UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KA/Amendment No. 1
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______to_____
Commission file number 0-18083
Williams Controls, Inc.
(Exact name of registrant as specified in its charter)
Delaware 84-1099587
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14100 SW 72nd Avenue, Portland, Oregon 97224
--------------------------------------- ---------
(Address of principal executive office) (zip code)
Registrant's telephone number, including area code:
(503) 684-8600
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($.01 par value)
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.
(1) Yes X No
--- ---
(2) Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of November 30, 1999, 19,783,528, shares of Common Stock were outstanding and
the aggregate market value of the shares (based upon the closing price of the
shares on the NASDAQ National market) of Williams Controls, Inc. held by
nonaffiliates was approximately $26,956,328.
Documents Incorporated by Reference - None
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Company
Directors. Our directors as of January 26, 2000 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------- ------- -------------------------------------------------------------- ----------
Year First
Name Age Position/Office with Company Elected
- ---------------------------- ------- -------------------------------------------------------------- ----------
Thomas W. Itin 65 President, Chairman of the Board, Chief Executive Officer and 1988
Treasurer
H. Samuel Greenawalt 71 Director 1994
Timothy S. Itin 41 Director 1994
Anthony B. Cashen 65 Director 1999
Charles G. McClure 46 Director 1999
- ---------------------------- ------- -------------------------------------------------------------- ---------
</TABLE>
Thomas W. Itin has been Chairman of the Board and Chief Executive Officer of the
Company since March 1989 and a Director since inception of the Company in
November 1988. In addition, Mr. Itin was elected President and Treasurer of the
Company in June 1993. Mr. Itin serves on the Cornell University Council and is
Chairman of the Technology Transfer Committee of the Council. Mr. Itin has been
Chairman, President and owner of TWI International, Inc. ("TWI") since he
founded that entity in 1967. TWI acts as consultant for mergers, acquisitions,
financial structuring, new ventures and asset management. Mr. Itin also is the
owner and principal officer of Acrodyne Corporation. In addition, Mr. Itin is
Chairman of the Board and President of LBO Capital Corp. and Ajay Sports, Inc.
and its subsidiaries, both of which are publicly-held corporations. Mr. Itin was
awarded a Masters of Business Administration degree from New York University and
received a Bachelor of Science degree from Cornell University.
H. Samuel Greenawalt has served as a director of the Company and a member of the
Audit Committee of the Board since March 1994. From 1987 until his retirement in
June 1994, Mr. Greenawalt served as Senior Vice President, Business Development,
for Michigan National Bank in Detroit, Michigan. Mr. Greenawalt continues to
provide consulting services to Michigan National Bank. From 1958 to 1987, Mr.
Greenawalt served in various commercial lending capacities at Michigan National
Corporation. From 1954 to 1958, he was with the investment firm of
McNaughton-Greenawalt Company. Since June 1993, Mr. Greenawalt has served as a
director of Enercorp, Inc., a publicly traded business development company that
owns approximately ten percent of the Common Stock of the Company. Mr.
Greenawalt received a Bachelor of Science degree from the Wharton School of the
University of Pennsylvania, and is a graduate of the University of Wisconsin
Banking School.
Timothy S. Itin has served as a director of the Company and a member of the
Audit and Compensation Committees of the Board since March 1994. Since January
1999, he has been a Partner in the investment banking firm of Thomas Weisel
Partners in San Francisco, California. From July 1998 to December 1998, he was a
Principal in the investment banking firm NationsBank Montgomery Securities, LLC,
located in San Francisco, California. From January 1996 to June 1998, Mr. Itin
was a Managing Director of the investment banking firm of Volpe Brown Whelan &
Company, LLC, in San Francisco. From 1991 through 1995, Mr. Itin was a Managing
Director of Jensen Securities, an institutional brokerage firm located in
Portland, Oregon, where he served on Jensen's management committee. From 1989 to
1991, he was employed by Laurel Management Partners, a money management
affiliate of Montgomery Securities. From 1983 to 1989, Mr. Itin was a Limited
Partner at Montgomery Securities and worked in the field of investment banking,
institutional trading and full service brokerage in San Francisco. Mr. Itin has
earned the designation of Chartered Financial Analyst (CFA) and received a
Bachelor of Arts degree in economics from Dartmouth College.
Anthony B. Cashen has served as a director of the Company since February 1999.
For the past five years, Mr. Cashen has served as a Managing Partner, then as a
Senior Partner, of LAI Ward Howell, a publicly held management consulting and
executive recruiting firm located in New York City. He has served as Secretary,
Treasurer and director of LBO Capital Corp., a publicly held corporation, since
its inception. He currently serves as a director of Immucell Corp. and Ajay
Sports, Inc., both publicly held corporation. See "Certain Relationships and
Related Transactions". Previously, Mr. Cashen had been an officer and principal
of the investment firms A.G. Becker, Inc. and Donaldson Lufkin and Jenrette,
Inc. He received an MBA from the Johnson Graduate School of Management at
Cornell University, and a Bachelor of Science degree from Cornell University.
2
<PAGE>
Charles G. McClure has served as a director of the Company since February 1999.
Since August 1997, he has been President of Detroit Diesel Corporation, a
publicly held company, and has been a director since November 1997. From 1995 to
1997, he was President, and before that Vice President and General Manager, of
the Americas Division of Johnson Controls, Inc., a publicly held company. From
1992 to 1995, he was Vice President and managing director of Johnson Controls'
Automotive Systems Group's European Operations. Mr. McClure serves on the
Cornell University Council and is a member of the Technology Transfer Committee
of the Council. He received an MBA from the University of Michigan and a
Bachelor of Science degree from Cornell University.
Executive Officers. The executive officers of the Company at January 26, 2000
are as follows:
- ----------------------------------- ----- --------------------------------------
Name Age Position/Office with Company
- ----------------------------------- ----- --------------------------------------
Thomas W. Itin 65 Chairman of the Board, Chief Executive
Officer, President and Treasurer
Gerard A. Herlihy 47 Chief Financial Officer and Chief
Administrative Officer
Thomas K. Ziegler 54 Vice President and Counsel
Timothy J. Marker 50 Vice President - Sales and Marketing
Kim L. Childs 44 Corporate Controller
- ----------------------------------- ----- --------------------------------------
For information on Thomas W. Itin, see his biography above.
Gerard A. Herlihy has been Chief Financial and Administrative Officer since
February 1997, and Secretary of the Company since August 1997. Prior to joining
the Company, Mr. Herlihy directed turnarounds of financially troubled companies.
From 1994 to 1996, he was President and Chief Operating Officer and a member of
the Board of Directors of CliniCorp, Inc., a publicly-held healthcare company.
CliniCorp filed for Chapter 11 bankruptcy protection during the year following
Mr. Herlihy's resignation. From 1992 to 1993, he was Chief Financial Officer and
a member of the transition turnaround team at Melnor, Inc., a $50 million
manufacturer of lawn and garden products. From 1991 to 1992, Mr. Herlihy was the
turnaround advisor to and a member of the Board of Directors of Blount Doors and
Millwork, Inc., a $40 million door manufacturer. Positions held prior to 1991
included acquisition advisory work for William E. Simon & Sons, Managing
Director of Corporate Finance at Thomson McKinnon Securities, and audit
supervisor at Peat, Marwick, Mitchell & Co. Mr. Herlihy has an MBA Degree from
the Harvard Business School and a Bachelor of Science Degree from the University
of Rhode Island. He is also a Certified Public Accountant ("Retired Status").
Thomas K. Ziegler has been Counsel since 1994, assuming the position of Vice
President in 1998. Since 1994, he has been President of Williams Technologies,
Inc., a wholly-owned subsidiary of the Company involved in research and
development and technology partnering on behalf of the Company's subsidiaries.
From 1989 to 1994, he was an attorney practicing patent law for the firm Dykema
Gossett in Bloomfield Hills, Michigan. He received a Juris Doctor degree in Law
and a Bachelor of Science degree in Electrical Engineering, both from the
University of Missouri.
Timothy J. Marker has been Vice President, Sales and Marketing of the Company
since August 1997. Prior to joining the Company, from 1996 to 1997, he was the
President of Electro-Mechanical Products, a $50 million company involved in the
manufacture and sale of precision switches, sensors and RFI noise suppression
devices to the global automotive industry, which is a division of Alcoa Fujikura
Limited. From 1989 to 1995, Mr. Marker was President of Electro-Mechanical
Products, a division of Electro-Wire Products, Inc. From 1982 to 1988, Mr.
Marker was Vice President of Sales/Engineering for this same company. From 1972
to 1982, Mr. Marker worked for General Motors' Packard Electric Division, where
his last position was Account Manager responsible for Packard's Chevrolet Truck
account with annual sales of $310 million. Mr. Marker has a Bachelor of Science
degree from Purdue University.
Kim L. Childs has been Corporate Controller of the Company since March 1999.
Prior to joining the Company, she was the Manager of Accounting Services in 1997
and 1998 for PacifiCorp Group Holdings, Inc., which included accounting for the
unregulated activities of this Fortune 500 utility. From 1993 to 1997, Ms.
Childs was a senior manager with Talbot, Korvola & Warwick LLP, a public
accounting firm. In addition to her experience in the private sector, Ms. Childs
was with KPMG Peat Marwick and Deloitte & Touche for a combined total of seven
years, and left Peat Marwick as a senior manager. Ms. Childs has a bachelor of
science degree from Oregon State University and is a Certified Public Accountant
in the states of Oregon and Washington.
3
<PAGE>
Timothy S. Itin is the son of Thomas W. Itin. There are no other family
relationships among the directors and executive officers of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of the
Securities Exchange Act of 1934 requires the Company's officers and directors,
and persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission ("SEC"). Officers, directors and greater
than ten-percent shareholders are required by the SEC regulation to furnish the
Company with copies of Section 16(a) forms they file. Based solely on review of
the copies of such forms furnished to the Company, or written representations of
the reporting persons, the Company has determined that all required reports were
timely filed during the year except that one executive officer of the Company
filed a late report on Form 3.
Item 11. Executive Compensation
Summary Compensation Table. The table below sets forth the compensation received
by the Chief Executive Officer of the Company and other executive officers of
the Company, for the past three fiscal years, who received compensation in
excess of $100,000 during the fiscal year ended September 30, 1999. The Company
has no restricted stock award or long-term incentive plans.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------- ------- ---------------- ----------------- ----------------- --------------- ----------------
Securities All Other
Name and Principal Position Year Salary ($) Bonus ($) (1)(5) Other Annual Underlying Compensation
Compensation ($) Options (#) ($)
- ---------------------------- ------- ---------------- ----------------- ----------------- --------------- ----------------
Thomas W. Itin 1999 200,000 300,000
Chief Executive Officer ------- ---------------- ----------------- ----------------- --------------- ----------------
1998 150,000 150,000 300,000
------- ---------------- ----------------- ----------------- --------------- ----------------
1997 150,000 150,000 300,000
- ---------------------------- ------- ---------------- ----------------- ----------------- --------------- ----------------
Gerard A. Herlihy 1999 139,402 75,000
Chief Financial Officer ------- ---------------- ----------------- ----------------- --------------- ----------------
1998 120,000 60,000 80,000
------- ---------------- ----------------- ----------------- --------------- ----------------
1997 75,000 (2) 50,000 20,000 (4) 70,000
- ---------------------------- ------- ---------------- ----------------- ----------------- --------------- ----------------
Timothy J. Marker 1999 133,605 50,000
VP - Sales and Marketing ------- ---------------- ----------------- ----------------- --------------- ----------------
1998 120,000 (3) 50,000 70,000
------- ---------------- ----------------- ----------------- --------------- ----------------
1997 12,500 (2) 5,000 30,000
- ---------------------------- ------- ---------------- ----------------- ----------------- --------------- ----------------
Thomas K. Ziegler 1999 125,250 20,000
VP and Counsel ------- ---------------- ----------------- ----------------- --------------- ----------------
1998 120,000 35,000 30,000
------- ---------------- ----------------- ----------------- --------------- ----------------
1997 120,000 30,000 60,000
- ---------------------------- ------- ---------------- ----------------- ----------------- --------------- ----------------
</TABLE>
(1) Bonuses for 1997 were not known or calculable at the date that the 1998
proxy was mailed to stockholders. The table above reflects the bonus
paid as 1997 compensation.
(2) The compensation reflects the fact that the executives noted, in the years
noted, did not work for the entire fiscal year. Mr. Herlihy started in
February 1997, and Mr. Marker started in August 1997.
(3) Reflects a performance-related bonus built into regular compensation of
$20,000.
(4) Other compensation reflects consulting fees paid prior to Mr. Herlihy's
initial date of employment.
(5) Mr. Itin did not receive a bonus for 1999. No 1999 bonuses have been
awarded for the remaining executives at the date of this filing.
4
<PAGE>
Options/SAR Grants Table. The table below summarizes options granted during the
fiscal year ended September 30, 1999 to the executive officers in the Summary
Compensation Table. The Company has not granted any SARs.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ------------------------------ ------------- ------------- ------------ -------------- ---------------------------------
# of
Securities % of Total Exercise Potential Realizable Value at
Name Underlying Options Price Expiration Assumed Ann'l Rate of Stk.
Options Granted to ($/Share) Date Price Appreciation for Option
Granted Employees Term
- ------------------------------ ------------- ------------- ------------ -------------- ---------------------------------
5% ($) 10% ($)
- ------------------------------ ------------- ------------- ------------ -------------- -------------- ------------------
Thomas W. Itin 300,000 40 2.20 10/16/03 105,769 306,306
- ------------------------------ ------------- ------------- ------------ -------------- -------------- ------------------
Gerard A. Herlihy 75,000 10 2.25 10/2/08 106,126 268,944
- ------------------------------ ------------- ------------- ------------ -------------- -------------- ------------------
Timothy J. Marker 50,000 7 2.25 10/2/08 70,751 179,296
- ------------------------------ ------------- ------------- ------------ -------------- -------------- ------------------
Thomas K. Ziegler 20,000 3 2.25 10/2/08 28,300 71,718
- ------------------------------ ------------- ------------- ------------ -------------- -------------- ------------------
</TABLE>
Aggregated Option Exercises and Fiscal Year-End Option Value Table
The table below summarizes fiscal year-end option values of the executive
officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------- --------------- ---------------- ------------------------------- -------------------------------
# Shares Securities Underlying
Name Acquired on $ Value Unexercised Options at Year Value of In-the Money Options
Exercise Realized End (#) at Year End ($)
- ------------------------- --------------- ---------------- ------------------------------- -------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- --------------- ---------------- ------------- ----------------- -------------- ----------------
Thomas W. Itin 0 0 562,500 637,500 134,513 102,788
- ------------------------- --------------- ---------------- ------------- ----------------- -------------- ----------------
Gerard A. Herlihy 0 0 111,250 113,750 31,984 21,611
- ------------------------- --------------- ---------------- ------------- ----------------- -------------- ----------------
Timothy J. Marker 0 0 70,000 80,000 9,780 10,560
- ------------------------- --------------- ---------------- ------------- ----------------- -------------- ----------------
Thomas K. Ziegler 0 0 65,000 45,000 24,990 11,250
- ------------------------- --------------- ---------------- ------------- ----------------- -------------- ----------------
</TABLE>
Pension Plan. Under the Company's Pension Plan, the Company is required to
contribute amounts sufficient to fund specified retirement benefits for covered
employees. Benefits are calculated on the basis of an employee's final average
pay and length of service. Final average pay generally means the average of the
employee's three highest annual compensation amounts during the last ten
calendar years of employment. Compensation means taxable compensation plus any
salary deferrals allowable under the Internal Revenue Code Sections 125 or 402.
Compensation is limited in accordance with Internal Revenue Code Section
401(a)(17). For the 1999 calendar year, compensation considered under the plan
may not exceed $160,000. Benefits are payable under normal (age 65), early (age
55 with 10 years of service) or deferred (over age 65) retirement or death.
Employees who are officers or directors of the Company participate in the
Pension Plan on the same basis as other employees, however, the plan is closed
to new entrants. As a result, the only officer of the Company who is eligible
for the plan is Thomas Itin. In general, an employee retiring under the plan
will receive an annuity payable for life without any offsets.
The following table sets forth estimated annual benefits as retirement under the
Pension Plan for covered employees of the Company at various assumed years of
service and levels of final average pay. The calculations are shown for an
employee retiring at age 65 in the form of a level single life annuity to the
employee. The years of credited service and final average pay for Pension Plan
purposes as of September 30, 1999 for Thomas Itin is 6.75 years of service and
$156,666 final average pay.
5
<PAGE>
Estimated Annual Retirement Benefits
(nearest $100)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Years of Service
- --------------------------------------------------------------------------------------------------------------
Final Average
Salary 5 10 15 20 25 30 35
- --------------------------------------------------------------------------------------------------------------
$125,000 9,200 18,500 27,700 37,000 46,200 55,400 64,700
- --------------------------------------------------------------------------------------------------------------
$150,000 11,300 22,600 33,900 45,200 56,500 67,800 97,100
- --------------------------------------------------------------------------------------------------------------
$175,000 11,900 23,700 35,600 47,400 59,300 71,100 83,000
- --------------------------------------------------------------------------------------------------------------
$180,000 11,900 23,700 35,600 47,400 59,300 71,100 83,000
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Compensation of Directors. The non-employee directors of the Company are paid
$1,500 for each regular Board meeting attended and $500 for each telephonic
Board meeting and are reimbursed for reasonable costs incurred to attend the
meetings.
In February 1999, H. Samuel Greenawalt, Timothy S. Itin, Anthony B. Cashen and
Charles G. McClure, the non-employee directors of the Company, each received
non-statutory stock options exercisable for ten years to purchase up to 10,000
shares of Common Stock for $2.44 per share. These stock options were
automatically granted under the 1995 Stock Option Plan for Non-Employee
Directors at 100% of the fair market value of the Common Stock on the date of
grant.
Employment Contracts, Termination of Employment and Change in Control
Arrangements. In 1994, the Company entered into a, five-year employment contract
with Mr. Itin under which he will serve as Chief Executive Officer at a minimum
salary of $150,000 per year. On August 15, 1997, the Company's Board approved
the terms of an amended employment agreement with Mr. Itin to employ him through
fiscal 2002. The terms of the revised employment agreement have never been
formalized and no agreement has been executed.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The table below sets forth, as of December 31, 1999, the number of shares of
Common and Preferred Stock beneficially owned by each director and executive
officer of the Company listed in the Summary Compensation Table individually,
all executive officers and directors as a group and all beneficial owners of
more than five percent of the Common and/or Preferred Stock. The following
stockholders have sole voting and investment power with respect to their
holdings unless otherwise noted.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------------- ------------------- ----------------- ---------------------- -----------------
Amount of
Amount of Percentage of Preferred Stock Percentage of
Name and Address Common Stock Common Stock Beneficially Preferred Stock
Of Beneficial Owner Beneficially Owned Owned* Owned Owned**
- ------------------------------------- ------------------- ----------------- ---------------------- -----------------
Thomas W. Itin (1)(2)(4) 6,031,784 29.4 -0- -0-
7001 Orchard Lake Rd., Suite 424
West Bloomfield, MI 48322-3608
Enercorp, Inc. (5) 2,002,329 10.0 -0- -0-
7001 Orchard Lake Rd., Suite 424
West Bloomfield, MI 48322-3608
Acrodyne Corporation (6) 1,200,000 6.0 -0- -0-
7001 Orchard Lake Rd., Suite 424
West Bloomfield, MI 48322-3608
H. Samuel Greenawalt (7)(12) 2,192,829 11.0 -0- -0-
7001 Orchard Lake Rd., Suite 424
West Bloomfield, MI 48322-3608
6
<PAGE>
- ---------------------------------- ---------------------- ----------------- ---------------------- -----------------
Amount of
Amount of Percentage of Preferred Stock Percentage of
Name and Address Common Stock Common Stock Beneficially Preferred Stock
Of Beneficial Owner Beneficially Owned Owned* Owned Owned**
- ---------------------------------- ---------------------- ----------------- ---------------------- -----------------
Timothy S. Itin (7) 65,000 *** -0- -0-
1 Montgomery Street, Suite 3700
San Francisco, CA 94104
Anthony B. Cashen (11)(16) 161,719 *** -0- -0-
99 Park Avenue, 20th Floor
New York, NY 10016
Charles G. McClure (16) 5,000 *** -0- -0-
13400 Outer Drive, W.
Detroit, MI 48239
Gerard A. Herlihy (3)(8) 570,466 2.9 -0- -0-
700 NW 12th Avenue
Deerfield Beach, FL 33442
Thomas K. Ziegler (9) 126,000 *** -0- -0-
7001 Orchard Lake Road, Suite 422
West Bloomfield, MI 48322
Timothy J. Marker (10) 98,281 *** -0- -0-
42155 Merrill Street
Sterling Heights, MI 48314
Mark E. Brady (13) 1,011,994 4.93 17,500 22.3
Robert J. Suttman, II
Ronald L. Eubel
7777 Washington Village Drive
Suite 210
Dayton, OH 45459
E. H. Arnold (14) 181,818 *** 5,000 6.4
625 South Fifth Avenue
Lebanon, PA 17042
Dolphin Offshore Partners, L.P. (15) 1,445,456 7.0 12,750 16.2
c/o Dolphin Management Inc.
129 East 17th Street
New York, NY 10007
All executive officers and 8,658,463 41.1 -0- -0-
directors as a group (17) (9 persons) --------- ---- --- ---
</TABLE>
* Based upon 19,878,728 shares outstanding at December 31, 1999.
** Based upon 78,500 shares outstanding at December 31, 1999.
*** Less than one percent.
7
<PAGE>
1) Includes 637,500 shares of Common Stock issuable upon exercise of
presently exercisable stock options held by Mr. Itin. Also includes
4,144,600 shares of Common Stock owned by family members and affiliates of
Mr. Itin, including ownership of Acrodyne Corporation and/or its
affiliates which also is reported separately in this table. Acrodyne
Corporation is owned by TWI and TWI is owned by a Michigan co-partnership
of which Mr. Itin is the sole equity owner. Also includes 58,200 shares of
Common Stock held in the name of Dearborn Wheels, Inc. Mr. Itin disclaims
beneficial ownership of the 58,200 shares. Also includes 402,600 shares of
Common Stock owned by certain trusts for which Mr. Itin's spouse serves as
trustee. Neither Mr. or Mrs. Itin is a beneficiary of these trusts, and
they disclaim beneficial ownership of the 402,600 shares owned by the
trusts. Also includes 156,719 shares of Common Stock owned by Ajay Sports,
Inc. Mr. Itin is President, CEO and a director of Ajay Sports, Inc., and
disclaims beneficial ownership of the 156,719 shares of Common Stock.
2) Includes 413,899 shares of Common Stock owned by the Company's Employee
Stock Ownership Plan Trust (the "ESOP"), of which Mr. Itin is the trustee.
Mr. Itin disclaims beneficial ownership of these shares, other than the
11,269 shares allocated for his benefit. Also includes 187,000 shares of
Common Stock owned by the Company's Union Employees Pension Plan, of which
Mr. Itin is a trustee. Mr. Itin disclaims beneficial ownership of these
shares. Also includes 115,000 shares of Common Stock owned by the
Company's Non-Union Employees Retirement Income Pension Plan, of which Mr.
Itin is the trustee. Mr. Itin disclaims beneficial ownership of these
shares. Also includes 221,499 shares of Common Stock owned by the
Company's 401(k) Plan for Non-Union Employees, of which Mr. Itin is a
trustee. Mr. Itin disclaims beneficial ownership of these shares except
for 25,800 shares allocated for his benefit. Also includes 97,367 shares
of Common Stock owned by the Company's 401(k) Plan for Union Employees, of
which Mr. Itin is a trustee. Mr. Itin disclaims beneficial ownership of
these shares. As a trustee, Mr. Itin shares voting and dispositive power
over the securities owned by these plans.
3) Includes 221,499 shares of Common Stock owned by the Company's 401(k) Plan
for Non-Union Employees, of which Mr. Herlihy is trustee. Mr. Herlihy
disclaims beneficial ownership of these shares, other than 6,579 shares
allocated for his benefit. Also includes 97,367 shares of Common Stock
owned by the Company's 401(k) Plan for Union Employees, of which Mr.
Herlihy is trustee. Mr. Herlihy disclaims beneficial ownership of these
shares. Also includes 115,000 shares of Common Stock owned by the
Company's Non-Union Employees Retirement Income Pension Plan, of which Mr.
Herlihy is the trustee. Mr. Herlihy disclaims beneficial ownership of
these shares. As a trustee, Mr. Herlihy shares voting and dispositive
power over the securities owned by these plans.
4) Does not include the ownership by Enercorp, Inc. as reported separately in
this table. Mr. Itin owns approximately 8.3% of the outstanding voting
securities of Enercorp, Inc.
5) Includes 150,000 shares of Common Stock issuable upon exercise of stock
options that are exercisable within 60 days.
6) See Note (1) above regarding the ownership of Acrodyne Corporation. Mr.
Itin may be deemed to be a beneficial owner of the shares of Common Stock
owned by Acrodyne Corporation and its affiliates, and, therefore, these
shares are included in the ownership reported for Mr. Itin in this table.
7) Includes 70,000 shares of Common Stock issuable upon exercise of stock
options that are exercisable within 60 days of the date of this table.
8) Includes 130,000 shares of Common Stock issuable upon exercise of stock
options that are exercisable within 60 days.
9) Includes 70,000 shares of Common Stock issuable upon exercise of stock
options that are exercisable within 60 days.
10) Includes 82,500 shares of Common Stock issuable upon exercise of stock
options that are exercisable within 60 days.
11) Includes 156,719 shares of Common Stock held in the name of Ajay Sports,
Inc. Mr. Cashen is a director of Ajay Sports, Inc. and disclaims
beneficial ownership of the 156,719 shares of Common Stock.
8
<PAGE>
12) Includes 1,952,329 shares of Common Stock and 150,000 options that are
exercisable within 60 days of the date of this table held in the name of
Enercorp, Inc. Mr. Greenawalt is a director of Enercorp, Inc. owns
approximately 2.4% of the outstanding voting shares of Enercorp, Inc. Mr.
Greenawalt disclaims beneficial ownership of the 1,852,329 shares of
Common Stock and 150,000 options.
13) Information is based on the Schedule 13G dated February 17, 1999 filed
with the SEC by these individuals. The Common Stock ownership includes
636,364 shares issuable upon conversion of the 17,500 shares of perferred
stock listed under perferred stock.
14) Information is based on the Company's records related to its sale of the
preferred stock to this individual. The Common Stock ownership includes
181,818 shares issuable upon conversion of the 5,000 shares of preferred
stock listed under preferred stock.
15) Information is based on the Schedule 13G dated August 3, 1999 filed with
the SEC by this entity. The Common Stock ownership includes 254,546 shares
issuable upon exercise of warrants currently excercisable within 60 days
and 463,637 shares issuable upon conversion of the 12,750 shares of
preferred stock listed under preferred stock.
16) Includes 5,000 shares of Common stock issuable upon exercise of stock
options that are exercisable within 60 days of the date of this table.
17) Includes 4,633 shares attributed to one executive to one executive officer
not named in the Summary Compensation Table. This amount includes 3,750
shares of Common stock issuable upon exercise of stock options that are
excercised within 60 days of this table.
Item 13. Certain Relationships and Related Transactions
At September 30, 1999 the Company had an investment in and notes receivable from
Ajay Sports, Inc. ("Ajay") in the amount of $6,152,000 including a $500,000 note
receivable reflected as a reduction in the Company's shareholders' equity
relating to the issuance of 206,719 shares of the Company's common stock to
Ajay. Ajay manufactures and distributes golf accessories and outdoor leisure
furniture primarily to retailers in the United States and during 1999, purchased
ProGolf Discount, a franchisor of golf equipment and accessories. The Company
has manufacturing rights in certain Ajay facilities through 2002, under a joint
venture agreement.
The Company's investment in and note receivable from affiliate at September 30,
1999 is comprised of an investment in preferred stock of Ajay in the amount of
$4,565,000 and a secured note receivable in the amount of $1,587,000. In
addition, the Company could be obligated to advance to Ajay up to an additional
$1,515,000 under the terms of the intercreditor agreement. In August, 1999, $500
was paid to a previous lender, on behalf of Ajay, under the terms of an
intercreditor agreement. Also, at September 30, 1999 the company had receivables
of $245 from Ajay for unpaid interest and fees uncurred from May to September1
1999 which is included in trade and other accounts receivable at September 30,
1999. The chairman of the Company has provided a guarantee of the investments in
and loans to Ajay. At September 30, 1998, the Company had an investment in Ajay
preferred and common stock in the amount of $5,000,000 and $53,000 respectively
and a secured note receivable from Ajay in the amount of $1,087,000.
Prior to July 11, 1997, the Company had guaranteed Ajay's $13,500,000 credit
facility and charged Ajay a fee of 1/2 of 1% per annum on the outstanding loan
amount for providing this guaranty. From July 11, 1997 through June 30, 1998,
the Company and Ajay had a joint and several loan obligation to a bank. On June
30, 1998, the Company restructured its investment in Ajay (the "Ajay
Restructuring".) The objective of the Ajay Restructuring is to separate the
Company's and Ajay's financing, eliminate Ajay's dependency on the Company for
capital and provide Ajay with adequate working capital to grow its operations
and improve shareholder value which would benefit the Company. The restructuring
provides Ajay three years to improve shareholder value at which time the notes
receivable become due and payable. No dividends are accrued and payable on the
preferred stock through July 31, 2001. The preferred stock dividend rate
increases to an annual rate of 17% in 2001 and 24% in 2002, rates which the
Company believes would require Ajay to raise capital from new sources to redeem
the preferred stock.
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As a result of the Ajay Restructuring, the bank provided separate loan
facilities to the Company and Ajay. As consideration to the bank for the
separate loan facilities, the Company provided Ajay $2,000,000 in additional
capital during 1998 which included the purchase of Ajay notes payable of
$948,000 previously provided by affiliated parties of the Company, and agreed to
convert $5,000,000 of advances to Ajay into a new cumulative convertible
preferred stock. The preferred stock is convertible into 3,333,333 shares of
Ajay common stock.
The secured promissory notes bear an annual interest rate of 16% payable
monthly. In addition, Ajay has agreed to pay the Company annual administrative
fees of $90,000 and a management fee for sourcing products overseas in the
amount of $80,000 annually.
The Company owns 686,274 shares of common stock in Ajay which represents
approximately 16% of Ajay's outstanding common stock. The investment is recorded
on the equity method of accounting due to the common ownership of Ajay and the
Company by the chairman of the Company who is also the chairman of Ajay. For the
three years ended September 30, 1999, 1998 and 1997, the Company reported losses
on its investment in Ajay in the amount of $488,000, $506,000 and $384,000
respectively. In addition, the company has options to purchase 1,851,813 shares
of common stock at an exercise price of $1.08. The investment in Ajay common
stock has been reduced to zero in the Consolidated Balance Sheet as a result of
the Company's equity interest in Ajay's losses since acquisition. During the
year ended September 30, 1999, the Company's investment in Ajay's preferred
stock was reduced by $435,000 as a result of continuing recognition of the
Company's equity interest in Ajay's losses.
Based upon the closing bid price, the market value of the investment in Ajay
common shares was approximately $558,000 at September 30, 1999. At September 30,
1999, Ajay had approximately 4,205,000 common shares outstanding. In addition to
the Company's options and convertible preferred stock at September 30, 1999,
Ajay had approximately 230,000 of outstanding preferred stock that is
convertible to approximately 64,000 shares of Ajay common stock and outstanding
options and warrants to purchase approximately 756,000 shares of Ajay common
stock at prices ranging from $1.08 to $4.13 per share.
Also, during the year ended September 30, 1999, $157,000 was paid to Compusonics
Video Corp., for website development and e-commerce designs. The Company's Chief
Executive Officer is a controlling shareholder of the affiliated company.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
WILLIAMS CONTROLS, INC.
Date: January 28, 2000 By /s/ Gerard A. Herlihy
----------------------------
Gerard A. Herlihy,
Chief Financial Officer
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