ST. FRANCIS BANK, F.S.B.
BY_____________________________
Its___________________________
Address: 13400 Bishops Lane
Suite 190
Brookfield, WI 53005
Attn: John C. Tans
Facsimile No.: 414-486-8778
- ------------- --------
$100,000,000 100%
==========================
49
<PAGE>
SCHEDULE 1.1
Existing Liens and Security Interests
The liens and security interests arising under the March 9, 1998 Amended
and Restated Credit Agreement among Ladish Co., Inc. and General Electric
Capital Corporation, as amended.
April 24, 1997 Escrow Agreement between Ladish Co., Inc. and Trinity
Fitting and Flange Group, Inc. with Bank One Wisconsin Trust Company as escrow
agent.
<PAGE>
SCHEDULE 3.1
Subsidiaries
1. Stowe Machine Co., Inc., a Nevada corporation
2. McLad Corporation, a Nevada corporation
<PAGE>
SCHEDULE 3.4
Litigation
None
<PAGE>
SCHEDULE 3.18
Environmental Matters
Ladish Co., Inc. has been named as a potentially responsible party at the
following locations:
Site Status
---- ------
1) Hunts Superfund Site Consent order signed, site
Caledonia, WI remedied, monitoring continuing.
2) Fadrowski Superfund Site Site remedied, owner has
Franklin, WI monitoring responsibility.
3) ILCO Superfund Site Ladish settled as a De Minimis
Leeds, AL party and dismissed.
4) Marina Cliffs Superfund Site Ladish settled as a De Minimis
South Milwaukee, WI party and dismissed.
Former subsidiary of Ladish Co., Inc. was named as a potentially responsible
party at the Operating Industries Inc. site in California. The subsidiary was
liquidated with no additional assets.
<PAGE>
SCHEDULE 3.20
Year 2000 Compliance
Ladish Co., Inc. is in the process of changing its information technology system
and believes that the new system will be Year 2000 compliant.
<PAGE>
SCHEDULE 6.3
Guaranty Obligations
Ladish Co., Inc. has guaranteed the performance of its wholly-owned subsidiary,
Stowe Machine Co., Inc. ("Stowe") in connection with the purchase by Stowe of
the business and assets of Adco Manufacturing, Incorporated.
Ladish Co., Inc. has guaranteed certain aspects of the performance and condition
of the assets of its former Industrial Products Division ("IPD") under the sale
of IPD to Trinity Fitting and Flange Company, Inc.
X-2
EXHIBIT 21
As of December 31, 1999 the Company had the following subsidiaries:
(i) Stowe Machine Co., Inc., a Nevada corporation; and
(ii) McLad Corporation, a
Nevada corporation.
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 28, 2000
included in the Ladish Co., Inc. 10-K, dated February 21, 2000, and to all
references to our firm included in this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
February 19, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF LADISH CO., INC. AS OF AND FOR THE
TWELVE MONTHS ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,008
<SECURITIES> 0
<RECEIVABLES> 25,522
<ALLOWANCES> 300
<INVENTORY> 42,427
<CURRENT-ASSETS> 68,895
<PP&E> 145,855
<DEPRECIATION> (62,648)
<TOTAL-ASSETS> 159,583
<CURRENT-LIABILITIES> 29,888
<BONDS> 0
0
0
<COMMON> 143
<OTHER-SE> 73,467
<TOTAL-LIABILITY-AND-EQUITY> 159,583
<SALES> 170,241
<TOTAL-REVENUES> 170,241
<CGS> 151,065
<TOTAL-COSTS> 7,186
<OTHER-EXPENSES> (236)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (810)
<INCOME-PRETAX> 11,416
<INCOME-TAX> 1,713
<INCOME-CONTINUING> 9,703
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,703
<EPS-BASIC> 0.71
<EPS-DILUTED> 0.67
</TABLE>
