UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-18083
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
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
--- ---
The number of shares outstanding of the registrant's common stock as of January
31, 2000: 19,917,478
<PAGE>
Williams Controls, Inc.
Index
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets, December 31, 1999
(unaudited) and September 30, 1999 1
Unaudited Consolidated Statements of Operations,
three months ended December 31, 1999 and 1998 2
Unaudited Consolidated Statements of Cash Flows,
three months ended December 31, 1999 and 1998 3
Notes to Unaudited Consolidated Financial Statements 4-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8-10
Part II. Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature Page 12
<PAGE>
Part I
Item 1.
Williams Controls Inc.
Consolidated Balance Sheets
(Dollars in thousands, except share and per share information)
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, September 30,
1999 1999
(unaudited)
------------------- ---------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 827 $ 2,323
Trade and other accounts receivable, less allowance of $453 and
$484 at December 31, 1999 and September 30, 1999, respectively 10,353 11,187
Inventories 10,756 9,828
Deferred income taxes and other 4,438 4,325
Net assets held for disposition 237 360
------------------- ---------------------
Total current assets 26,611 28,023
Property plant and equipment, net 20,472 20,775
Investment in and note receivable from affiliate 5,932 6,152
Net assets held for disposition 461 500
Goodwill and intangible assets, net 5,619 5,764
Deferred income taxes 3,093 3,025
Other assets 229 265
=================== =====================
Total assets $62,417 $64,504
=================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $10,033 $ 9,223
Accrued expenses 3,452 3,449
Current portion of long-term debt and capital leases 5,350 5,193
Estimated loss on disposal 484 1,000
------------------- --------------------
Total current liabilities 19,319 18,865
Long-term debt and capital lease obligations 22,281 24,743
Other liabilities 2,887 2,690
Commitments and contingencies
Shareholders' equity:
Preferred stock ($.01 par value, 50,000,000 authorized;
78,500 issued and outstanding at December 31, 1999 and
September 30, 1999) 1 1
Common stock ($.01 par value, 50,000,000 authorized;
19,913,728 and 19,898,728 issued at December 31,
1999 and September 30, 1999, respectively) 199 199
Additional paid-in capital 21,611 21,574
Accumulated deficit (3,004) (2,691)
Treasury stock (130,200 shares at December 31, 1999 and
September 30, 1999) (377) (377)
Note receivable (500) (500)
------------------- --------------------
Total shareholders' equity 17,930 18,206
------------------- --------------------
Total liabilities and shareholders' equity $62,417 $64,504
=================== ====================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
1
<PAGE>
Williams Controls, Inc.
Consolidated Statements of Operations
(Dollars in thousands, except share and per share information)
(unaudited)
Three months Three months
Ended Ended
December 31, December 31,
1999 1998
-------------- --------------
Sales $15,877 $14,399
Cost of sales 12,131 10,015
-------------- --------------
Gross margin 3,746 4,384
Operating expenses:
Research and development 1,697 648
Selling 440 497
Administration 1,107 915
-------------- --------------
Total operating expenses 3,244 2,060
-------------- --------------
Earnings from continuing operations 502 2,324
Other (income) expenses:
Interest income (70) (125)
Interest expense 629 473
Other (income) expense, net (8) 112
Equity interest in loss of affiliate 220 190
-------------- --------------
Total other expenses 771 650
-------------- --------------
Earnings (loss) from continuing operations
before income tax expense (benefit) (269) 1,674
Income tax expense (benefit) (103) 643
-------------- --------------
Net earnings (loss) from continuing operations (166) 1,031
Dividends on preferred stock 147 150
-------------- --------------
Net earnings (loss) allocable to common
shareholders $ (313) $ 881
============== ==============
Net earnings (loss) per common share - basic $(0.02) $ 0.05
============== ==============
Weighted average shares used in per share
calculation basic 19,776,843 18,248,760
============== ==============
Net earnings (loss) per common share - diluted $(0.02) $ 0.05
============== ==============
Weighted average shares used in per share
calculation - diluted 19,776,843 21,312,041
============== ==============
The accompanying notes are an integral part of these statements.
2
<PAGE>
Williams Controls, Inc.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Three months Three months
Ended Ended
December 31, 1999 December 31, 1998
------------------- -------------------
Cash flows from operating activities:
Net earnings (loss) $(166) $1,031
Adjustments to reconcile net earnings to net cash from continuing
operations:
Depreciation and amortization 721 384
Equity interest in loss of affiliate 220 190
Changes in working capital of continuing operations:
Receivables 834 1,244
Inventories (928) 464
Accounts payable and accrued expenses 813 (1,855)
Other 153 (78)
------------------- -------------------
Net cash provided by operating activities of continuing operations 1,647 1,380
Cash flows from investing activities:
Payments for property, plant and equipment (199) (695)
Cash flows from financing activities:
Repayments of long-term debt and capital lease obligations (2,480) (3,093)
Borrowing under term notes - 2,500
Preferred dividends (147) (150)
Proceeds from issuance of common stock 37 75
------------------- -------------------
Net cash used in financing activities of continuing operations (2,590) (668)
Net cash used in discontinued operations (354) (47)
------------------- -------------------
Net decrease in cash and cash equivalents (1,496) (30)
Cash and cash equivalents at beginning of period 2,323 1,281
=================== ===================
Cash and cash equivalents at end of period $ 827 $1,251
=================== ===================
Supplemental disclosure of cash flow information:
Interest paid $ 648 $ 486
=================== ===================
Income taxes paid $ 15 $ 347
=================== ===================
Capital leases for equipment $ 175 $ -
=================== ===================
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
Williams Controls, Inc.
Notes to Unaudited Consolidated Financial Statements
Three Months ended December 31, 1999 and 1998
(Dollars in thousands, except share and per share amounts)
Cautionary Statement: This report contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements include, without limitation, those
statements relating to development of new products, the financial
condition of the Company, the ability to increase distribution of the
Company's products, integration of businesses the Company acquires,
disposition of any current business of the Company, including its
Agricultural Equipment segment. These forward-looking statements are
subject to the business and economic risks faced by the Company. The
Company's actual results could differ materially from those anticipated
in these forward-looking statements as a result of the factors described
above and other factors described elsewhere in this report.
1. Organization
Williams Controls, Inc., including its wholly-owned subsidiaries,
Williams Controls Industries, Inc. ("Williams"); Aptek Williams, Inc.
("Aptek"); Premier Plastic Technologies, Inc. ("PPT"); ProActive
Acquisition Corporation ("ProActive"); Williams Automotive, Inc.;
GeoFocus, Inc. ("GeoFocus"); NESC Williams, Inc. ("NESC"); Williams
Technologies, Inc. ("Technologies"); Williams World Trade, Inc. ("WWT");
Kenco/Williams, Inc. ("Kenco"); Techwood Williams, Inc. ("TWI"); Agrotec
Williams, Inc. ("Agrotec") and its 80% owned subsidiaries Hardee
Williams, Inc. ("Hardee") and Waccamaw Wheel Williams, Inc. ("Waccamaw")
is hereinafter referred to as the "Company" or "Registrant."
2. Interim Consolidated Financial Statements
The unaudited interim consolidated financial statements have been
prepared by the Company and, in the opinion of management, reflect all
material adjustments which are necessary to a fair statement of results
for the interim periods presented. The interim results are not
necessarily indicative of the results expected for the entire fiscal
year. Certain information and footnote disclosure made in the last annual
report on Form 10-K have been condensed or omitted for the interim
consolidated statements. Certain costs are estimated for the full year
and allocated to interim periods based on activity associated with the
interim period. Accordingly, such costs are subject to year-end
adjustment. It is the Company's opinion that, when the interim
consolidated statements are read in conjunction with the September 30,
1999 annual report on Form 10-K, the disclosures are adequate to make the
information presented not misleading. The interim consolidated financial
statements include the accounts of the Company and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
3. Comprehensive Income (Loss)
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 130, "Reporting
Comprehensive Income", which requires companies to report a measure of
all changes in equity except those resulting from investments by owners
and distributions to owners. Total comprehensive income (loss) for the
three months ended December 31, 1999 and 1998 was $(166) and $1,031,
respectively, and consisted solely of net earnings (loss). As of December
31, 1999, accumulated other comprehensive loss was $(3,004) and consisted
of accumulated deficit.
4. Earnings (loss) per Share
Basic earnings per share ("EPS") and diluted EPS are computed using the
methods prescribed by Statement of Financial Accounting Standards No.
128, "Earnings Per Share". Basic EPS is calculated using the
weighted-average number of common shares outstanding for the period and
diluted EPS is computed using the weighted-average number of common
shares and dilutive common equivalent shares outstanding.
4
<PAGE>
Following is a reconciliation of basic EPS and diluted EPS from continuing
operations:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended Three Months Ended
December 31, 1999 December 31, 1998
-------------------------------- -------------------------------
Per Per
Share Share
Loss Shares Amount Income Shares Amount
Income (loss) from continuing
Operations $(166) $1,031
Less-Preferred stock dividends (147) (150)
--------- ---------
Basic EPS-
Income (loss) from continuing
Operations available to common
Shareholders $(313) $(0.02) $881 18,248,760 $0.05
19,776,843
========= =========
Effect of dilutive securities -
Stock options and warrants - - - 154,190
Convertible preferred stock - - 150 2,909,091
Diluted EPS - --------- ------------ --------- ----------
Income (loss) from continuing
Operations available to common
Shareholders $(313) 19,776,843 $(0.02) $1,031 21,312,041 $0.05
========= ============ ========= ========= =========== =========
</TABLE>
At December 31, 1999 and 1998, the Company had options and warrants
covering 3,558,797 and 1,050,661 shares, respectively of the Company's
common stock outstanding that were not considered in the respective
dilutive EPS calculations since they would have been antidilutive. In
1999, conversion of the preferred shares would have been antidilutive and
therefore was not considered in the computation of diluted earnings per
share.
5. Inventories
Inventories consisted of the following:
December 31, September 30,
1999 1999
------------------- ---------------------
Raw material $ 7,741 $6,867
Work in process 875 697
Finished goods 2,140 2,264
=================== =====================
$10,756 $9,828
=================== =====================
Finished goods include component parts and finished product ready for
shipment.
6. Debt
In February 2000, the Company amended its credit facility with a bank
(the "Bank"). Terms of the amendment extend the due date of Term Loan III
from February 1, 2000 to April 1, 2000, advance the Company $1,000 under
a new term loan ("Term Loan IV") which is due April 1, 2000 and bears
interest at the Bank's prime rate plus 1.25%, advance $800 under Term
Loan I (subject to adjustment for a subsequent appraisal of certain
equipment), and advance certain lesser amounts as a result of the change
in eligibility of certain receivables. Should a private placement of debt
or equity be successful before April 1, 2000, $1,000 of the first $3,000
of net proceeds received by the Company are to be paid to the Bank in
payment of Term Loan IV. 75% of the net proceeds received by the Company
in excess of $3,000 are to be paid to the Bank in payment of Term Loan
III, until retired.
5
<PAGE>
In addition, under the amendment to the credit facility with the Bank,
certain financial covenants were revised. The amendment requires the
Company to maintain certain tangible net worth, which requirement was
$10,400 at December 31, 1999; achieve certain consolidated net income
(loss) from continuing operations, which requirement was $(500) for the
three months ended December 31, 1999; and maintain a debt service
coverage ratio (as defined in the agreement). The Company was in
compliance with all of its financial covenants as of and for the three
months ended December 31, 1999. In addition, the amendment to the credit
facility provides for additional capital leases during each fiscal year
not to exceed $2,500. The Company will pay the Bank $50 for the amendment
to the credit facility.
7. Sale Leaseback and Financing
In April 1997 the Company sold the Portland, Oregon manufacturing
facility in a sale/leaseback transaction for $4,600. The transaction was
accounted for as a financing and the capitalized lease obligations of
$4,600 were recorded as long-term liabilities. In April 1998, under the
terms of the agreement, a mortgage note was provided to the purchaser in
the amount of $3,200, which was reported as a note receivable at
September 30, 1998. In December 1998, a repurchase option was exercised
on the property for $4,700 consisting of cash of $1,500 and the note
receivable of $3,200. Accordingly, the note receivable of $3,200 and the
capital lease obligation of $4,600 have been eliminated from the balance
sheet at September 30, 1999. The costs associated with the building
repurchase are reported in other expenses during the three months ended
December 31, 1998. In December, 1998 the Company borrowed $2,500 from a
bank under amended term loans to finance the repurchase of the Portland,
Oregon manufacturing facility and for working capital purposes.
Approximately $1,222 of the additional financing was borrowed under an
amendment to our existing Term Loan I, the increased principal amount of
which is payable in equal monthly installments of $60 with the remaining
balance of the entire Term Loan I of $3,150 due at maturity on July 11,
2001. Approximately $1,278 of the additional financing was provided under
an amended Term Loan II which is payable in 18 equal installments of $71,
plus variable interest (8.5% at December 31, 1999).
8. Acquisition
In July, 1999, the Company purchased the ProActive Pedals division of
Active Tools Manufacturing Co., Inc. ProActive Pedal is a designer and
developer of patented adjustable foot pedal systems and modular pedal
systems. The purchase price included $5,750 in cash, plus the assumption
of approximately $286 in liabilities. In addition, the Company entered
into a patent license with the patent holder that required an initial
payment of $600 and minimum annual royalty payments of $95 per year for
ten years. Assets acquired include tooling designs, technology and patent
rights on adjustable foot pedal systems, as well as designs of modular
foot pedal systems. The acquisition was accounted for using the purchase
method of accounting and the results of operations of ProActive have been
included in the consolidated results of operations of the Company from
the acquisition date. The purchase price allocation resulted in a $1,750
charge to operations for acquired in-process research and development,
determined by independent appraisal, for the year ended September 30,
1999. The technological feasibility of the acquired technology, which has
no alternative future use, had not been established prior to the
purchase. The allocation of the purchase price also resulted in $1,820
being allocated to developed technology, which is being amortized over a
seven year period. The excess of the purchase price over the fair value
of the assets acquired and liabilities assumed of $2,162 was recorded as
goodwill and is being amortized on a straight line basis over a 15 year
period.
The following unaudited proforma results of operations for the three
months ended December 31, 1998 include the results of ProActive Pedals
assuming such acquisition occurred as of October 1, 1998 and excludes the
acquired in-process research and development charge.
1998
-------
Sales $14,502
Operating income 1,523
Earnings from continuing operations 532
Net earnings per share - basic 0.02
Net earnings per share - diluted 0.02
The purchase was financed through the private placement of 1,331,149
shares of the Company's common stock with net proceeds of approximately
$3,379. In addition, the Company borrowed $2,500 from its bank under a
new term loan facility ("Term Loan III").
9. Reclassifications
Certain amounts previously reported in the financial statements as of and
for the three months ended December 31, 1998 have been reclassified to
conform to current fiscal year presentation.
6
<PAGE>
10. Segment Information
<TABLE>
<CAPTION>
<S> <C> <C>
Three months Three months
Ended Ended
December 31, December 31,
1999 1998
--------------- --------------
Sales by classes of similar products from continuing operations
Vehicle components $15,024 $13,771
Electrical components and GPS 853 628
=============== ==============
$15,877 $14,399
=============== ==============
Earnings (loss) from continuing operations
Vehicle components $1,649 $3,142
Electrical components and GPS (1,147) (818)
=============== ==============
$502 $2,324
=============== ==============
Identifiable assets
Vehicle components $52,634 $46,771
Electrical components and GPS 9,085 8,175
--------------- --------------
Total assets - continuing operations 61,719 54,946
--------------- --------------
Agricultural equipment - discontinued operations 698 8,681
--------------- --------------
Total assets $62,417 $63,627
=============== ==============
Capital expenditures
Vehicle components $195 $655
Electrical components and GPS 4 40
=============== ==============
Total capital expenditures $199 $695
=============== ==============
Depreciation and amortization
Vehicle components $618 $300
Electrical components and GPS 103 84
=============== ==============
Total depreciation and amortization $721 $384
=============== ==============
</TABLE>
7
<PAGE>
Item 2.
Williams Controls, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Dollars in thousands, except per share amounts)
Financial Position and Capital Resources
Financial Condition, Liquidity and Capital Resources
The Company's principal sources of liquidity are funds generated from
operations, borrowings under our credit facilities, and capital leases for
equipment purchases from various leasing companies. Primarily as a result of the
acquisition of ProActive Pedals in July, 1999, the Company has a bridge loan
outstanding at December 31, 1999. In addition, partly as a result of significant
capital expenditures and increased inventories in the last quarter of fiscal
1999, the Company has extended payments due to several major vendors
significantly past the scheduled payment date.
In February 2000, the Company amended its credit facility with a bank (the
"Bank"). Terms of the amendment extend the due date of Term Loan III from
February 1, 2000 to April 1, 2000, advance the Company $1,000 under a new term
loan (Term Loan IV) which is due April 1, 2000 and bears interest at the Bank's
prime rate plus 1.25%, advance $800 under Term Loan I (subject to adjustment for
a subsequent appraisal of certain equipment), and advance certain lesser amounts
as a result of the change in eligibility of certain receivables.
In addition, the Company has begun the process of raising additional capital in
a private placement of convertible, subordinated debt. Should a private
placement of debt or equity be successful before April 1, 2000, $1,000 of the
first $3,000 of net proceeds received by the Company are to be paid to the Bank
in payment of Term Loan IV. 75% of the net proceeds received by the Company in
excess of $3,000 are to be paid to the Bank in payment of Term Loan III, until
retired. Should the Company not be successful in raising additional capital, the
Company would request an extension of Term Loan III and Term Loan IV from the
Bank.
The Company anticipates that cash generated from operations, bank borrowings,
and leases will be sufficient to satisfy the Company's other working capital and
capital expenditure requirements for current operations for the next twelve
months. At December 31, 1999, the Company's working capital was $7,292 compared
to $9,158 at September 30, 1999 and the current ratio was 1.38 compared to 1.49
at September 30, 1999. The primary reason for the decrease is the reduction in
cash of $1.5 million from September 30, 1999 to December 31, 1999 which was used
to pay principal and interest payments to the Bank.
Cash flows from continuing operations was $1,647 for the three months ended
December 31, 1999 compared to $1,380 for the first three months of fiscal 1999.
In the three months ended December 31, 1999, decreased earnings of $1,197 were
more than offset by increased depreciation and amortization of $337 and changes
in working capital totaling $1,097.
Net cash used in investing activities was $199 for the three months ended
December 31, 1999 compared to $695 for the fiscal 1999 period. All payments were
for property, plant and equipment.
In December, 1998 the Company borrowed $2,500 from the Bank under amended term
loans to finance the repurchase of the Portland, Oregon manufacturing facility
and for working capital purposes.
The Company's discontinued operations used cash of $354 and $47 for the three
months ended December 31, 1999 and 1998, respectively.
Market Risk - The Company has not entered into derivative financial instruments.
The Company may be exposed to future interest rate changes on its debt. The
Company does not believe that a hypothetical 10 percent change in end of period
interest rates would have a material effect on the Company's cash flow.
Recent FASB Pronouncements - In June 1999 the FASB issued Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 137"). SFAS 137 is an amendment to SFAS 133 "Accounting for
Derivative Instruments and Hedging Activities." SFAS 137 establishes accounting
and reporting standards for all derivative instruments. SFAS 137 is effective
for fiscal years beginning after June 15, 2000. The Company does not have any
derivative instruments and accordingly, the adoption of SFAS 137 will have no
impact on the Company's financial position or results of operations.
Year 2000 Conversion - At December 31, 1999, 100% of the Company's mission
critical systems that might have had a material Year 2000 liability were Year
2000 compliant. Total amount spent by the Company in preparation for the Year
2000 conversion was approximately $310. The Company did not experience any
material year 2000 failures. While not all Year 2000 issues were necessarily
expected to arise in January 2000, we believe our efforts to address Year 2000
issues have been successful in avoiding any material adverse effect on our
financial position or results of operations. The Company does not expect any
material adverse effect on our financial positon and results of operations, but
will continue to monitor for Year 2000 issues.
8
<PAGE>
Williams Controls, Inc.
Management's Discussion and Analysis of Results of Operations
(Dollars in thousands, except per share amounts)
Results of Operations
Three months ended December 31, 1999 compared to the three months ended December
31, 1998
Sales
Sales from continuing operations increased $1,478, or 10.3%, to $15,877 in the
first quarter of fiscal 2000 from $14,399 in the first quarter of fiscal 1999
primarily due to higher unit sales volumes in the Company's Vehicle Components
segment.
Sales from continuing operations in the Vehicle Components business unit
increased $1,253 or 9.1%, to $15,024 in the first quarter of fiscal 2000 over
levels achieved in the first quarter of fiscal 1999 due to electronic throttle
control ("ETC") unit sales, approximately half of which was from new automotive
and medium truck contracts. Sales from continuing operations in the Company's
Electrical Components and GPS business units increased $225, or 35.8%, primarily
due to revenues in the first quarter of fiscal 2000 as a result of the
completion of the Chicago Metra contract at the GPS subsidiary.
Gross margin
Gross margin from continuing operations was $3,746 or 23.6% of sales in the
first quarter of 2000, compared to $4,384 or 30.5% of sales in the comparable
fiscal 1999 period. Gross margin decreased $638 or 14.6%, in the first quarter
of fiscal 2000 as a result of reduced gross margins at the Vehicle Components
business unit of $771. The primary reasons for the decrease in gross margins at
the Vehicle Components business unit include increased management information
system expenses of approximately $229 for continued support of an enterprise
wide resource planning system, wide area network and year 2000 compliance,
increased depreciation and amortization expense as a result of significant
capital expenditures made in fiscal 1999 and the increase in amortization
expense resulting from the acquisition of ProActive Pedals, and a decrease in
the gross margin realized at the Company's plastic injection molding and tooling
subsidiary of $496.
The Company's plastic injection molding and tooling subsidiary, the operating
results of which are included in the Vehicle Components business unit, reported
an increased loss from operations of $619 in the first quarter ended December
31, 1999 compared to the prior fiscal quarter as losses continue while gearing
up for future increased sales as a result of new orders. The Company expects
operating losses to continue, at least for the next quarter. Sales, gross margin
(loss) and operating income (loss) for the quarter ended December 31, 1999 were
$1,230, ($432) and ($808), respectively compared to $1,436, $63 and ($189) in
the prior fiscal period.
Operating expenses
Operating expenses for continuing operations were $3,244 for the three months
ended December 31, 1999 compared to $2,060 for the comparable fiscal 1999
period, or an increase of $1,184, or 57.5% as a result of increased research and
development expenses. Operating expenses as a percent of net sales from
continuing operations increased to 20.4% in the first quarter of fiscal 2000
compared to 14.3% in the comparable 1999 quarter.
Research and development expenses for continuing operations increased $1,049, to
$1,697 during the first quarter of fiscal 2000 compared to $648 in the
comparable fiscal 1999 period. As a percent of sales from continuing operations,
research and development expenses increased from 4.5% to 10.7%. Research and
development expenses were increased to design ETC products compatible with
gasoline powered vehicles, develop commercial applications for inertia, tilt and
position sensor products, and develop adjustable foot pedal and ETC systems for
passenger vehicles. The Company is in the early stages of development of these
programs and expects to increase research and development spending by
approximately $4,200 in fiscal 2000. The majority of the additional expense will
be used to develop passenger vehicle electronic throttle controls and adjustable
foot pedals.
9
<PAGE>
Interest and Other Expenses
Interest expense from continuing operations increased $156, or 33.0%, to $629 in
the first quarter of fiscal 2000 from $473 in the first quarter of fiscal 1999
primarily because of the increase in capital leases as a percent of total
outstanding debt, which is at a higher average interest rate than bank debt, and
the decrease in allocated interest expense included in discontinued operations
which was $26 and $86 for the quarters ended December 31, 1999 and 1998.
respectively.
Discontinued operations
The Company has received two offers to purchase the Agricultural Equipment
Segment. Both offers are subject to additional due diligence, execution of
definitive agreements, and requisite approvals. The Company has accepted both
offers while not granting exclusivity to either buyer. Both offers are
equivalent in value, and neither offer would result in an additional loss for
the disposal of this discontinued business segment.
Net sales from the Agriculture Equipment business unit declined $327 or 18.4% to
$1,449 in the first quarter of fiscal 2000 compared to $1,776 in the first
quarter of fiscal 1999. The decline in sales was due to lower unit sales
attributable primarily to a weak farm economy. The loss from operations for the
discontinued Agriculture Equipment business unit decreased $161 to $468 due to a
reduction in selling and administration expenses totaling $329.
Net earnings available to common shareholders
Net earnings (loss) allocable to common shareholders was $(313) in the quarter
ended December 31, 1999 compared to $881 in the comparative prior year period
due to decreased gross margins as a percent of sales and increased research and
development expense and interest expense.
The effective income tax rate was 38.4% for the quarters ended December 31, 1999
and 1998.
10
<PAGE>
Part II
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 - Eighth Amendment to Credit Agreement
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
11
<PAGE>
Williams Controls, Inc.
Signature
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 thereunto duly authorized.
WILLIAMS CONTROLS, INC.
/s/ Gerard A. Herlihy
----------------------------
Gerard A. Herlihy,
Chief Financial Officer
/s/ Kim L. Childs
----------------------------
Kim L. Childs,
Corporate Controller and
Principal Accounting Officer
Date: February 14, 2000
12
<PAGE>
Williams Controls, Inc.
Signature
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 thereunto duly authorized.
WILLIAMS CONTROLS, INC.
-----------------------------
Gerard A. Herlihy,
Chief Financial Officer
----------------------------
Kim L. Childs,
Corporate Controller and
Principal Accounting Officer
Date: February 14, 2000
12
EIGHTH AMENDMENT TO CREDIT AGREEMENT
THIS EIGHTH AMENDMENT TO CREDIT AGREEMENT entered into as of February
8, 2000 by and among WILLIAMS CONTROLS, INC., a Delaware corporation, AGROTEC
WILLIAMS, INC., a Delaware corporation, APTEK WILLIAMS, INC., a Delaware
corporation, GEOFOCUS, INC., a Florida corporation, HARDEE WILLIAMS, INC., a
Delaware corporation, KENCO/WILLIAMS, INC., a Delaware corporation, NESC
WILLIAMS, INC., a Delaware corporation, PREMIER PLASTIC TECHNOLOGIES, INC., a
Delaware corporation, WACCAMAW WHEEL WILLIAMS, INC., a Delaware corporation,
WILLIAMS CONTROLS INDUSTRIES, INC., a Delaware corporation, WILLIAMS
TECHNOLOGIES, INC., a Delaware corporation, WILLIAMS WORLD TRADE, INC., a
Delaware corporation, WILLIAMS AUTOMOTIVE, INC., a Delaware corporation,
TECHWOOD WILLIAMS, INC., a Delaware corporation, (each individually referred to
as "Borrower" and all collectively referred to as "Borrowers"), and WELLS FARGO
CREDIT, INC., successor in interest to Wells Fargo Bank, National Association
("Bank").
RECITALS
Borrowers and Bank are parties to that certain Credit Agreement dated
as of July 11, 1997, as previously amended by seven amendments thereto
(collectively, "Agreement"). Borrowers and Bank desire to revise the Agreement
in the manner set forth herein. All capitalized terms used herein and not
otherwise defined herein shall have the meaning attributed to them in the
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
of the parties contained herein, Borrowers and Bank agree as follows:
1. Definitions.
(a) The definitions of "Fee Computation Amount," "Permitted
Liens" and "Tangible Net Worth" are hereby amended in their entirety to read as
follows:
"Fee Computation Amount" means, as of the date of computation,
the total of (i) the amount set forth in item (i) of Section 3.1(a) and
(ii) the then outstanding principal balance of Term Loan I, Term Loan
II, Term Loan III, Term Loan IV and Real Estate Loan.
"Permitted Liens" means (i) Liens arising by operation of law
for taxes, assessments or governmental charges not yet due, (ii)
statutory Liens of mechanics, materialmen, shippers, warehousemen,
carriers, and other similar persons for services or materials arising
in the ordinary course of business for which payment is not yet due,
(iii) non-consensual Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, (iv) Liens
for taxes or statutory Liens of mechanics, materialmen, shippers,
warehousemen, carriers and other similar persons for services or
materials which are due but are being contested in good faith and by
appropriate and lawful proceedings promptly initiated and diligently
conducted and for which reserves satisfactory to Bank have been
established, (v) Liens listed on Schedule I, (vi) Liens in favor of
Bank; and (vii) liens to U.S. Bank National Association (formerly known
as United States National Bank of Oregon) which are subject to
subordination terms acceptable to Bank. and (viii) purchase money Liens
upon or in any fixed asset of Borrowers to secure Indebtedness
permitted by Section 9.2(e); provided, however, that: (a) any such Lien
is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost
(including, without limitation, the cost of construction and the
reasonable fees and expenses relating to such Indebtedness) of the
property subject thereto, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed such cost, and (c) such Lien does
not extend to or cover any other property other than such item of
property, any improvements on such item, and the proceeds from the
disposition of such items.
"Tangible Net Worth" means stockholders' equity less: (i) all
intangible assets (net of amortization); (ii) all treasury stock; and
(iii) all obligations due from stockholders and employees.
(b) The definitions of "Eligible Foreign Accounts," "Public
Offering" and "Term Loan IV" are hereby added to the Agreement to read as
follows:
"Eligible Foreign Accounts" means those Accounts from account
debtors not located in the United States that Bank in the Good Faith
exercise of its discretion determines to be eligible for the purpose of
determining the Borrowing Base. General criteria for Eligible Accounts
may be established and revised from time to time by Bank in Good Faith.
Without limiting such discretion as to other Accounts, the following
Accounts shall not be Eligible Accounts:
(i) (A) that portion of Accounts unpaid 90 days or
more after the invoice date and (B) that portion of Accounts
that do not provide for payment in fall within 90 days after
the shipment date;
(ii) that portion of Accounts that is disputed or
subject to a claim of offset or a contra account,
(iii) that portion of Accounts not yet earned by the
final delivery of goods or rendition of services, as
applicable, by Borrower to the account debtor;
(iv) Accounts owed by any unit of government;
(v) Accounts owed by an account debtor that is
insolvent, the subject of bankruptcy proceedings or has gone
out of business;
(vi) Accounts owed by a shareholder, Subsidiary,
Affiliate, officer or employee of Borrower;
(vii) Accounts not subject to a duly perfected
security interest in the Bank's favor or which are subject to
any lien, security interest or claim in favor of any Person
other than the Bank including without limitation any payment
or performance bond;
(viii) that portion of Accounts that has been
restructured, extended, amended or modified;
(ix) that portion of Accounts that constitutes
advertising, finance charges, service charges or sales or
excise taxes;
(x) that portion of Accounts owed by any one account
debtor that would permit Revolving Advances supported by such
account debtor's Accounts to exceed $200,000 at any one time;
(xi) Accounts denominated in any currency other than
United States dollars, Canadian dollars, French francs, Swiss
francs, German marks, Japanese yen, United Kingdom pounds
sterling;
(xii) Accounts with respect to which Borrower has not
instructed the account debtor to pay the Account to the Cash
Collateral Account;
(xiii) Accounts owed by debtors located in countries
not acceptable to the Bank in its sole discretion; and
(xiv) Accounts owed by an account debtor, regardless
of whether otherwise eligible, if 25% or more of the total
amount due under Accounts from such debtor is ineligible under
items (i), (ii) or (viii) above.
"Public Offering" means any public offering or private
placement after February 1, 2000 of equity or debt securities of
Williams Parent.
"Term Loan IV" has the meaning set forth in Section 3.4(e)
hereof.
2. Section 3.1(e). Section 3.1(e) is hereby amended by revising
items (iv) and (viii) to read as follows:
(iv) Accounts with respect to which more than 90 days (150
days with respect to Accounts of Hardee Williams, Inc.) have elapsed
since the date of the original invoice applicable thereto; and
(viii) the chief executive office of the account debtor with
respect to such Account is not located in the United States of America,
unless (a) the account debtor has delivered to Borrower an irrevocable
letter of credit issued or confirmed by a bank satisfactory to Bank,
sufficient to cover such Account, in form and substance satisfactory to
Bank and, if required by Bank, the original of such letter of credit
has been delivered to Bank or Bank's agent and the issuer thereof
notified of the assignment of the proceeds of such letter of credit to
Bank, (b) such Account is subject to credit insurance payable to Bank
issued by an insurer and on terms and in an amount acceptable to Bank,
(c) the account debtor resides in a province of Canada which recognizes
Bank's perfection and enforcement rights as to Accounts by reason of
the filing of a UCC-1 in the state of the applicable Borrower's chief
executive office, (d) such Account is otherwise acceptable in all
respects to Bank (subject to such lending formula with respect thereto
as Bank may determine); or (e) Eligible Foreign Accounts under the
Bank's Foreign Receivables Eligibility Program in which Borrowers may
elect to participate on ten days prior written notice to Bank, provided
that Borrowers pay the fee set forth in Section 3.6(g).
3. Section 3.3.
(A) Contemporaneously herewith, Bank has increased Term Loan I
by advancing an additional $800,000 to Borrowers, and as of the date hereof, the
outstanding principal balance of Term Loan I is $3,923,900. Section 3.3(a) is
hereby amended in its entirety to read as follows:
On the terms and subject to the conditions contained
in this Agreement, Bank agrees to make a term loan ("Term Loan I") to
Borrowers in the amount of $3,923,900. Borrowers shall repay the
principal of Term Loan I in monthly principal payments of $46,713.10
each on the first day of each month beginning March 1, 2000. Bank, at
Borrowers' expense, shall have the orderly liquidation of Borrowers'
machinery and equipment appraised (the "Appraisal") by an appraiser
acceptable to Bank. Within 60 days of notice by Bank to Borrowers of
the results of the Appraisal, Borrowers shall make a principal payment
to Bank on Term Loan I in the amount necessary to reduce the then
outstanding principal balance of Term Loan I to the lesser of
$3,924,000 or the value of Borrowers' machinery and equipment set forth
in the Appraisal ("Reduced Principal Amount"). If the principal of Term
Loan I is so reduced to less than $3,924,000, the amount of each
monthly principal payment thereafter shall be that amount which is
equal to 1/84th of the Reduced Principal Amount. Borrowers shall repay
the outstanding principal balance of Term Loan I, together with all
accrued and unpaid interest and related fees on the earlier of the
Maturity Date or the due date determined pursuant to Section 10.2.
(B) The Second Replacement Term Loan I Promissory Note dated
December 16, 1998 in the original principal amount of $4,105,000 is hereby
replaced by the Third Replacement Term Loan I Promissory Note, in the form of
the promissory note attached hereto as Exhibit A, executed by Borrowers and
delivered contemporaneously herewith.
4. Section 3.4.
(A) Section 3.4 is hereby retitled "Term Loans II, III and IV" and is
amended by deleting subsections (f) and (g) and by amending subsection (e) in
its entirety to read as follows:
(e) Contemporaneously herewith, Bank has made an advance
("Term Loan IV") to Borrowers of $1,000,000. Borrowers shall repay the
outstanding principal balance of Term Loan IV, together with all
accrued and unpaid interest, on the earliest of (I) April 1, 2000, (II)
the due date determined pursuant to Section 10.2, or (III) upon receipt
of the net proceeds of a Public Offering. Borrowers may prepay Term
Loan IV in whole or in part, from time to time. Each partial prepayment
shall be applied to the principal balance of Term Loan IV in inverse
order of maturity. Term Loan IV shall be evidenced by a Note payable to
the order of Bank in the form attached hereto as Exhibit B.
(B) Upon the closing of one or more Public Offerings providing Williams
Parent with aggregate net proceeds exceeding $3,000,000, Borrowers shall repay
Term Loan III by an amount equal to 75% of such net proceeds in excess of
$3,000,000. Further, subsection (d) of Section 3.4 is hereby amended to delete
"February 1, 2000" and replace it with "April 1, 2000."
5. Section 3.6.
(A) Section 3.6(a) is hereby amended in its entirety to read as
follows:
(a) The outstanding principal balance of each Revolving Loan
which is a Base Rate Loan shall bear interest at a fluctuating rate per
annum equal to the Base Rate in effect from time to time. The
outstanding principal balance of each Revolving Loan which is a LIBOR
Loan shall bear interest at a fixed rate per annum determined by Bank
to be equal to the aggregate of LIBOR in effect on the first day of the
applicable Fixed Rate Term plus 225 basis points. The outstanding
principal balance of each portion of Term Loan I and Real Estate Loan
which is a Base Rate Loan shall bear interest at a fluctuating rate per
annum equal to the aggregate of the Base Rate in effect from time to
time plus 25 basis points. The outstanding principal balance of that
portion of Term Loan I and Real Estate Loan which is a LIBOR Loan shall
bear interest at a fixed rate per annum determined by Bank to be equal
to the aggregate of LIBOR in effect on the first day of the applicable
Fixed Rate Term plus 225 basis points. The outstanding principal
balance of Term Loan II shall bear interest at a fluctuating rate per
annum equal to the aggregate of the Base Rate in effect from time to
time plus 75 basis points. The outstanding principal balance of Term
Loan III and Term Loan IV shall each bear interest at a fluctuating
rate per annum equal to the aggregate of the Base Rate in effect from
time to time plus 125 basis points. The foregoing notwithstanding, the
rate of interest applicable at all times during the continuation of an
Event of Default shall be the applicable rate set forth above plus an
additional 200 basis points. All fees, expenses and other amounts not
paid when due shall bear interest (from the date due until paid) at a
fluctuating rate per annum equal to the Base Rate in effect from time
to time plus 300 basis points.
(B) A new subsection (g) is hereby added to Section 3.6 to read as
follows:
(g) If Borrowers elect to participate in Bank's
Foreign Receivables Eligibility Program, Borrowers shall pay Bank a fee
of $2,500 per quarter payable in advance on the first day of each
quarter (and on the date Borrower first elects to participate in such
Program if such date is not the first day of a quarter).
6. Section 8.18. Section 8.18 is hereby amended in its entirety to read
as follows:
(a) Williams Parents' Tangible Net Worth (computed without
regard to deferred income taxes) shall, as of the end of each month,
exceed the applicable amount set forth below:
-------------------------------- ---------------------------
Month Amount
-------------------------------- ---------------------------
October, 1999 -
February, 2000 $10,400,000
-------------------------------- ---------------------------
March - May, 2000 $10,800,000
-------------------------------- ---------------------------
June - August, 2000 $11,540,000
-------------------------------- ---------------------------
After August, 2000 $12,440,000
-------------------------------- ---------------------------
(b) Williams Parents' consolidated net income from continuing
operations for the periods set forth below shall not be less than the
amount set forth below:
-------------------------------- ---------------------------
Period Amount
-------------------------------- ---------------------------
Three Months ending December
31, 1999 ($ 500,000)
-------------------------------- ---------------------------
Six months ending
March 31, 2000 $ 67,000
-------------------------------- ---------------------------
Nine months ending
June 30 2000 $ 925,000
-------------------------------- ---------------------------
Twelve months ending
September 30, 2000 $ 1,865,000
-------------------------------- ---------------------------
(c) Maintain a Debt Service Coverage Ratio of not less than
1.1:1 for the quarter ending December 31, 1999, for the six months
ending March 31, 2000, for the nine months ending June 30, 2000 and for
the twelve months ending each September, December, March and June
thereafter. "Debt Service Coverage Ratio" means, as of any date, the
ratio of (i) Williams Parent's consolidated net income from continuing
operations after taxes for the period plus (A) the sum of the amounts
for such period included in determining such net income of consolidated
income tax expense, consolidated depreciation and amortization expense,
non-cash expense related to in-process research and development costs
arising from the Pro Active Pedals, Inc. acquisition, and non-cash
losses with respect to investment in Ajay Sports, Inc., less (B) gains
on sales of assets (excluding sales in the ordinary course of business)
and other extraordinary non-cash gains for such period and the
unfinanced portion of capital expenditures made during such period to
(ii) the total scheduled principal payments due during such period for
Term Loan I and the Real Estate Loan.
7. Section 9.2. Section 9.2 is hereby amended in its entirety to read
as follows:
Borrowers and Subsidiaries, on a consolidated basis, create or
suffer to exist any Indebtedness except:
(a) the Obligations;
(b) current liabilities in respect of taxes, assessments and
governmental charges or levies incurred, or liabilities for labor,
materials, inventory, services, supplies and rentals incurred, or for
goods or services purchased, in the ordinary course of business
consistent with industry practice in respect of arm's length
transactions and the past practice of Borrower;
(c) Indebtedness owed to Borrower;
(d) Indebtedness created by the Public Offering in an
amount not greater than $8,000,000; and
(e) Indebtedness in an amount not greater than $2,500,000
incurred during the fiscal year ending September 30, 2000 to finance
capital expenditures permitted by Section 9.14.
8. Section 10.1. Section 10.1 of the Agreement is hereby amended by
deleting subsection (i).
9. Additional Covenants.
(A) Williams Parent shall promptly prepare and file its
Federal income tax return for 1999. Upon the receipt of any refund with
respect to such Federal income tax return, Williams Parent shall
immediately deliver to Bank, duly endorsed for payment to Bank, such
refund(s) for application by Bank first to any principal balance of
Term Loan III or Term Loan IV then outstanding and next to the
reduction of the then outstanding principal balance of the Revolving
Loans.
(B) Before May 1, 2000, Borrowers shall assign to Bank, in
form and substance satisfactory to Bank, all of Borrowers' right, title
and interest in all licenses related to patents or trademarks acquired
in connection with the acquisition of Pro Active Pedals, Inc., and
cause Pro Active Pedals, Inc. to assign to Bank, in form and substance
acceptable to Bank, all of its licenses and rights with respect to
patents and trademarks.
10. Accommodation Fee. As consideration for Bank entering into this
Eighth Amendment to Credit Agreement, Borrowers hereby agree to pay Bank an
accommodation fee of $50,000.
11. Effective Date. This Eighth Amendment shall be effective upon (i)
the execution of this Eighth Amendment by Borrowers and Bank; and (ii) payment
of the accommodation fee.
12. Ratification. Except as otherwise provided in this Eighth
Amendment, all of the provisions of the Agreement are hereby ratified and
confirmed and shall remain in full force and effect.
13. One Agreement. The Agreement, as modified by the provisions of this
Eighth Amendment, shall be construed as one agreement.
14. Counterparts. This Eighth Amendment may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same agreement.
15. Oregon Statutory Notice.
<PAGE>
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY
BANK AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH
ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY
BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY
BANK TO BE ENFORCEABLE.
IN WITNESS WHEREOF, the parties have executed this Eighth Amendment to
Credit Agreement as of the date first above written.
WILLIAMS CONTROLS, INC. AGROTEC WILLIAMS, INC.
By:/s/ Gerry A. Herlihy By:/s/ Gerry A. Herlihy
- ----------------------------- ----------------------------------
Title: Chief Financial Officer Title: Chief Financial Officer
APTEK WILLIAMS, INC. GEOFOCUS, INC.
By:/s/ Gerry A. Herlihy By:/s/ Gerry A. Herlihy
- ----------------------------- ----------------------------------
Title: Chief Financial Officer Title: Chief Financial Officer
HARDEE WILLIAMS, INC. KENCO/WILLIAMS, INC.
By:/s/ Gerry A. Herlihy By:/s/ Gerry A. Herlihy
- ----------------------------- ----------------------------------
Title: Chief Financial Officer Title: Chief Financial Officer
NESC WILLIAMS, INC. PREMIER PLASTIC TECHNOLOGIES, INC.
By:/s/ Gerry A. Herlihy By:/s/ Gerry A. Herlihy
- ----------------------------- ----------------------------------
Title: Chief Financial Officer Title: Chief Financial Officer
WACCAMAW WHEEL WILLIAMS, INC. WILLIAMS CONTROLS INDUSTRIES, INC.
By:/s/ Gerry A. Herlihy By:/s/ Gerry A. Herlihy
- ----------------------------- ----------------------------------
Title: Chief Financial Officer Title: Chief Financial Officer
WILLIAMS TECHNOLOGIES, INC. WILLIAMS WORLD TRADE, INC.
By:/s/ Gerry A. Herlihy By:/s/ Gerry A. Herlihy
- ----------------------------- ----------------------------------
Title: Chief Financial Officer Title: Chief Financial Officer
WILLIAMS AUTOMOTIVE, INC. TECHWOOD WILLIAMS, INC.
By:/s/ Gerry A. Herlihy By:/s/ Gerry A. Herlihy
- ----------------------------- ----------------------------------
Title: Chief Financial Officer Title: Chief Financial Officer
WELLS FARGO CREDIT, INC.
By:
-------------------------------
Title:
----------------------------
<PAGE>
EXHIBIT A
TO
EIGHTH AMENDMENT TO CREDIT AGREEMENT
Third Replacement Term Loan I Promissory Note
$3,923,900 February 8, 2000
FOR VALUE RECEIVED, the undersigned, WILLIAMS CONTROLS, INC. a Delaware
corporation, AGROTEC WILLIAMS, INC., a Delaware corporation, APTEK WILLIAMS,
INC., a Delaware corporation, GEOFOCUS, INC., a Florida corporation, HARDEE
WILLIAMS, INC., a Delaware corporation, KENCO/WILLIAMS, INC., a Delaware
corporation, NESC WILLIAMS, INC., a Delaware corporation, PREMIER PLASTIC
TECHNOLOGIES, INC., a Delaware corporation, WACCAMAW WHEEL WILLIAMS, INC., a
Delaware corporation, WILLIAMS CONTROLS INDUSTRIES, INC., a Delaware
corporation, WILLIAMS TECHNOLOGIES, INC., a Delaware corporation, WILLIAMS WORLD
TRADE, INC., a Delaware corporation, WILLIAMS AUTOMOTIVE, INC., a Delaware
corporation, TECHWOOD WILLIAMS, INC., a Delaware corporation, (each individually
referred to as "Borrower" and all collectively referred to as "Borrowers")
hereby jointly and severally promise to pay to the order of Wells Fargo Credit,
Inc. ("Bank") the principal sum of Three Million Nine Hundred Twenty-Three
Thousand Nine Hundred Dollars ($3,923,900) as follows: (A) monthly principal
payments of $46,713.10 each on the first day of each month beginning March 1,
2000, (B) as otherwise required pursuant to the terms of the Credit Agreement
referred to below; and (C) the outstanding principal balance and all accrued
interest on the Maturity Date.
This promissory note is one of the Notes referred to in, and subject to
the terms of, that certain Credit Agreement among Borrowers and Bank dated as of
July 11, 1997 as amended from time to time ("Credit Agreement"). This promissory
note replaces that certain Second Replacement Term Loan I Promissory Note dated
December 16, 1998 (the original of which is attached hereto) in the original
principal amount of $4,105,000 executed by Borrowers. This promissory note is
not a novation; it is executed for the purpose of evidencing the changed terms
set forth in the Eighth Amendment to Credit Agreement of even date herewith.
Capitalized terms used herein shall have the respective meanings assigned to
them in the Credit Agreement.
Borrower further promises to pay interest on the outstanding principal
balance hereof at the interest rates, and payable on the dates, set forth in the
Credit Agreement. All payments of principal and interest hereunder shall be made
to Bank at Bank's office in lawful money of the United States and in same day or
immediately available funds.
Bank is authorized but not required to record the date and amount of
each payment of principal and interest hereunder, and the resulting unpaid
principal balance hereof, in Bank's internal records, and any such recordation
shall be prima facie evidence of the accuracy of the information so recorded;
provided however, that Bank's failure to so record shall not limit or otherwise
affect Borrower's obligations hereunder and under the Credit Agreement to repay
the principal hereof and interest hereon.
The Credit Agreement provides, among other things, for acceleration
(which in certain cases shall be automatic) of the maturity hereof upon the
occurrence of certain stated events, in each case without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by Borrowers.
Borrowers' obligations evidenced by this promissory note are secured by
the collateral described in the Loan Documents. The Loan Documents describe the
rights of Bank and any other holder hereof with respect to the collateral.
In the event of any conflict between the terms of this promissory note
and the terms of the Credit Agreement, the terms of the Credit Agreement shall
control.
This promissory note shall be governed by and construed in accordance
with the laws of the State of Oregon.
<PAGE>
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES, AND COMMITMENTS MADE BY
BANK AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH
ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE, MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY
BANK TO BE ENFORCEABLE.
WILLIAMS CONTROLS, INC. AGROTEC WILLIAMS, INC.
By:___________________________ By:_______________________________
Title:________________________ Title:____________________________
APTEK WILLIAMS, INC. GEOFOCUS, INC.
By:___________________________ By:_______________________________
Title:________________________ Title:____________________________
HARDEE WILLIAMS, INC. KENCO/WILLIAMS, INC.
By:___________________________ By:_______________________________
Title:________________________ Title:____________________________
NESC WILLIAMS, INC. PREMIER PLASTIC TECHNOLOGIES, INC.
By:___________________________ By:_______________________________
Title:________________________ Title:____________________________
WACCAMAW WHEEL WILLIAMS, INC. WILLIAMS CONTROLS INDUSTRIES, INC.
By:___________________________ By:_______________________________
Title:________________________ Title:____________________________
WILLIAMS TECHNOLOGIES, INC. WILLIAMS WORLD TRADE, INC.
By:___________________________ By:_______________________________
Title:________________________ Title:____________________________
WILLIAMS AUTOMOTIVE, INC. TECHWOOD WILLIAMS, INC.
By:___________________________ By:_______________________________
Title:________________________ Title:____________________________
<PAGE>
EXHIBIT B
TO
EIGHTH AMENDMENT TO CREDIT AGREEMENT
Term Loan IV Promissory Note
$1,000,000 February 8, 2000
FOR VALUE RECEIVED, the undersigned, WILLIAMS CONTROLS, INC. a Delaware
corporation, AGROTEC WILLIAMS, INC., a Delaware corporation, APTEK WILLIAMS,
INC., a Delaware corporation, GEOFOCUS, INC., a Florida corporation, HARDEE
WILLIAMS, INC., a Delaware corporation, KENCO/WILLIAMS, INC., a Delaware
corporation, NESC WILLIAMS, INC., a Delaware corporation, PREMIER PLASTIC
TECHNOLOGIES, INC., a Delaware corporation, WACCAMAW WHEEL WILLIAMS, INC., a
Delaware corporation, WILLIAMS CONTROLS INDUSTRIES, INC., a Delaware
corporation, WILLIAMS TECHNOLOGIES, INC., a Delaware corporation, WILLIAMS WORLD
TRADE, INC., a Delaware corporation, WILLIAMS AUTOMOTIVE, INC., a Delaware
corporation, TECHWOOD WILLIAMS, INC., a Delaware corporation, (each individually
referred to as "Borrower" and all collectively referred to as "Borrowers")
hereby jointly and severally promise to pay to the order of Wells Fargo Credit,
Inc. ("Bank") the principal sum of One Million Dollars ($1,000,000) pursuant to
the repayment terms for Term Loan IV set forth in the Credit Agreement (as
defined below).
This promissory note is one of the Notes referred to in, and subject to
the terms of, that certain Credit Agreement among Borrowers and Bank dated as of
July 11, 1997, (as amended, modified or supplemented from time to time, the
"Credit Agreement"). Capitalized terms used herein shall have the respective
meanings assigned to them in the Credit Agreement.
Borrower further promises to pay interest on the outstanding principal
balance hereof at the interest rates, and payable on the dates, set forth in the
Credit Agreement. All payments of principal and interest hereunder shall be made
to Bank at Bank's office in lawful money of the United States and in same day or
immediately available funds.
Bank is authorized but not required to record the date and amount of
each payment of principal and interest hereunder, and the resulting unpaid
principal balance hereof, in Bank's internal records, and any such recordation
shall be prima facie evidence of the accuracy of the information so recorded;
provided however, that Bank's failure to so record shall not limit or otherwise
affect Borrower's obligations hereunder and under the Credit Agreement to repay
the principal hereof and interest hereon.
The Credit Agreement provides, among other things, for acceleration
(which in certain cases shall be automatic) of the maturity hereof upon the
occurrence of certain stated events, in each case without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by Borrowers.
Borrowers' obligations evidenced by this promissory note are secured by
the collateral described in the Loan Documents. The Loan Documents describe the
rights of Bank and any other holder hereof with respect to the collateral.
In the event of any conflict between the terms of this promissory note
and the terms of the Credit Agreement, the terms of the Credit Agreement shall
control.
This promissory note shall be governed by and construed in accordance
with the laws of the State of Oregon.
<PAGE>
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES, AND COMMITMENTS MADE BY
BANK AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH
ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE, MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY
BANK TO BE ENFORCEABLE.
WILLIAMS CONTROLS, INC. AGROTEC WILLIAMS, INC.
By:___________________________ By:_______________________________
Title:________________________ Title:____________________________
APTEK WILLIAMS, INC. GEOFOCUS, INC.
By:___________________________ By:_______________________________
Title:________________________ Title:____________________________
HARDEE WILLIAMS, INC. KENCO/WILLIAMS, INC.
By:___________________________ By:_______________________________
Title:________________________ Title:____________________________
NESC WILLIAMS, INC. PREMIER PLASTIC TECHNOLOGIES, INC.
By:___________________________ By:_______________________________
Title:________________________ Title:____________________________
WACCAMAW WHEEL WILLIAMS, INC. WILLIAMS CONTROLS INDUSTRIES, INC.
By:___________________________ By:_______________________________
Title:________________________ Title:____________________________
WILLIAMS TECHNOLOGIES, INC. WILLIAMS WORLD TRADE, INC.
By:___________________________ By:_______________________________
Title:________________________ Title:____________________________
WILLIAMS AUTOMOTIVE, INC. TECHWOOD WILLIAMS, INC.
By:___________________________ By:_______________________________
Title:________________________ Title:____________________________
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