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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended July 3, 1999
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to .
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Commission file number 1-12164
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WOLVERINE TUBE, INC.
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(Exact name of registrant as specified in its charter)
Delaware 63-0970812
(State of Incorporation) (IRS Employer Identification No.)
1525 Perimeter Parkway, Suite 210
Huntsville, Alabama 35806
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(Address of Principal Executive Offices) (Zip Code)
(256) 353-1310
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(Registrant's Telephone Number, including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each class of Common Stock, as of
the latest practicable date:
Class Outstanding as of August 6, 1999
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Common Stock, $0.01 Par Value 13,322,864 Shares
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FORM 10-Q
QUARTERLY REPORT
TABLE OF CONTENTS
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PART I
Page No.
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Item 1. Financial Statements
Condensed Consolidated Statements of Income (Unaudited)--
Three-Month and Six-Month Periods Ended July 3, 1999 and July 4, 1998..................1
Condensed Consolidated Balance Sheets (Unaudited)-- July 3, 1999 and
December 31, 1998......................................................................2
Condensed Consolidated Statements of Cash Flows (Unaudited)--
Six-Month Periods Ended July 3, 1999 and July 4, 1998..................................3
Notes to Condensed Consolidated Financial Statements (Unaudited).......................4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................................8
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................16
PART II
Item 1. Legal Proceedings.....................................................................18
Item 4. Submission of Matters to a Vote of Security Holders...................................18
Item 6. Exhibits and Reports on Form 8-K......................................................19
</TABLE>
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
WOLVERINE TUBE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands except share amounts)
<TABLE>
<CAPTION>
Three-month period ended: Six-month period ended:
JULY 3, 1999 July 4, 1998 JULY 3, 1999 July 4, 1998
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<S> <C> <C> <C> <C>
Net sales $ 164,317 $ 169,640 $ 325,162 $ 339,939
Cost of goods sold 140,198 143,975 278,931 289,479
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Gross profit 24,119 25,665 46,231 50,460
Selling, general and administrative expenses 7,394 6,114 14,779 12,549
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Income from operations 16,725 19,551 31,452 37,911
Other expenses:
Interest expense 3,170 1,202 6,298 2,788
Amortization and other, net 338 190 583 435
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Income before income taxes and cumulative effect of
accounting change 13,217 18,159 24,571 34,688
Income taxes 4,626 6,491 8,760 12,445
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Income before cumulative effect of accounting change 8,591 11,668 15,811 22,243
Cumulative effect of accounting change
(net of tax benefit of $2,211) -- -- 5,754 --
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Net income 8,591 11,668 10,057 22,243
Less preferred stock dividends (70) (70) (140) (140)
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Net income applicable to common shares $ 8,521 $ 11,598 $ 9,917 $ 22,103
====================================================================================================================
Earnings per common share--basic:
Income before cumulative effect of accounting change $ 0.64 $ 0.82 $ 1.17 $ 1.57
Cumulative effect of accounting change -- -- (0.43) --
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Net income per common share--basic $ 0.64 $ 0.82 $ 0.74 $ 1.57
====================================================================================================================
Basic weighted average number of common shares 13,373 14,112 13,369 14,099
====================================================================================================================
Earnings per common share--diluted:
Income before cumulative effect of accounting change $ 0.63 $ 0.81 $ 1.16 $ 1.55
Cumulative effect of accounting change -- -- (0.43) --
====================================================================================================================
Net income per common share--diluted $ 0.63 $ 0.81 $ 0.73 $ 1.55
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Diluted weighted average number of common and common
equivalent shares 13,544 14,317 13,532 14,295
====================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
1
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WOLVERINE TUBE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
<TABLE>
<CAPTION>
JULY 3, December 31,
1999 1998
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(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 74,287 $ 78,899
Accounts receivable, net 85,960 66,231
Inventories 100,004 108,134
Prepaid expenses and other 1,626 1,094
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Total current assets 261,877 254,358
Property, plant and equipment, net 195,671 197,708
Deferred charges and intangible assets, net 88,343 87,984
Assets held for resale 2,989 2,989
Prepaid pensions 6,095 6,379
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Total assets $ 554,975 $ 549,418
=========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 36,196 $ 38,653
Accrued liabilities 9,792 12,584
Deferred income taxes 3,015 3,018
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Total current liabilities 49,003 54,255
Deferred income taxes 26,186 25,903
Long-term debt 215,408 215,689
Postretirement benefit obligations 11,391 11,606
Accrued environment remediations 2,781 3,002
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Total liabilities 304,769 310,455
Redeemable cumulative preferred stock, par value $1 per share; 20,000
shares issued and outstanding at July 3, 1999 and December 31, 1998 2,000 2,000
Stockholders' equity
Cumulative preferred stock, par value $1 per share; 500,000
shares authorized -- --
Common stock, par value $0.01 per share; 40,000,000 shares
authorized, 14,187,364 and 14,147,060 shares issued as of
July 3, 1999 and December 31, 1998, respectively 142 141
Additional paid-in capital 102,022 101,514
Retained earnings 177,347 167,430
Accumulated other comprehensive income (12,073) (15,494)
Treasury stock at cost (19,232) (16,628)
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Total stockholders' equity 248,206 236,963
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Total liabilities, redeemable cumulative preferred stock and
stockholders' equity $ 554,975 $ 549,418
=========================================================================================================
</TABLE>
Note: The Balance Sheet at December 31, 1998 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Notes to Condensed Consolidated Financial Statements.
2
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WOLVERINE TUBE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six-month period ended:
JULY 3, 1999 July 4, 1998
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 10,057 $ 22,243
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 7,834 8,923
Cumulative effect of accounting change 5,754 --
Changes in operating assets and liabilities:
Accounts receivable (19,291) (20,537)
Inventories 9,111 2,268
Prepaid expenses and other (1,326) (1,029)
Accounts payable (2,768) (6,868)
Accrued liabilities including pension, postretirement
benefit and environmental (850) 4,521
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Net cash provided by operating activities 8,521 9,521
INVESTING ACTIVITIES
Additions to property, plant and equipment (11,196) (13,930)
Acquisition of business assets -- (27,017)
Other (340) (76)
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Net cash used by investing activities (11,536) (41,023)
FINANCING ACTIVITIES
Net borrowings from revolving credit facility -- 29,281
Issuance of common stock 509 773
Principal payments on long-term debt (335) (351)
Purchase of treasury stock (2,604) --
Dividends paid (140) (140)
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Net cash provided (used) by financing activities (2,570) 29,563
Effect of exchange rate on cash and equivalents 973 (864)
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Net decrease in cash and equivalents (4,612) (2,803)
Cash and equivalents beginning of period 78,899 15,096
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Cash and equivalents end of period $ 74,287 $ 12,293
================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
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WOLVERINE TUBE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 3, 1999
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries after elimination
of significant intercompany accounts and transactions. The accompanying
condensed consolidated financial statements have been prepared in accordance
with instructions to Form 10-Q and do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The accompanying condensed consolidated financial
statements (and all information in this report) have not been examined by
independent auditors; but, in the opinion of management, all adjustments, which
consist of normal recurring accruals necessary for a fair presentation of the
results for the periods, have been made. The results of operations for the three
and six-month period ended July 3, 1999 are not necessarily indicative of the
results of operations that may be expected for the year ending December 31,
1999. For further information, refer to the consolidated financial statements
and footnotes included in the Company's annual report on Form 10-K for the year
ended December 31, 1998.
During the implementation of the Company's new information systems, the Company
reviewed the estimated useful lives of its property, plants and equipment. This
evaluation revealed that certain equipment was being depreciated over periods of
time which were shorter than their respective useful lives. Accordingly, a
change in estimate was made to the estimated useful lives of certain equipment,
which resulted in an increase of approximately $722,000 in net income in the
three and six-month periods ended July 3, 1999. The effect of this change in
estimate on the net income for the year ended December 31, 1999 is expected to
be approximately $1,444,000.
The Company uses its internal operational reporting cycle for quarterly
financial reporting.
NOTE 2. CONTINGENCIES
The Company is subject to extensive U.S. and Canadian federal, state, provincial
and local environmental laws and regulations. These laws, which are constantly
changing, regulate the discharge of materials into the environment. The Company
has received various communications from regulatory authorities concerning
certain environmental matters and has currently been named as a potentially
responsible party ("PRP") at various waste disposal sites. The Company believes
that its potential liability with respect to these waste disposal sites is not
material.
The Company has accrued environmental remediation costs of $2,781,000 as of July
3, 1999, consisting primarily of $32,000 for estimated remediation costs for the
London and Fergus, Canada facilities, $946,000 for the Decatur, Alabama
facility, $300,000 for the Greenville,
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Mississippi facility, $740,000 for the Jackson, Tennessee facility and an
aggregate of $763,000 for the Ardmore, Tennessee facility and the Shawnee,
Oklahoma facility (with respect to the Double Eagle Refinery site). Based on
information currently available, the Company believes that the costs of these
matters are not reasonably likely to have a material adverse effect on the
Company's business, financial condition or results of operations.
NOTE 3. INVENTORIES
Inventories are as follows:
<TABLE>
<CAPTION>
JULY 3, 1999 December 31, 1998
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(In thousands)
<S> <C> <C>
Finished products $ 21,374 $ 22,740
Work-in-process 25,601 28,401
Raw materials and supplies 53,029 56,993
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$100,004 $108,134
==================================================================================
</TABLE>
NOTE 4. INTEREST EXPENSE, NET
Interest expense is net of interest income and capitalized interest of
$1,040,000 and $537,000 for the three-month periods ended July 3, 1999 and July
4, 1998, respectively, and $2,162,000 and $889,000 for the six-month periods
ended July 3, 1999 and July 4, 1998, respectively.
NOTE 5. LONG-TERM DEBT
The Company's unsecured $200 million Revolving Credit Facility (the "Facility")
(i) provides for an aggregate available revolving credit facility of $200
million, including a $20 million sub-limit facility available to Wolverine Tube
(Canada) Inc., (ii) matures in full in April 2002, and (iii) provides for a
floating base interest rate that is, at the Company's election, either (a) the
higher of the federal funds effective rate plus 0.50% or the prime rate, or (b)
LIBOR plus a specified margin of 0.25% to 0.875%. As of July 3, 1999, the
Company had approximately $67 million in outstanding borrowings and obligations
under the Facility and approximately $133 million in additional borrowing
availability thereunder.
The Company is currently party to an interest rate swap agreement which
effectively fixes the interest rate on $65,000,000 in principal amount of
floating rate borrowings provided under the Facility at a rate of 6.82% plus the
specified margin of 0.25% to 1.00%. This agreement expires on May 7, 2002 and is
based on the three-month LIBOR. This interest rate swap is accounted for as a
hedge; the differential to be paid as interest rates change is accrued and
recognized as an adjustment to interest expense.
In August 1998, the Company issued $150 million in principal amount of 7 3/8%
Senior Notes (the "Notes") due August 1, 2008. The Notes were issued pursuant to
an Indenture, dated as of August 4, 1998, between the Company and First Union
National Bank, as Trustee. The Notes (i) have interest payment dates on February
1 and August 1 of each year, commencing February 1,
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1999, (ii) are redeemable at the option of the Company at a redemption price
equal to the greater of (a) 100% of the principal amount of the Notes to be
redeemed, or (b) the sum of the present value of the remaining scheduled
payments of principal and interest thereon from the redemption date to the
maturity date, discounted to the redemption date on a semiannual basis at a rate
based upon the yield of the specified treasury securities plus 25 basis points,
plus, in each case, accrued interest thereon to the date of redemption, (iii)
are senior unsecured obligations of the Company and are pari passu in right of
payment with any existing and future senior unsecured indebtedness of the
Company, including borrowings under the Facility, (iv) are guaranteed by certain
of the Company's subsidiaries, and (v) are subject to the terms of the
Indenture, which contains certain covenants that limit the Company's ability to
incur indebtedness secured by certain liens and to engage in sale/leaseback
transactions.
NOTE 6. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Financial Accounting Standards Board
Statement No. 130, Reporting Comprehensive Income ("Statement 130"). Statement
130 establishes new rules for the reporting and display of comprehensive income
and its components; however, the adoption of Statement 130 had no impact on the
Company's net income or stockholders' equity. Statement 130 requires unrealized
gains or losses on the Company's foreign currency translation adjustments, which
prior to the adoption of Statement 130 were reported separately in stockholders'
equity, to be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of Statement
130. During the second quarters of 1999 and 1998, total comprehensive income
amounted to $10,523,000 and $8,884,000, respectively. For the first six months
of 1999 and 1998, total comprehensive income amounted to $13,478,000 and
$19,921,000.
NOTE 7. INDUSTRY SEGMENTS
The Company adopted Financial Accounting Standards Board Statement 131,
Disclosures About Segments of an Enterprise and Related Information, during
1998. The Company's reportable segments are based on the Company's three product
lines: commercial products, wholesale products and other products. Commercial
products consist primarily of high value added products sold directly to
equipment manufacturers. Wholesale products are commodity-type plumbing tube
products, which are typically sold to a variety of customers. Other products
consist primarily of commodity-type rod, bar and strip products, which are sold
to a variety of customers.
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Summarized financial information concerning the Company's reportable segments is
shown in the following table:
<TABLE>
<CAPTION>
Commercial Wholesale Other Consolidated
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(In thousands)
<S> <C> <C> <C> <C>
QUARTER ENDED JULY 3, 1999
SALES $113,764 $31,310 $19,243 $164,317
GROSS PROFIT 16,366 6,359 1,394 24,119
Quarter ended July 4, 1998
Sales $125,639 $27,426 $16,575 $169,640
Gross profit 23,253 1,466 946 25,665
Commercial Wholesale Other Consolidated
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(In thousands)
SIX-MONTH PERIOD ENDED JULY 3, 1999
SALES $226,827 $57,503 $40,832 $325,162
GROSS PROFIT 32,961 10,440 2,830 46,231
Six-month period ended July 4, 1998
Sales $248,024 $58,529 $33,386 $339,939
Gross profit 44,457 4,661 1,342 50,460
</TABLE>
NOTE 8. CUMULATIVE EFFECT OF ACCOUNTING CHANGE
During the first quarter of 1999, the Company adopted the American Institute of
Certified Public Accountants' Statement of Position 98-5, Reporting on the Costs
of Start-Up Activities (the "Statement"), which requires that certain costs
related to start-up activities be expensed as incurred. In accordance with the
Statement, the Company recognized a charge for the cumulative effect of a change
in accounting principle of $8 million pre-tax ($5.8 million after-tax). The
implementation of the Statement required the Company to write-off the remaining
start-up costs relating primarily to the Company's Roxboro, North Carolina;
Jackson, Tennessee; and Shanghai, China facilities.
NOTE 9. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three-month period ended: Six-month period ended:
JULY 3, 1999 July 4, 1998 JULY 3, 1999 July 4, 1998
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(In thousands, except per share data)
<S> <C> <C> <C> <C>
Income before cumulative effect of accounting change $ 8,591 $ 11,668 $ 15,811 $ 22,243
Cumulative effect of accounting change
(net of income tax benefit) -- -- 5,754 --
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Net income 8,591 11,668 10,057 22,243
Preferred dividends (70) (70) (140) (140)
====================================================================================================================
Net income applicable to common shares $ 8,521 $ 11,598 $ 9,917 $ 22,103
====================================================================================================================
Basic weighted common shares outstanding 13,373 14,112 13,369 14,099
Employee stock options 171 205 163 196
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Diluted weighted average common and common equivalent
shares outstanding 13,544 14,317 13,532 14,295
====================================================================================================================
Earnings per share-basic:
Income before cumulative effect of accounting change $ 0.64 $ 0.82 $ 1.17 $ 1.57
Cumulative effect of accounting change -- -- (0.43) --
- --------------------------------------------------------------------------------------------------------------------
Net income per common share $ 0.64 $ 0.82 $ 0.74 $ 1.57
====================================================================================================================
Earnings per share-diluted:
Income before cumulative effect of accounting change $ 0.63 $ 0.81 $ 1.16 $ 1.55
Cumulative effect of accounting change -- -- (0.43) --
- --------------------------------------------------------------------------------------------------------------------
Net income per common share $ 0.63 $ 0.81 $ 0.73 $ 1.55
====================================================================================================================
</TABLE>
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE-MONTH PERIOD ENDED JULY 3, 1999 COMPARED TO THREE-MONTH PERIOD
ENDED JULY 4, 1998
For the three-month period ended July 3, 1999 consolidated net sales were $164.3
million, compared with $169.6 million in the three-month period ended July 4,
1998. The decrease in sales for the three-month period this year versus last
year was primarily attributable to a decrease in the average price of copper and
a decline in demand for the Company's higher-margin technical tube products, but
was partially offset by an increase in pounds of product shipped and fabrication
charges. The cost of copper is generally passed along to the Company's customers
and is included in the cost of goods sold. The average COMEX price of copper was
$0.67 per pound in the most recent three-month period, compared with $0.78 per
pound in the same period a year ago. The primary impact to the Company of lower
copper prices is lower net sales and cost of goods sold. The Company uses
various strategies to minimize the effect of copper prices on the Company's
earnings.
Total pounds shipped for the three-month period of 1999 increased by 3.2 million
pounds to 99.7 million pounds, compared with 96.5 million pounds in the
three-month period a year ago. Shipments of commercial tube products decreased
3.7%, primarily as a result of decreased shipments of technical tube products as
discussed above. Technical tube shipments decreased from prior year levels as
the Company experienced a significant, unexpected decline in demand for these
products from major customers. Shipments of the Company's wholesale products for
the three-month period of 1999 increased 11.7% to 23.7 million pounds, primarily
as a result of increased unit fabrication charges in the United States market.
Rod, bar and strip product shipments for the three-month period of 1999
increased 21.3% from the three-month period a year ago as shipments of strip
products to the Canadian mint increased.
Consolidated gross profit decreased 6.2% to $24.1 million in the three-month
period of 1999 compared to $25.7 million in the three-month period of 1998. This
decrease was primarily the result of decreased shipments of technical tube that
are included in commercial products, which are generally the Company's highest
margin products. In addition, higher costs associated with the
slower-than-anticipated ramp-up of the Jackson, Tennessee facility affected
gross profit to a lesser extent. Increased shipments of wholesale products and
rod, bar and strip products partially offset the reduction of gross profit
resulting from the decreased shipments of technical tube.
Consolidated selling, general and administrative expenses for the three-month
period of 1999 were $7.4 million, as compared to $6.1 million in the three-month
period of 1998. This increase was primarily the result of incremental
depreciation on the Company's new research and
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development center, information systems software, increased employee
compensation expenses relating to performance incentives and relocation costs
and increased foreign currency losses.
Consolidated net interest expense for the three-month period in 1999 increased
to $3.2 million from $1.2 million in the three-month period of 1998. This
increase was primarily the result of increased interest expense associated with
the issuance of the Company's $150 million in principal amount of 7 3/8% Senior
Notes due 2008 in August 1998.
The effective tax rate for the three-month period ended July 3, 1999 was 35.0%,
compared with 35.7% in the three-month period in 1998. The reduction in the
effective tax rate is primarily the result of tax benefits related to the
Shanghai, China facility.
Consolidated net income for the three-month period of 1999 was $8.6 million, or
$0.63 per diluted share and $0.64 per basic share, compared to $11.7 million or
$0.81 per diluted share and $0.82 per basic share, in the three-month period a
year ago.
SIX-MONTH PERIOD ENDED JULY 3, 1999 COMPARED TO SIX-MONTH PERIOD
ENDED JULY 4, 1998
For the six-month period ended July 3, 1999 consolidated net sales were $325.2
million, compared with $339.9 million in the six-month period ended July 4,
1998. The decrease in sales for the six-month period this year versus last year
was primarily attributable to a decrease in the average price of copper and a
decline in demand for the Company's higher-margin technical tube products, but
was partially offset by an increase in pounds of product shipped and fabrication
charges. The average COMEX price of copper was $0.65 per pound in the most
recent six-month period, compared with $0.78 per pound in the same period a year
ago. The primary impact to the Company of lower copper prices is lower net sales
and cost of goods sold. The Company uses various strategies to minimize the
effect of copper prices on the Company's earnings.
Total pounds shipped for the six-month period of 1999 increased by 5.1 million
pounds to 197.2 million pounds, compared with 192.1 million pounds in the
six-month period a year ago. Shipments of commercial tube products decreased
1.9%, primarily as a result of decreased shipments of technical tube products.
As previously discussed, technical tube shipments have decreased from prior year
levels as the Company experienced a significant, unexpected decline in demand
for these products from its major customers. The decrease in commercial tube
products was partially offset by increased shipments of industrial tube used in
the residential air conditioning industry. Shipments of the Company's wholesale
products for the six-month period of 1999 were unchanged from the prior year
period. Rod, bar and strip product shipments for the six-month period of 1999
increased 27.5% from the six-month period a year ago as shipments of strip
products to the Canadian mint increased during the six-month period of 1999.
Consolidated gross profit decreased 8.5% to $46.2 million in the six-month
period of 1999 compared to $50.5 million in the six-month period of 1998. This
decrease was primarily the result of decreased shipments of technical tube that
are included in commercial products, which are generally the Company's highest
margin products. In addition, costs associated with the
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slower-than-anticipated ramp-up of the Jackson, Tennessee facility affected
gross profit to a lesser extent. Increased fabrication charges from wholesale
products and rod, bar and strip products partially offset the reduction of gross
profit resulting from the decreased shipments of technical tube.
Consolidated selling, general and administrative expenses for the six-month
period of 1999 were $14.8 million, as compared to $12.5 million in the six-month
period of 1998. This increase was primarily the result of incremental
depreciation on the Company's new research and development center and
information systems software, increased employee compensation expenses relating
to performance incentives and relocation costs, foreign currency losses and
increased marketing and professional fees.
Consolidated net interest expense for the six-month period in 1999 increased to
$6.3 million from $2.8 million in the six-month period of 1998. This increase
was primarily the result of increased interest expense associated with the
issuance of $150 million in principal amount of 7 3/8% Senior Notes due 2008 in
August 1998.
The effective tax rate for the six-month period ended July 3, 1999 was 35.7%,
compared with 35.9% in the six-month period in 1998. The reduction in the
effective tax rate is primarily the result of tax benefits related to the
Shanghai, China facility in the second quarter of 1999.
During the six-month period of 1999, the Company recognized a charge for the
cumulative effect of a change in accounting principle of $8 million pre-tax
($5.8 million after tax). The Company adopted the American Institute of
Certified Public Accountants Statement of Position 98-5, Reporting on the Costs
of Start-Up Activities (the "Statement"). The implementation of the Statement
required the Company to write-off the remaining start-up costs relating
primarily to the Company's Roxboro, North Carolina, Jackson, Tennessee and
Shanghai, China facilities.
Consolidated net income for the six-month period of 1999 was $10.1 million, or
$0.73 per diluted share and $0.74 per basic share, compared to $22.2 million or
$1.55 per diluted share and $1.57 per basic share, in the six-month period a
year ago. Income before the cumulative effect of an accounting change in the
six-month period of 1999 was $15.8 million, or $1.16 per diluted share and $1.17
per basic share.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $8.5 million in the first six
months of 1999 compared to $9.5 million in the first six months of 1998. The
decrease in cash provided by operations in the first six months of 1999 was
primarily due to decreased net income exclusive of the cumulative effect of the
accounting change, which was partially offset by a decrease in inventory. The
$19.3 million increase in net accounts receivable from December 31, 1998 was
primarily due to increased sales over year-end 1998 levels.
The Company's $200 million unsecured credit agreement (the "Credit Agreement")
(i) provides for an aggregate available revolving credit facility of $200
million, including a $20 million sub-
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limit facility available to Wolverine Tube (Canada) Inc., (ii) matures in full
in April 2002, and (iii) provides for a floating base interest rate that is, at
the Company's election, either (a) the higher of the federal funds effective
rate plus 0.50% or the prime rate, or (b) LIBOR plus a specified margin of 0.25%
to 0.875%. As of July 3, 1999 the Company had approximately $67 million in
outstanding borrowings and obligations under the Credit Agreement and
approximately $133 million in additional borrowing availability thereunder.
In the ordinary course of business the Company enters into various types of
transactions that involve contracts and financial instruments with off-balance
sheet risk. The Company enters into these financial instruments to manage
financial market risk, including foreign exchange risk, commodity price risk for
certain customers and interest rate risk. The Company is exposed to loss on the
forward contracts in the event of non-performance by the customer whose orders
are covered by such contracts. However, the Company does not anticipate
non-performance by such customers. The Company accounts for its interest rate
swaps as a hedge, accordingly, gains and losses are recognized as interest
expense. The Company enters into these financial instruments utilizing
over-the-counter as opposed to exchange-traded instruments. The Company
mitigates the risk that counter parties to these over-the-counter agreements
will fail to perform by only entering into agreements with major international
financial institutions.
Capital expenditures were $11.2 million for the first six months of 1999
compared to $13.9 million for the first six months of 1998. The Company
currently expects to spend approximately $27 million in the aggregate in 1999
under its existing capital program. The Company believes that it will be able to
satisfy its existing working capital needs, interest obligations, stock
repurchases and capital expenditure requirements with cash flow from operations
and funds available from the Credit Agreement.
IMPACT OF YEAR 2000
The Company utilizes a number of computer software programs and operating
systems throughout its organization, including applications used in order
processing, shipping and receiving, accounts payable and receivable processing,
financial reporting and various other administrative functions. The Company
recognizes the need to ensure that its operations will not be adversely impacted
by applications and processing issues related to the upcoming calendar year 2000
(the "Year 2000 Issue"). The Year 2000 Issue is the result of computer programs
that have been written to recognize two-digit, rather than four-digit, date
codes to define the applicable year. To the extent that the Company's software
applications contain source codes that are unable to appropriately interpret a
code using "00" as the upcoming year 2000 rather than 1900, the Company could
experience system failures or miscalculations that could disrupt operations and
cause a temporary inability to process transactions, send and process invoices
or engage in similar normal business activities.
Based on an assessment of its systems during 1998, the Company determined that
it would be required to modify or replace significant portions of its software
so that its computer systems will function properly with respect to dates in the
year 2000 and thereafter. The Company presently believes that with modifications
to its existing software and certain conversions to new software,
11
<PAGE> 14
the Year 2000 Issue will not pose significant operational problems for its
computer systems. In addition, the Company's systems and operations are
dependent, in part, on interaction with systems operated or provided by vendors
or other third-parties, and the Company has surveyed substantially all of those
parties about their progress in identifying and addressing problems that their
computer systems may face in connection with the Year 2000 Issue. The Company
believes that it has no exposure for contingencies related to the Year 2000
Issue for the products it has sold.
The Company's plan to address the Year 2000 Issue (the "Plan") identifies
exposure in three areas: information technology, operating equipment with
embedded chips or software, and third-party vendors. In addition, the Plan
involves the following four phases for each of the exposure areas: assessment,
remediation, testing and implementation. With respect to information technology,
the Company has fully completed its assessment of this area. This assessment
indicated that most of the Company's significant information technology systems
could be affected, particularly the general ledger, billing, payables and
inventory systems. To date, the Company is 98% complete on the remediation phase
for the information technology area and expects to complete software
reprogramming and replacement no later than August 15, 1999. Once software is
reprogrammed or replaced, the Company will begin testing and implementation.
These phases run concurrently for multiple systems. To date the Company has
completed 95% of its testing and has implemented 98% of its remediation systems.
Completion of the testing phase for all significant systems is expected by
September 30, 1999, with all remediation and implementation of systems expected
to be fully tested and operational by October 1, 1999.
The Company is completing the assessment and remediation phases for its
operating equipment with embedded chips or software. As the assessment phase
continues, the Company will begin to develop and implement any necessary
remediation efforts with the manufacturers or servicers of the operating
equipment. The remediation phase was completed June 30, 1999. Testing and
implementation of affected equipment is expected to be completed by September
30, 1999.
The assessment of third-party vendors and customers and their exposure to the
Year 2000 Issue is 100% complete for systems that directly interface with the
Company and 100% complete for all other material exposure. The Company has
completed surveying all significant third-parties with whom it conducts
business, has completed remediation efforts on the effected systems and has
completed the testing and implementation phases. The Company has queried its
significant suppliers that do not share any information systems with the Company
("external agents"). To date, the Company is not aware of any external agent
with a Year 2000 Issue that would materially impact the Company's business,
financial condition or results of operations. The Company, however, has no means
of ensuring that external agents will be Year 2000 compliant. The inability of
external agents to complete their Year 2000 resolution processing in a timely
fashion could materially impact the Company's business, financial condition or
results of operations. The effect of non-compliance by external agents is not
determinable by the Company.
12
<PAGE> 15
The Company is utilizing both internal and external resources to reprogram, or
replace, and test its software for Year 2000 modifications. The total cost of
the Year 2000 project is estimated at $6.4 million and is being funded through
operating cash flows. Of the total project cost, approximately $6.2 million is
attributable to the purchase of new software, which is being capitalized. The
remaining $0.2 million, which is being expensed as incurred, is not expected to
have a material effect on the Company's business, financial condition or results
of operations. To date, the Company has incurred approximately $6.0 million in
costs related to the assessment, remediation and implementation efforts in its
Year 2000 modification project, the development of the plan for the purchase of
new systems and systems modifications. The Company has engaged an independent
consultant (the "Consultant") to review the adequacy, completeness and
feasibility of the Plan. The Consultant has made recommendations that the
Company is currently considering regarding improvements to the Plan. After the
Company completes the review and responds to these recommendations, the
Consultant will review the Company's responses to these recommendations and will
continue to monitor the Company's execution of the Plan. The Company currently
has no contingency plans in place in the event that it does not complete all
phases of the Year 2000 remediation program. The Company plans to evaluate the
status of completion in August of 1999 and develop contingency planning.
The costs of the project and the timeframe in which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third-party modification plans
and other factors. Specific factors that might result in additional costs or
time delays include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes and similar uncertainties. Based on the Company's current
estimates, the Company does not anticipate that the cost of compliance with the
Year 2000 Issue will be material to its business, financial condition or results
of operations; however, there can be no assurance that the Company's systems, or
those of its vendors, customers or other third-parties, will be made Year 2000
compliant in a timely manner or that the impact of the failure to achieve such
compliance will not have a material adverse effect on the Company's business,
financial condition or results of operations.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain of the statements and subject areas contained herein in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
are not based on historical or current facts deal with or may be impacted by
potential future circumstances and developments. Such statements and the
discussion of such subject areas involve, and are therefore qualified by, the
inherent risks and uncertainties surrounding future expectations generally, and
also may materially differ from the Company's actual future experience involving
any one or more of such subject areas. The Company has attempted to identify, in
context, certain of the factors that it currently believes may cause actual
future experience and results to differ from current expectations regarding the
relevant statement or subject area. The Company's operations and results may be
subject to the effect of other risks and uncertainties in addition to the
relevant qualifying factors identified herein, including but not limited to,
cyclicality and seasonality in the
13
<PAGE> 16
industries to which the Company sells its products, the impact of competitive
products and pricing, extraordinary fluctuations in the pricing and supply of
the Company's raw materials, volatility of commodities markets, unanticipated
developments in the areas of environmental compliance, unanticipated
developments in the process of assessing and addressing issues relating to the
year 2000 issue and other risks and uncertainties identified from time to time
in the Company's reports filed with the Securities and Exchange Commission.
ENVIRONMENTAL
The Company's facilities and operations are subject to extensive environmental
laws and regulations. During the three-month period ended July 3, 1999, the
Company spent approximately $0.2 million on environmental matters which included
remediation costs, monitoring costs and legal and other costs. The Company has a
reserve of approximately $2.8 million for environmental remediation costs which
is reflected in the Company's Condensed Consolidated Balance Sheet. Based upon
information currently available, the Company believes that the costs of the
environmental matters described below are not reasonably likely to have a
material adverse effect on the Company's business, financial condition or
results of operations.
Oklahoma City, Oklahoma
The Company is one of a number of Potentially Responsible Parties ("PRPs") named
by the United States Environmental Protection Agency (the "EPA") with respect to
the soil and groundwater contamination at the Double Eagle Refinery Superfund
site in Oklahoma City, Oklahoma. The costs associated with the cleanup of this
site will be entirely borne by the PRP group (the "Group"), as the site owner
has filed for bankruptcy protection. In March 1993, twenty-three PRP's named
with respect to the soil contamination of the site, including the Company,
submitted a settlement offer to the EPA. Settlement negotiations between the
Group and the EPA are continuing, and a settlement and consent order is
currently being contemplated among the PRPs, the EPA and the State of Oklahoma
which would provide for each PRP's liability to be limited to a prorata share of
an aggregate amount based on the EPA'a worst-case cost scenario to remediate the
site. Under the current proposal, the Company's settlement amount is estimated
to be $390,000.
Decatur, Alabama
The Company is subject to an order under Section 3008(h) of the Resource
Conservation and Recovery Act to perform a facilities investigation of its site
in Decatur, Alabama, including a portion of the site where wastes were buried
(the "Burial Site"). Should the EPA decide to order remediation, the remaining
monitoring, legal and other costs are estimated to be $946,000. The Company is
currently awaiting comments and approval from the EPA on a Corrective Measures
Study ("CMS") that Henley (a former owner of the facility) had submitted to the
EPA regarding the Burial Site. The cost to the Company to comply with the CMS,
as currently presented, will not have a material adverse effect on the Company's
business, financial condition or results of operations.
14
<PAGE> 17
Ardmore, Tennessee
On December 28, 1995, the Company entered into a Consent Order and Agreement
with the Tennessee Division of Superfund (the "Tennessee Division"), relating to
the Ardmore, Tennessee facility (the "Ardmore facility"), under which the
Company agreed to conduct a preliminary investigation regarding whether volatile
organics detected in and near the municipal drinking water supply are related to
the Ardmore facility and, if necessary, to undertake an appropriate response.
That investigation has disclosed contamination, including elevated
concentrations of certain volatile organic compounds, in the shallow residuum
groundwater zone at the Ardmore facility. Under the terms of the Consent Order
and Agreement, the Company submitted a Remedial Investigation and Feasibility
Study ("RI/FS") work plan, which was accepted by the Tennessee Division, and the
Company has initiated the RI/FS. Based on the available information, the Company
preliminarily estimates a range of between $373,000 and $1,173,000 to complete
the investigation and remediation of this site.
A report of a 1995 EPA site inspection of the Ardmore facility recommended
further action for the site. The Company believes, however, that because the
Tennessee Division is actively supervising an ongoing investigation of the
Ardmore facility, it is unlikely that the EPA will intervene and take additional
action. If the EPA should intervene, however, the Company could incur additional
costs for any further investigation or remedial action required.
Greenville, Mississippi
Following the Company's acquisition of its Greenville, Mississippi facility (the
"Greenville facility"), a preliminary investigation disclosed volatile organic
contaminants in soil and groundwater at the site. Based on further
investigation, it appears that the contamination has not spread off-site. The
Company entered into a Consent Order with the Mississippi Department of
Environmental Quality (the "MDEQ") for a pilot study program which will help
determine the effectiveness of certain technology tentatively identified for
remediation and which will also help define the scope of remediation for the
site. The pilot study program concluded on June 1, 1997. The Company entered
into a final consent agreement with the MDEQ on July 15, 1997. Remediation
efforts began in the third quarter of 1997 and are expected to take
approximately three years. However, there can be no assurance that remediation
efforts will be allowed to be discontinued after three years, and operations,
maintenance and other expenses of the remediation system may continue for a
longer period of time. Through October 3, 1998, applicable costs of testing and
remediation required at the Greenville facility had been shared with the former
owners of the facility pursuant to the terms of an Escrow Agreement established
at the time the facility was acquired. Subsequent to October 3, 1998, the
Company released the former owners of the facility from liability related to the
remediation of the Greenville facility following the receipt of a $145,000
settlement payment. The Company estimates the remaining investigative and
remedial costs could total $300,000 under the remediation plan the Company
adopted, but these costs could increase if additional remediation is required.
15
<PAGE> 18
Jackson, Tennessee
In connection with the Company's acquisition of its Jackson, Tennessee facility
(the "Jackson facility"), a preliminary investigation disclosed soil and/or
groundwater contamination at this site. The Company has performed a Phase I
Environmental Audit and identified the existence of volatile organic
contaminants; however, the extent of any such contamination has not been fully
determined. Investigation at the site is being conducted pursuant to a consent
order with the State of Tennessee by a prior owner of the property. Based on
currently available information, the Company preliminarily estimates that
remediation costs could amount up to $740,000. However, certain of the
remediation costs may be reimbursed pursuant to the terms of an indemnification
agreement between the Company and the previous owners of the Jackson facility.
Other
The Company has been identified by the EPA as one of a number of PRPs at
Superfund sites in Athens, Alabama and in Criner, Oklahoma. The Company believes
that its potential liability with respect to these Superfund sites is not
material. There can be no assurance, however, that the Company will not be named
a PRP at additional Superfund sites in the future, or that the costs associated
with those sites would not be substantial.
The Company believes that it faces no significant liability for the Athens,
Alabama site because it has removed all of the material that it contributed to
the site. The Company believes that it faces no significant liability for the
Criner, Oklahoma site because Henley, the prior owner of the site, has retained
liability for all cleanup costs resulting from past disposal of used oil at the
Criner, Oklahoma site pursuant to an indemnification agreement between the
Company and Henley. Henley, which is not affiliated with the Company, has
discharged these obligations to date.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISKS
The Company is exposed to various market risks, including interest rates and
derivative commodity instruments. The Company enters into financial instruments
to manage and reduce the impact of changes in interest rates and commodity
prices.
INTEREST RATE SWAP AGREEMENTS
The Company enters into interest rate swap agreements to modify the interest
characteristics of its outstanding debt. Each interest rate swap agreement is
designated as a hedge with the principal balance and term of a specific debt
obligation. These agreements involve the exchange of amounts based on a fixed
interest rate for amounts based on variable interest rates over the life of the
agreement, without an exchange of the notional amount on which the payments are
based. The differential to be paid as interest rates change is accrued and
recognized as an adjustment of
16
<PAGE> 19
interest expense related to debt (the accrual accounting method). The fair value
of the swap agreements and changes in the fair value as a result of changes in
market interest rates are not recognized in the financial statements. The
Company is party to one interest rate swap agreement. The estimated fair value
of this interest rate swap has materially changed as interest rates have changed
since year-end 1998. The estimated fair value of this interest rate swap was a
net payable of $3.2 million at December 31, 1998 and a net payable of $1.2
million at July 3, 1999. A one-percent decrease in the 30-day LIBOR rate would
increase the amount payable to approximately $3.2 million.
DERIVATIVE COMMODITY INSTRUMENTS
In connection with the purchase of certain raw materials, principally copper,
on behalf of certain customers for future manufacturing requirements, the
Company has entered into commodity-forward contracts as deemed appropriate for
these customers to reduce the Company's risk of future price increases. These
forward contracts are accounted for as hedges and, accordingly, gains and losses
are deferred and recognized in cost of sales as part of the product cost. The
amount of forward contracts and their respective fair value have materially
changed since year-end 1998 primarily due to changes in copper prices. At
December 31, 1998 the Company had entered into contracts hedging certain future
commodity purchases through December 31, 2000 of approximately $42.1 million.
The estimated fair value of these outstanding contracts was approximately $37.5
million at December 31, 1998. At July 3, 1999 the Company had entered into
contracts hedging certain future commodity purchases through December 31, 2000
of approximately $36.0 million. The estimated fair value of these outstanding
contracts was approximately $38.3 million at July 3, 1999. A 10% adverse change
in commodity prices at July 3, 1999 would decrease the fair value of these
outstanding contracts to $34.5 million.
17
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no material legal proceeding developments during the three-month
period ended July 3, 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 20, 1999, the Company held its Annual Meeting of Stockholders. The
matters voted on at the meeting and the results of these votes are as
follows:
1. Election of Directors.
<TABLE>
<CAPTION>
Votes For Votes Withheld
--------- --------------
<S> <C>
12,001,034 72,003
</TABLE>
2. Amend the Company's 1993 Equity Incentive Plan to provide for an
increase (i) in the maximum number of shares of Common Stock that may
be issued or sold thereunder from 1,225,000 to 2,075,000, and (ii) in
the maximum number of shares of Common Stock issuable pursuant to
options or stock appreciation rights that may be granted to a
participant during any calendar year from 60,000 to 125,000 shares of
Common Stock.
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstained Broker Non-Votes
--------- ------------- --------------- ----------------
<S> <C> <C> <C>
8,712,006 2,040,851 18,369 1,301,811
</TABLE>
3. Amend the existing stock option plan for outside directors to (i)
increase the maximum number of shares of Common Stock that may be
issued thereunder from 105,000 to 185,000 shares, (ii) provide that,
rather than limiting the formula grants of 1,000 options to be made
only on the first four anniversaries of a non-employee director's
initial election to the Board of Directors, such grants shall be made
on each anniversary of such director's election to the Board of
Directors, and (iii) allow for options to be granted to outside
directors from time to time in lieu of retainer amounts or other
compensation otherwise payable to the outside director.
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstained Broker Non-Votes
--------- ------------- --------------- ----------------
<S> <C> <C> <C>
9,941,685 808,790 20,751 1,301,811
</TABLE>
4. Appointment of Ernst & Young LLP as Independent Auditors.
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstained
--------- ------------- ---------------
<S> <C> <C>
12,052,550 10,069 10,418
</TABLE>
18
<PAGE> 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Third Amendment and Limited Waiver to Credit Agreement dated
June 30, 1999, by and between the Company, Wolverine Tube
(Canada) Inc. and the lenders named therein.
10.2* Agreement for Supplemental Executive Retirement Benefits.
27.1 Financial Data Schedule (for SEC use only)
(b) Reports
The Company filed no reports on Form 8-K during the three-month period
ended July 3, 1999.
- --------
* Identifies exhibit that is a "management contract or compensatory plan or
arrangement" required to be included as an exhibit to this Form 10-Q.
19
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
WOLVERINE TUBE, INC.
By: /s/ James E. Deason
---------------------------------
Name: James E. Deason
Title: Executive Vice President, Chief Financial Officer,
Secretary and Director
Dated: August 11, 1999
20
<PAGE> 1
Exhibit 10.1
WOLVERINE TUBE, INC.
WOLVERINE TUBE (CANADA) INC.
THIRD AMENDMENT AND LIMITED WAIVER
TO CREDIT AGREEMENT
This THIRD AMENDMENT AND LIMITED WAIVER TO CREDIT AGREEMENT (this
"AMENDMENT") is dated as of June 30, 1999 and entered into by and among,
WOLVERINE TUBE INC., a Delaware corporation (the "COMPANY"), WOLVERINE TUBE
(CANADA) INC., an Ontario corporation ("WOLVERINE CANADA"; the Company and
Wolverine Canada are each a "BORROWER" and collectively, the "BORROWERS"),
CREDIT SUISSE FIRST BOSTON, as administrative agent (in such capacity, the
"ADMINISTRATIVE AGENT"), MELLON BANK, N.A., as documentation agent (in such
capacity, the "DOCUMENTATION AGENT") and the financial institutions listed on
the signature pages hereto (each individually referred to herein as a "LENDER"
and collectively, as "LENDERS"), and is made with reference to that certain
Credit Agreement dated as of April 30, 1997, by and among the Borrowers, the
Lenders, the Administrative Agent and the Documentation Agent, as amended as of
June 26, 1998 and as of March 10, 1999 (such Credit Agreement, as so amended,
the "CREDIT AGREEMENT"). Capitalized terms used herein without definition shall
have the same meanings herein as set forth in the Credit Agreement.
R E C I T A L S
WHEREAS, Wolverine Canada desires to enter into a joint venture with
Ratcliffs/Severn Limited, an Ontario Corporation ("RATCLIFFS") pursuant to an
Acquisition Agreement to be entered into by and among Wolverine Canada,
Ratcliffs and Wolverine Ratcliffs, Inc. ("WRI"), in substantially similar form
to the draft dated June 23, 1999 and distributed to the Lenders on June 28, 1999
(the "ACQUISITION AGREEMENT"), which provides that Wolverine Canada will
transfer certain assets to WRI, a newly formed Ontario corporation that will be
a Subsidiary of Wolverine Canada, on the initial closing date thereunder, and
Ratcliffs will transfer certain assets to WRI on the initial closing date and on
subsequent closing dates as contemplated therein;
WHEREAS, Ratcliffs will eventually own 25.5% of the issued and
outstanding capital stock of WRI and Wolverine Canada will own the remaining
shares;
WHEREAS, pursuant to the Acquisition Agreement, Wolverine Canada will
transfer substantially all of the copper and brass strip manufacturing business,
and the assets and liabilities relating thereto, carried on by Wolverine Canada
at its facility in Fergus, Ontario and shall grant a non-exclusive/
non-transferable license for use of the "Wolverine" trademark in connection
therewith for so long as WRI is a Subsidiary of Wolverine Canada (such assets
and granting of a trademark license the "TRANSFERRED ASSETS");
<PAGE> 2
WHEREAS, in consideration for the Transferred Assets, Wolverine Canada
will receive 745 common shares of stock of WRI and a non-interest bearing
promissory note in the amount of Cdn.$5,000,000 payable in full within 45 days
of its issuance;
WHEREAS, Wolverine Canada will make an intercompany loan to WRI in an
aggregate principal amount not to exceed Cdn.$8,500,000, which will be secured
by a lien on substantially all of the personal property of WRI pursuant to a
general security agreement executed by WRI in favor of Wolverine Canada and
subordinated to the lien granted over the same assets to secure WRI's working
capital facility with other lenders;
WHEREAS, pursuant to the Acquisition Agreement, Wolverine Canada will
enter into a Unanimous Shareholders' Agreement with Ratcliffs and WRI in
substantially similar form to the draft dated June 22, 1999 and distributed to
the Lenders on June 28, 1999 (the "STOCKHOLDERS AGREEMENT"), which, inter alia,
includes provisions that, by requiring supermajority approval, have the effect
of restricting WRI's ability to (i) pay dividends or make any other
distributions on any of WRI's capital stock owned by Wolverine Canada; (ii) make
loans or advances to the Borrowers or any Subsidiary of the Borrowers, (iii)
transfer any of its property or assets to the Borrowers or any Subsidiary of the
Borrowers, or (iv) grant a Lien to the Administrative Agent to secure the
Obligations without the consent of Ratcliffs, as shareholder, or directors that
have been appointed by Ratcliffs;
WHEREAS, in connection with the foregoing the Borrowers have requested
that Requisite Lenders, pursuant to Section 10.6 of the Credit Agreement, agree
to modify and or waive certain provisions of the Credit Agreement on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1
AMENDMENTS EFFECTIVE UPON ACQUISITION
Upon the consummation of the transactions contemplated by the
Acquisition Agreement, and so long as (i) no Potential Event of Default or Event
of Default has occurred and is continuing at that time, or would result
therefrom, and (ii) the Borrowers are in compliance on a pro forma basis with
the financial covenants contained in Section 7.6 of the Amended Agreement (as
defined below) for the preceding four fiscal quarters, assuming that the
transactions contemplated by the Acquisition Agreement occurred at the beginning
of such period, the terms of the Credit Agreement shall simultaneously therewith
be amended as follows:
A. AMENDED DEFINITIONS. The following definitions set forth in Subsection 1.1 of
the Credit Agreement shall be amended by deleting each such definition in its
entirety and substituting the following definitions therefor:
""CANADIAN DOLLARS" and the symbols "CDN.$" means the freely
transferable money of the country of Canada.
2
<PAGE> 3
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
loss) of the Company and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period determined in
conformity with GAAP; provided that there shall be excluded (i) the
income (or loss) of any Person (other than any Subsidiary of any
Borrower other than WRI) in which any other Person (other than any
Borrower or any of its respective Subsidiaries) has a joint interest,
except to the extent of the amount of dividends or other distributions
actually paid to any Borrower or any of its respective Subsidiaries by
such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of any
Borrower or is merged into or consolidated with any Borrower or any of
its respective Subsidiaries or that Person's assets are acquired by
any Borrower or any of its respective Subsidiaries, (iii) the income
of any Subsidiary of any Borrower to the extent that the declaration
or payment of dividends or similar distributions by that Subsidiary of
that income is not at the time permitted by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that
Subsidiary, (iv) any after-tax gains or losses attributable to Asset
Sales or returned surplus assets of any Pension Plan, and (v) (to the
extent not included in clauses (i) through (iv) above) any net
extraordinary gains or net non-cash extraordinary losses."
B. ADDITIONAL DEFINITIONS. Subsection 1.1 of the Credit Agreement shall be
further amended by adding the following definitions thereto in the appropriate
alphabetical order:
""RATCLIFFS" means Ratcliffs/Severn Limited, an Ontario corporation.
"WRI" means Wolverine Ratcliffs, Inc. an Ontario corporation.
"WRI ACQUISITION AGREEMENT" means the Acquisition Agreement by and
among Wolverine Canada, Ratcliffs/Severn Limited, an Ontario
corporation and WRI, submitted to Requisite Lenders in connection with
the approval of the Third Amendment with such changes thereto as were
agreed to by the Administrative Agent prior to its execution, with
such further changes, amendments, supplements or other modifications
that may be approved by Requisite Lenders from time to time.
"WRI SECURITY AGREEMENT" means the general security agreement executed
by WRI in favor of Wolverine Canada to secure the intercompany
indebtedness in an aggregate principal amount not in excess of
Cdn.$8,500,000 owed by WRI to Wolverine Canada (which amount shall not
include the indebtedness evidenced by the WRI Short-Term Note) and
approved prior to its execution by the Administrative Agent, with such
amendments, supplements or other modifications that are approved by
Requisite Lenders from time to time.
3
<PAGE> 4
"WRI SHORT-TERM NOTE" means the non-interest bearing promissory note
payable in full within 45 days of its issuance issued by WRI for the
benefit or Wolverine Canada in the amount of Cdn.$5,000,000.
"WRI STOCKHOLDERS AGREEMENT" means the Unanimous Shareholders'
Agreement by and among Wolverine Canada, Ratcliffs/Severn Limited, an
Ontario corporation and WRI, submitted to Requisite Lenders in
connection with the approval of the Third Amendment with such changes
thereto as were agreed to by the Administrative Agent prior to its
execution, with such further changes, amendments, supplements or other
modifications that may be approved of by Requisite Lenders from time
to time.
"THIRD AMENDMENT" means that certain Third Amendment and Limited
Waiver to Credit Agreement dated as of June 30, 1999, by and among the
Company, the Borrowers, the financial institutions listed on the
signature pages thereof, the Administrative Agent and the
Documentation Agent."
C. INTERCOMPANY INDEBTEDNESS. Subsection 7.1 of the Credit Agreement shall be
amended by deleting subsection (iv) and substituting therefor the following:
"(iv) The Borrowers may become and remain liable with respect to
Indebtedness to any of their wholly-owned Subsidiaries, any
wholly-owned Subsidiary of the Company that is a Subsidiary Guarantor
may become and remain liable with respect to Indebtedness to the
Company or any other wholly-owned Subsidiary of the Company and WRI
may become and remain liable with respect to the Indebtedness to
Wolverine Canada that is evidenced by the WRI Short-Term Note and
additional Indebtedness to Wolverine Canada in an amount not in excess
of Cdn.$8,500,000; provided that (a) all such intercompany
Indebtedness in an amount in excess of $2,500,000 (or, with respect to
Indebtedness owed by Wolverine Finance to (X) the Company, $20,000,000
and (Y) Small Tube, $20,000,000) in the aggregate shall be evidenced
by promissory notes, (b) all such intercompany Indebtedness in an
amount in excess of $2,500,000 in the aggregate owed by any Borrower
to any of its respective Subsidiaries shall be subordinated in right
of payment to the payment in full of the Obligations pursuant to the
terms of the applicable promissory notes or an intercompany
subordination agreement, and (c) any payment by any Subsidiary of any
Borrower under any guaranty of the Obligations shall result in a pro
tanto reduction of the amount of any intercompany Indebtedness owed by
such Subsidiary to such Borrower or to any of its respective
Subsidiaries for whose benefit such payment is made;"
D. WRI SECURED INDEBTEDNESS. Subsection 7.1 of the Credit Agreement shall be
amended by adding the following subsection (xii) immediately after subsection
(xi) thereto:
"(xii) WRI may become and remain liable with respect to other secured
Indebtedness in an aggregate principal amount not to exceed
$20,000,000 at any time outstanding."
4
<PAGE> 5
E. PROHIBITIONS ON LIENS. Subsection 7.2A of the Credit Agreement shall be
amended by adding the following subsections (iv) and (v) immediately after
subsection (iii) thereto:
"(iv) Liens on the assets of WRI granted pursuant to the WRI Security
Agreement; and
(v) Liens incurred or assumed in connection with Indebtedness
permitted by subsection 7.1(xii)."
F. LIMITATIONS ON CERTAIN RESTRICTIONS. Subsection 7.2 of the Credit Agreement
shall be amended by deleting subsection D thereto and substituting therefor the
following:
"D. LIMITATIONS ON CERTAIN RESTRICTIONS. Except as provided herein,
the Borrowers will not, and will not permit any of their respective
Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by the
Borrowers or any other Subsidiary of the Borrowers, (ii) repay or prepay
any Indebtedness owed by such Subsidiary to the Borrowers or any other
Subsidiary of the Borrowers, (iii) make loans or advances to the Borrowers
or any other Subsidiary of the Borrowers, (iv) transfer any of its property
or assets to the Borrowers or any other Subsidiary of the Borrowers, or (v)
grant a Lien to the Administrative Agent to secure the Obligations, other
than pursuant to the WRI Stockholders Agreement."
G. INVESTMENTS; JOINT VENTURES. Subsection 7.3 of the Credit Agreement shall be
amended by deleting subsection (vi) and substituting therefore the following:
"(vi) The Borrowers may make Investments in Joint Ventures in an
aggregate amount not to exceed $17,000,000."
H. RESTRICTION OF FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS. Subsection
7.7 of the Credit Agreement shall be amended by adding the following subsection
(vii) immediately after subsection (vi) thereto:
"(vii) WRI may issue additional shares of its capital stock to
Ratcliffs at the time of the "Secondary Closing" and the "Final
Closing" in accordance with the terms of the WRI Acquisition Agreement
(as each such term is defined therein); provided that Ratcliffs shall
not in the aggregate own more than 25.5% of the issued and outstanding
shares of WRI."
5
<PAGE> 6
SECTION 2
OTHER AMENDMENTS
A. ADDITIONAL DEFINITIONS. Subsection 1.1 of the Credit Agreement is hereby
amended by adding the following definitions thereto in the appropriate
alphabetical order:
"GRANTING LENDER" has the meaning assigned to that term in Subsection
10.1G
"SPC" has the meaning assigned to that term in Subsection 10.1G
B. ASSIGNMENTS. Subsection 10.1 of the Credit Agreement is hereby amended by
adding the following paragraph at the end thereof as a new clause G to the end
of such section:
"G. ASSIGNMENT TO SPECIAL FUNDING VEHICLES. Notwithstanding
anything to the contrary contained herein, any Lender (a "GRANTING
LENDER") may grant to a special purpose funding vehicle (a "SPC"),
identified as such in writing from time to time by the Granting Lender
to the Administrative Agent and the applicable Borrower, the option to
provide to either Borrower all or part of any Loan that such Granting
Lender would otherwise be obligated to make to the Borrowers pursuant
to this Agreement; provided that (i) nothing herein shall constitute a
commitment by any SPC to make any Loan; (ii) if an SPC elects not to
exercise such option or otherwise fails to provide all or any part of
such Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the terms hereof. The making of a Loan by an SPC hereunder
shall utilize the Commitments of the Granting Lender to the same
extent, and as if, such Loan were made by such Granting Lender. Each
party hereto hereby agrees that no SPC shall be liable for any
indemnity or similar payment obligation under this Agreement (all
liability for which shall remain with the Granting Lender). In
furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreement) that, prior
to the date that is one year and one day after the payment in full of
all outstanding commercial paper or other senior indebtedness of any
SPC, it will not institute against, or join any other person in
instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency, or liquidation proceedings under the laws of
the United States, any State thereof or Canada. In addition,
notwithstanding anything to the contrary contained in this Section
10.1, any SPC may (i) with notice to, but without the prior written
consent of, the applicable Borrower and the Administrative Agent and
without paying any processing fee therefor, assign all or a portion of
its interests in any Loans to the Granting Lender or to any financial
institutions (consented to by the applicable Borrower and the
Administrative Agent) providing liquidity and/or credit support to or
for the account of such SPC to support the funding or maintenance of
Loans and (ii) disclose on a confidential basis any non-public
information relating to its Loans to any rating agency, commercial
paper dealer or provider of any surety, guaranty or credit or
liquidity enhancement to
6
<PAGE> 7
such SPC. This selection may not be amended without the written
consent of the SPC."
SECTION 3
LIMITED WAIVER
Provided that (i) as of the date hereof and as of the date that
Wolverine Canada enters into the Acquisition Agreement and (ii) after giving
effect to the transactions contemplated by the Acquisition Agreement:
(i) no Potential Event of Default or Event of Default exists;
(ii) the Borrowers are in compliance on a pro forma basis for the
preceding four fiscal quarters, assuming that the transactions
contemplated by the Acquisition Agreement occurred at the beginning of
such period, with the financial covenants contained in Section 7.6 of
the Amended Agreement (as defined below); and
(iii) all representations and warranties contained in the Credit
Agreement and the other Loan Documents are true, correct and complete
in all material respects on and as of the date hereof except to the
extent such representations and warranties specifically relate to an
earlier date, in which case they were true, correct and complete in
all material respects on and as of such earlier date;
the provisions of subsections 2.4A(iii)(c), 7.3, 7.7 and 7.11 are hereby waived
to the extent but only to the extent necessary to permit Wolverine Canada to
execute and deliver the Acquisition Agreement and consummate the transactions
contemplated thereby.
SECTION 4
LIMITATION OF WAIVER
Without limiting the generality of the provisions of subsection 10.6
of the Credit Agreement, the waiver set forth above shall be limited precisely
as written and relates solely to the Acquisition Agreement in the manner and to
the extent described above, and nothing in this Amendment shall be deemed to:
(a) constitute a waiver of compliance by the Borrowers with respect to (i)
subsections 2.4A(iii)(c), 7.3, 7.7 and 7.11 of the Credit Agreement in any
other instance or (ii) any other term, provision or condition of the Credit
Agreement or any other instrument or agreement referred to therein (whether
in connection with the Acquisition Agreement or otherwise); or
(b) prejudice any right or remedy that Agent or any Lender may now have or
may have in the future under or in connection with the Credit Agreement or
any other instrument or agreement referred to therein.
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<PAGE> 8
Except as expressly set forth herein, the terms, provisions and conditions of
the Credit Agreement and the other Loan Documents shall remain in full force and
effect and in all other respects are hereby ratified and confirmed.
SECTION 5
BORROWERS' REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, each of the Company and
Wolverine Canada hereby represents and warrants to each Lender that the
following statements are true, correct and complete:
A. CORPORATE POWER AND AUTHORITY. The Company and Wolverine Canada
have all requisite corporate power and authority to enter into this Amendment
and to carry out the transactions contemplated by, and perform their obligations
under, the Credit Agreement as amended by this Amendment (the "Amended
Agreement").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment and the performance of the Amended Agreement have been duly authorized
by all necessary corporate action on the part of the Company and Wolverine
Canada, as the case may be.
C. NO CONFLICT. The execution and delivery by the Company and
Wolverine Canada of this Amendment and the performance by the Company and
Wolverine of the Amended Agreement do not and will not (i) violate any provision
of any law or any governmental rule or regulation applicable to the Company,
Wolverine Canada or any of their respective Subsidiaries, the Certificate or
Articles of Incorporation or Bylaws of the Company, Wolverine Canada or any of
their respective Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on the Company, Wolverine Canada or any of
their respective Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of the Company, Wolverine Canada or any of their
respective Subsidiaries, (iii) result in or require the creation or imposition
of any Lien upon any of the properties or assets of the Company, Wolverine
Canada or any of their respective Subsidiaries (other than Liens created under
any of the Loan Documents in favor of Agent on behalf of Lenders), or (iv)
require any approval of stockholders or any approval or consent of any Person
under any Contractual Obligation of the Company, Wolverine Canada or any of
their respective Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution and delivery by the Company
and Wolverine Canada of this Amendment and the performance by Company and
Wolverine Canada of the Amended Agreement do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body.
E. BINDING OBLIGATION. This Amendment and the Amended Agreement have
been duly executed and delivered by the Company and Wolverine Canada and are the
8
<PAGE> 9
legally valid and binding obligations of the Company and Wolverine Canada
enforceable against the Company and Wolverine Canada in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the Third Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Potential Event of Default.
SECTION 6
MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS.
(i) On and after the date hereof, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Credit Agreement, and each
reference in the other Loan Documents to the "Credit Agreement",
"thereunder", "thereof" or words of like import referring to the
Credit Agreement shall mean and be a reference to the provisions of
the Credit Agreement as amended and waived hereby.
(ii) Except as specifically amended or waived by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of
the Administrative Agent or any Lender under, the Credit Agreement or
any of the other Loan Documents.
B. HEADINGS. Section and subsection headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose or be given any substantive effect.
C. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
9
<PAGE> 10
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
D. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Amendment shall become effective upon (i) the execution
of a counterpart hereof by Borrowers and Requisite Lenders, (ii) receipt by the
Company and the Administrative Agent of written or telephonic notification of
such execution and authorization of delivery thereof and (iii) receipt by the
Administrative Agent from the Company for distribution to the Lenders party to
this Amendment of an amendment fee in an amount equal to 0.05% of each such
Lender's Commitment (the date of satisfaction of such conditions being referred
to herein as the "THIRD AMENDMENT EFFECTIVE DATE"); provided, that the
amendments set forth in Section 1 hereof shall not become effective except as
set forth in such Section.
SECTION 7
ACKNOWLEDGEMENT AND CONSENT BY GUARANTORS
Each of Tube Forming L.P., Small Tube Manufacturing Corp., and
Wolverine Finance Company hereby acknowledges that it has read this Amendment
and consents to the terms hereof and further hereby confirms and agrees that,
notwithstanding the effectiveness of this Amendment, the obligations of such
Loan Party under each of the Loan Documents to which it is a party shall not be
impaired and each of the Loan Documents to which it is a party are, and shall
continue to be, in full force and effect and are hereby confirmed and ratified
in all respects.
[Remainder of page intentionally left blank]
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
WOLVERINE TUBE, INC.
By: /s/ James E. Deason
-------------------------------------
Name: James E. Deason
Title: Executive Vice President
Notice Address:
Wolverine Tube, Inc.
1525 Perimeter Parkway, Suite 210
Huntsville, Alabama 35808
Attention: James E. Deason
WOLVERINE TUBE (CANADA) INC.
By: /s/ James E. Deason
-------------------------------------
Name: James E. Deason
Title: Executive Vice President --
Finance & Administration
Notice Address:
Wolverine Tube, Inc.
1525 Perimeter Parkway, Suite 210
Huntsville, Alabama 35808
Attention: James E. Deason
S-1 Execution
<PAGE> 12
TUBE FORMING L.P.,
a Delaware limited partnership
By: WOLVERINE TUBE, INC.
By: /s/ James E. Deason
--------------------------------------
Name: James E. Deason
Title: Executive Vice President
Notice Address:
Wolverine Tube, Inc.
1525 Perimeter Parkway, Suite 210
Huntsville, Alabama 35808
Attention: James E. Deason
SMALL TUBE MANUFACTURING CORP.,
a Delaware corporation
By: /s/ James E. Deason
-----------------------------------------
Name: James E. Deason
Title: Executive Vice President
Notice Address:
Wolverine Tube, Inc.
1525 Perimeter Parkway, Suite 210
Huntsville, Alabama 35808
Attention: James E. Deason
S-2 Execution
<PAGE> 13
WOLVERINE FINANCE COMPANY,
a Tennessee corporation
By: /s/ James E. Deason
------------------------------------------
Name: James E. Deason
Title: Vice President -- Finance
Notice Address:
Wolverine Tube, Inc.
1525 Perimeter Parkway, Suite 210
Huntsville, Alabama 35808
Attention: James E. Deason
S-3 Execution
<PAGE> 14
CREDIT SUISSE FIRST BOSTON,
as the Administrative Agent
By: /s/ Robert N. Finney
------------------------------------------
Name: Robert N. Finney
Title: Managing Director
By: /s/ Thomas G. Muoio
------------------------------------------
Name: Thomas G. Muoio
Title: Vice President
Notice Address:
Credit Suisse First Boston
11 Madison Avenue
New York, NY 10010-3629
Attention: Robert Finney
S-4 Execution
<PAGE> 15
CREDIT SUISSE FIRST BOSTON,
as a Lender
By: /s/ Robert N. Finney
------------------------------------------
Name: Robert N. Finney
Title: Managing Director
By: /s/ Thomas G. Muoio
------------------------------------------
Name: Thomas G. Muoio
Title: Vice President
Notice Address:
Credit Suisse First Boston
11 Madison Avenue
New York, NY 10010-3629
Attention: Robert Finney
S-5 Execution
<PAGE> 16
MELLON BANK, N.A., individually and as
Documentation Agent
By: /s/ Roger N. Stanier
-----------------------------------------
Name: Roger N. Stanier
Title: Vice President
Notice Address:
Mellon Bank, N.A.
Three Mellon Bank Center
23rd Floor
Pittsburgh, PA 15259-0003
Attention: Loan Administration
Copy to:
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258-0001
Attention: Steven Prather
S-6 Execution
<PAGE> 17
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, (successor by merger to Bank of
America Illinois) as a Lender
By: /s/ Bianca Hemmen
-----------------------------------------
Name: Bianca Hemmen
Title: Senior Vice President
Notice Address:
Bank of America
901 Main Street, 67th Floor
Dallas, Texas 75202
Attention: Bianca Hemmen
S-7 Execution
<PAGE> 18
CREDIT LYONNAIS ATLANTA AGENCY
as a Lender
By: /s/ David M. Cawrse
-----------------------------------------
Name: David M. Cawrse
Title: First Vice President & Manager
Notice Address:
Credit Lyonnais, Atlanta Agency
One Peachtree Center
303 Peachtree Street NE
Suite 4400
Atlanta, GA 30308
Attention: Ronald Blissett
S-8 Execution
<PAGE> 19
NATIONSBANK, N.A., (successor by merger to
NationsBank, N.A. (South)) as a Lender
By: /s/ Bianca Hemmen
------------------------------------------
Name: Bianca Hemmen
Title: Senior Vice President
Notice Address:
Bank of America
901 Main Street, 67th Floor
Dallas, Texas 75202
Attention: Bianca Hemmen
S-9 Execution
<PAGE> 20
THE BANK OF NOVA SCOTIA,
as a Lender
By: /s/ W. J. Brown
------------------------------------------
Name: W. J. Brown
Title: Vice President
Notice Address:
The Bank of Nova Scotia
Suite 2700
600 Peachtree Street NE
Atlanta, GA 30308
Attention: Pat Brown
S-10 Execution
<PAGE> 21
FIRST UNION NATIONAL BANK
as a Lender
By: /s/ Donna J. Emhart
------------------------------------------
Name: Donna J. Emhart
Title: Vice President
Notice Address:
First Union Capital Markets
PA 4805
1339 Chestnut Street
Philadelphia, PA 19107
Attention: Donna J. Emhart
S-11 Execution
<PAGE> 22
SUNTRUST BANK, NASHVILLE, N.A.
as a Lender
By: /s/ Jon C. Long
------------------------------------------
Name: Jon C. Long
Title: Vice President
Notice Address:
Suntrust Bank, Nashville, N.A.
P.O.Box 305110
Nashville, TN 37230-5110
Attention: Woody Woodring
S-12 Execution
<PAGE> 1
Exhibit 10.2
AGREEMENT
for
SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFITS
This Agreement is made as of the first day of June, 1999, between Wolverine
Tube, Inc. (the "Company") and Dennis Horowitz (the "Executive").
RECITALS
WHEREAS, Company desires to employ and retain the unique experience, ability,
and services of Executive as Company's President and Chief Executive Officer;
and
WHEREAS, Company desires to provide a nonqualified retirement benefit to
supplement the retirement income benefit provided to Executive under the
Wolverine Tube, Inc. Retirement Plan as Amended and Restated (the "Retirement
Plan"), and the Wolverine Tube, Inc. Supplemental Benefit Restoration Plan (the
"Supplemental Plan"); and
WHEREAS, the terms and conditions of this Agreement have been duly approved and
authorized by the Compensation Committee of the Company's Board of Directors;
NOW, THEREFORE, in consideration of the mutual covenants set forth in this
Agreement, and of other good and valuable consideration which Company and
Executive have received and accept as sufficient, Company and Executive agree as
follows:
1. AGREEMENT TERM
The term of this Agreement begins on June 1, 1999 and continues until
all payments provided for hereunder have been made by the Company. No
termination of this Agreement shall have the effect of reducing benefits accrued
by Executive prior to the date of such termination.
2. DEFINITIONS:
All capitalized terms in this Agreement shall have the meanings
contained in the Retirement Plan, as it shall be amended from time to time,
except that the following terms shall have the meanings indicated:
2.1 ACTUARIAL EQUIVALENT
"Actuarial Equivalent" means a benefit having the same value as the
benefit which it replaces, computed on the bases of the corresponding actuarial
equivalence assumptions in effect under the Retirement Plan.
<PAGE> 2
2.2 ADMINISTRATOR
"Administrator" means the Retirement Committee under the Retirement
Plan, and any successor to the Retirement Committee.
2.3 AFFILIATE
"Affiliate" means--
(a) any corporation while it is a member of the same "controlled
group" of corporations (within the meaning of Code
section 414(b)) as the Company;
(b) any other trade or business (whether or not incorporated)
while it is under "common control" (within the meaning of Code
section 414(c)) with the Company;
(c) any organization during any period in which it (along with the
Company) is a member of an "affiliated service group" (within
the meaning of Code section 414(m)); or
(d) any other entity during any period in which it is required to
be aggregated with the Company under Code section 414(o).
2.4 AGREEMENT
"Agreement" means this Agreement for Supplemental Executive Retirement
Benefits, which is effective June 1, 1999.
2.5 BENEFICIARY
"Beneficiary" means the individual designated by the Executive to
receive any death benefits payable on the Executive's behalf under the
Retirement Plan.
2.6 BENEFIT COMMENCEMENT DATE
"Benefit Commencement Date" means the date on which the Executive's
benefits shall commence under Article IV. The Executive's Benefit Commencement
Date shall be--
(a) the first day of the month coincident with or next following
the later of--
(1) the Executive's Termination of Service; or
(2) the date on which the Executive attains his or her
Earliest Retirement Age; or
2
<PAGE> 3
(b) the date selected by the Administrator, in its sole and
absolute discretion, for the commencement of benefit payments
under the Supplemental Plan; provided, however, that this date
shall not precede the Executive's Termination of Service.
2.7 BOARD
"Board" means the Company's Board of Directors.
2.8 CODE
"Code" means the Internal Revenue Code of 1986, as amended from time to
time. A reference to a particular section of the Code shall also be deemed to
refer to the regulations and any other regulatory guidance under that Code
section.
2.9 COMPANY
"Company" means Wolverine Tube, Inc. and any successor thereto that
agrees to adopt and continue this Plan.
2.10 CREDITED SERVICE
"Credited Service" means Credited Service, as defined in the Retirement
Plan, used to calculate the amount of the Executive's benefit under the
Retirement Plan.
2.11 DISABILITY
"Disability" means any physical or mental infirmity, which would result
in the Executive incurring a "disability" under the disability provisions
contained in the Retirement Plan.
2.12 EARLIEST RETIREMENT AGE
"Earliest Retirement Age" means the earliest date on which the
Executive could incur a Termination of Service and elect to commence benefits
immediately under the Retirement Plan.
2.13 ERISA
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time. A reference to a particular section of ERISA shall
also be deemed to refer to the regulations and any other regulatory guidance
under that section.
2.14 NORMAL RETIREMENT DATE
"Normal Retirement Date" means the first day of the month coincident
with or next following the Executive's sixty-fifth birthday.
3
<PAGE> 4
2.15 PLAN YEAR
"Plan Year" means the calendar year.
2.16 RETIREMENT PLAN
"Retirement Plan" means the Wolverine Tube, Inc. Retirement Plan as
Amended and Restated, effective as of January 1, 1989, and as amended from
time to time.
2.17 SUPPLEMENTAL PLAN
"Supplemental Plan" means the Wolverine Tube, Inc. Supplemental Benefit
Restoration Plan, as Amended and Restated, effective January 1, 1994, and as
amended from time to time.
2.18 TERMINATION OF SERVICE
"Termination of Service" means the Executive's resignation, discharge,
or retirement from the Company other than by death.
3. BENEFIT ELIGIBILITY
Executive becomes entitled to benefits under this Agreement upon a
termination from employment or death subject to the terms and conditions set
forth herein.
4. RETIREMENT BENEFITS
4.1 NORMAL RETIREMENT BENEFITS
(a) ELIGIBILITY. If the Executive, upon a Termination of Service,
is entitled to a normal retirement benefit under the
Retirement Plan, he shall be eligible for a normal retirement
benefit under this section 4.1. Except as otherwise provided
in section 7, this normal retirement benefit shall be
calculated as a single life annuity corresponding to the
standard form of benefit under the Retirement Plan.
(b) AMOUNT. The Executive, if eligible for a normal retirement
benefit under subsection (a) shall be entitled to a monthly
benefit under this Agreement equal to the difference between
paragraphs (1) and (2) where--
(1) is the monthly normal retirement benefit to which the
Executive would be entitled under the Retirement Plan
as of his Normal Retirement Date, calculated without
regard to--
(A) the compensation limit in effect under Code
section 401(a)(17) and corollary provisions
in the Retirement Plan; and
4
<PAGE> 5
(B) the limits on benefits in effect under Code
section 415 and corollary provisions in the
Retirement Plan;
and
(2) is the monthly normal retirement benefit payable to
the Executive under the Supplemental Plan and the
Retirement Plan as of his Normal Retirement Date.
For purposes of calculating (1) above, and notwithstanding
anything else contained in the Retirement Plan, the monthly
normal retirement benefit under the Retirement Plan shall be
calculated by giving the Executive the following additional
Credited Service:
(A) for the period beginning on January 1, 1999 and
ending on December 31, 2004, six additional years of
Credited Service if the Executive is still employed
by the Company on December 31, 2004; plus
(B) for each year of Credited Service the Executive
receives under the Retirement Plan after December 31,
2004, the Executive will actually receive two times
the years of Credited Service received in accordance
with the Retirement Plan.
(c) COMMENCEMENT. Payment of benefits under this section 4.1 shall
begin on the Executive's Normal Retirement Date. However, the
Administrator, in its sole and absolute discretion, may direct
that payments shall begin at a later date; in that event, the
benefits under this section shall be adjusted to be the
Actuarial Equivalent of the benefit otherwise commencing at
the Executive Normal Retirement Date.
4.2 EARLY RETIREMENT BENEFIT
(a) ELIGIBILITY. An Executive who incurs a Termination of Service
and is entitled to an early retirement benefit under the
Retirement Plan shall be eligible for an early retirement
benefit under this section 4.2. Except as otherwise provided
in section 7, this early retirement benefit shall be
calculated as a single life annuity corresponding to the
standard form of benefit under the Retirement Plan.
(b) AMOUNT. The Executive, if eligible for an early retirement
benefit under subsection (a) shall be entitled to a monthly
benefit under this Agreement equal to the difference between
paragraphs (1) and (2) where--
(1) is the monthly early retirement benefit to which the
Executive would be entitled under the Retirement Plan
as of his Benefit Commencement Date,
5
<PAGE> 6
calculated without regard to the limits described
in section 4.1(b)(1)(A) and (B) hereof, and
(2) is the monthly early retirement benefit payable to
the Executive under the Supplemental Plan and the
Retirement Plan if benefits were to commence as of
the Executive's Benefit Commencement Date.
For purposes of calculating (1) above, and notwithstanding
anything else contained in the Retirement Plan, the monthly
retirement benefit under the Retirement Plan shall be
calculated by giving the Executive the following additional
Credited Service:
(A) for the period beginning on January 1, 1999 and
ending on December 31, 2004, six additional years of
Credited Service if the Executive is still employed
by the Company on December 31, 2004; plus
(B) for each year of Credited Service the Executive
receives under the Retirement Plan after December 31,
2004, the Executive will actually receive two times
the years of Credited Service received in accordance
with the Retirement Plan.
(c) COMMENCEMENT. Payment of benefits under this section 4.2 shall
begin on the Executive's Benefit Commencement Date.
If the Executive's Benefit Commencement Date is delayed by the
Administrator beyond the Executive's Normal Retirement Date,
the benefits under this section shall be adjusted to be the
Actuarial Equivalent of the benefit that would be payable
hereunder if such benefit commenced at the Executive's Normal
Retirement Date.
4.3 LATE RETIREMENT BENEFIT
(a) ELIGIBILITY. If the Executive, upon a Termination of Service,
is entitled to a late retirement benefit under the Retirement
Plan, he shall be eligible for a late retirement benefit under
this section 4.3. Except as otherwise provided in section 7,
this late retirement benefit shall be calculated as a single
life annuity corresponding to the standard form of benefit
under the Retirement Plan.
(b) AMOUNT. The Executive, if eligible for a late retirement
benefit under subsection (a) shall be entitled to a monthly
benefit under this Agreement equal to the difference between
paragraphs (1) and (2) where--
(1) is the monthly late retirement benefit to which the
Executive would be entitled under the Retirement Plan
as of his Benefit Commencement Date,
6
<PAGE> 7
calculated without regard to the limits described
in section 4.1(b)(1)(A) and (B) hereof, and
(2) is the monthly-deferred retirement benefit payable to
the Executive under the Supplemental Plan and the
late retirement benefit payable to the Executive
under the Retirement Plan if benefits were to
commence as of the Executive's Benefit Commencement
Date.
For purposes of calculating (1) above, and notwithstanding
anything else contained in the Retirement Plan, the monthly
retirement benefit under the Retirement Plan shall be
calculated by giving the Executive the following additional
Credited Service:
(A) for the period beginning on January 1, 1999 and
ending on December 31, 2004, six additional years of
Credited Service if the Executive is still employed
by the Company on December 31, 2004; plus
(B) for each year of Credited Service the Executive
receives under the Retirement Plan after December 31,
2004, the Executive will actually receive two times
the years of Credited Service received in accordance
with the Retirement Plan.
(c) COMMENCEMENT. Payment of benefits under this section 4.3 shall
begin on the Executive's Benefit Commencement Date.
4.4 DISABILITY RETIREMENT BENEFIT
(a) ELIGIBILITY. If the Executive, upon a Termination of Service,
is entitled to a disability retirement benefit under the
Retirement Plan, he shall be eligible for a disability
retirement benefit under this section 4.4. Except as otherwise
provided in section 7, this disability retirement benefit
shall be calculated as a single life annuity corresponding to
the standard form of benefit under the Retirement Plan.
(b) AMOUNT. The Executive, if eligible for a disability retirement
benefit under subsection (a) shall be entitled to a monthly
benefit under this Agreement equal to the difference between
paragraphs (1) and (2) where--
(1) is the monthly disability retirement benefit to which
the Executive would be entitled under the Retirement
Plan as of his Benefit Commencement Date, calculated
without regard to the limits described in section
4.1(b)(1)(A) and (B) hereof, and
7
<PAGE> 8
(2) is the monthly disability retirement benefit payable
to the Executive under the Supplemental Plan and the
Retirement Plan if benefits were to commence as of
the Executive's Benefit Commencement Date.
For purposes of calculating (1) above, and notwithstanding
anything else contained in the Retirement Plan, the monthly
retirement benefit under the Retirement Plan shall be
calculated by giving the Executive the following additional
Credited Service:
(A) for the period beginning on January 1, 1999 and
ending on December 31, 2004, six additional years of
Credited Service if the Executive is still employed
by the Company on December 31, 2004; plus
(B) for each year of Credited Service the Executive
receives under the Retirement Plan after December 31,
2004, the Executive will actually receive two times
the years of Credited Service received in accordance
with the Retirement Plan.
(c) COMMENCEMENT AND DURATION. Payment of benefits under this
section 4.4 shall begin on the Executive's Benefit
Commencement Date.
The Executive who is receiving a benefit under this section
shall not be entitled to any other benefit under this Article
or Article 5. Benefits under this section shall be subject to
rules comparable to the disability retirement benefit rules in
the Retirement Plan concerning duration, entitlement to and
amounts of other retirement benefits, medical examinations,
and other restrictions.
4.5 VESTED BENEFITS ON OTHER TERMINATIONS OF EMPLOYMENT
(a) ELIGIBILITY. If the Executive, upon a Termination of Service
(other than normal, early, deferred, or disability retirement
described in sections 4.1 through 4.4), is entitled to a
vested benefit under the Retirement Plan, he shall be eligible
for a benefit under this section 4.5. Except as otherwise
provided in section 7, this benefit shall be calculated as a
single life annuity corresponding to the standard form of
benefit under the Retirement Plan.
(b) AMOUNT. The Executive, if eligible for a benefit under
subsection (a) shall be entitled to a monthly benefit under
this Agreement equal to the difference between paragraphs (1)
and (2) where--
(1) is the monthly benefit to which the Executive would
be entitled under the Retirement Plan as of his
Benefit Commencement Date, calculated without regard
to the limits described in section 4.1(b)(1)(A) and
(B) hereof, and
8
<PAGE> 9
(2) is the monthly benefit payable to the Executive under
the Supplemental Plan and the Retirement Plan if
benefits were to commence as of the Executive's
Benefit Commencement Date.
For purposes of calculating (1) above, and notwithstanding
anything else contained in the Retirement Plan, the monthly
retirement benefit under the Retirement Plan shall be
calculated by giving the Executive the following additional
Credited Service:
(A) for the period beginning on January 1, 1999 and
ending on December 31, 2004, six additional years of
Credited Service if the Executive is still employed
by the Company on December 31, 2004; plus
(B) for each year of Credited Service the Executive
receives under the Retirement Plan after December 31,
2004, the Executive will actually receive two times
the years of Credited Service received in accordance
with the Retirement Plan.
(c) COMMENCEMENT. Payment of benefits under this section 4.5 shall
begin on this Executive's Benefit Commencement Date. If the
Executive's Benefit Commencement Date is accelerated by the
Administrator before the Retirement Plan's "Early Retirement
Date," the benefits under this section shall be adjusted to
be the Actuarial Equivalent of the benefits that would be
payable hereunder if such benefit commenced at the
Executive's Early Retirement Date. If the Executive's
Benefit Commencement Date is delayed by the Administrator
beyond the Executive's Normal Retirement Date, the benefits
under this section shall be adjusted to be the Actuarial
Equivalent of the benefits that would be payable hereunder
if such benefits commenced at the Executive's Normal
Retirement Date.
4.7 REEMPLOYMENT
If the Executive, after Termination of Service, is subsequently
reemployed, the Executive and his benefits hereunder shall become subject to
rules comparable to the rules in the Retirement Plan regarding suspension of
benefits, recalculation of benefits, and similar items.
5. CHANGE IN CONTROL AND TERMINATION WITHOUT CAUSE BENEFITS
For purposes of this Agreement, a "Change in Control" shall have the
meaning contained in section 1(b)(v) of that certain Amended and Restated Change
in Control, Severance and Non-Competition Agreement entered into by the Company
and Executive as of April 20, 1999, a copy of which definition is attached
hereto as Exhibit A. For purposes of this Agreement, "Termination Without Cause"
shall mean any instance not covered under the definition of "Termination For
Cause" as contained in section 1(a)(ii) of that certain Amended and Restated
Change in Control, Severance and Non-Competition Agreement entered into by the
Company and
9
<PAGE> 10
Executive as of April 20, 1999, a copy of which definition is attached hereto as
Exhibit B. In the event that the Company experiences a Change in Control prior
to August 15, 2004 or should the Executive be Terminated Without Cause prior to
August 15, 2004 (which is the date on which Executive attains the age of
fifty-eight (58) years), Executive will be deemed to have attained said age as
of the date of said Change in Control or Termination Without Cause, and all
benefits calculated pursuant to sections 4.1 through 4.6 above under the terms
of the Retirement Plan shall be calculated as if Executive had attained age
fifty-eight (58) on said date and had become fully vested in the benefits
provided hereunder (whether or not he is then vested under the Retirement Plan
or the Supplemental Plan), and Executive shall be entitled to make any elections
pursuant to this Agreement as if he had attained said age.
6. DEATH BENEFIT
6.1 ELIGIBILITY.
If the Executive has accrued vested rights under the Retirement Plan
and dies before the date on which his benefits under section 4 hereof are to
commence, and his spouse or children under the age of 21 are entitled to death
benefits under the Retirement Plan, such spouse or children shall be eligible
for death benefits under this section.
6.2 AMOUNT.
A spouse or child of the Executive who is eligible for a death benefit
under section 6.1 shall be entitled to a benefit under this Agreement equal to
the difference between subsections (1) and (2) where--
(1) is the death benefit to which the spouse or child would be
entitled under the Retirement Plan as of the earliest date on
which such benefit would be payable, calculated without regard
to the limits described in section 4.1(b)(1)(A) and (B)
hereof, and
(2) is the death benefit payable to the spouse or child under the
Supplemental Plan and the Retirement Plan if such benefits
were to commence as of such earliest date of payment.
For purposes of calculating (1) above, and notwithstanding
anything else contained in the Retirement Plan, the monthly
retirement benefit under the Retirement Plan shall be
calculated by giving the Executive the following additional
Credited Service:
(A) for the period beginning on January 1, 1999 and
ending on December 31, 2004, six additional years of
Credited Service if the Executive is still employed
by the Company on December 31, 2004; plus
10
<PAGE> 11
(B) for each year of Credited Service the Executive
receives under the Retirement Plan after December 31,
2004, the Executive will actually receive two times
the years of Credited Service received in accordance
with the Retirement Plan.
6.3 FORM, TIMING, AND DURATION
Payment of benefits under this section shall begin at the earliest
possible date such benefits would be payable to the spouse or child, as
applicable, under the Retirement Plan. Payments shall continue for the duration
described in the Retirement Plan. Payment shall be in the standard form for such
benefits described in the Retirement Plan.
Notwithstanding the foregoing, the Administrator may, in its sole and
absolute discretion, direct that payment be made in a form or at a time other
than that described above. In that event, the benefits payable shall be the
Actuarial Equivalent of the benefits described in the first paragraph of this
section.
7. FORM OF PAYMENT
7.1 UNMARRIED PARTICIPANT.
The form of payment for the Executive if he is not married on his
Benefit Commencement Date shall be a single life annuity.
7.2 MARRIED PARTICIPANT.
The form of payment for the Executive if he is married on his Benefit
Commencement Date shall be a statutory joint and survivor spouse annuity. A
statutory joint and survivor spouse annuity provides--
(a) a monthly benefit to the Executive for life; and
(b) upon the Executive's death, a monthly benefit to the
Executive's surviving spouse for life equal to 50 percent of
the monthly amount payable during the Executive's lifetime.
This statutory joint and survivor annuity shall be the Actuarial
Equivalent of the single life annuity in subsection (a).
7.3 OPTIONAL PAYMENT FORMS.
The Administrator may, in its sole and absolute discretion, direct that
payment be made in a form other than that described in subsection (a) or (b). In
that event, the benefit payable under the optional payment form shall be the
Actuarial Equivalent of the single life annuity described in subsection (a).
11
<PAGE> 12
8. FUNDING
8.1 STATUS AS UNFUNDED PLAN
The Agreement is intended to constitute an unfunded plan maintained for
a "select group of management or highly compensated employees" within the
meaning of Section 201(2) of the Employee Retirement Income Security Act of
1974. The benefits under this Agreement shall be paid from the general assets of
the Company, or from a trust fund the assets of which remain available to the
general creditors of the Company in the event of its insolvency. The benefits
shall not be funded in advance in any way except, in the Company's discretion,
through such a trust.
8.2 EVENT UPON WHICH TRUST WILL BE FUNDED
Nothing contained in this Agreement, and no action taken pursuant to
the provisions of this Agreement, shall create a trust or fiduciary relationship
between the Company and the Executive, Executive's spouse, or Beneficiary.
Notwithstanding the foregoing, the Company may establish and fund a trust for
said purpose, in which event the assets of the trust shall nonetheless be
available to the general creditors of the Company in the event of its
insolvency. In the event that the Company experiences a Change in Control, as
described in Section 5 above, it will immediately deposit into such a trust an
amount of money, calculated by actuaries acceptable to the Executive, which will
be sufficient with any other assets then held in said trust for said purpose to
fund the obligation of the Company under this Agreement. Any such trust will be
designed to avoid creating a funded promise hereunder for purposes of applicable
Internal Revenue Service and Department of Labor regulations relating to
constructive receipt of income and applicability of funding requirements of the
Employee Retirement Income Security Act of 1974, as amended.
8.3 UNSECURED INTEREST
Neither the Executive nor any Beneficiary shall have any interest
whatsoever in any specific asset of the Company or an Affiliate. To the extent
that any person acquires a right to receive payments under this Agreement, such
right shall be no greater than the right of any unsecured general creditor of
the Company.
9. MISCELLANEOUS PROVISIONS
9.1 ADMINISTRATION
The Agreement shall be administered by the Administrator.
The Administrator shall have all powers necessary or appropriate to
carry out the provisions of the Agreement. It may, from time to time, establish
rules for the administration of the Agreement and the transaction of the
Agreement's business.
12
<PAGE> 13
The Administrator shall have the exclusive right to make any finding of
fact necessary or appropriate for any purpose under the Agreement including, but
not limited to, the determination of eligibility for and amount of any benefit.
The Administrator shall have the exclusive right to interpret the terms
and provisions of the Agreement and to determine any and all questions arising
under the Agreement or in connection with its administration, including, without
limitation, the right to remedy or resolve possible ambiguities,
inconsistencies, or omissions by general rule or particular decision, all in its
sole and absolute discretion.
All findings of fact, determinations, interpretations, and decisions of
the Administrator shall be conclusive and binding upon all persons having or
claiming to have any interest or right under the Agreement and shall be given
the maximum deference allowed by law.
9.2 APPEALS FROM DENIAL OF CLAIMS
If any claim for benefits under the Agreement is wholly or partially
denied, the claimant shall be given notice of the denial. This notice shall be
in writing, within a reasonable period of time after receipt of the claim by the
Administrator. This period shall not exceed 90 days after receipt of the claim,
except that if special circumstances require an extension of time, written
notice of the extension shall be furnished to the claimant, and an additional 90
days will be considered reasonable.
This notice shall be written in a manner calculated to be understood by
the claimant and shall set forth the following information:
(a) the specific reasons for the denial;
(b) specific reference to the Agreement provisions on which the
denial is based;
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why this material or information is necessary;
(d) an explanation that a full and fair review by the
Administrator of the decision denying the claim may be
requested by the claimant or an authorized representative by
filing with the Administrator, within 60 days after the notice
has been received, a written request for the review; and
(e) if this request is so filed, an explanation that the claimant
or an authorized representative may review pertinent documents
and submit issues and comments in writing within the same
60-day period specified in subsection (d).
13
<PAGE> 14
The decision of the Administrator upon review shall be made promptly,
and not later than 60 days after the Administrator's receipt of the request for
review, unless special circumstances require an extension of time for
processing. In this case the claimant shall be so notified, and a decision shall
be rendered as soon as possible, but not later than 120 days after receipt of
the request for review. If the claim is denied, wholly or in part, the claimant
shall be given a copy of the decision promptly. The decision shall be in
writing, shall include specific reasons for the denial, shall include specific
references to the pertinent Agreement provisions on which the denial is based,
and shall be written in a manner calculated to be understood by the claimant.
9.3 EXPENSES
All expenses incurred in the administration of the Agreement shall be
paid by the Company.
9.4 AMENDMENT AND TERMINATION
The Company and the Executive hereby reserve the right to amend,
modify, or terminate the Agreement at any time, and for any reason, by action of
the Board of Directors of the Company and by the Executive, in writing. However,
no amendment or termination shall have the effect of reducing the benefits
accrued by the Executive prior to the date of the amendment or termination.
9.5 NO CONTRACT OF EMPLOYMENT
Nothing contained in this Agreement shall be construed to give the
Executive the right to be retained in the service of the Company or its
Affiliates or to interfere with the right of the Company or its Affiliates to
discharge the Executive at any time.
9.6 WAIVER.
The failure of either party to insist in any one or more instances upon
performance of any terms or conditions of this Agreement shall not be construed
as a waiver of future performance of any such term, covenant, or conditions. The
obligations of both Company and Executive shall continue in full force and
effect.
9.7 SEVERABILITY.
If any provision of this Agreement shall be held illegal or invalid,
the illegality or invalidity shall not affect its remaining parts. The Agreement
shall be construed and enforced as if it did not contain the illegal or invalid
provision.
9.8 ASSIGNMENT.
Executive may not assign or otherwise alienate the benefits payable
under this Agreement.
14
<PAGE> 15
9.9 TAX WITHHOLDING.
Company may withhold from any payment under this Agreement any federal,
state, or local taxes required by law to be withheld with respect to the payment
and any sum Company may reasonably estimate as necessary to cover any taxes for
which it may be liable and that may be assessed with regard to the payment.
9.10 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Alabama.
9.11 ENTIRE AGREEMENT.
This Agreement supersedes all previous agreements between Executive and
Company, and contains the entire understanding and agreement between the
parties, with respect to the subject matter hereof, and supplements the
Retirement Plan and Supplemental Plan. This Agreement may not be amended,
modified, supplemented, or terminated except by a subsequent written instrument
signed by both parties.
* * * * * * * * * *
IN WITNESS WHEREOF, the parties hereto have executed this instrument, effective
as of June 1, 1999.
WOLVERINE TUBE, INC.
By /s/ Jan K. Ver Hagen
------------------------------------
Jan K. Ver Hagen, Chairman of the
Board
EXECUTIVE
By /s/ Dennis Horowitz
------------------------------------
Dennis Horowitz
15
<PAGE> 16
EXHIBIT A
(v) For purposes of this Agreement, "Change in Control" shall mean:
(A) The Company is merged, consolidated or reorganized into or with another
corporation or other legal person, and as a result of such merger, consolidation
or reorganization less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately after such
transaction are held in the aggregate by the holders of Voting Stock (as that
term is hereafter defined) of the Company immediately prior to such transaction;
(B) The Company sells or otherwise transfers all or substantially all of
its assets to another corporation or other legal person, and as a result of such
sale or transfer less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately after such
sale or transfer is held in the aggregate by the holders of Voting Stock of the
Company immediately prior to such sale or transfer;
(C) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing
that (x) any person (as the term "person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing 15% or
more of the combined voting power of the then-outstanding securities entitled to
vote generally in the election of directors of the Company ("Voting Stock"), or
(y) any person has, during any period, increased the number of shares of Voting
Stock beneficially owned by such person by an amount equal to or greater than
15% of the outstanding shares of Voting Stock; provided, however, that transfers
of shares of Voting Stock between a person and the affiliates or associates (as
such terms are defined under Rule 12b-2 or any successor rule or regulation
promulgated under the Exchange Act) of such person shall not be considered in
determining any increase in the number of shares of Voting Stock beneficially
owned by such person;
(D) The Company files a report or proxy statement with the Securities and
Exchange Commission pursuant to the Exchange Act disclosing in response to Form
8-K or Schedule 14A (or any successor schedule, form or report or item therein)
that a change in control of the Company has occurred or will occur in the future
pursuant to any then-existing contract or transaction; or
(E) If, during any period of two consecutive years, individuals who at the
beginning of any such period constitute the Directors of the Company cease for
any reason to constitute at least a majority thereof; provided, however, that
for purposes of this clause (v) each Director who is first elected, or first
nominated for election by the Company's stockholders, by a vote of at least
two-thirds of the Directors of the Company (or a conalonce thereof) than still
in office who were Directors of the Company at the beginning of any such period
will be deemed to have been a Director of the Company at the beginning of such
period.
Notwithstanding the foregoing provisions of Sections (C) or (D) unless
otherwise determined in a specific case by majority vote of the Board, a "Change
in Control" shall not be deemed to have occurred for purposes of Sections (C) or
(D) solely because (1) the Company, (2) an entity in which the Company directly
or indirectly beneficially owns 50% or more of the voting securities (a
"Subsidiary"), or (3) any employee stock ownership plan or any other employee
benefit plan of the Company or any Subsidiary either files or becomes obligated
to file a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K, or Schedule 14A (or any successor schedule, form or
report or item therein) under the Exchange Act disclosing beneficial ownership
by it of shares of Voting Stock, whether in excess of 15% or otherwise, or
because the Company reports that a change in control of the Company has occurred
or will occur in the future by reason of such beneficial ownership.
<PAGE> 17
EXHIBIT B
(ii) For purposes of this Agreement, termination for "Cause" shall mean
termination of the Executive's employment by the Company because of (A) the
Executive's conviction for, or guilty plea to, a felony or a crime involving
moral turpitude, (B) the Executive's commission of an act of personal dishonesty
in connection with his employment by the Company, (C) a breach of fiduciary duty
in connection with his employment with the Company which shall include, but not
be limited to, (1) investment in any person or organization with the knowledge
that such person or organization has or proposes to have dealings with the
Company, such person or organization competes with the Company, or the Company
is considering an investment in such person or organization (the reference to
"organization" excludes federal credit unions, publicly owned insurance
companies and corporations the stock of which is listed on a national securities
exchange or quoted on NASDAQ if the direct and beneficial stock ownership of the
Executive, including members of his immediate family, is not more than one
percent (1%) of the total outstanding stock of such corporation); (2) a loan
(including a guaranty of a loan) from or to any person or organization having or
proposing any dealings with the Company or in competition with the Company; (3)
participation directly or indirectly in any transaction involving the Company
other than as a director or as an officer or employee of the Company; (4)
acceptance from any person or organization having or proposing any dealings with
the Company or in competition with the Company of any gratuity, gift,
entertainment or favor which exceeds either nominal value or common courtesies
which are generally accepted business practice; or (5) service as an officer,
director, partner or employee of, or consultant to, any person or organization
having or proposing dealings with the Company or in competition with the
Company; (D) the Executive's failure to execute or follow the written policies
of the Company, including, but not limited to, the Company's policy against
discrimination or harassment, or (E) the Executive's refusal to perform the
essential functions of the job, following written notice thereof. Termination of
the Executive's employment as a result of his death or disability (if such
Executive is eligible for benefits under the Company's long-term disability plan
or would be eligible for such benefits were the Executive a participant in said
plan) shall constitute a termination by the Company with Cause for purposes of
this Agreement.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENTS OF INCOME OF WOLVERINE TUBE, INC. FOR THE SIX
MONTH PERIOD ENDED JULY 3, 1999 AND THE CONDENSED CONSOLIDATED BALANCE SHEET OF
WOLVERINE TUBE, INC. AT JULY 3, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUL-03-1999
<CASH> 74,287
<SECURITIES> 0
<RECEIVABLES> 85,960<F1>
<ALLOWANCES> 0
<INVENTORY> 100,004
<CURRENT-ASSETS> 261,877
<PP&E> 195,671<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 554,975
<CURRENT-LIABILITIES> 49,003
<BONDS> 215,408
2,000
0
<COMMON> 142
<OTHER-SE> 248,064
<TOTAL-LIABILITY-AND-EQUITY> 554,975
<SALES> 325,162
<TOTAL-REVENUES> 325,162
<CGS> 278,931
<TOTAL-COSTS> 278,931
<OTHER-EXPENSES> 15,362
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,298
<INCOME-PRETAX> 24,571
<INCOME-TAX> 8,760
<INCOME-CONTINUING> 15,811
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 5,754
<NET-INCOME> 10,057
<EPS-BASIC> 0.74
<EPS-DILUTED> 0.73
<FN>
<F1>THE VALUES FOR THE TAGS RECEIVABLES AND PP&E ARE SHOWN NET OF THEIR RESPECTIVE
ALLOWANCE ACCOUNTS.
</FN>
</TABLE>
